Pushing boundaries: the rise of German business schools

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

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 is replete with retro lights, hammer and compass emblems and a stained-glass window portraying the leftwing intellectual and revolutionary Rosa Luxemburg.

Its surroundings reflect the distinctive past attitudes to business and education in Germany. But in the two decades since ESMT’s creation, much has changed in the country, its companies and attitudes to management, bringing about a flourishing business education sector with ambitions to compete with international rivals.

“For a long time we didn’t have an international business school in Germany on the same level as Harvard, Insead or IMD,” recalls Gerhard Cromme, the industrialist who chaired the group of executives who created ESMT in 2002. “We were sending our people to the US, the UK, France and Switzerland. In the late 1990s, we came together and said let’s do something about it.”

In the US, UK, Canada and Australia, many universities launched business schools during the 20th century. Other countries such as France and Spain instead opened independent private institutions which built strong international reputations.

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

“They focused on the importance of education to build autonomous world citizens rather than to offer narrow professional training,” he says. The result was the domination of public, free universities decoupled from business education and without selective admission 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 everybody,” argues 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.

We need different skills to be successful in China or Brazil. The global footprint of the German economy has forced management to expand their skills

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

Joachim Lutz, the dean of the business school at Mannheim university, a rare exception of a state institution which opened its own faculty in 2005 — albeit with a separate legal status — points to broader structural explanations. German companies focused on offering apprenticeships and providing in-house training for managers rather than recruiting from business schools, he argues. “During the postwar economic miracle, the job market was fantastic and the educational system didn’t need to look elsewhere,” he says.

Furthermore, many of the country’s largest and most successful businesses were industrial and manufacturing groups in sectors such as chemicals, equipment and cars. That meant workers with engineering training — as well as law, given Germany’s strong legalistic culture — were the focus of recruitment and promotions.

“Often the best technical specialists were promoted to management. Germans thought that learning about management came only through experience,” says Hiltrud Werner, a former board-level executive at Volkswagen who undertook executive education programmes 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 benefits. As dean of Nova Business School in Lisbon, he has had to introduce a cap to handle overwhelming demand.

Across its six masters programmes, a third of the 1,600 student intake last year was German, up from a quarter in 2019. ‘We have never marketed to the country aggressively but we have had to introduce a limit to maintain diversity,’ he says.

One factor has been growing awareness of Nova abroad since it joined the Cems alliance of leading business schools more than a decade ago. A second is the relatively low price: fees are similar to those in Germany and low compared with rivals elsewhere including the UK; and accommodation and other living costs are cheaper.

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

But he has made a particular effort to appeal to the best German candidates, bringing leading German-based employers to recruit locally, so they have the reassurance of good jobs back home after graduating.

But that changed in the 1990s, says Lutz. “We had reunification and the EU’s opening of the market for goods and jobs. German industry looked further afield in expanding globally.”

Indeed, Werner says German companies are now becoming more internationally oriented, expanding sales and operations abroad and recruiting foreigners with more diverse backgrounds into senior roles at home. This has increased the range of skills required of executives, boosting demand for business education. “We need different skills to be successful in China or Brazil. The global footprint of the German economy has forced management to expand their skills,” she says.

Business training is becoming “more significant”, agrees Oliver Hennig, senior vice-president of operations at BioNTech who also attended ESMT. “It’s expected that technical staff going into managerial roles and negotiating contracts understand what is happening,” he says.

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

If business schools are attracting a growing number of German students, they are also raising their reputation and appeal to foreign students for masters’ degrees. The country offers the prospect of careers within Europe’s largest economy — and the chance for non-Europeans to gain work visas across the EU after completing their studies.

Since Brexit and Covid-19, German business schools such as Mannheim have gained in two ways, says Lutz: fresh interest from foreign students who will gain access to the EU labour market no longer open to those who study in the UK; and domestic students who now prefer to remain at home since the pandemic began.

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