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The Study on Employee participation and involvement (EPI) in a Dutch subsidiary in Malaysia[1]
Professor Dr. BalakrishnanParasuraman
Dr. NoraaniBinti Mustapha
Department of Management and Finance, Faculty of Entrepreneurship and Business
Universiti Malaysia Kelantan, Locked Bag 36,
16100 Kota Bahru, Kelantan
Email:
Leonie Kooiker
Prof. Dr. ir. R. Goodijk
University of Tillburg, Netherland
Prof.mr.Dr. E. M. Kneppers-Heijnert
Faculty of Economics and Business
Human Resource Management
University of Groningen, The Netherlands
The Study on Employee participation and involvement (EPI) in a Dutch subsidiary in Malaysia
Prof. dr. BalakrishnanParasuraman
Dr. NoraaniBinti Mustapha
Leonie Kooiker
Prof. dr. ir. R. Goodijk
Prof.mr. dr. E. M. Kneppers-Heijnert
Abstract
Employee participation and involvement (EIP) is an important element for the success of business performance in the organisations(Marchington&Suter 2013: Parasuraman and Satrya 2011).
Employee participation (EP) is a much studied field in the Western world. From the literature it is known that EP can have positive effects in the company, as it could increase employee commitment and productivity. The system of labor relations in the Netherlands differs a lot from the Malaysian situation. As not much research has been done on EP in Malaysia, and especially not in multinational companies (MNCs), this study has the aim to contribute to the existing literature, and is an exploratory study focusing on one case study in a Dutch subsidiary, Dutch Lady Malaysia. The main research question in this study was: ‘Which forms of employee participation are developing successfully in a Dutch subsidiary in Malaysia?’ The results are retrieved from a qualitative research based on a case study in one Dutch subsidiary. The findings reveal that indirect as well as direct forms of EP are present in the Dutch subsidiary. However, employees can only participate in the company to a limited extent. Factors that stimulate the development of EP are the positive management attitudes towards EP, and the supporting core values in the company. Restricting factors have to do with the Malaysian context, as the legislation is not supporting indirect forms of EP (trade unions, and representative bodies), and the Malaysian culture has an important influence in the sense that Malaysian employees often do not dare to speak up. While the positive outcomes of EP are recognized, employees hardly have an influence at the organizational level. Implications of this study are discussed. The findings indicate that there is a need for further elaborated research in this field.
1.INTRODUCTION AND BACKGROUND OF STUDY
In today’s turbulent, fast changing environment, firms need to be more flexible, adaptive and competitive (Singh, 2009; Becton & Schraeder, 2009). According to Singh (2009) involving the workforce’s entire capacity to generate new ideas and ways of working, is one of the drivers of success. In research and practice employee involvement and employee participation is one of the HR practices that has been receiving much attention for a long time (Ogbeide & Harrington, 2009). EP refers to the wide variety of policies, mechanisms, and practices that enable employees to take part in decision making, frequently at the level of the enterprise or workplace (Parasuraman, 2007).
In most Western countries a form of indirect EP is forced by legislation. In the Netherlands, EP is considered as ‘part of the organizational culture’ (Goodijk & Sorge, 2005). Trade unions play a role at the organizational and national level, and the Law on Works Councils requires companies with more than 50 employees to install a Works Council. While the trade unions are involved in collective bargaining on wages and other primary conditions as representatives of workers, the role of the Works Councils at the level of the organization is to influence the strategic decision making process (Goodijk, 2003).These works councils have a few rights which give them influence in the process of (strategic) decision making in the organization (Goodijk, 2000). Works councils have the right to receive relevant information and the right to advise on major issues concerning financial economic matters like transfers of ownership, plant closings and major investments. Works councils also have the right to approve on changes in social arrangements (e.g. pensions, working hours, wages, safety rules) (De Jong, DeJong, Mertensa & Wasley, 2004; Allertz, 2002). Furthermore, works councils of so-called structure corporations have the right to recommend members of the Supervisory Board (Goodijk, 2000). However, indirect forms of EP are losing support in organizations, as increasing attention is paid to direct forms of participation (Goodijk & Sorge, 2005; Boxall & Purcell, 2008).
In Malaysia, EP is not as common as in the Western world. Joint Consultative Committees (JCCs) and Collective Bargaining are present in large organizations. However, research by local and foreign scholars revealed that trade unions and employees have very limited influence in Malaysian workplaces (Todd & Peetz, 2001; Frenkel & Kuruvilla, 2002; Parasuraman & Jones, 2006).
Recently, some research has been done in large local companies (f.e. Parasuraman & Jones, 2006; Parasuraman, 2007). Some studies on EP in multinational companies (MNC’s) in Malaysia have been conducted (f.e. Rose, 2002), but the literature on this is very limited. This study has the aim to contribute to the existing literature on EP in Malaysia, for that purpose the following main research question was formulated:
‘Which forms of employee participation are developing successfully in a Dutch subsidiary in Malaysia?’
Three sub questions were formulated:
- What forms of EP are present in a Dutch subsidiary in Malaysia?
- What factors influence the presence or development of EP?
- What are the effects of EP in the company?
This paper begins with a review of the literature on EP. Findings from studies conducted in the Western world are presented, but the focus is on studies conducted in Malaysia. Thereafter, the research methodology is explained. In section 4, background information on the Malaysian system of industrial relations is provided. Hereafter, the main research findings and analysis are presented. Finally, conclusions and implications of the findings are explained.
2.EMPLOYEE PARTICIPATION
EP can have different forms in the workplace. First, EP can be direct, providing employees a direct say in the company through work in teams or on projects, or indirect, which is representative participation (Boxall & Purcell, 2008; Parasuraman & Jones, 2006). Indirectly employees can participate through a representative channel (Boxall & Purcell, 2008).
In industrial democratic terms, the emphasis of EP has been on workers right to participate, often through indirect means. Participation on the other hand has been defined as part of an influence-power continuum as “joint decision making or as influence sharing between hierarchical superiors and their subordinates” (Wagner and Gooding, 1987, in Parkes et al., 2007) or “a process which allows employees to exert some influence over their work and the conditions under which they work (Heller et al., 1998, in Parkes et al., 2007).Interest in employee participation first gatheredmomentum in the 1970s as an initiative to increase the quality of work life (Langhan-Fox, et al., 2002). Today, the primaryaim of EP is toincrease organizational efficiency and competitiveness (Langhan-Fox, et al., 2002).
Several studies conducted in the Western world and in Malaysia have shown the positive effect of EP on organizational commitment (e.g. Bakan et al., 2004; Yahya, Ahmad & Fatima, 2008; Karia & Asaari, 2006). The relationship between EP and performance is also positive. Jabroun and Balakrishnan (2000) found that managerial employees in the Public Service Department in Malaysia perceived their level of participation as high and EP has moderate and positive relationship with job performance.EP can improve the quality of decision-making by broadening inputs, promote commitment to the outcomes of the decision-making process, improves motivation and cooperation in the workplace and can contribute to improved employee/employer relations in the workforce (Markey, 2001).
A combination of direct and indirect forms of EP leads to the best organizational results (Parasuraman, 2007; Pyman et al., 2006; Parasuraman, 2001; Brewster, Wood, Croucher & Brookes, 2007). Direct and indirect forms of participation are mutually supportive as the EPOC (Employee Participation in Organizational Change) survey indicates(Gollan & Markey, 2001).
3.MALAYSIA IR PRACTICES
The Malaysian government has set the objective to become a developed country by 2020, formulated in ‘Vision 2020’ (Todd & Peetz, 2001). Recently, the New Economic Model (NEM) has been developed to achieve this objective. The goals of the NEM are to gain high income, inclusiveness (enabling all communities to fully benefit from the wealth of the country), and sustainability (meeting present needs without compromising future generations) to eventually improve the quality of life (NEAC, 2010). One of the pillars is the ‘1Malaysia, People First, Performance Now’concept to unite allMalaysians to face the challenges ahead (NEAC, 2010: 3).
Three Act are of major importance for this study, the Employment Act 1955, the Trade Union (TU) Act 1959 and the Industrial Relations (IR) Act 1967 (Parasuraman, 2004).Besides the Acts, the Ministry of Labour (now Ministry of Human Resources) in conjunction with the Malaysian Council’s of Employers Organizations (MCEO) and Malaysian Trade Union Congress (MTUC) drew up the Code of Conduct for Industrial Harmony in 1975 (Parasuraman, 2005). The aim of the Code was to lay down principles and guidelines for employers and workers on the practice of industrial relations for achieving greater industrial harmony.This Code emphasises employee participation and is also used as reference in the Industrial Court. However, as it is not legislation, employers do not use the Code widely (Interview MTUC, April 16, 2010; Parasuraman, 2007).
In Malaysia industrial relations are strongly controlled by the government, to defend the political and economic status quo (Todd & Peetz, 2001). The MTUC andITF mentioned that the state of Malaysia seems not to support the trade unions (Interview MTUC, April 16, 2010; Interview ITF, April 20, 2010). This was also found byParasuraman and Schwimbersky (2005) and Todd and Peetz (2001). Industrial relations are highly controlled by the state and the existence of trade unions as a legitimate actor is not favoured.
Trade unions in the private sector, whether in the essential services or not, are free to negotiate with their employers and sign collective agreements. These collective agreements have to be registered with the Industrial Court (Arudsothy, 1990). However, as mentioned by the MEF and MTUC, the scope of collective bargaining is limited (Interview MTUC, April 16, 2010; Interview MEF, April 1, 2010). The IR Act 1967 includes that no trade union shall include in its proposal for a collective agreement any of the following matters (which have come to be called “management prerogatives”): the promotion, transfer, employment or termination of the services of any person, dismissal, or reinstatement of any worker and the assignment by the employer of tasks and duties to any employee (Arudsothy, 1990; Parasuraman, 2004). According to the MEF the management prerogatives are in place for economic reasons. As Malaysia wants to become a developed country, employees are not yet involved in the management of an organization. The involvement of the unions in this kind of issues is mainly through information sharing(Interview MEF, April 1, 2010).
Consequently, EP in decision-making is weak at the organizational level and ‘many issues such as company business and investment plan, mergers and acquisition cannot be raised in the workplace (Parasuraman & Schwimbersky, 2005:305).
4.STUDIES ON EP IN MALAYSIA
The study of Parasuraman (2007) shows that different direct forms of EP are present in workplaces in Malaysia: quality circles, total quality management, MS ISO 9000, employee suggestions scheme (ESS), 5S, teamwork, team briefings, problem-solving teams, formal meetings, informal meetings, face-to-face communication and daily walk by senior managers. Indirect forms of EP that are found to be present in Malaysia are JCC (Management-union Committee), Safety and Health Committee, Sports and Recreation Committee, and Collective bargaining (CA) (Parasuraman, 2007).This study reveals that the direct forms are mainly on quality, productivity, management-employees relationship, problem-solving methods and the enhancement of customer satisfaction in relations to product and services, whereas the indirect forms are mainly installed to improve health and safety procedures, enhance union-management relations in order to avoid misunderstanding between parties, and encourage participation of non-managerial employees in the social and recreations activities (Parasuraman, 2007).
Research (e.g. Singh, 2009; Kennedy, 2002) shows that the Malaysian culture plays a role in workplaces. The GLOBE study[2] shows that effective leaders in Malaysia are expected to show compassion while using more of an autocratic than participative style (Kennedy, 2002). The literature review of Khati (2009) also supports this finding, as this study reveals that in countries with high power distance (like Malaysia) employees are unwilling to participate in decisions and are content with their managers making decisions and giving them instructions, which they follow passively. However, Singh (2009) states that there seems to be a tendency now among Malaysian executives to portray such individualistic orientations.
Furthermore, the corporate values in the company play a role (Markey, 2001), as well as the management attitudes towards EP (Boxall & Purcell, 2008; Parkes et al., 2007). The study of Razali (1996) conductedin Malaysia reveals that when non-management professionals perceived their supervisors as highly favourable towards participation in decision making, increased participation in all three areas (social, personnel, and economic/strategic) heightened employee commitment. The relationship between the management and the union is also often mentioned as being important for the success of EP. The study of Satrya & Parasuraman (2007) reveals that unions in Posco adopted more cooperative relations with the management, because there were many rules and legislations preventing unions of becoming involved in industrial action. Therefore, the result finding that the management strongly supported most of the union activities was not surprising.
The studies of Parasuraman and Jones (2006) and Parasuraman (2007) conducted in large Malaysian companies, reveal that EP is present through JCC’s and collective bargaining, however only to a limited extent. The union and non-managerial employees’ capacity to influence the management final decisions is still questionable. The final decisions were still in the hands of the management. Parasuraman (2007) refers to Pateman (1970) who called this ‘pseudo participation’ where management has already made the final decisions and they only persuade union and employees to accept their decisions.
5.SIGNIFICANCE OF THE STUDY
As not much research in MNCs in Malaysia has been conducted, especially not in Dutch subsidiaries, this study has the aim to contribute to the theory on EP in Malaysia. The objective of the study is to find out if EP is present or developing in a Dutch subsidiary in Malaysia.Malaysia attracts a lot of foreign capital (Baharumshah & Almasaied, 2009), and 169 Dutch companies are operating in Malaysia (Dutch Embassy in Kuala Lumpur, 2009). The findings can reveal important implications for foreign companies in Malaysia.
6.RESEARCH METHODODLY
The results are retrieved through a qualitative case study approach (Burnes, 2004; Parasuraman, 2008; Strauss & Corbin, 1998). The case study approach was used here because a case study can provide a rich understanding of the company in question (Burnes, 2004). Parasuraman (2008) recommends the use of case studies in investigating employee participation in Malaysia because the boundaries between the phenomenon (employee participation) and the context (Malaysian industrial relations system) are not clearly evident and multiple sources of evidence are used. He furthermore states that, ‘the case study approach is also appropriate for describing, analyzing and understanding formal and informal processes of employee participation in the organizations’ (Parasuraman, 2008: 88).
The case study consisted of two steps: document analysis and open interviews. Strauss and Corbin (1998) and Yin (1981) advice to gather data on the same phenomenon in different ways such as interviews and written reports to enhance the objectivity and construct validity of the study.The documents analyzed were annual reports, and business reports found at the company website, the collective agreement, the Employee Handbook and newsletters. Furthermore, documents on Malaysian legislation were retrieved from MEF and MTUC.
An in-depth interview was used to gather extended, detailed data. It was decided to use open interviews basically because they stimulates interaction and gives more detailed information (Silverman, 2000; Lewis, 2003). As this study is an exploratory study the need to obtain extended information and ask for explanation is best satisfied by using an in-depth interview as opposed to using a closed interview. As EP is a complex, and sensitive issue (Parasuraman, 2008) in-depth interviews were used because they are appropriate for understanding complex processes and issues (e.g. motivations, impacts) and for sensitive issues Lewis (2003).
Ten members of a Dutch subsidiary in the food industry in Malaysia, including directors and managers, and union representatives were interviewed. Interviews with MTUC, MEF, ITF, and HR managers of three other large companies operating in Malaysia for a long time, were conducted to clarify and broaden the understanding of the issue under study.
The different forms of EP present or developing in the company were assessed. To find out if the forms of EP present in the company, actually give employees influence in the company, it is important to consider a few criteria. First, it is important to consider how much “access” employees have, which could be assessed by using the continuum of Cotton et al. (1988), ranging from no information is given about decisions, to the decision is completely in the hands of employees. Besides that, the timing of participation has to be considered (Goodijk, 1995; Allertz, 2002), as well as the sort of decisions employees can influence (Razali, 1998). Finally, the level (job, departmental, or organizational) at which employees can have an influence is important (Bakan et al., 2004).
Factors that influence the development of EP are considered in this study. Participants were asked for the drivers behind the development of EP in their company, and for the factors that restricted the development of EP. Specifically, participants were asked about the management style and attitudes towards EP, the relationship between management and unions, the core values in the company, the organizational culture and the Malaysian culture, and to what extent these factors had an influence on the development of EP.
The success of forms of EP was assessed by looking at the degree of influence employees have.
The generalizability of this study to other companies is limited, as only one case study is included. Because of problems with getting access to companies, no more case studies could be included. This problem was also mentioned by Parasuraman (2008) and Bhopal and Todd (2000). In this study, the primary aim is to find if theoretical principles of EP are developing in a Dutch subsidiary in Malaysia. For theory testing, one case study can be enough (Westgren & Zering, 1998).