The Effect of Employee Involvment on Firm Performance: Evidence from an Econometric Case Study
AbstractWe provide some of the most reliable evidence to date on the direct impact of employee involvement through participatory arrangements such as teams on business performance. The data we use are extraordinary --daily data for rejection, production and downtime rates for all operators in a single plant during a 35 month period, almost 53,000 observations. Our key findings are that: (i) membership in offline teams initially enhances individual productivity by about 3% and reduces rejection rates by more than 25%; (ii) these improvements are dissipated, typically at a rate of 10 to 16% per 100 working days; (iii) the introduction of teams is initially accompanied by increased rates of downtime and these costs diminish over time. In addition: (iv) the performance-enhancing effects of team membership are greater and more long-lasting for team members who are solicited by management to join teams; similar relationships exist for more educated team members. These findings, which are best interpreted as lower bound estimates of the effects of teams, are consistent with the diverse hypotheses including propositions that: (i) employee involvement will produce improved enterprise performance through diverse channels including enhanced discretionary effort by employees; (ii) various kinds of complementarities accompany many changes in organizational design (such as between teams and formal education); (iii) the introduction of high performance workplace practices are best viewed as investments, though there are significant learning effects; (iv) differences in performance for team members solicited by mangers compared to those who volunteer are consistent with various hypotheses including management signaling and opportunistic behavior by employees, but inconsistent with hypotheses based on Hawthorne effects
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2003-612.
Length: 44 pages
Date of creation: 01 Sep 2003
Date of revision:
Contact details of provider:
Postal: 724 E. University Ave, Wyly Hall 1st Flr, Ann Arbor MI 48109
Phone: 734 763-5020
Fax: 734 763 5850
Web page: http://www.wdi.umich.edu
More information through EDIRC
Productivity; High Performance Work Practices; Employee Participation; Human Resource Management Practices;
Find related papers by JEL classification:
- M54 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Labor Management
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- D20 - Microeconomics - - Production and Organizations - - - General
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- John MacDuffie, 1995. "Human resource bundles and manufacturing performance: Organizational logic and flexible production systems in the world auto industry," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(2), pages 197-221, January.
- Kandel, Eugene & Lazear, Edward P, 1992.
"Peer Pressure and Partnerships,"
Journal of Political Economy,
University of Chicago Press, vol. 100(4), pages 801-17, August.
- Edward L. Glaeser & David Laibson & Jose A. Scheinkman & Christine L. Soutter, 1999.
"What is Social Capital? The Determinants of Trust and Trustworthiness,"
NBER Working Papers
7216, National Bureau of Economic Research, Inc.
- Edward L. Glaeser & David Laibson & Jose A. Scheinkman & Christine L. Soutter, 1999. "What is Social Capital? The Determinants of Trust and Trustworthiness," Harvard Institute of Economic Research Working Papers 1875, Harvard - Institute of Economic Research.
- Susan Helper, 1997. "Complementarity and Cost Reduction: Evidence from the Auto Supply Industry," NBER Working Papers 6033, National Bureau of Economic Research, Inc.
- Takao Kato, 2000.
"The Recent Transformation of Participatory Employment Practices in Japan,"
NBER Working Papers
7965, National Bureau of Economic Research, Inc.
- Takao Kato, 2003. "The Recent Transformation of Participatory Employment Practices in Japan," NBER Chapters, in: Labor Markets and Firm Benefit Policies in Japan and the United States, pages 39-80 National Bureau of Economic Research, Inc.
- Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
- Harry J. Paarsch & Bruce S. Shearer, 1999. "The Response of Worker Effort to Piece Rates: Evidence from the British Columbia Tree-Planting Industry," Journal of Human Resources, University of Wisconsin Press, vol. 34(4), pages 643-667.
- Ichniowski, Casey & Shaw, Kathryn & Prennushi, Giovanna, 1997. "The Effects of Human Resource Management Practices on Productivity: A Study of Steel Finishing Lines," American Economic Review, American Economic Association, vol. 87(3), pages 291-313, June.
- Jones, Derek C & Kato, Takao, 1995. "The Productivity Effects of Employee Stock-Ownership Plans and Bonuses: Evidence from Japanese Panel Data," American Economic Review, American Economic Association, vol. 85(3), pages 391-414, June.
- Gibbons, Robert & Waldman, Michael, 1999. "Careers in organizations: Theory and evidence," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 36, pages 2373-2437 Elsevier.
- Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
- Peter Cappelli & David Neumark, 2001.
"Do "high-performance" work practices improve establishment-level outcomes?,"
Industrial and Labor Relations Review,
ILR Review, Cornell University, ILR School, vol. 54(4), pages 737-775, July.
- David Neumark & Peter Cappelli, 1999. "Do "High Performance" Work Practices Improve Establishment-Level Outcomes?," NBER Working Papers 7374, National Bureau of Economic Research, Inc.
- Paul Osterman, 1994. "How common is workplace transformation and who adopts it?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(2), pages 173-188, January.
- Heywood, John S. & Jirjahn, Uwe & Wei, Xiangdong, 2008. "Teamwork, monitoring and absence," Journal of Economic Behavior & Organization, Elsevier, vol. 68(3-4), pages 676-690, December.
- Uwe Jirjahn & Kornelius Kraft, 2010.
"Teamwork And Intra-Firm Wage Dispersion Among Blue-Collar Workers,"
Scottish Journal of Political Economy,
Scottish Economic Society, vol. 57(4), pages 404-429, 09.
- Jirjahn, Uwe & Kraft, Kornelius, 2008. "Teamwork and Intra-Firm Wage Dispersion among Blue-Collar Workers," IZA Discussion Papers 3291, Institute for the Study of Labor (IZA).
- Robert D. Mohr & Cindy Zoghi, 2006. "Is Job Enrichment Really Enriching?," Working Papers 389, U.S. Bureau of Labor Statistics.
- Hempell, Thomas & Zwick, Thomas, 2005. "Technology Use, Organisational Flexibility and Innovation: Evidence for Germany," ZEW Discussion Papers 05-57, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Laurie Gendron).
If references are entirely missing, you can add them using this form.