Five Challenges for Total

Having an eye on ‘management culture’ and in particular French leadership styles, it would be impossible to write anything this week other than to pay homage to the former CEO and Chairman of Total who died in a plane crash on 21 October. The global reaction to his tragic and untimely death was testament enough to a leader who evidently touched the lives of many people. In the French corporate environment, which tends to lean towards ‘management’ rather than ‘leadership’, he stood out as a leader first and foremost. He formulated clear visions of where the group needed to go and spent time communicating those; he engaged people with his energy and determination; he was empathetic and could relate to each counterparty individually; he established a truly global and senior network; and above all, was a very good communicator. He will be missed.

With all the news agencies covering the story this week, most also focused on the challenges ahead for the energy group. The most succinct of these was penned by the WSJ (“5 Challenges for Oil Group Total”, 21 October 2014). Here they are along with further considerations (“et alors”):

Five Challenges for Total

Verbatim from WSJ 21.10.14:

European oil major is a French institution

Managing Total is no easy task. The company is invariably in the political, media, and environmental spotlight. It is France’s biggest energy group by market capitalization, equivalent to nearly $130 billion, making it the second largest on the Paris bourse, and second only to Royal Dutch Shell among European oil and gas companies. Boasting nearly 100,000 staff working in more than 130 countries, Total is as admired by investment analysts for its growth potential as it is under scrutiny by environmentally-sensitive politicians and lobbyists.

Go where the oil is

Under Christophe de Margerie, Total has proved anything but risk averse. The company placed a big bet on Russia, which indirectly contributed 9% of its oil output last year—up from less than 1% a decade ago—but now has to contend with the sanctions western countries have imposed. Total’s recent investments include projects in Kazakhstan and Uganda.

A mega project turned sour

Total—along with Shell, Exxon and others—has invested heavily in one of the world’s biggest oil fields, Kazakhstan’s Kashagan, which remains unproductive after tens of billions of dollars of investment and years of delays.

Making the most of an African oil champion

Total is one of the oil and gas companies with the most experience of operating in Africa. The continent has large untapped hydrocarbon reserves but also a reputation among its governments for frittering away oil wealth, leaving many countries with large energy deficits amid robust economic growth, rapidly increasing populations and sometimes unstable politics. Africa contributed more than 28% of Total’s oil and gas output in 2013, ahead of the Middle East and Europe.

Re-inventing Total as an energy group

Under Mr. de Margerie, Total has put more effort into diversifying from oil and gas into new sources of energy. Total has chosen solar power and biomass as its preferred sectors while eschewing the big bets that rivals have made on unconventional sources of oil and gas. Total has a 65% stake in Silicon Valley-based SunPower Corp. Total’s New Energies division broke-even in 2013.

Et alors

Christophe de Margerie leaves some very big shoes to fill and to meet these 5 challenges, effective leadership will be necessary to helm this ‘French institution’ going forward. The analysts appear to be pleased with the nomination of Patrick Pouyanne as CEO.  In any succession, success is rarely achieved by replicating the predecessor’s leadership style; however, for the new CEO, there is a ‘sixth’ challenge, namely which ‘leadership style’ to adopt? Without imitating his predecessor exactly, there are potentially some points for the new CEO to carry forward from the late Mr de Margerie: vision, engagement and communication.

American and French Leadership

Can American-style leadership work in France and vice versa? Hofstede considered this in some of his early work focusing exclusively on his review of “power distance” (the extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally) and “uncertainty avoidance” (the extent to which the members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these). In “Motivation, Leadership and Organisation: Do American Theories Apply Abroad?” in Organisational Dynamics, Summer 1980, Hofstede surveyed and then plotted the power distance and uncertainty avoidance of 40 national cultures which resulted in 6 different clusters. If we further assume that leadership is related to organizational culture, then by cross-referencing Hofstede’s work with Mintzberg’s organizational cultural categories, we can address the question: can American-style leadership work in France and vice versa?

 

Here’s an overview of Hofstede’s and Mintzberg’s work focusing on American and French cultures before answering the question (in “et alors”).

 

American and French Leadership

 

The American and French national cultures (Hofstede) appear to relate to certain organizational cultures (Mintzberg) as follows:

 

American

 

With a low power distance (40%), hierarchy is only established for convenience, superiors are always accessible and managers rely on individual employees and teams for their expertise. Both managers and employees expect to be consulted and information is shared frequently. At the same time, communication is informal, direct and participative.

 

American culture is uncertainty accepting (46%). Consequently, there is a larger degree of acceptance for new ideas, innovative products and a willingness to try something new or different, whether it pertains to technology, business practices, or foodstuffs. Americans tend to be more tolerant of ideas or opinions from anyone and allow the freedom of expression.

 

Clustered with Anglo-Saxon and Scandinavian countries (which all exhibit low power distance and low uncertainty avoidance), American culture tends to correspond with Mintzberg’s “Adhocracy” organizational configuration. The “key part” of this configuration rests with the managers and support staff who ensure there is a “mechanism” of mutual adjustment (i.e. continually adapting).

 

French

 

With a high power distance (68%) power is highly centralized and hierarchy is needed if not existential; the superiors may have privileges and are often inaccessible. In management, the attitude towards managers is more formal, the information flow is hierarchical. Even the way information is controlled is associated with power and therefore unequally distributed.

 

France exhibits one of the highest uncertainty avoiding cultures (86%). Certainty is often reached through academic work and concepts that can respond for the need of detail, context, and background. Teachings and trainings are more inductive. In management structure, rules and security are welcome and if lacking, can create stress. Therefore planning is favored and some level of expertise is welcome; however change is often considered stressful.

 

Clustered with Latin counties (which all exhibit high power distance and high uncertainty avoidance), French culture tends to correspond with Mintzberg’s “Simple Structure” organizational configuration. Like a “family”, the “key part” of this configuration rests with the “strategic apex” (top management) who ensure there is a “mechanism” of hierarchical supervision (and is generally conservative).

 

Et alors?

 

The reason Hofstede focused his early work on power distance and uncertainty avoidance was to answer the question, “do American theories apply abroad?” Given the above, it is clear that in France the answer is no and this equally applies to French theories (relating to motivation, leadership and organization) in the USA. Given the cultural context there is little, if any, compatibility meaning that it is unlikely that American-style leadership will work in France and vice versa.

 

In Mintzberg’s “adhocracy” American-style leaders will have full delegation to advance in a pragmatic manner with projects and will be rewarded for not only succeeding but learning from failure. In the “simple structure” the French-style leaders will revert all decisions to the strategic apex and constantly pass detailed information up the hierarchy (and failure is not tolerated). The differences between these two organizations suggest that is unlikely that the leadership-styles are transferrable!

 

With both Hofstede and Mintzbeg’s work there are some similarities and overlaps with other cultures. For example Latin cultures might find it easier to engage and work with Asian cultures which exhibit high power distance (even though they generally exhibit a different attitude towards uncertainty avoidance). Whilst there are overlaps with some cultures, there is no overlap with American and French cultures making it difficult for leaders of either culture to operate effectively in the other.

 

Career Management

According to Sonnenfeld and Peiperl, when reviewing how careers are managed, any “new job assignment (i.e., promotion or job change within a company) is governed by two basic variables: the source of the promotion candidate and the criteria for selection” (“Staffing policy as a strategic response: a typology of career systems”, Academy of Management Review 13(4), 588–600, 1988). A combination of these variables leads to four different career management “typologies” that can be found within organizations. Besides helping individuals understand how careers are being managed, it is also a useful starting point to assess whether any given career management system is a consequence of other forces such as national cultures.

Here are the four career management typologies along with further implications (“et alors”):

Career Management

Considering the source of the promotion candidate (external or internal) and the criteria for selection (group or individual contribution), there are four career management typologies characterized as follows:

Fortress (external candidates, group contribution)

·         Despite frequent layoffs, but with a strong respect for seniority, entry is passive and selective.

·         Development focuses on the retention of good group-contributors.

Club (internal candidates, group contribution)

·         With low turnover, mainly at retirement, entry is “early career” and emphasizes reliability.

·         Development is slow with staff passing through required steps eventually becoming generalists.

Baseball Team (external candidates, individual contribution)

·         With high turnover and cross-employer career paths, entry at any career level depends on credentials.

·         Development is essentially “on-the-job” with little formal training or succession planning.

Academy (internal candidates, individual contribution)

·         With low turnover, either due to retirement or (very rarely) poor performance, entry is strictly early career and emphasizes potential.

·         Development is specific job training with elaborate career paths mainly for (and including the tracking of) high potentials.

Et alors

According to Segella et al, career management “systems” in organizations are highly dependent on nationality (“Culture and career advancement in Europe: promoting team players vs fast trackers”, European Management Journal Vol. 19, No. 1, pp. 44–57, 2001). In particular, “most European” organizations appear to operate as “clubs” except for the French who favour the “internal, high performance employee”. In addition, they go on to say that in France, “sometimes the most important criteria for success is being labeled early as an individual of high potential whereas in other countries success was more linked to personal qualities or achievements.” France appears to be relatively unique in using the “academy” career management system (with the “fortress” also being quite rare whilst the “baseball team” is often seen in Anglo-Saxon organizations). With the French cultural reference, the “academy” type of career management might be suitable for French firms operating with exclusively French remits (staff, location, business etc.); however it likely to cause tensions in French firms operating internationally with multinational staff in different locations and with many different businesses…

French Management

This week’s Economist is full of facts regarding “the French way of work” (Schumpeter, 19.11.11, www.economist.com).  BVA (a polling firm) says that two fifths of French employees actively dislike their firm’s top managers and that out of 10 countries surveyed France ranks last for workers’ opinion of company management. Separately, less than half of French staff consider that their managers help them reach their goals compared with two thirds worldwide. TNS Sofres (a market studies firm) showed that France is unique in that both middle management and the lower level workforce are “largely disengaged from their companies”. Further studies cite that contrary to popular myth both inside and outside France, French employees are far from lazy: there is a strong work ethic but the “problem” according to Schumpeter is that human resources are poorly managed.

The context of this problem is that French management practices might have to be improved if French firms are to remain competitive in the global market place. Schumpeter therefore goes on to describe French management and in reading the editorial I was reminded of a now old but evidently still very relevant article in the Harvard Business Review, “The Making of a French Manager” (1991, J.L. Barsoux and P. Lawrence, www.hbr.org). The key points that Schumpeter outlines are also detailed by these authors as the fundamental observations of what “makes” a French manager.

Here is a summary followed by my culturally biased critique (“et alors”).

French Management

The authors set out to research what made French management successful (within the context of the early 1990s when France was being hailed as the “new Japan”); however they concluded that the French model produces a mixture of strengths and weaknesses. Here are their key points:

Management as an intellectual activity

The emphasis is on intellect rather than action: “the French do not share the Anglo-Saxon view of management as an interpersonally demanding exercise where plans have to be sold upward and downward”. Instead, managers must be clever: “they must be able to grasp complex issues, analyse problems, manipulate ideas and evaluate solutions”. The downside for this is that it is assumed that with their engineering background, French managers can usually solve anything “assuming they can detect the problem”. This is not always the case since “spotting problems is less to do with IQ than talking to people, asking the right questions, listening to answers and sometimes improvising.”

Leadership and Organisation

Centralised, rigid and highly hierarchical, the organisation is based on respect for authority. With very little accountability at the top, “there is a clear connection between the intellectual manager and the organisational centralisation. Senior executives believe they owe their high position to their intelligence and cunning.” By implication, all the “critical” decisions are made centrally, and those at the centre have to be informed of everything “so they can check other people’s decisions.” Compartmentalised, there is little in the way of decentralisation or “empowerment” of the lower ranks.

Grand Ecoles

Intellectual superiority is confirmed early in life: the French education system is referred to as “mathematical Darwinism – survival of the most numerate” with a heavy emphasis on the sciences leading to a supposedly (cf. Schumpeter) meritocratic system where the best students become engineers and end up with the best grades at the best schools. The problem with this “meritocracy” is that it leaves little room for meritocracy in the workplace since senior management and leadership positions are “secured” for the grand ecole graduates with self-replicating replacement strategies and old-school ties.

Career Development

Development is “inegalitarian” and more “a case of sponsorship than ability”. It is expected that grand ecole graduates will stay with the same firm for life: Michelin is cited as not recruiting persons for jobs but instead seeking “to fit the job to the person”. For the end of careers, similarly “ill-defined posts are set aside to accommodate burnt-out managers.” Career development therefore principally means “acculturation”: “being schooled in the thought, ways and folklore of the company.” Back to intelligence – if you are “clever enough” then it is otherwise considered that you can cope with anything. “Formal training is largely irrelevant, reserved primarily for the lower echelons.”

Et alors?

The authors conclude that the French model of management with its emphasis on intellect “serves research and strategy formulation well but is perhaps less well suited to flexible responses in fast paced industries where planning from the top can be cumbersome”. Noting all the above points, a further conclusion might be that that if your business is complex project engineering that requires a lot of detailed planning, then France is potentially the place to be; if however you want a business which is nimble, innovative, practical and flexible, then France is perhaps not the place to be!

Whilst this article and Schumpeter’s are similar they were both looking at French management through different lenses: in 1991 it was what can the world learn from France; twenty years later it is what can France learn from the world? Knowing that many Anglo-Saxon management theories simply do not work in the French culture (ref. any other article in this blog) and vice versa, then Schumpeter’s “problem” becomes highly nuanced. Do French management methods have to change? Possibly not! Even with low employee engagement and low work-satisfaction, an engineering-style management culture appears to be durable in France. Can French management methods be exported? Probably not! The same engineering-style management culture does not appear to be viable anywhere other than France.

The challenge therefore materialises for French companies operating internationally. Whilst French multinational companies might have exported their management methods twenty years ago, a multinational French company will today have to adapt its management methods to remain competitive globally!