Navigating Uncertainty: Employee Participation Dynamics in Times of Crisis

The flow of information continues to expand exponentially while, at the same time, decision-making becomes more complex. Employees, organizations, and societies face an increasingly hard challenge in identifying and utilizing information effectively. In the context of a crisis, the need for timely and correct information increases even more to support management decisions. Communication channels such as meetings and staff involvement committees (voluntary or mandatory) are crucial for efficient knowledge flows between employees, management, and within divisions. However, less is known about their pattern of creation at different stages of a crisis. This empirical study investigates the relevance of the Financial Crisis for the introduction and dissolution of staff involvement committees. Using the German IAB Establishment Panel, we use a conditional difference-in-differences framework and provide empirical evidence of whether employers initiated or abolished staff involvement committees in different stages of the recession. Our findings reveal that negatively affected establishments are more likely to introduce communication channels, especially during the crisis.