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Motivating employee owners in ESOP firms: human resource policies and company performance

By Douglas Kruse, Joseph Blasi, Robert Buchele, Adria Scharf, Loren Rodgers, Chris Mackin and Richard B. Freeman

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 coworkers. 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 which battles against tendencies to free ride

Topics: HD Industries. Land use. Labor
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 2004
OAI identifier: oai:eprints.lse.ac.uk:19930
Provided by: LSE Research Online

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