Luxury Talent Management: Leading and Managing a Luxury Brand

By G. Auguste and M. Gutsatz

The first book focusing specifically on talent management, retention and leadership in the luxury industry. It explores how to lead and manage the people this industry attracts, and the major HR challenges the industry is about to face as the previous generation of luxury pioneers retire and Asia becomes a major player in the luxury world.

• Language: English
• Publisher: Palgrave Macmillan
• Release date: Mar 28, 2013
• ISBN: 9781137270672

Book preview

Luxury talent

management

Leading and managing

a luxury brand

Michel Gutsatz

and

Gilles Auguste

© Michel Gutsatz & Gilles Auguste 2013

All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission.

No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6–10 Kirby Street, London EC1N 8TS.

Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages.

The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright, Designs and Patents Act 1988.

First published 2013 by

PALGRAVE MACMILLAN

Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS.

Palgrave Macmillan in the US is a division of St Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010.

Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world.

Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries.

ISBN: 978–1–137–27066–5 hardback

This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin.

A catalogue record for this book is available from the British Library.

Library of Congress Cataloging-in-Publication Data

Gutsatz, Michel.

Luxury talent management : leading and managing a luxury brand / by Michel Gutsatz and Gilles Auguste.

     pages cm

ISBN 978–1–137–27066–5

 1. Luxury goods industry. 2. Luxuries – Marketing. 3. Product management. I. Auguste, Gilles. II. Title.

HD9999.L852G87 2013

658.8′27—dc23                                  2012045717

10    9    8    7    6    5    4    3    2    1

22  21  20  19  18  17  16  15  14  13

Printed and bound in Great Britain by

CPI Antony Rowe, Chippenham and Eastbourne

CONTENTS

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Lists of boxes, figures and cases

Acknowledgments

Test: Is luxury the right industry for your talent?

About the authors

Introduction: the luxury industry’s talent challenges

Part 1: Understanding the fundamentals of the luxury industry

Introduction

Two unique factors

The three business characteristics of the luxury industry

The luxury brands’ conceptual framework

The three luxury organizational models

The four luxury corporate cultures

The four key populations to manage

Part 2: Portraits and jobs in luxury

Introduction

Executive talent

Creative/design talent

Manufacturing/workshop talent

Retail talent

Part 3: Case studies

Introduction

Case study 1: Robert Polet, a modern gipsy at Gucci

Case Study 2: A difficult succession plan in a family luxury business

Case Study 3: From marketing development to creation

Case study 4: The Dior case, a successful leadership duo example

Part 4: A luxury talent methodology

Introduction

The Luxury Competencies Model: A framework to identify and replicate talent

Developing customer service

Cultivating creative/designer talent

Addressing the digital age

Part 5: Looking forward: luxury and China

The special characteristics of luxury in China

The key brand competencies the Chinese need to acquire

Why hiring Asian executives is essential?

Conclusion: Principles for Luxury Change Management

Notes

Bibliography

Index

LIST OF BOXES, FIGURES AND CASES

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Lists of insights

Companies live and die – luxury brands survive

Designers are experts with complex sources of inspiration

Financing the development of a luxury brand

The Luxury Brand Manager profile

Restructuring organizations – an executive challenge

The top 100 luxury board members in profile

The luxury creative profile: keeper of the brand

Organization chart of the design function at Bally

The ladies’ shoes collection calendar at Bally

The Hermès/Eurocopter helicopter

The Watch manufacturer model

The secrets and Savoir-Faire of a high jewelry workshop

The story of the Kelly bag

How Charles Christofle built his brand around manufacturing

The shop as a business unit

A retail career path example

How to lead Sales Experts or Grands Vendeurs

Luxury industry trend/moves and profiles

Are luxury leaders portable?

Why should luxury specific competencies be developed in in-house Academies?

The Retail Academy of Richemont Group

List of case studies

The Tom Ford case study

Analyzing the Cartier Odyssey

Louis Vuitton and Takashi Murakami

Recruiting a General Manager for a Swiss family business

Assessing the leadership style of a luxury executive board

Recruiting a Store Director

Engineering a retail career package

Recruiting a Design and Development Director

The Net-a-porter.com case study

The Tai Ping case

Listening to a successful duo: The Shang Xia case

List of figures

ACKNOWLEDGMENTS

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We appreciate the time and insights of those who contributed to this book. Particular thanks to:

The support of Claire Beaume-Brizzi, whose numerous interviews and written portraits helped get this book published.

The hard work of Pepita Diamand, who helped clarify our perspectives on the luxury industry and contributed valuably to the book’s final draft.

The creativity and design of Nicolas Thulie, as reflected in all the boxes, figures and tables that illustrate the book.

The support of our publisher, Eleanor Davey Corrigan, whose patience and good advice made this project fly.

Stuart Crainer, who published our first paper in the Business Strategy Review (the London Business School’s management journal).

Michel Chevalier, who has since the beginning been very supportive of this work.

Finally, thanks to all the people who helped us enormously by sharing their professional experiences and who prefer that their names remain undisclosed.

TEST: IS LUXURY THE RIGHT INDUSTRY FOR YOUR TALENT?

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If you answered yes to each of these questions, your chance of succeeding in the luxury industry is pretty high!

If you answered no to just one of these questions, be glad you found this book.

ABOUT THE AUTHORS

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Gilles Auguste conducts strategic and global talent assignments for clients in the luxury and retail industries working with world renowned luxury brands. He is currently Senior Adviser at Sociovision, an independent consulting agency specializing in the monitoring of socio-cultural change. Gilles was formerly VP in the leadership consulting practice at AT Kearney Search and served as International Human Resources Director at Cartier (Richemont Group). Previously, Gilles spent eight years in the consulting industry with Bossard Consultants then Gemini Consulting, as Senior Manager, working on change management issues for a wide range of industries. Gilles is also a teacher at the Catholic University of Paris and with Luxury Group Academy. He received his Master in Human Resources from the Institut de Gestion Sociale in Paris and is a graduate of the Accelerated Development Programme from the London Business School.

Michel Gutsatz is an international expert in luxury brand management and is Director of MBAs at Euromed Management (Marseille & Shanghai) and Adjunct Professor at CEIBS (Shanghai). He advises investment funds, luxury brands, and retailers in Europe, China, and the United States. Prior to that Michel was Managing Director at White Spirit, an Image Strategy Agency. He served as Human Resources and Internal Communication Director of the Bally Group in Switzerland, as a member of the Executive Committee, and here he redeveloped the whole HR function and redesigned the Bally in-store service strategy, convinced that service and retail are critical to the success of a luxury brand. Michel developed the MBA in international luxury brand management at ESSEC Business School. His blog, BrandWatch (michelgutsatz.com), is an acclaimed reference in brand strategy. He is the author (with Michel Chevalier) of Luxury Retail Management – How the World’s Top Brands Provide Quality product & Service Support (2012).

INTRODUCTION: THE LUXURY INDUSTRY’S TALENT CHALLENGES

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The global luxury market doubled in ten years: It went from 77 billion € in 1995 to 147 billion € in 2005. Since then it has grown a further 30 percent to 191 billion € in 2011 (Source: Bain: Luxury Goods Worldwide Market Study, October 2011). This impressive development is largely thanks to a generation of talented luxury executives who professionalized the industry – an industry made up of less than 200 brands – transforming regional companies into global players.

This fascinating business now faces four talent issues that will shape its future:

1. Preparing for Succession. The generation that led this major development is close to retirement and the industry will have to find new talent to replace them (see Figure 4.1 Exemplary leaders of the luxury industry – milestones). Critical questions like Do we hire talent from outside or inside the industry? have to be answered.

2. Managing Luxury’s Idiosyncrasies. The luxury industry has three major characteristics that its executives know well:

• Most brands are part of family businesses and have to be managed as such (never forget that both LVMH and Richemont, luxury’s two top groups, are family businesses – respectively, the Arnault and the Rupert families).

• Creation is critical to its success – the management of creative teams and designers is a profession in itself that requires specific managerial skills.

• Retail is a very important challenge because the store is where the brand meets its customers: luxury brands moved into this field only in the last ten years and face important issues there: hiring store managers, developing sales experts, building compensation systems, building long lasting customer relationships, etc.

3. Strengthening the Customer Experience. Luxury customers’ behaviors have evolved: They now seek more than just the product; they expect an experience and a personalized relationship. They look for a level of service that goes way beyond the standards luxury brands deliver today. This will require new competencies and innovative approaches to retail and marketing in order to gain customer loyalty.

4. Readiness for the Asian Markets. The luxury industry is entering new markets that will be the levers of its future growth: Identifying local talent and mastering cultural issues are critical. This is a major concern for China, which will become luxury’s no. 2 market within the next decade. As the Bain & Company analysts say: " Go East! What’s in your luggage? ".

Such people change issues are generally tackled intuitively, mainly based on experience: Many executives will reference their previous experiences– mostly in marketing, finance or distribution – when making decisions. They often lack expertise in what the future holds: creation, retail, the internet and customer experience. They master the intricacies of the business but lack a conceptual vision of what luxury is about, its unique business model and the very specific competencies and behaviors that are needed to grow within it. All luxury brands are full of both success stories and extraordinary failures due to the insufficient personal adjustment of another wise talented executive who did not adapt to the industry (if coming from the exterior) or to a new brand (if coming from the inside).

Luxury brand executives also often rely on the external expertise of consulting companies and headhunters to tackle what is fundamentally a mix of change management issues with a very strong people dimension. Although they may have significant experience of the industry, these experts are themselves faced with a major organizational challenge: few of them master both the change management and people issues.

Our view is that luxury brands will have to address each of these four challenges in an innovative manner, based on two major factors:

• The unique aptitudes and skills cultivated by the generation of executives that led the luxury industry to its present heights need to be understood and transferred. A major study led by one of the authors has already achieved much of this: In 2000, most of the CEOs and executives of the luxury industry were interviewed, and their unique competencies and Leadership Profiles identified.

• Talent Management has to be seen as critical to all business decisions made within the shifting global landscape and these turbulent times. Those brands that are ready to adopt a new mindset about their Talent and can foster specific leadership skills will emerge as future winners in the luxury industry.

This book has four objectives:

Louis Cartier, grandson of the founder, revolutionized timepieces when he introduced the Tank watch in 1917 (Photo Atelier Nadar, courtesy Cartier)

PART 1

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Understanding the fundamentals of the luxury industry

We are not here to sell boilers and vats, but for the potentiality of growing rich beyond the dreams of avarice.

Samuel Johnson, while auctioning off the contents of a brewery, 1781

Introduction

The objective of Part 1 is to give a unique understanding of what the luxury industry is about and what differentiates it from other brand-centered industries.

This understanding is critical to anyone wanting to lead a successful career in luxury: The hurdles are numerous, and even efficient executives from other industries have been known to fail because they had underestimated these idiosyncrasies.

We have identified 17 topics that summarize what makes luxury such a different industry:

• Two unique factors:

• The family business heritage

• The essence of creation

• Three business characteristics

• The luxury business model in Six key points

• Four unique financial features

• The time factor

• One conceptual framework

• Three organizational models

• The traditional French Craft Organizational Model

• The Flexible Network Organization: the Italian variant

• The Flexible Network Organization: the American variant

• Four corporate cultures

• Tribal

• Mechanist

• Holistic

• Mercenary

• Four key populations to manage

• Manufacture/Workshop workforce

• Creatives and designers

• Retail staff

• Executives/Managers

1.1 Two unique factors

1.1.1 Unique factor 1: The family business heritage

Time is a critical factor for the understanding of luxury.

A fundamental dimension of time is of essence to a luxury brand: Heritage.

• The brand’s history is proof of its power and ability to survive. It becomes a trusted reference for customers in a chaotic and uncertain world.

• The customers’ capacity to appreciate luxury is something that cannot be acquired overnight. Valuing luxury craftsmanship, brand history, etc. are elements that customers learn with time. A perfect example is found in the development of special exhibitions (like Louis Vuitton’s Retrospective Exhibition in Shanghai in 2010) or artisan shows in new major markets like China. Such activities are necessary to embed the luxury culture in these new markets.

• The essence of quality is durability: a luxury product is generally made to last a long time and may even, in some cases, be transferred to the next generation. This is the selling argument of some major watch brands, such as Patek Philippe who advertises, " You never actually own a Patek Philippe. You merely look after it for the next generation. "

Heritage means that brand awareness is built over relatively long periods of time, which helps explain the role that Families have