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Harold S. Geneen (1910-1977): chief executive of International Telephone and Telegraph (ITT).

Harold Geneen is known for turning ITT from a moderately successful American-based company into a massive international conglomerate which ran like a machine during the 1960s and 1970s. In 1961 ITT's sales were just over $760 million, with a profit margin of $29 million. When Geneen relinquished the post of Chief Executive in 1977, ITT was the largest conglomerate in the world. It had merged with, absorbed or taken over some 350 companies of all shapes and sizes in 80 countries, generating sales of $17 billion and earnings of over $500 million.

Descriptions of Geneen have varied from power-mad, hard-nosed, obsessive, paranoid or despotic on the one hand to, on the other, committed, disciplined, perfectionist, determined. Whichever are most accurate, he left behind a business machine that was almost without parallel in terms of the systematic efficiency which characterised its operations and the simultaneous awe and dread that ITT and Geneen inspired in the workforce.

In Sir Michael Edwardes' introduction to Managing, Geneen's autobiography ghosted by Alvin Moscow, it is pointed out that ITT, with its more than two hundred profit centres and products, made repeated annual increases in profits of 10-15%, whatever the economic and political circumstances, during Geneen's stewardship.

Life and career

Harold Sydney Geneen was born in Bournemouth in the UK in 1910. Though his parents moved to the USA when he was one, he remained fond of England, and London, all his life, partly because he felt more able to preserve his privacy and personal safety there than in the USA.

After leaving school at the age of 16, Geneen became a page in the New York Stock Exchange, and was working there during the Great Crash. He soon realised that he was skilled with numbers, began evening classes at New York University, and went on to join the accountancy firm of Lybrand, Ross and Montgomery. He worked in a number of other companies, including Bell and Howell and a Pittsburgh steel company called Jones and Laughlin, setting up strict financial control systems.

In 1956 Geneen was hired, at the age of 47, as Executive Vice-President of Raytheon, a giant electronics company. There, he moved in his own people, set up his own control systems and started to acquire companies. By 1959 he had increased Raytheon's earnings per share from $2 to $3.50. Geneen, while beginning to be known for motivating people with sticks as well as carrots, was also gaining a reputation for drive and commitment. When he left Raytheon, shares dropped by 6.5 points.

ITT

ITT was founded in 1920 by Colonel Sosthenes Behn, a charismatic entrepreneur who wanted to build a company to rival AT&T (American Telephone and Telegraph). He gave his company the name ITT with the intention of engendering confusion, and during his career there acquired a range of telephone companies outside the USA.

Behn, a commanding man, whose cosmopolitanism and negotiating skills held ITT together as a loose conglomerate, left ITT in 1956. He was a hard man to replace, and Geneen, who made it quite clear that figures were his strength and that he would run a tight ship, was hired by a firm of recruitment consultants in 1959. By this time, most of ITT's $765 million annual sales came from overseas interests.

Geneen's management of ITT

When Geneen found that most of ITT's profits were coming from Europe, and that only one person in the New York HQ seemed to know about the European operation, he started on a tour of his foreign interests. During this, he learned that ITT managed the overseas subsidiaries through a kind of laissez-faire independence, leaving them to do more or less as they pleased. Geneen noted the waste and lack of control that this allowed, but also a consequent potential, with stricter controls, for higher profitability.

Over the next few years, Geneen implemented a system of controls, reviews, checks and crosschecks, pressures and measures to ensure that there was no room for surprises or errors. He wanted all problems to surface, believing that the human element was not so much to be distrusted as inclined not to reveal everything that made up the whole picture. Geneen achieved his overview of the complete picture by means of a number of integrated control mechanisms:

* Every year, his managers would submit fully documented five- and one-year plans and then weekly, monthly and quarterly reports to measure progress against these plans. Geneen would sometimes spend 200 days each year locked in meetings with his executives going over these plans and the reports on them.

* These meetings were confrontational in their nature. Using his instinct, Geneen would sense problems, and continue probing until he got to their root in terms of `unshakeable fact'. An added dimension was that managers would listen to the cross-examination of others, knowing their own turn would soon come. There was no way of beating this system, and managers unable to adopt the Geneen way either left or were fired. At the end of Managing, in a chapter curiously entitled `On Caring', Geneen discusses how, to accomplish objectives, a manager has to have the necessary information to make decisions. He describes facts as power, and refers to the need for solid facts in order to be able to recognise the reality of a situation.

* Geneen implemented a structure of checks and balances so that problems would rise to the top. He said that, while he did not want to see every piece of information, he did not know what to ignore until he had seen it:

* His Personnel Department was an elaborate--and high-status--mechanism for evaluating people, testing performance, screening new recruits and measuring suitability for promotion.

* His financial control systems were so thorough that his chief controller could check the movements of all inventories, excessive stocks and unprofitable products, to see if resources could be better allocated or if a product was nearing the end of its life-cycle.

* When a problem needed further investigation Geneen would assign a taskforce to tackle and solve it. These taskforces cut right across the organisation and reported to Geneen.

* Parallel systems of several people were instituted to explore the same problems, passing up information for review and resolution. This meant that up to four or five people might work simultaneously on the same thing. While one manager might have felt responsible for an area, in actuality several could be, on and off. Integration meant not only co-operation but also disempowerment.

* Geneen was a workaholic and expected the same commitment from his executives. He would regularly work until 10.00pm or later, seven days a week, and then take home reports to absorb before starting again next morning at 10.00am. He required his executives to put firm before family and be available whenever he required them. He claimed that, if he had enough time, arms and legs, he would do all the work himself. While his managers may have been no more than extensions of himself, he paid them well, to ensure that they committed themselves to ITT.

Geneen's penchant for systematic controls apart, he possessed an unusual capacity to store and recall minute details and so keep the overall picture of ITT in his mind. He also seemed to know exactly when to pursue a problem to unearth the unshakeable facts which would, in turn, reduce or eliminate the surprise element.

Geneen and Acquisitions

Geneen's control systems were in place by 1963. His planning for the second phase proposed a doubling in ITT's size in five years, based on massive expansion and diversification. By swallowing up a ragbag of companies whose only unifying characteristic was a potential for profit, a company that could make anything anywhere was to be created. A guest would ultimately be able to book into an ITT hotel (Sheraton), use an ITT phone, hire an ITT car (Avis), park it in an ITT car park (APCOA), buy ITT insurance (Abbey Life), buy ITT potato chips or candy (Continental Baking), and so on.

A first major problem occurred in the mid-1960s, when Geneen tried to buy ABC (American Broadcasting Companies) and diversify into leisure and media. The Federal Communications Commission had deep suspicions about ITT's meteoric growth, influence, power and potential for restricting or eliminating competition. After two years of fighting the FCC and the Justice Department, which initiated investigations into ITT's influence with foreign governments, Geneen called off the bid. The ABC affair brought doubts about Geneen's methods and ambitions into the open, and raised the spectre of a commercial organisation dominating international news.

The acquisitions continued, however, and painful reorganisation usually followed each European acquisition, according to Anthony Sampson.

In the late 1960s, when Geneen was trying to buy an insurance company, Hartford Fire, ITT attracted the full attention of the Senate Anti-Trust Committee. From 1869, under US anti-trust laws, it was illegal to act in restraint of trade, set up monopolies, or interfere with free trade and competition. The Federal Trade Commission had evidence that by the end of the 1960s, over 60% of the USA's manufacturing assets were held by just 200 corporations.

Geneen's view that a conglomerate was more useful to society than government because it created work, jobs and prosperity was a factor behind the anti-trust exchanges between ITT and the US government. In the Hartford case, Geneen was pitted against Ralph Nader, who saw Geneen as a dictator more interested in power than profit, wanting to build up his own economic nation-state.

Following lengthy anti-trust proceedings, ITT was able to acquire Hartford but had to divest itself of other major corporate assets, and was not able to acquire others valued at over $100 million. The value of ITT stock fell by $1 billion in the next three days.

When Geneen retired in 1979, he found it hard to let go of power, and dabbled in the affairs of his successors. Even in his late 80s he continued to work a 10-hour day from his office in a New York hotel. He died in 1997 and in the same month ITT was taken over.

Geneen in perspective

Geneen's harsh style of leadership is firmly located in the outdated Taylorist camp, and seems totally out of kilter with prevailing approaches that stress empowerment and adaptation to changing market conditions rather than the seeking of immunity to them.

Geneen's focus on cash, mergers and acquisitions, together with the dominance of numbers, facts and logic in everything he did were important to ITT's success. During the anti-trust battles, Geneen's major defence was that the organisation's spread of interests secured it against economic fluctuations. Geneen's methods and outcomes, however, alienated many, while vast interests and industries were obscured beneath the ITT shroud, and no-one outside ITT could know how profitable the individual subsidiary companies were.

In his last book, The synergy myth, published in 1997, Geneen saw the fall of ITT as a justification of his own methods, which advocated growth rather than consolidation as the key to enduring success. This verdict, however, fails to take account of the fast-changing external environment, or of the more free market dynamics of the 1980s and 1990s. For Anthony Sampson, ITT's fundamental weakness was that, by nature, it could not tolerate more than one entrepreneur, or the sort of creative people who are essential to real innovation.

Geneen had exceptional qualities, especially in terms of mind for detail, and he achieved exceptional success for ITT for many years. As Sampson stresses, however, the demanding system of controls that he set up at ITT required relentless hard work and great stamina.

Further reading

Books
Managing, Harold S Geneen with Alvin Moscow
London: Granada: 1984

The synergy myth: and other ailments of business today, Harold S Geneen
London: St Martins Press, 1997

The Sovereign State, the secret history of ITT, Anthony Sampson
London: Hodder & Stoughton, 1973
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Publication:Thinkers
Geographic Code:1USA
Date:Dec 1, 1999
Words:1973
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