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Environment, Corporate Ideology, and Employee Involvement Programs
IRENE GOLL*
Corporations are implementing employee involvement programs in both union and nonunion settings in response to growing environmental pressures. This study examines the relationships among environmental pressures, corporate ideology, and participative practices in union and nonunion settings and tests two industrial relations models. Questionnaires measuring environmental pressures, corporate ideology, and participation were completed and returned by the Vice President of Human Resources (or similar corporate executive) in 159 of the largest manufacturing companies in the United States. Multiple regression results show that environmental pressures exert little effect on corporate ideology, but ideology has a signifcant effect on participative practices in both union and nonunion settings.
RECENT ESTIMATES SUGGEST that in the United States, nearly one-third of all employees in corporations with 100 or more employees participate in at least one employee involvement program (New York Stock Exchange, 1982). Programs most frequently implemented include: job design, problem solving groups, autonomous work teams, business teams, greenfield plants, productivity-sharing plans, and joint labor-management programs (Gorlin and Schein, 1984).
This study tests two industrial relations models in which ideology acts as an important variable shaping participative practices. The first model, by Roberts, Okamoto, and Lodge (1979), suggests that environmental pressures shape corporate ideology, which in turn influences the company’s participative
* School of Management, University of Scranton. The author would like to thank J . Joseph Loewenberg, Arthur Hochner, Gerald Zeitz, Nancy Brown Johnson, and two anonymous reviewers for their helpful comments on earlier versions of this paper.
INDUSTRIAL RELATIONS, Vol. 30, No. 1 (Winter 1991). 0 1991 Regents of the University of California 00 19/8676/9 1/2 10/138/$10.00
138
Research Note I 139
practices. The second model, by Kochan, Katz, and McKersie (1986), suggests that industrial relations outcomes are not determined by environmen- tal pressures alone. Their model focuses on the role of strategic choice in shaping the industrial relations system. The results presented here support only the second of the two models.
Literature Review
Employee participation. Participation refers to the influence of employees in the decision-making processes of the workplace (Tannenbaum, 1976). In the U.S., employees’ influence is typically channeled through the system of collective bargaining. Traditionally, this involvement has been limited to issues of wages, hours, and terms and conditions of employment. Surveys of employees show that union members rate their union’s performance higher on traditional bargaining issues than on nontraditional issues (Kochan, Katz, and Mower, 1984). Thus, collective bargaining seems to provide employees with a useful form of influence over the traditional issues. Pressure to expand participation into other areas is increasing as a result of workers’ growing concern with nontraditional working-life issues (ibid. ). The programs often act as supplements to collective bargaining and widen the range of issues over which employees in union settings have influence (Kochan, 1980).
Industrial relations theory identifies ideology as an important variable shaping employee-management practices (e.g. , Bendix, 1974; Dunlop, 1958; Kerr et al., 1964; Walton and McKersie, 1965). Although the ideology of labor is clearly important, the focus here is on the ideology of management. The beliefs and values of the top decision makers within an organization underlie the strategies that have shaped the recent changes in the industrial relations system (Kochan et al., 1984).
Environmental pressures and corporate ideology. Organizational culture contains many elements: symbols, language, ritual, ideology, and myth (Pettigrew, 1979). Ideology is a particularly important element because it potentially links attitude with action (ibid.). Ideology refers to a set of beliefs and values about the world that provide a frame of reference (Starbuck, 1982); it is defined as the publicly expressed view of the organization’s key decision makers (Thompson, 1980). Organizational outcomes reflect, at least in part, the values and viewpoints of powerful actors in the organization (Hambrick and Mason, 1984). The founder of an organization, for example, puts a personal stamp on organizational beliefs and values (Pettigrew, 1979); these are transmitted from generation to generation. Members of the
140 / IRENEGOLL
dominant coalition (the inner circle) have a large investment in these beliefs (Dunbar et al., 1982). Employees may seek guidance in ideological matters from organizational elites, but they are less likely to fully embrace the official beliefs.
The first of the two models tested here suggests that the implementation of participative programs reflects a shift in ideology that is a response to environmental pressures. In Roberts et al.’s (1979) two-stage model, the environment affects ideology which in turn influences participative practices:
Environmental Corporate Pressures Ideology + + Participation
The model developed by Kochan et al. (1986) suggests that changes taking place at the strategic and policymaking level of a company affect industrial relations at the level of the workplace. The external environment shapes the institutional structure, but it does not fully determine industrial relations outcomes. Instead, value systems shape the choices that are made.
These two models suggest the following hypotheses: First, that environmen- tal pressures influence corporate ideology; second, that corporate ideology affects the implementation of participative programs and employee influence over a range of decisions.
Methodology
Sumey. To test the hypoi,,eses, survey data were collected from a sample including the largest firms in the manufacturing sector, ranked by market value (as identified in Business Week [ 1985, 19861). A questionnaire measuring environmental pressures, corporate ideology, and participative practices was mailed to the Vice President of Human Resources (or to the Chief Executive Officer) in 645 corporations. (Individual top managers were identified using Standard and Poor’s Register [ 19851 and Dun and Bradstreet’s Directory [ 19851 .) A follow-up mailing four weeks later yielded a total of 159 completed questionnaires, a response rate of 25 per cent. There were no differences between respondents and nonrespondents with respect to industry or profitability (return on sales and return on equity) for 1985. Responding companies have more employees (mean = 33,459; SD = 69,608) than nonresponding companies (mean = 16,443; SD = 29,283) for 1985.
Whether these corporate officers completed the questionnaires themselves or delegated the task to others is not known.
Research Note I 141
Variables. Seven environmental pressures identified by Freedman (198S), domestic competition, foreign competition, government regulation, industry or market deregulation, union pressure, changing industry structure, and demographic changes in the work force, are included in the variable Environmental Pressures. Respondents rated the degree to which each pressure affects the company’s employee-management relations on a scale of 1 (no effect) to 5 (very great effect).
The second variable is Corporate Ideology. Researchers suggest that the following nine underlying dimensions characterize corporate ideology: individualism, corporate social responsibility, government involvement (Lodge, 1978, 1987), risk taking, organicity, technocracy, participation, coercion (Khandwalla, 1976a,b), and orientation to profit (Sutton et al. , 1956). Three statements were used to measure each of these dimensions (for a total of 27 items). The statements assessing individualism and the government involvement in business are drawn from Lodge (1978, 1987). For example, the following statement measures the role of government involvement: “Top management believes and values that the least government is the best government.” Statements evaluating social responsibility and orientation to profit are derived from Aupperle’s (1984) measures of a company’s orientation to its discretionary and economic responsibilities, respectively. One example of a statement measuring Social Responsibility is: “The corporation believes in performing in a manner consistent with the philanthropic and charitable expectations of society.’’ The statements measuring the remaining dimensions come from Khandwalla ( 1976a,b). For example, this statement measures risk taking: “Top management believes and values decision-making by active search for big, new opportunities, and large bold decisions despite uncertainty of their outcomes.’’
Using a scale of 1 (strongly agrees) to 5 (strongly disagrees), respondents rated each of the 27 statements on the degree to which it agrees with their company’s explicit ideology, i.e., its publicly expressed beliefs and values. For each dimension, Cronbach’s alpha (standardized) is: individualism (. 22); social responsibility (.74); government involvement (.47); risk taking (.47); organicity (.38); technocracy (.54); participation (.68); coercion (.31); and profit (.42). The low reliabilities for many of the dimensions suggest that the theoretical dimensions of ideology found in the literature have little empirical validity. Responses to the original 27 items were then factor analyzed (n-factor, orthogonal rotation). An item was included in a factor if it loaded most heavily on that factor and had a loading score of .40 or greater. Three dimensions of ideology had Eigenvalues greater than 1 .OO (see Table 1). Scales were formed for each of these three dimensions by
142 / IRENEGOLL
calculating a mean of the responses to the items included in each dimension.2 Factor 1, progressive decision making, refers to the corporation’s emphasis
on normative decision making or administrative process (alpha = .85). A high score on this dimension suggests that a company emphasizes using analytical techniques, broad information search and communication, and participative decision making. The central theme in this factor is the emphasis on a widespread and systematic search when making decisions. Factor 2 includes the three items originally used to measure the corporation’s emphasis on social responsibility (alpha = .74). Factor 3, orgunicity, measures the company’s commitment to organizational flexibility (alpha = .66). A company with a high score on organicity de-emphasizes an authoritarian style of management and rigid adherence to rules (thus the negative loadings of the items). Since corporate ideologies do not readily lend themselves to distinctive types, this study focuses on the independent effects of progressive decision making, social responsibility, and organicity on the dependent measures.
The variable Formal Participation measures hourly workers’ involvement in participative programs and their influence on decisions. Research suggests that formal prescriptions for employee involvement are good predictors of employees’ actual participation (Industrial Democracy in Europe, 198 1). Respondents reported the number of programs implemented and the number of employees in those programs (1 = none to 5 = all employees). The programs include: problem-solving groups, autonomous work teams, business teams, productivity-sharing plans, employee-management joint programs, quality circles, and quality of worklife programs. The number of employees in programs is the mean of the responses to all seven programs. Respondents rated union and nonunion settings separately. Respondents also rated the amount of participation formally provided by the programs for three types of decisionsQWL, traditional, and strategic-on a scale of 1 (no influence) to 5 (very great infl~ence).~ Participation was defined in the survey as the company’s formal, written, and operative rules and regulations for giving employees a say in decision making. Three indices were calculated by creating response means for each category. Respondents rated union and nonunion settings separately. For union settings, respondents indicated the
One item that loaded closely to both Factor 3 and Factor 1 was dropped from the scale for Factor 3. A more detailed description of the ideology items and their factor loadings is presented in Go11 and Zeitz (in press).
For the specific issues see Kochan et al. (1984).
Research Note I 143
TABLE 1 DIMENSIONS OF CORPORATE IDEOLOGY
Factor Dimension loading
Progressive Decision Making
1. 2. 3. 4.
5. 6. 7. Open channels of communication
Social Responsibility
1. 2. 3.
Organicity
1. 2.
3. 4.
A systematic search for opportunities and problems Participative decision making at management levels The explanation of proposed changes to those affected by them Individual fulfillment through place in community, participation in organic social process The application of operations research techniques Participative consensus-seeking decision making with feedback
Monitoring opportunities to solve social problems Performing in a manner consistent with the philanthropic expectations of society Viewing philanthropic behavior as a useful measure of corporate performance
Getting personnel to follow the formally laid down procedures Holding fast to true and tried management principles despite changes in business conditions Emphasizing hard work and obedience to authority Reliance on top executives to make all product and service decisions
.67
.71
.75
.55
.52
.73
.73
.57
.79 -67
- .48 -.51
- .46 - .67
% Cum YO Common common
Dimension Eigenvalue variance variance
Progressive Decision 5.42 42.0 42.0
Social 2.22 17.1 59.1
Organicity 1.62 12.6 71.7
Making
Responsibility
amount of influence the programs afforded beyond that provided by collective bargai~ing.~
Three control variables are included: Per Cent Unionized, Profitability, and Size. Unionization is included since it may shape the company’s ideology or directly affect its participative practices. Controls for size and profitability
A limitation of the study is that the questionnaire asks the respondent to report on participation across all plants. Participation may, in fact, differ from one plant to another.
144 / IRENEGOLL
are necessary because larger, more profitable companies have resources that may allow them to implement innovative programs regardless of ideology. The per cent of hourly employees unionized is derived from responses to the questionnaire. Profitability, total net income divided by sales, is drawn from Business Week and Standard and Poor’s Stock Reports (1986). Size, measured as total number of employees, is presented in Standard and Poor’s Register (1986).
The analyses first test the hypothesized effect of environmental pressures on ideology and then test the relationship between ideology and participation. The independent variables in the regressions show a correlation of less than .50, suggesting that multicollinearity is not a problem.
Results Most of the responding companies (119) have both union and nonunion
settings. Of the remaining companies, eight reported only union settings and 32 reported only nonunion settings. Overall, 24.3 per cent of employees in union settings and 33.5 per cent of employees in nonunion settings were involved in one or more programs.
Environment and ideology. Table 2 shows the results of regressing the dimensions of ideology on environmental pressures and control variables. The first hypothesis receives little support. Only organicity is related to pressure from foreign competition, which fosters a greater emphasis on flexibility within the corporation. Management may view pressure from foreign competitors as threatening permanent job loss and thus may stress greater flexibility and decentralization. Very little of the variability in any of the three dimensions of ideology is explained by environmental pressures and control variables (8-9 per cent).
Ideology and participative programs. The results of regressing the number of participative programs and number of employees in such programs on ideology, environment, and controls in union and nonunion settings are shown in Table 3. Environmental pressures and control variables are included to test for the possibility that they directly affect participation. The number of programs implemented and the number of employees in programs show a significant relationship to progressive decision making in the union setting and to social responsibility in the nonunion setting. Thus, the hypothesis relating ideology to participative programs receives support in both settings.
The more the company emphasizes participation, open channels of communication, searching for alternatives, and explaining changes to
Research Note I 145
TABLE 2 RESULTS OF REGRESSING CORPORATE IDEOLOGY ON ENVIRONMENTAL PRESSURES AND CONTROL
VARIABLES
Dependent variables (beta coefficients)
Independent variables
Progressive Social Organicity
(n= 127)” (n= 127)” (n= 127)” decision making responsibility
Environmental pressures Domestic Competition Foreign Competition Government Regulation Deregulation Union Pressure Industry Structure Demographic Changes
Control variables Per Cent Union Profitability Size
R2 F value
. 0s
.02 - .08
.12 - .07 -.02
.10
-.03 .18 .10
.08 1.06
-.18 .13 .14 . I0
- .05 - .09
.13
.09
.04 - .06
.09 1.16
.02
.19* - .06
.07 -.18 -.15
.12
.14 - .02 - .06
.09 1.20
*P c .05; **p 5 .01; ***p 5 ,001. ‘Although 159 completed questionnaires were returned, n= 127 in these regressions because some data, especially the per cent unionized, are missing for some companies.
employees, the greater the number of programs in union settings and the greater the number of union employees in them. The more the corporation believes in its responsibility to society, the greater the number of nonunion programs implemented and the greater the number of nonunion employees involved in them. In nonunion settings, the implementation of participative programs may be management’s response to employees’ expectations regarding involvement in decision making. The alternative hypothesis that environmental pressures directly affect the implementation of programs received no support. Larger companies tend toward greater formal partici- pation.
Ideology and injluence in decisions. Table 3 shows the results of regressing influence in QWL, traditional, and strategic decisions on ideology, environ- ment, and controls in union and nonunion settings. Progressive decision making is significantly related to QWL decisions in union and nonunion
TA
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WL
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onal
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=126
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=122
) (n
=80)
(n
=103
) (n
=82)
(n
=103
) (n
=82)
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)
Cor
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9***
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.26*
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nsib
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rgan
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Envi
ronm
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Com
petit
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ign
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petit
ion
Gov
ernm
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egul
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n D
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ulat
ion
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on P
ress
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In
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ry S
truct
ure
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ogra
phic
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nges
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trol V
aria
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r C
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on
Prof
itabi
lity
Size
- .0
9 - .0
2
-.lo
.IS
.10
- .0
9 .os
-.01 .03
.09
- .0
7 .2
1*
.30
.21*
.I
1
- .0
6 .0
2 .0
3 .0
2 .0
3 - .0
2 - .0
1
- .0
6 .oo
.29*
*
.23
.17
.22*
- .0
5 .1
2
-.07
-.04
.07
-.OO
.07
.oo
- .0
8 .04
.01
.01
.01
-.06
.0
2 .04
.08
-.07
- .0
3 .04
.23*
* .2
4**
.34
.23
.16
.12
-.I9
.2
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.03
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-.01 .oo
.07
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.33
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-.I3
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- .0
7
.28
.09
.09
-.19 .06
.04
.24*
-.3
8**
.08
.23*
.02
- .0
6 - .04
.32
F values
2.96
*'*
2.51
**
3.62
***
2.41
**
2.51
**
2.65
**
2.39
**
.17
.19
.22*
-.12 .02
-.06
.IS
- .0
5 .0
7 .0
2
.13
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-.1
5 .23
2.02
*
.17
.22
- .0
2 .0
7 .2
2 .0
6
-.29*
-.0
3 .2
4*
-.02
.09
.01
.05
.03
- .2
2 .0
6 .1
0 .0
3 -.
I0
.04
.14
.04
.04
-.24*
-.04
-.13
.26
.13
1.80
1.
00
*p 5
.05
; **
p C .0
1; *
**p 5 .
m1.
Research Note I 147
settings. Thus, the hypothesis relating ideology to influence in decisions receives support for QWL decisions. In addition, foreign competition shows a significant positive effect on QWL decisions in union settings. In their union settings, companies may adopt the practices of foreign competitors such as the Japanese in an effort to boost their competitive position. In nonunion settings, less profitable companies have greater provisions for employee involvement in QWL issues, perhaps to improve productivity.
Ideology shows no relationship to employee influence over traditional issues in union settings. Pressures from deregulation and demographic change show a positive relationship to union involvement in traditional decisions. Greater union pressure is associated with significantly less involvement of union employees in the traditional issues outside of collective bargaining. Stronger unions are in a better position to press for handling bread-and-butter issues within the framework of collective bargaining. Organicity shows a positive relationship to nonunion influence over traditional issues; a company’s emphasis on flexibility may result in nonunion employees having a greater say in bread-and-butter issues. Ideology shows no relationship to employee involvement in strategic issues in union or nonunion settings. Union employees’ involvement in strategic decisions is significantly influenced by pressure from foreign competition. Firms may adopt participative practices in union settings in an effort to boost their own competitive position. Paradoxically, strategic issues show an inverse relationship to pressure from domestic competitors in union settings. Less pressure from domestic competitors may allow firms to experiment with involving union employees in the newer strategic issues, such as the use of new technology. Ideology, environment, and the control variables have little effect on nonunion employees’ participation in strategic decisions.
These findings support the hypothesis that ideology affects employee influence with respect to QWL issues. They also support the alternative hypothesis that environmental pressures directly affect employee involvement in traditional and strategic issues.
Discussion The results of this study suggest that although environmental pressures
influence corporate ideology very little, ideology significantly affects participative practices. In union settings, the company’s emphasis on progressive decision making is significantly related to the number of participative programs implemented, the number of employees in these programs, and the amount of employee influence over QWL decisions. In nonunion settings, the company’s emphasis on social responsibility is
148 / IRENEGOLL
significantly related to the number of programs implemented and the number of employees involved. Its emphasis on progressive decision-making and on organicity significantly affect QWL and traditional issues, respectively, in nonunion settings. In both union and nonunion settings, participative programs seem to be designed largely to allow for employee involvement in QWL decisions. The traditional issues are handled mainly through collective bargaining in union settings and unilaterally by management in nonunion settings. Except for decisions regarding the use of new technology, the programs provide employees with very little influence over strategic issues.
These findings support Kochan et d ’ s (1986) industrial relations model in which activities at the top strategic level shape participative practices at the third level: Management does make strategic choices which significantly influence outcomes and which account for many of the recent changes in the industrial relations system. Further research is needed to examine the effect of the beliefs and values of an organization’s key decision makers on the institutional structure and subsequent industrial relations outcomes.
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Research Note I 149
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