Hello from Hamburg,
The board of the Family Business and Politics Foundation sums up the current sentiment among many small and medium-sized business owners as follows: “Morale is at rock bottom.” It blames this gloom on lengthy approval and planning procedures. Excessive bureaucracy is forcing many companies to relocate abroad. And there’s no doubt that the challenges facing company management are significant: high energy prices in a particularly energy-intensive industrialized nation. Rising interest rates are undermining the long-standing, highly profitable financing models in the construction industry. A politically driven shift toward a carbon-neutral economy and electric powertrains in a country dominated by internal combustion engine vehicles.
This is the dominant topic in business circles, and the culprits are quickly identified: environmental movements and ideologically driven Greens who wanted to push through the economic transformation at any cost. Unhelpful government agencies that are understaffed and have zero digital infrastructure. The European Union, which is stifling entrepreneurial freedom with its regulatory frenzy. The lazy Generation Z. And above all, the “traffic-light” coalition government, whose disunity is making everything even worse. In the same breath, calls are growing louder for the state—which is otherwise demonized—to cushion the hardship, for example through subsidized industrial electricity.
Self-criticism and questioning our own role in this mess? Not a chance. Yet: Didn’t we—against our better judgment—switch to new powertrains in the automotive industry too early, knowingly accepted concentrated risks by relying on cheap energy from Russia, triggered scandals that rocked entire industries through misguided subsidies, delayed the digitization of internal processes, created ever-greater complexity within companies through agonizingly long internal decision-making processes, and failed to part ways with customers or products we’ve grown fond of—but which have long been operating at a loss? No wonder German companies rank second to last in terms of profit margins when compared to other industrialized nations, as economics professor Hermann Simon recently calculated. A letter from a reader of my newsletter on the myth of the skilled labor shortage also fits into this picture; as the head of a foundation, she is setting up a program to promote excellence among apprentices. After many conversations with HR managers at the company, she concludes that “one of the reasons there is such a shortage of apprentices is that the job postings simply don’t match the pool of applicants. Breaking out of old, familiar patterns seems incredibly difficult.”
If you dig deeper, you’ll uncover homegrown management blunders and signs of complacency rooted in the growth that has been taken for granted over the past decades. Instead of conjuring up a collective fear of doom and whining about consequences that are partly the result of our own actions and inactions, how about we focus our attention on what we ourselves can improve?
I’m reminded of the puzzled look on the faces of two managing partners at a large, mid-sized machine tool manufacturer when I asked them how the current economic upheaval was affecting them. Despite everything that could be improved, the company is in impeccable shape. Its internal processes have long been transparent. Production is largely automated. And rather than complaining about the supposedly difficult business conditions in Germany, both continue to see enormous market potential for their products both here and internationally. Production and sales are structured in a way that allows them to mitigate geopolitical risks. Constantly engaging in self-criticism and maintaining a sense of restlessness are deeply rooted in the company’s culture.
Of course, government agencies often operate dysfunctionally, and there is a widespread obsession with regulation at both the national and supranational levels—but it doesn’t hurt to focus on what Germany has successfully navigated through all the crises of recent years, and what is recognized more clearly abroad than here at home: Within a year, we have ended our energy dependence on Russia. Currently, 61 percent of the electricity we consume comes from renewable energy sources. Not only have we successfully weathered a pandemic, but we’ve also used it to drive the ongoing digital transformation of how we work together. Inflation is falling. New industries, such as semiconductor and battery companies, are emerging at a rapid pace, particularly in eastern Germany. Given the legal certainty here and other reliable framework conditions, anyone threatening to relocate their operations should ask themselves: Where to, exactly? Reliable options are becoming increasingly scarce in these turbulent times.
Let’s just accept it for what it is: We are experiencing a major, inevitable transformation of our economy—one that is becoming more environmentally and socially conscious and more meaningful, and in which business success is measured less than before by the mantra “bigger, faster, further.” This is a challenge that also holds new opportunities—let’s seize them with determination and courage.
