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I read that Tektronix was planning on moving their scope production to
China. I believe they are down to less than 4000 employees from a peak of
24,000. that will drop much farther if production moves to China.
the FIRST thing Danaher should have done was fire all the TEK beancounters
and upper management. They ran a great company into the ground.
By the time Danaher got to them, the real criminals were long
gone. The bean-counters that had done the largest damage to
Tek, anyway.
In and around the year 1982, Tek had about 24,000 employees
and their gross revenue was almost $1.4 billion. This worked
out to something like $62k/employee. In that same year,
IBM's figure was near $125k/employee. I was making on the
order of $36k, that year, and I believe in that year profit
share was 0% (or close to it.) When I had started, in 1979,
profit share was 16% and the folks who had been there when I
arrived said that was down from about a more usual figure of
about 20%.
I'd been there about four years at the time and I have to say
that from the down-in-the-trenches place I lived -- 3 manager
levels inserted between me and the president -- I couldn't
have noticed better loyalties. I almost never saw an empty
office on saturdays or even sundays when I would also stop in
to work towards a calendar target I'd been given. I didn't
mind contributing to that spirit, either. It was wonderful
to be a part of and I felt good about playing a small role
shouldering work with others, too.
Not that it was a majority working week-ends, or that all
week-ends were filled with busy little elves making santa's
toys. People had lives. We were all part of something and
we had an identity. We knew who we were and that was part of
a whole team. Some of that team were able to make extra time
sometimes. Some weren't. But we never doubted the whole
team we were part of. We just each played the roles we
could, when we could.
The bean-counters were not so blind they couldn't see a bad
gross revenue per employee ratio. Especially since that is
one of the easiest and first calculations the MBAs there made
each year. However, apparently, they had a very difficult
time measuring this sense of pride and spirit and work ethic
and it never showed up in their 10k report where only numbers
and ratios make the grade.
By the end of 1981, the bean-counters on the board level
hatched some plans. They didn't believe in themselves,
didn't trust their own ability or the executive staff's
ability to take risks and succeed. And they didn't believe
in their employees or undertand the sense of place and
identity a great many of us had there, and what that could
mean when and if the executives chose to ask us to push hard
and get something done for them.
They could ask and I think many of us would have gone the
extra mile, instantly, had they merely said they have a goal
and need us to push towards it. That's something you can't
write down on a 10k report, but it sure is something that can
make a huge difference if you set your mind to achieving
important goals and need the rank-and-file to get behind you
to get a job done.
Profit share was down. Gross-revenue-per-empoyee was a mess.
Another factor loomed to the board of directors. Leveraged
buyouts were increasingly in the news and a serious danger to
Tek around that time. Tek had, circa 1982, $600 million
dollars at US National Bank. On their 10k report, it was
also clear that Tek had no short term or long term debt. They
were debt free, flush in cash, and looked about like slab of
juicy meat to an LBO-buyout-dog. The board decided to act, I
think, starting in 1981 and continuing forward to begin
buying their own stock shares back. I don't remember the
budgets set aside for that, but the amounts were huge and
intended to draw down some of that $600 million and become
less of a target.
But to get the gross-revenue-per-employee figure back up, I
think it was in 1982 that they also offered early retirement
to over 800 employees as a step to try before going on to
change an old policy and start firing people, wholesale.
You see, stories I heard when arriving were that if your job
wasn't needed anymore, Tek would allow you quite a long time
to run around the company and find some other area where they
needed you. And they would maintain some kind of salary for
you, too. That was quite a sense of security to have.
What shocked the board (I spoke with a board member for hours
about this), was that just about all of them took the early
retirement offer -- 795 is the figure I remember... in any
case, it was nearly 800. And the offer was made to some 820,
or so. Jim Castles told me that executive staff had planned
to that about 200 would.
I spoke personally with Jim Castles about this, who was on
the board. This conversation was in late 1983, while I was
running about securing venture capital (seed money) for a new
business I'd decided to start with four others. In the
process, the capitalist types put me in touch with Jim, but
the discussion turned to the subject of Tektronix for a bit.
(We succeeded, by the way, and launched a new company and a
product that was rated top in its class in national
publications. But that is another story for another time.)
I had been seeing what had happened to Tek in a short year or
two, before leaving. People were actually being let go,
without any time to find other work. Profit share was 0.
People showing up on weekends had significantly dropped.
Loyalty was falling. Etc. That was the context.
But I could not believe my ears, early in talking with Jim.
Apparently, they just wanted to avoid being an LBO target and
also to get the gross revenue/employee figure up. Buying
stock was the decision to inhibit the LBO part. Early
retirement and a change in employee policy allowing them to
just fire people with two weeks' notice was another.
But it was so obvious to me those were bean-counter steps,
not the steps of what you expect from top leadership in a
company. It's the kind of thing a CPA might do. But not the
kind of thing a captain of industry does.
(1) Never buy your own stock back. You sell stock because
you know how to do more with money than others do. That's
why you are in business. If the best thing you can do with
your cash is buy your own stock, you should find something
else to do.
(2) $600 million in cash in a bank and no debt is a good
thing, not a bad thing. Yes, you might be easy pickings as
an LBO target, but the solution isn't to throw the cash away
buying stock. The answer is to put that money together with
the money of others and do something with it. Be an active,
not a passive, manager of it. Tek had no debt. They could
have easily secured another $2 billion on their credit and
lack of debt and the fact that they could also contribute
that $600 million (it was NOT set aside for payroll, in case
you are wondering ... this was cash over and above operating
cash levels.) Going into debt is a great way to avoid being
a target.
The question is... what to do with all that.
Gee. I don't know. Let's see. Tek's bean-counters figure
there are too many employees. Maybe 10,000 too many by that
revenue/employee ratio, or more. Tek could muster $2.5
billion in a matter of a months' time. What a place to be!!
This means they would be able to enter any business arena,
cold turkey, with 10,000 employees already hired up and in
their seats, $2.5 billion dollars in cash to move forward on,
and... well... it was so clear to me because of all the work
I'd been doing, struggling for venture capital... that this
was a situation ANYONE IN THEIR RIGHT MIND would have drooled
for. It's like a wet dream. Who wouldn't want to have an
army of loyal employees, willing to work weekends if needed,
ready to go and 2.5 billion in cash to push along in some
direction??? Cripes. That's what everyone wishes for,
dreams about, and never gets to have. And here Tek was,
sitting on this possibility and deciding to bean count
themselves into the ground, instead.
It made no sense.
And I told Jim that, standing there next to him simply
shocked as I began to learn the fuller picture. I was
working my ass off for $1 million. It was like pulling
teeth. Those venture types were brutal about it, too. And
here I was learning the details of a company that was two
inches of vencture capital heaven, fully in their control,
and they were walking in the OPPOSITE DIRECTION!! I was
flabbergasted. Damn, would I have killed for that!!
The problem was, they didn't believe in themselves. To
succeed, you don't have to make the best decisions. You just
have to be able to make the decisions you do make, work out
much of the time. If you can navigate reasonably well, even
if the course you set isn't perfect, you will do okay. But
they didn't even believe that about themselves. They were
scared and had no confidence about managing that wonderful
situation they were in.
Some answers to the revenue/employee question are "get the
revenue up, keeping the employees the same" Another is "lose
employees, keeping the revenue the same." Apparently, the
only thing they felt confident to do was "lose employees."
But with that kind of cash availability in hand and the
existing employees, they could have chosen the other route --
had they had confidence in themselves to manage the needed
steps moving forward. But they didn't believe in themselves
about setting such a course. So they let that opportunity go
and instead chose to sail the company into the rocks,
instead, further ruining loyalties of some very good people
and letting go the core of all of those who'd been there 20
years and more and who formed the nervous system within the
company that _I_ relied upon when I needed to know who to go
to on some subject. They gutted, via early retirement; the
bought their own stock back rather than going into debt for
some new, confident business direction, and they started a
two week notice practice besides.
Damn, what anyone wouldn't have done to be able to pull
together billions of dollars and thousands of vetted
employees willing to work weenends for them. And they had
that right there, sitting on the table in front of them. And
because they didn't believe in themselves enough, because
they doubted their abilities, they pushed that away and chose
a bean-counter's approach.
The sad thing to me is that in late 1983, all that was clear
as crystal. Jim didn't argue with me. We just stood there
sadly discussing this disaster. At the time we were talking,
I think there were still about 22 thousand employees, which
Tek was actively working downwards. Much of the banked money
was gone. The 20+ year employees gutted out of the company.
The iceberg had hit the titanic, the hull ripped, but she was
hadn't yet sunk. But we could see the inevitable.
Jon
