CNBC European Business | Running On The Spot

Running On The Spot

French companies must generate more joie de travail, says Sarah Wachter

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The world is growing weary of watching French president Nicolas Sarkozy jogging with his entourage, but the display of the head of state’s well-toned quadriceps is part of a well-developed publicity campaign to get his countrymen to work harder. The new labour minister reportedly claims to sleep only four hours a night. Sarkozy is said to have ordered his cabinet to toil through July and postpone their summer holidays, which are considered sacrosanct in France.

Rest and athletic endurance are needed for the long slog ahead of reforming France’s rigid labour market. The Labour Code, which dates back to Napoleon, needs overhauling to make it easier to hire and fire workers, bridge pay inequalities and prompt French firms to take on increased numbers of older workers to stave off a pensions crisis.

The French people’s lack of work ethic has a lot to do with the antiquated way that big companies in France are managed. A heavily centralised, elitist decision-making structure is at the root of the problem. France SA desperately needs a full makeover of its hiring and management of human resources.

In a Paris Match interview last summer, presidential contender Segolene Royal boldly stated the obvious: France must stop treating its CEOs like kings. The tradition dates back to Louis XIV, who centralised France in part through excessive micromanagement. The Sun King famously used to sign off on the kitchen receipts at Versailles.

Today French CEOs still hold too much sway over everyday decisions, and this bogs down operations and harms corporate competitiveness in a global economy moving at warp speed. “In a French company there is the chief executive, and everyone else is just a courtesan,” a retired French aerospace executive told me.

Some of France’s CAC-40 companies still maintain a creaky hierarchy akin to a 19th-century government bureaucracy.

An employee’s place in the hierarchy is everything. To speak with someone two levels above, it may be necessary to make an appointment – even if the executive to whom you wish to speak is standing only a few steps away.

This vast hierarchy creates an upward-gazing corporate culture. “When I moved back to France from Silicon Valley, I had to forget everything I learned,” a 26-year-old French engineer told me. “Here, the only priority is realising your boss’s project.” Young French employees – unlike a fast-growing category of self-made millionaires worldwide – are often given little incentive to innovate within their companies.

The way to scale the hierarchy is to build up a network, starting at university. Without one, landing a job in a big French company is practically impossible. While lack of a well-heeled network is partly why qualified jobseekers of Maghrebin and subSaharan origin have such a hard time breaking in, mid-level executive jobs and above are found almost exclusively by networking.

The star system in corporate France anoints mostly the best graduates from the best schools, creating a narrow talent pool for innovation. On a business trip to the US, a French executive once sighed to me, upon seeing a promotion for a “best restaurants in Philadelphia” contest: “We don’t have anything like that. In France, it’s just the top performers from the top schools who get feted.”

Among the world’s top performers, France’s big companies have made huge strides in the past decade or so; they have privatised state-owned firms, streamlined operations, cut costs, adopted GAAP accounting standards and applied best practices in investor relations. In unlocking human potential, embracing diversification and nurturing innovation from the bottom up, however, they have a long way to go.

Without recourse to leaving a company, because social benefits aren’t portable, French employees often stay in the same company for years and get stale in their jobs, and until deeper reforms are made to the process for starting up a business – especially a cut in taxes and social charges and an in-depth analysis of hidden systemic rigidities – there they will stay. Unless France SA overhauls its unhealthy human resources regime, Mr Sarkozy may find himself jogging in place.