First, you only had to complete your EU mandated 37.5 hours per week. If you went over (without a good reason like an urgent project deliverable,) they would ask why you were being inefficient, and if you needed more managerial support or more resource on your team.
Second, you had to account for every one of those 37.5 hours against tasks and their estimates - and you often didn't write your own estimates (and when you did, it was with manager review.)
Your results, therefore, were based on slip and gain against quite realistic estimates, and if there was serious slip on an estimate (e.g. 2 hours work took you a day) there would inevitably be a review (although, generally, one focussing on how you could improve next time.) Hours worked were measured too, though, and if there was a lot of work and not enough resource and you stayed late to fill the gap, you were rewarded (especially if this was sustained over a long period of time.)
If I procrastinated some of my time away at this place, I had to catch up the time later in order to make my weekly status look acceptable. As I worked there, I got better at getting my assigned stuff done during standard office hours, and avoiding working late evenings and Saturdays (which I hated more than resisting procrastination, it turned out!)
Oh, a final point - they also had flexible working hours (one guy would start at about 3pm and work until midnight! I tended to fall into a 10-6 or 11-7 pattern..) so if people weren't in at 9am, noone raised an eyebrow. Indeed, I was told not to arrive before 10am on my first day, as there would likely be noone to let me in.
I think ultimately this is about organisational culture - something you have to concentrate on defining early on in a new company, and which is almost impossible to change. This is one reason I want to start my own company when I finish my PhD, rather than working for someone else's which doesn't get my work style and punishes me for not fitting in. This is partly why I left that old employer, although it wasn't to do with their perception of how hard I worked, it was a different aspect of their culture.
It's great that your organization is responsible about it. Sounds like there's a great deal of trust in your organization.
It sounds like there are numerous ways for this to go badly - ie: when it gets noticed that you went over 37.5 hours in some organizations that might start to be a blame game, or you'd start getting requests to "we need it done, but we also need you to do it off the clock so we don't get into trouble for breaking EU regs".
It's great that your organization sees that people might be in trouble and has a mature (aka: not blaming) attitude. I guess I always assume organizations will adopt ROWE without making the appropriate cultural changes.
just to briefly defend the EU - the 37.5 hour mandate is how much a contract can oblige you to work, not how much work you can actually do. That was, more controversially, recently capped at 60 hours per week or something, which was a massive problem for medical students/interns who wanted to qualify in less than 10 years.
Back to the company, by the time I left the culture had morphed a bit, and people were encouraged to work extra hours to compensate for their slip, where necessary. Still much better than (what I hear of) the US, where stupidly long hours are expected (apparently).
First, you only had to complete your EU mandated 37.5 hours per week. If you went over (without a good reason like an urgent project deliverable,) they would ask why you were being inefficient, and if you needed more managerial support or more resource on your team.
Second, you had to account for every one of those 37.5 hours against tasks and their estimates - and you often didn't write your own estimates (and when you did, it was with manager review.)
Your results, therefore, were based on slip and gain against quite realistic estimates, and if there was serious slip on an estimate (e.g. 2 hours work took you a day) there would inevitably be a review (although, generally, one focussing on how you could improve next time.) Hours worked were measured too, though, and if there was a lot of work and not enough resource and you stayed late to fill the gap, you were rewarded (especially if this was sustained over a long period of time.)
If I procrastinated some of my time away at this place, I had to catch up the time later in order to make my weekly status look acceptable. As I worked there, I got better at getting my assigned stuff done during standard office hours, and avoiding working late evenings and Saturdays (which I hated more than resisting procrastination, it turned out!)
Oh, a final point - they also had flexible working hours (one guy would start at about 3pm and work until midnight! I tended to fall into a 10-6 or 11-7 pattern..) so if people weren't in at 9am, noone raised an eyebrow. Indeed, I was told not to arrive before 10am on my first day, as there would likely be noone to let me in.
I think ultimately this is about organisational culture - something you have to concentrate on defining early on in a new company, and which is almost impossible to change. This is one reason I want to start my own company when I finish my PhD, rather than working for someone else's which doesn't get my work style and punishes me for not fitting in. This is partly why I left that old employer, although it wasn't to do with their perception of how hard I worked, it was a different aspect of their culture.