Employee voice increases company performance

In 1991, Finland introduced regulations granting employees the right to representation on management or supervisory boards of companies employing at least 150 people. The primary goal was to facilitate information exchange between management and ordinary employees. The consequences of this reform are evident in surveys. According to the 2015 European Working Conditions Survey (the latest available data), Finnish employees rate their influence on company decisions as the highest in Europe. Poland also ranks relatively high in this regard, ranking in the top half of countries.

Because the law only applies to companies with more than 150 employees, this provides a natural experiment to assess the causal effects of increasing the role of workers in decision-making. Simply compare key variables—productivity, wages, and investment—after 1991 between companies with and without 150 employees, while controlling for structural factors (interest rates, economic conditions).

This was done by researchers J. Harju et al. (2024) in the scientific article "Voice at Work." What does it turn out to be?

The reform increased labor productivity in the affected companies by approximately 6.7 percent. This is a significant result, as most interventions (changes in regulations, legal standards, etc.) yield lesser results. Additionally, a positive impact on company survival was observed, along with a significant reduction in compulsory layoffs and a slight increase in wages, particularly among the lowest-paid workers. Therefore, a certain wage compression occurred, as the greatest benefits were reaped by those with the lowest earnings.

These results confirm the information exchange theory: employees directly involved in production often possess unique information about various processes and opportunities for improvement that managers do not have access to. Without appropriate communication channels between organizational levels, this valuable knowledge is lost. The study shows that improving information flow actually optimizes organizational processes and increases company performance. This is likely due to greater motivation among employees who feel their voices are heard and taken into account.

This demonstrates how fundamental the institution of employee voice in the workplace is to a company's development. Importantly, it's not just about formal legal regulations that increase employee influence on company decisions, but perhaps even more so about organizational culture—informal mechanisms that ensure employees have a say in important matters, and that their opinions are taken seriously when final decisions are made.