Employee Participation in Decision-making (PDM) and Firm Performance

The objective of this study is to examine the influence of employee participation in decision-making on firm performance in Saudi Arabia’s manufacturing sector. Data were collected through pre-validated, piloted questionnaires, which were e-mailed to 341 manufacturing firms. The questionnaires asked about employee involvement in decision-making and performance variables. The response rate was 63.4 percent. Dimensions of PDM were rendered into 20 statements in the form of a five-point Likert scale. The scale, ranging from no involvement to substantial involvement, measured the degree of PDM. Additionally we used a five-point Likert scale to determine the extent of the firms’ performance in terms of the 10 criteria. The scores of the 10 items were summed and averaged to establish the mean index of the firms’ performance. An index of less than 4.0 was regarded as low firm performance; an index of 4.0 and above was considered to represent high firm performance. Statistical tools were used in analysis. Through product– moment correlation, we examined whether a relationship existed between employee participation in decision-making and firm performance. Regression analysis provided the extent of variation in the dependent variable and Z-test (approximated by the independent samples t-test). Findings showed a significant positive relationship exists between PDM and firm performance, suggesting that PDM is an essential component influencing firm performance. The higher the level of employee participation in decision-making, the higher the level of firm performance.Future studies involving the service industry would shed light on PDM in industries besides manufacturing.


Introduction
A certain logic supports the opinion that an organization benefits from their managers and employees collaborating, and research has shown the close link between organizational and individual effectiveness (Irawanto, 2015).For many years, the relationship between job performance and participation has been an area of interest for business researchers.If employees are to understand the need for creativity and commit to changing their work behaviors in new and improved ways, they must be involved (Singh, 2009;Kingir & Mesci, 2010).Employee involvement in decision-making creates a sense of belonging among workers and an agreeable environment in which both management and employees willingly contribute to healthy relations (Noah, 2008).Thus, workers' involvement in decision-making can be seen as a motivational tool for encouraging high productivity and positive attitude (Noah, 2008).Skepticism regarding the relevance and value of employee participation in decision-making to firm performance persists, and as such this study assesses whether employee participation in decision-making has a significant impact on firm performance.
Though Saudi Arabia's manufacturing sector is of great interest, little is known about the influence of employee participation in decision-making on firm performance.The study's focus on manufacturing stems from the perspective that the sector is a producer of jobs, a creator of positive spill-over effects, and a potential mechanism of modernization (Alsughayir & Albarq, 2013).In addition, expansion of manufacturing output has been crucial in the effective transformation of most economies that have experienced sustained surges in per-capita income (Soderbom & Teal, 2002).The Saudi government has ascribed huge significance to industrial development in providing the industrial sector with numerous supports and facilities.The Saudi industry has consequently made enormous progress, clearly derived from the increase of industrial investment following the establishment of Saudi Central.Invested capital increased to over SR 883 billion in 2013, up from approximately SR 12 billion in 1974.Meanwhile the number of employees has increased from 34,000 in 1974 to 843,000 in 2013 (The Saudi Department of Statistics & Information, 2014).Therefore, studies should examine manufacturing and the factors encouraging its growth.A forward-looking modern business trusts and involves its employees in decision-making at all levels; it does not keep them in the dark about decisions that affect them."Command and control" is no longer a suitable approach.A collaborative and open framework utilizes the capabilities of all employees (Hewitt, 2002).The focus on the manufacturing sector is because of the sector's potential and relevance to Saudi economic development.The sample companies were drawn from manufacturing firms in the second industrial area of Riyadh, the capital and commercial nerve center of Saudi Arabia, and where the largest concentration of industries lies.
Factors affecting the existence of PDM are the investigation's main focus.Though PDM has been researched in developed countries, generalizability of those findings across cultures remains an issue.Are the outcomes of these previous studies done in Western culture also relevant in Saudi culture?Hofstede's (1994) cultural study revealed that a Middle East country as Saudi Arabia scored high on masculinity, high on uncertainty avoidance, quite high on collectivism, and very high on power distance, as compared to other cultures.In considering Hofstede's findings, specialists may wonder whether Saudi workers are culturally prepared to take on management practices such as PDM, though this austere view of Saudi culture is somewhat fading.Hence, this investigation analyzes the link between employee participation in decision-making and firm performance within the context of the Saudi manufacturing industry.
This study evaluates the influence that participative decision-making has on firm performance through purposive sampling.Responses on a wide variety of issues regarding employee participation in decision-making and firm performance were collected from manufacturing firms.The region of Riyadh, the capital of Saudi Arabia, leads all other regions with 1,748 factories, or 38 percent of the total number of operational factories in the country; it also leads all other regions in terms of industrial labor with 199,607 laborers, or 38 percent of total industrial labor in Saudi Arabia (Central Department of Statistics and Information, 2014).This study's population was comprised of manufacturing firms in Riyadh, capital of Saudi Arabia.

Literature Review
Employee participation in decision-making, also known as participative decision-making, has to do with shared decision-making in the workplace (Mitchell, 1973).PDM is the degree to which employers encourage or allow their employees to be involved in organizational decision-making (Talib & Rahman, 2010).Since the 1940s, the impact of PDM on performance has been studied.However, as American businesses encountered competitive challenges requiring higher performance levels, techniques such as PDM gained renewed interest in the 1980s (Paul, Niehoff, Turnley, 2000).Studies argued that PDM is a crucial element in improving job satisfaction in organizations (Black & Gregersen, 1997;Kim, 2002;Han, Chiang, & Chang, 2011), and previous research proved that worker participation is a way for management to increase worker satisfaction (Cotton, Vollrath, Froggatt, Lengnick-Hall, Jennings, 1988).A definition of participation is involvement (Vroom, 1974), implying that managers must treat their employees fairly to accomplish organizational goals.Employee involvement in organizational decision-making has a place within the hierarchy of needs (Mitchell, 1973;Vroom, 1974).Being involved in decision-making may be a challenge for many employees but may also increase their motivation (Scott & Marshall, 2004).Employee participation plays a key role in effective implementation of management strategies and employee job satisfaction (Harber, Marriott, Idrus, 1991;Ardichvili, Page, Wentling, 2003).Black and Gregersen (1997) stated that PDM ranges from formal to informal.A formal system entails explicit guidelines as to who is allowed to participate, what decisions employees can participate in, and how involvement occurs.An informal system has much less explicit rules regarding who can participate and what can be discussed.Formal systems are more common (Black & Gregersen, 1997).
Many scholars and managers contend that if employees are adequately informed about matters concerning them and given the chance to make decisions related to their work, there will be benefits for both the organization and the individual (Shadur, Kienzle, Rodwell, 1999).PDM enhances production efficiency, employee morale, and job satisfaction; it also builds a better sense of control and trust in the employees (Chang & Lorenzi, 1983).When employees are afforded opportunities to contribute ideas and suggestions in decision-making, firm performance may increase because deep employee involvement in decision-making maximizes the diversity of perspectives (Kemelgor, 2002).Sashkin (1976) in his research defines the outcomes of PDM as quality improvement.Better information flow and use clarify task goals, thus producing qualitatively better decisions.Support for the participative approach and how its effects continue can be time-consuming due to learning through behavioral practice, which represents the behavioral process effect.However, potential benefits gleaned from greater employee involvement in decision-making depend on whether employee interests align with firm interests (Ogden, 1992;Spreitzer & Mishra, 1999).
According to Noah (2008), there is also a significant relationship between frequency of employee consultations and organizational commitment.Workers with greater choice regarding how to do their work have high job satisfaction and, consequently, have high performance (Spreitzer et al., 1997).Research further revealed that firm performance increasingly hinges on employee involvement in decision-making (Arthur, 1994;Daft & Lewin, 1993;Deninson & Mishra, 1995;Spreitzer & Mishra, 1999).
Moreover, several studies suggested that a slight positive relationship exists between the degree of participation and employee satisfaction (Black & Gregersen, 1997).However, the findings of PDM were vague.Some findings indicated almost no impact for PDM, while some scholars argued that participation is a joint responsibility of employees and managers that convenes members to tackle issues and make decisions through team work (Davis & Newstrom, 1997;Budhiono et al., 1999;Kim, 2002).Employee participation requires employees to understand a problem and later decide on a solution.Three concepts develop from this approach: (1) mental and emotional involvement, (2) motivation to contribute to organizational performance, and (3) acceptance of responsibility.Budhiono et al. (1999) stated that participation is an important aspect of the decision-making process, during which all levels of an organization supply necessary information.Employees who actively participate in decision-making with set individual goals thus internalize the organization's goals.Employee involvement contributes to organizational efficiency because it can improve the quality of decision-making by increasing inputs and promoting commitment to the outcomes (Miller & Monge, 1986).However, Latham, Winters, Locke. (1994) argued that there is much less evidence for the value of employee involvement on quality decision-making.In fact, PDM may make employees feel positively about their jobs and organizations but actually does little to enhance firm performance (Wagner, 1994).Hence, the study's hypothesis: Employee participation in decision-making has significant influence on firm performance.

Methodology
A survey was conducted between June 3 and the end of December 2015.A chief executive or senior manager from each sample firm received a phone call that explained the study and requested his or her e-mail to enter as a volunteer participant; this individual was to acquire permission and identify appropriate respondents from his firm's employees or middle-level managers.The volunteer respondents who participated in this study were sent e-mails with the questionnaire.No interviewer asked questions or guided the respondents; the respondents independently read and answered the questions.Because the survey was administered in Saudi Arabia, we had the questionnaire translated from English to Arabic by two bilingual (Arabic and English) Arabian lecturers.This double-translation method was used to ensure the accuracy of the translation, as to avoid confusion or misinterpretation, and to ensure that the Arabic version sufficiently represented the English one.A total of 340 copies of the questionnaire were e-mailed to the manufacturing firms; 241 were completed and returned.
This study employed a structured, pre-validated, piloted questionnaire based on a literature review.The PDM questionnaire was adopted from Barringer and Bluedorn (1999), and dimensions of PDM were rendered into 20 statements in the form of a five-point Likert scale.The scale, ranging from no involvement to substantial involvement, measured the degree to which employees of different hierarchical levels of an organization are involved in its (strategic planning process) decision-making.The scores of the 20 items were summed and averaged to establish the mean index of the firms' employee participation in decision-making.An index of less than 4.0 was considered low or shallow PDM; an index of 4.0 and above was considered high or deep PDM.
Meanwhile, the firms' performance scale had 10 performance criteria, as derived from Khandwalla (1995).The 10 performance criteria are: profit growth, financial strength, sales revenue, performance stability, operating efficiency, employee morale, new ideas, environmental adaptation, public image, and social impact on society.We measured the extent of the firms' performance in terms of the 10 criteria using a five-point Likert scale.The scores of the 10 items were summed and averaged to ascertain the mean index of the firms' performance.An index of less than 4.0 was considered low firm performance; an index of 4.0 and above was considered high firm performance.

Statistical Program for Social Sciences (SPSS) version 20® (SPSS Science, Chicago, IL) was used to analyze the data.
Descriptive statisticssuch as frequencies, percentages, and meanwere calculated to measure the demographic characteristics of respondents, in order to answer questions concerning employee participation in decision-making and firm performance.Further, product-moment correlation was used to analyze the existence of a relationship between employee participation in decision-making and firm performance.Regression analysis was used to assess the amount of variation in the dependent variable.

Results
As presented in Table 1, the questionnaires were e-mailed to a total of 340 managers.Of 340 questionnaires, 241 were completed and returned.The response rate was 63.4 percent.Table 1 shows the participants' demographic characteristics.Of 241 respondents, 110 (45.6 percent) were age 41 to 50 years; 138 (57.2 percent) were of bachelor-level education; and 193 (80.1 percent) had 10 years of experience and above.The age of the majority of the organizations was 10 to 20 years.Pearson's correlation coefficient analysis was used to define the connection between employee participation in decision-making and firm performance, as shown in Table 2.The analysis concludes that employee participation in decision-making is significantly linked to firm performance.(Pearson's correlation coefficient; r = 0.849, p < 0.01).We identified the value of independent predictors of PDM on firm performance using a linear regression analysis.

Employee participation in decision-making
Pearson correlation 1 1 p-value (two-tailed) n 241
The hypothesis was tested through a regression analysis.Shown in Table 3 are the results of the regression analysis of the relationship between employee involvement in decision-making and firm performance.The analysis of variance of the fitted regression equation is significant with an F value of 975.436, which indicates that the model is a good one.Because the p-value is less than 0.05, there is a statistically significant relationship between the variables, at a 72 percent confidence level.The results of the independent sample t-test in Table 4 indicate that the performance mean index (mean = 4.50) of firms with high employee participation in decision-making is different from the performance mean index (mean = 2.82) of firms with low employee participation in decision-making.The difference between the two means is statistically significant at p < 0.05, as shown in Table 5.Therefore, a significant difference exists between the performance of firms whose employee participation in decision-making is high and that of firms whose employee participation in decision-making is low.

Discussion and Conclusion
The study illustrates a significant and positive relationship between PDM and firm performance, in which increased PDM improved firm performance.In being involved in decision-making, employees gain access to resources required to complete a project (Zubair et al., 2015), and if involved in decision-making, employees may be able to set working conditions and standards, and influence the rewards system (Thibaut and Walker, 1975).As proven in the study, PDM can affect firm performance, but the findings also show that for the sample firms, on average, employee involvement in decision-making was low.This implies the possibility of firm managers not being analytical about employee PDM, probably due to their practice of high-power distance culture, in which employees are seen and not heard.In Saudi Arabia, firm employees arrive from different countries where this culture creates division and even increases internal conflict, and as such, managers resolve the issues by being the decision-maker.Hofstede's (1994) cultural study revealed that a Middle East country as Saudi Arabia scored high on masculinity, high on uncertainty avoidance, quite high on collectivism, and very high on power distance, as compared to other cultures.In considering Hofstede's findings, specialists may wonder whether Saudi workers are culturally prepared to take on management practices such as PDM, though this austere view of Saudi culture is somewhat fading.
Furthermore, Saudi authorities are going for new and different concepts where can minimize the foreign workers stays, discourage companies from hiring them, or limit their stay by give citizens a job-market in other ways, in contrast, this mean reducing in employee PDM at the current situation where most of them expertise.
The important implications derived from this study can help scholars better understand the link between employee participation in decision-making and firm performance within the manufacturing industry of Saudi Arabia.In fact, in an academic context, Zin and Talet (2016) stated that "from the researcher's involvement and experience in teaching public administration or management curricula, there is need for a strong, clear educational effort by practitioners in both the public and private sectors in the country to integrate participative management ethics.Perhaps the Saudi Ministry of Education should form a task force at the national level, composed of professionals and educators and supported by various training agencies in Saudi, to help formulate more concrete teaching plans and strategies in this area".
Marketing Practices, 1(1), 1The findings can also highlight important implications for manufacturing firm management in signifying the need for firms to demonstrate their commitment to employee involvement in decision-making to improve performance.A framework of intensive employee participation in decision-making is an approach for increasing firm performance in competitive markets.Members of today's well-educated workforce cannot deliver their utmost capacity unless they are treated as equals and shown that they are appreciated.Employees of the front line who are aware of the issues have little authority in making decisions, while their managers who do have the authority are unaware, and thus organizations often fail to enhance performance.Business owners pay consultants thousands of naira to advise them on how to effectively develop operations, but existing staff can actually provide much of the same knowledge for nothing.Therefore, in order to spur growth in the Saudi manufacturing sector, firm managers must encourage more employee participation in decision-making activities.
The investigation was done in a limited geographical region within a limited time frame, in the manufacturing sector of Riyadh.The findings may not extrapolate to all sectors, as the sample size is insufficient.A larger sample may be required for generalization.Since the data were collected from employees and managers through a questionnaire, cognitive bias or social desirability bias may exist.This study focuses on the effect of PDM on firm performance; however, many other variables not included in the modelsuch as freedom, rewards, resource availability, communication, and criticism concerning work environment (climate) and creativitymay be better variables and could contribute.Future studies should cover the service industry rather than only the manufacturing industry; thus, generalization of the findings may be justified.Future studies should also examine firm size and firm age and their influence on employee participation in decision-making.

Table 1 .
Demographic Characteristics of the Participants

Table 3 .
Regression Analysis of Employee Participation in Decision-Making and Firm Performance

Table 4 .
Group Statistics An index of less than 4.0 was considered low or shallow employee participation in decision-making; an index of 4.0 and above was considered high or deep employee participation in decision-making. *