French Attempts at Conquering The American Market
Very few books have been written about French-American or American-French take-overs. One of them was written in 1997 by Guillaume Franck, a professor of international management at HEC, probably the most influential French business school. It takes a searching, often humorous, 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 - A la conquête du marché américain" and it is is published by the Parisian publishing house, Editions Odile Jacob".
The book is full of serious research. It is also rich with anecdotes : one of them about French "managers" sent to the U.S. by one parent company who had 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 amazement provoked in a French HR department by American managers who were offered plum roles in the French home office but who turned them down because the contracts proposed weren’t tightly written enough ? A one-page outline of a contract is all a French executive usually expects or is offered. This is because French executives are used to the benefits and protection of very tightly-written French labor laws. In the U.S. labour market a worker has to look out for him or herself, and a solid contract with the company is the best way of doing that. Even when the French employers realised that refusal of the jobs could all be put down to cross-cultural differences, they still felt very upset about the lack of confidence being shown in them by the American executives. In France, building the private relationship is everything.
One notable French success was that of AXA’s take-over of Equitable Life (although Fortune magazine dated July 14, 2003 suggests that AXA may have got its fingers burned by providing "gap insurance" in Hollywood). This was a success which also delivered its fair share of anecdotes. Claude Bébéar, AXA’s then 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 methods which had been successful for him 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.
American Guilt When There No Space For Spouses
However, 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 leaned on to accept a trip to the Great Wall of China. Once in China the WASP guilt complex took over and the American managers decided to skip the bonding sessions and the schmoozing. Their thinking was that if AXA had not made provision for work it must just be an oversight on the part of one of Claude’s lieutenants, but never mind, the Americans would arrange it all themselves. They decided to undertake a study of the Chinese Insurance market. They set up meetings with Chinese leaders and talked risk and return while their French counterparts strengthened their relationships with Bébear. Bébéar, nonetheless, proved himself a quick learner. This was the occasion on which he realised that American managers make very strong distinctions between work and play. For them, if spouses had been included, the signals would have been in place for understanding this as a social event. But because spouses had not been included, the whole junket had to be made to mean something else, i.e. work. On future social occasions with American managers, Claude Bébéar provided the space for spouses.
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. It initially got itself into a bad situation by offering the managers of Motel 6, the company it bought out, a handsome benefits package based on maintaining quarterly and yearly profits over a three-year period, by which time the managers on board at the time of acquisition would leave the company. Introducing a theme which runs throughout the book, Franck details this example of "moral hazard" : the American managers of Motel 6 immediately stopped managing in the interests of the shareholder and ran the company solely to increase short-term bottom-line profits to reward themselves with the highest possible bonuses. Capital investment came to a halt, preventive maintenance vanished, rooms were no longer redecorated. In fact, in many motels, the rooms were no longer even swept or cleaned. Regular clients began to prefer to sleep in their cars in the parking lot when faced with the alternative of a louse and rat-ridden room in a Motel 6 which had become known as a hang-out for drug-dealers.
When Accor realised what was happening they sent Georges Le Mener to turn the situation around. He had come to them after leaving vocational school with only a flimsy hotel management certificate. However he had later graduated with honors from the internal Accor training system, one of the best in France. As Guillaume Franck writes in his book, Le Mener arrived at Motel 6 knowing he had confidence in himself, but knowing precious little about the U.S. and even less about the American budget hotel market. He succeeded against all odds. In making a success of Motel 6, Le Mener handsomely paid back the training and confidence Accor senior management had vested in him. Without him Accor would never have made another acquisition in the U.S., but because of him they later purchased Red Roof Inns and they now have more than 10% of the budget hotel market in the U.S.
Accor brings its managers up through a tough corporate university just outside Paris in which the client is king. The company recruits its staff from outside the elite French management schools (les grandes écoles). Pechiney, on the other hand, used the old boy network to a maximum. Pechiney bought American Can in a famously corrupt deal and is a perfect example of all that can go wrong with the French management style. Le Mener bore more of a resemblance to the typical American manager than to any other French manager mentioned in the book. Many of the other French managers mentioned were incapable of functioning six thousand miles away from their "grande école" support networks and they had to be ignominiously repatriated, in a number of cases because their American subordinates and colleagues perceived so much arrogance that they just couldn’t work with them.
The Elite French Schools and Recent Changes
Most of these ineffective clones, suggests Franck, were sadly typical of an elitist French schooling and State system which has more in common with the ancient Chinese mandarin way of preparing people for responsibility than it has to modern business-school methods. The best graduates from the the elite schools, in which education is more or less free to the lucky few used to spending their lives serving the state. Over the past ten years, however, the beneficiaries of this system have begun to turn their backs on a sclerotic bureaucracy and some have even preferred to reimburse the state immediately after graduation instead of handling the prospect of serving out their minimum five-year term in high-level, but stultifying, jobs in a State sector which hasn't even heard of modern Human Resource management. Jean-Pierre Raffarin, the French prime minister nominated last year, is an exception to the elite-schools old boy network and for a long time worked as a consultant in the private sector. In France "who are you ?" (i.e. the social network you belong to) has traditionally been more important than "what have you achieved lately ?". Second-rate managers were protected by their networks and moved from one "state-subsidised" failure to another, destroying enormous economic value at each step of the way (think of Bull and the Credit Lyonnais). It is early days, but Raffarin seems to be intent on improving on this traditional way of state-controlled management (I am writing this on July 04, 2003).
After French-American mergers and aquisitions, many French managers and American managers do not see eye-to-eye over meetings. French managers use meetings to build relationships with each other and to try to make sense of what is going on in the company's political environment. American or British managers usually use meetings to decide on action plans, do milestone checks and hold structured reviews.. According to Franck, many of the American managers in his book perceived meetings with their French colleagues as just a lot of endless talk. French managers perceived their American colleagues as unable to control their desire go off half-cocked, ready-fire-aim, before any problem situation was adequately understood or framed.
The American Manager's Tendency To Favour The Bottom Line By Neglecting R&D
In the cases where French acquisitions were a success, American managers were pleased to see that their French counterparts were willing to spend more money on R&D and capital investment than the previous owners. Before the purchase, many of the U.S. plants had been 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 long-term outlays. 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 broken pieces, run foul of pollution laws, find him or herself faced with on-the-job accidents, or encounter any other of the myriad dangers that 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 firms they acquired were managed in such a way as to turn out product in plants held together with scotch tape.
The American Manager's Superiority In Marketing And Customer Service
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 reputation, 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 led him to the conclusion that U.S. management methods export themselves overseas better than do French methods. American companies impose more or less the same company cultures and the same quantitative reporting structures on all of their subsidiaries, whatever the geographical location. Thus, an American company coming to France for the first time knows it needs to learn how to read and write French but it does not feel it has to transform itself into a company with a French national culture and its egalitatian approach means it frequently has fewer labour problems than its French national competitors. French companies, on the other hand have company cultures which are offshoots of the particular Business or Engineering schools at which it managers were educated and from which they continue to recruit. The French idea of labour-relations is political, conflictual and class-based, not, as with American companies, supply and demand based.
Many French companies are run by managers who have graduated from the elite schools, who only feel comfortable if they can impose their national system on the foreign acquisition. Therefore, French companies have neither a culture nor a management model which inserts itself easily into other national cultures. After acquisition, French companies often try to impose on the acquired company an over-qualified elite which owes its success to an up-or-out educational system. Until recently, this elite was too culturally-determined to be exportable and it was seriously beginning to lack the requisite variety needed to compete in continually evolving markets. French companies who have recently made successful acquisitions in the US or the UK have succeeded because they realized, sometimes after a lot of pain, that they had to manage their subsidiaries with American style managers.
It is no surprise that the French companies which are now acquiring a culture of successful overseas acquisition, such as Accor and L'Oreal are also the companies which are proving the best at modernizing the management culture in their French home base.
©John Gaynard, 2000-2003-2006-2007