Tune in to Germany’s Business Culture
Doing business in Germany can be an unfamiliar experience for someone from an English-speaking country. And the differences can start right from a first meeting.
When you shake hands with your negotiating partner (named, let’s say, Johann Schmidt), err on the side of formality and call him Herr (Mr.) Schmidt. Only switch to first names if he suggests it. This is, after all, a country where businessmen sometimes answer the phone by simply saying their surname: “Schmidt!” If it’s Johanna Schmidt you are meeting – less likely, in this fairly patriarchal culture – then call her Frau Schmidt whether she is married or not. Yes, Frau means Mrs., but the word for Miss (Fraulein) is rather informal. And in a country that greatly values education, it’s worth finding out whether Mr. or Ms. Schmidt has a doctorate. If so, you might cause offense by failing to call them Herr Doktor Schmidt (or Frau Doktor Schmidt).
Seniority within a company is important, so it’s good to be clear about someone’s job title and responsibilities. The distinction between the executive role of managers and the monitoring role of directors is quite clear-cut. The “chairman-CEO” who leads many a US firm is virtually unknown in Germany. Make sure you know if you are talking to the supervisory board chairman (Aufsichtsratsvorsitzender) or the chief executive (Vorstandsvorsitzender).
It’s also worth finding out what part of the country your conversation partner comes from. Germany is a federation of 16 states. Different areas have their own customs and dialects, and there is a lot of regional pride.
It’s not just individuals whose geographic background is worth taking note of, but companies too. Germany is a highly decentralized economy, unlike many European countries where one city dominates. The capital, Berlin, is Germany’s biggest city, but far from being the sole business center.
For example, the mighty German auto industry focuses around the southern cities Munich (BMW) and Stuttgart (Daimler/Mercedes) and the mid-northerly state Niedersachsen (Volkswagen). The port cities Hamburg and Bremen are major commerce centers, and Hamburg is also a big place for media and entertainment. The state of Nordrhein-Westfalen, to the west, is home to coalmining and steelmaking, and is also where you’ll find the headquarters of phone giant Deutsche Telekom (in Bonn) and airline Lufthansa (Cologne). But the airport Lufthansa uses the most is Germany’s biggest, in Frankfurt. And Frankfurt is Germany’s finance hub, hosting the main stock exchange and the headquarters of most large financial institutions. Except the huge insurer Allianz, that is, which is based in Munich.
German business life is full of concepts that may seem odd to foreigners. Artisans’ guilds still exist. There are cooperatively-owned health insurers and banks. And the country is covered by a network of local savings banks and regional development banks in which local governments hold part-ownership.
Delve into corporate finance, and you’ll discover words like Pfandbrief and Schuldschein for home-grown types of debt instruments, usually left untranslated. And then there is the curious Stille Anlage, a way of being a capital investor in a bank without showing up as a shareholder – an option often chosen by local governments.
There is some hostility toward hedge funds as investors in German companies. These investment funds, which make short-term bets on companies that are high-risk but potentially high-profit, are nicknamed Heuschrecken (grasshoppers) in Germany. US investors have been surprised by the way they are demonized for, quite openly, just wanting to make money. There is not a lot of native German venture capital activity because of domestic regulations – insurers were traditionally barred from investing in such entities. So most venture capital is foreign – and therefore, to some locals, suspect.
Another potential area of culture shock for foreigners doing business in Germany – especially if they plan to establish or acquire a company there – is the degree to which employers must allow for workers’ interests. Taking over a German company sometimes requires reaching agreement with employee representatives. Staffers’ nominees can occupy up to half of the seats on a supervisory board. And any employer in Germany needs to be mindful of regulations on employees’ days off. A surprisingly large number of Christian festivals are official public holidays every year.
The acquisition of a German company by a foreign investor can be a highly political event. In fact, politicians are sometimes asked to step in to prevent a sale, even of privately owned companies – and sometimes they do just that, although European Union regulations limit their freedom in this regard. Incidentally, an American businessperson who opposes state intervention in the market may be surprised to learn that this is a “liberal” position, in German parlance.
Not that any of these issues needs to stand in the way of successful dealings between Germans and foreigners. On the contrary – Germany is a very open economy whose businesspeople enjoy thriving relations with North Americans, fellow-Europeans and many others. Evidently, many people find Germany is not just a beautiful country to visit, but an exciting place to do business!
Written by David Hill for EuropeUpClose.com