The Effects of Expanding Employee Decision Making on Contributions to Firm Value in an Informal Reward Environment

Abstract

I use an experiment to examine whether expanding employee decision making - by either allowing employees to jointly determine firm activities with employers or assigning employees the sole authority to determine these activities - affects contributions to firm value. I investigate this issue in an informal reward setting where employers cannot commit to how employees will be rewarded. Experimental results demonstrate that employees jointly determining firm activities with employers evaluated the decision-making environment to be fairer than employees with either no role or sole authority to choose firm activities which led them to derive more enjoyment from their work environment which ultimately led them to contribute a greater amount to firm value. Despite the higher contributions, employees with a joint role neither expected nor received a greater informal reward from employers. My findings contribute to literature suggesting that the incorporation of non-pecuniary factors such as employees' preferences for a fair decision-making environment into organizational architecture designs can increase the efficiency of employment relationships.