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

Abstract

<p>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.</p>