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Germany's Big Firms Pay Price for Small-Town Ties
From the Wall Street Journal of Mon, 22 Dec 2014 23:03:01 EST
In most cases, German companies’ small-town ties stem from early days as family-run businesses. Above, Adidas in Herzogenaurach.
In most cases, German companies’ small-town ties stem from early days as family-run businesses. Above, Adidas in Herzogenaurach. picture-alliance/dpa/Associated Press

WALLDORF, Germany—This country’s major brands have reached the far corners of the world. But at some of Germany’s biggest companies, just getting to headquarters can be a trek.

Global giants Adidas AG and Volkswagen AG are based in spots almost unknown outside Germany, and which many Germans would have trouble locating on a map. Fashion house Hugo Boss AG , software maker SAP SE and media conglomerate Bertelsmann SE are as much as an hour’s drive from a second-tier city and even farther from population centers like Berlin, Hamburg or Munich.

Not only do these out-of-the-way locations complicate travel for globe-trotting executives and rank-and-file commuters alike, they also can make it harder to recruit top talent.

“Some job interviews may take longer and require some additional convincing,” said Bertelsmann Chief Executive Thomas Rabe.

SAP, Europe’s largest software maker, is tackling the problem by expanding in Berlin and New York, rather than here in its home base of Walldorf, a town of 15,000 that is south of Heidelberg and bordered by asparagus fields.

“I would like to see us going into the major cities, because that’s where the young, creative people want to be,” SAP’s chief executive, Bill McDermott, said at a news conference earlier this year.

In most cases, the companies’ small-town ties stem from their early days as family-run businesses. Adolph Dassler started making shoes in his mother’s laundry room before World War II, and when he named his Herzogenaurach-based business Adidas in 1949, it had just 47 employees.

Companies often have to pay more to woo talent if their head offices are off the beaten path, and jobs typically take longer to fill than in major cities, said Ricardo Corominas, managing director of recruitment advisory firms Michael Page and Page Personnel. That forces some employers to offer perks like company cars or to accept shortened workdays to offset longer commutes, he said.

“For companies in rural regions it is clearly more difficult to find employees than for those in urban areas,” said Mr. Corominas.

Workers with sought-after skills, such as engineers and programmers, are particularly hard to attract.

Otto Bock HealthCare GmbH, which makes artificial limbs and wheel chairs, struggled for more than a year to fill a senior human-resources vacancy, said Carsten Hochwald, its human-resources director for Germany. Two candidates, he said, rejected offers because they didn’t want to work in Duderstadt, a central German city of roughly 20,000.

Product-manager and senior technician positions also remained unfilled for more than a year, according to Mr. Hochwald.

In rural areas, almost 54% of companies are short of skilled workers, compared with 42% of those in metropolitan areas, according to a poll published last year by Institut der Deutschen Wirtschaft, a business think tank. Sparsely populated areas “are usually less attractive,” the institute reported. Young and elderly people, in particular have gravitated to cities in recent years because of better educational opportunities, a livelier atmosphere and more health-care options, it said.

Of course, the prospect of living and working in a pastoral setting doesn’t deter everyone. Adidas says it doesn’t have a problem attracting employees to Herzogenaurach, which is set amid farmland and forests. That’s despite the fact that the town, which is close to Nuremberg, lacks a train station.

“I can’t find anything negative about being here,” said designer Caroline Hess, who lived in Paris and Berlin before joining Adidas six years ago.

In fact, many German companies have such strong reputations that they attract employees regardless of their location, said Jörg Ritter, co-head of global family-business advisory at executive-search firm Egon Zehnder in Berlin. “Most companies tend to be in premium segments that attract top managers—particularly from Asia—who want to work for a German premium brand.”

Still, remote surroundings can complicate operations. Hugo Boss’s hometown of Metzingen, nestled among vineyards in Germany’s southern mountains, doesn’t vibrate with the pulse of fashion like New York, Paris or Milan, where many of the company’s rivals are based.

The up-market fashion brand compensates for its location, a spokeswoman said, by sending employees on trips. Jason Wu, its womenswear designer, whose fans include U.S. First Lady Michelle Obama, works in New York part of the time.

SAP’s Mr. McDermott puts a positive spin on Walldorf’s serenity. “Sometimes you have places like Walldorf, places where people don’t commonly come to or understand to be technology hubs,” he said. “But once your mind is stretched to a new dimension, you might actually have a higher level of thinking.”

But Mr. McDermott, who splits his time among Germany, the U.S. and global travel, acknowledged that not all coders would agree. Three out of four SAP employees work outside Germany. The company has research and development facilities in several locations around the globe, and wants to expand where it can attract talent.

SAP employs around 2,000 people in the Silicon Valley area and plans to hire in New York and the Berlin region.

People with design skills “tend to be in the centers of gravity, where the scene is,” Bernd Leukert, its executive board member for innovation, said in September. “We’ve identified New York as a center and decided to invest there.” The group opened an innovation center in Potsdam, near Berlin, earlier this year, where it also aims to recruit, he said.

Online-game developer Altigi GmbH is based in Hamburg, Germany’s second-largest city, which simplifies recruiting, said CEO Kai Wawrzinek. “It’s clearly much easier than getting 12,000 people to Walldorf,” he said, “Hamburg is certainly a great location.”

For Bertelsmann, a solution to the challenges in recruiting at home is to run business units in major cities. “Bertelsmann is a global media group,” said Mr. Rabe, the CEO.

Only about 10% of the group’s roughly 112,000 employees are at its corporate headquarters in Gutersloh. The book-publishing business, Penguin Random House, is based in New York.

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