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The Frontiers and Boundaries Handbook is a step-by-step guide to fostering effective employee involvement.store

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

Douglas Kruse (Rutgers University and NBER)
Richard Freeman (Harvard University, LSE, and NBER)
Joseph Blasi (Rutgers University)
Robert Buchele (Smith College)
Adria Scharf (University of Washington)
Loren Rodgers (Ownership Associates)
Chris Mackin (Ownership Associates)
The full text is available in PDF format and as a multipart webpage.

Presented at panel on "Econometric Case Studies of Human Resources and Firm Performance," Industrial Relations Research Association, January 2003, Washington, D.C. This paper is part of the National Bureau of Economic Research's Shared Capitalism Research Project, funded by the Russell Sage and Rockefeller Foundations. Address comments and questions to: Douglas Kruse, School of Management and Labor Relations, Rutgers University, 94 Rockafeller Road, Piscataway, NJ, 08854, 732-445-5991, dkruse@rci.rutgers.edu


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 ESOP firms, using employee survey data from 13 companies. Between-firm comparisons of 11 ESOP firms show that an index of human resource policies, nominally controlled by management, is related to employee reports of co-worker performance and other good workplace outcomes. Within-firm comparisons in two firms show that workers 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.

Motivating Employee-Owners: Next Section

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