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Culture of German Management
German management, as it has evolved over the centuries and has established
itself since World War II, has a distinct style and culture. Like so many
things German, it goes back to the medieval guild and merchant tradition,
but it also has a sense of the future and of the long term.
The German style of competition is rigorous but not ruinous. Although
companies might compete for the same general market, as Daimler-Benz and
BMW do, they generally seek market share rather than market domination.
Many compete for a specific niche. German companies despise price competition.
Instead, they engage in what German managers describe as Leistungswettbewerb,
competition on the basis of excellence in their products and services.
They compete on a price basis only when it is necessary, as in the sale
of bulk materials like chemicals or steel.
The German manager concentrates intensely on two objectives: product
quality and product service. He wants his company to be the best, and
he wants it to have the best products. The manager and his entire team
are strongly product oriented, confident that a good product will sell
itself. But the manager also places a high premium on customer satisfaction,
and Germans are ready to style a product to suit a customer's wishes.
The watchwords for most German managers and companies are quality, responsiveness,
dedication, and follow-up.
Product orientation usually also means production orientation. Most German
managers, even at senior levels, know their production lines. They follow
production methods closely and know their shop floors intimately. They
cannot understand managers in the United States who want only to see financial
statements and "the bottom line" rather than inspect a plant's production
processes. A German manager believes deeply that a good-quality production
line and a good-quality product will do more for the bottom line than
anything else. Relations between German managers and workers are often
close, because they believe that they are working together to create a
good product.
If there is a third objective beyond quality and service, it is cooperation--or
at least coordination--with government. German industry works closely
with government. German management is sensitive to government standards,
government policies, and government regulations. Virtually all German
products are subject to norms--the German Industrial Norms (Deutsche Industrie
Normen--DIN)--established through consultation between industry and government
but with strong inputs from the management associations, chambers of commerce,
and trade unions. As a result of these practices, the concept of private
initiative operating within a public framework lies firmly imbedded in
the consciousness of German managers.
The German management style is not litigious. Neither the government,
the trade unions, nor the business community encourages litigation if
there is no clear sign of genuine and deliberate injury. Firms do not
maintain large legal staffs. Disagreements are often talked out, sometimes
over a conference table, sometimes over a beer, and sometimes in a gathering
called by a chamber of commerce or an industrial association. Differences
are usually settled quietly, often privately. Frequent litigation is regarded
as reflecting more on the accuser than on the accused. Because of these
attitudes, Germany has comparatively few lawyers. With one-third the population
and one-third the GDP of the United States, Germany has about one-twentieth
the number of lawyers.
German managers are drawn largely from the ranks of engineers and technicians,
from those who manufacture, design, or service, although more non-engineers
have risen to the top in recent years. They are better paid than other
Europeans (except the Swiss), but on average receive about two-thirds
of the income that their American counterparts expect. Because managers
usually remain in one firm throughout their careers, rising slowly through
the ranks, they do not need a visible bottom-line result quickly. Managers
do not need to be concerned about how their careers might be affected
by a company's or a division's progress, or lack of progress, for each
year and certainly not for each quarter.
German taxation also induces management toward long-term planning. German
tax legislation and accounting practices permit German firms to allocate
considerable sums to reserves. German capital gains tax rules exempt capital
gains income if the assets are held for more than six months or, in the
case of real estate, for more than two years.
Because management has not been regarded in Germany as a separate science,
it was rare until the 1980s to find courses in management techniques such
as those taught at schools of management in the United States. Germans
believed that management as a separate discipline bred selfishness, disloyalty,
bureaucratic maneuvering, short-term thinking, and a dangerous tendency
to neglect quality production. Instead, courses at German universities
concentrated more on business administration, or Betriebswirtschaft ,
producing a Betriebswirt degree. Despite this, two West German schools
for business administration, the Hochschule für Unternehmensführung
and the European Business School, were established during the 1980s, but
they teach in ways that reinforce rather than overturn traditional German
ways of management.
Out of this compendium of business practices arises what might be termed
a German management style, with the following characteristics: collegial,
consensual, product- and quality-oriented, export-conscious, and loyal
to one company and committed to its long-term prospects. One could legitimately
conclude from this that the German system could stifle change because
it is not as innovative, aggressive, or results-oriented as the United
States management style. That, however, would not be correct, for change
can and does take place. It occurs gradually, not always obviously, under
the mottoes of stability and permanence, with the least dislocation possible,
and often under competitive pressures from abroad. German managers themselves
occasionally speculate that change might come too slowly, but they are
not certain whether or how to alter the system and its incentive structures.
- Domestic
Economy and International Economic Relations
- Bundesbank
- The Economic Miracle
- Impact of Unification
on German Economy
- Germany in
the World Economy
- National German Currency
- Culture of German
Management
- Geography (lands and
capitals, climate)
- Society (population, religion,
marriage, urbanization, social structure, immigration)
- Education (elementary,
junior, senior, vocational, higher)
- Economy (the Economic
Miracle, financial system, Bundesbank, business culture)
- Politics (government,
the Chancellor, the President, parties, Bundestag)
- Mass Media (newspapers,
radio and TV)
- Armed Forces (army,
navy, air forces, police)
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