The last act of a Greek tragedy has been played with Erikson’s takeover of Marconi. There are many elements and actors in this sad story, but the one I can’t get out of my mind is Arnold Weinstock. In the early ’60s, when I first met him, Arnold was head and shoulders above any other manager in Britain - as he proved by turning the General Electric Company from basket case to stock market star. His methods were simple and direct. They included:
1) strict budgeting and holding managers responsible for delivering against forward budgets
2) rigid control of cash and repatriation of any surplus to the centre
3) abrasive questioning of managers to see if they were delivering the results for which they were held fully responsible in autonomous business units.
All this seems commonplace today, but in the enclosed, stuffy atmosphere of British business in that period, it was radical and greatly disliked by the fuddy-duddies who ran most of industry. However, success repeated year after year overrode the conservatives. GEC eventually took over the entire UK electrical and electronics industry - an amazing feat. Now, the Marconi sale removes pretty well the last brick in a totally destroyed edifice. What went wrong?
Weinstock’s strengths became weaknesses. The rigid financial and budgetary controls and inquisitorial methods stunted entrepreneurial zest over the very years in which new stars like Intel, Microsoft, Nokia etc. etc. were scooping up the growth and profits. GEC remained profitable and cash-rich, but its life blood was oozing imperceptibly away. At the same time, the domination of management by the genius boss made his underlings think like pygmies - even though they were running significant autonomous businesses. The result was that, on Weinstock’s wrongly delayed retirement, the successor management was unworthy, headed up by unsuitable imports who were tempted into a ridiculously rash attempt to repair the technological lag and realise their equally absurd ambitions in telecoms by acquisitions, mainly in the US, that proved wrong-headed and appallingly timed.
Throughout the debacle, Weinstock kept publicly silent, though privately critical. And words of his uttered to me in 1966 ring in my head: ‘Profit is not an objective. Profit is what you get from doing the right things right’. The fate of GEC is what happens when you do the wrong things. Doing them right is no protection.
Question: what are your strengths, and which could hold the seed of future weakness?
