Working Paper: NBER ID: w10177
Authors: Douglas Kruse; Richard Freeman; Joseph Blasi; Robert Buchele; Adria Scharf; Loren Rodgers; Chris Mackin
Abstract: What enables some employee ownership firms to overcome the free rider problem and motivate employees to improve performance? This study analyzes the role of human resource policies in the performance of employee ownership companies, using employee survey data from 14 companies and a national sample of employee-owners. Between-firm comparisons of 11 ESOP firms show that an index of human resource policies, nominally controlled by management, is positively related to employee reports of co-worker performance and other good workplace outcomes (including perceptions of fairness, good supervision, and worker input and influence). Within-firm comparisons in three ESOP firms, and exploratory results from a national survey, show that employee-owners who participate in employee involvement committees are more likely to exert peer pressure on shirking co-workers. We conclude that an understanding of how and when employee ownership works successfully 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) the corporate culture that battles against tendencies to free ride.
Keywords: employee ownership; human resource policies; performance; ESOP
JEL Codes: J330; J540
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ownership stakes (G32) | sense of ownership among employees (M54) |
| human resource policies (J08) | motivation of performance (D29) |
| human resource policies (J08) | employee performance outcomes (M51) |
| human resource policies (J08) | coworker performance (D29) |
| human resource policies (J08) | favorable workplace outcomes (J29) |
| participation in involvement committees (D71) | peer pressure on coworkers (C92) |
| participation in involvement committees (D71) | accountability among employees (M54) |