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European CEOs Are Taking Charge

Europe's Best CEOs move decisively to fit their companies to today's recessionary realities while remaining poised to profit from an economic upturn. The region's top CEOs, such as SKF's Thomas Johnstone, are stepping up their dialogues with shareholders and customers.

Running a global company is no easy task in the best of times, but when the worst recession since the Great Depression strikes, a CEO is on the field alone, with no playbook.

The first instinct might be to hunker down, cut costs and wait out the storm. European chief executives are certainly taking a knife to their operations to boost efficiency. But the region’s top CEOs are also taking an active approach to the crisis, stepping up their dialogues with shareholders, customers and other stakeholders and looking for new growth areas to position their companies for an economic ­recovery.

“In times of crisis many companies become internally focused, but we did the opposite,” says Thomas Johnstone, CEO of SKF, the Swedish ball-­bearings and lubricants manufacturer. “We said it was important to get out there with the customers and stay in the ­market.”

Johnstone has looked for ways to lower expenses, cutting staff where necessary and putting on hold plans to open new ball-­bearings plants in India. But he also encouraged his sales force to minimize time spent on internal meetings and telephone conferences and instead get out and meet customers. That approach is a major reason investors name Johnstone as the best in Europe’s Engineering & Machinery sector, according to Institutional Investor’s seventh annual ranking of Europe’s Best CEOs.

“You can’t lose sight of the customer,” he says. “So we implemented programs last October to put salespeople out on the front lines much more and get people working with customers more actively. We told them, ‘Your job is in the market.’”

Given that he is the head of one of the biggest advertising companies in the world, it comes as no surprise that Maurice Lévy, CEO of Publicis Groupe, is voted the top CEO in the Media sector. Lévy is discouraging companies from cutting marketing budgets in the crisis — it’s a no-­brainer for many CEOs to slash spending on marketing; there is an immediate impact on costs. But Lévy warns that there is also an immediate consequence that could have an even more lasting effect: A company becomes invisible.

“The first thing that happens is you see a decline of sales, and the second is a decline in brand preference,” says Lévy. ­“It’s important to protect your brand for the ­future.”

[Click on the following names to read the executive profiles of SAB Miller CEO Ernest (Graham) Mackay, Publicis Groupe CEO Maurice Lévy, Compass Group CEO Richard Cousins, AXA CEO Henride Castriesand SKF CEO Thomas Johnstone.]

At his own company, Lévy is using the crisis to carry out some restructuring of the sprawling Publicis group and to accelerate the company’s push into digital media and ­technology.

The key, he says, is to understand that ­it’s all about communication. ­It’s about resisting the natural urge to seek shelter from the storm and put on hold efforts to find new business and target growth.

Henri de Castries, head of AXA and the top-ranked CEO in the Insurance sector, discovered anew the importance of maintaining close contact with shareholders when his company’s stock got pounded in March after rival American International Group reported a record loss of $62 billion. There was not much de Castries could do except pick up the phone or get on a plane and talk to investors and analysts and emphasize that AXA, Europe’s second-­largest insurer, had avoided the derivatives that undermined AIG and that its underlying insurance business was performing well.

“If we had forgotten it, the crisis is also showing us that communication in hard times is essential — communication with staff, with clients and with investors,” he says.

Ernest (Graham) Mackay, CEO of brewer SABMiller and winner in the Beverages sector, says he had to start looking after his wholesalers around the world. Many were no longer able to get bank financing because of the credit crunch, and Mackay decided to give them loans. “If our products ­don’t get to the market, that wholesaler goes out of business,” he says. “So we give them credit and work with those wholesalers to keep them in ­business.”

It’s hard enough negotiating the obstacles you can see. But if the new economy has taught CEOs anything new, ­it’s that what you ­don’t see coming can be deadly. ­That’s why CEOs remain cautious about signs of improvement in the ­economy.

“Our assumption is that the economy will remain difficult for the rest of the year, and ­we’re not even calling next year,” says Richard Cousins, CEO of contract caterer Compass Group and the No. 1 executive in the Business & Employment Services ­sector.

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