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Germany: The Power behind the Power

Last month, when DaimlerChrysler CEO J?rgen E. Schrempp and a dozen other top managers met Chancellor Gerhard Schr?der for dinner in Berlin, at least one participant seemed on particularly warm terms with the German leader. As the bosses discussed the deteriorating economy, other guests noted that management consultant Roland Berger addressed the Chancellor in the familiar du form. Most of the others, of course, used the more formal sie.

It should have come as no surprise that Berger and Schr?der were on intimate terms. Berger, 63, may be the best-connected man in Germany. The client roster at Munich's Roland Berger Strategy Consultants includes Deutsche Bank as well as Daimler. In addition, Berger offers advice on economic issues--often gratis--to the country's top elected leaders at both ends of the political spectrum. Such ties have helped make his management consultancy second only to McKinsey & Co. in Germany. With 1,500 employees and annual fees of $400 million, Berger is third in Europe and among the top 10 management consultants worldwide.

DECLINED POST. As government and business alike try to cope with a new kind of downturn, Berger's behind-the-scenes influence is on the rise. "He knows everybody," says Munich publisher Hubert Burda. Berger has been advising Schr?der since he was Prime Minister of Lower Saxony in the early 1990s. The future Chancellor sought Berger's advice on key appointments in companies partly owned by the local government such as Volkswagen.

After Social Democrat Schr?der became Chancellor in 1998, he asked Berger to be the nation's Economic Minister. But Berger, a political conservative, declined: For a long time, Berger has advised Edmund Stoiber, conservative Prime Minister of Bavaria--a national figure who may well try to unseat Schr?der next year. "Roland Berger is a very important adviser," says Stoiber aide Hans Schleicher. "He understands the issues from top to bottom."

Berger manages to stay on friendly terms with politicians on both sides of the aisle by sticking to economics rather than campaign advice. "I keep everything confidential, and I don't give Mr. Schr?der different answers than I give Mr. Stoiber," Berger says. At the dinner with Schr?der last month, Berger proposed a program to alleviate joblessness that combines old-fashioned fiscal stimulus with free-market finance. His plan: to use private investment to build roads in East Germany. Investors would supply the capital in return for a share of toll receipts. The solution was typical Berger. During his frequent talk show appearances and interviews, Berger urges Germans to accept a little more risk in return for faster growth.

What other kind of advice is Berger whispering in the ear of Germany's leaders? At the moment, he's pushing to dismantle labor laws that give workers broad protection against being fired but discourage companies from hiring new people. So far, Schr?der is resisting anything of the kind. But with unemployment at 9% and growing, the Chancellor is under pressure to take action.

Berger can already claim a major role in restructuring some of Germany's biggest companies. In the mid-1990s, he advised his friend Schrempp on how to dismantle Daimler's cumbersome holding structure. Last year, after D?sseldorf's Veba and Munich's Viag merged to form e.on, Germany's largest utility, the integration was handled by Berger's consultancy.

Has Berger ever given bad advice? If so, he's loath to admit it. Take Daimler-Benz's takeover of Chrysler Corp., which Berger favored but which has left the otherwise profitable German carmaker struggling to turn around an ailing U.S. subsidiary. Yet by itself, Berger still argues, Daimler lacked the bulk to prevail in global competition. In addition, advice from Berger's firm hasn't been enough to restore profitability at Frankfurt-based construction company Philipp Holzmann, which nearly went bankrupt in 1999.

Rivals accuse him of being a better rainmaker than consultant. Berger counters that 78% of his fees come from repeat clients, a sign of customer satisfaction. And even competitors concede Berger has done a masterful job of selling himself, even if they criticize his follow-through. "He's a formidable entrepreneur," says Antonella Mei-Pochtler, a senior vice-president in the Munich office of Boston Consulting Group. That, few would dispute, is something Germany needs. By Jack Ewing in Munich

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