Germany: Culture of German Management - Part 2

From ExecutivePlanet.com

Overview of German management and practices

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.

Reprinted with permission from About.com - for more information please visit germanculture.about.com

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