The DNA of the Success of German Manufacturing

          --- 139 years Rationalization Proposals in Germany

              Frank Li  May 28, 2012  in Waterloo, On. Ca

      http://www.kwcg.ca/bbs/home.php?mod=space&uid=61910&do=blog&id=3789

Germany may be one of the few rich countries relying on the ha rd w orking rather than that of natural resources, which has attracted many international dignitaries to explore the secrets of its success, but most of them seem to have focused on the macro policy with ignoring the micro details. Or may say they are simply focussing on appearance; not nature or engine.

The significant one of being ignored is the legislated management on rationalization proposals (RP) -  to point out the existing problems with appropriate solutions and company extracts bonus to proposal contributor from the net cost savings in the first year by the RP .

Since Mr. Friedrich Alfred Krupp of German ThyssenKrupp AG firstly coined the management concept of RP in 1872, German companies have begun the practices of management on RP.    

Currently, it not only is an important component of human resource management but also is one of the main features of corporate culture of German Enterprises. 

         Friedrich Alfred Krupp - Wikipedia   

  Photo: https://en.wikipedia.org/wiki/Friedrich_Alfred_Krupp  

As human nature, as common sense, no matter which race and which nationality, including myself, when we heard advice from others, the first feeling is to be despised; the uncomfortable reaction may show on the face, or even verbal unfriendly. Maybe, it was the reason that German government enforces the management of rationalization proposals by legislation. 

In such a corporate atmosphere, German business leaders have been emphasizing people-oriented, and taking the staff as working-capital. They encourage more employees to involve in optimizing the corporate management by exploring and exerting every potential to promote the development of enterprises. China saying goes, three ordinary brains are better than one unordinary one. I think that, the more eyes observed, the more problems would be found, and the more brains devoted, the more wisdoms would be produced.

In such a corporate atmosphere, the sense of responsibility of employees is largely increased. The enthusiasm of employees for the work is large upsurge. The spirit of tacit cooperation is cultivated. Every employee could work positively, initiatively, creatively and actively. The product quality is largely improved, the production efficiency is greatly increased, and the upgrade of the products is speeded up. Thereby, the enterprises are always full of vitality with high competitive ability in hot competing market.

They have established a sound management system of RP with corresponding incentive policies and accumulated a lot of valuable experiences. Such as, set up specialized department and specialized personnel to manage RP, the employees can easily input and query the contents and the implemented results of RP through corporate network system.

As the saying goes, if we hope horse running faster, we must feed it with grass. If we hope hen laying more eggs, we must feed it with grains. In the same way, the activity of RP can continue to develop in German enterprises; the reward in bonuses or materials plays a key role.

The award criteria for RP are basically same in different German companies. It is according to the net cost savings after implementation of RP in the first year. It divided into several grades, specifically, the annual net cost savings within the 2,500 EUR, according to the following standard bonuses: 

Annual cost savings are more than 2500 EUR, then, the bonus is 25% of the actual amount of net cost savings. For example, net cost savings is 5000 EUR, and then the prize money amounted to 1,250 EUR.

Some RP can not estimate the direct economic benefits, but can play an important role in improving safety, preventing accidents, protecting environment, improving product quality and enhancing corporate-image, and thus can make indirect economic benefits, then, according to the grade of lowest, low, medium and high respectively give 20, 75, 150 and 250 EUR or material reward. In accordance with "Personal Income Tax Law" of Germany, material reward is tax-free. The taxes of bonuses are paid by enterprises.

German companies pay great attention to the training of management personnel on RP. In 1943, Frankfurt Chamber of Commerce, University of Frankfurt and eight companies jointly set up an authority of researching RP - German Institute of Business Administration, and designed to promote cooperation closely between research institutions and enterprises.

In 1954, the Institute established a Working Group to research the management mechanism of the RP. Currently, each year, the Institute held courses of "idea manager" to train management personnel of RP for corporate, and providing a platform for the exchange of the experience in the RP management.

The Institute also publishes the annual reports that comprehensively introduce the current state of RP management in German companies. And select top ten best companies in RP management, and select advanced enterprises in RP management from various industries.

Table 1. The annual statistics by the Institute on the economic benefits gained from the implementation of the RP in German Companies.

Now, we may understand that why did Germany become a big manufacturing country. Their experiences are valuable for the Corporations of Canada.

3 years ago, I once met a circus animal trainer, who once traveled many countries. He was very talkative. We talked a lot. The most of conversations has faded from my memory. But, there is one thing that I remember still as new. That is I once requested him to compare the differences between the countries. He said that, “Italians are good at enjoying life, listening to music, dancing, playing and so on. Germans are working! Working! Only life is working. They are simply crazy.”

December 19, 2011, 9:47:20 AM, I searched on Internet with the key words of Italian debt crisis, amazingly, only in 0.25 seconds, I got 126,000,000 results. It demonstrated the severity of the debt crisis in Italy. It is terrible. Too much enjoying has harmed the life of Italians, and may trigger big trouble for other countries. Now, people’s eyes are greedily watching hard-earned money of Germans and China-people, desire them make donation to save those trouble maker of European debt crisis.

 Days ago, I read an article that . Obviously, smart Italians have started to turn on the right way.

Frugal living and hard working is the essential that human can be survival to today. We must re-pick up this spirit to learn from Great Germans and China-people.

Note: The information was excerpting translated from the articles on the Internet.