Diversity within German Management Boards: Achieving success with multicultural teams

Even now, while scarcely 30 percent of the executive board positions in DAX companies are filled by foreign managers, last year saw new appointments in this area soar. Angela Westdorf, Managing Partner and Vice Chairman of the international executive search and leadership consulting company Signium, examines why mid-sized as well as larger companies need to rethink their approach.

When the Management Board of the health care group Fresenius SE meet, members include three Germans, one Austrian, one American, one Swede – and a British female. Even in the highly globalised world of German DAX companies, having a senior management entity as international as this one is far from common. At E.ON, RWE or Thyssen Krupp, for example, the four-member Executive Boards are exclusively populated by Germans. Likewise, German is the lingua franca within the Management Board of the car manufacturer BMW – a company that generated the lion’s share of sales outside its home country in 2017. Although Chief HR Officer Milagros Caina Carreiro-Andree was born in Spain, he grew up in Germany. World export champion Germany produces and sells its goods worldwide, but decisions are usually made by German locals. For almost a decade now, a study shows the proportion of board members of non-German origin has remained below 30 percent. All the same: last year, almost 40 percent of newly appointed DAX board members held foreign passports.

Angela Westdorf, Managing Partner at Signium and Vice Chairman on Signium’s international board since the beginning of 2018, says rethinking is imperative. “Companies can also bring certain corporate cultures onto the board depending on nationality.” For example, if German attention to detail could be unified with American assertiveness or the Indian talent for improvisation, this mixture could help the company thrive, she added. Westdorf also said that increasing globalisation meant companies would also be willing to pay for added insights from key markets, although the motives behind such steps would differ considerably. “The times you bring experts on board are when a country has already become important, when it’s emerging as a growth driver or when you have problems on the ground and have yet to achieve your targets,” explains the executive search specialist, who focuses on life sciences and healthcare. All of which would also explain the influx of so many top foreign managers from the USA. Last year, the United States was the key export market for German companies. China, however, the number three exporter, is hardly represented among countries of origin on German executive floors. Exceptions include Zhengrong Liu, a Shanghai native and Beiersdorf’s Chief HR Officer since 2014. However, if Chinese companies continue to increase their shareholdings in Germany, with Daimler the most recent example, this could soon change.

The Executive Search Consultant has also noticed a hike in demand for overseas managers among her pharma and tech clients. Companies are increasingly keen to internationalise their German headquarters. “Some search assignments read like: We’re open to all nationalities – all except German,” reports Westdorf. According to her, Signium leveraged a dense network of contacts, ensured ongoing optimisation of search operations, expedited internal workings free of red tape and provided international locations to make searching as efficient and professional as possible. Founded in 1951 in the USA and with a presence in Germany for more than 35 years, the company now has 43 offices in 30 countries. Most recently, offices were also opened in Mexico City and Seoul (Korea). The positive economic situation, political stability and comparatively healthy earnings opportunities also enhanced the labour market appeal of Germany abroad and made the search easier, according to Angela Westdorf.

Westdorf also attributes the relatively slow internationalisation of board members in German companies to what remains a prevalent trend towards in-house CEO appointments. The same applies to CFOs, albeit to a lesser extent. Any foreigners promoted have often given long years of service before reaching management board level. Allianz, for example, has just appointed the Spaniard Iván de la Sota as its first Chief Digital Officer to the board. The 53-year-old, fluent in German, previously headed the Ibero-Latin American region for Allianz and has been with the insurance group for 27 years. The British Karen Parkin meanwhile, an Adidas board member since 2017, has also been working for the sporting goods giant since 1997.

According to Westdorf, language barriers could also further hinder internationalisation, and not many foreign managers spoke German sufficiently to communicate smoothly with their colleagues on a technical level. Similarly, not every company would see it as a given to have all parties revert to English in the presence of a non-German speaking colleague. She has already seen some highly qualified managers throw in the towel after a few months. “Foreign managers have it far easier in the UK, for example, because most are fluent in English,” Westdorf is convinced.

But even here, at least the large listed companies are rethinking things. A survey of DAX companies published by the newspaper Handelsblatt at the end of 2017 showed that 18 of the 30 companies had introduced English as their company language, including Fresenius, Allianz, Bayer, Linde, SAP and Siemens. In-house documents, instructions and guidelines are written in English, in which these employers also expect their managers to be fluent.

For mid-sized companies, it’s another story entirely. Although complaints about the shortage of skilled workers are particularly vociferous, they are only slowly opening up to foreign colleagues and German is usually expected. Westdorf was even asked to find an internationally-minded production manager for a client, who should speak Swabian, if possible.

Last but not least, the geographical location of the companies sometimes complicated the search, according to Westdorf, with some Americans asking where Germany itself was. Westdorf said this applied all the more to provincial locations, where small- and mid-sized enterprises were often at home, as well as some corporations. “But the corporations have become more flexible. As teleworking increases ever-further, reservations about commuting are declining accordingly”, comments Westdorf. This contrasts with mid-sized companies, in which in-person presence was usually obligatory.

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