The Effect Of Employee Participation On Organizational Performance

Project and Seminar Material for Industrial Relations and Personnel Management

The Effect Of Employee Participation On Organizational Performance

Chapter One


1.1 Background To The Study

Participation of employee describes the involvement of employee in decision making which is concerned with shared decision making in the work situation [Mitchell, 1973]. [Locke & Schweiger, 1979] defines employee participation as a joint decision making between managers and subordinates. According to [Noah, 2008] it is a special form of delegation in which the subordinate gain greater control, freedom of choice with respect to bridging the communication gap between the management and workers. It refers to the degree of employee involvement in organization’s strategic planning activities. A company can have deep or shallow employee participation in decision making [Barringer & Bleudorn, 1999]. The employee participation in the planning process leads to potential innovation, which may facilitates opportunity and recognition in the organization [Zivkovic et al, 2009]. Managers provide opportunities for participation of subordinates in decision making on the basis of their merits as it has been proved by researchers to have improved organizational performance [Witte, 1980; Sagie & Aycon, 2003]

The advantages of employee participation in an organization:

  1. It increases employee’s morale and enhances the productivity [Chang& Lorenzi, 1983]
  2. It provide employees the opportunity to use their intellectual which will lead to better decisions for the organization [Williamson, 2008]
  3. Employee participation contributes to trust and sense of control[Chang& Lorenzi, 1983]
  4. As a result of employee participation, resources required to monitor employee can be minimized thus reduced cost [Arthur, 1994; Spreitzes &Mishra, 1999]
  5. Employee participation in an organization maximizes the view points and give diversity of perspectives [Kemelgor, 2002]

There are too many evidences that shows organizational’s performance increase with the increase in employee participation [Arthur, 1994; Daft & Lewin, 1993; Denninson & Mishra, 1995;

Productivity is the performance measure encompassing both efficiency and effectiveness, high performing and effective organization posses a culture of encouraging employee participation. Therefore, employees are more willing to get involved in decision making process, like goal setting, problem solving activities which results in higher performance [ Hellriegel, Slocum & Woodman 1998]. Encourage more modern participative style of management raise employee productivity and satisfaction even with low compensation rates [Madison, Wisconsin, 2000]. Job satisfaction increases productivity through high quality motivation and through increasing working capabilities at the time of implementation [Miller & Mange, 1986]. These were the evidences that participative working environment has more substantial effects on workers’ productivity.

Every organization seeks to improve and increase its performance level by providing learning opportunities to its workers (Weiss et al., 1998). Organizations must perform at individual level to improve their performance of whole organizational. All subdivisions of the organizations must perform well to achieve overall performance level (Ward, 2007). Organizations in all over the world have designed different processes to improve performance level from functional to employees and till organizational level to perk up overall organizational performance. Organizations are also required to manage performance of its employees and functions by setting goals and achieving those (Good et al., 2004). According to Dess & Robinson (1984), organizational performance can be enhanced by improving employee participation and management must have certain tools to improve employee participation in that sector. Wheelen and Hunger (1998) says that level of performance is based on objectives and goals set by an organization. For every company working in market the main goal is to earn profit and reduce expenses. Organizations can improve their profit and reduce their expenses by improving employee participation (Sorenson, 2002). According to Lee et al., (2004) level of progress and participation is different in every company. Many organizations delegate authority and power to their employees and due to that authority organizations performance also increases. An organization which gives authority to their employee to take decision also enhances their own skills. Organizations which perform well also involve employees in decision making and other organizational decisions. Rashid, et al., (2003) says that organizations also require more profit on their input and financial benefits on all expenses occurred. According to Ho et al., (2006) organizations require different analysis to measure their profitability and this shows that organization profitability can be increased when performance level of an organization also increases.

1.2 Statement Of The Problem

Employee participation shows that each employee is a different person, not just a component in a mechanism, and every employee is concerned in serving the business to get together its objective. Each employee contribution is asked for and appreciated by organization. Workers and management recognize that each employee is involved in running the business (Apostolou, 2000). Employee participation is a procedure to authorize workers to contribute in decision-making behavior suitable to their rank in the association.

Employee participation can therefore be seen as an umbrella title under which can be found a wide range of practices, potentially serving different interests. Any exploration of ‘employee participation’ has therefore to encompass terms as wide-ranging as industrial democracy, cooperatives, employee share schemes, employee involvement, human resource management (HRM) and high-commitment work practices, collective bargaining, employee empowerment, team working and partnership to capture the full picture of employee participation. However, the researcher will investigate the effect of employee participation on organizational performance.

1.3 Objectives Of The Study

The general objective of this study is to examine the effect of employee participation on organizational performance while the following are the specific objectives:

  1. To examine the effect of employee participation on organizational performance
  2. To find out ways/methods of introducing effective employee participation programme in an organization
  3. To determine the challenges that are associated with employee participation.

1.4 Research Questions

  1. What are the effects of employee participation on organizational performance?
  2. What are the ways/methods of introducing effective employee participation programme in an organization?
  3. What are the challenges associated with employee participation in an organization?

1.5 Hypothesis

  • HO: There is no significant relationship between employee participation and organizational performance.
  • HA: There is significant relationship between employee participation and organizational performance.

1.6 Significance Of The Study

This study will help management and administrators of corporate business organization as a guide in implementing an effective employee participation programme to encourage employee involvement in decision making. By doing so, employee will put in their intellectual contribution towards improved organizational performance. The findings of this research work will also serve as reference for academic endeavour to lecturers and students and also help the public who would want to know about some advantages and disadvantages (if any) of employee participation and its effect on organizational performance.

1.7 Scope/Limitations Of The Study

The scope of this study on the effect of employee participation on organizational performance will cover the process of employee involvement in decision making process in an organization carefully describing the benefits that is accrue to it.

1.8 Definition Of Terms


A social unit of people that is structured and managed to meet a need or to pursue collective goals


Joint consultation in decision making, goal setting, profit sharing, teamwork, and other such measures through which a firm attempts to achieve organization performance


The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract, performance is deemed to be the fulfillment of an obligation, in a manner that releases the performer from all liabilities under the contract.

The Effect Of Employee Participation On Organizational Performance

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