Works Council Effectiveness: Determinants and Outcomes

Abstract

This thesis aimed to gain more insights into works council effectiveness in two ways: 1. studying the influence of works council presence on organizational outcomes; and, 2. studying the determinants of works council effectiveness. We found that productivity increases with the presence of a works council. Works councils in smaller organizations (less than 50 employees), have a positive effect in reorganizations without layoffs. Creating acceptance for reorganizations, can lead to understanding among employees. In reorganizations with layoffs, works council presence is negatively related to productivity in small organizations. Layoffs may signal to employees that the works council did not do its best to prevent bad consequences for the employees, and that it is siding with management. Our study of works council effects on labor turnover revealed that in good times, works council presence does not affect voluntary quits, and is associated with more hires and layoffs. In bad times, in organizations with a works council, more voluntary quits are reported, hires are not affected, and less involuntary quits occur. Works councils might thus place the organizational interests above employee interests in good economic times, and the other way around in bad economic times. We employed an experimental design to gain more insights into the fundamental processes underlying works council advice. Managers had to choose to set a low or high price for their products. Part of the managers received an advice from a works council, advising high or low. Managers only follow the works council advice when it is in line with playing Nash (choosing “low”). This reflects the conflict of interests that exists between management and works councils; if the goals are more aligned, cooperation is more likely to occur. Furthermore, prosocial managers tended to follow the advice of works councils more often. They even chose a high price when the works council advised to play a low price. These results support earlier research, suggesting that a favorable attitude towards the works council often leads to more effective works councils. We found that the position in the organizational social network did not show positive effects for the works council members. Influence tactics used by the works councilors were more important, and mostly regarding influence towards management. These influence tactics for example include behaving rationally, and searching for support from persons higher in the organization. To come to a more integrative model of works council effectiveness, combining determinants and outcomes, we conducted case study research. We found support for some of our earlier findings, and we identified new important determinants of works council influence. Management attitude was again identified as one of the crucial elements affecting works council influence. Further, influence tactics are important. Relations with management, as well as relations with employees and internally, are important determinants of works council influence. Also, a well understood and well performed dual task of the works council was expected to lead to higher works council influence.