Although frustrated by a lack of compelling research evidence, researchers from the Policy Studies Institute say there are quite strong indications that a combination of profit-sharing and direct involvement by employees in decision making may enhance the economic performance of small firms.

Employee Involvement in Small Firms, by Alex Bryson and Neil Millward, provides a rigorous analysis of recent research on the subject, covering everything from the financial involvement of employees in profit-sharing schemes to two-way communications and worker representation at senior management levels.

Although employee involvement is less prevalent in firms with between 25 and 100 workers than it is in larger sized firms, well over a quarter (29%) of small firms reported an employee involvement initiative of some kind in a recent three-year period.

Unfortunately, the authors say that there is no easy blueprint for success. While some combinations of financial participation and direct involvement appeared advantageous in many circumstances, no simple link could be established between any particular schemes and favourable economic outcomes. Initiatives that have proved successful for one company may not work for another. There did, however, appear to be links between the use of some employee involvement practices and intermediate outcomes such as staff commitment and low turnover.

Although the present EU Directive on European Works Councils applies only to organisations with over 1,000 employees, the European Commission has begun consultations with the EU social partners on possibility of a more general legal framework for employee information and consultation in companies at national level. This could affect small and medium sized companies.

‘No employee involvement scheme or practice guarantees improved economic performance for all firms in all circumstances’ said Alex Bryson. ‘Practices must be tailored to the specific circumstances facing individual firms. The adoption of inappropriate methods can actually damage economic performance.’

Neil Millward added: ‘the combination of meaningful and direct participation by employees appears to pay dividends for firms in general and could be a foundation for success in the small firms sector too.’

The report was sponsored by the Department of Trade and Industry.

Contact:	Neil Churchill on	0171 468 2236 (office)

1. Employee Involvement in Small Firms is available from Grantham Books, on 01476 541080, priced £15.00.

2. PSI is a registered educational charity (no 313819) and has no association with any political party, pressure group or commercial interest.

3. Adair Turner, Director General of the Confederation of British Industry, will address a PSI seminar on flexible labour markets today (Wednesday 3rd December). More information from Neil Churchill.