IHRM PRACTICES IN GERMANY Schenkenbei: SP Nagesh Chetan Sethi Sahil Bhushan Amit Kumar Gaurav Gupta Jagdeep Singh
Germany Overview Population: 82.34 million – Berlin (Capital) 3,404,000 – Hamburg 1,754,00 – Munich 1,294,000 – Cologne 989,000 – Frankfurt am Main 652,000 – Stuttgart 593,000. Currency: Euro Founding member of the EEC GDP Growth - real growth rate 1.8% Inflation rate: 2.6% Unemployment: 12.6%. However, the unemployment is high due to the higher unemployment rate in former East Germany (16.8% in East Germany vs. 8.4% in West Germany).
10 Reasons for Choosing Germany Leading Economy: 3rd largest Economy Global Player High Productivity Excellent Workforce Innovative Power First-Class Infrastructure Inviting Incentives Competitive Tax Conditions Secure Investment Framework Quality of Life
Features of German business Environment Since unification in 1989, Germany is Europe’s most populous nation and the continent’s largest economy. Situated at the heart of the European continent, and fundamentally shaped by Europe’s history, it is characterized by deep regional identities while at the same time also conveying a “national” German culture. In today’s global business environment, developing successful business strategies and valuable business relationships, based on an awareness of this German culture, is essential for one’s organisation. Economic Growth Stable Economic Environment Business Landscape Foreign Direct Investment Infrastructure Workforce Innovative Power Trade Fairs
IHRM activities Human Resource Planning Recruitment and Selection Training and Development Performance Management Remuneration Repatriation Employee Relation
Human Resource Planning (HRP) Identifying top-management potential early. Identifying critical success factors for future international managers. Providing developmental opportunities. Tracking and maintaining commitment to individual in international career paths. Tying strategic business planning to HRP an Vice-versa. Dealing with multiple business units while attempting to achieve globally and regionally focused strategies
Recruitment and Selection • Ethnocentric • Key management positions filled by parent-country nationals • Polycentric • Host-country nationals manage subsidiaries and Parent company nationals hold key headquarter positions • Regiocentric • Hiring and promoting employees on the basis of the specific regional context of the subsidiary • Geocentric • Seek best people, regardless of nationality, Best suited to Global and trans-national businesses
Causes of Expat assignment failure • Major Reasons in Germany: • Inability of spouse to adjust • Manager’s inability to adjust • Language Problems
Remuneration /Compensation • How to adjust compensation to reflect national differences in economic circumstances and compensation practices. • How expatriate managers should be paid.
Some facts on IHRM in Germany • The German firm - high uncertainty avoidance - rules settled everything. • Expert based, need for education and certification, delegation, participative management, extensive employee protection, somewhat risk averse • For non-managerial employees, international firms normally adapt their compensation and performance appraisal systems to local laws, customs, and cultures. • While U.S. workers appreciate feedback from an appraisal system, German workers are resentful of feedback.
Co-determination • In Germany, there is a statutory system for some form of employee representation on the board of directors or supervisory boards of some types of company. • Statutory works councils systems based on legislation or widely applicable collective agreements exist in 12 EU members (primary is the German model of the betriebsrat) Tax Equalization • Expatriates may face two tax bills for the same pay, one from the host country and one from the home country. • Most parent-country governments have devised regulations that allow the expatriate to minimize double taxation. Often, the expatriate may need to pay income tax in only one country. • In cases where additional taxes are incurred by the employee, the employer will usually reimburse the employee for this extra tax burden.
Types of Compensation system Headquarters Salary System • Headquarters pay scale plus differentials. The salary for the same job at headquarters determines the base salary of the home country national. The differential can be a positive addition to an expatriate’s salary, or it can be a negative allowance to account for the extra benefits that might be associated with the particular overseas placement Citizenship Salary System • The manager’s salary is based on the standard for the country of his or her citizenship or native residence. An appropriate differential is then added, based on comparative factors between the two countries
Remuneration in Germany • Typically use balance sheet approach • Equalizes purchasing power to maintain same standard of living across countries • Provides financial incentives to offset qualitative differences between assignment locations. • Pay for Schools, health care, etc. • Base Salary • Same range as a similar position in the home country • Foreign service premium • Extra pay for work outside country of origin • Allowances • Hardship, housing, cost-of-living and education allowances • Taxation • Firm pays expatriate’s income tax in the host country • Benefits • Level of medical and pension benefits identical overseas
German Culture Key Concepts and Values Business Etiquette Appearance Businessmen wear dark suits, solid conservative ties and white shirts Women also dress conservatively, in dark suits and white blouses Chewing gum while talking to someone is considered rude
Behavior in Business Situations • Germans are strongly individualistic. • shake hands at both the beginning and the end of a meeting. • Age takes precedence over youth. • Punctuality is necessity. • When introduced to a woman, wait to see if she extends her hand. • Appointments are mandatory and should be made 1 to 2 weeks in advance. • Letters should be addressed to the top person in the functional area, including the person's name as well as their proper business title. • If you write to schedule an appointment, the letter should be written in German.
Communication • Germans are very private • Titles are very important • Shake hands at both the beginning and end of a meeting • Business decisions are not made over the phone
Punctuality • Germans value their time • As business men they work hard • They are under a lot of pressure • It’s considered bad etiquette to be late • Or too early! • It shows disrespect for their time
Standard Work Schedule • 9 to 5 Monday-Saturday • Except a few business men 6 p.m. all the time • Sundays most jobs are closed • Unless they have a limited operating permit • Only a few business are 24 hours, i.e. Gas Stations etc.
Women in the Workforce Only 4% of women work in office management Many women rights still very outdated They believe women should be in the kitchen taking care of the children in the church Many women don’t attend college or try to further their education in any way
About German People • Value order, privacy, punctuality • Are thrifty, hard working, industrious • Respect perfectionism • Have sense of community, strong desire for belonging • Appear reserved, unfriendly until you get to know them better
Meeting & Greeting • Shake hands with everyone present when arriving, leaving • Never shake hands with one hand in your pocket. • When introducing yourself, never use your title. Introduce yourself by last name only. • Titles very important. Never use titles incorrectly. If unsure, err in favor of a higher title. • Initial meetings are used to get to know each other. They allow your German colleagues to determine if you are trustworthy. • Meetings adhere to strict agendas, including starting and ending times. • At the end of a meeting, some Germans signal their approval by rapping their knuckles on the tabletop.
Corporate Culture Contacts vital to a business success. Use bank, German representative or Chamber of Industry and Commerce. Rank very important in business. Strict vertical hierarchy. Power held by small number of people at top. Deference given to authority. Subordinates rarely contradict or criticize boss publicly. Decisions debated informally before meetings with compliance rather than consensus expected in meeting. Decision making slow with thorough analysis of all facts. Plans cautious with fallback positions, contingency plans, comprehensive action steps.
Dress & Gifts Being well, correctly dressed very important. Gifts not exchanged at business meetings. Give books, bourbon, whiskey, or classical music.
The Bottom-line: When in Germany, do as the Germans do Germans more formal and punctual than most of world. They have prescribed roles and seldom step out of line. Don't be offended if someone corrects your behavior.Policing each other is a social duty. Don’t lose your temper publicly. Compliment carefully and sparingly. Stand when an elder or higher ranked person enters room. There is a strict protocol to follow when entering a room: The eldest or highest ranking person enters the room first. Men enter before women, if their age and status are roughly equivalent.
First 100 days in German Organisation • In comparison to a few years ago when the economy was a bit healthier, a new employee’s starting probation period is now really used by companies for what it is. • No other reason could explain the results of a recent survey carried out by Germany’s Chamber of Industry and Commerce which show that in a sample of 21,000 companies, 50% of terminations took place during the probation period. • One method that helps in the integration process is the mentor-model, which has long been known as a popular success measure for new CEOs and even the German Chancellor can also be helpful in orienting anyone new to a job.
Negotiation in Germany The perfect negotiator: • having the patience of a clockmaker and not suffering from prejudices or stereotypes. • do not confront the other party immediately with arguments and demands. Take time at the beginning of the negotiations to break the ice • Set up your goals and plan your negotiation time: • Genuinely communicate your own strengths: Make sure that you communicate your own strengths, regardless of whether others have the same strengths or not. • Pick the right moment: which point in the negotiation process would be the best time to use them. • Be fair and objective: When negotiating, keep cool and do not let your emotions get the best of you. If your proposal or position leaves the other party annoyed, do not consider this to be a sign of success. • Listen attentively, ask questions, repeat, and summarize: • "Visualize" your arguments: Don't just make claims, but make your ideas clear with easy to follow steps • Use clever phrases: • Use of "I" & "We":
IHRM and National Cultural differences: Hofstede (1980) Power distance: status importance, hierarchy: Spain-Sweden Individualism: group, socialization… vs. autonomy, personal challenges… USA-Japan Uncertainty avoidance: risk, instability tendency: Italy-Hong Kong Masculinity/femininity: rigid sexual stereotypes: Germany-Finland Long-term/short-term orientation: China-USA
“Diversity does not only makes Business Sense, It’s a Business must” Dr. Dieter Zetsche, Chairman of Board of Management, Daimler AG Daimler’s Diversity management program has been in place since 2005. They aim to be one of the most highly respected companies in automotive industry for diversity and inclusion by 2010 Diversity management at Daimler:focused on implementation and are currently working on the following activities: • Diversity awareness and in-depth training for managers • Performance evaluations incorporate diversity management criteria • Development programs: mentoring, staff rotation, international exchanges • Transparent placement processes • Flexible working arrangements • Marketing and recruitment initiatives for focused target groups
Germany’s commitment to diversity charter: Commitment along the following items: 1. Create a valuing Corporate Culture 2. Ensure fair and meritocratic processes 3. Ensure internal representation 4. Internal and external communication 5. Employee involvement 6. Yearly progress report • Benefits of Diversity to Daimler: • It improves customer care and marketplace competition • It enhances corporate image and reputation by maintaining ethics and values; • It helps becoming an employer of choice to attract and retain talent by improving people management and development and being aware of labour market factors; • It has to do with complying with legislation; • It plays a key role in recognizing corporate social responsibilityto improve relationships with communities, make economic activity more inclusive, and improve business markets.
Compensation Policies • Compensation is performance-based and success-oriented • The same basic principles apply worldwide • A large proportion of variable compensation. • Geared to individual performance and company profits. • A Daimler Group component for all executives • Compensation in the collective bargaining sector • Employee Pension Plan • Conversion of salary to gain capital gains/benefits • Direct insurance • Mutual funds & company share entitlement • Additional Benefits • Employee sales • Daimler company health insurance fund • sports, cultural and leisure facilities
Staffing and Recruitment Policies The company attracts talented individuals from all over the world. No discrimination between men and women Consists for both locals and expats New recruits and in house movement of staff for optimal use of workforce Adequate training provided to maintain required standard Known for its tough screening process
1997: acquisition of Wertkauf • 1998:take over of Interspar • Appointment of US citizen, Rob Tiarks, as CEO • Ethnocentric approach unsuccessful Do It the Wal-Mart Way No adaptation to German Culture No pre-departure training Denial of differences between Germany and the United States
Why Wal-Mart Failed Low price strategies did not work Poor product qualities Dirty stores Service Wal-Mart in Berlin
Wal-Mart and Labour Unions Refused to have labor unions Does not comply with local labor laws: Co-determination Faces huge strikes Hours of work Video surveillance Employee relationship Hiring and Firing
Concluding Remarks Wal-Mart’s ethnocentric approach was a failure Human resources failed to recognize cultural differences Wal-Mart survival only possible if labor was allowed to participate in management Good employee-employer relationship is the key to success