Project Management Institute

Transfer of Power

Germany's Project Teams Face a Moment of Truth in a Post-Brexit EU

BY NOVID PARSI

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PHOTO BY PAUL ZINKEN/PICTURE ALLIANCE VIA GETTY IMAGES

ANXIETY AND OPPORTUNITY HAVE GRIPPED GERMANY'S PROJECT ENVIRONMENT.

With all eyes focused on post-Brexit repercussions, political and economic uncertainty threaten to slow Germany's full-throttle chance to stake its claim as the official pacesetter for the European Union (EU).

This year's GDP growth rate is expected to finish at just 0.8 percent, down from earlier 1.9 percent projections. Meanwhile, 2020 forecasts of 1.7 percent growth would mean three straight years of rates below 2.0 percent. And for the first time since 2005, government leadership is murky. With longtime chancellor Angela Merkel—viewed by many as the de facto leader of the EU—not seeking reelection, seeds of doubt already exist over the impact her possible successors will have on projects.

No matter what—if any—Brexit deal is reached, Germany faces a mixed bag of consequences. Germany's economy is closely tied to Britain's. German companies have investments in Britain worth €120 billion. As an export-driven economy, Germany sends a wide range of industrial products to Britain, and the bilateral trade of goods and services is worth about €175 billion a year.

“Most export-oriented German goods and services industries will be impacted by Brexit,” says Thomas Zimmermann, PMI-ACP, PMP, global project portfolio manager, Karl Storz SE & Co. KG, a medical device manufacturer, Tuttlingen, Germany. “Several German companies expect their business with the U.K. to deteriorate in 2019 and beyond.”

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—Thomas Zimmermann, PMI-ACP, PMP, Karl Storz SE & Co. KG, Tuttlingen, Germany

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PHOTO BY MOHSSEN ASSANIMOGHADDAM/PICTURE ALLIANCE VIA GETTY IMAGES

Mercedes-Benz vehicles await delivery in Ahlhorn, Germany.

Germany's manufacturing hubs face up to €3.3 billion in tariffs imposed by the United Kingdom if no free-trade agreement is reached, cutting the country's exports to the U.K. in half and further eroding economic gains, according to the German Economic Institute. The auto industry will be hit particularly hard. Fourteen percent of all German-made vehicles are shipped to the U.K., and a global industry transformation is additionally accelerating the need to innovate.

Germany exports almost 800,000 cars a year to Britain, and a no-deal Brexit could jeopardize about 100,000 jobs in an already slumping industry. Last year, German carmakers faced a decreased demand from China, whose sagging economy has resulted in a diminished appetite for all German goods. And the industry has yet to come up with a solution to the threat of emerging technologies, namely automation, even though such risks put an estimated half of all the country's auto jobs at risk.

CHAIN REACTION

It's not all doom and gloom. Some German companies have been taking a proactive approach to capitalize on the uncertainty. For example, in anticipation of Brexit, global biotech organization CSL Behring last year executed projects to secure its supply chain. The projects ensured that any supplies that CSL Behring obtained from Britain, such as manufacturing equipment or chemicals, could be sourced elsewhere within the EU.

“We started to address the problem early. We didn't wait for Brexit,” says Dirk Nadler, PMP, senior manager, project delivery support, CSL Behring, Marburg, Germany.

His company doesn't rely heavily on British supplies, but biotech and pharma organizations that do source or manufacture most of their supplies in Britain will encounter greater challenges, Mr. Nadler says. “They're highly affected by Brexit because it's a highly regulated market. You can't just manufacture materials in the U.K. today and then build a plant somewhere in the EU in a year or two—it's not that easy.” Such factories cost millions of euros to build and have to undergo an extensive regulatory approval process before they can operate, which can take five to 10 years, he says.

“The extent of an organization's supplies from the U.K. will determine the extent of Brexit's effect on their operations,” Mr. Nadler says.

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GETTY IMAGES

The airport in Frankfurt, Germany, a city that is seeing business growth due to Brexit

It's not just goods that move across borders—it's people, too. Many German projects employ team members from Britain; many Germans work for British companies. In a post-Brexit world, that flow will be more limited. “Free movement is not a given anymore,” Mr. Nadler says. “Moving people from the U.K. to the EU and vice versa was pretty easy until now, but it will be harder to get the people you need on projects.”

After Brexit, travel regulations between Britain and EU states will change. As a result, project managers will have to assign tasks strategically and assess how talent availability could impact schedules, Mr. Nadler says.

“How long can I stay there? Am I allowed to work there? Will that affect how long my project will take and how much it will cost?” These are the kinds of questions that Mr. Nadler says he and other German project managers working in Britain will now have to answer.

BREXIT'S BRIGHT SIDE

Germany's financial services industry, on the other hand, is primed to take advantage of Brexit. Although the U.K. has been the EU's most developed financial center, that could change as British banks likely become more difficult to access and more expensive for EU business customers.

Already, some U.K. financial firms are looking to relocate to the EU, and to Germany in particular. Since the 2016 Brexit vote, more than 45 financial institutions launched projects to set up or bolster their presence in Germany, mostly in Frankfurt, and the number of British organizations setting up shop in Germany increased by 34 percent. Last year, 168 British organizations relocated to Germany—almost half of them because of Brexit, according to the economic development agency Germany Trade & Invest.

For example, financial giant UBS has moved more than €32 billion in assets from its U.K. business to Germany. As many as 10,000 financial jobs are expected to relocate from London to the financial hub of Frankfurt by 2024 so banks and insurance companies can retain their rights to keep doing business in the EU—likely with a heavy emphasis on scaling fintech initiatives.

PURSUIT OF INFLUENCE

Organizations in Germany must adapt in a post-Brexit EU. Here's how two industries are bracing for the impact.

TECH TITAN

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A sensor station for an air quality measurement network in Darmstadt, Germany

As one of Europe's fastest-growing tech countries, Germany is investing more to bridge its digital gaps and modernize its economy. Last year, it announced it would dedicate €3 billion to artificial intelligence projects and €2.4 billion to digital infrastructure projects.

And that's going to drive a demand for project managers, says Thomas Zimmermann, PMI-ACP, PMP, global project portfolio manager, Karl Storz SE & Co. KG, Tuttlingen, Germany. “We're seeing an increased demand for project managers across most industry sectors,” he says. Much of that demand, he notes, stems from innovation in digitalization, big data management and cybersecurity. “All of that drives new projects.”

SHIFTING GEARS

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A 3D printing production site in Maisach, Germany

TOP PHOTO BY ARNE DEDERT/PICTURE ALLIANCE VIA GETTY IMAGES. BOTTOM PHOTO COURTESY OF EOS

Germany's auto industry may be the largest in the EU, but it has yet to find an answer for the sector's technological transformation. The NextGenAM project is a step in the right direction. Launched in 2017 and completed this year, the project developed a digital, fully automated production line for serial additive manufacturing. The joint project from Daimler, EOS and Premium AEROTEC serves as a proof of concept for 3D printing in the auto industry. The primary challenge for this project, and for other fully automated additive production plants, is communication: Teams had to ensure seamless interface and engagement among all the robots and other machines.

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GETTY IMAGES

The UBS Bank and the opera house buildings in Frankfurt, Germany

“The shifting landscape is bringing some opportunities,” says Massimo Rovitti, PMP, project manager, Wirecard AG, a global payments processor, Munich, Germany. “The fear of not having full access to the European market is a strong push for financial firms located in the U.K. that have customers and business abroad to reconsider their location.”

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—Massimo Rovitti, PMP, Wirecard AG, Munich, Germany

Teams must scale up to adapt and prepare for the potential of new customers. Businesses that had been using payments processors based in Britain face the prospect of additional regulations and fees. Some have been deciding to shift to EU-based payments processors—like Wirecard. “My company and my industry are already seeing some positive impacts in Germany,” Mr. Rovitti says.

EU IMPACT

GDP BY COUNTRY (IN US$ TRILLION) As one of Europe's fastest-growing tech countries, Germany is investing more.

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SHARE OF THE EU'S GDP

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Sources: Eurostat, 2018; World Bank, 2018

LEADING EDGE

Gaining the EU's inside track also requires project leaders who can influence stakeholders and forge a strategic vision for each initiative amid constant change. As a result, organizations in Germany will place more emphasis on people skills, Mr. Zimmermann says.

“The new economy and its projects will be dominated by greater flexibility, ever-changing requirements, less hierarchy, more cross-functional teams, more agile and hybrid approaches and more and more interaction among team members,” he says. “All of that requires skills like communication, leadership and conflict resolution.”

Staring down a flurry of adjustments will be even more daunting with a lack of change management skills among organizations, Mr. Nadler says. Change managers will be uniquely positioned to help organizations improve communication among teams and “ensure everyone is on board with any new procedures,” Mr. Nadler says. “We live in an uncertain world, and project managers always have to have flexibility, but Brexit will add to that.”

Having strong communication and planning skills will help project managers confront a blur of shifting requirements that are sure to add to the hurdles teams face, Mr. Rovitti says. “People skills are the most important skills for project managers, especially with Brexit and the changing regulations.”

Increased complexity is another certainty, says Mr. Nadler. Coping with new regulations means project professionals “will have to build additional regulatory work into their projects,” he says.

For example, the payments processing industry recently adjusted to the revised Payment Services Directive, which mandates two-factor authentication for most electronic payments as well as other customer-security measures. It went into effect in September 2019, which means teams preemptively launched projects to either upgrade existing software or create new software that will make all infrastructure compliant. Similarly, Europe's medical device manufacturing industry is adopting the new EU Medical Device Regulation, which will go into effect next year. But post-Brexit, U.K. medical device manufacturers will be regulated by their country's Medicines and Healthcare Products Regulatory Agency. Getting U.K. devices approved and certified by the EU will add more complexity and cost, Mr. Zimmermann says.

“That could be a major issue for the delivery of medical devices and could cause potential delays and product shortages,” he says. Added regulations will create a stronger need for project managers with robust risk management skills, he adds.

Regardless of where Brexit lands, organizations in Germany will have one thing top of mind: having the upper hand in a reshaped EU. For project teams, the ability to translate opportunity into action will mean delivering value in an unsettled business environment.

“If you deliver on time and cost but the project doesn't deliver what the business needs, you will not be as valuable a project manager,” Mr. Nadler says. “So project managers in Germany have to understand their projects’ benefits and think more like a business leader than a project executor.” PM

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—Dirk Nadler, PMP, CSL Behring, Marburg, Germany

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

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