TCS Daily


By Joshua Livestro - August 27, 2004 12:00 AM

If it's true that every political career ends in failure, the same can be said of careers in business. One moment the CEO is master of the universe, the next moment he's on his way out. In the end, the combined effects of shareholder pressure, union actions and political shenanigans will do him in. And if that doesn't get him, brute market forces will. Like Jack Welch, most aren't able to pick their own title for the final chapter of their biography (Welch's was famously picked by his final opponent, European Competition Commissioner Mario Monti: "Go home, Mr. Welch").

Every once in a while, however, a business leader comes along who manages to meet all of fate's challenges, being as successful at the end as he was at the beginning. Heinrich von Pierer is very much in that category. In his 13 years at the helm of German industrial giant Siemens, he has been instrumental in transforming the company from a typical old economy German engineering company (heavy on personnel, low on transparency and flexibility) into a truly global new economy powerhouse. He will retire at the end of 2004 at a moment of his own choosing -- a rare thing for a CEO.

During the 1990s, von Pierer managed to push through a dramatic program of restructuring. In spite of that, at the end of his career, he is more respected than ever, reaping plaudits from both press and politics. Earlier this year, the conservative Christian Social Union, one of Germany's largest political parties, even considered nominating von Pierer as their candidate for the presidency of the Federal German Republic.

It seems von Pierer possesses a number of qualities that have allowed him to succeed where others usually fail. Like most, he had the courage to do what was necessary even if it was unpopular at the time. In the process of preparing Siemens for the 21st century economy, von Pierer had to take some very hard decisions, most of them affecting the company's German workforce. German workers made up more than 60 percent of Siemens' workforce when von Pierer was appointed in 1992. By 2004, that was reduced to 40 percent. Since he took over, the number of employees in Germany has been reduced by more than 80,000. There is every chance that more German jobs will have to be shed before decade's end.

These painful measures were inevitable, not least because of the opening up of Eastern Europe and the Far East. Labor is cheap there, and unlike in Germany, the workforce is more than happy to be rewarded for actual work done, not just for hours spent on the factory floor. In the process, however, he has helped Siemens to become a major player in the new economy markets of microchip technology and mobile telephony. He has also helped the company to stay profitable even in the downturn years at the start of the new century.

But his courage was never mean-spirited. It was always tempered by a practical knowledge of what was possible and an essential sense of fair play. He was among the first to see the potential of the Eastern European and Far Eastern markets and workforces. But for von Pierer, outsourcing has never become a goal in itself. At the end of his 13-year tenure, Siemens is still very much a German company. But it's a new type of German company, blazing a trail to the new Germany that has always been on von Pierer's mind: combining typical German strengths in engineering and efficiency with the flexibility and work ethic of the new global economy.

The recent deal between Siemens and the largest German trade union, IG Metall, saving 2,000 jobs at mobile phone plants in Bochum and Kamp-Linfort in return for longer working hours without extra pay and performance-related bonus schemes, was a typical product of his approach. He combined an uncompromising message of the need for fundamental reform with a willingness to accept compromises that moved his firm and his country decisively closer to his goal of getting the German economy moving again.

Following this deal, the leader of the Christian Democrat Party (CDU), Angela Merkel, called von Pierer an icebreaker. In a way that picture sums up von Pierer's main qualities. Through his courage, he has been instrumental in beating a path to the new century for his company. And in doing so, he may also prove to have been instrumental in beating a similar path for his country, through the frozen wastelands of the Western European welfare state in the direction of the Anglo-Saxon free-market economy. He has done it, however, in the most German of ways, by using his practical wisdom and his sense of fairness to break the ice between discussion partners, by actually getting the famous German social partners to sit down together to discuss necessities instead of entitlements.

He has made Germany take a crucial step in the direction of the global economy, and he has done it the only way it could ever be done, namely the German way. Looking back, the only minor blemish on an otherwise perfect record is that he never did become German president. Maybe the chancellorship would make a good consolation prize?


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