Even severe critics of Arnold Weinstock (and they were plentiful) must grieve at the circumstances of his passing - with a once-great fortune decimated by the near-destruction of his once-great company. It's a Greek tragedy of management: and as in all Greek tragedy, its negative elements carry powerful, positive morals.
The positive side of Weinstock's legacy extends far beyond the old GEC money machine which became the new Marconi bottomless pit. The young Weinstock was first of all young: he showed that new and radically-minded people were capable of shaking up the mausoleums of British management. He also showed how: by replacing wasteful overheads with tight controls that forced the managers of intelligently separated businesses to manage effectively.
The basic Weinstock methods have become all but universal, though often honoured as much in the breach as the observance. At the start his ideas were revolutionary (in Britain, though not the US). He gathered all cash into the centre: budgets became key growth mechanisms, testing managers harshly, not by improvement over past performance, but against their forecasts of future deeds. GEC budget meetings became famous (or infamous, according to taste) for the caustic inquisitions with which Weinstock withered the unfortunate.
The first critics, especially in the management mausoleums, regarded this new-fangled pressure as positively un-British. The gainsayers were swamped by the results: to immense City approval, Weinstock showed that ruthless, cost-averse management, holding managers to tough targets and key financial ratios, delivered in bucketfuls what is now known as 'shareholder value'. Alas: hindsight shows that the seeds of later decline were already being sown in that wonderful early success.
First, too much came to revolve round the central figure. Weinstock's first finance director, Sir Kenneth Bond, was an important partner. But the central apparat at GEC's relatively Spartan, small HQ took on the nature of a court. Weinstock's inquisitions and equally abrasive phone calls only strengthened this monarchical aspect. Managers often ran scared, and Weinstock's emergence, after two vast takeovers, as the emperor of all UK electrical engineering crowned his eminence.
The dilemma is general to chief executives, even those (which means most of them) weaker in mind and personality than the brilliant Weinstock. His theory of management hinged rightly on decentralization, leaving managers fully and freely responsible for delivering the goods and the goodies. But the big boss inevitably sets the style. The greater the success, the more potent this unseen but powerfully pervasive top-down influence. Awaiting those sharp phone calls from Stanhope Gate, allegedly deskbound GEC managers buckled down to making their numbers - and that, too, eventually undermined the Weinstock magic.
Back in the 1960s, defending himself against charges of over-emphasising profits, Weinstock averred that profit was not an objective, but a result - the result of doing things properly. This telling aphorisim is unarguable. So in the 1990s I was disconcerted to hear him declare that profit was all that mattered. The distance between Weinstock I and Weinstock II helps explain the changing reputation of GEC and its creator. His companies did many things properly: but were they the truly important things?
A tough financial regime, geared to profits, and applied through merciless inquisition, discourages risk. It's no sin to be risk-averse: the great manager, of course, seeks dead certs. The sin, though, is to miss opportunity. Weinstock's empire straddled the technologies and markets of latter century super-growth. Where companies like Nokia, Intel and Dell flourished, GEC had footholds, beachheads and even (as in telephony) large occupied territories. But its managers, whether or not they perceived these golden opportunities, seemingly lacked the appropriate motivation. The various financial targets were met, the cash mountain piled up, but the chances were all lost.
What you measure in management, by and large, is what you get. The financial conservatism that gave GEC so much strength could have been a platform for risk-taking opportunism. Companies badly need both virtues. But as negative forces worked through, GEC entered a new and troubling zone. Andy Grove, the chairman of Intel, has tellingly described the 'strategic inflection point' when revolutionary technologies (like his own microprocessors) radically change an entire industry. Miss that point, and the company dies. But that's only one way in which corporations can pass a point of no return.
The old GEC was a classic diversified conglomerate. Here financial controls link unrelated businesses whose preferred characteristics are established and protected markets, captive customers, cost-plus contracts, stable technologies and high margins. Even the similar ABB, with a far more dynamic record than GEC, has run into the same roadblock. Markets, customers and technologies are up for grabs in a fiercely competitive world where cost-plus plums and fat margins are dreams of yesteryear. Weinstock's successors were thus right on one vital matter: GEC needed reinvention.
Unfortunately, they moved from Safety First to something perilously close to Safety Last. Weinstock's defence and other babies were thrown out with the bathwater. But Weinstock wasn't blameless. He hung on too long. Super-bosses should be held to the same statutory retirement as anybody else. Supposedly, Weinstock was partly motivated by a wish (not shared by all others) for his son Simon to succeed. The latter's tragic death removed that possibility. But the whole approach offended against another golden management rule: never let powerful bosses have the decisive voice in appointing the succession.
Source : here
The first critics, especially in the management mausoleums, regarded this new-fangled pressure as positively un-British. The gainsayers were swamped by the results: to immense City approval, Weinstock showed that ruthless, cost-averse management, holding managers to tough targets and key financial ratios, delivered in bucketfuls what is now known as 'shareholder value'. Alas: hindsight shows that the seeds of later decline were already being sown in that wonderful early success.
First, too much came to revolve round the central figure. Weinstock's first finance director, Sir Kenneth Bond, was an important partner. But the central apparat at GEC's relatively Spartan, small HQ took on the nature of a court. Weinstock's inquisitions and equally abrasive phone calls only strengthened this monarchical aspect. Managers often ran scared, and Weinstock's emergence, after two vast takeovers, as the emperor of all UK electrical engineering crowned his eminence.
The dilemma is general to chief executives, even those (which means most of them) weaker in mind and personality than the brilliant Weinstock. His theory of management hinged rightly on decentralization, leaving managers fully and freely responsible for delivering the goods and the goodies. But the big boss inevitably sets the style. The greater the success, the more potent this unseen but powerfully pervasive top-down influence. Awaiting those sharp phone calls from Stanhope Gate, allegedly deskbound GEC managers buckled down to making their numbers - and that, too, eventually undermined the Weinstock magic.
Back in the 1960s, defending himself against charges of over-emphasising profits, Weinstock averred that profit was not an objective, but a result - the result of doing things properly. This telling aphorisim is unarguable. So in the 1990s I was disconcerted to hear him declare that profit was all that mattered. The distance between Weinstock I and Weinstock II helps explain the changing reputation of GEC and its creator. His companies did many things properly: but were they the truly important things?
A tough financial regime, geared to profits, and applied through merciless inquisition, discourages risk. It's no sin to be risk-averse: the great manager, of course, seeks dead certs. The sin, though, is to miss opportunity. Weinstock's empire straddled the technologies and markets of latter century super-growth. Where companies like Nokia, Intel and Dell flourished, GEC had footholds, beachheads and even (as in telephony) large occupied territories. But its managers, whether or not they perceived these golden opportunities, seemingly lacked the appropriate motivation. The various financial targets were met, the cash mountain piled up, but the chances were all lost.
What you measure in management, by and large, is what you get. The financial conservatism that gave GEC so much strength could have been a platform for risk-taking opportunism. Companies badly need both virtues. But as negative forces worked through, GEC entered a new and troubling zone. Andy Grove, the chairman of Intel, has tellingly described the 'strategic inflection point' when revolutionary technologies (like his own microprocessors) radically change an entire industry. Miss that point, and the company dies. But that's only one way in which corporations can pass a point of no return.
The old GEC was a classic diversified conglomerate. Here financial controls link unrelated businesses whose preferred characteristics are established and protected markets, captive customers, cost-plus contracts, stable technologies and high margins. Even the similar ABB, with a far more dynamic record than GEC, has run into the same roadblock. Markets, customers and technologies are up for grabs in a fiercely competitive world where cost-plus plums and fat margins are dreams of yesteryear. Weinstock's successors were thus right on one vital matter: GEC needed reinvention.
Unfortunately, they moved from Safety First to something perilously close to Safety Last. Weinstock's defence and other babies were thrown out with the bathwater. But Weinstock wasn't blameless. He hung on too long. Super-bosses should be held to the same statutory retirement as anybody else. Supposedly, Weinstock was partly motivated by a wish (not shared by all others) for his son Simon to succeed. The latter's tragic death removed that possibility. But the whole approach offended against another golden management rule: never let powerful bosses have the decisive voice in appointing the succession.
Source : here
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