Employee involvement is creating an environment in which people have an impact on decisions and actions that affect their jobs. Employee involvement is not the goal nor is it a tool, as practised in many organizations. Rather, it is a management and leadership philosophy about how people are most enabled to contribute to continuous improvement and the ongoing success of their work organization.
My bias, from working with people for 35+ years, is to involve people as much as possible in all aspects of work decisions and planning. This involvement increases ownership and commitment, retains your best employees, and fosters an environment in which people choose to be motivated and contributing. It is also important for team building.

How to involve employees in decisionmaking and continuous improvement activities is the strategic aspect of involvement and can include such methods as suggestion systems, manufacturing cells, work teams, continuous improvement meetings, Kaizen (continuous improvement) events, corrective action processes and periodic discussions with the supervisor.

Intrinsic to most employee involvement processes is training in team effectiveness, communication, and problem solving; the development of reward and recognition systems; and frequently, the sharing of gains made through employee involvement efforts.

Employee Involvement Model
For people and organizations that desire a model to apply, the best I have discovered was developed from work by Tannenbaum and Schmidt (1958) and Sadler (1970). They provide a continuum for leadership and involvement that includes an increasing role for employees and a decreasing role for supervisors in the decision process. The continuum includes this progression.

Tell: the supervisor makes the decision and announces it to staff. The supervisor provides complete direction. Tell is useful when communicating about safety issues, government regulations and for decisions that neither require nor ask for employee input.

Sell: the supervisor makes the decision and then attempts to gain commitment from staff by "selling" the positive aspects of the decision. Sell is useful when employee commitment is needed, but the decision is not open to employee influence.

Consult: the supervisor invites input into a decision while retaining authority to make the final decision herself. The key to a successful consultation is to inform employees, on the front end of the discussion, that their input is needed, but that the supervisor is retaining the authority to make the final decision. This is the level of involvement that can create employee dissatisfaction most readily when this is not clear to the people providing input.

Join: the supervisor invites employees to make the decision with the supervisor. The supervisor considers his voice equal in the decision process. The key to a successful join is when the supervisor truly builds consensus around a decision and is willing to keep her influence equal to that of the others providing input. -humanresources.about.com