For manufacturers, listening to workers pays off in productivity

What you’ll learn:

• Manufacturing companies that listen to their front-line workers pay their employees 3.6% more than those that don’t.
• Such manufacturers also see 16% higher productivity.
• 62% of workplaces report daily use of worker voice, but only one-fifth of manufacturing companies report having multiple channels for worker voice.

In the hustle and bustle of manufacturing, it’s not uncommon for managers to lose touch with front-line workers. But when companies seek out and heed input from these employees, everyone benefits: Employers see higher productivity, and employees see higher pay. 

That’s the conclusion of new research from MIT Sloan professor Nathan Wilmers and Dylan Nelson, professor of business administration at the University of Illinois at Urbana-Champaign. 

The study, based on data from a federally mandated U.S. Census Bureau survey of 30,000 U.S. manufacturing establishments, revealed that the productivity boost that manufacturers experienced more than compensated for the labor costs they incurred.

“The average establishment that seeks out worker input records more productivity gains than they’re paying out in higher labor costs, which is good news,” Wilmers said.

Here’s more detail on the study and its findings: 

Finding 1: Manufacturers that incorporate employee feedback have higher productivity.  

Employers that used input from their employees (“worker voice”) saw productivity rise by 16% (as determined by revenue generated per worker). 

Front-line workers are ideal candidates to offer first-person accounts of production or machinery issues. “Very often, the first thought for a manager is ‘OK, can I get more out of my engineers?’ or ‘Can I get some technology-based improvement?’ and they might overlook the value that they can get from front-line workers,” Wilmers said. 

In an auto manufacturing plant, for example, engineers are the ones who create the plan for how to build a car. But as front-line workers actually execute on that plan, they’re the ones who are able to discern how to set up the system more efficiently and reorganize what’s happening on the shop floor. 

As indicated by their self-reported answers on the survey, successful companies recorded and incorporated this employee input into their decision-making. 

Finding 2: Manufacturers that incorporate employee feedback pay their workers more, with the increase offset by productivity gains.  

The research found that companies that use input from their employees pay workers 3.6% more, on average. They do this because:

• They’re able to, given the productivity boost and a subsequent increase in revenue.
• They more highly value their workers and the input they provide. Even when the authors adjusted their model to remove extraneous factors, such as a windfall gain related to an improved business position, they still found a small wage premium among firms that sought out worker voice. 
  
  “When these front-line workers give valuable information, this raises their value to the company and allows them to get a bigger slice of the pie as their own suggested product improvements are being implemented,” Wilmers said. 
  
  This holds true whether the workers ask for a raise or whether the companies offer it of their own accord.
  
  Wilmers noted that AI is unlikely to offset labor costs, at least initially, because “front-line manufacturing workers in a lot of ways are pretty protected from AI-type changes because they’re mostly working with their hands.”
• Workers with perceived value have more bargaining power. 
  
  Some 62% of workplaces surveyed reported daily use of worker voice, but only one-fifth of manufacturing companies reported having multiple channels for worker voice. Why?
  
  “One reason suggested by our data is that while worker voice in production increases productivity, it also increases bargaining power,” the authors write. Although this can raise labor costs for employers, the authors argue that the overall productivity benefit trumps higher costs. 

Finding 3: For workers, unions still matter. 

Worker voice and increased pay have long been hallmarks of organized labor, and the authors note that their findings don’t negate the need for union membership, which hit a new low in 2024. 

Their research showed that financial gains from union membership are approximately twice as large as the average pay boost that workers see at employers that use their input. 

“Our view is that although direct voice does benefit workers on average in manufacturing, it’s not a big enough magnitude to substitute for the union benefit,” Wilmers said. 

Finding 4: Employee input can help with retention. 

Incorporating worker feedback can also help companies retain employees because it allows workers to feel seen, heard, and valued. It might also be possible, Wilmers said, that companies are able to pay their workers less because they are happy in their current positions. 

“We don’t look at that directly, but that would paradoxically be one reason that you maybe wouldn’t expect an earnings benefit of worker voice,” Wilmers said. “If worker voice is making workers happier, and they feel valued, maybe you can pay them a little bit less because they’re working in an environment where they feel listened to. So it could be the case that’s also happening in the background and already offsetting a little bit of the earnings gain that we measured.”

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A systematic approach to capturing worker voice

Given those findings, Wilmers said, employers should develop a systematic approach to seeking feedback and consider it “a real source of value” for the organization.

“Management is hard, and it requires balancing between different priorities, but our paper shows that there are productivity gains to be had. This could be worth focusing on more than managers currently are,” he said. 

Wilmers advised seeking input in multiple formats, including stand-up meetings, an annual feedback process, and worker surveys.

Beyond manufacturing: Other industries where front-line workers have value to add

Wilmers said the research findings are relevant beyond the manufacturing sector and could be applied in other hands-on, “learning-by-doing” settings, such as retail, restaurants, or construction. In such environments, “there might be a disconnect between the workers who are actually doing the job and the managers who have to make decisions about the business,” he said.

Consider, for instance, a retail store that is reorienting its business for e-commerce and therefore doing more delivery and in-store pickup and transforming its operations into a warehouse. In this case, there would be a lot of learning by doing and shifting away from the standard way of selling goods, and the retailer would need to figure out what is and isn’t working as new processes are put into place. 

In this case, “the people actually doing that work are going to be really effective at giving feedback on it,” Wilmers said. 

The full research paper, “Earnings Effects of Direct Worker Voice in Production,” covers wages, employee feedback, productivity, and effective management practices in manufacturing. 

Nathan Wilmers is an associate professor of Work and Organization Studies at MIT Sloan and part of the core faculty the MIT Institute for Work and Employment Research. Wilmers researches wage and earnings inequality, economic sociology, and the sociology of labor. In his empirical research, he studies how wage stagnation and rising earnings inequality result from weakening labor market institutions, changing market power, and job restructuring. He received widespread attention for his research showing that casual chain restaurants like Applebee’s and Chili’s are the best places for people in the U.S. to meet and socialize with those from different income classes.

Dylan Nelson is an assistant professor of business administration at the at the University of Illinois at Urbana-Champaign’s Gies College of Business. His research seeks to link questions of performance and productivity to questions of purpose, worker experience, and workers’ job mobility.