Chairman of the Executive Board of Thüringer Aufbaubank
We spoke with Mr. Wierlacher about #FutureGoodGovernance.
A ship needs a captain. There is a lot of talk about new leadership concepts, about participation and freedom. How much leadership will a company still need in the future and how much agility can it tolerate? How do you envision corporate leadership in the future?
Future corporate management will differ from traditional management in a number of ways, but without completely replacing it. Let’s take the keyword authority; it can happen in some cases that – to stay with the metaphor – the captain knows a lot about how to motivate his crew and how to settle conflicts on board, but little about how to deal with a difficult shoal he has never navigated before. In such cases, it makes sense to listen to the advice of an experienced helmsman or to let him take the lead temporarily. This is a new understanding of leadership that is not based on rank or length of service, but on competence in the particular area of expertise in question. Properly understood, this need not detract from a manager’s authority and self-image – quite the opposite, in fact, as he himself benefits from the improved performance of his team. One of the most important tasks of a company manager is to decide when and in what way he takes over tasks himself, where he gives employees freedom or, if necessary, limits it. Basically, every company management must strike the necessary balance between continuity and innovation or flexibility. This is certainly easier to say than it is to do, especially since this process also depends on the expectations of employees and customers and, not least, on the product; a company in the optics and photonics industry certainly has different standards and a different corporate culture than a development bank that I manage as CEO. General statements about what leadership should look like are not very helpful.
The Gretas of the world have also focused attention on companies and their fields of action. What challenges do you expect in terms of social responsibility and thus sustainability in the company?
When they say “the Gretas”, that sounds almost a little too flippant to me. What it comes down to is that companies are aware of their social relevance and should live up to it. This is not a new idea, but one that is coming to the fore again today. I am very grateful, by the way, that this is the case. The first is simply that we understandably want to avoid being criticised, and there is nothing wrong with that. There is nothing wrong with that, but I think the second type of motivation is more positive and also more far-reaching; a company never acts completely autonomously and is always part of a network, a network of relationships with other players. If these feel taken seriously and valued, this also has an effect on self-perception. Because these relationships are of a long-term nature and ultimately also determine the economic future. And the more a company’s environment notices that it is not just perceived strictly as a “supplier”, a “service provider” or a “customer”, but as an actual partner, the more this also benefits the company. This is then a kind of sustainability that benefits all sides.
Trust is good, control is better. Today, it is still primarily about numbers and compliance. Artificial intelligence, however, is changing perspectives and thinking here as well. How can you imagine a future system for monitoring the Management Board? Will a supervisory board still watch over the management in the near future, or will ‘monitoring’ soon be replaced by a technically highly equipped external service provider?
The statement “trust is good, control is better” is very general and, on closer inspection, only true under certain conditions. It is true that we live in a corporate world that is very much oriented towards measurable things, namely quarterly figures and growth rates. However, it should not be forgotten that controlling can never consist of monitoring alone. If this were the case, employees would rightly complain about a lack of trust. An employee who is not trusted and who has to be constantly monitored is not necessarily an asset to the company. Especially when the monitoring is based primarily on technical means, this damages the character of human cooperation enormously. Large mail order companies or parcel delivery companies have therefore rightly come in for criticism. The companies from our region that I know and support mostly work differently – fortunately. This also applies to the use of artificial intelligence; AI can certainly help to optimize processes and structures, e.g. to create a more comprehensive, efficient order or customer management. But if AI is used contrary to the interests of the employees, this quickly has negative consequences, which also get around. And wanting to monitor a board of directors using AI sounds more like bad dreams of the future at the moment.
Companies are subject to a constant process of change. What challenges do you expect for your company in the next 10 years? How will they change your company? What will change for the employment and qualification of the employees?
In terms of the rapid pace of technical development, 10 years is almost an eternity. In addition, at Jenoptik we are dealing with a large number of very different areas of application, all of which are developing rapidly. This means that we will have to adapt to numerous new requirements, from medical technology to aviation, from the automotive sector to mechanical engineering and security technology. What this will mean for the employment situation or the number of employees can hardly be predicted for this period. The decisive factor will be whether we succeed in remaining attractive as an employer in the future and in attracting well-trained and motivated young people. And here we have every reason to be optimistic. I think the successes of the last few years are something to be proud of. Since we train people ourselves, since we also involve students from the Cooperative State University and since we want to further increase the training quota in 2020, I assume that we – together with the entire region – are on the right track.
There is a lot of debate about centrality vs. decentrality, agility and core competence in organizations. Will there even be companies in today’s sense 20 years from now? What changes in terms of business organization and financing do you expect or would you like to see?
Of course there will still be companies in today’s sense in 20 years. Despite all the changes – and all the fashionable terms, many of which disappear just as quickly as they appear – the structure of the economy will not change so fundamentally that the demise of the classic company is imminent; certainly not in this period. Where it makes sense and is economically more efficient, new ways of doing things will certainly be possible or even necessary. Some of the work can be done from anywhere, so that compulsory presence will become superfluous in some areas. Later on, some areas of administration and decision-making will certainly also be taken over by AI systems. These systems will initially take on the role of an assistant before they are mature enough to make decisions themselves. Of course, the balance must always be maintained; because a mere increase in efficiency would be pointless if it meant an alienation from people at the same time.
Car manufacturers are becoming mobility service providers, food manufacturers are becoming lifestyle providers, media companies are becoming data science companies. Where will your industry go? Will industries – as we know them today – even exist in ten years? What will come then?
The terms you mention here initially describe the desired external perception of companies. Of course, automobile manufacturers continue to produce cars and do not disappear into the virtual world. Let’s stay with Jenoptik, a company with a great tradition; in the longest period of its existence, it was almost exclusively concerned with optical, mechanical and later optoelectronic products, which were sold to industrial customers or private individuals. The more we know today, the more data is added, the more specific the fields of application become, the more the boundaries between product and service become blurred. In addition, other possible fields of application are emerging. Only intelligent software technology allows us to fully exploit the possibilities of our products. The industry is undoubtedly becoming more diverse, more powerful and therefore more exciting. The fact that industries and companies are changing is nothing new. Nor do I see, with very few exceptions, that industries would disappear completely. What is changing, however, is the fact that software is becoming more and more important in all areas. As a result, markets are naturally changing and the importance of companies that produce intelligent software products is growing.
Corporate leaders today are asked from various quarters about the purpose of the company or the specific mission of the company. How do you meet this demand? What positive or critical lessons have you learned? What advice would you give to a CEO in another industry on how best to approach this issue.
Certainly, today’s corporate management operates in a much stronger field of tension than in the past. At Jenoptik we have a responsibility to our employees, our shareholders, our customers and also to society and the environment. At the same time, we have to remain competitive, which means that we have to deal with a wide range of change processes – some of which I have already mentioned. If you ask about one lesson I have learned from this, it is the importance of serenity and humility; because we should not claim to do everything right. Rather, the economic factors, as well as the different relationships with partners, often have to be weighed against each other. Finally, decisions have to be made that cannot please everyone anyway. This is the case for every commercially oriented company. At Thüringer Aufbaubank, as an institution under public law, the mission is clearer and even formulated as a law; we support the state in fulfilling its public tasks. However, I would like to hold back on giving advice to CEOs of other sectors – except perhaps to remain open-minded and capable of learning, and to seek communication with all partners.
The so-called stakeholders, especially the (institutional) shareholders, are much more aware of their ownership rights and obligations than they were just a few years ago. It is therefore no longer sufficient to simply tick off the requirements of a code (“comply-or-explain”). Internationally, the intensive and permanent communication/interaction of stakeholders with company management is on the rise (“apply-and-explain”). What trends do you see here and how do you assess them?
It is certainly true that shareholders are watching us more closely than ever before. This has to do with the general professionalization of stakeholders and the increasing need for transparency. Shareholders who take their options seriously, however, also generally know that it hardly makes sense to over-regulate a company or to strictly commit it to one course. This would be the case, for example, if there were disproportionate interference with board activities.
In my view, the existing systems and commitments are sufficient. The communication of all stakeholders and the ability of a management board to act should not be restricted by an overly rigid system of rules. Moreover, it would be wrong to regard shareholders as a homogeneous stakeholder. After all, they have very different ideas about the trade-off between corporate growth versus dividends or about a company’s development horizon. Their interests therefore diverge widely and require constant readjustment. It makes far more sense to regulate this through communication rather than through regulations, the impact and interpretation of which are then argued over by lawyers in case of doubt.
At present, #FutureGoodGovernance is still comparable to a crystal ball in many areas. What future aspects of good governance are you particularly concerned about? What would you wish for if you had three wishes free? Where do you see a challenge for politics? And what responsibilities will companies and their managers have in the future?
Jenoptik has expressly welcomed the German Corporate Governance Code as a voluntary commitment by German industry. At the same time we have made it clear that we consider it essential in some points to be able to deviate from recommendations for action if there are good reasons for doing so. The Code should not be seen as a lifeless bureaucratic instrument that restricts corporate management, but should set out general guidelines.
I assume that transparency will become an even more important feature in the management of companies in the coming years. After all, digitalization describes a multitude of highly diverse and individual development processes. Today, managers have to keep an eye on the technical aspects, this concerns feasibility as well as time and human resources. On the other hand, in addition to a great deal of idealism, they need a clear assessment of what can be predicted – and what cannot.
As far as good governance is concerned, I will content myself with one wish: that we remain in constructive dialogue with politicians. We have succeeded so far, despite all the upheavals and differences. I am convinced that politicians also know what they have to gain from reliable companies with regional roots. I also assume that this will continue to be the case in the future, even if here and there people overshoot the mark for ideological or even just rhetorical reasons. A reliable regulatory framework is a basic prerequisite for healthy economic activity. One thing is certain: in the future, not only corporate processes will change, but also structures such as hierarchies or spatial or professional boundaries. This also means a fundamental change in governance, away from an authoritative to a collegial style of leadership. In some cases, leadership will also generally be replaced by a somewhat more differentiated governance model. One problem here is the narrowed time horizon for change. These are not only more complex than ever before, but also have a multitude of interactions with each other. Direct plannability thus decreases and this can often only be compensated for by increased agility. The better the general working climate within a company, the more intensively the basic practices and also the values have been internalized, the better we will succeed in this.