Eigenkapitalquote. German Mittelstand companies carry notably high equity ratios by international standards, and treat it as a matter of prudence rather than inefficiency. Debt is capacity you have already spent. Equity is the buffer that lets a firm survive a year it did not plan for.
The prudence principle
Das Vorsichtsprinzip. Section 252 of the German Commercial Code requires that valuation be made prudently. Losses and risks are recognised as soon as they become probable. Profits are recognised only once realised. The principle exists to protect creditors, and it traces back to the first all-German Commercial Code of 1861.
The German balance sheet is built to understate.
“They pay their bills“
The German newspaper, Die Welt, complimented the Chinese highly when it wrote that they pay for their Mercedes Benz automobiles on-time. Zahlungsmoral literally means payment morals.
Zuverlässigkeit is not only a human, but also a product characteristic. Germans expect dependability and durability, especially in technical areas. German power producers constantly stress the Zuverlässigkeit of their nuclear power plants.
Infrastructure in Germany is expected to have 100% Zuverlässigkeit. Brown- or blackouts of the electricity grids occur very rarely. The telephone network almost never fails. Lack of reliability in Germany quickly leads to protests by customers and citizens.
Tausend gute Taten machen keine schlechte gut. A thousand good deeds don‘t make up for one bad one. Wenn ich mich auf Dich verlasse, bin ich verlassen. To be dependent on you means to have been abandoned.
Unzuverlässigkeit is the opposite of Zuverlässigkeit. In the German context, to be labeled unreliable or undependable is a serious criticism, a flaw not easily removed. Unreliable people are not trusted, their reputation is damaged. It is the same for unreliable products.
If commitments are not met it is imperative to prove that external factors were the cause. Unzuverlässigkeit – unreliability – costs time and money and increases risk, which Germans do their best to keep at a minimum.
A German reporting from a state in the former Soviet Union: “The same problems keep repeating themselves. Aspects of important agreements are changed suddenly, which is not a problem as long as everyone is informed quickly. In team meetings we agree to a schedule, which shortly thereafter is not held to due to delays in the delivery of material, which had been ordered two weeks late. When we then contact other sources we find out that they are out of stock. Our work processes get written down, but within a month or two no one knows where they are or what they mean.”
Germans have great difficulty dealing with lack of reliability. Even with their own high standards do they have their problems. Compared to other countries, public transportation in Germany is very reliable. But not dependable enough for the Germans. The same goes for weather forecasts, an imprecise science. Not reliable.
Personal liability
Germany is a country based on the rule of law. And there are many laws in Germany. The Germans abide by them. For Germans, rules and regulations are one way to reduce risk of personal liability. This can make working with Germans difficult for non-Germans. A conditional German yes might very well be based on the fear of being made personally responsible for the outcome of an agreement.
Working with Germans or setting foot on German soil immediately involves coming in contact with German laws. Why are escalators in Germany so slow? Because the store owner is liable for any accidents.
Bus drivers in Germany will only let passengers enter or exit at designated bus stops, even if it is only ten meters away. For legal reasons. When sending an email to a group of friends the other email addresses should not be visible. Personal email addresses are private and protected by Datenschutz, information privacy protection laws.
Computers often need repair. Employees of companies are not permitted to take action, unless they are in the IT department. If repairing leads to further damage, the employee is personally liable. For it is not their job, but the employer‘s, to repair company equipment.
The same goes for cleaning. Rolling up your sleeves and cleaning dirty windows in your office is a nice gesture, but not a good idea in Germany. The employee is liable for any injury incurred during the cleaning. The company‘s insurance company certainly will not pick up the costs. And the company can even charge the employee for not focusing on the work they are paid for.
German laws also prescribe clearly in which locations what kinds of commercial space can be used for. Many an organization has learned the hard way that the space they rented cannot be used for the purposes they intended.
Fehlerkultur
Fehlerkultur – literally failure-culture – is defined by sociologists as the way in which societies react to failure (mistakes) and to those who commit them. A German psychologist took a closer look at Fehlerkultur within German companies.
In the past, innovation in Germany, he wrote, was the product of a long collective decision making process. The great inventions of the Industrial Revolution in Germany were very seldom the result of an individual genius, but instead the achievement of groups of men and women.
Problems (mistakes, errors, failures) were identified, analyzed and solved collectively, as a group. The final product was ausgereift – technically mature, well-engineered, sophisticated. American-styled “trial and error” does not exist in German thinking, which is why there is no accurate German translation for it.
The negative side of this German national-cultural strength is that a systematic, perfection-oriented group approach to solving problems (to innovation) requires patience and time. And time is not always offorded by today’s rapid market developments.
It is in such circumstances, according to the study, that the Germans inclination to blame those who take risks and inevitably make mistakes comes stronger into play.
Mistakes are deemed almost as a personal and professional transgression which demand being exposed, and the perpetrator punished. This heightens even more the innate German fear of commiting errors, which in turn stymies creative thinking.
Sich bewähren
sich bewähren means to prove one‘s worth or value, to be reliable, to have worked. From Middle High German meaning to turn out to be true, right, correct.
In Germany there is no higher testament to quality than something which has proven itself over time. Das hat sich bewährt, that has proven itself, is very persuasive to German ears. Over generations, decades, even centuries. Solid, known, established, predictable, tested.
In German literature and movies, the harking back to family, tradition, home region is a constant theme. The ideal, idyllic world is to be protected against the corrupting forces of modernity.
German companies, time and again, advertise their solidity, quality, reliability by stating their longevity and tradition: Established 1885. Above the entrance doors of German Fachwerkäuser – half-timbered houses traditional in the Middle Ages, also called gingerbread houses – one can read Erbaut 1375.
Overview
Overview. The view from an elevated point, from which one can see across an expanse.
Ich habe den Überblick verloren. I have lost overview. Er überblickt die Sache nicht mehr. He no longer has an overview of the situation. These are statements one often hears in Germany. The details, and the kinds of details, have become too great to maintain an understanding of the situation. Germans place high value on Überblick (overview), on understanding a situation as a whole, as a system.
Überblick is especially important in those professions where the details are critical: air traffic controllers, project management, every kind of logistical coordination.
Durchblick: Literally through-view; view, perspective between, through, into a situation; to grasp the interrelations, connections, mutual influences.
Er hat den Durchblick. He has through-view. Er blickt da voll durch. He totally sees through the situation. Blicken Sie durch? Do you have through-view? These are typical sentences in German. Those who “see through” know what they’re talking about, understand both the details and the big picture. A Durchblicker knows a topic through and through and is on the path to becoming a true expert.
Durchblick is expecially important in those professions where a high level of expertise is demanded, such as in the natural sciences, nuclear physics, in the most sophisticated areas of surgery.
Umsicht: Literally view around. Intelligent, goal-oriented awareness of all important factors necessary to make wise, reflected decisions.
The Germans are considered to be people with Umsicht. They avoid unnecessary risk, shy away from situations involving factors which they cannot calculate. “Vorsicht ist die Mutter der Porzellankiste” (Carefulness is the mother of the porcelain) is a well-known German figure of speech. Germans are careful, umsichtig (aware of their surroundings). They take their time, proceed tentatively.
Umsicht is especially important in those areas where mistakes have significant negative effects: airline pilots, train conductors, legislators, and of course medical physicians.
Germany. Geography. Risk.
How a people understands risk is based on its experiences as a people, on the decisions it has made and on their ramifications. Decisions take place within a concrete context, within certain parameters, such as geography. Germany lies in the middle of Europe, has always had a number of neighbors, some friends, some foe, others neutral.
Germany’s topography offers little protection. In the East vast flatlands flow into the steppes of Russia. Never a maritime power, Germany to the north has only narrow access to the high seas. With the exception of the Rhine River, there are also no natural barriers in the West offering protection.The Alps to the south offer protection, however.
Compared to such countries as the U.S., China, Russia, Germany has limited natural resources. The U.S. is a continental nation, defended by oceans to the East and West. Great Britain, once a great power, has forever enjoyed the protection of the seas as an island nation.
Any mistakes Germany made in its relations with its neighbors and the powers beyond was felt directly by its people. Time and again in its history devastating wars were fought on German territory, decimating its population and ravaging its economy. For some of the wars the German people have themselves to blame. For others they were victims.
Risiko or risk from Italian risico: to do something involving a certain degree of chance, with possible negative effects; possibility of significant loss, failure.
Germans often say auf Nummer sicher gehen, literally to play the safe number, when they want to avoid unnecessary risk. Germans prefer to “check twice and be sure”. They check, test, question, analyze. They’re often considered to be overly detailed, risk averse, even pedantic in their approach. Being particularly careful may test one’s patience, but the Germans would rather be safe than sorry.
Or lieber den Spatz in der Hand, als die Taube auf dem Dach, figuratively “better a bird in the hand than two in the bush“.
Nuclear energy? No thanks!
The German anti-nuclear-energy movement began as a social movement back in the 1970’s. It was directed against civilian consumption of nuclear energy. In comparison to other European countries, the movement has also received both the strongest and most continuous support in Germany. The anti-nuclear-energy movement is strongly connected to the environmentalist movement: Greenpeace, BUND and Robin Hood, for example, categorically reject the use of nuclear energy.
The accident on Three-Mile-Island in 1979 and the catastrophe at Chernobyl in 1986 provided the movement with new fuel. In 2000, the Schroeder-Fischer government began the process of phasing out the use of nuclear energy throughout the country.
While in 2010 the Kohl-government was gearing up for an extension of the run-time of the remaining nuclear plants, the German reaction to the nuclear incident in Fukushima in 2011 forced Chancellor Merkel, an advocate of nuclear energy, to reconsider this decision. Germany now plans to phase out nuclear energy completely by May 30th, 2022.
Fukushima ultimately resulted in an acceleration of the phasing-out of nuclear facilities in Germany. One year after Fukushima Chancellor Merkel defended her decision: “As we have witnessed, risks emerged in a highly developed industrial country, which we never would have considered to be possible. That is what convinced me that we should accelerate the phase-out”.
Meanwhile, Japan continues to invest in the nuclear industry. Great Britain is planning the construction of a new atomic plant. Even in France Fukushima could not slow the success of the nuclear industry. And in the USA, Fukushima also had no significant impact on opinions on nuclear energy held by the President and other politicians.
The German anti-nuclear energy movement and the nation’s response to Fukushima demonstrate the unique understanding that Germans have of risk.
Citizens exposed
Towards the end of 2014, the German Postbank conducted a study with the goal of identifying the good policies which Germans enforce with regard to their financial matters. The results were summarized in article titled When it comes to money, Germans are bureaucrats who are afraid to take risks:
“Like a pillar of economic wisdom, the desire to have a higher income looms above all other factors. The remaining results are actually more reflective of the ‘financial illiteracy’, which the Germans are already often credited with.
In this way, the study exposed the citizens as being fearful bureaucrats, who above all just want to increase their personal wealth through taxation, saving, and maintaining better control of their finances, rather than earn money through smart investing, or saving for retirement.”
Risikoscheu – A fear of risks: The attribute of a decision-maker to prefer the path of lesser risk – and thereby most minimal loss – when confronted with several alternatives which have an equal anticipated gain. This may mean waiting longer for the same reward, or even settling for a lesser gain, if the chances are greater that it will be received.