Employee involvement in decision-making: the more the better?

Abstract

PurposeThe purpose of this paper is to relate participative decision-making (PDM) to organizational learning, and examine the impact of PDM on organizational performance.Design/methodology/approachThe paper integrates the resource-based theory with organizational learning theory to develop a framework, and distinguishes PDM in which decisions are jointly made by employees and managers from employee decision-making (EDM) in which decisions are completely in the hands of employees. The paper incorporates an augmented Cobb–Douglass production function into a structural equation model to estimate the performance impact of PDM and EDM.FindingsThe paper tests the framework against firm-level data form China, and finds that PDM provides an opportunity for collective learning, and has a positive relationship with productivity-based profit gains; the positive relationship is stronger in firms whose management has greater accumulated knowledge and experience; EDM fails to provide an opportunity for collective learning, and has a negative relationship with productivity-based profit gains.Originality/valuePrior research focused on the role of PDM in enhancing the motivation and performance of individual employees, considered the degree of employee involvement as a continuum with the highest being decision-making “completely in the hands of employees,” and concluded that the more involved are employees in decision-making the better. This paper relates PDM to organizational performance, and challenges this conventional view from an organizational learning perspective.