Corporate leadership Wanted: Blue-Chip Entrepreneurs

Executives who have experience of setting up their own businesses are few and far between in Germany's top firms, despite such companies being keen to recruit entrepreneurs. Do the figures reflect typical German risk aversion, or the favoring of careerists?
Adidas's Herbert Hainer is one of only two DAX-30 chief executives to have created a business from scratch.

What do a former gourmet shop owner from Long Island and a former bar owner from Dingolfing, a small town in southern Germany, have in common? Today, they are the bosses of two of Germany’s largest corporations.

Bill McDermott, the American boss of software giant SAP, already had his own food business while at school aged 17. And the outgoing head of sports retailer Adidas, Herbert Hainer, ran a bar called the Gussofen (Cast Iron Oven) with a fellow student while studying business administration at college.

“The Gussofen was a huge success,” said Mr. Hainer, looking back. “The two of us took turns working there evenings and didn’t even pay ourselves a salary in the beginning. After a year, we completely paid off the loan we had taken out and resold the bar at a profit.”

As founders of business enterprises, Mr. Hainer and Mr. McDermott are considered exotic in the corporate world. Mr. McDermott will likely be the last boss of a DAX exchange-listed company who has an entrepreneurial background after Mr. Hainer leaves Adidas in October. In the United States, not a single head of a company represented in the Dow Jones Index has ever started or managed a company they owned.

As bold, innovative and creative as entrepreneurs are at realizing their ideas, it is equally difficult for them to build up an organization and lead people Reinhard Sprenger, Management author

Hubertus Graf Douglas think's he knows why that’s the case. He is the senior client partner and managing director of human resources consultant Korn Ferry in Germany.

“The current generation of CEOs comes from a time when entrepreneurial spirit was less in demand than preserving or expanding the legacy of the preceding founding generation. Everyone was instantly given a job, and the entrepreneurial issue most often never came up,” he said.

Those at the helm of major publicly-listed corporations today, he says, spent their careers climbing up the various management levels.

The trouble now is that, faced with globalization and digitalization, the conditions have changed.

“That’s why bosses with entrepreneurial experience would also do a lot of good for corporations today,” Mr. Douglas said.

This is particularly true at a time when many companies wish for employees to be “entrepreneurs within the enterprise.” Doers instead of managers are what’s needed.

That type of person can perhaps be found most by looking at the mostly younger companies listed on NASDAQ, the American stock exchange that deals mostly in technology companies. Twenty-nine of its 100 chief executives were at one time entrepreneurs of their companies. Among them: Elon Musk of Tesla, Facebook boss Mark Zuckerberg, Larry Page from Alphabet and Amazon’s Jeff Bezos. All of them not only founded their companies but remain in charge today.

About a third of the firms represented in the German stock-market index for young technology firms, the TecDAX, were also founded by their leaders. The best-known is probably Ralph Dommermuth of United Internet.

After having trained as a banker, Mr. Dommermuth first worked as a freelancer in computer sales before he founded a company in the high-tech field in 1988. With that, he presents an unusual career path that human resources managers and headhunters call “mosaic” careers.

It’s a profile that will gain in importance in the future. René Obermann, a college dropout-turned-entrepreneur who became chairman of the board of Deutsche Telekom and today is a private-equity manager, is an example of this new type of manager.

“In twenty years, things will look quite different when today’s younger generation has matured to become CEOs,” said Mr. Douglas.

A significant percentage of former founders will be on executive boards of major corporations. The new generation of chief executives will “have a tremendously high degree of learning agility and have first-hand experienced of what it means to take on risks and deal with them,” he said.

Whether the executive headhunter’s predictions will prove true, however, is doubted by other experts.

“The entrepreneurial gene is a rarity in Germany,” said Reinhard Sprenger, who some call Germany’s top management author.

Renowned management and personnel psychologist Rüdiger Hossiep said the wish that “employees should be entrepreneurs within the enterprise” is a preposterous demand. This is because the conventional German education system features exposure to people and a society that’s completely adverse to risk-taking.

“We only take a look at risky ventures in the movies,” Mr. Hossiep said.

In Germany, it isn’t courage that leads directly to the management board, but rather the ability to wait for an employee’s turn.

This is confirmed in a 2015 study by executive recruitment consultants Odgers Berndtson. The typical DAX-30 company executive board member is 48 and has been with the company for 12 years before they are called to the highest decision-making body. This average run-up time hasn’t changed much in the past 10 years.

In other words, the person sitting on a board has already been in the company for some time. The employee is in his or her mid-30s before moving step-by-step towards the top of a company. Such workers don’t want anything to disturb their progress.

However, anyone who says at age 35 that “in five years I want to take my boss’s place because he is retiring” certainly doesn’t have an entrepreneurial gene, said Jörg Kasten, head of the international recruiters Boyden.

Quelle: dpa
Bill McDermott of software firm SAP is the other.
(Source: dpa)

 

So the ones who get ahead in a company hierarchy are the ones who have practical experience in it and are familiar with its system of power.

“A social juggler who appears smooth on the outside but works to his own advantage with the force of a steamroller is preferred in personnel decisions,” is how Mr. Hossiep described the ideal candidate for a corporate career.

This is especially true when the aspirant presents degrees from the right universities and has the right overall disposition. In this regard, the management psychologist thinks elite colleges such as the University of Mannheim appear to still be like cadet schools that once produced Germany’s elite.

“There the next generation of executives is drilled to function and execute without complaint,” Mr. Hossiep said.

What a contrast to United Internet’s Mr. Dommermuth, a self-made manager with a banking background.

But them, this might be not be such a bad thing. Some experts say the psychological profile required of a top executive does significantly differ from that of a founder.

“As bold, innovative and creative as entrepreneurs are at realizing their ideas, it is equally difficult for them to build up an organization and lead people,” said managerial expert Mr. Sprenger.

Running a big company requires boring things like planning, regulated procedures and organizational charts that are needed to ensure order, overview and security, he said. Some entrepreneurs are uncomfortable with such things: They may often be capable of learning, but they are unteachable.

“I doubt that such people can be happy in a corporate structure,” Mr. Sprenger said.

Hired managers rather than entrepreneurs prove to be stronger orientated toward leadership and consensus, he adds.

“In the American tech scene, there are extremely obstinate and successful movers and shakers like Mark Zuckerberg or Amazon founder Jeff Bezos. But you don’t make a career in a corporation with such a personality profile. That takes adaptable, team-orientated people,” Mr. Sprenger said.

And what becomes of those who imagine themselves between the two extremes? Those who on the one hand like to structure and administrate but on the other would prefer creating rather than sitting for 12 years waiting for a post on the executive board?

“Experienced managers with an entrepreneurial gene like to work as interim managers,” said Jörg Kasten, a managing partner and board chairman at Boyden.

“I’m an avowed nomad,” Mr. Kasten quoted one candidate as saying. The person had just recently rejected a top post with long-term prospects, but the candidate preferred the career model of two years here, two years there, to get a company back in the black, for example, or to conclude a restructuring.

So the typical pattern looks something like this: A founder makes the company big, goes public with it and runs it for a couple years. That’s why the number of chief executives with entrepreneurial experience is higher in the NASDAQ 100 and TecDax than in the Dow Jones or DAX 30.

The older a company becomes, the more the experienced managers move to its senior positions. The impetuousness of younger years gives way in the best cases to a systematic, profitable strategy of growth.

In the worst cases, corporate sclerosis follows: The entrepreneurial edge is lost, and increasing numbers of management levels make the company sluggish. People who think out of the box are left out and innovations are curbed out of concern for the lucrative core business.

This is a malady that the economist Joseph Schumpeter, the so-called pioneer of “creative destruction,” has already described. And it’s one that possibly allowed many established carmakers to miss the trend to electric mobility, for example.

Adidas boss Mr. Hainer is at least confident that his entrepreneurial experience has helped his firm.

“I not only learned my first economic virtues in Gussofen but also before that in my parent’s butcher shop, and they have been instilled in me to this day,” he said.

According to the Adidas chief, the most important lesson is: “You should have more money in the cash register in the evening than you put in it in the morning, if you want be successful in the long-term.”

Such entrepreneurial experiences are more important today than ever before, he says. “That is why at Adidas we search specifically for candidates that bring entrepreneurial thinking to the table and want to contribute their own creativity.”

 

Claudia Obmann is an editor of the careers section of Handelsblatt. To contact the author: [email protected]