Motivating Employee-Owners in Esop Firms: Human Resource Policies and Company Performance

35 Pages Posted: 4 Jan 2004 Last revised: 12 Sep 2009

See all articles by Douglas L. Kruse

Douglas L. Kruse

Rutgers University

Richard B. Freeman

National Bureau of Economic Research (NBER); University of Edinburgh - School of Social and Political Studies; Harvard University; London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP)

Joseph Blasi

Rutgers School of Management and Labor Relations - New Brunswick

Robert Buchele

Smith College - Department of Economics

Adria Scharf

University of Washington

Loren Rodgers

Ownership Associates, Inc.

Chris Mackin

Ownership Associates, Inc.

Date Written: December 2003

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 co-workers. 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 that battles against tendencies to free ride.

Suggested Citation

Kruse, Douglas L. and Freeman, Richard B. and Blasi, Joseph R. and Buchele, Robert and Scharf, Adria and Rodgers, Loren and Mackin, Chris, Motivating Employee-Owners in Esop Firms: Human Resource Policies and Company Performance (December 2003). NBER Working Paper No. w10177. Available at SSRN: https://ssrn.com/abstract=481449

Douglas L. Kruse (Contact Author)

Rutgers University ( email )

Piscataway, NJ 08854
United States
908-445-5991 (Phone)
908-445-2830 (Fax)

Richard B. Freeman

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-868-3900 (Phone)
617-868-2742 (Fax)

University of Edinburgh - School of Social and Political Studies ( email )

Adam Ferguson Building
George Square
Edinburgh EH8 9LL
United Kingdom

Harvard University ( email )

Littauer Center
Cambridge, MA 02138
United States
617-868-3900 (Phone)

London School of Economics & Political Science (LSE) - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE

Joseph R. Blasi

Rutgers School of Management and Labor Relations - New Brunswick ( email )

Piscataway, NJ 08854
United States
732-445-5444 (Phone)
732-445-2830 (Fax)

Robert Buchele

Smith College - Department of Economics ( email )

Northampton, MA 01063
United States

Adria Scharf

University of Washington ( email )

Seattle, WA 98195
United States

Loren Rodgers

Ownership Associates, Inc. ( email )

122 Mt. Auburn Street
Cambridge, MA 02138
United States

Chris Mackin

Ownership Associates, Inc. ( email )

122 Mt. Auburn Street
Cambridge, MA 02138
United States

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