Alignment Is Essential For Great Success

“If you want to change the world, start by changing yourself.”

In my blog post on 6 January this year I decried Footsie directors being paid one hundred times the average wage. I argued that we needed a new dialogue if we wanted to make a significant change to British society and that halving this wage gap would be a very beneficial start. Not in my wildest dreams did I expect that, no more than four months later, the newly elected president of France, Françoise Hollande, would be proposing a pay cap on the bosses of government owned businesses of just twenty times that of the lowest paid member of staff.

Mr Hollande is of course a politician and we’ll have to wait and see just where this goes but with large state involvement in industry the French state does have considerably more influence over this sort of thing than most of its European peers. The French government own a controlling stake in EDF, the nuclear power group, and Areva the nuclear engineering company and if this goes ahead their CEOs’ remuneration will reduce by 70% and 50% respectively.

The French government also own large stakes in GDF Suez, Renault and EADS and while they can’t force through changes in these companies the political rhetoric has turned to a patriotic call to share the country’s economic pain and for them also to follow the new government’s lead. Mr Hollande and his ministers have taken a 30% pay cut and they are also planning a new 75% tax on yearly wages above €Im.

There is I think much that any business owner can learn from what Mr Hollande is doing here. You could argue that the “new broom” is just making highly politicised changes, which is no doubt true to some extent, but it is a highly aligning move and alignment is often a much overlooked attribute of business strategy and management practice. In the face of a severe economic crisis doesn’t it make sense for everyone to cut back? Well, not everywhere. Just look at the UK where there is no political will to cut back on boardroom excess, primarily because our leaders don’t even think it’s a problem and arguable the majority of the pain is falling on the least well-off while the rich are largely unaffected.

I have no idea if this is just posturing by Hollande and his new team, in order to curb further excess, but if it, or even something vaguely like it, goes ahead I think it will have a major impact on France’s economy. In France, in particular, this sort of move is overdue and it may just force less enlightened and egalitarian politicians elsewhere to think again. Whether it is a country or your business, aligning strategy with the economic realities of the market and all of the stake-holders with the fundamental aims of the business, is simply essential for great success. Sadly though, it doesn’t often happen.

Viva Le France!

Mark

 

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