The Effect of Employee Involvment on Firm Performance: Evidence from an Econometric Case Study
We 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
|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
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.:
- 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.
- John Paul Macduffie, 1995. "Human Resource Bundles and Manufacturing Performance: Organizational Logic and Flexible Production Systems in the World Auto Industry," ILR Review, Cornell University, ILR School, vol. 48(2), pages 197-221, January.
- 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.
- Paul Osterman, 1994. "How Common is Workplace Transformation and Who Adopts it?," ILR Review, Cornell University, ILR School, vol. 47(2), pages 173-188, January.
- Holmstrom, Bengt & Milgrom, Paul, 1994. "The Firm as an Incentive System," American Economic Review, American Economic Association, vol. 84(4), pages 972-91, September.
- Kandel, E. & Lazear, E.P., 1990.
"Peer Pressure and Partnerships,"
90-07, Rochester, Business - Managerial Economics Research Center.
- 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.
- 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.
- 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.
- 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.
- David Neumark & Peter Cappelli, 1999. "Do "High Performance" Work Practices Improve Establishment-Level Outcomes?," NBER Working Papers 7374, National Bureau of Economic Research, Inc.
- Susan Helper, 1997. "Complementarity and Cost Reduction: Evidence from the Auto Supply Industry," NBER Working Papers 6033, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:wdi:papers:2003-612. See general information about how to correct material in RePEc.
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.