The European car market has been stagnating. Earnings are mostly generated in North America and Asia. Many German companies doing business abroad lack the foreign executives with on-the-ground expertise.
Something has got to change, and it has to change quickly. That's a way of interpreting the most recent announcements made by the German car and truck maker Daimler with regard to its future staff policy.
"There will be more projects outside Germany with our partners abroad," Human Resources chief Wilfried Porth said in a statement. He said to this end the firm's program to recruit young executives was being reshaped, a program under which up to 500 young executives are trained. In future, every second of them will come from abroad, while at present it's only every third. It remains unclear for the time being when exactly that objective could be reached and exactly which posts these foreign executive are to hold. Market analysts believe changes in that direction are long overdue.
The automobile industry is strong in oversees markets, particularly North America and China, while business has been sluggish in Europe for years.
But, unlike many of its rivals, Daimler has missed out on some important trends, claims Stefan Bratzel, who heads the Center of Automotive Management in Bergisch Gladbach, Germany. He says that applies particularly to adapting to respective business environments abroad. "For this you need staff which knows the country in question well and whichs understands the local market and its peculiarities," says Bratzel.
He cites Brazil as being a country with very different regions and a poor road infrastructure in parts of the nation. Car makers need to offer certain tailor-made engine technologies, he says, adding that ethanol plays a big role in Brazil as a fuel.
Cultural diversity drives change
Torsten Wulf, an expert on strategic management structures at Marburg University, confirms that having international executives can at least be part of an entrepreneurial success story. He points to Germany's Bertelsmann Group.
"It's relatively strong on the Chinese market and has many Chinese executives working for it on the ground," Wulf notes. But having foreign executives may also be of some advantage at home. "People with different backgrounds can change executive approaches in running a firm, which is why many companies make a point of using such opportunities."
Kaspar Rorsted is among the most prominent foreign managers operating from Germany. Since 2008, the Dane has been at the helm of German household chemicals giant Henkel. Wulf says he's managed to change the management culture. "Scandinavian nations have a different way of dealing with working-hour schemes, allowing for instance for part-time executives," Wulf says. "This has an effect on corporate culture, and changes can best be implemented with new brooms at the helm."
No homogeneous picture
A look at executive-level structures in the 30 German DAX-listed companies reveals that internationalization processes have progressed at different speeds. A 2012 study by the consulting firm, Simon-Kuchner & Partners, shows that the executive boards of Daimler, Lufthansa, Commerzbank and Merck are manned by Germans only. At the other end of the scale there's Fresenius Medical Care which has an 88-percent share of foreign executives, followed by Linde and SAP where 60 percent of all executives are foreigners.
On average, nearly 30 percent of the DAX companies' executive board members come from abroad. While this means that there are now twice as many foreign executives compared to the year 2000, the figure has remained unchanged for several years.
There are two main reasons for this, explains Jan Merkel, senior consultant with Simon-Kuchner & Partners. On the one hand, rather conservative recruitment policies have not died out, and secondly, language barriers still play a role.
"Even if everyone at the executive level has a certain command of English, in-house communication is hampered by people who don't speak the local language," Merkel maintains.
At least Daimler has now signaled it's willingness to recruit more foreign executives, says spokesman Markus Mainka. "It's all about mirroring our global business model in our executive structures in order to better understand the specifics on the ground, the markets there, and the wishes of consumers," says Mainka. "And this should enable us to offer corresponding products and services."
For the time being, though, it's unclear when exactly Daimler's board of managers will welcome its first foreign executive.