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Do Employee-Owned Firms Produce More Positive Employee Behavioural Outcomes? If Not Why Not? A British-Spanish Comparative Analysis

Abstract Whether ‘employee ownership’ takes the form of worker cooperatives, coownership or simply employee share ownership plans, there are normally high expectations that a range of positive outcomes will result. Yet many empirically based studies tend to find a much more complex picture. An influential segment of that empirical literature has posited the need for a number of mutually reinforcing workforce management components to be in place alongside coownership. Drawing on detailed case research in two large and successful coowned retailers in Spain and Britain this paper examines the role of these wider elements supporting employee ownership.We find that employee ownership can be linked to higher productivity and lower employee turnover, while at the same time being linked to higher absenteeism and mixed effects on attitudes. Expectations held by managers and employees are higher; these expectations are not always fully met. The role of managers was also found to be crucial.

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Link to the full version paper in BJIR: http://rdcu.be/tjf1
Introduction
– Dispersed and mixed results of previous research:
• Almost ½ of research studies find positive effects
• Almost another ½ of research studies find neutral effects.
• Some studies even find negative effects.
– Existing empirical research generally fails to explain the reasons
for such dispersed and mixed results.
Employee
Ownership
Satisfaction,
Engagement,
Absenteeism,
voluntary
turnover…
http://rdcu.be/tjf1
Introduction
• Need to fill the gap in the literature and answer why
+ and – responses happen
• GOAL: to shed light upon how employee ownership
and the internal fit between employee ownership
and the HRM system affects employee attitudes and
behaviours in Eroski and JLP
 Mixed results as a signal of + and – responses
http://rdcu.be/tjf1
Brief presentation of JLP and Eroski
EROSKI. The biggest coop ofEROSKI. The biggest coop of
Mondragon corporationMondragon corporation
Three different employment
models in Eroski
  2005 2006 2007 2008 2009 2010 2011 2013 2015
Cooperative working
members 8,053 8,062 8,177 8,426 8,935 8,229 8,463 11,828 11,379
Employees with partial
employee ownership
(GESPA) 4,632 4,713 5,154 6,307 6,468 6,350 5,602 467 479
Employees without
ownership 18,609 19,877 37,227 37,972 32,136 28,436 27,769 24,137 21,621
Total employment 31,294 32,652 50,558 52,705 47,539 43,015 41,834 36,432 33,509
% of cooperative
working members 25.7% 24.7% 16.2% 16.0% 18.8% 19.1% 20.2% 32.4% 33.9%
Source: Authors’ analysis based on Annual Reports and Social Responsibility Reports of Eroski
(from 2005 to 2015).

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Do Employee-Owned Firms Produce More Positive Employee Behavioural Outcomes? If Not Why Not? A British-Spanish Comparative Analysis

  • 1. Link to the full version paper in BJIR: http://rdcu.be/tjf1
  • 2. Introduction – Dispersed and mixed results of previous research: • Almost ½ of research studies find positive effects • Almost another ½ of research studies find neutral effects. • Some studies even find negative effects. – Existing empirical research generally fails to explain the reasons for such dispersed and mixed results. Employee Ownership Satisfaction, Engagement, Absenteeism, voluntary turnover… http://rdcu.be/tjf1
  • 3. Introduction • Need to fill the gap in the literature and answer why + and – responses happen • GOAL: to shed light upon how employee ownership and the internal fit between employee ownership and the HRM system affects employee attitudes and behaviours in Eroski and JLP  Mixed results as a signal of + and – responses http://rdcu.be/tjf1
  • 4. Brief presentation of JLP and Eroski
  • 5. EROSKI. The biggest coop ofEROSKI. The biggest coop of Mondragon corporationMondragon corporation
  • 6. Three different employment models in Eroski   2005 2006 2007 2008 2009 2010 2011 2013 2015 Cooperative working members 8,053 8,062 8,177 8,426 8,935 8,229 8,463 11,828 11,379 Employees with partial employee ownership (GESPA) 4,632 4,713 5,154 6,307 6,468 6,350 5,602 467 479 Employees without ownership 18,609 19,877 37,227 37,972 32,136 28,436 27,769 24,137 21,621 Total employment 31,294 32,652 50,558 52,705 47,539 43,015 41,834 36,432 33,509 % of cooperative working members 25.7% 24.7% 16.2% 16.0% 18.8% 19.1% 20.2% 32.4% 33.9% Source: Authors’ analysis based on Annual Reports and Social Responsibility Reports of Eroski (from 2005 to 2015).
  • 7. • 93,000 partners in 2015 • 336 Waitrose supermarkets • 43 John Lewis Department stores) http://rdcu.be/tjf1
  • 9. Year 2014 2013 2012 2011 2010 2009 2008 2007 Sales (£m) 10172 9541 8730 8206 7422 6968 6763 6362 Sales growth over previous year (%) 6.6 9.3 6.4 10.6 6.5 3.0 6.3 - Revenue (1) 9028 8466 7759 7362 6735 6267 6052 5686 Revenue growth over previous year (%) 6.6 9.1 5.4 9.3 7.5 3.6 6.4 - Net (Post-Tax) Profits (2) 304 312 301 322 258 359 (3) 320 263 Partnership Bonus (£m) 203 211 165 195 151 125 181 154 Bonus (% of Salaries) 15 17 14 18 15 13 20 18 Retained Profits (£m) 102 101 136 127 107 233 (2) 130 108 Notes (1) Revenue = Sales less VAT and ‘sale or return’ sales (2) Profits after tax but prior to Partnership Bonus (3) Profits affected by exceptional gain Table 5: JLP: 6-year performance summary (£m) Source: Basterretxea, I. Storey, J. (2017).  Do Employee-Owned Firms Produce More Positive Employee Behavioural Outcomes? If Not Why Not? A British-Spanish Comparative Analysis. British Journal of Industrial Relations. doi: 10.1111/bjir.12247, p.18
  • 10. JLP score External benchmark firms’ scores Question Median external Upper quartile external Sample size (No of firms) Sample size (no. of employees) My line managers communicates with me regularly and effectively 73 74 78 120 328,889 My line manager encourages us to find better ways to do things as a team 67 72 76 130 370,019 My ideas to improve our business are welcomed 65 77 81 171 693,765 My line manager gives me regular feedback 60 63 69 297 1,522,678 There is a strong sense of teamwork 72 81 86 109 364,765 Table 7: JLP employee attitude scores compared with benchmark firms (negative comparisons) •Problem: Relatively low marks in items in which there should be a coop- advantage” –Raised Expectations? –Difficulties to manage participation: •“I just think we're sitting on a heritage and a gold mine, the gold mine of ready engagement that other Source: Basterretxea, I. Storey, J. (2017).  Do Employee-Owned Firms Produce More Positive Employee Behavioural Outcomes? If Not Why Not? A British-Spanish Comparative Analysis. British Journal of Industrial Relations. doi: 10.1111/bjir.12247, p.21
  • 11. Results in JLP • Complacency as something of the past. • Now, good behavioural responses: – “Our sick absence is lower and also our turnover is lower” (JLP Manager) – (sick absence arround 3% in 2010-2013, vs 6.8% in the UK retail industry(2012) • Partner satisfaction surveys 2011, 2012, 2013. Positive overall results compared to a external benchmarking sample of 297 organisations (comparison with median and upper quartile)
  • 12. Reasoning of managers to positiveReasoning of managers to positive responses in JLPresponses in JLP • “Three prong hypothesis” (Kruse et al. 2004) • Klein’s (1987) 3 models: • Ownership • Participation in decision making • Financial reward from ownership • + Innovative human resource policies (Kruse et al. (2004; 2010) • Fourth prong Fourth prong; leadership or influence of management in harnessing the employee ownership idea, breathing life and meaning into it and communicating a sense of direction and legitimacy to a version of industrial democracy which is viable and sustainable. Communication (Internal and external) of the link between: employee ownership - partner satisfaction and pride- customer superb service- • Waitrose Reasons to shop: “…, people who work at Waitrose, owns Waitrose, so if you are happy, they are,…” – http://WWW.YOUTUBe.com/watch?v=l1QiyjTUNZk
  • 13. Results in Eroski • Higher productivity in cooperativized Business (Problem: managers in Eroski are not able to link this higher productivity only to the coop nature. Other situational factors also explain this higher productivity of the cooperativized business) http://rdcu.be/tjf1
  • 14. Results in Eroski • Low levels of voluntary turnover also for managers, despite their low salaries (1-7.8 wage differentials in Eroski) • Sign of “strong adhesions”, “commitment to the project”, “our emotional salary”. “involvement with the kind of company”, “involvement with the principles that drive the business”, ...
  • 15. Results: the bright side of EO in Eroski • Extremely high adhesion and commitment levels of partners evidenced by hard decisions made by partners – No monetization of interests since 2008 – Working hours of each partner increased a 10% in 2009 (reduced to a 5% in 2011) – No wage increase in many years and a 5% reduction of wages in 2013 – The partners are the ones voting for those decisions (92% of partners have voted in 2013 and 78% of partners voted in favor of reducing their wages) http://rdcu.be/tjf1
  • 16. • Higher absenteeism rates of members in Eroski Coop owners Eroski S. Coop. Employees with partial ownership (since 2012 coop owners of second degree coop) Permanent employees Temporary employees 2005 6.61% 6.52% 6.15% 2.52% 2006 6.36% 6.58% 7.19% 2.38% 2007 5.99% 6.01% 6.79% 2.95% 2008 5.40% 5.51% 6.45% 2.82% 2009 6.02% 5.12% 5.88% 1.98% 2010 7.21% 4.54% 5.48% 1.59% 2011 6.51% 4.08% 5.02% 1.50% 2012 5.26% 3.11% 4.05% 1.19% 2013 5.44% 2.96% 4.09% 1.32% 2014 5.82% 3.32% 4.69% 1.28% Table 3: Sick leave rates* of Eroski working coop members; employees with partial ownership and non-members (2005-14) *Sick leave rates= % of sick and accident leave hours / total working hours Source: Basterretxea, I. Storey, J. (2017).  Do Employee-Owned Firms Produce More Positive Employee Behavioural Outcomes? If Not Why Not? A British-Spanish Comparative Analysis. British Journal of Industrial Relations. doi: 10.1111/bjir.12247, p.12
  • 17. Results in Eroski • High overall satisfaction • Lower satisfaction of coop members in employee motivation surveys (2006, 2008 and 2011) • Ex. 2008. lower satisfaction in the parent company (Eroski S.Coop) than in the non cooperative subsidiaries for all items: Training, promotion, recognition, salary, labor conditions, information- communication, management style, global satisfaction, Participation, goals, values-policies, quality of living, innovation, change management, community, labour climate, employment security http://rdcu.be/tjf1
  • 18. Variable Group N Mean (std) Comparison Group N Mean (std) Mean difference Cohen’s d Satisfaction Coop owners 4,548 4.4871 (0.98) Employees with partial ownership 3,427 4.8685 (0.81) -0.38143*** 0.42 Permanent employees 11,589 4.7932 (0.95) -0.30610*** 0.32 Temporary employees 3,126 5.0729 (0.82) -0.58587*** 0.65 Engagement Coop owners 4,563 4.0235 (1.19) Employees with partial ownership 3,432 4.4308 (1.01) -0.40732*** 0.37 Permanent employees 11,602 4.0523 (1.14) -0.02876 0.02 Temporary employees 3,133 4.1386 (1.02) -0.11508*** 0.10 Training Coop owners 4,581 3.3872 (1.21) Employees with partial ownership 3,445 3.9172 (1.08) -0.52996*** 0.46 Permanent employees 11,641 3.7416 (1.14) -0.3584*** 0.29 Temporary employees 3,144 4.1361 (1.02) -0.74892*** 0.63 Participation Coop owners 4,569 3.6752 (1.24) Employees with partial ownership 3,447 4.1573 (1.04) -0.48213*** 0.42 Permanent employees 11,606 3.7312 (1.28) -0.05600** 0.04 Temporary employees 3,111 3.5954 (1.26) 0.07979** 0.06 Autonomy Coop owners 4,568 3.9370 (1.24) Employees with partial ownership 3,445 4.2439 (1.14) -0.30698*** 0.26 Permanent employees 11,620 3.7475 (1.32) 0.18942*** 0.15 Temporary employees 3,125 3.6190 (1.27) 0.31797*** 0.25 Information Coop owners 4,569 4.2433 (1.00) Employees with partial ownership 3,447 4.5707 (0.89) -0.32738*** 0.35 Permanent employees 11,629 4.1768 (1.10) 0.06654*** 0.06 Temporary employees 3,140 4.1636 (1.10) 0.07967*** 0.08 Table 4.- Comparative Satisfaction, engagement and evaluation of HR policies by Eroski coop members vs. Rest of employees Source: Basterretxea, I. Storey, J. (2017).  Do Employee-Owned Firms Produce More Positive Employee Behavioural Outcomes? If Not Why Not? A British-Spanish Comparative Analysis. British Journal of Industrial Relations. doi: 10.1111/bjir.12247, pp.14-15
  • 19. • EXPECTATIONS: MEMBERS EXPECT MORE Reasoning of managers to workingReasoning of managers to working owners responsesowners responses
  • 20. • EGALITARIANISM. NOT ENOUGH LINK BETWEEN PAY AND PERFORMANCE (Linked to the free rider or 1/N problem) Reasoning of managers to workingReasoning of managers to working owners responsesowners responses
  • 21. • Employment security and impossibility to fire partners for low performance as a cause of complacency, shirking and high absenteeism of some members. • Difficulty to sanction poor performing partners prompts some supervisors to also shirk in their monitoring tasks Reasoning of managers to workingReasoning of managers to working owners responsesowners responses
  • 22. • Austerity measures (< wages; > working hours) allow resilience, but also generate dissatisfaction, exhaustion… • Environmental factors (High Unemployment rates as a cause of low voluntary turnover) Reasoning of managers to workingReasoning of managers to working owners responsesowners responses http://rdcu.be/tjf1
  • 23. Link to the paper: http://rdcu.be/tjf1
  • 24. Thank you Imanol Basterretxea (Universidad del País Vasco UPV/EHU, Spain) John Storey (Open University, UK)