Humankind

Achieving and maintaining success on the international stage is one of today’s greatest challenges for companies. Yet another is reacting quickly and flexibly to changes in the business world. How to master such challenges is in turn one of the challenges faced by Dr. Corinna Elosge and Christian Mahringer, two young business economists at the University of Stuttgart’s Institute of Business Administration (BWI) and Institute of General Business Administration and Organization (ABWL). One thing they find time and again in their research is that the role of the individual is decisive for the success of the whole.

The world of business is always in movement. One company buys up another, another spins off areas and opens up new branch offices. Established companies and startups develop new technologies and change to cope with the changing competition. We see it in today’s automotive industry, where traditional giants do battle with ‘outsider’ competitors like Apple and Google, but also in the IT branch, where innovations appear too fast to follow. The ability to survive in global trade has become the most important success factor in Big Business.

Young researchers at the University of Stuttgart’s business institutes are currently studying what conditions companies must meet in order to develop this ability. The research focus is not only on market analyses, strategy papers, or company statistics but also and above all on the role of the people working in a company. The question is: how does the behavior of the individual affect the versatility of his/her company?

Dr. Corinna Elosge is a scientific research assistant who wrote her dissertation at the University of Stuttgart’s Institute of International and Strategic Management. She is part of the team of Prof. Michael-Jörg Oesterle, which studies how and with what methods companies penetrate foreign markets, what countries they focus on in doing so, and why. This area of study, the framework for their work, contains virulent issues: after all, German companies achieve about 70 percent of their turnover in foreign countries. Even medium-sized German companies in branches of industry like machine design and construction and plant engineering receive a large share of their earnings outside their home markets.

Elosge’s doctoral thesis presents her study of the impact of a CEO change on the international development of a company. Even though the top person is not omnipotent, he or she has a decisive influence on strategy. Even in German companies, where the principle of collegiality is so important, CEOs are in a position of might. ‘ Their experience and values make them appear as the major doers and shapers,’ was the observation of Corinna Elosge.

Mastering this task required, of course, data. Very much data. So her work started with a comprehensive work of research, in which Corinna Elosge concentrated on more than 100 major German companies. Fortunately, she was able to access a set of data complied in earlier years for another scientific research project. The ‘catch’, however, was that the information contained there had to be updated. So, after finding that annual company reports often failed to help her move forward, the young scientist buried herself in databases and archives.

‘It was an excursion into the recent history of business,’ she reports: not all companies in her first sampling had survived over the years. Great companies of the past like Hoechst, Mannesmann or Degussa are no longer around in their former shape. ‘Panel Mortality’ is the buzzword of experts for this effect.

At the conclusion of her research work, she possessed data for the 102 largest German production companies from 1990 to 2012. Elosge then analyzed this data by means of different statistical methods to see whether they matched various hypotheses. For example, she asked whether a CEO’s time in office affected the international development of his company. She also studied the frequency of change and its impact, and how much it matters whether a new CEO comes from the company’s own ranks or from elsewhere.

Companies today are interested in these questions, knowing how much influence a CEO has. When a change of CEO is on the horizon, the potential successor is either broken in and introduced to his future tasks within the company itself or is recruited discreetly from the outside. Both procedures are well-known in commercial research. ‘But they have been only rarely studied in the international context,’ says Elosge. Her dissertation showed that there is a connection between the overall number of top-management changes and the degree of internationalization of a company. This can be illustrated in the form of an upside-down letter ‘U’. That is, companies often go international when a new person is at the top. Fresh wind seems to billow out the sails of doing business abroad. But, as economist Elosge also warns, ‘This effect has its limits.’ When there are too many top-level changes, internationalization tends to grind to a halt.

And internationalization is also affected when outside managers from other branches come to the top chair in a company. The share of business abroad often displays inconstant growth, changing at different tempos, often with major ups and downs. One possible explanation for this is that external managers may bring new experience that is good for internationalization but also introduce incalculables. As Corinna Elosge put it, ‘The impact of too many changes is negative.’

One reason for turbulence may lie in the top-level manager’s behavior. Examples of practical evidence for this thesis can be found in cross-branch fusions. Even when a company finds an outstanding enhancement for itself in a business fusion, the two partners often fail to merge seamlessly because the top-level managers on both sides cannot work together. These human drawbacks are dangerous for business firms; they keep companies from adapting quickly to changing market conditions.

What applies at the management level is also true for the company as a whole. That’s why management needs to know how each employee can strengthen his company’s ability to adapt - for example by keeping up with what’s happening and being alert to new opportunities. In short: by acting entrepreneurially. Christian Mahringer is a person who studies such issues. He is a 27-year-old scientist working with Prof. Birgit Renzl at the University of Stuttgart’s Institute of General Business Administration and Organization. Mahringer’s research takes him into an area called ‘dynamic capabilities’ by business economists: how companies can continuously renew themselves and continue to develop in times of change. For one thing, it requires that employees continually bring new insights into the company. Implementing these insights effectively, however, also requires that they know for whom this information is relevant.

The human aspects of applied economics have fascinated Mahringer since his first day at the University. After entering upon his studies at the University of Hohenheim, he soon specialized in the area of business psychology. ‘I was always intrigued most by the actions of individuals in the business context.’ Later, after he received his doctorate near Salzburg, his professor, who had been called to the University of Stuttgart, asked him if he wanted to join her. He said yes and now, not even 30 years old, he has already marked up his first successes: he regularly presents some of his research results at international scientific conferences, and was recently honored by the prestigious European Academy of Management (EURAM).

The following example shows what a typical research project in his discipline sometimes looks like: it starts with a survey at a company which provides packaging machines for pharmaceuticals. This is a highly specialized market, with little competition and only a few customers. The loss of only one customer immediately affects sales volume, and a single error in sales and marketing can have painful results.

Employees in the company were asked about events which they viewed as outstanding successes. The resulting input, it was thought, would show how companies can integrate knowledge from the outside. The statement of the question was intentionally left somewhat vague. ‘We hoped in this way to be open for new issues while formulating questions for future research projects,’, says Mahringer. The answers of the employees brought interesting details to the surface. One, for example, related how his customer made improvements in his own packaging machine because the version he wanted was unavailable. ‘That was very important information for the supplier,’ says Mahringer. But the salesman in the field got that information only because he had developed a relationship of trust with that particular customer. ‘Just one example to show how important personal contact is,’ says Mahringer. Other respondents in the study confirmed this. Some insisted that the often-scorned golf course meetings are the best opportunity for a give-and-take with partners, customers, and suppliers.

Mahringer’s research work extends to more than the way in which companies gather information. That information must also be put to efficient use - by precisely those persons who need it most. Today’s information technology offers resources for this. For example, information can easily be presented in comprehensible form digitally. ‘But it’s not enough just to send it out by email and trust that the right people will receive the relevant information,’ says Mahringer. On the contrary: experience has shown that it is precisely complex data which is least often correctly assessed. But there’s hope: data fulfills its purpose ‘when it serves as the basis for discussion.’

Discussions - and Mahringer’s work makes this clear time and again - are of central importance for successful processes of change. One condition, however, is that they be honest and target-oriented. ‘If they are only pro forma, they are useless,’ says Mahringer. The goal must be to find out what the respective employee really thinks and needs and how he assesses a problem. For their part, employees can only give wings to change if they have the feeling that they can in fact make a difference. ‘If not, it is very likely that the change process will come to nothing.’
Heimo Fischer