Performance and the Conjunction of Better Management Practices and Non-Union Workplace Representation

Using data from the European Company Survey for a cluster of nations possessing a common system of workplace representation, we consider two factors deemed important correlates of firm performance, namely the deployment of structured management practices and the presence of works councils. The outcome indicators are management’s assessment of establishment financial performance and labor productivity growth. For the full sample of works council and non-works council establishments, we report that better management practices are strongly associated with improved establishment performance, independent of works council presence, while the autonomous ‘contribution’ of works council presence is negative and statistically significant in the case of the labor productivity outcome but not profitability. Management perceptions of different aspects of works council operation were then used to categorize works council types, but generally failed to produce a consistent pattern of finding with respect to the outcome indicators. The same was true of employee views of management, although in both cases the strong positive association between better management practices and both performance measures persisted. However, use of a bilateral measure of industrial relations quality yielded consistency. That is, distrust of the other side and disagreement as to the climate of industrial relations each recorded a significantly negative association with financial performance and labor productivity growth, while the relation between management practices and performance was unchanged.