What British business can learn from the French

Forget the cliches - our old rival is hotbed of management innovation and is leading the way in sustainability.

by Paul Simpson
Last Updated: 28 Jan 2020
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Food for thought

“A third of a loaf.” That was how, at a high-level summit in Dublin Castle in November 1979, Margaret Thatcher dismissed the offer of a £350m rebate on British payments to the European Community. The prime minister then proceeded to harangue her fellow heads of government at length, speaking, as Roy Jenkins, who was president of the European Commission at the time, recalled “without pause but not without repetition”. 

Her rant angered the other European leaders, who had offered £350m to start the bargaining process rather than, as she concluded, a “full and final settlement”. After Thatcher said “It’s my money, I want it back” once too often, French president Vale´ry Giscard d’Estaing stopped listening and began reading his newspaper. German chancellor Helmut Schmidt was slightly more polite – he pretended to have nodded off. 

That non-meeting of minds helps explain why the French and British are doomed to misunderstand each other. With an intensity that was either admirable or demonic, depending on which side of the negotiating table you were on, Thatcher focused relentlessly on a single issue: the rebate. D’Estaing was just as adamant, albeit less vociferously, that the budget had to be considered alongside other issues, such as energy and fishing. The Iron Lady’s single- mindedness – and urgency (she insisted that the next summit would be the “last chance” to resolve the rebate before something unspecified but terrible happened) – was lauded in the British media but it seemed, to a technocrat like D’Estaing, profoundly illogical when matters of such complexity were being negotiated.

The “warm friendship” – the literal translation of the ‘Entente Cordiale’, signed by the two countries back in 1904 – has had its chilly moments of late, especially since the UK voted to leave the European Union in 2016. Even so, to imply, as Stephen Clarke did with the title of his best-seller, 1000 Years of Annoying the French, that both countries have spent a millennium annoying each other, is well over the top. Both nationalities’ images of the other, perpetuated by cartoonish, if not downright racist media stereotypes, are about as accurate as reflections in a funhouse mirror. 

France is a world leader in art, design, high fashion... and civil disobedience. Credit: Francois Durand/Getty Images

Maybe it’s time to forget ‘Vive la difference’, after all we have much in common. Both the UK and France could be said to have lost an empire (more or less at the same time) and failed to find a role. Both are racked by centrifugal forces: in the French regions, the fear and loathing of Paris, which accounts for 30 per cent of the country’s GDP, is at least as intense as regional distrust of London, which accounts for 22 per cent of Britain’s GDP. Both are struggling to cope with large immigrant communities.

Both are uncertain how to compete economically in a globalised marketplace that is increasingly polarising around the US and China. Both rely on the service sector for around 80 per cent of their GDP. And both do a lot of trade with each other: in 2018, UK exports of goods and services to France were worth £41.7bn and British imports from France amounted to £44.4bn.

There is also the fact, deeply discomfiting for those Britons wedded to the belief that we are inherently more efficient than our noisy neighbours, that French business – and in some instances the French government – owns all or part of EDF (which generates 20 per cent of the UK’s electricity), the Thameslink, Gatwick Express, Southern, Southeastern and Great Northern railway lines and Veolia, which manages more waste than any other company in the UK. TGV, the railway company owned by the French state, was also chosen by the British and Belgian authorities to run the Channel Tunnel line between London and Brussels.

Where these two countries do differ significantly is in their philosophy of business and economics. The British have, albeit with a few ‘ifs’, ‘buts’ and ‘ahems’, largely subscribed to the American laissez-faire model of capitalism. The French have not done so. Instead, in the same way that the late Chinese leader Deng Xiaoping described his policies as “Socialism with Chinese characteristics”, France’s leaders have adopted “Capitalism with French characteristics”.

Economist Nicolas Baverez calls this the ‘French model’, which he defines as: “a large public sector, an expanded role for the state in the provision of economic and social affairs (notably, in the provision of health and welfare) and a constant preference for internal social stability over dynamic change.” This strategy, he argues, reflects the policies pursued by the country’s ruling elite since the late nineteenth century, suggesting that the Left and Right have persevered with the ‘French model’ even as other nations modernised their economies by shrinking the public sector and encouraging innovation and competitiveness. The inevitable outcome of this stance, he concludes, was social and economic stagnation.

Same but different

There is some merit in this argument and yet the economic statistics don’t quite support the narrative that the country would be so much better off if it had only followed the exact same economic strategy as Thatcher and Ronald Reagan in the US. France’s economic growth has not differed much from the UK’s. When the Financial Times compared and contrasted the two economies in 2017, it found Britain ahead in terms of lower unemployment, foreign direct investment, economic growth and size of GDP, but behind France on disposable income, inequality of wealth and productivity. On that latter point, the paper was unusually damning: “A typical French person could take every Friday off and still produce as much as a typical British person working Monday to Friday.”

That said, there is a consensus that the ‘French model’ needs a radical overhaul, although if Paul Smith, assistant professor of French and Francophone studies at the University of Nottingham, is right, it is hard to envisage the circumstances in which that could happen. And for that, he holds Franc¸ois Mitterrand, president from 1981 to 1995, largely responsible.

“Many of the policies that Mitterrand introduced – such as lowering the retirement age from 65 to 60, starting the process of shortening the working week to 35 hours and the expansion of the welfare state – have become sacrosanct. Even Nicolas Sarkozy didn’t dare to suggest raising the retirement age, as Emmanuel Macron has done, to 62. What France has had since Mitterrand is a succession of presidents who have come in, promised change, met opposition and failed to deliver change.”

It is not yet clear whether Macron, reductively tagged by the British media as the ‘French Tony Blair’, will break that pattern or whether, when he stands for re-election in 2022, he will be forced to reflect on D’Estaing’s observation that: “When you tell the French a truth, and propose a remedy, you are sure to be defeated.”

The entente wasn't always this cordiale: Thatcher and Chirac share a lighter moment. Credit: Sebnem Coskun/Anadolu Agency/Getty Images

France still has, as Smith says, a “demonstration culture” – and, for that matter, a striking culture. When changes that affect the status quo are proposed, thousands of people (or in the case of the retirement law, more than a million) take to the streets in anger. Others simply down tools. In the past year, the ‘gilet jaunes’ (yellow jackets) protests have threatened the internal social stability so prized by successive governments. “The choice of yellow jackets was deliberate,” says Smith, “because by French law everyone is obliged to have one in their car. Even though the rule was designed to make the roads safer, wearing the yellow jackets was a protest against the state telling them what to do.”

That stance reflects, he says, the over-regulation of French society. The country’s labour code is a monumental 3,000-page volume, it takes an average of 184 days to obtain a permit to build new premises and on the ease of doing business index, it comes in at number 32, lagging well behind Kazakhstan, Malaysia and the UK (ranked eighth).

The gilet jaunes represent a baffling array of political views – from the hard right to the hard left – but the core of the original movement was rural and outer-suburban, with workers, pensioners and small business owners rebelling on behalf of what some demonstrators called ‘peripheral France’ against a metropolitan elite. Sound familiar?

The gilet jaunes have proved a powerful and surprisingly tenacious force. “In France, there is a tendency to interpret every event in terms of the country’s own past,” says Smith, “so as soon as these protests started, commentators began alluding to the Poujadists, the 1950s movement led by Pierre Poujade, who owned a stationer’s shop, which began when he organised a boycott of tax inspectors.”

Poujadism was equally hard to pin down ideologically and is probably most accurately characterised, some historians suggest, as the “anti-everything movement”. This powerful, if fleeting, rebellion helped to bring down the Fourth Republic, creating the crisis that legitimised Charles De Gaulle’s return as the saviour of France in 1958. 

De Gaulle created a new system of government where the president was so powerful that, as he told one of his colleagues: “Basically, the Fifth Republic is me.” One of the fiercest critics of this new system was Mitterrand who, when he came to office 23 years later, became rather fond of his sweeping presidential powers.

Changing attitudes

One of the intriguing strands in the gilet jaunes’ manifesto (with a lower case m) is the demand for a less centralised government, including the specific proposal for a bottom- up, referendum-driven system, like Switzerland’s, which would symbolically, if not actually, mark the end of De Gaulle’s Fifth Republic. Yet the clamour for decentralisation is reflected, for very different reasons, in some of France’s corporate titans as they adapt to, manage and anticipate change.

French companies have traditionally been strictly hierarchical. Sometimes, that top-down attitude has been expressed physically and literally. At one industrial gas company in the 1990s, for instance, the CEO’s office was on the top floor and the typing pool was stuck in the basement. Managers – known as ‘cadres’ – were usually recruited from a few elite universities (the select grandes e´coles). In some companies, offices were allocated not by job title but by educational qualifications. Bosses often liked to assert their status by correcting their subordinates’ minor grammatical errors. Even at large – and well-known – companies, such nit-picking could bring a meeting to a premature, and unruly end. Yet this rigid hierarchical model, summed up by one French executive as “lick up, kick down” is beginning to change.

One of France’s first corporate champions of decentralisation was Jacques Calvet, a former chief of staff to d’Estaing, who rescued car maker Peugeot-Citroe¨n from bankruptcy as CEO between 1984 and 1997. To do so, he had to cut thousands of jobs, challenging the principle, still an article of faith at many large French companies, that staff were employed for life. (The vaguely defined posts often found for senior managers were called ‘voies de garage’ after the railway sidings for boxcars that are no longer in use.) Recognising that he was too logical, and not intuitive enough, Calvet delegated much decision-making, although he still insisted on selecting the colour of the door trims for new models. 

Other large French companies have since followed his lead – and gone much further. At the food multinational Danone, CEO Emmanuel Faber has radically restructured the group’s decision-making process. “If you want to be fit for the world market we operate in today, you have to have locally rooted decision-making,” he explained. “We have accelerated our programme of localisation. We have 30 clusters, which are small groups of countries in seven regions that are the backbone of Danone and we have delegated decision-making to them.”

That shift is echoed at Pernod-Ricard, one of the world’s largest drinks companies, which is being quietly refashioned by chairman and CEO Alexandre Ricard. At the group’s head office in Paris, the 47-year-old grandson of Paul (who created the eponymous brand of anise in 1932) works from a desk in the HR department. He has a small meeting room for confidential discussions but believes that working mostly in an open-plan office gives him a more accurate, unfiltered understanding of the business.

The art of management

Ricard’s desk is only a symbol, but symbols are important in companies – especially French ones. His decision to spend months studying technology in Silicon Valley reinforced the message that leaders needed to be open, receptive and engaged. After reorganising operations around what he calls “moments of conviviality” – essentially the different times and circumstances in which someone might want to drink champagne, a cognac or a whiskey – he is now using technology to automate processes, and free staff for more creative tasks. “In doing that, we will create the workplace of the future,” he said. The progress made to date convinced him of one thing: “We have to recognise that the corporation as we know it today – with pyramids, hierarchies, siloes and budgeting processes – will not exist.”

In America and the UK, the art of management is often envisaged as a demanding interpersonal exercise. To the French, it is an intellectual challenge – hence the focus on recruiting the right ‘cadres’ from ‘grandes e´coles’. A bias in favour of thought, rather than deed, is not without its drawbacks – as one factory manager noted: “It’s become something of a cliche´ that French managers can solve any problem, as long as they can detect the problem in the first place.”

But it is possible that French business leaders, with their intellectual outlook, and semi-detached view of the shibboleths of Anglo-American laissez-faire capitalism, are better equipped than anyone to reimagine a system that even the Financial Times has belatedly recognised is in urgent need of radical reform.

That re-imagining process gathered momentum in April 2019 when the French parliament approved PACTE, a corporate governance framework which encourages companies to look beyond profit and consider the social and environmental impact of their activities. The way this change was managed is almost as noteworthy as the law itself. Divided over whether to pass new laws or make a few rhetorical gestures for businesses to get their act together, French politicians asked Jean-Dominique Senard (then the CEO of Michelin, now the chairman of Renault and its alliance with Nissan and Mitsubishi) and Nicole Notat, president of an NGO that rates companies on non-financial measures, to study the issue. Their report formed the basis of the law, the first change to this clause in the civil code since it was written in 1807, when Napoleon was in power.

The law was, Senard declared, an explicit rebuttal to the Anglo-Saxon tenet of fiduciary duty that the purpose of a company is mainly profit (see feature, p10). He blames that tenet for the corporate overreach that has fuelled nationalism, populism and anti-globalism across the world. If nothing changes, he suggests, nations would be presented with an unenviable choice between two forms of capitalism: the ruthless mercantile pursuit of profit or the interventionist, protectionist, state capitalism exemplified by China.

It is not clear what the next step in France’s campaign to create a less degenerate form of capitalism will be, but parliament’s initiative does show that, even in a country riven by social unrest, it remains possible for the system to draw logical conclusions and then act on them. That faith in Cartesian logic is, Smith says, one of the reasons that technocracy, even though it is often used as a term of abuse, is alive and well in France. “Macron is a technocrat and he showed that initially by making the kind of errors that career politicians don’t make. One good example was his attempt to get rid of the civil servants in towns and villages whose sole function was to listen to people and help them solve their problems. It wasn’t going to save much money – and would have damaged the system in which local officials can feed back to the centre, telling them what people are worried about.”

With gilet jaunes rising and Macron’s ratings falling, the centrist technocrat looked doomed to follow the same dismal trajectory as Jacques Chirac, Nicolas Sarkozy and Franc¸ois Hollande but Smith says he has turned things around – for now – by orchestrating a national debate, promising to listen to the concerns aired at thousands of meetings across the country.

It also helped that the labour reforms he introduced in March 2017 – including easing the regulatory burden on businesses with more than 50 staff – have started to stimulate the economy. A bit. His plans to privatise state- owned businesses, not hugely popular with voters, may provide a further stimulus.

In recent years, France and the UK have both been beset by profound, almost existential, self-doubt. Six years ago, literary historian Jean Marie Paul lamented that “Even idiots have now stopped being happy.” In June, a poll by BritainThinks found the British public in such a bleak mood – 72 per cent expected the UK’s social divisions to get worse – that pollster Deborah Mattinson remarked: “I’ve been listening to people in focus groups since the 1980s and I cannot recall a time when the national mood was more despairing.” Yet there is something in the suggestion by Albert Camus, France’s most resonant post-war intellectual pin-up, that: “Alas, after a certain age every man is responsible for his own face.” A sentiment that surely applies to companies – and countries – too. 

Main image: Universal/?Kobal/?Shutterstock

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