Practising the art of foreign exposure: Germany's management culture is shrugging off its closed image by going cosmopolitan. John Eisenhammer reports

A PARADOX of German business has been its capacity to act globally while thinking provincially. This is not just a characteristic of that powerhouse of small and medium- sized firms, the mittelstand, which exports from the forgotten hinterlands to every corner of the globe. The country's giant international players have behaved in much the same way, confidently conquering large swathes of foreign markets while remaining ensconced at home behind inward-looking traditions and Teutonic conservatism.

When the head of a firm with global sales worth tens of billions of marks had something significant to say, he would not call the international press, probably not even the national one, but nurtured the tradition of the fireside chat with familiar faces from the local papers.

Despite the intense irritation it caused foreign investors, this closed German business environment clearly worked rather well, to judge by the country's extraordinary export successes. But in recent years, the rapid globalisation of business and the emergence of strong, new competitors, notably in the Asia-Pacific region, have placed increasing strain on the traditional German way of doing things, forcing important changes. One of these has been the internationalisation of management.

To a degree unrivalled on the Continent, and perhaps not even matched by Britain, management hierarchies from top to bottom have been rapidly opening up to foreigners as companies seek to enhance their global thinking and reach. It was only in 1989 that the appointment of Giuseppe Vita, a Sicilian, as head of Schering, the pharmaceutical multinational, caused a stir. Today, it would merit only passing attention.

Germany has a long tradition of Swiss and Austrians in top management posts, but they are rather like Americans in Britain. They are not considered real foreigners. The change of the past few years has been the striking increase in the number of board members who are 'real' foreigners.

The most publicised example has been at Volkswagen. When Ferdinand Piech, an Austrian, took over as chief executive at the beginning of last year, he looked around the world for the best ally to lead his internal revolution. He found Jose Ignacio Lopez de Arriortua, a Basque engineer working for General Motors.

Speaking only broken English and barely any German, Mr Lopez brought with him a task force of Spaniards, Belgians and Dutch who are now galvanising - or terrorising, depending on which way you look at it - VW's staid corporate management.

The board member appointed by Germany's insurance colossus, Allianz, to expand its European operations, is Roberto Gavazzi, an Italian. Earlier this year Daimler-Benz named as the head of MTU, its aero-engine unit, an American called John Tucker, with an eye to strengthening ties with the US market. John Craven, a Briton, sits on the board of Deutsche Bank, while Robert Hoogstraten, a Dutchman, was brought in to improve the international position of Siemens-Nixdorf, the computer maker.

'We can only survive if we really behave internationally,' says Jurgen Schrempp, head of Deutsche Aerospace and the man tipped to succeed Edzard Reuter at the top of Daimler- Benz. Mr Schrempp is typical of another new generation increasingly in evidence at the highest reaches of corporate life - the German who has spent much of his career abroad. Jurgen Strube, the chief executive of BASF, and Bernd Pischetsrieder of BMW, also fall into this category.

But just as important as these changes at the top are the conscious efforts of a growing number of German firms to recruit internationally for their graduate managers. Hans-Joachim Borsdorf of the management consultants Spencer Stuart in Stuttgart, speaks of the rise in German companies' campus recruitment at European and US business schools and universities. This internationalisation of management development is a clear signal of company efforts to match the changes in their markets, he says.

The growing influence of globally aware senior managers is one of the factors eroding the barriers of secrecy and caution that closed off German business. The press offices of household name companies used to reel off the annual success story of sales and profits, and regarded any further questions as an impertinence. Slowly, these companies are discoving corporate communications and public relations.

This process has often been encouraged by the advent of senior managers from abroad, who feel comfortable in a more open working environment. One such example was provided by Allianz's annual press conference last year when, interrupting in mid- flow a question about current business performance, the new board member responsible for North America, Herbert Hansmeyer, who has spent most of his career abroad, simply shot out the latest figures. These were accompanied by the smack of numerous jaws from Allianz board traditionalists hitting the polished podium tabletop. In such small ways, traditions are changed.

The international influence has been felt in another key development, the emergence of German companies from the Dark Ages into the light of investor relations. That there is no German language equivalent for this function highlights its irrelevance in a business culture that traditionally regarded shareholders as a nuisance. This is now changing. Most big firms have investor relations departments; some of them are even quite forthcoming, usually in companies that have been infected with the virus of shareholder value by managers hailing from foreign climes.

This gradual internationalisation is also contributing to a broader transformation of Germany's management culture, which has traditionally emphasised the importance of specialist, usually technical, knowledge. Hordes of senior managers are engineers, contributing to a business culture imbued with total confidence in the technical superiority of its products and the belief that one only had to make them more and more sophisticated and clients throughout the world would flock to buy.

This specialist ethos has recently been criticised for over-engineering. German management, it was argued, needed to refocus away from the amazing things its engineers could do towards satisfying what clients and the market really wanted.

This implies a shift in the evaluation of management skills. It would be over-hasty to claim that Germany is abandoning its admiration of the specialist, technical manager for the Anglo-Saxon-type all-rounder, but there is shift towards measuring management potential more broadly. One of the factors receiving greater attention is international exposure. Dietrich Maurice, a headhunter in Munich, says this is fast becoming a must for promotion to the board.

(Photographs omitted)