Lecture 12
Employee Participation
1
Relevance of employee
participation
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Major changes in work organisation and decision making
have looked to the approaches by competitors in different
contexts (Applebaum and Batt 1994).
More participative structures have been positively
associated with productivity (Levine and Tyson 1990).
Challenge for firms - identify and master new forms of
competitive advantage; mobilising the knowledge and
problem-solving skills of workers and continuous
improvement.
Challenge for employees - recognise that training and
education prerequisite for labour market participation; to
accept the need to participate more fully in problemsolving and decision making.
2
The breakdown of mass
production
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Traditionally firms learn by moving down the learning
curve - this is the most efficient was to produce a
standardised item.
Deviating from this approach, either by increasing product
variety or quality, brings an end to the cumulative gains in
productivity and increasing costs (Appplebaum and Batt
1994).
New production systems - socio-technical production
systems, TQM, continuous improvement, team-based
production concepts (Aoki 1992).
3
Types of employee involvement
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Levin and Tyson (1990) construct a typology, which
classifies employee participation into three broad
categories – consultative, substantive and representative.
Consultative participation gives employees opportunities to
give their opinions, but management reserves the right to
make the final decisions.
Substantive participation includes direct employee
participation such as semi-autonomous work teams –
employees are given wide discretion to develop job-design.
Representative participation, which includes joint
management-employee consultative committee and
employees representation on management boards.
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Types of employee involvement
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Financial participation - share ownership/ profit sharing
Shares may be allocated to employees or a proportion of
company profits may be distributed annually.
These schemes allow the employee to share in the
opportunities of the organisation.
Managerial support for these schemes rests on the belief
that the interests of employees and the firm will be aligned.
5
Ben-ner and Jones (1995)
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Cannot be viewed as a unitary concept.
Classify in terms of directness of participation and the
extent of the influence that employees have over
organisational decisions.
A new conceptual framework to define and differentiate
among diverse forms of employee ownership is developed.
Two central rights associated with ownership, return and
control rights is identified (Ben-ner and Jones 1995).
6
Ownership arrangements
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Ownership of an asset consists of the right to control its
use and to enjoy its returns.
In an organisation, control entails the determination of the
objectives of the organisation, the positions that
individuals occupy, the functions of these positions, who
occupies them and how their occupants are induced to
carry out their functions.
Returns include the financial and physical payoff generated
from the operation of the organisation: these can be
distributed in profits, wages and working conditions.
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The effects of return rights
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OB: the affect of return rights on individual motivation
should be positive.
The argument is that the greater the collective share of
employees in the returns of the firm in which they work,
the greater the dependence of their individual well-being
on the firms’ well-being.
In economic literature doubts expressed: ‘1/n problem’.
Free-rider problem.
Will not lead to an increase in motivation.
8
The effects of control rights
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Employees gain more access to information and participate
in decision making that effect the entire organisation.
This informational gain improves the basis of agreements
between management and labour.
Access to strategic decision making places employees in a
better position to enforce agreements.
Full employee control when divorced from return rights is
potentially damaging.
Control rights should have a greater effect than return
rights that are solely administered.
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The effects of combining return
and control rights
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The productivity effects of combing control and return
rights is greater than the sum of parts.
‘Emulative ‘ behaviour: each worker emulates in part or in
full the behaviour of other workers, thus reducing or
eliminating the free-rider problem.
For rational emulative behaviour to emerge employees
must:
set work standards
determine methods of implementation
Establish methods to enforce standards
10
The effects of combining return
and control rights
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Primary enforcement mechanism: mutual monitoring.
Employees must be able to share their observations
without fear that they are betraying peers; entails control
rights that shield them from management.
Employees should retain benefits of their monitoring and
work effort; return rights.
Employees should care about what their co-workers think,
internalise norms of behaviour.
Therefore in order to have a significant degree of
individual motivation effect, return and control rights must
be combined.
11
Joint consultation
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Joint-consultation is a mechanism for
managers and employee representatives to
meet on a regular basis in order to exchange
views, to utilise members knowledge and
expertise, and to deal matters of common
interest which are not the subject of
collective bargaining (Marchington et al
1992).
12
Extent of employee participation
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Marchington observed that the most common forms of
participation involve direct personal communications –
daily ‘walk-arounds’ by management (82 per cent of
workplaces), followed by meetings between senior
management, middle-management and employees (69 per
cent) and newsletters (51 per cent of workplaces).
However, representative participation was rare in most
Australian firms in the AWIRS 1990 survey – 14 per cent
of workplaces had a joint consultative committee and 7 per
cent of workplaces had employee representatives on
managerial boards.
13
AWIRS 1995
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AWIRS 95 a large-scale workplace survey conducted by
the Commonwealth Department of Industrial Relations.
The data of AWIRS 1995 were collected in the period
from September 1995 to January 1996. The principal
investigator was the Department of Industrial Relations.
This cross-sectional data is based on a sample of 2001
workplaces with 20 or more employees covering all major
ANZSIC divisions, excluding those in forestry, agriculture,
fishing and defense across all states and territories. These
2001 cases represent an estimated total of 37,200
workplaces.
14
Outcomes of employee
participation
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Levine and Tyson (1990) suggests that the research shows
that participation usually leads to small, short-run
improvements of organisational performance, and
sometimes to significant, long-lasting improvements.
Shop-floor job redesign has been shown to be positively
related to job satisfaction, commitment, quality and
productivity and a reduction in turnover and absenteeism.
Batt and Applebaum (1995) investigated the effects of
consultative and substantive forms of participation on a
number of individual and organisational outcomes.
Consultative participation generated few positive
outcomes. It had no effect in terms of quality, job
satisfaction or product quality.
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Outcomes of employee
participation
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Where firms introduced self-managed work teams or reorganised work to provide greater autonomy and variety,
the impact was uniformly positive (Batt and Applebaum
1995).
Fernie and Metcalf (1995) most forms of employee
participation were associated with economic outcomes.
Communication about investment plans and strategic
direction were associated with improvements in
productivity.Existence of joint consultation made it easier
for management to modify existing workplace practices
and introduce new technology. Positively related to
positive industrial relations climate.Off-line programs such
as QC’s and problem solving groups no affect on
productivity
16
International perspectives on
joint consultation
The German experience with joint
consultation
 The Japanese approach to joint consultation
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17
Ramsay (1977): Cycles of
Control
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Ramsay argues that worker participation has evolved out
of the humanisation of capitalism, as is usually suggested,
but has appeared cyclically. These cycles are traced over
more than a century and are shown to correspond to
periods where management authority is felt to be facing
challenge. Participation is thus best understand as a means
of attempting to secure labours’ compliance.
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The logical pattern of industrial
democracy
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Success - the inducement of cooperation and of
legitimating reinforcing managerial authority;
incorporation; common interest.
Triviality - schemes may get under way with high
expectations and enthusiasm form both sides, but
conflicting aspirations for the scheme, and the inability of
‘common interest’ to cover real issues of importance to
workers, leads to a loss of interest.
Instability - management may attempt to impose a unitary
frame of reference, and refuse de facto recognition of
unions and bargaining
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The logical pattern of industrial
democracy
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Change of committee status - where management do not
insist on the rigid application of a unitary framework, but
permit the participative machinery to become an effective
channel for collective bargaining. This grants the scheme a
far better change of survival, but removes from it most of
the essential integrative rationale of participation as
conceived from a management viewpoint.
20
First Waves
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Allen (1964) analyses the emergence of conciliation and
arbitration procedures in the second half of the 19th
century.
He shows that these procedures appeared at times when
employers were put under pressure, in particular by tight
labour market.
At times of high unemployment management resisted any
calls for institutions of collective bargaining as
infringements on their sacrosanct authority.
Management of de facto but not formal recognition.
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First
Waves
Beginning of the 1860’s it is possible to trace waves of
participation, especially in the form of profit-sharing.
Example: Henry Briggs, Son and Co. in the 1860’s through
the WW1. In the face of worsening labour relations, Briggs
attempted to change his image as an exploiter and
repressor, by means of a new and more subtle form of
exploitation and repression.
The declared aim of Briggs was to detach workers from
their unions.
Profits pay-outs.
The initial success was short lived as in the ensuing boom
Briggs failed to increase the share-out in line with growth.
22
Labour unrest and profit schemes
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Ramsay (1977:484): ‘If one examines the subsequent
history of profit-sharing down to WW1 it is possible to
identify a direct relationship between the introduction of
profit-sharing with a high level of employment or labour
unrest’.
Participation schemes were not philanthropic, but to
combat labour organisation, improve labour organisation
and overcome resistance to change.
Participation was unitary. It was offered to give feelings of
involvement, whilst actually intended to provide a means
for management to get its definitions of the situation
accepted
The cycles are tied into the conditions which make this
challenge to management authority periodic.
23
Joint Consultation
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Post WWII employers approached participation from the
view point of creating an ‘enterprise culture’. This
epitomized the human relations views of Elton Mayo. The
natural solidarity of work groups was to be channeled, as it
had been during the was through JPC, to the benefit of all.
Employers made sure that their voice took precedence:
final decisions should rest with them.
In late 1940’s 545 out of 751 firms had joint consultation.
Yet by 1950 as economic conditions improved the
popularity of joint consultation faded
24
Quote: Worker’s view of
consultation.
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….is suspicious. He ‘knew what management was like
before the war’, and believes that ‘the leopard will not
change its spots’. If while full time employment lasts the
manager has to prefer the ‘carrot’ to the ‘stick’, then it is
for the worker to make the best of it while he can, for if
conditions change there will be little heard of joint
consultations’ Ramsay (1977:492)
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Major issues
Employee Training
 Actual say
 The extent to which employees actually
want to participate
 The requirement of a legal framework
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