Informal Control, Effective Voice and Perceptions of Work Reward Fairness in a Worker Co-operative

Abstract

Worker co-operatives aim to produce a fairer distribution of work rewards than exists in conventional firms. Workers collectively own the firm and participate democratically in decisions, so should be able control rewards. However, direct participation in decisions is inefficient in larger firms. To balance democracy with efficiency, larger co-operatives combine a formal hierarchy with worker voice in decisions via elected representatives. This move is associated with the emergence of unequal informal organizational control and reward differentials. In this paper we ask how informal organization shapes control processes and worker perceptions of reward fairness in a representative democratic co-operative. We present a mixed-methods case study of a retail firm facing financial crisis which had reduced pay and benefits for workers. In this context, workers who maintained informal friendships with elected representatives on the firm’s governing board had a more effective voice in rewards than workers without such relationships. Effective voice in turn led workers to perceive their rewards as fairer. Fairness perceptions had important consequences for the co-operative spirit – the shared perception that all organization members were working towards common goals without opportunism. We explore the implications of our findings for maintaining democracy and promoting co-operative survival in times of crisis.