News: Analysis & Commentary: EXECUTIVE SUITE
MAN OVERBOARD AT MANPOWER
The CEO's heir apparent is suddenly walking away
For months, executives and board members of Manpower Inc. have planned a grand fete on July 13 in Paris for more than 100 French customers at the plush Pierre Cardin restaurant along the Seine. The party will celebrate the sponsorship of the World Cup by the world's largest temporary help firm and highlight Manpower's French presence.
But these soccer fans are likely to be a bit subdued. On July 6, Manpower announced the abrupt resignation of its chief European executive and chief financial officer, Jon F. Chait, amid a management shakeup brought on in part by an earnings shortfall in France, Manpower's second-largest market, and mounting corporate expenses.
From numerous accounts, Chait, 47, was seen by insiders and investors as heir apparent to Chairman and Chief Executive Mitchell S. Fromstein, 70. Executives who know Fromstein and Chait--who is not commenting--say Chait was increasingly keen to get on with it. But retirement isn't on Fromstein's agenda. What's more, Fromstein, a dominant figure in the industry for nearly two decades, seemed to have cooled to Chait, a lawyer who joined Manpower in 1989. "I wasn't willing to make a selection from one candidate at this time," says Fromstein. Now, the betting is on Jeffrey Joerres, 39, who will oversee Europe, excluding France, and all global accounts.
Differences between Fromstein and Chait appear to have boiled over as Fromstein planned to dismantle Manpower's European headquarters in Brussels that he had set up in 1995 and that Chait had run. Now, country managers will report directly to the Milwaukee headquarters. Chait wanted to oversee France, which could generate 40% of Manpower's revenue this year, say some insiders. But Fromstein says the sheer size of the market argues for his direct oversight. "We need to shorten the lines of communications and reporting."AWKWARD TIME. Now, board members will be mulling how to get a grip on mounting costs and the margin squeeze in France, which some insiders say stem from a drive for market share. Directors also soon may deal more directly with the question of who will succeed Fromstein, who has been CEO since 1976, except for one month when he was ousted after a hostile 1987 takeover by Britain's Blue Arrow PLC. He was reinstated at the behest of angry franchisees.
Indeed, the shakeup comes at an awkward time. Manpower's stock is at about $28, down from a 52-week high of $50.38. A new computer system is late and may cost $25 million more than initially estimated. Morgan Stanley Dean Witter & Co. analyst Adam Waldo figures that Manpower sales will rise 18% this year, to $10.5 billion, but income will fall 12%, to $144 million. "It is vital to shareholders that credibility be restored," says Jane R. Davenport, a vice-president at Montag & Caldwell Inc., Manpower's largest shareholder.
Could Manpower be vulnerable to a raid? Some investors think it's not impossible. Waldo is not predicting a takeover, but Fromstein, who regained management control in 1988, dismisses the possibility. But the normally gregarious executive admits that recent months have been "humbling." He insists costs will be brought under control and that earnings will soon rebound. That could give Manpower reason to really celebrate--next year.By Richard A. Melcher in Chicago