French and American Management Cultures
It is becoming a fairly common occurrence to read newspaper articles about French companies making acquisitions in the U.S. Indeed two companies (Suez-Lyonnaise des Eaux and Vivendi) seem to be making something of a competition out of who can buy the biggest part of the North American water distribution market. Suez recently purchased Calgon Corp. and Nalgo Chemical Co. while Vivendi bought the California company U.S. Filter. Interestingly, however, until Rhone Poulenc Chimie acquired Union Carbide in 1987, French purchases of American companies were very rare. Since then more than 20 big French companies have made forays into the U.S. corporate scene. A book written recently by Guillaume Franck, who is a professor of international management at HEC, an influential French business school, takes a searching look at French acquisitions in the U.S. The book should be required reading for any French company wishing to buy into the U.S. or any American company wishing to buy into France. The book´s title is Conquering The American Market, (Editions Odile Jacob.)
The book is full of serious research. It is also rich with anecdotes : such as the one about the French "managers" sent to the U.S. by the parent company with high-level technical skills and non-existent people skills.
The American senior executives to whom they were assigned refused to put them into any job higher than line management, and they even hesitated about giving them that much responsibility over staff. Or what about the American managers who were offered plum roles in the French home office but who turned them down because the contracts proposed werenâ€™t tightly written enough ?
The French company executives, used to the constraints of very protective French labor laws, could not understand why the Americans wanted every "i" dotted and every "t" crossed until they were told that in the American market a worker has to look out for himself, and a solid contract with the company is the best way of doing that. A one-page outline is all that a French executive usually asks for, expects or is offered.
Franck´s book details many other experiences in addition to that of Rhone Poulenc.
One of the successes is that of Accor, the hotel chain, although it initially got itself into a bad situation by putting its trust in the managers of the company it had bought out, Motel 6. It offered them a handsome benefits package, based on maintaining quarterly and yearly profits. Introducing a theme which runs throughout the book, Franck details how the American managers immediately stopped managing in the interests of the shareholder and set themselves the objective of rewarding themselves with the biggest possible bonuses. Capital investment came to a halt, preventive maintenance vanished, rooms were no longer refurbished, in fact in many cases they were no longer even swept or cleaned. When the only alternative in small-town America was a louse-ridden room in a room in a Motel 6 which had become known as a hang-out for drug-dealers, people began to prefer to sleep in their cars.
When Accor realised what was happening, Georges Le Mener was the person they chose to turn the situation around. He had come to them after leaving school with a flimsy hotel management certificate, but they had put him through the Accor training system and he paid back handsomely on the confidence Accor senior management vested in him. He is probably the reason Accor just made another purchase : Red Roof Inns which has more than 10% of the budget hotel market in the U.S. As Franck says, Le Mener arrived at Motel 6 knowing that he had confidence in himself, but precious little else. He knew a little about the U.S. but he knew nothing of the American budget hotel market and he had no company knowledge to fall back on.
However, Accor brings its managers up through a tough school in which the client is King. The company bootstraps outside the traditional French management old boy networks, of which Pechiney (who bought American Can in a famously corrupt deal) was a perfect example.
Le Mener, who bears more of a resemblance to the typical American manager than to any French manager mentioned in the book, repaid in full the confidence Accor had invested in him. Many other French managers however had to be repatriated, in a number of because their perceived arrogance meant that American staff just couldnâ€™t work with them. Most of these people, suggests Franck, were clones typical of an elitist French school system which has more in common with the ancient Chinese mandarin way of preparing people for responsibility than it has to market-based management methods.
Many French managers and American managers also did not see eye-to-eye over meetings. French managers use meetings to try to make sense of what is going on in the environment and American managers see this lengthy sense-making process as just a lot of endless talk. American managers see meetings as occasions on action plans and French managers perceived this as a desire to go off half-cocked before the problem situation was adequately understood.
Another success is that of AXA´s take-over of Equitable Life. A success which also delivered its faire share of anecdotes. Claude Bébéar, AXA´s president was very quickly adopted by his American senior executives who welcomed him not only as a White Knight but also as a person who demonstrated hands-on organizational skills.
Bébéar wanted to bring his U.S. managers into the fold by using the methods that worked in France, an invitation every year to a bonding session without spouses in an exotic part of the world : sometimes the Ténéré desert, at other times the West Indies or China. The American managers felt guilty about the prospect of traipsing around the world and having fun at a time when Equitable had its back to the wall. A few of them turned down an invitation to the Gobi desert, but they were persuaded to accept a trip to the Great Wall of China. Instead of the bonding sessions, however, they began to do undertake a study of the Chinese Insurance market. They set up meetings with Chinese leaders of their own accord and talked risk and return instead of schmoozing. The American managers of Equitable Life, it seems, make very strong distinctions between work and play. If wives had been involved (nearly all of the managers were male) there would have been no difficulty in understanding this as a social event. But if wives had not been included, this must mean something else, i.e. work. If AXA had not made provision for work it must just be an oversight on poor Claude´s part, but never mind, the Americans would provide the work themselves.
In the cases where acquisitions were a success, American managers were pleased to see that their French counterparts were willing to spend money on R?D and capital investment. Before the purchase, many of the U.S. plants were being run on a shoe-string, and milked of investment. All too often, it seems, an American manager who knows that he will be in a job for only two or three years will have a tendency to shirk necessary investment. The money thus "saved" will drop to the bottom line. This is because the manager knows that he or she is being judged on the quarterly profit figures. Unfortunately, his or her successor will be left to pick up the pieces, run foul of pollution laws, find him or herself faced with on-the-job accidents, or encounter any other of the myriad dangers hat could have been avoided by preventive maintenance. This short-term attitude to investment is anathema to French engineers and managers who pride themselves on health and safety, plant maintenance and product quality. They were amazed at how many American plants they acquired were allowed to turn out product in plants held together with scotch tape.
American managers, on the other hand, run rings around the French when it comes to marketing and customer service. In France line managers have next to no contact with clients. In the U.S. the line manager seems to be constantly talking to and about the client. This is where the French know they have the most to learn. Only in the luxury goods industry do the French have the same brand awareness and clout and as good a distribution system and knowledge of the client as do the Americans.
Franck´s comparison of American and French styles of management leads him to the conclusion that U.S. methods export themselves better. They impose more or less the same reporting structures on all of their subsidiaries, whatever the geographical location. An American company coming to France needs to learn how to read and write French but, culturally, it does not need to transform itself into a French company. French companies, however, do not have a management model which transfers easily. At first they try to impose on the acquired company an over-qualified elite which is seriously beginning to lack the requisite variety needed to compete in continually evolving markets. Then the ones who succeed with their mergers and acquisitions in the U.S. realize they have transform themselves, to a greater or lesser extent, into American companies and they do what it takes.