Commentary: The Humbling of Germany's Superbosses
The higher they rise, the harder they fall. That adage seems tailor-made these days for Germany's most powerful managers, from DaimlerChrysler's Jurgen E. Schrempp and Deutsche Telekom's Ron Sommer to the architect of the new-look Deutsche Bank, Rolf-Ernst Breuer. Not so long ago, they were trumpeted as die Superbosse, boldly positioning their companies as some of the most aggressive outfits on the planet. They were, after all, the biggest players from Europe's biggest economy, and they seemed destined to remake a hidebound German economy, even as they stalked deals in far-flung markets.
If yesterday's heroes have starring roles anymore, it's Wagner's Gotterd&aamul;mmerung (Twilight of the Gods) that comes to mind. True, the chill winds of economic slowdown are making life difficult for top managers everywhere. But Germany Inc.'s fall from grace is in a class of its own. Even as other European carmakers such as Renault, Peugeot, and Fiat are staying above water, Shrempp's DaimlerChrylser is hemorrhaging red ink in its American operations. DT's Sommer splurged on an acquisition binge, then went and piled up $46 billion in debt while bidding for third generation mobile licenses: Now shareholders want Sommer's resignation. And while Breuer has overseen the remaking of Deutsche Bank, he failed badly in his bid to merge it with Dresdner Bank, a move that would have created the Eurozone's single largest bank.
ONE-MAN SHOWS. There are some valuable lessons in this humbling of die Superbosse. One, it shows how urgently German corporate culture needs to open up. Without freewheeling input, CEOs are much more vulnerable. Many large companies remain rigidly hierarchical and centralized structures, in which middle managers are not encouraged to think creatively. Compared with executives in other European countries and in the U.S., Germans "like to be directed, like to align behind a figure on a pedestal," says Joel Markus, the head of Germany, Austria, and Switzerland for recruiter Korn/Ferry International.
Overcentralization creates problems overseas, too. The heads of many German companies haven't assimilated the single most elementary lesson for corporate globe-trotting: "Think global, act local," a credo that successful companies like General Electric Co. and BP Amoco follow very closely. CEOs like Schrempp and Sommer had no problems thinking globally, of course--they after all presided over an unprecendented wave of foreign expansion. It was the local thinking that got them in hot water.
Sure, Schrempp's underlying strategy in taking over Chrysler Corp. is probably sound: If technology and procurement can be shared among Daimler Benz, Chrysler, and Mitsubishi, the cost savings could be huge indeed. But Shrempp roared into Detroit in Nov., 1998, without a clear idea how to bridge the cultural barriers with U.S. managers. Friction with the Germans led to a steady exodus of Chrysler executives, and the resulting turmoil distracted management as Chrysler's operational woes mounted. Now a German--Schrempp's powerful Mr. Fix-It, Dieter Zetsche--has been sent in to repair Chrysler. He may succeed, but valuable time has been lost. Compare this sad tale with the nonconfrontational and efficient way France's Renault has been able to turn around Japan's Nissan Motor Co.
Similarly, Sommer could have used Deutsche Telekom's 80-million-strong home market as a springboard to become a global player. Instead, his ambitious 1999 attempt to merge with Telecom Italia floundered, thanks in part to needlessly bruised Italian sensitivities. Sommer, and his major shareholder, the German government, failed to assure Italians that their national phone company wouldn't be just an outpost in a Bonn-based empire.
Even the New Economy players, who should know better, have stumbled. Hasso Plattner, co-chairman of Walldorf-based enterprise software giant SAP, set up a research center in Palo Alto, Calif., and forged a host of alliances with some of the hottest software groups in Silicon Valley. But most floundered: Even the smallest decisions had to be vetted nine time zones to the east in Walldorf. So much for thinking local.
One way to shake up German management is simply to promote foreigners. In part, this has already started happening, since value-conscious outfits have to turn to the best talent around. So Werner G. Seifert, head of the Deutsche Börse, is Swiss, while Paul Achleitner, CFO of insurance giant Allianz, is Austrian. But German companies have hesitated to go outside their own cultural realm in recruiting CEOs. That may be because very few supervisory boards in Germany have foreigners. In a globalized economy, that's not a recipe for success, even for the brainy executives who lead Germany's greatest companies.
By John Rossant
Rossant is European regional manager.