Trust as the cement in the employment relationship? The role of trust in different workplace employment relations regimes

Abstract

PurposeThis paper addresses the puzzle of why the same workplace employment relations regimes can lead to different performances and why different regimes can produce the same performance. It is argued that the incidence of mutual, and not necessarily unilateral, trust between the employee representation and the management accounts for these differences, as mutual trust fosters information sharing and helps to strike deals that are mutually beneficial. Against the background that the institutional and organizational characteristics of some workplace employment relations regimes also constitutes information sharing and joint decision making, the author further argues that mutual trust is a functional equivalent.Design/methodology/approachMethodologically, the article is international and cross-country comparative in nature and conducted on the basis of a unique, large and transnational comparable data set of the employment relationship at firm level in eleven countries.FindingsOur results show that strong mutual trust is associated with significantly higher incidences of increases in firm profitability, regardless of the workplace employment relations regime in which the firms are embedded.Practical implicationsThe results clearly indicate that trust between the employee representation and the management works as a functional equivalent to performance enhancing employment relations regimes. Therefore, some policy recommendations and imposed institutional reforms of employment relations regimes by the IMF and the European Central Bank in some countries are sub-optimal and might not have been necessary. Trust building initiatives between the employee representation and the management are therefore an alternative, which is less conflictual and could have the same effect on the performance of firms.Originality/valuePrevious analyses on differences in the performance effects of workplace employment relations regime concentrated almost exclusively on institutional factors. Factors that account for differences in the functioning of regimes such as in particular the role of trust were not considered before. Against this background, the originality of this analysis is that it clearly shows that it is not sufficient to consider only the institutional and organizational structure of regimes, but it is essential for a better understanding of the effects of the employment relationship to consider factors which account for the functioning of the regimes such as, in particular, trust.