Sewing the Head Back On the Chicken

What a treat we have install, waiting to see if France will allow Carrefour to turnaround.

On 31st January 2012 I wrote about the sad plight of Carrefour, the second largest retailer by sales in the world, whose hypermarket empire was even then seriously underperforming; with no obvious idea what it was going to do next.

Well, now it has a new man in charge, Georges Plassat; he seems not only to know what to do but he has started to do it. With a wonderful instinct for both self promotion, and a savvy understanding that what he will have to do will be dangerous for him personally – so a heightened public profile could protect him a little, he has deployed some wonderfully descriptive language on the subject.

He has described the company as having a “serious illness” and being a “headless chicken” which will take three years to turn around. He seems to think that it is possible though to reattach a head, albeit a different one, to the corporate body that may only vaguely resemble the old one.

With any turnaround activity deciding what to do is the easy bit, getting people to do what you want is quite another thing, particularly in France: the ex-CEO of France Telecom is currently under investigation for allegedly having some responsibility for the suicide of 20-30 staff when he tried to impose similar corporate restructuring: in itself a warning shot across the bows for people like Georges.

Carrefour has a rather outdated hypermarket business model and it is also very exposed to underperforming Eurozone countries. All this seems to have come about because no one at the top of the organisation was paying much attention to either strategy, or the practical realties of managing such a huge and diverse business during the period of rapid change, on many fronts, that we have seen over the last decade or so. Reliance on centralised bureaucracy is never much use in a competitive market: not everywhere operates like France after all.

Georges has a menu of actions to put Carrefour right again: reducing net debt by cutting costs at the bloated HQ and in-store; slashing the “unbelievable” E500M annual French marketing budget; reducing its operating footprint, by withdrawing from some of the 25 countries it currently operates in; decentralising and devolving power to local businesses; refocusing on fresh food and away from jewellery and electrical goods; and most interestingly of all, reversing the universal branding strategy. Mostly pretty obvious stuff really, but all at once, in a major French company, during a recession? Georges is clearly a fearless Frenchman and it will be interesting to see if he, or the French people and their unions, win in the end.

It seems to me that too much centralisation and complication meant that the army of corporate executives, supposedly in charge, were somewhat out of touch with reality, although comfortable and well fed. The alarming comment from Georges that it is a “rather impersonal company” and that too many senior executives were “happy to abandon it” suggests that it wasn’t only the management that had taken their eyes off the proverbial ball. With powerful shareholders and unions to contend with they didn’t seem to have the desire to fight for the business: or should I have said incentives. Well, Georges seems to have: he doesn’t seem to need the money but what a coup if he pulls it off.

Mark

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