SAP and Unions Works Council, a German issue

I wish I had more color commentary on this issue, which has been brewing for a while in our German headquarters, but it's largely a mystery to me how these union issues work.

I know there are some pretty intense emotions on the anti-union side, which is interesting and hopefully reflects a generational shift in attitudes toward markets and labor in Germany. However, having read what I just wrote I probably wouldn't agree with it either for the simple reason that college graduates per capita is still lower than the U.S., and unemployment for youths is still high compared to other economies, such as the UK. Lastly, there is a lot of anxiety about jobs moving offshore to India and nearshore to Eastern Europe, and this largely plays into the hands of the old-time union folk. 

SAP moves to create non-union workers' council | InfoWorld | News | 2006-03-15 | By John Blau, IDG News Service SAP has taken steps to form a workers' council comprised of non-union employees in an effort to fend off what the German software vendor views as the harmful influence of unions on its "startup" company culture.

UPDATE: It was pointed out in the comments that I was confusing the issue of works councils and unions, and that it is correct. In an effort to clarify what a "works council" is, here are some of the rights that they enjoy. The last point is the most important one because I don't think that the current effort to establish a works council is motivated by benefits, I think it is driven by the fact that SAP has been building substantial software development capability in India, the U.S., and Eastern Europe.

More influence for employees. Works council has to be consulted by the Board if company plans to:
– lay off or hire people
– introduce technical means to control peoples work habits or behaviour
– introduce new remuneration models or change existing ones
– build new technical facilities (but this applies more to the industrial sector)
– change work processes

Work council can furthermore influence:
– protection of work safety and health conditions (pregnacy, ergonomics etc.)

More information for employees. Board has to notifiy works council if the plan to:
– lay off or regroup people
– relocate workers to other workplaces
Important: Works council has legal means to oppose. If Board and council cannot agree, they will have to go to court over this

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12 thoughts on SAP and Unions Works Council, a German issue

  1. I simply don’t get it. I know SAP has grown and it’s different from the time I was there, but for all know:
    – SAP employees are well compensated, cared for
    – more “management” than labor types
    – very “individuals”, if they don’t like SAP, move on somwhere else rather then get into some union fight.

  2. and the recent vote on the issue demonstrated that the overwhelming majority of employees are against a union (think it was 93% against). The problem in Germany is that the laws actually encourage the formation of these worker guilds within companies and give them an extraordinary degree of rights once established. It only took 3 employees out of the entire company to call for the vote.

  3. I’m completely not sure what to make of this, either 😉

    One side you might be taking is employees voted against unions because they feared SAP might take away free lunches (in the true sense of the meaning) once the work council decided to press the company for *anything* they might be entitled to by law.

    The other side is while SAP employees are well cared for, that might change any day. In that case, having a work council means employees are in a far better position. A kind of extra insurance for bad times.

    Unions don’t have anything to do with that directly – of course they’d like to get in to recruit members (you have to pay them 1% of your gross salary), but you can have (and I think SAP should!) a work council without *any* union involvement. In the building phase, the employees pushing the work council like to rely on the unions knowledge of the law, this is why they’re mentioned at all.

    The german law is very clear on the issue – it doesn’t say you *may* have elections to form a work council, they say you *have* to have elections every four years. This is a strange law in many ways – because of it, companys are careful to hire new employees. As a result of that, it’s desirable to have a work council to get a bit more job security. Catch 22.

    This is different in the US – due to the lack of such laws, it’s a lot easier to get a new job once a company gives you the pink slip.

    Again – lots of aspects to that debate, right now I’m not sure I have an opinion if this will be good or bad for SAP. But as it’s inevitable (so it seems), let’s make sure employees embracing the “SAP culture” will form the work council.

  4. Hi Jeff ,
    A lot of people are confusing the works council with the union. All the major german companies and even most german subsidiaries of non German companies (ie IBM) have works councils. They dont have an extraordinary degree of rights though. (At least by european legal standards)

    At SAP we have had a more informal model, and 90% of the employees felt this was fine. However, the German constitution enshrines the right to a formal Works council.

    the union (in this case the metalworkers union????go figure) has been pushing to have this formal structure. It is very unlikely though that they will have any significant influence on the works council or SAP.

    I’ve written a bit more on this “German” thing my blog.

  5. Well, let’s be PC and call it work council – smells a bit union-ish to me 🙂 It looks like 7% of the employees are forcing their will onto 93%. I still think in a free market economy the best approach is to make your own decisions, and move on if you no longer like where you are – especially in the information business, where most employees are highly educated and skilled.
    To put it bluntly – corporations and the market economy as a whole work best if we let management do their job.

  6. I think ( and so do 90+ percent of the rest of SAP in Germany) it is a pity that the works council (betriebsrat) thing is coming. But I dont think it will really effect SAP’s operations significantly. the 3 guys who went to court to get this installed were simply exercising their rights under German law (Most european countries have some kind of similar concept) For instance Oracle Germany has works council (betriebsrat) (sorry about the German link ) so it isnt a big competitive issue.

    To Zoli’s comment. On a more general point the term free market is pretty overused. The recent radical overhaul of the US compliance model via SOX is an indicator that “letting management do their job” has its limits. In the same way that well run companies dont need the SOX oversight, SAP doesnt really need a betriebsrat .

    SAP was voted employer of the year in Germany, so things are in pretty good shape.

  7. Zoli: another side of your position would be that democracy also means representation for minorities…
    I agree that at the current time, having a work council is not a necessitiy at SAP. OTOH, “moving on”, as you say, is a lot harder in germany than it is in the US. I know a lot of “highly educated and skilled” people with years of experience who haven’t been able to find a job in 3 years or more.
    So far we are really really happy with what the management did as a part of their job, but I think some people might say, in a typical german manner: “well, you never know… maybe just in case…”. That may be germish, but I recommend you read Thomas’s blog to see why this is not necessarily a bad thing.

  8. Frank,

    You mention the difficulty of “moving on”. This is where the issue gets skewed in Germany. A U.S. employee who is highly skilled and in the IT sector is also probably willing to relocate and make certain changes when changing jobs. How many people do I know who’ve simply up and moved from Austin to San Francisco or from Orlando to Chicago, etc…….many! Although this is generalization at it’s finest, most highly-skilled and educated Germans I know simply aren’t as flexible as their US counterparts (although I don’t criticize this….it has certain benefits which differentiate the highly skilled educated worker from his counterpart in the US—that’s another issue). This in turn makes it significantly more difficult to find a new job if you are looking for one. Ask your friends who’ve been out of work for three years whether they’ve considered relocating. I’d be curious to find out how many were willing to pick up and move from Hamburg to Munich or from Berlin to Karlsruhe, or even from Germany to the UK or from Germany to Eastern Europe, and on and on. I believe in debating this issue (I’m effected by it directly) but we can’t compare apples and oranges, and that is somewhat the case when comparing highly educated skilled workforces and their job opportunities in Germany vs. the U.S. Hence, arguing that it is more difficult in Germany than in the U.S. to “move one” really doesn’t carry much weight when considering a works council in my opinion.


  9. Paul,
    probably valid for some, but not in the cases I mentioned. Maybe due to unionism, more likely due to the overall conditions for employers in germany, companies just don’t hire that much, generally. In the last few years, we had big companies like Telekom, Deutsche Bank, VW and others – all making huge profits – lay off thousands of staff. There simply is not enough employment opportunity for all those people. Also, this often hits people over 40 with families, which have a whole set of other challenges when trying to move. I’ve been working in 5 different german areas in the last 15 years, so I know what I’m talking about.
    There’s definitely more areas than this where germany differs from the US, including employee mindsets. But having said that, this is not something you can turn around in 5 years, after it has developed over a hundred years probably.

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  11. Change hurts, and it’s not a mindset that is hundreds of years old in Germany which needs changing. It is actually a post WWII mindset, maybe a bit over 50 years old. (Check how many Germans bailed out of the country pre-war and left for the US to become successful entrepreneurs, etc.) It’s unfortunately an unrealistic mindset and people in Germany are going to need to adapt or they will get seriously left behind. Frank, by the way, I live in Germany and have done so for almost the past 10 years. I’ve also lived in multiple regions as an educated and skilled worker and have successfully found new work when necessary. AND, I came here as an outsider (Ausländer as the Germans may like to call me) and have been doing OK. I’ve had significantly more hurdles than a local would (language issues, cultural differences, supporting backbone of family and friends missing) thrown at me. So, I too know what I am talking about.

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