CEO Transform Thyself

By Donlon, J. P. | Chief Executive (U.S.), September 2006 | Go to article overview

CEO Transform Thyself


Donlon, J. P., Chief Executive (U.S.)


In turning Textron around, Lewis Campbell found it necessary to turn himself around. BY J.P. DONLON

Performance improvement is on every CEO's agenda and most reckon they have a clear idea about how best to pursue it. Details in the playbook may differ from company to company but the broad strokes are familiar to most leaders. Every now and then a CEO will reach a critical point in his or her career where he must decide whether or not to throw out the playbook and start again. But in doing so sometimes a leader must also re-examine the standard playbook in his own head-the assumptions, ideas and received truths that have filled his or her mind over many decades of experience that have served the leader well. After all, it's probably what brought him to the comer office in the first place.

A Duke University-trained mechanical engineer, Lewis Campbell, 60, joined Textron as EW and COO in 1992 after a 24-year career at GM, where he held a number of key management positions including general manufacturing manager of GM's Rochester Products Division. A William Holden-type with glasses, the soft-spoken Winchester, VA, bom executive sporting his trademark blue shirt looks the part. He became president in 1994 and CEO four years later. From the time he joined the company to a year after he became CEO he saw Textron's share price rise from 20 to 98. (The company is perhaps best known for its Bell Helicopter, Cessna Aircraft and E-Z Go golf carts as well as its role, along with Boeing, for producing the V-22 Osprey in addition to other specialized military vehicles.) But six quarters into what looked like a promising start as CEO, Campbell faced the perfect storm.

In May 1999, Textron shares fell nearly 70 percent from its 98 peak at about 24x current year earnings to around 30 in late 2001. Much of the decline was precipitated by poor capital allocation decisions that led to illadvised acquisitions of unfavorable industrial businesses. The company's EPS-focused business model that awarded quarterly accretion forced management to invest funds in acquisitions to avoid dilution. This was made worse by a collapse in the business jet market that sent Cessna into a nosedive. To make matters worse, overearning industrial businesses such as E-ZXSo, Jacobsen and Greenlee started to turn south. The operating income lost from these businesses alone represented an earnings drag of $0.60 a share. The downturn following 9/11 only made things worse.

Many CEOs facing such a crisis would be content to fall back on their own experience. Campbell chose not to. Subordinates describe him as someone who has a willingness to learn new things and perhaps more importantly, to change himself.

As the granddaddy of conglomerates Textron was exhibiting business model fatigue. Each of its businesses was expected to meet its EPS targets and deliver a tribute to corporate.

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