Pushing the Boundaries: The Rise of German Business Schools

One of Germany’s leading business schools sits awkwardly in Berlin between the rebuilt Humboldt Forum museum complex and a rose garden planted by Margot Honecker, former education minister and wife of East Germany’s last leader. Is a communist.

The European School of Management and Technology, founded to train the country’s capitalist elite, is based in the former state council office of the defunct German Democratic Republic. It’s filled with retro lights, hammer and compass emblems, and a stained glass window depicting leftist and revolutionary intellectual Rosa Luxemburg.

Its surroundings reflect distinctive past attitudes towards business and education in Germany. But in the two decades since ESMT was founded, much has changed in the country, its businesses and its attitudes towards management, resulting in a thriving business education sector with ambitions to rival its international rivals.

“For a long time, we didn’t have an international business school in Germany at the same level as Harvard, Insead or IMD,” recalls Gerhard Cromme, the industrialist who chaired the executive group that created the ‘ESMT in 2002. “We were sending our people to the United States, the United Kingdom, France and Switzerland. In the late 1990s we got together and said to each other that something had to be done about this subject.

In the United States, United Kingdom, Canada, and Australia, many universities launched business schools during the 20th century. Other countries such as France and Spain have instead opened independent private institutions which have forged a solid international reputation.

But Germany has been slower to develop business schools. One reason was the 19th-century legacy of Prussian scholars Wilhelm and Alexander von Humboldt, after whom the museum complex near ESMT is named, says Claus Rerup, a management professor at the Frankfurt School of Finance and Management. , established in 1957. as a specialist training academy for banks.

“They focused on the importance of education in building empowered global citizens rather than providing narrow job training, he says. The result has been the dominance of free public universities, decoupled from commercial education and without selective admissions policies for students.

“What is missing is an elite education in Germany. After the Second World War, the prevailing spirit was that university education should be open to everyone,” says Markus Rudolf, Dean of WHU – Otto Beisheim School of Management, a private business school established in 1983 in Koblenz and now with a second campus in Düsseldorf. “That spirit has not changed. Elite is a bad word,” he adds.

The two men denounce a conservatism and a distrust of business as an academic discipline in the country’s public universities. “The dominance of public institutions is too great,” says Jörg Rocholl, President of ESMT. “There was a completely different governance that did not allow for the emergence of world-class business schools.”

Joachim Lutz, the dean of Mannheim University’s business school, a rare exception from a state institution that opened its own faculty in 2005 – albeit with a separate legal status – points to structural explanations wider. German companies have focused on offering apprenticeships and in-house training for managers rather than recruiting from business schools, he explains. “During the post-war economic miracle, the labor market was fantastic and the education system didn’t need to look elsewhere,” he says.

In addition, many of the largest and most successful companies in the country were industrial and manufacturing groups in sectors such as chemicals, equipment and automobiles. This meant that workers with an engineering background – as well as the law, given Germany’s strong legalistic culture – were at the center of recruitment and promotions.

“Often, the best technical specialists were promoted to management. The Germans believed that learning management was only done through experience,” explains Hiltrude Wernera former Volkswagen board member who completed executive education programs at ESMT.

German students attracted to Portuguese education

If Germans have struggled to find institutions in their home country where they want to study, Daniel Traça in Portugal has reaped the rewards. As dean of Nova Business School in Lisbon, he had to introduce a cap to cope with overwhelming demand.

In its six master’s programs, a third of the 1,600 students enrolled last year were German, up from a quarter in 2019. “We never did any aggressive marketing in the country, but we had to introduce a limit to maintain diversity,” he says.

One factor has been Nova’s growing recognition overseas since joining the Cems alliance of leading business schools more than a decade ago. A second is the relatively low price: the fees are similar to those in Germany and low compared to competitors elsewhere, including the UK; and housing and other living expenses are cheaper.

Another is what Traça calls the “Nova way of life”: sun, sea and surf. “Our students mention the climate, the social life, the Lisbon scene and the campus,” he says. It suggests that its facilities, agile approach and applied curriculum contrast with the sometimes more traditional and theoretical German universities.

But he has made a special effort to attract the best German candidates, getting major Germany-based employers to recruit locally, so they are assured of good jobs back home after graduation.

But that changed in the 1990s, Lutz says. “We had the reunification and the opening of the goods and employment market by the EU. German industry looked further by expanding globally.

Indeed, according to Werner, German companies are now becoming more internationally oriented, expanding their overseas sales and operations and recruiting foreigners from more diverse backgrounds into leadership positions at home. This has broadened the range of skills required of executives, which has spurred the demand for business education. “We need different skills to succeed in China or Brazil. The global footprint of the German economy required management to develop its skills,” she says.

Business education is becoming “more important,” agrees Oliver Hennig, senior vice president of operations at BioNTech who also attended ESMT. “Technical staff who take on leadership roles and negotiate contracts are expected to understand what’s going on,” he says.

His company, which pioneered mRNA vaccines to fight Covid-19, is part of the country’s growing start-up culture. ESMT’s Rocholl says students are turning their backs on traditional corporate hierarchies and want to work for new companies that are more inclusive, agile and entrepreneurial. “It will be an interesting battle to see how mature companies can remain attractive to young talent.”

If business schools attract a growing number of German students, they also increase their notoriety and attract foreign Masters students. The country offers the prospect of careers in Europe’s largest economy – and the possibility for non-Europeans to obtain EU-wide work visas after completing their studies.

Gerhard Cromme chaired the executive group that created ESMT in 2002

Gerhard Cromme chaired the executive group that created ESMT in 2002

Since Brexit and Covid-19, German business schools such as Mannheim have won in two ways, according to Lutz: the renewed interest of foreign students who will have access to the EU labor market is no longer open to those studying in the UK; and national students who now prefer to stay at home since the start of the pandemic.

“We are based in Germany but we don’t see ourselves as a German business school. Most of our competitors are abroad,” says Rudolf from WHU. He and his peers may not yet be viewed as highly as some of his international rivals, but they have ambitions to match their peers overseas.

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