Improving company performance by investing in people

European companies are rethinking how they can sustainably secure growth and competitiveness in the wake of the biggest global economic crisis since the Great Depression of the 1930s. And this task, hard enough by itself, is happening in the light of long-term developments in demography, mobility and the internationalisation of markets. Eurofound has looked at the innovative ways in which companies combine workplace practices with regard to work organisation, human resource management, direct participation and social dialogue and at how these practices may bring successful (or otherwise) outcomes for companies and workers.

Combining workplace practices 

The overview report of the third European Company Survey shows that there are multiple approaches associated with better performance and well-being, but the key common dominator between these approaches is the facilitation of direct employee participation.

The report examined practices across nine different areas, which are often interlinked.

  • Collaboration and outsourcing in the development, production (or delivery) and marketing of goods and services;
  • Internal organisation and information management: organisation of departments, teamwork, task rotation, information management (knowledge sharing, monitoring quality and monitoring external ideas);
  • Decision-making on daily tasks: autonomous teamwork and employee autonomy in decision-making;
  • Recruitment, employment and career development: employment contracts, performance appraisal, tenure and promotion opportunities;
  • Training: paid time off for training and on-the-job training;
  • Working time flexibility: flexibility in starting and finishing times, accumulation of overtime, part-time work;
  • Variable pay: performance related pay and financial participation;
  • Direct employee participation: Instruments to enable direct employee participation, level of involvement, attitudes towards direct participation;
  • Workplace social dialogue: types of structures, communication with the workforce, resources for the employee representation, information provision, level of involvement, level of influence, trust, industrial action.

This revealed five common ways in which the approaches to each of these areas are combined.

The largest group of companies (Systematic and involving) combines a top-down approach to decision-making on daily tasks with a highly structured internal organisation, high investment in human resource management (HRM), and extensive use of direct and indirect participation. This group resembles the ‘high performance work systems’ that are widely discussed in both the professional and academic literature and have been observed in previous Eurofound research. This approach to work organisation is characterised by a strong focus on teamwork, flexibility in terms of working time and pay, and investments inarrangements, training and employee participation.

The second largest group (Externally oriented) combines high levels of collaboration and out­sourcing with a top-down approach to decision-making on daily tasks, moder­ately structured internal organisation, moderate investment in HRM, and little direct and indirect participation.

In a third group (Top-down and internally oriented) top-down decision-making on daily tasks is even more prevalent, and comes along with very little collaboration and outsourcing, a highly structured approach to the internal organisation, moderate investment in HRM, and moderately supported direct and indirect participation.

The fourth group (Passive management) also has a top-down approach decision-making on daily tasks, combined with a moderately structured internal organisation, hardly any investment in HRM, and very little direct and indirect participation. This group resembles the ‘traditional or simple organisations’ found in previous research.

Finally, the fifth group (Interactive and involving) is the only group that is characterised by a joint approach to decision-making on daily tasks, which is combined with a moderately structured internal organisation, fairly lim­ited investment in HRM, but extensive use of direct participation. Again, we find similarities with an approach discussed in the literature, labelled ‘discretionary learning’. These differ from ‘high performance work systems’ in their less formal organisational structure and stronger emphasis on individual and team autonomy.

Associations with performance and well-being

The figure shows the average scores for each of these five groups on indicators of establishment (local site) performance and workplace well-being. The ‘Systematic and involving’ and ‘Interactive and involving’ groups both score highest on establishment performance, but the ‘Interactive and involving’ group scores much higher on workplace well-being. The other three groups score below average on both establishment performance and workplace wellbeing. The ‘Passive management’ and ‘Top-down and internally oriented’ groups have the worst scores on performance. The ‘Top-down and internally oriented’ and ‘Externally oriented’ groups score lowest on well-being.

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Note: The scores on the axes are z-scores indicating a relative difference from the mean (0).

Workplace practices are not a panacea. Even in the two most favourable groups only around half of the establishments have an above-average score on both performance and well-being. In the least favourable group (passive management) this is the case for just over a quarter of establishments. This implies that companies should not only look at workplace design, but also at their wider cultural, institutional and socio-economic context, and should try to find the combination of workplace practices that best matches their circumstances.

Conclusions

The common characteristic of companies that score well on both performance and well-being are their extensive practices for ensuring direct employee participation, supporting the notion that ‘win-win’ arrangements need to include measures to enable optimal use of employees’ knowledge. However, even when these favourable practices are in place, achieving ‘win-win’ outcomes is not guaranteed. Further research is required to investigate how to best match workplace practices with the wider circumstances and characteristics of the establishment. In the meantime, policy makers, social partners and company managers should be encouraged to explore how they can best facilitate the involvement of employees in operational and strategic decision-making. By stimulating and facilitating employees to vocalise and utilise their tacit knowledge managers gain access to a largely untapped resource. Importantly, tapping into this resource does not only improve workplace performance but increases well-being as well.

This article was first published in Social Europe Journal.

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