Does more labour law lead to stronger companies?

OK, here’s a piece of idle conjecture…

One of the things that has surprised me a bit in my time since joining Microsoft has been how hierarchically deferent the company seems in comparison to previous employers. It’s the first US company I’ve worked for, and have been quite taken back by how status and power sit together in a way that I’ve not really seen before.

At an event last night I was chatting about this to a Canadian chap who has worked in the Canada, the US and Europe. Was this typical of US companies, I wondered? His take was that it seemed more common to him in US-based companies and maybe one of the major factors behind it was that employment in the US is “at will”, and so perhaps employees were less willing to openly challenge the views of their chain of management command because of a perception (real or otherwise) that it could lead to dismissal.

Which got me thinking – does stronger labour law lead to stronger companies?

A bit of a leap, maybe: a couple of drivers behind the hypothesis.

At a macro level, I’ve worked in a number of companies over the years who have had subsidiaries in Germany, and undoubtedly that market seemed to have the highest level of complexity relating to employment law when it came to implementing any form of business change. Germany, the sick man of Europe… although to be fair I have no idea as to whether German companies are hierarchically deferential or not.

At a micro level, in his book Outliers, Malcolm Gladwell dedicates an entire chapter to examining the reasons why Qantas has had such an exemplary safety record over the years. The predominant conclusion for me was that Australian culture isn’t very hierarchically deferential at all as so it wouldn’t be unheard of at all for a co-pilot to openly challenge the decisions and actions of his or her pilot (“What the bloody hell do you think you’re doing flying towards that mountain, mate?!”); low safety record airlines are very commonly correlated with cultures in which deference to one’s superiors is absolute.

So does that mean that a fear of losing one’s job leads to less willingness to challenge one’s superiors, which in turn leads to poorer decision making and worse companies overall? I’d love to know if there is any evidence, and I feel an email to More or Less coming on. Another thought, though, is that at different stages in the life of a company, in this global world we live in, it might make sense for companies to shift headquarters to meet the needs at the time – start up in liberal labour-lawed USA, grow the business in mid-labour lawed UK, sustain the established business in regulated Germany…

But as I say – pure conjecture.

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