Move out of range to think out of the box

By Chris Shevlin, Financial Times, 20/8/2004

Geopost uses unusual tactics to encourage the managers of its many divisions to work together, writes Christopher Shevlin.

An invitation to attend the annual summer meeting of Geopost, a France-based transport and logistics company, was sent to the top 40 executives along with some mischievous advice: bring an extra-warm sweater.

Claude Begle, Geopost’s chief executive, had already begun to spread rumours that Copenhagen was not the real location. He had even encouraged loose talk of bear-hunting in Siberia.

But no one suspected the truth: that the 40 managers would soon find themselves aboard a small boat in the Arctic Circle, in almost perpetual daylight, and with no means of contacting the outside world apart from the ship’s radio.

It sounds like a wildly eccentric way of running a company, but Mr Begle believes he was not just being whimsical. At the time, Geopost badly needed to make some decisions about the group’s structure, and to bring together what had become a diverse assortment of companies.

Geopost is a recent invention, created in 1999 by La Poste, the French postal service. It has grown rapidly by acquisition, and in 2003 its revenues were €2.3bn (£1.6bn), making it the third largest parcel company in Europe. At the time of the Arctic escapade, it comprised companies from France, Germany, Spain, the Netherlands and the UK, all operating under their own brand names. But why were managers taking decisions about the group’s structure in the Arctic Ocean rather than at the smart Hyatt hotel in Copenhagen?

The short answer seems to be that it was the only way to compel the managers to work on relationships with one another, rather than playing politics and keeping in touch with their company headquarters back home. The Arctic Ocean is now one of the few places in the world where you can be sure no one can get a mobile phone signal.

Mr Begle wanted to make certain that the decisions they made were not based on office politics, but on the interests of the group as a whole. To do that, he says, he was prepared to be unconventional. “You cannot sleep because it is always light, you cannot get out of the boat, and you have an open bar. So what happens? You get drunk, you fight, you hate each other, you reconcile, you fight again, you discuss business. Four days later, we had a structure. That’s maybe not in the management books, but it works.”

It is not in the management books. The standard approach to integrating acquisitions is to look for synergies and economies of scale, to establish common brands and to standardise. That is the approach taken by the big players in the parcels and logistics industry – FedEx and UPS, the two US giants.

FedEx recently re-branded all the companies it owns to make customers aware of the breadth of its services. Its most recent acquisition (for $2.4bn, £1.3bn) was Kinko’s, the print services chain. It, too, has been rebranded, and is now FedEx Kinko’s. None of this seems to have hurt: FedEx’s revenue grew by 10 per cent last year to $24.7bn, and net income rose by 29 per cent.

Whether Geopost’s model — autonomy supported by a common culture — will succeed is still unclear. Revenue grew by 5.3 per cent this year, to €2.26bn, and earnings before interest, tax, depreciation and amortisation were up to €82.4m — including all the money spent on acquisitions.

But the comparison is perhaps unfair: the two companies are at different points in their life cycles. FedEx has decades worth of brand recognition, whereas Geopost currently uses its brand only in the UK. To extend a very well-known brand to take in lesser-known brands makes sense; to replace many well-known local brands with a single unknown one sounds like folly.

Mr Begle believes that allowing acquired companies to keep their brands and identities helps Geopost retain its managers. “If you buy a company and you are too ruthless in the way you integrate it, you may lose up to half of your valuable managers, which means you lose a solid part of the enterprise value you just paid for.” They appear to have succeeded in this respect: no manager left when Parceline and Interlink in the UK or DPD, the German parcel service, were acquired.

Even when there are obvious savings on offer, Mr Begle prefers not to sacrifice the principle of independence for each company. A consultancy that offered him standardised weighing technology for the group, with a breakdown of the savings, was given a list of names to call in each company and told that each would make its own decision.

But to balance this system of local autonomy, Geopost needs to promote a common culture to unite its constituent parts. It is for this reason, says the group, that it puts so much stress on its team-building activities and makes them such, exotic affairs — and it shows no signs of curbing its taste for them.

The Arctic excursion took place last year. In June this year, 300 of its managers met in the Sahara, to mark Geopost’s southward expansion into Turkey and Tunisia. Senior managers followed this with a cruise down the Yangtze river — they are, after all, in negotiations to enter the Chinese market.

Mr Begle remarks “Geopost has an interesting management style, which is a little bit the opposite of the others. We believe in a very decentralised management structure but with a strong corporate culture, which is the unifying element. To promote that culture, we do a lot of things — sometimes crazy things.”