September 18, 2018

Shaping the Future of Work at Daimler

During a recent visit to the MIT Sloan School, two Daimler AG leaders described how, in Germany, management and representatives elected by workers cooperate to codetermine the company’s future. Then a panel of U.S. experts discussed what Americans might learn from the German approach.

 Michael Brecht (left), Chairman of Daimler AG's Group Works Council, and Jürgen Hartwig (right), Head of Human Resources at Daimler Trucks, discussed how they work together during a panel moderated by Wilma B. Liebman (center), an adjunct professor at New York University School of Law and the former Chairman of the National Labor Relations Board in the United States. 

Codetermination is a word that’s unfamiliar to many Americans. However, in Germany, it’s an important part of labor law and corporate governance that mandates certain forms of employee participation in business decisions. This employee participation is accomplished via works councils elected to represent all employees of a given establishment, as well as by employee representation on companies' supervisory boards.

During a symposium at the MIT Sloan School of Management on September 7, Jürgen Hartwig, Head of Human Resources at Daimler Trucks, and Michael Brecht, a Daimler employee who serves as Chairman of Daimler AG’s Group Works Council, Deputy Chairman of Daimler's Supervisory Board, and President of Daimler’s World Employee Committee, described how codetermination requires them to work together—and how management and the work councils are jointly preparing for technological change in the company in the years ahead. The moderator of the discussion was Wilma B. Liebman, an adjunct professor at New York University School of Law, as well as a visiting research fellow at the Rutgers University School of Management and Labor Relations, and the former Chairman of the National Labor Relations Board in the United States. The event was hosted by the MIT Institute for Work and Employment Research and the Good Companies, Good Jobs Initiative at MIT Sloan, in partnership with the Transatlantic Labor Institute, the Embassy of the Federal Republic of Germany in Washington, and the Friedrich Ebert Stiftung.

Hartwig described what he believes are three requirements for making codetermination work successfully:

  1. Good attitude on both sides:  If either the union or management has strongly negative attitudes about the other side, codetermination won’t work well, Hartwig indicated.
  2. Knowledge, understanding, and experience. In order to have codetermination and co-leadership, Hartwig explained, workers’ representatives need both a certain level of knowledge of the business topics facing the company and experience. Management representatives, meanwhile, need to understand the role and the needs of the union and the works councils. “You have to understand what are the needs from the other side,” he said.
  3. Personal trust. Hartwig told the audience that he has a close working relationship with Brecht. He said the two of them typically talk at least twice a week and discuss issues facing the company, including those affecting its future direction, extremely openly.  “We trust each other,” Brecht agreed.

There is, of course, sometimes conflict between what workers and managers want. But “it’s not every day a fight,” Brecht said, and Hartwig described the relationship as a “game of give and take,” where both parties know that they will have to work together after they have conflict.

Brecht noted that the codetermination process requires time. And Hartwig acknowledged that, as a manager, it often seems like it would be easier if he didn’t have to consult the works council about decisions. However, Hartwig explained, although it sometimes takes longer to make decisions using codetermination, once decisions are made, “execution is much easier,” because of the alignment that’s achieved through the process.  A key feature of their relationship is that both sides have access to and share information on possible company strategies before those strategies, including ones involving new technologies, are decided upon.  This provides time to determine and implement needed training and workforce adjustment processes before technological or other changes occur.

Lessons for the U.S.

In the second part of the discussion, a panel of four experts discussed what lessons for the U.S. can be drawn from the Daimler experience—with the caveat that practices from one country cannot be simply exported and replicated in another. Kathleen Thelen, the Ford Professor of Political Science at MIT and President of the American Political Science Association, pointed out that in Germany, codetermination is obligatory, with a statutory underpinning. “It’s not a choice,” she said, and the two sides have to negotiate with one another until they find a solution together.  In contrast, she said, one of the challenges for labor-management negotiations in the U.S. is that management can so readily avoid needing to negotiate with unions.

Tobias Schulze-Cleven, Assistant Professor of Labor Studies and Employment Relations and Associate Director of the Center for Global Work and Employment at the Rutgers University School of Management and Labor Relations, observed that the long-term focus that the German system fosters—where management and employee representatives have to work together for the long term—is something that the U.S. could learn from. “In this country, many companies don’t seem interested in the long term anymore,” Schulze-Cleven said.

Gary Casteel, retired UAW Secretary-Treasurer and Director of the UAW Transnational Department and former Director of UAW Region 8, reflected on the efforts of the UAW to develop some version of a works council arrangement in the U.S. and, in particular, on an effort to  organize the Volkswagen plant in Chattanooga, Tennessee and develop a works council there.  Casteel indicated he is heartened that he sees signs of more interest in the U.S. in concepts like works councils than there used to be. “The way that I see progress being made is slowly, but I’m encouraged,” he said.

According to Thomas Kochan, the George M. Bunker Professor of Management at the MIT Sloan School of Management, Co-Director of the MIT Institute for Work and Employment Research, and Faculty Director of the Good Companies, Good Jobs Initiative at MIT Sloan, it is an ideal time for this discussion. Kochan thinks reluctance to consider works councils or worker representation on company boards in the U.S. appears to be fading.  Today, he notes, there is a growing consensus that labor law is sufficiently out of date and failing to meet its objectives that more fundamental changes in law are needed that might involve different institutional arrangements—including reforms to corporate governance. 

Although circumstances are different in Germany and the U.S., Thelen said, the value of comparisons like this “is to show what’s possible.” One lesson from the German experience? “Strong unions are compatible with strong economic performance,” Thelen observed.

The bottom-line implication many in the room took away from the discussion was:  Policies and practices regarding American management and labor need to be adapted so that, like their German counterparts, the two groups can work together to design and implement the technologies that will play increasingly important roles in the work of the future.

To read a more in-depth analysis of this event, click here.

Martha E. Mangelsdorf


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