Only Businesses with Works Councils Increase Productivity by Implementing Modern Work Forms

Businesses with works councils manage to increase productivity by implementing modern work forms such as flat hierarchies, group work and profit centres. Businesses which lack a works council, however, are unable to take advantage of such work forms.

This is the finding of a representative study carried out by the Centre for European Economic Research (ZEW) in Mannheim. The study first clarifies the interaction of the two possible ways in which employee participation in a business might be increased; the implementation of modern work forms by management, or the creation of works councils, established according to the wishes of employees themselves. The study is based on the representative IAB Establishment Panel compiled by The Institute for Employment Research (IAB). It is carried out on an annual basis and collates data from around 15,000 businesses in all sectors.

Employee participation is a proven method for the improvement of the competitiveness of a business. Employees who are able to influence business processes, are often more motivated and more commercially-minded. The study shows that the management, particularly in businesses which exhibit productivity deficits in comparison to competitors, tends to adopt measures which increase employee participation. Aims to increase productivity levels are subsequently achieved. Businesses which implemented group work, individual work groups and/or flat hierarchies between the years 1996 and 1997, had a net increase in value in 1997, which was a good 25 per cent greater than that achieved by businesses which did not make use of measures.

Looking at the productivity of businesses, either with or without works councils, indicates, however, that it is only businesses with works councils which have been able to significantly improve productivity. In businesses without works councils, the introduction of modern work forms has had no influence on the gross value added to the business. This finding confirms that works councils in Germany play a significant function, supporting the introduction and implementation of modern work forms. They can also help to establish trusting working relationships between managers and their staff. Given that these work forms are often met with opposition from employees, trust plays a particularly important role when it comes to their implementation.

Contact

Prof. Dr. Thomas Zwick, Telephone: +49(0)621/1235-131, E-mail: zwick@zew.de