The Clubby World of ITT

SEVERAL years ago, Harold Geneen complained about the image of the company that he heads: "You can stop 15 people in the street and not one will know what ITT is. That bothers me." Geneen hardly has that worry today. ITT is a household name. Everybody who reads the headlines knows that the International Telephone and Telegraph Corp. is the multibillion-dollar firm that quietly agreed to put up at least $100,000 to help finance this year's Republican National Convention, and shortly thereafter negotiated a controversial settlement in a classic antitrust case. But Geneen's interests scarcely run to backroom politics. By concentrating on business to the exclusion of almost everything else, including personal life, Geneen has built ITT into the eighth largest U.S.-based industrial concern and the biggest of all multinational conglomerates.

The man and the company are really indistinguishable. In an era of colorless hired managers, trim, short-haired Geneen has shaped a corporation that everyone in business identifies with him. When he became its president in 1959, ITT already was large, with sales of $765 million, but it mostly produced and ran telecommunications systems abroad. Under Geneen, ITT through a dizzying series of acquisitions has become a hotel operator (Sheraton), insurance seller (Hartford Fire), car renter (Avis), baker (Continental Baking), homebuilder (Levitt), as well as a maker of pulp and cellulose and a major shareholder in Comsat. Overseas it has been rolling like Patton's Third Army into cosmetics, food products, auto parts and construction materials. Last year it employed almost 400,000 people in 67 countries. They generated sales of $7.3 billion, excluding Chilean and insurance operations, and profits of $337 million.

Highest Paid. Geneen plays this corporate machine like an organ and tries to keep his fingers on every last key. A trained accountant, he thinks in figures--sales, profits, production, inventories. He requires subordinates round the world to send him reams of detailed reports, which he stuffs into several briefcases for perusal while being chauffeured to and from ITT's checkbook-modern Manhattan headquarters. His long working days are spent in meetings with ITT people, and his social engagements are related to business. Though he is perhaps the highest-paid executive in the U.S. (1970 salary: $766,755) he cares little for good food or wine, custom tailoring or other perquisites, and has no hobbies or compelling outside interests. His second wife June accommodates herself to his single-minded devotion to business.

The management structure of ITT is that of a federated empire. Division chiefs are free to run their operations, so long as they can convince Geneen that they are hitting his targets of a 15% compounded growth in profits every year, or have excellent reasons why they cannot do so. In order to check, Geneen summons more than 100 lieutenants to two monthly meetings, one in Manhattan and one in Brussels. The meetings, which are exhaustive reviews of all the figures and problems of each division, often last four days and nights.

Running them, Geneen lets junior executives put searching questions to their bosses, and he can be argued out of a position by a rare manager who possesses more facts than he does. But Geneen is also impatient, demanding quick figure-filled answers to his questions, and occasionally brutal, verbally flaying or simply ignoring executives who pose questions that he considers irrelevant. Working for Geneen is a tension-filled experience; ITT managers tend to be garrulous, because of the necessity of constantly justifying themselves. They find his constant demands challenging, if unnerving. They also are paid top dollar; five ITT executives drew more than $200,000 each in 1970. Geneen once publicly chastised an executive almost to the point of making him weep, then gave him a $10,000 raise. Moreover, executives who do well under Geneen are eagerly sought by headhunters. ITT graduates include Charles T. Ireland, president of CBS, and Robert Kenmore, chairman of the big Kenton Corp.

ITT executives form a tight club. Admittance comes only after eight hours of psychological testing, applied to everyone down to the lowliest employees. Once in, ITT executives speak to and socialize almost exclusively with other ITT people. The club has a mania for security; paper-shredding machines like the one that chewed up ITT's Washington files whine continually in most ITT offices. Returning from Washington on a company plane last week, Geneen cracked: "Now I guess we'll have to acquire a company that makes paper-shredding machines."

ITT has much experience in dealing with politicians, mostly foreign. Some of its best customers for telephone and telegraph gear are European and Latin American governments. Dealings with these government officials are often on a straight quid pro quo basis. For example, in bidding for a government contract abroad, the company might offer to build a plant in an underdeveloped part of the host country. Close ITT watchers do not find it the least unusual that the company--or, for that matter, many a large, powerful firm--when threatened with antitrust prosecution, would approach Administration leaders directly and do everything possible to weigh the scales in its favor. Geneen, cloistered in the company, might well be unaware of how damning some of these moves could appear to the U.S. public.

Hedged Bets. ITT's recent sorry relations with the U.S. Government raise some questions about its future growth. True, the trustbusters could have given the company a tougher deal; for example, they could have forced it to sell off Hartford Fire instead of the lesser Avis, Levitt and several other companies. ITT stands to collect about $600 million from those sales, and Geneen figures that he can reinvest the money--mostly in Europe--in ways that will raise profits by 10% to 12% a year. But the trustbusters have forbidden ITT from making any major acquisitions in the U.S. for at least ten years, and that will crimp its imperial aims at home. Beyond that, the political cloud cast over ITT is bound to affect its relations with customers, including the Government, in ways as yet unimagined.

Geneen's long-range goal is to leave ITT financially invulnerable, and to build a management group that can carry on without missing him. At 62, he has three years to do that before reaching mandatory retirement. Given his close identification with the company, any bets on ITT's future after he departs might have to be warily hedged.

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