BUSINESSWEEK ONLINE : NOVEMBER 20, 2000 ISSUE
INTERNATIONAL -- SPECIAL REPORT

Managers without Borders (int'l edition)
Europe's companies, executives, and workers are becoming more mobile, flexible, and transnational

When the executive committee of consulting and software giant Cap Gemini Ernst & Young meets, the view of the Arc de Triomphe out the window is practically the only clue that the corporate headquarters is in Paris. Meetings are conducted in English by a British-born chief executive, Geoff Unwin. Only three of nine committee members of this French company are French. The rest are Dutch, British, Swiss, and American. And the multinationalism extends beyond the boardroom. At a training center in a 17th-century chateau outside Paris, Cap Gemini regularly brings together executives from different countries to work on strategy projects. And if you clash with foreign colleagues, you can start looking for employment elsewhere. ''Our clients demand people who are mobile and internationally literate. So do we,'' CEO Unwin says.

Europe is creating a new business elite: men and women who move easily across national borders, switching languages and cultures as smoothly as they flick on their ever-present cell phones. They are rejuvenating once-parochial companies and banks, injecting fresh ideas, and challenging conventional wisdom. As this elite expands, its members could finally push down barriers that protect many European companies. Already their internationalism is seeping into politics and culture, nudging Europe closer to the kind of economic and social union it has long sought. Their common language--English--is rapidly becoming the language of European business.

Of course, these new-style execs are not consciously setting out to change Europe. But their willingness to go wherever opportunity beckons is introducing a kind of healthy uncertainty into the old ways of doing business. Forget about loyalty to country and company. These transnational managers view themselves as free agents, changing jobs rapidly to seek new experiences and burnish their resumes. ''For the first time in Europe we are seeing people taking it on themselves to make tracks for another country, to have an ability to function in a lot of different places,'' says Maury Peiperl, a London Business School professor who studies the career paths of European executives.

The push started more than a decade ago, as the European Union stepped up its drive for economic integration. ''The flow of capital started, the flow of goods started, and now the labor is finally going, too,'' Peiperl says. True, less than 2% of EU residents work outside their home countries in Europe. But 40 of Europe's biggest 200 companies are now run by a non-native chief executive, according to the association of executive search consultants. And top European business schools such as LBS and INSEAD say at least half their graduates in Europe are working outside their home countries.

It's a big change from the classic career path in European business. Too often, the route to success led from an elite national university, through a stint in government, to a managerial post where cultivating relationships was all-important. But with cross-border mergers and acquisitions totaling $1.75 trillion in Europe since the start of 1999, companies now need execs who can manage transnational teams, thrive in the rocky environments of newly merged companies, and read diverse cultural situations. Since about one-fourth of all shares in Europe's publicly traded companies are now held by foreigners, shareholders are not bound by national loyalties: They just want managers who can deliver results, whatever their passport.

That explains why Marks & Spencer PLC, an icon of British retailing, recently brought in Belgian Luc Vandevelde for a makeover. Vandevelde, once a star executive at France's Promodes chain, has already introduced a stylish designer label, opened factory outlets, and jettisoned antiquated policies, such as the longstanding refusal to honor any credit card except the retailer's house card.

While the turnaround of M&S is still a work in progress, some of these globe-trotting executives' moves have already had a huge impact. Only six years ago, Renault was a notoriously inefficient auto maker majority-owned by the French government. Then CEO Louis Schweitzer brought in Carlos Ghosn, a Brazilian who had worked more than a decade for Groupe Michelin in the U.S. and Latin America, to run Renault's manufacturing. Quickly dubbed ''Le Cost Killer,'' Ghosn stamped out glaring inefficiencies. Now Ghosn is pursuing a similar turnaround as chief operating officer of Nissan Motor Co., Renault's Japanese partner. And his replacement in France is another outsider, Belgian Pierre-Alain de Smedt. He's a longtime executive of Volkswagen, a pioneer in cost-cutting.

Ghosn's experience proves a key point: Sometimes, it's easier to bring in an outsider to make painful decisions. That's what happened three years ago at Swiss drugmaker Roche Holding Ltd., when British geneticist Jonathan Knowles was enlisted to overhaul the research program. Despite howls of protest from some scientists, he drastically scaled back the company's sprawling portfolio of basic research and focused on less risky but more solid improvements in known compounds. A new raft of drugs will soon show if Knowles was right.

In many ways, the European companies have learned their transnational skills from their American rivals, who have been hiring managers worldwide for years. Thus, European executives with American ways started popping up. Philippe Bourguignon is applying lessons learned as head of Euro Disney to engineer a turnaround at French tour company Club Med. Some European companies have never been provincial--Consumer giants such as Anglo-Dutch Unilever Group and France's L'Oreal have had multinational management teams for years.

SEARCH TEAMS. While U.S. companies were picking up top staff wherever they could find them, many European companies continued to see themselves as strictly national operations. The resistance to outsiders was especially strong in old-line industries such as utilities or Germany's machine-tool makers. ''The Americans were recruiting and managing across national borders, whereas you never saw a German company recruiting French workers,'' says Antonio Borges, a Goldman, Sachs & Co. investment banker in London who specializes in cross-border deals. ''Finally, the Europeans are actively searching for talent from other countries.'' Borges is himself a cross-border phenomenon: Portuguese-born, adept at four languages, and the former dean of INSEAD.

It's not just top-level managers who are being recruited across national borders. ''More and more, we're being asked to flesh out organizations that are doing business globally,'' says Doug Bugie, managing director of MRI Worldwide, a British executive-search firm specializing in midlevel managers earning as little as $40,000 a year. He's now hunting across borders for his clients, searching for systems analysts, advertising sales representatives, and other midlevel executives.

Bob Scott is one of these country-hopping middle managers. Eight years ago, he was an engineer in a Nottinghamshire coal mine and never imagined he would live one day in Paris and speak French. But after joining a British consulting firm that was acquired by Cap Gemini, Scott moved to France in 1998 to work in sales for the company's Internet and e-commerce practice. He now figures his cross-border experience gives him an edge. ''With so many global mergers, the people more capable of running these organizations are more likely to come from Europe than anywhere else,'' Scott says.

The question now is whether the movement will trickle down further, giving Europe the kind of labor mobility that has fueled U.S. economic expansion. No one expects jobless East German factory workers to pack their bags for low-unemployment havens such as Helsinki and Barcelona. But young workers who speak English are increasingly mobile, wherever they are in the corporate pecking order. ''I haven't thought about returning to Italy at all,'' says Paolo Bafico, who moved to Dublin from Genoa five years ago to take a sales job at Oracle Corp. Now working for Irish software maker IONA Corp., Bafico says: ''In Italy, it is much harder to break into the top levels. Here there's more opportunity.''

Dublin itself is a haven for these transnational workers. Thousands of young foreigners are there working for Irish companies, U.S. multinationals, and, increasingly, for European companies profiting from Ireland's relatively low taxes and labor costs. Just last month, Italian bank UniCredito moved its entire asset-management division to Ireland, transferring more than 20 executives from Milan to Dublin. Worker mobility is adding to the pressure for tax and labor reform across the Continent. This year, French and German policymakers, alarmed at the increasing mobility of business and workers, announced major tax cuts to keep both at home. They're following the lead of countries like Spain and Finland, which have attracted high-tech industry and foreign workers with business-friendly policies.

Old Dubliners may shake their heads at the new, international buzz their city has acquired. But there seems to be no turning back. Every day a sign appears that borders in Europe mean less and less. In September, Briton Derek Brown was named director of Guide Michelin, the bible of French gastronomy. A few weeks later, Sven-Goran Eriksson--a Swede living in Italy--was recruited to coach Britain's national soccer team. The chef of Rome's best restaurant--well, he's German. Europe's borders are still there. But to many Europeans, they just don't matter anymore.

By Carol Matlack in Paris, with Kerry Capell in Dublin and bureau reports

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