University of Chicago, International Roundtable Ruth-Ann McKellin

April 18, 2012

Grew up in West Germany

Returned in the early 1990s and worked with German consulting firm

Reunification project: ◦ Client was the Sozialministerium of Thuringen

◦ Project was privatizing healthcare facilities:

Hospitals

Clinics

Orphanages

Health spas (yes, they are part of the healthcare system!)

1945 ◦ Germany is split into two

parts—East Germany controlled by the Communist Soviet Bloc, and West Germany aligned to Capitalist Europe.

◦ Berlin divided into four parts, controlled by Soviet Union, United States, United Kingdom, and France.

1952 ◦ East German

government closed the West German border

1961 ◦ August 13: Berlin Wall is

built in the dead of night to keep East Berliner from fleeing to West Berlin. 3.5 Million had escaped since 1945.

1989 ◦ Hungarian border fence removed and thousands of

East Germans escaped to the West

◦ “Peaceful Revolution” led to the removal of the Berlin wall

12% of western Germans were still unhappy with the reunification

8% of eastern Germans were still unhappy with the reunification

25% of western Germans would like the Wall put back

25% feel they have suffered financially because of the unification

X% unemployment

$100 Billion in 2004 pumped into eastern Germany too much

“Besser-Wessies”

12% of eastern Germans would like to be separated again

33% feel they have not improved financially since the fall of communism

2X% unemployment Infusion of investment is

too little “Jammer-Ossies”

Forsa-Institut, September 2004

As of July 2010, unemployment in the east (11.5%) was nearly double what it was in the West (6.6%) An astonishing 50 percent of the 80 billion euros ($103 billion) in annual developmental subsidies transferred from west to east is eaten up by social benefits and welfare payments.

Results of reunification leave Merkel satisfied (26. 9. 2010)

“Merkel, who grew up in East Germany, said since 1990

Germans in the east have done “unbelievably” well in adjusting

to life under the federal constitution of the former West

Germany. “

The solidarity pact, under which

the eastern states still receive aid

for development from those in

the west, would not need to

continue beyond its planned

phasing-out in 2019…

The prosperity levels in the

eastern states would approach

those in the west by that time.

What did East Germany have to offer?

Communist

Socialist

Antiquated infrastructure

Inadequate social systems

Low global status

No unemployment

DM had little value

Federalist Capitalist Modern

infrastructure Developed social

systems High global status Low unemployment DM was strong

History

Traditions

Language (with dialects, of course)

Strong work ethic

Cultured (music, art, architecture, etc.)

Christian Religion

Culture: “It refers to the way people think, feel, and act. Geert [Hofstede] has defined it as ‘the collective programming of the mind distinguishing the members of one group or category of people from another.’ The ‘category’ can refer to nations, regions within or across nations, ethnicities, religions, occupations, organizations, or the genders. A simpler definition is 'the unwritten rules of the social game.‘”

Continuing, there are six national culture dimensions that have been evaluated in 50+ countries based on these attributes: ◦ Power Distance

◦ Uncertainty Avoidance

◦ Individualism vs. Collectivism

◦ Masculinity vs. Femininity

◦ Long-Term Orientation

◦ Indulgence versus Restraint

Power Distance Power Distance is the extent to which the less powerful members of organizations and institutions (like the family) accept and expect that power is distributed unequally. This represents inequality (more versus less), but defined from below, not from above. It suggests that a society's level of inequality is endorsed by the followers as much as by the leaders. Power and inequality, of course, are extremely fundamental facts of any society and anybody with some international experience will be aware that "all societies are unequal, but some are more unequal than others".

Uncertainty avoidance Uncertainty avoidance deals with a society's tolerance for uncertainty and ambiguity. It indicates to what extent a culture programs its members to feel either uncomfortable or comfortable in unstructured situations. Unstructured situations are novel, unknown, surprising, different from usual. Uncertainty avoiding cultures try to minimize the possibility of such situations by strict laws and rules, safety and security measures, and on the philosophical and religious level by a belief in absolute Truth: "there can only be one Truth and we have it". People in uncertainty avoiding countries are also more emotional, and motivated by inner nervous energy.

The opposite type, uncertainty accepting cultures, are more tolerant of opinions different from what they are used to; they try to have as few rules as possible, and on the philosophical and religious level they are relativist and allow many currents to flow side by side. People within these cultures are more phlegmatic and contemplative

and not expected by their environment to express

emotions.

Individualism vs. Collectivism Individualism on the one side versus its opposite, collectivism, is the degree to which individuals are integrated into groups. On the individualist side we find societies in which the ties between individuals are loose: everyone is expected to look after her/himself and her/his immediate family.

On the collectivist side, we find societies in which people from birth onwards are integrated into strong, cohesive in-groups, often extended families (with uncles, aunts and grandparents) which continue protecting them in exchange for unquestioning loyalty. The word collectivism in this sense has no political meaning: it refers to the group, not to the state. Again, the issue addressed by this dimension is an extremely fundamental one, regarding all societies in the world.

Masculinity vs. Femininity Masculinity versus its opposite, femininity, refers to the distribution of emotional roles between the genders which is another fundamental issue for any society to which a range of solutions are found. The IBM studies revealed that

◦ (a) women's values differ less among societies than men's values; (b) men's values from one country to another contain a dimension from very assertive and competitive and maximally different from women's values on the one side, to modest and caring and similar to women's values on the other. The assertive pole has been called masculine and the modest, caring pole feminine.

◦ The women in feminine countries have the same modest, caring values as the men; in the masculine countries they are more assertive and more competitive, but not as much as the men, so that these countries show a gap between men's values and women's values.

Long-Term vs. Short-Term Orientation Long- term oriented societies foster pragmatic virtues oriented towards future rewards, in particular saving, persistence, and adapting to changing circumstances.

Short-term oriented societies foster virtues related to the past and present such as national pride, respect for tradition, preservation of "face", and fulfilling social obligations.

Indulgence versus Restraint

◦ Indulgence stands for a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun.

◦ Restraint stands for a society that suppresses gratification of needs and regulates it by means of strict social norms.

Process-oriented versus Results-oriented,

Job-oriented versus Employee-oriented,

Professional versus Parochial,

Open systems versus Closed systems,

Tightly- versus Loosely-controlled, and

Pragmatic versus Normative.

Managing international business means handling both national and organization culture differences at the same time.

Organization cultures are somewhat manageable while national cultures are given facts for management

Common organization cultures across borders are what holds multinationals together.

Eurostat, Unemployment Rates in Europe, Last updated: Apr 9, 2012. http://www.google.com/publicdata/explore?ds=z8o7pt6rd5uqa6_&met_y=unemployment_rate&idim=country:de&fdim_y=seasonality:sa&dl=en&hl=en&q=german+unemployment+chart#!ctype=l&strail=false&bcs=d&nselm=h&met_y=unemployment_rate&fdim_y=seasonality:sa&scale_y=lin&ind_y=false&rdim=country_group&idim=country:de&ifdim=country_group&tstart=664264800000&tend=1329631200000&hl=en_US&dl=en

Forsa-Institut, September 2004 Hofstede, Geert. Culture. http://geerthofstede.nl/culture.aspx and National

Cultures http://geerthofstede.nl/dimensions-of-national-cultures Kristin Zeier, Reunified Germany is a nation of many faces and variable success,

Deutsche Welle, 27.09.2010, http://www.dw.de/dw/article/0,,6025610,00.html Richard Connor (AP/AFP/Reuters), Results of reunification leave Merkel satisfied,

Deutsche Welle, 26.09.2010. http://www.dw.de/dw/article/0,,6046204,00.html Staff, FindingDulcinea. "On This Day: East and West Germany Reunited."

FindingDulcinea. 3 Oct. 2011. Web. 19 Apr. 2012. http://www.findingdulcinea.com/news/on-this-day/Oct/Germany-Reunited.html

Wirtz, Michael, German Reunification Provides Lessons for EU Expansion, January 28, 2005, VOA news, http://www.gmfus.org/archives/german-reunification-provides-lessons-for-eu-expansion