#Resilience


Richemont: a corporate culture in question

CORONAVIRUS CHRONICLES

Français
June 2020


Richemont: a corporate culture in question

The travails of the Richemont group more broadly reflect a corporate culture that seems somewhat out of sync with an ever more horizontal and complex world. The accelerating effect of the pandemic crisis reveals trends that have been at work for a long time, and that we were already worried about back in January 2019. To get out of this situation, the group’s brands should be given greater autonomy. They deserve it!

T

he editorial about Richemont that you can read by clicking here is not from this week but from January 2019. However, it could just as well apply to the situation of the last few weeks.

In this editorial, we were concerned about a form of drift in the decision-making process – a somewhat technocratic approach that attempted to align new launches as closely as possible with a new generation of watch buyers, when in fact the ethos of the famous “millennials” is defined by horizontality in relationships, and a search for authenticity. Form must be brought into line with function, if watch brands are to succeed in keeping up with the times: “Watchmaking genius cannot be dictated by shareholder pressure,” we wrote at the time.

“The main impact of the pandemic crisis is to accelerate underlying trends that would have taken longer to manifest themselves in a normal situation.”

The main impact of the pandemic crisis is to accelerate underlying trends that would have taken longer to manifest themselves in a “normal” situation. In the watchmaking world, over the last three months we have witnessed a sudden reversal in the fortunes of several major players.

From Baselworld to Richemont, the crisis reveals pre-existing flaws

The most striking case is certainly the complete disappearance of Baselworld, a process that accelerated suddenly after years of turmoil in the relationship between the fair’s management and the exhibiting brands. At brand level, we have also seen many digital strategies, including e-commerce, suddenly being implemented much faster than originally planned.

The latest “victim” of this acceleration effect is Richemont, now facing management issues. The tipping point was reached as a result of decisions related to managing the financial effects of the pandemic internally. But the signals were strong, even before the crisis, as our 2019 editorial pointed out. Indeed, it’s a fundamental role of the media to highlight such signals, long before the point of no return is reached (which is why healthy, independent media are essential in any industry, which must make the most of their observations to prevent such situations!)

“The tipping point was reached as a result of decisions related to managing the effects of the pandemic. But the signals were strong even before the crisis, as our 2019 editorial pointed out.”

Our colleague Grégory Pons has charted the various episodes of the Richemont “saga”, which came to a head with the simultaneous publication of trimmed-down bonuses for staff and greatly increased bonuses for the management committee. All this came against a backdrop of discontent at every level, and social movements in France and Italy, leading to the departure of Sophie Guieysse, the group’s controversial HR director (who certainly cannot be solely responsible for the situation).

Even if the management committee bonuses were largely based on results posted before the outbreak of the pandemic, the announcement was particularly ill-timed, especially since the group had taken advantage of state-funded payments for partial unemployment (which in itself is perfectly legitimate): in the end, both employees and taxpayers had to foot the bill. Richemont chairman Johann Rupert, who has voluntarily halved his salary since April, is now having to deal with a situation that has become difficult to control and could cause further turmoil. Nevertheless, an agreement seems to have been reached on wages. For further details, please refer to Businessmontres.

A matter of corporate culture?

The core of the issue, laid bare by the pandemic crisis, is that of a corporate culture that seems increasingly at odds with new societal and entrepreneurial realities. This affair shows that, post-coronavirus, it is no longer possible to act in exactly the same way as before. There will be no turning back, as a prominent CEO told us.

Comparing the different approaches taken by watch brands in terms of communication, it is striking to note the verticality of the discourse within Richemont’s subsidiaries, which often makes it difficult to identify any genuine substance beyond the worn formulations of the official press release.

There is little room for manoeuvre. And yet, today more than ever, the most vital element of watchmaking is what humans put into it. This leads to paradoxical situations that often fall short of the desired outcome, where, for example, highly disruptive products have to be presented as part of a strictly controlled conversation. Or traditional craftsmanship is lauded to the skies with linguistic conventions learned at the best business schools.

“This limited room for manoeuvre leads to paradoxical situations that often fall short of their target, where, for example, highly disruptive products have to be presented as part of a strictly controlled conversation.”

A new era

We have entered a new era of horizontality, ruled by social networks that are primed and ready to call out “political correctness” that is not backed up by actions. All it takes is a whiff of inauthenticity, and the reaction is merciless. Faced with this new reality, there are two approaches that make it possible to more or less escape this fate.

The first option is to lay off the hyperbole and let the product speak for itself, as a number of major independent brands do (Tudor, which is rapidly gaining ground, is a good recent example). The second is to highlight the authenticity of the creators, an approach widely embraced by the new watchmaking generation that has shaken up the discourse since the beginning of the millennium (the “human” collaboration between Max Büsser and Edouard Meylan on a duo of pieces is probably the most recent example).

“We have entered a new era of horizontality, ruled by social networks primed to call out political correctness when it is out of step with actions.”

Within a group, it’s difficult to get everyone speaking the same language, because the interests of different brands are increasingly hard to reconcile with the drive for centralisation. Today’s best-performing brands have room for manoeuvre, not only in terms of business decisions, but also in the way they communication, which is key at a time when reputation counts more than anything else.

Autonomy, a key to recovery?

After a phase of consolidation in Swiss watchmaking over the last thirty years, with the formation of “supergroups” such as Richemont, one wonders whether the current era is not more favourable to the agility of independents, whatever their size. Georges Kern only lasted a few months in Richemont’s centralising machine, before leaving to relaunch Breitling, and he doesn’t seem to regret his choice.

But the question for the groups is not so much the independence of their constituent entities, as it is their autonomy. It is possible to be an industry leader, while belonging to a group. It’s a matter of autonomy, of finding the right balance between respecting the interests of the group and those of each brand. The rise of Bulgari, through the strong choices made by Jean-Christophe Babin, combined with his willingness to engage with the wider industry, and not just his own brand (look at the Geneva Watch Days initiative), shows that creative autonomy can lead to positive commercial results for the world’s largest luxury group. The cases of Cartier or Van Cleef & Arpels within Richemont itself also illustrate this.

“It’s a question of autonomy, of finding the right balance between respecting the interests of the group and those of each brand.”

In the face of the growing complexity of global issues, decision-making autonomy is more relevant than ever. Thanks to its liquidity, a group can certainly keep ailing brands afloat. But the long-term existential resilience of the winners of globalisation still relies, even in this age of metrics and robotics, on the human factor. And this is particularly the case in watchmaking. Despite the difficult climate that seems to have set in, the watch brands of the Richemont group still have plenty of this vital resource. Giving them back some form of autonomy means treating them as the “human” resources they are. They deserve it!

Explore the Europa Star archives - Join us as a Club member
New: 40’000 pages added, since the year 1950!
Our data base contains over 100,000 pages and 70 years of fully searchable back issues, up to the most recent publication. A treasure trove for all knowledgeable professionals and aficionados.