Avoid Catastrophe Before Chasing Growth

"Busy men never have time to do all of the things that need doing. Many have a tendency to get beguiled by the peripheral aspects of running a business. In Indian Head we have always said that the main priorities of executive attention are these, and in this order: Number i: Avoid catastrophe!!! Number 2: Keep the show on the road. Meet or beat the current plan. Number 3: Plan for future profit improvement. Don't go off chasing rainbows with grandiose growth schemes until you are sure that you have been minding the store, don't start vast proj- ects WITH HALF VAST IDEAS.'"

"The disparity between the forecasts of Textron's earnings and the re- sults actually achieved is a subject which must be of concern to the Direc- tors. The figures for the first quarter of the current year reveal how over-optimistic we were a year ago. The earnings for 1956—again after high hopes—amounted to only $6,502,592. In the years 1949 to 1956 in- clusive, the average earnings per year on the Common Stock were 60 cents. There must be a reason why a Company which engenders so much ex- citement as Textron, and which so confidently proclaims the wonders it is about to perform, so invariably fails to meet expectations. In the opinion of the writer of this memorandum the explanation of this unhappy record is that too much is expected of the Chairman. Granted that he is the creator of the Company and the person to whom"

"alone credit is due for bringing it from its humble beginnings to its pres- ent size, and, acknowledging his quite exceptional mental powers, the fact remains that except for those years in which conditions were abnormally favourable he has never been able to translate his brilliance into anything commensurate in the way of earnings; but for the shareholders these, in the long run, far transcend in importance the pleasure they may derive from witnessing feats of virtuosity on the part of the Chairman. Mr. Little, in fact, has the defects of his qualities. To the same extent that he is bold and imaginative, he is impulsive and unpredictable. He moves with great speed and determination, and on many occasions the Directors have been presented with what were, in effect, faits accomplis which they have accepted through acquiescence rather than conviction. The resultant mistakes have been on such a scale that they have more than outweighed the successes, and this has been repeated so regularly that it has formed a pattern. The moral of the tale is that the Directors must take a more positive and critical attitude towards the conduct of the business. They must not assume that because a new project is recommended to them in persuasive terms that all is for the best in the best of worlds. It should be an invari- able rule that no proposal be adopted without the unanimous consent of the Board, and if any single member expresses disapproval, or even doubt, it should be immediately dropped. This does not mean that Textron will ever be a quality Company for its limitations are becoming increasingly clear, but at least it should be possible to avoid a repetition of such farci- cal situations as the S.S. LEILANI. What is suggested above is only a defensive measure. If anything of a more constructive nature could be devised that would be an additional source of strength to the Company."