Communication as an influence of EWC on decision making.

Introduction

Businesses and organizations within Europe and outside have significantly grown and become International over the recent years. This can be through gaining new markets, global supply chains, organizations restructuring, relocation, or outsourcing. Consequently, there are scenarios where employees in a particular country might be working for a company whose vital business decision is made from a head office that exists in a different European country or beyond. Eachcountry within Europe has a business environment that differs in regards to culture, social understanding, and economic parameters. Therefore, having a central decision-making point to international businesses raises critical questions regarding the practical repercussions of employment and working conditions. In this regard, there was a need to exchange information and communication more often. Employee’s also wanted to be given opportunities and a platform to express themselves from wherever they were working from. (Lecher et al., 2019)

The profound answer to this was the European Works Councils, a platform established by the European Directive of 1994 for mutual consultations and better decision making between employees and companies. When a company sets itself in several countries within Europe, European Union councils become representatives of all European employees in meetings convened by the central management.

EWCs’ mission is its mode of operation, negotiating differently with each company on their different ways of operations while sharing a common working framework. To actualize this, EWCs consisted of at least one representative from a European Union country where the company was operational. The representatives become contact persons between employees and decision-making management. They also transfer any updates from the administration to employees and, through mutual consultations, assist the administration to come up with better decisions. (Paul Marginson, 2018)

Over the years, the EWC directive has grown and diversified to become an integral model of companies’ compliance with European Union guidelines and modifying the European social model concept.  In international companies, especially those operating in Europe, EWC has a vital role in ensuring employee’s fundamental rights to information, representation, and consultation in matters affecting the company are upheld.

Because of this, EWCs have the mandate to;

  1. Articulate the needs of employees to central management. These needs range from economic, health and organizational matters
  2. Have regular contact with employees to receive and give feedback. Bring onboard all employees working for a multinational company and being their representatives in meetings with the head management
  3. Finding an equilibrium and satisfactory social dialogue.
  4. Ensure that employee’s fundamental rights to information and be consulted before making decisions are observed and upheld (managers must inform employees via the council on plans to hire, fire, and transfer). This influence also goes the extra mile when significant economic steps like vital capital investments are made.(McCormack, 2018)

From the rights, privileges, and mandates stated above, EWC brings about fair balance by being a link between employees and the company. They are a link that allows the participation of employees in the decision-making process regarding employment and issues arising from working conditions. This shows the significant influence EWCs have on managerial decision making. The influence is demonstrated by the integration between organizations decision making teams, employees, and EWCs. The organizations have no mandate to independently make decisions but rather inform and actively engage their employee’s through EWCs (Oesingmann, 2015). How does this happen, and what gives the EWCs this upper hand in organizations’ decision making?

First, let’s look at how EWCs operate. The organization that runs a business in at least two countries within the European Union Economic Area and have at lowest 1000 employees with a sum of at least 150 in two European states, the employer or employees are at-will and eligible to form a works council. Once an EWC is in existence, employees elect among themselves colleagues to represent them from the country where the company is currently operating from. Here the EWC becomes the face of the employees to the organization’s top management. Parameters like laws, different social and cultural beliefs and expectations vary from one country to another, therefore, necessitating the multinational councils to always meet more often and harmonize their communications and issues (Skorupinska, 2015)

Communication as an influence of EWC on decision making.

EWCs play a decisive role in regard to the anticipation of change and managing the same. They become vital preventive pillars or mitigators to adverse effects of reconstruction of employment agreements and organizational workforce conditions. European Works councils articulate various issues, among them continuous, updated, and detailed information. This breeds a conducive and productive relationship of trust between employees and decision-making leadership. More profoundly, if there is a likelihood of embracing technological change(George Bucăţa, 2017)

Michelle Seidel, in her article, states that change is vital in the business world, it is needed to keep up with the ever-changing trends in the market environment. However, adjusting how organizations traditionally operate has never been an easy process. More often, its painful and frustrating because employees become paranoid for fear of the unknown and job security scare. Therefore, to counter this and enable effective adoption and embracing of the changes, employers should communicate the changes effectively. This involves using a blend of channels to deliver the same, and the channels might either be official or unofficial. The essence of this is to enable all employees to comprehend the message. The second step is engaging the employees in an effective way; this might be allowing them to actively engage with the management and the new system at hand, ask questions, receive feedback to make sure that they embrace the expectations. Lastly, the management must manage and carefully manage any opposition that might arise without altering the normal operations of an organization.

The illustrations and explanations all narrow down to trust. Employees will seamlessly board the change train if they trust the source of information and intention. This is where EWCs play a crucial role because employees have great trust in work councils that constitute colleagues elected to represent their needs and articulate their fears. Therefore, any decision-making organ within an organization will highly open dialogue with EWCs before adopting such a decision, share comprehensive descriptions of the changes, modes, implications, and goals. With this, EWCs will be able to be the link of information and influence employees to embrace the sameMichelle Seidel (2019)

 

The legal power of European work councils.

Many organizations have been tempted to overlook engaging the works councils in their decision making. In such incidents, the companies become susceptible to repercussions like labor disputes and a decrease in employee productivity.  More so, the council might opt to seek legal address by an organization failing to observe applicable laws applied by all state members(Pries, 2019).

On 22 September 1994, in view of the agreement on social policy that was annexed to social protocol, EU Directive 94/45/EC was established. It was a method within the community tasked with the roles of passing information and consulting employees. This was converted into a common-law when the European Works Council was enacted. These updated rules bettered the employment and industrial Act (EIRA) of 2002. This was done to elevate the rights of employees within a community. In 2004, the coverage of the European Work Councils Directive was further extended by the three European Economic Area (EEA) countries: Norway, Liechtenstein, and Iceland. These countries were not members of the European Union (Pries, 2019).

In the case of Opel’s works council vs. Opel Management. The committee claimed that staff cuts had really gone too far while the management was accusing the worker’s council of blocking cuts. This happened in Frankfurt, Germany, when Opel’s works council that represented employees placed an injunction to the voluntary buyout plan. The decision had arrived as a result of continued losses incurred at Opel, a car making company whose parent entity was PSA Group and therefore hindering some operations and business forecast. This was happening immediately two years after the PSA group had acquired the full stake control of Opel from general motors. This action was aimed at reducing the payroll as a way of cutting costs to reinstate profit-making. By this time, a car making company from France was on the brink of getting the stake of Opel. They had agreed on the workforce that seemed redundant by then and worked with Opel’s workforce representatives regarding a willing buyout deal. This was all put on hold by the works council that requested management to put on hold their decision to voluntarily buy out the company with a critical focus on Russelsheim, Kaiserslautern, and Eisenach branches(Principles., 2018)

In this case, the management wanted to reduce more workforce than what had been communicated to the working councils. Nevertheless, management had proposed a 4.3% raise in pay. When the council blocked the idea, Opel demanded to do away with the new structure to commit and uphold newforms of production under PSA. However, the council went ahead and blocked the employees from giving consent to such contractual agreements. The council sited overlooking of earlier collective bargain agreements. It transposed correctly as per the European Union legislation. Under a contractual agreement between the company and employees, EWC has the mandate to oversee implementation.From this case, it is understood that EWC has a significant influence on managerial decisions as per the Recast directive.(Principles., 2018)

The 8th principle of the European pillars of social rights

It states that employees and EWCs have a fundamental right to be timely updated and engaged on matters deemed vital to them. Such range from transfers, company reconstruction, merging, and workforce redundancy. The principle goes ahead to state that employees or their EWCs and companies shall consult each other on designs and modes of implementing economic,employment, and social policies in line with each member country’s national practice.  Negotiations were encouraged through which collective agreements would be reached, enacted, and upheld while respecting each other.

The legal framework regarding information and consulting at country levels have developed over time. Revised directives are set to outline information and how workers are actively and adequately(Fontecha, 2017).Quite logic, top management is always the center of making decisions for the organizations.This includes a decision on strategy, reconstruction, markets, the company, employment, and growth. The leadership will do the planning, organizing, lead staff, and control the team by making decisions. The effectiveness of such decisions become an excellent basis for success to the managers. As a norm in the decision-making process, they are tasked to define the significant issue, analyze and outline any questions that might limit the decisions, at least have other options at hand if the one being intended fails, from all the options choose the best among them all. However, despite having the best alternative,  employees who form the core structure of the organization have to be involved. This breeds a sense of belonging and ownership. Psychologically it creates acceptance and embracing the decisions.(L Baccaro, 2017).

In the capitalist economic modeled countries, there are minimum traditions of employee consultations. This makes EWCshave a significant impact on the process and outcomes of top management decision-making. The United Kingdom and the United States of American MNCs are the most affected. Levels of influence in such cases arise from the integration of variables such as factors arising from the organization’sstructure, business area of focus, how the management is organized, and the already industry-based relationship and agreement. Therefore, it’s always prudent and common for management to inform EWCs (employee representatives) to validate their decisions. When EWCs are aware and give consent to decisions, employers take them as a platform to gain legitimacy for decisions made. This creates a collective identity and facilitating governance at corporate levels. It is the purpose of management to use the Directive to foster universal awareness of the issues and promote corporate identity among employees in the organization. EWCs become a significant influencer in the decision-making process because they develop a shared understanding of common problems in the organization, which facilities corporate governance in solving these issues. On the other side, the aspect of EWCs is the retention of managerial decision-making privilege. Even though the trade unions have justifiably expected more significant roles in influencing managerial decisions using the EWCs, this has not been realized in practice (Waddington et al., 2016).

Challenges Facing European Work Councils

Nevertheless, the EWCs are also facing some challenges which inhibit their operations. Some of them include communication barriers among the representatives, companies ignore most of their directives, and they also lack sufficient resources to drive growth. Overall, the impact of EWCs has significantly grown over the past decade; more organizations have realized the need to have agents who can serve as a link between management and employees.

Unfortunately, one of the issues affecting EWCs is that most of the agreements are made out of pre-directive agreements. The original EWC directive introduced the aspect of concluding agreements that are exempted from the law requirements (Landa, 2019). This was done to allow voluntary negotiations, and about 48 companies adopted the idea. Today, various European Work Councils still exist, but they no longer follow the directive rules that were initially set. For example, they do not follow the directives established on training rights, consultations, access to information, and support from trade unions (Landa, 2019). However, this is not an indication that the pre-directive agreements were wrong. Instead, most EWCs struggle to apply them today since most multinational enterprises have fixed frameworks that they follow (Landa, 2019).

Besides, the other challenge faced by EWCs is that most of the rights initially provided to their representatives are violated or ignored. For example, a survey conducted on EWC members indicated that companies’ managements inform only 24% of the workers’ representatives before finalizing decisions (Bratton & Gold, 2017).  Similarly, only 37% of workers are notified before plans are made public, while the proportion of those who are consulted during decision-making processes lies between 20% to 30% (Bratton & Gold, 2017).Worse still, a survey conducted on managers affirmed that they did not seem troubled by these findings, and they are not particularly concerned about workers’ rights (Greer, Gerards, &Slowe, 2018). This is a significant hindrance to the activities of EWCs since most of them operate with the primary goal being to uphold the core rights of workers (Greer, Gerards, &Slowe, 2018).

Conclusion

As shown, EWCs exist in many countries in Europe. Even though theymay have different names and different structures, they all play a common role in influencing matters pertaining to industry relations (employment and working conditions) within member states’ national systems and multinational companies.The EU Directive on European Works Councils (94/45/EC) has so far been their greatest legislative milestone actualizedat the European level. Case studies illustrated confirm that employee influence via EWCs is possible, especially in matters concerning corporate strategies, reconstruction, transfer, relocation, and closure of the business. Therefore, before making such decisions, managers have an obligation to inform and consult workers, either directly or through their council’s representatives on time. When employees get involved in decision making, there is a great sense of belonging, and they feel part of the company. This leads to a relationship between them and the management, motivation, trust, and, more importantly, improve productivity.

However, EWCs have also failed to demonstrate noticeable achievements of their influence because only a few multinational companies have instituted an EWC.  Factors such as employer resisting or official guidelines of the EWCs directive and the company’s’ specific agreements have been considered to hamper employee influence. EWCs have led to an increased rate of bureaucracy and rigidity among employees. This lags behind the decision making process, it becomes a cost to the company because of the time value for money. They are also a source of the unwanted increase in employee expectations. Workers have great expectations on what these platforms might achieve or influence the management in the decision in regards to reconstruction, employment, and working conditions. However, managers are only obliged to convey information on matters they are legally required to.

Research on EWCs has provided a multilayered analysis of how councils influence decision making by the management. The importance of employee involvement, their pros, and cons have also been clearly outlined. However, moreattention is needed in two areas, giving a clear legal mandate to the EWCs to seek legal redress on behalf of workers whenever their directivesare overlooked. Secondly, there needs to be a great integration between empirical and conceptual progress. This has been a profound undoing to measure the actual influence of EWCs.

References

Fontecha, L. M. (2017, 9 5). Pillars of social rights. The European pillar of social rights, pp. 149-153.

L Baccaro, C. H. (2017). European industrial relations. Trajectories of neoliberal transformation:

McCormack, P. (2018). Global HCM Integration: How to Comply with Works Councils.

Michelle Seidel, B. L. (2019, 2 12). What Causes Resistance to Change in an Organization? Change in Organizations.

Oesingmann, K. (2015). Workplace representation in Europe: Works council and their economic effects on firms. CESifo DICE Report, 13(4):59-64.

Paul Marginson, M. H. (2018). The impact of European Works councils on management decision-making in the US and UK. British journal of industrial relations, 42(2):209-233.

Principles., T. T. (2018, 4 27). Opel union blocks voluntary redundancies, stifling deeper PSA cuts – a memo.

Skorupinska, K. (2015). Towards a Europeanization of indirect employee participation. Economic and Industrial democracy.

Conchon, A., & Triangle, L. (2017). industrial European trade union: Over 20 years of working with European Works Councils. European Journal of Industrial Relations23(3), 309-322.

European Commission. (2020). Employee Involvement – European Works Councils. Retrieved on 1 March 2020 from https://ec.europa.eu/social/main.jsp?catId=707&langId=en&intPageId=211

Flax. (z.d.) What advantages might EWCS offer, and what disadvantages might they pose for employers?. Retrieved on 2 March 2020 from http://flax.nzdl.org/greenstone3/flax?a=d&c=BAWESS&d=D520&dt=si

Gold, M. (2018). European Works Councils: Who Benefits?. In New Frontiers of Democratic Participation at Work (pp. 51-72). Routledge.

Greer, S., Gerards, J., & Slowe, R. (2018). Human rights in the Council of Europe and the European Union: achievements, trends, and challenges (Vol. 29). Cambridge University Press.

Hann, D., Hauptmeier, M., & Waddington, J. (2017). European Works Councils after two decades. European Journal of Industrial Relations23(3), 209-224.

Havlovic, S. J. (2019). European Works Councils in the Hotel Industry. In Strategic Innovative Marketing and Tourism (pp. 569-574). Springer, Cham.

Landa, J. (2019). Trade Unions’ Rights, Work Councils’ Functions, and the Legal Framework for Governing European Corporations: a Spanish Perspective. Oñati Socio-Legal Series9(1).

Lecher, W., Nagel, B., & Platzer, H. W. (2019). The establishment of European Works Councils: from information committee to social actor. Routledge.

Lecher, W., Platzer, H. W., & Weiner, K. P. (2018). European Works Councils: development, types, and networking. Routledge.

George Bucăţa, M. R. (2017). The Role of Communication in Enhancing Work Effectiveness of an Organization.

 

Marginson, P., Hall, M., Hoffmann, A., & Müller, T. (2004). The Impact of European Works Councils on Management Decision‐Making in the UK and US‐based Multinationals: A Case Study Comparison. British Journal of Industrial Relations42(2), 209-233.

Pries, L. (2019). EWC–ineffective bureaucratic body or institutionalizing labor regulation at the European company level?. Trade Unions and European Integration (pp. 127-149). Routledge.

Pulignano, V. (2017). Articulation within (and across) transnational workplaces and the role of European Works Councils. European Journal of Industrial Relations23(3), 261-276.

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