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