It Pays to Give Workers More of a Say in How a Business Is Run

Practices that encourage workers to think and interact to improve the production process are strongly linked to increased productivity.

Giving workers more of a say in how a business is run may raise productivity, according to research by Sandra Black and NBER Research Associate Lisa Lynch. Using data from a 1994 survey of establishments conducted by the Census Bureau, they discover that those manufacturing plants in which workers played a significant decisionmaking role were markedly more productive than plants where they did not. Black and Lynch also find that plants where a high proportion of non-managerial workers used computers were more productive than other plants, as were plants whose workers had high average education levels.

Previous studies had found links between employee involvement and productivity in an individual plant or a specific industry, but Black and Lynch were the first to examine a nationally representative sample of businesses (both manufacturing and nonmanufacturing). Many of the manufacturing companies in their survey thus could be matched with the Census Bureau's longitudinal database on manufacturing establishments.

In How to Compete: The Impact of Workplace Practices and Information Technology on Productivity(NBER Working Paper No. 6120), they also find that some practices which companies have adopted to increase productivity have had no impact. For example, neither total quality management nor profit sharing exclusively for managers increased productivity (although profit sharing for non-management workers did increase productivity). Black and Lynch also find that unionization had a mixed impact on productivity. Unionized plants with traditional manager-worker relations had extremely low productivity; unionized plants that have adopted new workplace practices such as incentive-based compensation and employee participation not only were more productive than their old-fashioned unionized peers, but also outperformed nonunion plants that had adopted similar new workplace practices. In sum, Black and Lynch find that practices that encourage workers to think and interact to improve the production process are strongly linked to increased productivity.