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Motivating Employee Owners in ESOP Firms: Human Resource Policies and Company Performance

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  • Joseph Blasi
  • Robert Buchele
  • Richard Freeman
  • Douglas Kruse
  • Chris Mackin
  • Loren Rodgers
  • Adria Scharf

Abstract

What enables some employee ownership firms to overcome the free rider problem andmotivate employees to improve performance? This study analyzes the role of humanresource policies in the performance of employee ownership companies, using employeesurvey data from 14 companies and a national sample of employee-owners. Between-firmcomparisons of 11 ESOP firms show that an index of human resource policies, nominallycontrolled by management, is positively related to employee reports of co-workerperformance and other good workplace outcomes (including perceptions of fairness, goodsupervision, and worker input and influence). Within-firm comparisons in three ESOP firms,and exploratory results from a national survey, show that employee-owners who participatein employee involvement committees are more likely to exert peer pressure on shirking coworkers.We conclude that an understanding of how and when employee ownership workssuccessfully requires a three-pronged analysis of: 1) the incentives that ownership gives; 2)the participative mechanisms available to workers to act on those incentives; and 3) thecorporate culture which battles against tendencies to free ride.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0658.

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Date of creation: Nov 2004
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Handle: RePEc:cep:cepdps:dp0658

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

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Keywords: human resources; industrial relations; employee ownership;

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  1. Martin J. Conyon & Richard B. Freeman, 2001. "Shared Modes of Compensation and Firm Performance: UK Evidence," NBER Working Papers 8448, National Bureau of Economic Research, Inc.
  2. Douglas L. Kruse, 1993. "Profit Sharing: Does It Make a Difference?," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number ps.
  3. Craig, Ben & Pencavel, John, 1992. "The Behavior of Worker Cooperatives: The Plywood Companies of the Pacific Northwest," American Economic Review, American Economic Association, vol. 82(5), pages 1083-105, December.
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Cited by:
  1. Fabling, Richard & Grimes, Arthur, 2007. "HR Practices and Firm Performance: What Matters and Who Does It?," Occasional Papers 07/2, Ministry of Economic Development, New Zealand.
  2. Erika Harden & Douglas L. Kruse & Joseph R. Blasi, 2008. "Who Has a Better Idea? Innovation, Shared Capitalism, and HR Policies," NBER Working Papers 14234, National Bureau of Economic Research, Inc.

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