Management Practices and Establishment Performance Under Non-Union Workplace Representation

This paper brings together two factors deemed important correlates of firm performance: advanced management practices and works councils. The country sample comprises nations where workplace representation is via a works council. The Management Questionnaire of the 2013 European Company Survey defines our full sample of mixed establishments (with and without councils) and its sister Employee Representative Questionnaire is used to derive a much smaller matched sample of works council plants. The outcome indicators are subjective measures of financial performance and the growth in labor productivity. For the full sample, we report that better management practices are strongly related to improved establishment performance, with no suggestion that works council presence influences that association one way or another. Works council presence is, however, negatively associated with financial performance and labor productivity growth. Distinguishing between councils based on managements’ views of their type suggests that this negative association is likely attributable to unconstructive and delaying councils. Irrespective of works council type, the association between management practices and the performance indicators remains positive. Analysis of the smaller sample again confirms the favorable link between management practices and establishment performance. Circumstances in which the employee representative has a favorable view of the general work climate or expresses trust in management coincide with an improved financial situation if not higher productivity growth. Mutual distrust is negatively associated with financial performance situation but unrelated to labor productivity growth