03 Jun 2002  What Do YOU Think?

Are We Entering an Era of European Management Leadership?

Summing Up

Readers of this month's column agree that there are marked differences in the social environment for management in Europe and the United States. In some parts of Europe, at least, they foster management policies that may encourage more balance in a manager's life. Whether this will produce sustained economic superiority or a model to be emulated in the U.S. is debatable. While some would like to see a convergence around the best features of the European and U.S. approach to management, there was limited confidence that it would happen.

Antonio De Luca describes important differences this way: "If one has to generalize, it is fair to say that Americans pursue risk and Europeans seek stability ... (leading) to fewer opportunities with more limited financial rewards, but possibly more balance for Europeans. The solution, as usual, is a sensible convergence of these two nuanced cultural approaches."

Whether this will produce sustained economic superiority or a model to be emulated in the U.S. is debatable.
—James Heskett

Roy Bingham points out that "American management seems to work best when the key needs are speed, aggression, last-minute genius, and take-chance, inspiring leadership. In boom times when it's 'expand at all costs'--pick the American style. At other times the more deliberate, consultative European approach is your ally. Maybe this is why we are hearing more from the Europeans these days."

Jose Pedro Goncalves takes issue with the idea of a "European" style of management, pointing out that there is no one style. In some parts of Europe "(As a manager) I'm a human being." In others, "I'm just a number." In general "we (Europeans) are more human, but less flexible, and this 'leadership' is only temporary."

Dr. B. V. Krishnamurthy picks up this theme by commenting "to argue that Europe might be snatching the lead in management is a little far-fetched. When one looks at the very successful organizations anywhere in the world, one discerns striking similarities—emphasis on efficiency, innovation, quality, and responsiveness to customers—even as one also finds adaptations to cultural differences."

These comments tend to question whether management leadership has a "geographic home" as opposed to a winning set of behaviors in part fostered by the competitive, social, cultural, and legal environment. Given the prospect for continued movement toward competition and the propagation of "best practice" management ideas on a global scale, is the question largely academic? What do you think?

Original Article

In recent weeks, I have sat in on several meetings with heads of major European companies in which questions about American leadership have been raised. What's new, at least in my experience, is that the questions aren't confined to political leadership; those are perennial favorites among our European counterparts. Instead, the questions deal with issues of business leadership. They prompt the question of whether the highly-touted American style of management of the 90s is giving way to a new and different European style, just as Americans replaced Japanese management style as the sine qua non among the world's managers just a little more than a decade ago. In a word, the Europeans are acting as if they know something we in the U.S. don't.

If one has to generalize, it is fair to say thatAmericans pursue risk and Europeans seek stability.
— Antonio De Luca, Warner International NV

What is it they claim to know and practice? Much of it is described in a new book by Will Hutton, titled The World We're In (Little, Brown, 2002), from which excerpts (emailed to me by a U.K. manager) were published in England's Guardian newspaper last month.

First, work less but work smarter. It's well known that the official workweek has been shortened to thirty-five hours. What has happened? Take France, for example. French productivity is up; some would claim it is now higher than the U.S., just as is productivity in The Netherlands, Belgium, and the former West Germany. For example, Volkswagen's market share is climbing even though its highly unionized, highly paid work force puts in an average workweek of 28.8 hours.

To this we could add a second and related practice: Balance work and personal life. Many would claim that the quality of life (bolstered even by traditional measures of standard of living) in Europe is much higher than in the U.S.

Third, to paraphrase Hutton, divert money that would otherwise be paid for management mega-salaries and mega-incentives to investments in technology. Of course, tax laws generally discourage the former in Europe anyway. But they seem to be providing the fuel to help Europeans work smarter.

Fourth, rely more heavily on operational improvements and the contributions of employees rather than mergers and acquisitions to build value. This philosophy seems to be gaining some credence in the U.S. as well, with recent research on the high proportion of U.S. merger and acquisition activity that has actually destroyed value.

Some of Hutton's examples, such as the ascendancy of Airbus vs. Boeing, will rekindle the controversy about the importance of state subsidies to each. But his arguments raise a number of useful questions. Do the Europeans have it right? In the long run, will their management philosophy produce superior results? Combining all this with what is now the world's second currency, the Euro, is the baton being passed from American to European management? What do you think?

Comments

    • Anonymous

    After spending three years working in Europe for a large, multi-national food company, I agree that they "have it right" in their approach to balance by having more holidays and shorter workweeks. However, projects seldom get passed on when people leave for four weeks and this can be quite frustrating.

    Also, I disagree that the management style there is more effective than in the U.S. Decisions are usually made much slower and higher in the hierarchy. One might argue that this is a good thing, but it means that most European organizations are top-heavy. There is less emphasis on empowerment because people do not want to be empowered.

    I would like to see us move to more a more balanced workweek in the U.S. but it won't be easy. The mindset here has to change. In Europe, people are expected to take at least two consecutive weeks off twice a year. People tend to coordinate holidays to be off when the decision makers are also on vacation. In the U.S., if you are gone two weeks, your projects have been re-assigned to someone else.

    We are also going to see some shifts in Europe with the generation that is becoming working age. Those in the EU countries will have the ability to easily work and live in other EU countries. This will begin to change the job market and demographics as some families will choose to move due to quality of life issues and employment opportunities.

     
     
     
    • Antonio De Luca
    • Managing Director, Warner International NV

    If one has to generalize, it is fair to say that Americans pursue risk and Europeans seek stability. This naturally generates more volatility, and, therefore, more stress for Americans, while it leads to fewer opportunities with more limited financial rewards, but possibly more balance for Europeans.

    The solution, as usual, is a sensible convergence of these two nuanced cultural approaches. I feel this is already happening. However, in today's hype-dominated world, it would not surprise me if Americans would go overboard on Europe.

    Finally, during the 80's Japanese could do no wrong, during the 90's the U.S. reached perfection, it's only fair that Europe get its legitimate place in the sun.

     
     
     
    • Anonymous

    Will Hutton is too far to the left for me to take seriously.

     
     
     
    • Charlie Cullinane
    • VP/GM, Everbrite

    America and the world in general have become 'global' with management philosophies, CEOs, and structures that use the best of both worlds. There are many American companies with European CEOs who bring European styles of management with them. The USA has the benefit of having business partners in Europe and Asia allowing America to pick what is best from both areas.

    The government subsidies and interventions of Europe help keep inefficient operations running, which may not be helpful in the long run. These subsidies inhibit real long-term change.

    In the long run a hybrid of European, American, and Asian philosophies will produce superior results. The "best of the best" practices from around the world will ultimately produce the best results.

     
     
     
    • Shaun Greene
    • Manager, Guardsmark

    Leadership and Europe are two words that shouldn't be used together. The last time they had a leader of any substance was Thatcher. The workweek isn't short because of great productivity but because the powerful unions and the lack of business or political leadership to shut them down.

     
     
     
    • Daisy Moist
    • Administrator to Director of Product Management, Arrow Electronics

    The value of the Euro, both financially and politically, is a force that the U.S. has not acknowledged publicly. The growing global economy and subsequent relationships will undoubtedly force America to consider other ways of doing business. Although our business institutions and financial infrastructure will be slow to adopt change, it is inevitable. The U.S. will have to get used to being in a crowd, and playing "King Of The Hill" will be a more interesting game.

     
     
     
    • Anonymous

    I think that we put too much emphasis on "face time." We are too willing to use meetings in place of real work, which, of necessity, creates the need to spend more hours at work. I think that moving in the direction of the European model makes a lot of sense.

     
     
     
    • Dr. B. V. Krishnamurthy Professor
    • M. P. Birla Institute of Management, India

    The Triad countries have dominated International Business to such an extent that after Japan's amazing success story, followed by the resurgence of American companies, it is perhaps natural that the focus should now shift to Europe. The catalyst for this might have been the economic union that (Western) Europe has achieved.

    However, to argue that Europe might be snatching the lead in management is a little far-fetched. When one looks at the very successful organizations anywhere in the world, one discerns striking similarities—emphasis on efficiency, innovation, quality, and responsiveness to customers—even as one also finds adaptations to cultural differences.

    Thus, what is apparent is that organizations (and by extension, societies) are always learning from the experience of others. If Intel can innovate continuously, so can Nokia. The rise of Wal-Mart to the top of the Fortune 500 companies could be attributed at least as much as to its learning from the mistakes of others, (notably Sears and K-Mart) as to its own adaptation to changing situations.

    Therefore, the search for that elusive concept of the "best style of management" continues although one could argue on the basis of lessons learned until now that there may not be a best style after all. Centralization and decentralization can go together (as has been demonstrated by Hewlett-Packard, among others), flex-time and tele-working are meant to improve productivity, and many of the "either/or" concepts can, given a sufficiently broad perspective, be treated as complementary, to be used with discretion.

    All this might be driven by emerging compulsions. It augurs well for the entire world if Europe is able to come up with as many winners as America has done in the last two decades. With more and more emphasis on the free movement of all factors of production, one wishes that the learning process extended to other parts of the world as well.

    In the final analysis, we should be working towards a better world—not just a better America, or a better Japan, or a better Europe.

     
     
     
    • Anonymous

    The question is certainly legitimate but the evidence presented to make it look pressing is less than convincing:

    First, taking Will Hutton's book to set up this question strikes me as quite odd. What might be most useful to read is not his book but the recent commentary about it in the Economist.

    Second, the claimed parity between U.S. and European productivity levels does not exist. The 2002 edition of the European Commission's Competitiveness Report has just been launched. It shows EU productivity at about two-thirds of the U.S. level. Productivity growth, too, lags behind the U.S.

    Given these facts, it seems less than likely that European companies and their management styles are going to replace the U.S. ones. Most evidence does still, I think, point in the other direction. The challenge for European managers might be to turn being different into being better at doing things differently than the U.S. companies. Competition knows many different ways to create value, and maybe the future will be one of different management models supporting different strategies that successfully co-exist.

     
     
     
    • Roy Bingham
    • Managing Director/Partner, Health Business Partners, LLC

    I worked for nine years in London before HBS and seven years in the U.S. after HBS. I think the differences all go back to the characteristics of the sports we played as youngsters.

    In the U.K. it's cricket (everything according to the rules and at a measured pace) and rugby (free-flowing mayhem). Also in the U.K., as in the rest of Europe, it's soccer (stars matter, but its the team above all else).

    In the U.S. it's football (huge guys, extraordinarily fast and aggressive), basketball (almost everything that matters happens in the last three minutes of the game) and baseball (we only remember the pitchers and the stars who hit the home runs).

    My point? American management seems to work best when the key needs are speed, aggression, last-minute genius, and take-chance, inspiring leadership.

    European management is better suited to environments where the key skills are playing within the rules, steady incremental progress, and democratic processes.

    In boom times when it's "expand at all costs"—pick the American style. At other times the more deliberate, consultative European approach is your ally. Maybe this is why we are hearing more from the Europeans these days.

     
     
     
    • Jose Pedro Goncalves Managing Partner DecisionMaster, Lda

    Europe is not a country!

    When you write about Europe, you need to present the differences between the North and the South, because the working culture in these two regions has tremendous differences. I'm from Southern Europe (Portugal), and I have worked for American, Dutch, and, of course, Portuguese companies. In all of these experiences, my best memories are of the Dutch company. What is the difference? To the Dutch, I'm a human being. To the others, I'm just a number, not much more than a machine. I think that the Northern European approach to leadership and management can fuel productivity.

    But this "pretentious" European leadership can be the result of a very different phenomenon. As you know, the European worker is more "protected" than the American is. In periods of depression and big stress, the European worker can continue with his or her "normal" life. The American worker has much more to worry about. Because of this, I think that the American economy can have a bigger depression, but a faster comeback.

    So, we are more human, but less flexible, and this "leadership" is only temporary. Soon, the Americans will come back.