Employee Ownership, Motivation and Productivity
Employee ownership, motivation and productivity
A research report for Employees Direct from Birkbeck and The Work Foundation
By Jonathan Michie, Christine Oughton and Yvonne Bennion November 2002
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E M P LOY E E S D I R E C T R E P O R T N O V E M B E R 2 0 0 2
Contents
About the authors/Acknowledgements Foreword, by Will Hutton Executive Summary 1. Introduction 2. Site visits and interviews 3. Follow-up surveys 4. Focus groups 5. Discussion and Conclusion References
3 4 5 6 10 18 21 30 33
Layout: Wyvern 21 Printing: JW Arrowsmith
The Work Foundation. Registered as a charity no: 290003 This issue first printed November 2002 ISBN 1-84373-003-0
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the publishers. This publication may not be lent, resold, hired out or otherwise disposed of by way of trade in any form, binding or cover other than that in which is is published, without the prior consent of the publishers.
E M P LOY E E S D I R E C T R E P O R T N O V E M B E R 2 0 0 2
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About Employees Direct
Employees Direct is a working party established in July 2001, following a report commissioned by Mutuo1 on how the government’s aim of enhancing productivity through the motivational effects of employee shareholding might best be realised. 2 Employees Direct brings together academics, practitioners and opinion formers. Its intention is to report on the potential for employee shareholding to: first, play an active role in improving the corporate governance and accountability of firms second, to enhance employee motivation and productivity. This report has been commissioned to help inform this process. The Working Party members include Mutuo, the CBI, Job Ownership Ltd, the TUC, Unity Corporate Advisers, Cobbetts Solicitors, the
A research report for Employees Direct from Birkbeck and The Work Foundation
By Jonathan Michie, Christine Oughton and Yvonne Bennion November 2002
Page 2
E M P LOY E E S D I R E C T R E P O R T N O V E M B E R 2 0 0 2
Contents
About the authors/Acknowledgements Foreword, by Will Hutton Executive Summary 1. Introduction 2. Site visits and interviews 3. Follow-up surveys 4. Focus groups 5. Discussion and Conclusion References
3 4 5 6 10 18 21 30 33
Layout: Wyvern 21 Printing: JW Arrowsmith
The Work Foundation. Registered as a charity no: 290003 This issue first printed November 2002 ISBN 1-84373-003-0
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the publishers. This publication may not be lent, resold, hired out or otherwise disposed of by way of trade in any form, binding or cover other than that in which is is published, without the prior consent of the publishers.
E M P LOY E E S D I R E C T R E P O R T N O V E M B E R 2 0 0 2
Page 3
About Employees Direct
Employees Direct is a working party established in July 2001, following a report commissioned by Mutuo1 on how the government’s aim of enhancing productivity through the motivational effects of employee shareholding might best be realised. 2 Employees Direct brings together academics, practitioners and opinion formers. Its intention is to report on the potential for employee shareholding to: first, play an active role in improving the corporate governance and accountability of firms second, to enhance employee motivation and productivity. This report has been commissioned to help inform this process. The Working Party members include Mutuo, the CBI, Job Ownership Ltd, the TUC, Unity Corporate Advisers, Cobbetts Solicitors, the
References: JT Addison and CR Belfield (2000) ‘The impact of financial participation and employee involvement in financial performance: a reestimation using the 1998 WERS’, Scottish Journal of Political Economy, volume 47, number 5, pp 571-583. E Appelbaum, T Beiley, P Berg and AL Kalleberg (2000) Manufacturing Advantage: Why High-Performance Work Systems Pay Off, Cornell University Press. J Blasi, M Conte and D Kruse (1996) ‘Employee stock ownership and corporate performance among public companies’, Industrial and Labor Relations Review, volume 50, number 1, pp 60-79. P Burns (2000) The Silent Stakeholder, London: The Industrial Society (now The Work Foundation). MJ Conyon and RB Freeman (2001) Shared Modes of Compensation and Firm Performance: UK Evidence, mimeo. GAO (General Accounting Office) (1987) Employee Stock Ownership Plans: Little Evidence of Effects on Corporate Performance, Washington DC. J Godard (2001) ‘High performance and the transformation of work? The implications of alternative work practices for the experience and outcomes of work’, Industrial and Labor Relations Review, volume 54, number 4, pp 776-805. D Guest, J Michie, M Sheehan and N Conway (2000) Employment Relation, HRM and Business Performance: An analysis of the 1998 Workplace Employee Relations Survey, London: CIPD. D Guest, Z King, N Conway, J Michie and M Sheehan-Quinn (2001) Voices from the Boardroom, London: CIPD. Inland Revenue (1999) A New All-Employee Share Plan, London: Inland Revenue E Kandel and EP Lazear (1992) ‘Peer pressure and partnerships’, Journal of Political Economy, volume 100, number 4, pp 801-817. SJ Konzelmann and R Forrant (2002) ‘Creative work systems in destructive markets’, in Burchell, Deakin, Michie and Rubery (eds) Systems of Production: markets, organisations and performance, London: Routledge. D Kruse and J Blasi (1995) Employee ownership, employee attitudes and firm performance, NBER Working Paper no 5277. EP Lazear (1995) Personnel Economics, Cambridge Mass: The MIT Press. J Logue and J Yates (2001) The Real World of Employee Ownership, Ithaca and London: ILR Press. R McNabb and K Whitfield (1998) ‘The impact of financial participation and employee involvement on financial performance’, Scottish Journal of Political Economy, volume 45, number 2, pp 171-187. R McNabb and K Whitfield (2000) ‘The impact of financial participation and employee involvement on financial performance: a reestimation using the 1998 WERS: a reply’, Scottish Journal of Political Economy, volume 47, number 5, pp 584-590. J Michie (2001) ‘High performance work systems’, in Michie (ed.), A Reader’s Guide to Social Sciences, London: Fitzroy Dearborn/ Routledge. J Michie and C Oughton (2001) Employees Direct: Shareholder Trusts, Business Performance and Corporate Governance, London: Mutuo. J Michie and M Sheehan (1999a) ‘Labour market dynamics and innovation’, Industrial & Corporate Change, volume 8, number 2, pp 211-233. J Michie and M Sheehan (1999b) ‘No Innovation without representation? An analysis of participation, representation, R&D and innovation’, Economic Analysis, volume 2, number 2, pp 85-97. J Michie and M Sheehan-Quinn (2001) ‘Labour Market Flexibility, Human Resource Management and Corporate Performance’, British Journal of Management, volume 12, number 4, pp 287-306. J Michie and M Sheehan (2003) ‘Labour Flexibility and Innovative Behaviour’, Cambridge Journal of Economics, volume 27, number 1, forthcoming, January. P Nolan (2002) ‘Director’s Report’, in The Future of Work Bulletin number 4, August, Leeds University Business School, www.leeds.ac.uk/esrcfutureofwork/ MG Patterson, MA West, R Lawthom and S Nickell (1997) Impact of People Management Practices on Business Performance, London: CIPD. A Pendleton, E Poutsma, J van Ommeren and C Brewster (2001a) Employee Share Ownership and Profit-sharing in the European Union, Dublin, European Foundation for the Improvement of Living and Working Conditions. A Pendleton (2001) Employee Ownership, Participation and Governance: A study of ESOPs in the UK, London: Routledge. J Philpott (2002) ‘HRH – A work audit’, Perspectives, Summer, London: CIPD. FK Pil and JP MacDuffie (1996) ‘The Adoption of High-Involvement Work Practices’, Industrial Relations, volume 35, number 3, pp 423455. Offices in London, Birmingham and Scotland Contact us by telephone on: 0870 165 6700 or by fax on: 0870 165 6701 customercentre@theworkfoundation.com www.theworkfoundation.com