Schneider Electric – Aggressive French Giant

By : Jim Pinto,
San Diego, CA.
USA

Schneider Electric calls itself "the world’s power and control specialist". The company serves the residential, building, industry and energy and infrastructure markets. All operating numbers show significant growth in the past year, and their strategy of selective acquisitions continues. Here's a view of the Schneider Corporate Culture.

This article was published by:

Automation.com, January 2006

Schneider Electric calls itself "the world’s power and control specialist". Through its well-known controller brands – Merlin Gerin, Square D and Telemecanique – the company serves the residential, building, industry and energy and infrastructure markets.

With 85,000 employees, operations in 130 countries, and 13,000 distributor outlets, France-based Schneider Electric is high on the world list of major automation companies. 2004 revenue was about $14 billion, with growth of 18% (organic growth 8.5%) – significant growth in a flat world economy. For the first half-2005 (June 30, 2005) revenue increased by 6.4% and the 2005 outlook was revised upwards. All operating numbers showed significant growth over the comparable period of 2005. The strategy of selective acquisitions continues.

Background

Schneider has an interesting history, dating back to 1836. The company became one of Europe's leading manufacturers, evolving as a financial conglomerate with the name Groupe Schneider until the 1980s, when it changed focus through a series of major acquisitions.

Here is a list of major acquisitions dating back to 1984. Several other smaller acquisitions have not been listed.

1984 Magrini Galileo

1987 Federal Pacific

1988 Telemechanique

1991 Square D, Federal Pioneer

1993 Merlin Gerin

1996 AEG Schneider Automation, Modicon

1999 Lexel, Veris Industries, MITA, Infra+

2000 Crouzet, Bergher Lahr, Crompton Greaves, Conlog, Nu-Lec

2001 Prosyst, WA Brown, Inari, Think & Do, PDL

2002 Digital Electronics

2003 Clipsal, TAC, MGE-UPS, Hyde Park

2004 Andover Controls, Kavlico, Elau, Abacus, Magnecraft, Dinel

2005 (First half 2005): Power Measurement Inc, ABS EMEA , Juno Lighting, BEI Technologies

Strong growth objectives

Schneider has an ambitious corporate mission to support a strategy of faster, more competitive growth, beyond its own geographic and cultural limits. To stay competitive, R&D percentage is above 5%, relatively high for an automation company (most typically invest only 2%-3%).

Schneider operates in three sales regions: Europe (52%), North America (24%) and International (rest-of-world, which includes Japan and China) generates 24%. Electrical Distribution 63%; Automation 26%; Growth platforms 11%

Schneider Corporate Culture

According to senior managers, here is what makes Schneider's business culture different:

Diverse culture:
Schneider is very open to any type of culture. This is probably due to the fact that the group was built on acquisitions over the past 20 years. One way or another, all companies in the group share a common beginning - they were all acquired by Schneider. As a consequence, there is not such a thing as a predominant culture. It is very difficult to spot a real true Schneider original employee; there are not more than a few. The diverse cultures have probably been helpful in successful integration of very diverse companies such as Digital in Japan, and Clipsal in Asia.
Local cultures:
Because of the many acquisitions, Schneider is very respectful of the local cultures of the countries where they work. They have far fewer "expats" (French transplants) than any similar companies, and rely more on the growth of local people in the operations. Schneider prides itself on being very "local".
Brand names:
Schneider recognizes the value of the business acquired. When it makes sense, they keep the brands in the company portfolio - there are 70 different brand names, unusual for any company.
Sales Channels:
Schneider is more partner and distributor orientated than most of their competitors.
Corporate focus:
Schneider is focused on Automation and Electrical distribution, by choice. It does not diversify into businesses such as Medical, Telecom, or Financial services.
Management team:
Schneider's 11-member executive management team includes 4 non-French members. Of the industrial automation majors, perhaps only ABB is more internationalized at the top. The corporate management program is designed by top management (about 100 people in various companies).
New product development:
The R&D budget is decided at the corporate level. New products come from R&D centers located in France, US, UK, Singapore, China, Sweden, Japan etc.
Incentive plans:
There are good bonuses for the management (approximately 40% of staff level employees), and stock options for the top managers.

Schneider is a focused, well-managed, growth-orientated, global corporation. Look for continued aggressive acquisitions of large and small companies that fit its focused strategy in target markets.

American Subsidiary (Modicon) view of Schneider

Many people are surprised at how so many acquisitions have not only survived, but thrived, as part of this giant French company. Well, here is the view from a well-known major US subsidiary – Modicon. Paul Hamilton [paul.hamilton@modicon.com] from North Andover, MA, USA provided this feedback:

"Every 3 years the company organizes around a growth and productivity initiative that drives the behavior and objectives of all groups and divisions for the following 3 years. We are just starting the 4th such program that I am aware of. This one is a 4 year program as opposed to the previous 3 year programs.

"As this is the 4th generation of this type of program the company is becoming more efficient and more organized around developing and implementing goals and objectives. It is well organized and it strongly drives focused behavior and results. You can find this NEW2 program on the Schneider web site, finance section under new company program.

"Relative to the people and environment: Yes the 12 member executive team includes 4 non-French personnel as you mentioned. However, what is not so obvious is: 9 of these members are new to their positions in the last 1 to 2 years thus highly energized and motivated to achieve results. 8 have held senior expatriate positions in other countries prior to joining the staff. These assignments include China, USA, Africa, and other Asian and Europeans countries. This is a team with a real global view from personal experience as opposed to the typical fly-in-fly-out experience of many senior management teams.

"Moving a large company forward is about change. As you recognize, change is disruptive and creates some amount of discontent. I am sure, like every big company, we will have our share of people that are not happy as the company finds it way to the next level of results. However, there is a difference at Schneider.

"Management is engaged with the business and encourages people to express and act on their opinions if it brings real benefit to the company objectives. You can be an entrepreneur and you can make a difference if you choose. People are rewarded for this behavior.

"Management is clear and goal driven. Schneider’s NEW2 plan describes a simple set of objectives around people, growth, and efficiency that everyone in the company understands and has integrated into their own goals at a department or group level. These goals were not developed in a vacuum but developed with strong participation from the top 100 global managers.

"In 1Q05 NEW2 was cascaded to 600 top managers and subsequently to every employee in the company. The results, progress and issues are reviewed every month by the COO and cascaded down throughout the company. All this creates an environment of clear performance minded people focused on achieving results consistent with company goals.

"The company cares about people, the environment, and the community. Seldom have I seen a company that consistently encourages everyone to always try to make a difference in the places they live and in the world. Community programs are always in the highest level goals of the company.

"Schneider Electric employees expect this and respond to this though local programs or corporate programs such as our recent tsunami relief efforts. The company is always striving and driving to be at the forefront of Environmentally friendly behavior such as RoHS (reduction of hazardous substances) and Eco design programs.

"In summary: Schneider is a diverse company that thrives on and encourages local cultures to develop and grow in their own way in each country. Yet, at the same time, and without destroying this value, Schneider has been able to create an environment where everyone understands and is focused on the same goals for global growth and efficiency. This is the real value and culture of Schneider Electric. And that is why we will continue to succeed."

Continued growth plans

In the fast-changing business environment of a new century, Schneider continues to adapt, change and pursue innovation with its own corporate governance. The companies Board of Directors will be proposing the transformation of its own corporate mode of governance at the Shareholders' Meeting on 3 May 2006, to ensure the smooth succession of its leadership and the pursuit of its development strategy.

During the next years, look for Schneider to emerge as a clear leader in several key industrial automation target markets through strong organic growth, as well as a continued aggressive acquisition program.

It's interesting to note that Schneider made a strong ($60 million) acquisition offer for Australia-based CITECT in Oct. 2005. The offer was pre-empted by Thoma-Cressey, a US based venture capitalist, which acquired CITECT in January 2006. Clearly Schneider is now in the market to acquire another similar systems/software company for strategic reasons.

Schneider will continue to acquire key parts of ailing automation conglomerates, as well as strategic small and mid-sized companies that are poised for new growth. Right now, the aggressive French giant seems unstoppable.