Is Breeding Contentment Worth the Investment?

Employee-involvement programs generate worker satisfaction, but they may not lead to greater productivity

If you want to boost workplace morale, give your employees more say over their jobs. But don't expect that happier workers will necessarily be more productive ones. That's the implication of a recently published National Bureau of Economic Research study by three scholars who examined "employee involvement" programs.

The study, based in part on a survey of executives at 373 companies, found a dramatic increase in recent years in the percentage of businesses seeking greater employee participation in workplace decision-making. The survey looked at eight management practices, such as soliciting input from employees in designing compensation packages, creating self-managed teams, and setting up worker committees to analyze quality problems.

In 1983, the companies -- a mix of businesses, including manufacturing, service, and retail -- each had an average of 1.5 such programs in place. A decade later, that figure had jumped to six. By comparison, only 20% of companies regularly surveyed workers about job conditions in 1983. By 1993, the figure was 74%.


  Apparently, employees welcomed the chance to have a voice in their jobs. Another part of the study, based on a 1994 survey of 2,408 employees, found that 34% of those in involvement programs reported being "very" satisfied with the influence they exercised over their work lives. Only 19% of nonparticipants were equally enthusiastic.

Participants were also more likely to trust their employers, to feel loyal to them, and to rate relations with management as better than average. And if they worked in nonunion companies, they were less inclined than other workers to say they would favor union representation.

They apparently also believed their enthusiasm translated into a financial windfall for their employer: Fully 87% said the programs had been effective in improving productivity or quality. But their perceptions could be wrong. The researchers detected no difference in productivity -- measured in terms of sales per employee -- between companies with little commitment to employee involvement and companies with large percentages of workers in involvement programs.


  The study didn't look at the effect of the programs on costly turnover and absenteeism. And although it's a reasonable assumption that happier employees are less likely to skip work or quit than their less-happy colleagues, this doesn't necessarily mean employee-involvement programs save money for companies. That's because the cost of setting up and running the programs could offset savings in turnover and absenteeism, says Morris M. Kleiner, a labor economist at the University of Minnesota who wrote the study with Richard B. Freeman, a Harvard economist, and Cheri Ostroff, a professor and expert in organizational management at Columbia University's Teachers College.

The lack of a gain in productivity is suggestive rather than conclusive, because the number of companies surveyed was too small for a definitive reading, the study said. Still, the authors noted their finding is similar to the results of two other recent studies.

Does this mean companies should return to the pseudomilitary style of management familiar to an older generation of workers? Indeed not, Kleiner says. For one thing, even if employee involvement doesn't pump up productivity, it doesn't hamper it, either -- and it does produce a happier workforce. Giving employees more say could stave off discontent that otherwise might be channeled into presumably unwelcome union activity. And involvement breeds contentment. "Employees tend to like it," Kleiner says. "They would be upset if these programs were done away with."

The potential economic downturn notwithstanding, those are words for managers to keep in mind.

By Pam Mendels in New York

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