Although the economic slump has hit this once burgeoning industry hard, LVMH (at the time of the merger in the 80s, it was agreed that Louis Vuitton would come first in the
logo while Moet Hennessy would come first in the full name) is bucking the trend. It recently announced improved operating profits, up from 975 million to 1.25 billion. Thanks in part to its chief executive, Bernard Arnault, it now has a market value of around 12 billion. But he hasnt done this on his own. His right-hand woman adviser to the chairman to be precise, although this is only one of Concetta Lanciauxs three titles also happens to be his HR chief.
The idea was to restructure some companies, sell them and then concentrate on the core business, which became luxury goods, says Lanciaux, explaining her CEOs strategy in the mid-80s. The group he had bought was full of problems, and none of the companies was profitable. He told me that my number one problem was managers I need to have the best managers and its going to be very difficult to attract them. So, I need you to help me to get the best people to come and stay, he said.
My challenge was particularly difficult because there were no executives in luxury goods, she continues. Because they are small, family-owned companies, they dont have graduates or succession planning they do it themselves and they do it very well normally. That business model is fine of course, as long as you want to keep the companies small. However, that was not Arnaults goal.
Because of the lack of other luxury groups at the time, LVMH had to look further afield when recruiting and developing talent. In 1991, it partnered with Paris-based business school ESSEC to launch the luxury brand marketing LVMH ESSEC chair, funded with Fr10 million. Further partnerships have since seen programmes launched in Asia.
We had to open up, so we started to hire from other industries, such as consumer goods, and selecting people who had, how you say, good taste? she smiles, citing engineering and business schools as other sources. Then all of these people had to be inducted and trained so we had very strong programmes and a lot of on-the-job training.
This triggered une petite rvolution in France, luxurys homeland. For a while I was seen personally as damaging the luxury industry because these people coming from outside did not know the sector, and could possibly damage the specifics and make it too mass-market, she says. But when we brought in some American designers nobody had ever brought in American designers into French companies before it actually rejuvenated these brands. And it went far beyond our own companies everybody started doing it and once again Paris is the centre of the industry.
Lanciaux has the sort of background that makes her present role somehow inevitable. Born and brought up in Italy, educated in the US, and now living and working in France, she has an international presence that mirrors the luxury business. She also has the necessary creative streak once a professor of script-writing at Pittsburghs Carnegie Mellon University, she has an inherent understanding of much of the theatre that surrounds the catwalk.
While proclaiming her loyalty to luxury, she rues one decision. My major hobby is film I can watch three films in a row, she laughs. In fact I regret that I did not go into the film industry. Thats really what I was destined to do.
But she did manage to realise one cinematic ambition. When I was 16 years old, I wrote to Hollywood to get an autograph from James Dean, she reminisces, then laughs, I wrote and I got it. A mix of drama and determination the perfect combination for what lay ahead for Lanciaux.
Having decided to move from academia to the private sector, she later joined Intel as its European HR director in 1980. While speaking at a conference in 1985, a consultant there reported back to Arnault, who was then preparing a team to build his luxury group. When I was at Intel I was a senior executive, and when I moved into this job it was like going into a start-up, she smiles, almost whispering, it was the first time Id taken a major risk.
Its clear that Arnault and Lanciaux share a close working bond. She is astonished when it is suggested that not all CEOs rely on their HR bosses in quite the same manner. Her role, while once purely HR, now encapsulates more strategic management. She believes her continuing good relationship with him, and with her previous CEOs, are down to her grasp of strategy. I think its because I basically understood what they wanted to do, she grins. I dont think you can talk about any particular chemistry that you need to have with your boss because in fact I think Im quite a
different individual from him. But I really understood from the beginning what his strategies were.
She believes her role is also to help him clarify his plans. There has to be co-operation at that level, but not necessarily at other levels, she explains. You dont have to drink beer with him on a Saturday night, you know? Im thinking about work. I think my approach was not just to understand what he wanted in human resources, but to grasp what he wanted to do with the group, and then to devise the management model that would fit.
If you discuss strategies with your CEO from the very beginning, and you know where he plans to go with them then, Lanciaux believes, it gives you, as HR chief, much more of a chance to make suggestions and to be listened to. If I go to my boss and say, We have to raise everybodys salary by 5% no, she says, shaking her head. But if I say, I know that you want to double the profits of this particular company and I agree with you. In that company there are 15 people that can really help your dream come true. However, we have to change the salary of these 15 people then, yes, she smiles.
Chemistry can be a double-edged sword, she warns. Talking about the HR role, I think having too much chemistry could actually be a bad thing. It means that youre identifying too much with your CEO, and you dont have your own autonomy, she argues. But you do have to make the effort to understand the business and then insert your own programmes of action.
In addition to the epony-mous LVMH brands, the group also includes fashion houses Christian Dior and Givenchy, champagne labels Dom Perignon and Krug, and perfume and cosmetics names Guerlain and BeneFit. With some 40 brands potentially competing against each other in the group, recruitment and everyday business becomes complex. In the case of our group, what builds value and profits is the ability to act in an autonomous way and create new products. The business is built on the number of innovative products that come out every year 20% to 30% of the turnover is based on new products. Therefore our companies senior executives have to have a large dose of autonomy and creative capacity.
How do you avoid this becoming a jungle? This is one of my specific tasks, she smiles. Business and human needs are very different. This is why I think HR can contribute in a business. At a human level, everybody has a need to belong. And it is separate from business and the market, where you are competing. How did I reconcile this? By creating some common values, some cultural standards and systems that we all share.
LVMH House, the groups London home, situated near Savile Row, is the central point where much of this happens. Every month senior executives arrive from all over the world and, more importantly, from all the different divisions of the group. Everybody is free to speak up, network and exchange ideas, explains Lanciaux,Its also a big investment for the group, but its productive. It creates a common culture and level of values, and yet it doesnt bind people. When they leave, they can create a perfume that is better than the one being made next door.
Designers are well known for their volatility. Before enfant terrible Alexander McQueen left LVMHs house of Givenchy, he complained that he felt constricted by the group, and reportedly fell out with Arnault over rival Guccis financial support for McQueens own label. So do creative egos need to be treated with kid gloves? There is only one senior designer at each company, and they can have as much impact as the CEO, admits Lanciaux, cautiously. Handling creative people is extremely challenging. You also need to be creative and intuitive. Imagine how horrendous it would have been if we had put John Galliano into Louis Vuitton and Marc Jacobs in Dior. Our senior executives have to have both regular management skills and that intuition and that capacity to go beyond the sheer numbers.
Its this intuition that underpins the business and helps make that vital difference when a customer goes to buy a Louis Vuitton bag instead of a competitors. People use these as aspirational products, she explains, So we need people who manage and dream and make others dream.
The craftsmanship and family traditions are still often visible in the brands. Hennessy, for example, has been in partnership with the same winegrowers and distillers for generations and this is seen as one of
the key ingredients of its success. Lanciaux believes that HR can learn from this idea of understanding your industry so deeply.
In the future, HR that succeeds will be the kind that knows its sector very well. I have worked 18 years in this industry and I have a knowledge that allows me to select the right people for the right company in the group. But this isnt heavenly inspiration, she states, arguing that to acquire this knowledge, HR needs to keep talking. For the first five or six years [after she joined the group], we spent the whole week and every Saturday
interviewing one executive after another, so we really developed a great technique, she continues. I tell my young HR directors now that if they dont interview at least five people a day, then they are not learning enough. You gain strong knowledge of the market because when you interview people, there is a lot of knowledge transfer.
The groups aggressive growth has been through acquisition of such family firms as Hennessy, although Lanciaux argues that LVMH has tried to treat such moves sensitively the vision was one of integration. First of all, it was about respecting, identifying and then preserving all of the assets of the company not changing everything at once, she says. One of the mistakes that companies in this situation make is that they want to change everything and bring in their own culture. When we buy these brands, we buy them to develop them.
To develop the brand, the first thing you need to know is what makes that brand, she explains. Very often its a number of people who are behind it, often invisible. You have to find them, make them visible. This means that we have been able to preserve the integrity of these brands. Our style is not to go in there and replace everybody never.
Further changes at the group may not be far off. Speculation is rife that LVMH will sell off its non-core retail assets, such as shirtmaker Thomas Pink and beauty website Sephora, over the next two years. Rumours also abound of further acquisitions, with jewellery giants Bulgari and Tiffany cited as potential targets, as well as fashion label Giorgio Armani.
In terms of HR, what will the future bring? Thats a good question, she smiles. In the 80s, we introduced HR policies that were typical of larger multi-nationals expanding in a rapid growth period. They tended more to homogenise rather than differentiate, and to homogenise then facilitate the growth of individual potential, like the blossoming of a flower. It is not a question of denying what we have put in place, but about revisiting all of the key functions in HR.
And her own future? I would say now that I have come to a point of consolidation in my career. My role is really to prepare my successor or successors and to make the executives benefit as much as I can from my experience, she muses. Lanciaux is, however, absolutely adamant that no other sector attracts her in the meantime. There is still so much. You see, this industry is still at the first stage of development. Its very exciting now that we are entering the second one. I think that is much more interesting than moving somewhere else.
