Solving the world’s problems – everything ranging from productivity growth and employment creation to ageing and climate change – will require firms to get better at what they do. Modern management techniques are increasingly looking like they will help deliver on the necessity.
There is a growing body of evidence indicating that certain modern management practices increase firm profitability – specifically practices known as 'high-involvement management'. They were given this name since they work by engaging workers more fully in their jobs.
These techniques were first articulated and advocated by management theorists in the early 1980s. However, it is only recently that economists have realized their impact on firm performance. This is largely thanks to the immense data collection efforts by Bloom and Van Reenen (2010).
What remains largely unknown is the effect of these practices on workers – and their wellbeing in particular. There are two reasons for this:
- First, authors often claim that it is via the impact on workers that such practices improve firm performance.
These impacts could be either a good thing for worker wellbeing (job enrichment, job autonomy, rewarding effort fairly, or building effective teamwork, etc). Or they could be a bad thing for workers (demanding more effort for less pay, overbearing monitoring effort, and enforcing targets, etc).
So far, the scant evidence that exists on this has often been based on case studies looking at particular occupations or self-selected samples of workers.
- Second, in spite of a wealth of new evidence from economic studies on 'happiness' and 'wellbeing' (eg Graham 2011), few studies focus on worker wellbeing.
This is because studies rarely collect data on measures of both worker wellbeing and work environment.
What is known is somewhat contradictory
Initial studies of high-involvement management indicated clear productivity improvements but a barely discernible negative impact on worker wellbeing (Appelbaum et al 2000). A second generation of studies, however, paints a more complicated picture.
High-involvement management is often job-enriching, leading to improvements in job satisfaction, but sometimes at the expense of increased job-related anxiety and absenteeism (eg Frick and Simmons 2011). This is because greater job demands, which are often valued by workers, induce stress unless workers are able to tackle demanding tasks in a fashion that best suits them. Often job control is not ceded to employees and, to make matters worse, the social support from which workers might benefit psychologically – supportive supervision, for instance, or effective union representation – are also lacking (Wood and Bryson 2009).
Research based on new data
In a recent study, we contribute to the literature by using nationally representative data for Finland, a country renowned for being an 'early mover' in high-involvement management. Furthermore, its work practices are located within a wage structure and industry mix which, one might imagine, would be conducive to the 'work enriching' high-involvement management, rather than geared towards labour intensification (Böckerman et al 2011).
Our survey ask employees which practices they are exposed to in their job, including autonomous teamwork, performance-based incentive pay, systematic training and information-sharing by management. We estimate the effects of these practices on three measures of wellbeing, namely sickness absences, both short-term and long-term; subjective wellbeing (job satisfaction, work capacity, the state of one’s health, and feelings of tiredness); and physical discomfort at work, as measured by the experience of pain in four different parts of the body (the lumbar region, legs, arms, and neck).
In identifying any causal linkage between high-involvement management and worker wellbeing the chief obstacle is non-random exposure to high-involvement management. It is likely that those who do not feel up to high involvement will simply avoid it, potentially biasing any positive association between high-involvement management and wellbeing. Crucially, we are able to overcome this problem with very rich data on worker absence and earning patterns going back five years prior to the survey. We are thus able to account for patterns and incidence of prior sickness absence, thus ensuring our estimates are not simply a product of worker selection.
We find high-involvement management is positively associated with various aspects of employee wellbeing. In particular, it is strongly associated with higher evaluations of subjective wellbeing including higher job satisfaction and non-tiredness. It is also associated with a lower probability of having a workplace accident. However, it is also associated with having more short absence spells. Consistent with this, we present a model where high-involvement management increases short-term absence, both because working under this type of management is more demanding than standard production and because multi-skilled workers cover for one another’s short absences. The model suggests no systematic impact on long-term absence, and none is observed. So the nature of high-involvement management appears important for worker wellbeing, but it is not the only aspect of modern management that influences worker wellbeing. Another is the way in which new practices are introduced. In new work we are finding that what appears to matter here is employee involvement in the process of consultation and negotiation leading to change. In a study with British linked employer-employee data we find organisational change is positively associated with increased job-related anxiety, but this anxiety is absent where workers are covered by a union involved in organisational changes (Bryson et al 2009). The high-involvement management anxiety effect is still apparent among uncovered employees, even if they are involved in consultation over change.
Overall, this literature indicates the potential benefits of high-involvement management for firms but there are circumstances in which it can have negative effects on employee wellbeing. In minimising these costs firms must consider not only what combination of practices will improve performance, but also how best to introduce those practices, and how to monitor the effects on their workforce.
Appelbaum, E, T Bailey, P Berg. and AL Kalleberg, (2000) Manufacturing advantage: Why high-performance work systems pay off. Ithaca NY: Cornell University Press
Bloom, N and J Van Reenen, (2010) “Human Resource Management and Productivity”, CEP Discussion Paper 982, London School of Economics
Böckerman, P, A Bryson, and P Ilmakunnas, (2011) Does High Involvement Management Improve Worker Wellbeing?, NIESR Discussion Paper No. 380
Bryson, A, H Dale-Olsen, E and Barth, (2009) How Does Innovation Affect Worker Well-being?, CEP Discussion Paper 953
Frick, B. and R Simmons (2011) “The Hidden Costs of High Performance Work Practices: Evidence from a Large German Steel Company”, mimeo.
Graham, Carol (2011) “Happiness economics: Can we have an economy of wellbeing?”, VoxEU.org, 31 July.
Wood, S and A Bryson, (2009) ‘High involvement management’, Chapter 7 in W. Brown, A Bryson, J Forth and K Whitfield (eds) The Evolution of the Modern Workplace, pp. 151-175, Cambridge: Cambridge University Press.