Is Employee Participation A Prerequisite For Organisational
Performance And Growth In Modern Societies,
Such As Australia?
Monash University, September 1998
The aim of this paper is to look at the future of employee participation in modern societies such as Australia and USA when facing the unknown challenges (or opportunities) of a new millennium. The emphasis is on the question whether employee participation is a prerequisite for organisational performance and growth in these societies. The findings in this essay imply that today’s workers and managers realise that there is no way back once employee participation has been implemented. Hence, although organisations can survive in the short-run, employee participation is a prerequisite for organisational performance and growth in the long-run perspective.
Participation, organisation, performance, HRM, Australia, management
The last decades have seen demands from unions and employees about democratising the workplace walking hand-in-hand with growing recognition in management and society of potential various benefits from increased employee participation. No longer is the ’old’ Fordist and Taylorist model of an effective workplace (emphasising control, authority and hierarchy) the subject of discussion in employee relations. Rather, the issue now is how to best face a society in transition and rapid change with its new emerging sets of values.
The aim of this paper is not so much to look at the development of employee participation or going into too much detail about what different forms it may take. There are plenty of other papers and articles that do this and one more would only add to a massive pile of information and theories that already cover the issue. Instead, the aim is to look at the future of employee participation in modern societies such as Australia and USA when facing the unknown challenges (or opportunities) of a new millennium. The emphasis is on the question whether employee participation is a prerequisite for organisational performance and growth in these societies, because if it is not, employee participation may only be a temporary phase in employee relations and not a necessity for ensuring future organisational success. If, on the other hand, it can be said that a high level of participation entails increased productivity and growth, then there is a direct reason for today’s managers to seriously begin addressing the issue if this already has not been done.
Thus, this paper presents some theories of what employee participation may bring about in terms of organisational performance, and contrasts this with various surveys and findings in the issue. It looks at advantages and disadvantages with various forms of participation for both employers and employees in some of today’s modern societies, and due to these findings, gives an answer to the question above whether employee participation is a prerequisite of future organisational performance and growth.
2. A changing society
Many factors have impacted on the changing perceptions about employee participation in modern societies. Maybe the most influent one is the speed of the technical development during the last two decades, especially the increased use of information technology systems. According to Knudsen (1995: p.144), a lot of research from the 1980s point to the fact that the Taylorist approach fails to reap the full potential of information technology, arguing that optimal use of new tools and systems demands skilled workers that are more responsible and motivated. Hence, theories of Human Resource Management (HRM), Total Quality Management (TQM), and especially employee participation, became interesting to managers as a productive force.
Knudsen also writes that:
The thesis of participation as a productive necessity is rooted in the notion that a shift has occurred, or is occurring, from the mass-production paradigm of Fordism to a new era characterised by a number of different but related concepts (…) (Knudsen, 1995: p.145).
However, Knudsen (1995: p.146) notices that to speak of a productive necessity for participation seems an over-generalisation, as information technology not by itself promotes or reduces the participation of employees in decision-making processes. Social actors such as employees, managers, and union representatives are the ones determining, within given technological and social environments, how technology is chosen, introduced and used.
Wright (1995: p.163) refers to this ‘post-Fordist’ period as a period of ‘flexible specialisation’, and adds to the risen need of increased employee skill and autonomy reasons such as increasing product market volatility and the need to respond quickly to changes in demand, plus the saturation of mass markets and the movements towards non-price competition in niche markets. These post-Fordist ideas influenced most modern societies’ governments and employer and trade union organisations. Increased employee skills and participation thus became by most instances an accepted concept.
One contemporary example of an organisation in Australia that strongly emphasises employee participation is Waterworth Pty Ltd, which on its Internet homepage states that ‘employee participation in decision-making is essential because all decisions made by the company will have inevitable impact on every team member’. The company believes that each worker brings to the team their own unique qualities, and it is through the contribution of these qualities that it is able to ‘conquer all difficulties and triumph when threats materialise’ (Waterworth, 1998).
Waterworth Pty Ltd is an example of a company that has adopted a TQM approach in its employee relations. However, although this initially seems to be the most idyllic approach to employee relations, it does not reveal any facts about productive outcome. Thus, to be able to answer the question stated in the introduction, it is necessary to first look at in what ways employee participation in theory may affect organisational productivity and performance, and then to see if this is also happening in practice. Hence, the different forms of participation with the respective advantages and disadvantages for employees and employers are now discussed.
3. Employee participation
Employee participation can take many different forms, and although two organisations adopt a similar concept, social, cultural and other factors separating the two from each other may lead to two completely different participation schemes.
Ozaki (1996: p.6) distinguishes between two forms of participation: direct and representative (indirect). The latter involves participation through representative bodies such as, for example, trade unions, whereas direct participation can be defined as:
Opportunities which management provide, or initiatives to which they lend support, at workplace level, for consultation with and/or delegation of responsibilities and authority for decision-making to their subordinate either as individuals or as groups of employees, relating to the immediate work task, work organisation and/or working conditions (EPOC, cited in Ozaki, 1996: p.6).
This is usually the definition of participation when it is discussed as a means of improving organisational performance and individual workplace conditions, as it assumes the individual worker’s direct participation in some form of decision-making within the company. Some common assumptions regarding the connection between organisational performance and direct participation are summarised by Fernie and Metcalf (1995: p.382):
1. Employees generally have more knowledge and information about their work tasks and processes than their mangers do, and are therefore better placed to achieve improved performance.
2. Employee involvement provides employees with greater intrinsic rewards from work than do traditional forms of governance. These rewards will increase job satisfaction, and in turn, employees’ motivation to achieve new goals.
3. By giving workers greater access to management information, mutual trust and commitment will be increased.
Whether this theory of participation correlates with participation and the resulting outcome in practice, is discussed below. Before that, however, it is important to look more deeply into some of the major forms of direct and indirect employee participation. These include teamwork, financial participation, Quality Circles (QCs) and Joint Consultative Committees (JCCs).
One of the major differences between Fordist and Post-Fordist organisations is that the latter sees an important element in an effective work organisation being the formation of groups or teams of multi-skilled employees, capable of performing a variety of tasks and exercising autonomy over issues directly related to the work. (Wright, 1995: p. 160, and Ozaki, 1996: p.8).
In Mathew’s (1994: pp. 55-65) discussion about ‘best practice organisations’ (defined as high-productive and high-quality performing organisations), teambuilding play a considerable part and is essential in a modern society with its competitive environment that favours higher quality, innovativeness, rapid response to market shifts and intelligent production. Mathews sees teamwork as being the ‘heart’ of the new workplace culture, and fundamentally involves a process of ‘re-engineering’ the work flows so that groups of operators can take control of a series of tasks that produce a defined product or service.
There are many theories about what constitutes effective team-building, but the general notion is that if it is done correctly, it will be highly beneficial to organisational performance and productivity.
3.3. Financial participation:
According to Turberville (1998: p.3), employee financial participation is seen as a means of promoting employee loyalty and commitment to the organisation. It is part of HRM strategy to reach improved performance and productivity by getting the employees closer connected to he organisation he/she works in.
As with teambuilding, employee financial participation can take many forms, and its success depends upon how well it is integrated and carried out. One way of employee financial participation is to offer employees shares as part of or bonuses on their salaries - referred to here as ‘employee ownership’. According to Kruse and Blasi (1995), employee ownership in the U.S. has grown substantially in the past 20 years. It has helped changing workplace cultures in U.S. companies such as Avis, United Airlines and TWA, where employee ownership is part of a much larger effort to make the company more competitive with greater employee involvement and more flexible work rules and compensation. They argue, however, that for employee ownership to have any impact on productivity and performance, it has to be combined with other human resource policies such as improved communication, consultation and security.
Mathews (1994: p.75) also recognises gains of well developed pay systems to be higher commitment on the part of employees, and that it in the long run can be expected to enhance productivity and efficiency within the organisation. However, although there is an expectation that financial participation will motivate individuals to perform well, Fernie and Metcalf (1995: p.383) point out a number of reasons for caution, one being that some pay systems may imply higher risk-sharing by employees which in turn may generate a desire by the labour for a greater say in running of the enterprise. This could in the long run have a negative impact on the firm’s performance and productivity.
3.4. Quality Circles & Joint Consultative Committees:
Quality Circle arrangements began to be used in Western European countries and Australia in the early 1980s as an effort to increase efficiency and competitiveness. Today, well above 50% of establishments in countries such as Sweden, Japan and the United States seem to use some forms of Quality Circles, although other countries, such as the Netherlands, France and Australia show a lesser degree of implementation (Ozaki: 1996: pp.531-532).
Forming Quality Circles (QCs) is part of a Total Quality Control (TQC) technique to ensure that the organisation meets the increasing demand in modern societies for high-quality products. Responsibility for quality control is given to shopfloor employees, and QCs include groups of workers that meet in regular forums to analyse and suggest improvements to their work process (Wright, 1995: p.175).
However, Wright (1995: pp.176-177) argues that there are mixed implications of TQC for workers, and hence the organisation itself. The introduction of QCs can result in greater opportunities for employee involvement and increased management recognition of the skills of shopfloor employees. On the other hand, QCs can be short-term initiatives which management disbands after a period of experimentation. Thus, if TQC will have an impact on an organisation’s productivity in the long run, depends on whether both managers and employees accept it as an ongoing method towards increased organisational efficiency, performance and competitiveness.
Wright (1995: pp.176-177) further argues that the cost of implementing QCs programs, the formality of procedure, and the slowness in developing quality improvement presentations and then implementing suggestions, may be a reason for a waning of employer interest in QCs. Figure 3.1 shows the percentage of current Australian workplaces using quality management techniques:
Joint Consulative Committees (JCCs) is an indirect form of participation that is used as a mechanism for collective representation of employees in the workplace. The consultation process implied by the existence of JCCs makes it easier to change working practices or introducing new technology leading to faster productivity growth. However, whilst Fernie and Metcalf (1995: p.397) argue that there are weak favourable associations between the existence of a JCC and productivity growth, Marchington (1992a, p.534) implies that the line of reasoning that appears to be central to many of the federal government’s pronouncements on consultation and participation is that JCCs can increase efficiency, productivity and quality. This is due to the increase in the stock of ideas available to decision-makers or by enhancing employee awareness of broader organisational objectives and constraints.
3.5. Levels and degree of participation:
Apart from being aware of the different forms of employee participation, it is necessary to also look at what different levels it can be implemented and to what degree. Pateman (Teicher, 1992: pp.490-491) draws up a model that shows the complexity of participation in the workplace:
The model shows that an organisation can adopt different strategies in terms of employee participation where the ideal form, according to Teicher (1992: p.492), is both indirect and direct full participation at all levels of the workplace. He admits though, that few organisations are likely to achieve this, but that it provides a standard against which to assess employee participation initiatives, and which ultimately would be most efficient for the organisation.
However, it could be argued that setting such a high standard might enforce negative aspects of employee participation into organisational efficiency, hence affecting productivity. As noticed, too much participation could lead to the development of a ‘manager organisation’ where employees demand more and more autonomy in decision-making processes and therefore threaten the role of middle managers. This is observed by Turberville (1998: pp.26-27), and further discussed by Foegen (1998: p.2) who warns that increased emphasis on empowering employees in an organisation could go too far and have a negative effect on its efficiency and profitability. He states that ‘somebody must run things’ but that management control today arguably has become more illusion than reality, which is dangerous for the well-being of future organisations.
In contrast to this, Harley (1998: pp.20-21) believes that empowerment in modern organisations is a ‘pervasive myth’, and that employees really have not gained much control in decision-making processes. He refers to findings in numerous studies that reveal no change in employee involvement and control in the workplace. However, this view is not widely shared - instead, most writers and researchers in this field agree upon that employee participation rapidly has increased during the last decades. Where there still are uncertainties though, is whether employee participation in practice (not just theory) is an essential component for future organisational productivity and performance. This is now discussed.
4. Employee participation and productivity
Many reports and directives have regarded the processes of consultation and participation in the workplace as necessary ingredients for improved performance. In one report from 1990, the Australian Manufacturing Council (AMC) states that ‘traits of the new desired culture includes the incorporation of workers’ ideas to lift productivity and quality, and teamwork and HRM strategies to foster commitment’ (AMC cited in Lansbury, Davis and Simmons, 1996: p.32).
In a study by Black and Lynch (1997), it was found that establishment practices that encourage workers to think and interact in order to improve the production process are strongly associated with increased productivity. They also argue that TQM practises have insignificant or even negative impact on productivity unless the proportion of workers involved in regular decision making within the plant is also high. These findings thus seem to be leading towards accepting the hypothesis stated in the introduction that employee participation is a prerequisite of organisational performance and growth. However, since the data used in their survey consisted of a sample of more than 3,000 U.S. private firms but with a response rate of 66%, the results may be biased.
Black and Lynch also found that co-operative workplaces with a high level of union involvement were linked with higher productivity than non-union similar co-operative workplaces. These findings are similar to those of Kruse and Blasi (1995) in their survey of employee participation in U.S. manufacturing companies. This would suggest that unions, where they exist in organisations, play an important part in the participation process and must not be neglected by management. Ozaki (1996: p.25) also notices that unions cannot remain indifferent to direct participation as workers today are increasingly concerned with the intrinsic rewards of work. Especially financial participation seems to demand the involvement of unions. Results from a survey from 1992 show that the most important factor contributing to the overall success of employee share plans in 288 Australian companies was union support (Turberville 1998: p.14). Hence, unions do not seem to have an alternative to developing pro-active policies on participation in future modern organisations.
On the other hand, Marchington (1992a: p.545) draws the conclusion that non-union co-operative workplaces show more positive effects on productivity, efficiency and quality. However, Marchington’s sample seems to be biased in that it only involves surveying managers, and hence is not representative for the whole workforce - including employees and unions.
Figure 4.1 shows what impact the establishment of employee participation practices could have to previously non-cooperative organisations (Black and Lynch, 1997):
Base Case: Non-union, multi-establishing plant, profit sharing for managers, no profit sharing for non-managers, no TQM, no benchmarking, 1% employees meeting regularly about work issues, 1% employees in self-managing teams.
HPW system: Base case but 50% of workers meeting to discuss workplace issues regularly, profit sharing for non-managers, 30% of workers in self-managed teams, TQM, and benchmarking.
The table shows that improved and increased employee participation has a direct impact on productivity growth, and that unionised workplaces generally have a more positive effect on productivity than non-unionised workplaces. However, both Kruse & Blasi (1995) and Black & Lynch (1997) argue that although employee participation is a prerequisite for productivity growth, without complementing Human Resources or Total Quality Management practices it is nothing worth.
An Australian example of how increased employee participation positively has affected an organisation is the implementation of teams and various involvement programs at Ford Australia. Lansbury, Davis and Simmons (1996: pp.40-41) writes that the quality of Ford vehicles have shown substantial improvement since the adoption of involvement programs. However, they argue that profitability and other gains from these changes are more likely to be long-term rather than immediate, both for the employees and the organisation as a whole.
Prasnikar’s research about workers’ participation in developing countries shows that similar changes in employee participation in ‘non-modern’ societies also generally have a positive effect on productivity. For example, when self-management was introduced at Malta Drydocks, productivity increased by 2-3% per year. Cruz Azul in Mexico is another example of a successful enterprise with employee participation that has a higher labour productivity than the average industry in Mexico (Prasnikar, 1991: p.111).
Most studies show that employee participation seems to have a positive effect on performance and productivity and hence is here to stay. However, Wright (1995: p.180) argues that a trend emerged during the recession in 1990, suggesting a move away from participative policies back to the traditional management concerns of cost minimisation and ‘top-down’ rationalisation. Wright questions whether the application of new post-Fordist technologies and work reorganisation within the Australian industry has resulted in a fundamental break with previous management practice.
The findings in this essay imply that today’s workers and managers realise that there is no way back once employee participation has been implemented. Employees are more educated today than only a few decades ago, and if organisations want to stay alive in an increasingly competitive global market, they will have to acknowledge the benefits of a motivated, efficient, co-operative, and productive workforce which increased employee involvement in decision-making activities will produce. Hence, although organisations can survive in the short-run, employee participation could be said to be a prerequisite for organisational performance and growth in the long-run. But productivity may not entail the implementation of participation programs and schemes if these are not carried out thoughtfully in regard to external and internal factors such as unions, organisational culture, work force willingness, etc. How employee participation is best implemented will probably continue to perplex writers and managers, but it definitely is here to stay.
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