Book Review Harbir Sin&

Managing, by Harold Geneen with Alvin Moscow. New York Double- day, 1984, 297 pp., $17.95.

In recent times, there has been a surge of interest in the role of the Chief Executive Officer in running the large corporation. This interest has been further enhanced by the visibility of golden parachutes and takeover defenses, which have brought the role of top managers as agents of stockholders into the forefront of public attention. In this context, the book Managing by Harold Geneen with Alvin Moscow pro- vides unusual insight into the challenges faced by top executives in large corporations. Written in a very candid narrative style, the book provides a rich characterization of Geneen's experiences and philosophy as the chief executive of a major conglomerate.

In describing his philosophy of running a business successfully, Ge- neen stresses three important themes: an emphasis on strong leader- ship, the need for strict control systems, and a healthy skepticism of conventional wisdom. In terms of his own performance, Geneen had an impressive record in the 17 years that he headed the International Tele- phone and Telegraph Company. During this period, the company showed an increase in earnings for 58 consecutive quarters, and grew in sales from $766 million to $22 billion. This period involved 350 acquisi- tions, absorbed and merged into over 250 business units.. Under Ge- neen's stewardship, ITT rapidly grew into one of the most visible con- glomerates of the sixties and seventies. This phenomenal growth rate was managed through a high degree of centralization in control sys- tems, and an emphasis on monthly face-to-face meetings with his profit center managers.

Geneen asserts that strong leadership is critical for success, and should complement impersonal control systems in the large corpora- tion. He strongly emphasizes the need for the leader to instill the corpo- ration with enthusiasm for achieving diffirult goals. Geneen fostered managers with intense drive to achieve results against all odds. Con- sider, for instance, the following:

I wanted the people in I" to reach for goals that they might think were beyond them. I wanted them to ac- complish more than they thought was possible. And I wanted them to do it not only for the company and their careers, but also for the fun of it. (p. 129)

Human Resource Mnnngement, Summer 1986, Vol. 25, Number 2, Pp. 353-357 Q 1986 by John Wdey & Sons, Inc. ccc ~ 5 $ 0 4 . O f J

Geneen’s extraordinary drive for achieving seemingly unattainable results is strongly in evidence throughout the book. In Geneen’s world, the price paid for underperformance is severe, as illustrated below:

The most difficult task of all is firing a man who is work- ing hard, doing the best he can, but whose confidence in himself outstrips his abilities. He’s in over his head. . . . It breaks your heart to tell such a man he is incompetent. After all, you probably gave him raises and promotions for ten years. It was you who put him in deep water over his head. (p. 137).

It is clear that Geneen was involved in an unending search for higher and higher levels of performance. Goals were precisely defined and expectations were clear. And there was no tolerance for underachieve- ment in terms of previously committed goals. However, Geneen reveals an aspect of his personality that is not as well known as the harder, more results-oriented side. He reveals some empathy for those employees he had to let go, and describes at length the difficulties in implementing his system of strict controls. Nonetheless, his continuing drive for achieving financial goals at any price provided the resolve necessary for making those difficult personnel decisions.

Geneen was aware of the possibility that the CEO’s style could be- come highly authoritarian, even with the best intentions to guard against such a development. Yet it appears that Geneen was unable to prevent this in his years at ITT. For instance, he asserts that top man- agers should be less concerned about whether their meetings end on time and more concerned about whether the purpose of the meetings has been fa i led , even if they over-run substantially. The benefits of having open-ended, flexible meetings, in Geneen’s perspective, signifi- cantly outweigh the inconveniences of running late in successive meet- ings. However, one wonders about the extent of rationalization embed- ded in this statement. For instance, Geneen admits, “Most men close to me understand that I am not concerned about the inconveniences I often cause them. They know that when I keep them waiting, I am engrossed in business as important as theirs. They also know that once I am with them, they, too, will have my undivided and unlimited attention” (p. 156). This indicates, however, that Geneen was not sensitive to the aggravation these delays may have created for his managers. Neverthe- less, one appreciates the candor in Geneen’s statements about the tra- deoffs implicit in his preferred style of management.

Geneen’s tendency of looking beyond pat answers to the complex decision problems faced by the CEO provides valuable insight into deci- sion-making in the large corporation. In particular, one senses a skepti- cism for theories as bases for running the large corporation. One of the earlier quotes in the book illustrates precisely this point: “Theory G: You

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cannot run a business, or anything else, on a theory" (p. 17). The tone of his brief and cursory critique of Theory X, Theory Y, and Theory Z makes it amply clear that Geneen does not advocate running a business using a specific set of presaibed guidelines, "because business, like life, is much too vital and fluid to be wholly contained by any checklist, formula or theory" (p. 29). This approach to academic ideas and conven- tional wisdom is consistently reinforced throughout the book. Yet, it is cIear that Geneen does have some guidelines on running the large cor- poration, which are described in narrative style as the book develops. These guidelines are embedded within the overd themes of strong leadership, exceptional commitment to performance, and strict organi- zational control systems. In his advice to new professionals, Geneen provides some "precepts" for success in the large corporation. Interest- ingly, these precepts, as Geneen describes them, are a combination of personal values, not a checklist of do's and don'ts. Selfconfidence, the resolve to confront the hard problems, and the ability to decide on the close calls, pave the way to managerid success. While Geneen has been well known for his numbers-oriented managerial style, he places great emphasis on the role of "intangibles" in contributing to success in the large corporation. He highlights the key role of intuition, and the ability of the decision maker to make accurate assessments building upon nu- merical facts as well as prior experience. Numbers can only facilitate the expliat recognition of traddfs, but not act as a substitute for probing questions and independent thinking. As the CEO of a 6rm that grew through over 300 corporate acquisi-

tions, Geneen accumuiafed unique experience in the process of evaluat- ing acquisition candidates. Geneen was a great proponent of growth into multiple areas of economic activity during his tenure as CEO. The philosophy behind the conglomeration of ITT's lines of business is per- haps best summed up by the statement: "a multi-industry, multi-prod- uct company covering a wide span of the economic sector has a built-in insurance policy against an economic downturn" (p. 214). While there may be some benefit to income-smoothing, such a claim clearly should be reconciled to Geneen's other goal: the maximiation of stockholder returns. An important implicit assumption behind this extensive growth through acquisition is that the intrinsic value (to I") of the acquired businesses would be higher than the market price paid for them. Clearly, some improvements in performance may have resulted from the aggres- sive management techniques employed at ITT. In many instances, some systematic analysis was done for selecting the acquisitions. However, there are some truly surprising anecdotes about acquisition decision- making. Geneen somewhat casually mentions that some acquisitions were made after only a ten- or twenty minute inspection of their books, without even a visit to the company. Such inadents d into question the extent to which the corporation was redy functioning as a profit-

Singh: Review of A4anaging I 3.%

oriented entity with a responsibility to its stockholders. This issue has been underscored in recent times by favorable stockholder responses to the large scale divestiture program (65 divestitures of unrelated busi- nesses totalling $1.2 billion) put into place by Geneen’s current succes- sor over the past five years. Despite the extensive divestiture program, ITT was the object of speculative investments by corporate raider Irwin Jacobs, in December, 1984 on the assumption that its liquidation value was more than the current market value of the firm.

A refreshing characteristic of Geneen’s style is the candor that is very apparent when he expresses his views on different aspects of running the large corporation. A particular area of such commentary deals with the relationship between boards of directors and the incumbent man- agement of the firm. Geneen unequivocally asserts that the boards of large, publicly-held corporations are dominated by inside members ei- ther from or highly supportive of incumbent management. As a conse- quence, he argues, the role of the board as the representatives of the stockholder interests is substantially curtailed. He advocates opening up board memberships to a larger proportion of clearly independent mem- bers. Such a view is particularly provocative in the context of an increas- ingly more active hostile takeover market.

Geneen has very definite views on the likelihood of preserving and fostering the entrepreneurial spirit in large corporations. In this context, he makes strong statements on the current popular trend, the promo- tion of ”intrapreneurship.” While Geneen agrees that entrepreneurship is critical in any organization, irrespective of size, he adopts a pragmatic view about the likelihood of achieving such attitudes toward risk in the large corporation. In this section, we simultaneously note his conserva- tive attitude towards risk, as well as his ability to select those ideas that are likely to work in the large corporation. In Geneen’s view, while top management should make every effort to support and encourage new ideas, it is important to recognize that large size does foster a tendency to maintain status quo. Therefore, managers of large corporations should accept this characteristic of their organizations as a constraint, and attempt to offset this by exploiting other benefits of scale, instead of attempting to emulate the smaller, more maneuverable entrepreneurial organization.

Overall, this book leaves the reader with mixed feelings of respect for the individual, Geneen, and ambivalence towards his philosophy of running the large corporation. It becomes apparent why Geneen was such a success in his heyday as the CEO of ITT: a combination of inde- pendence, unconventionalism, and great intuition. The book provides considerable insight into the process of decision making in the large, diversified corporation. There is, however, a strong element of rational- ization, particularly with regard to managerial style and the tradeoffs involved in the evolution of Geneen’s style of management. Also, there is a tendency to avoid the more difficult and complex issues: for exam-

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ple, was it appropriate for ITT to have become such a highly diversified conglomerate corporation? Nevertheless, the provocative discussions on control systems, Ieadership, boards of directors and intrapreneurship provide a very useful basis for examining the inherent challenges of running the large corporation. Overall, the book provides unusual in- sights into the role of the CEO and his influence on all stakeholders of the firm in a refreshingly outspoken and candid style.

Harbir Singh is an Assistant Professor of Management at the Wharton School of Business, University of Pennsylvania. He has a Ph.D. in Business Administra- tion from the University o f Michigan and a Bachelor’s Degree in Electronics Engineering from the lndian Institute o f Technology, New &hi. He has com- pleted several research studies on strategic issues relating to cmporate mergers and acquisitions. For his dissertation research, he was awarded The Business Policy and Planning Award for Outstanding Research in Strategic Mianage- ment, 1985 by the Academy ofMamgement.

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