Litton Industries

"Whiz Kid Tex Thornton, to Litton Industries,"

"Polaroid, Xerox, Litton Industries,"

"A word here about the company's farsighted arrangement, unique at the time, to gain maximum benefit from stock options as a lure for the best talent without diluting the stock of the shareholders. It came about partly by accident. In the agreement with Lehman Brothers, Tex had ear- marked a part of his personal stock to be used for the express purpose of inducements ( Tex held the largest and controlling share of stock, followed in order by Ash and Jamieson ap- proximately on a 2-1-1 basis ) . Thus Tex would be in a posi- tion to face any future criticism of stock options by share- holders (which has occurred as recently as 1966) by the unanswerable rebuttal that the shares involved were coming out of his own hide. And further, that since he was disposing of his own property in the best interests of the company, the details and terms of each transaction were nobody else's business. The advantages of such flexibility, he could also point out, in baiting the right hook for the right fish, were obvious when compared with the inflexibility of the custom- ary stock option plans which must meet the approval of shareholders."

"The facts, as Tex saw them after leaving Howard Hughes, were these. There was room in the market which Hughes had tapped for at least one more blue chip company similarly oriented in advanced technology, especially in electronics. Most of the smaller electronics companies that had begun rushing into the field would ultimately be eliminated or ab- sorbed; thus he must think from the beginning in terms of an enterprise capable of extremely rapid growth toward blue ribbon status. Such an enterprise could be created by the purchase of one solid, profitable company for a building block toward internal growth. Other companies could be acquired if necessary in order to buy time, which would be of the essence, but only if they were integral to Tex's master plan. A final fact of which he was certain, after his experi- ence at Ford and Hughes, was that the cream of executives, scientists, and engineers must be hired as rapidly as possible, and could be, not through high salaries but through the inducement of generous participation in responsibility, and in the fruits of potential victory via stock options. In sum, the market was there, in electronics and related technologies, with a tremendous growth potential, for a man who knew what he was doing and how to move fast."

"''Do it anyway/' Tex would tell him, as he was often to tell others, "and Til straighten it out later." A newly assigned captain sought the counsel of Edward K. Dunn, another gray-haired ex-Baltimore banker whom Tex had recruited. The captain was worried whether or not Thornton had given him sufficient authority to carry out his directive. "You might as well learn now as later," Dunn told him, "that Tex doesn't yield authority generously to guys who aren't strong enough to grab it.""

"The goal transcended what is commonly implied by the term "conglomerate." Conglomeration—mere bigness and diversity—represented one means of gaining a commanding position in several industries. Tex's goal was to fit all the pieces together that were needed to manufacture a single product. That product was capability: to accumulate the resources to move in any direction, in any industry, in any part of the world, and if need be to create new "industries" (for want of a more precise word) where none existed."

""As I see it, the outstanding characteristics which made it possible for him, beginning as a second lieutenant and not thirty years old, to build the Statistical Control system throughout the AAF and get correct action taken on the facts it brought in, are complete moral courage, unusual persist-"

"One of the lasting lessons which the future creator of Litton Industries learned from the elder Tex is that you can apply the simple solution of a small problem to a much bigger one. Two examples."

"No one, least of all Singleton or Thornton, knew whether or not the engineers could prove out their radical theories, but a salient trait of Tex's now came into play: he believed then and now that when a subordinate fosters a fresh idea, you don't try to shoot it down before he has had a chance to make it work. Thus he summoned up the guts to under-"

"Bernard Baruch once prescribed for success in any under- taking: one, study the facts; two, make a decision; three, take an action."

"The master plan, of which Tex has never lost sight, was all there in the germ: to build a company of literally un- limited growth potential, diversified enough and managed skillfully enough to take on any job that could be mastered by the application of advanced technology, in a new age of stupefying rapidity of change."

"Tex believes that cash from profits ought for the most part to be plowed right back into your acreage to produce a richer harvest next year, acquisitions included. He ruled out, and still vetoes, any suggestion of paying cash dividends, prefer- ring stock dividends. His argument seems impeccable, from"

"Tex approached each negotiation from the other fellow's viewpoint first. What would be the best deal if you were the one being acquired? This, then, he translated so far as pos- sible into the terms that would be most advantageous to Litton. Both sides usually won, as in the example of Charlie"

"In taking a look at each of those years, crowded with ac- tion, crisis, and decision, I shall continue to emphasize the growth—less of Litton than of Thornton—to new dimen- sions. How did he cope with the tiger of his own creation whose tail he could not let go of even if he had wanted to? He did so by further shifting his mental focus from close- ups, as they say in Hollywood, to the long-shot view of Litton's future course. The days of the close-up, in the sense of familiarity with each of Litton's products, were rapidly passing in 1959. There were simply too many products thousands—for one man to keep in his head. Shareholders must have found this swelling list of sophisticated products in the annual reports incomprehensible. But each of them was falling into place in keeping with the long-shot views which Tex was commanding through larger windows of the mind—windows through which he gazed on long horseback"

"One window looked out on space: what role should Litton play in its further exploration? Another window looked out on the atmosphere: where would the company's role fit into better mastery of that more familiar, yet vast medium? An- other window looked out on the earth itself and down into the oceans: what should Litton be doing to improve the human condition in that most familiar medium of all?"

"To Tex the move was a logical extension of his philosophy of thinking under broad headings rather than in terms of products. Ingalls was not "ships" but a part of "transporta- tion." Ships, like other units of transportation, represented new opportunities for the application of Litton's electronic and other technological expertise. In a tradition-bound in- dustry, he was confident Litton could devise better methods both of building and operating marine units of transporta- tion. He was to take his lumps, particularly after certain contracts were subsequently underbid, but the Ingalls ac- quisition may well prove a bulwark of the company's back- log in the years immediately ahead."

"But his favorite window opened on a vista of intangibles rather than things. How could the new technologies at Lit- ton's disposal contribute to the drastic improvement of existing practices in education, in health, in office routines throughout industry, in the storing and ready retrieval of knowledge, and in the mounting crisis of employment—of preparing the presumably unemployable for jobs? How could Litton pioneer a role of world citizen—and play an active economic part in the destinies of other countries, rather than merely buying from and selling to them? Why wouldn't it be a good idea for Litton to make its expertise in planning and finance available, on a partnership basis, to any country that sought help? *"

"The Durants' most sweeping finding was that man, and not his environment, makes history; they cite his capacity, repeatedly demonstrated, to create a culture in the face of the severest natural adversity. When they find that tech- nological advances represent little more than "new means of achieving old ends," they are not, as it might seem at first blush, in conflict with Thornton's position. Again, he can't change people, but he believes technology can enrich man enormously by improved "means" in his pursuit of the more laudable "ends." He is in tune with the Durants' affirmation that the heritage of modern man is richer than ever before, that there is no discernible limit to his long climb upward, and with their belief that "If progress is real . . . , it is not"

"Through the earth window, including the seas, his mental eye took a fresh look at untapped riches and unexplored opportunities. Litton must concern itself with marine tech- nologies which could help harvest vast new under-ocean"

"Part of Thornton's success in negotiations, too, can be traced to stamina. "Tex would just plain wear the other side out," a colleague told me. "He'd keep a bargaining session going all day and beyond midnight. Then, while the others were knocking off a few hours sleep, Tex would lie down for bodily rest only, staying awake and letting his mind sustain its fierce concentration. By breakfast time, his thinking had so far outstripped the opposition that they were glad to agree to almost anything out of groggy exhaustion.""

"If all the facts could be known, idiots could make the decisions. —Tex Thornton, cofounder of Litton Industries, quoted in the Los Angeles Times in the mid-1960s. This is my favorite of all managerial quotes."

"Myles Mace had been involved in building Litton Industries—one of the first financial conglomerates. He was an expert in board work and corporate acquisitions. He believed that three professional categories should not be on industrial company boards: lawyers, because they thrive on conflicts, bankers, because they start with financing rather than operations, and consultants, because they always have more alternative solutions than exist in reality. One should absolutely collaborate with these professional categories but never let them have control over decisions"