This article examines the impact of management attitudes towards human resource management (HRM) practices on the presence of works councils in German small and medium-sized enterprises (SMEs). Based on a survey among executives of German SMEs, the key result of a logit regression analysis is that managers' attitudes towards key HRM practices have a strong impact on the prevalence of the works council in German SMEs. In particular, positive management attitudes towards individual employee participation and direct supervision seem to be detrimental for the institutionalization of works councils. The results suggest that there is more diversity and management choice regarding the institutions of industrial relations than generally expected in the case of German firms.