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German Business: Still Too Flabby (Int'l Edition)

International -- Editorials


For years, Germany Inc. has been restructuring. Companies have laid off thousands of workers, sold noncore businesses, and expanded into cheaper production sites abroad. But corporate Germany isn't yet in shape. Too many companies are hampered by a traditional mind-set: hierarchical, plodding, averse to risk, bureaucratic, aloof to customer's demands.

It's time for a deeper change. Only by taking steps to foster entirely new corporate cultures aimed at unleashing innovation will German companies stay in the global race. Siemens is taking the first step (page 46). Long ridiculed as a bureaucratic behemoth that was reluctant to change, Siemens has transformed itself since 1992 under CEO Heinrich von Pierer. Taking a page from U.S. management practice, he has turned tradition on its head to push the unit's eight divisions to cooperate more, develop products faster, and listen to customers. Managers in their 30s are put in charge of crucial projects. Employees critique bosses. New ideas are rewarded. Siemens is whipping itself into its best form in years.

There are signs that other German companies are following. Hoechst, BMW, and Daimler Benz are also trying to unleash the potential of their talented workforces. With the German mark rising, and German labor costs the highest in the world, such radical steps are more important than ever. The benefits of cost-cutting will otherwise quickly disappear.

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