Take Care Out There!
(Many would like to put your funds to work - some more than others)
Lord Weinstock was longtime director of England's electronics giant General Electric (subsequently renamed Marconi), which under his direction grew into Britain's largest industrial conglomerate, only to see the company collapse to near bankruptcy after his departure (including the loss of his personal fortune).
He died of cancer on Tuesday July 23, 2002 at age 77.
One of the fundamentals of his wealth-building strategies was to utilize the potential of his creditors – his “Accounts Payable”.
Insights from GEC Staffers:
- "Lord Weinstock couldn’t sleep if he thought his £3 billion company [paid] a penny [on time].He reveled in the way in which his company owed money. Payment terms to subcontractors were horrendous: 120 days, 150 even. That's how he built the cash pile, by making his creditors wait.
- "The small Melbourne subsidiary I worked for owed the milkman $6,000 on 120 days. It wasn’t a big place.
- "GEC insisted that we insist on 30 day payment from customers. Our customers within GEC, however, demanded 90 day payment terms. The differing terms of payment demanded by GEC from its suppliers and its customers meant that, in theory, no two GEC companies could ever agree terms with each other."
Lord Weinstock.
Remarkable and influential figure of British industry.
by Nicholas Faith
ARNOLD WEINSTOCK was one of the most remarkable and influential figures in British industry for over 30 years. He left a contested legacy: supporters pointed to the new tone of precision and sharpness he had injected into British industry in the 1960s; his increasing number of detractors pointed to the negativism, his failure to produce a proper strategy for the electrical and above all electronic manufacturing sector dominated by the General Electric Company, the giant he dominated for over 30 years.
Indeed, it is not too much to see that had he shown the slightest breadth of vision Britain would today be a world leader in every aspect of electronic manufacturing.
Weinstock was born in north-west London in 1924, the last of six children and very much an afterthought – his youngest sibling was 18 years old when he was born. Both his parents had left Russian-occupied Poland as part of the major Jewish exodus in the first years of the 20th century.
At Weinstock's birth his father, Simon, who was in the clothing trade, was 50, his mother an extraordinary 46. By the time Weinstock was 10, both his parents had died and he was taken in by his older brother Harry. The family lived in Highbury, where the young Arnold first showed his life-long enthusiasm for music in the local synagogue.
At the outbreak of the Second World War, Arnold Weinstock was at the Stoke Newington Central School (not quite of grammar school status) but was evacuated to deepest rural Warwickshire where, after a year, he was lucky to find hosts who encouraged his music-making (in the choir of the local Anglican church). He was also lucky that one of his teachers, Freddy Fogg, had accompanied the children and, as Weinstock later said, "became a sort of surrogate father. He made me take an interest in work which no one had been able to do before."
Thanks to Fogg, the young Weinstock's results in his Matriculation examinations, particularly in mathematics, were good enough to get a place at the London School of Economics. He arrived in Cambridge, where the LSE had been evacuated in September 1941, when he was only 17 and young for his age. He found the work intellectually exciting but was "regarded as a self-possessed and self-contained person who went his own way and avoided socialising". Throughout his life he was self-reliant. Partly a result of not having had a close family life he had learned to fend for himself. He was expected to get a first class degree but achieved only a lower second.
When he graduated, Weinstock was posted to the Admiralty's statistics department at Bath where he found another father figure, a Scottish major, James Mackay who taught him the importance of writing clear and forceful reports. During three intellectually satisfying years, Mackay also helped him grow from the gauche youth he had remained even after graduation. But Weinstock was never going to be satisfied with a civil servant's salary – £250 a year at the time. Throughout his life he lived in a high style, a notable contrast to the Puritanism, indeed meanness, he displayed at work.
He was a bon viveur who, even when his children were young, would take them out to meals at Claridge's or other expensively showy venues. The country house he bought in 1967, Bowden Park in Wiltshire, was one of the most successful designs by the architect James Wyatt, an estate which required a staff of nine, as well as two full-time gardeners.
Weinstock's first job in business came in 1947 because his elder brother Jack cut the hair of Louis Scott, an estate agent and property developer based in Mayfair. While Weinstock had none of the flair and willingness to take risks associated with property development and indeed used to pretend that the seven years he spent at Scott's had been wasted, in fact he showed an enormous capacity for the detailed work required on planning law and taxation.
On a personal level, it was through Scott that he met his future wife, Netta Sobell, at a dinner and in 1949 they were married. The new Mrs Weinstock was the daughter of Michael Sobell, a venturesome manufacturer of radio and later television sets and in 1954 Weinstock joined his father-in-law's business.
The 30-year-old Weinstock speedily showed the first sign of his management style. With colossal self-confidence he immediately took charge, largely ignoring his 63-year-old father-in-law who was suffering from prostate problems. Weinstock concentrated on producing – efficiently and profitably – basic products that worked in contrast to his competitors dominated by engineers who did not believe as did Weinstock that "the customer is king".
By 1958 when the Sobell company was floated on the Stock Exchange under the name of Radio and Allied it – and Weinstock – was established as among the most formidable operators in the whole electrical sector, a reputation that enabled them to take over the much larger General Electric Company (which had no connection with the American firm of the same name), a firm that had lost its way after the death of its founder. The takeover left Sobell and Weinstock in control, with 14 per cent of the share capital of the combined firm. In the icy month of January 1963, less than two years after the takeover, Weinstock and his accountant colleague Kenneth Bond, moved into GEC and began a clean-up operation that set the style not only for GEC but for much of British industry in the decades to come. Dead wood – starting with the former chairman – was ruthlessly eliminated. In doing so, Weinstock set a pattern more familiar in the 1990s of "lean management" and flat organisation, which proved highly effective within very strict and unimaginative limits. Weinstock's attitude: "either you do it my way or you go", typical of his brutally frank style, was greeted as a breath of fresh air within the cumbersome GEC bureaucracy.
Head office was tiny and centred round Weinstock, Bond, a lawyer, David Lewis, and, surprisingly, a personnel director, Jack Scamp, who proved enormously useful in helping with the redundancies which were a permanent feature of Weinstock's reign over GEC. The company at one point had over 250,000 employees, although these had been reduced to 170,000 by 1974 and ended up as just 57,000.
In 1967-68 Weinstock enjoyed two take-overs which left him as the uncrowned king of British manufacturing industry, a success due largely to the Wilson government's desire to create British contenders in major manufacturing sectors through the Industrial Reorganisation Corporation. The take-overs of Associated Electrical Industries (AEI) and English Electric (EE) were marked by Weinstock's reliance on government influence, a trait that was to grow over the years to compensate for his total inability to grow his businesses. The two groups were very different: AEI was a complacent, snobby, over- organised mess, taken over after a bitter contested bid.
Had it failed, Weinstock would have offered his resignation – though he expected it to be rejected. The take-over was the biggest single sign of the overthrow of the old industrial establishment by newcomers in league with new institutional money from pension funds and unit trusts. By contrast EE was much healthier, and run by the son of the founder, George Nelson, backed up by world-class engineers in power generation, in railway engineering and, above all, in electronics. Unfortunately EE was relatively heavily endebted and anxious to escape from a bid by Plessey so Weinstock got the group very cheaply and at the age of 44 found himself charge of a group with 228,000 employees.
Weinstock was greeted as a hero, but soon showed his limits – typically, as managing director he brushed Nelson, the chairman, rudely aside. For he was a one-man band – "the board is in constant session", he said during one bid. His management style was purely financial, dominated by figures and ratios, his object "the arrangement of the most economical use of resources". He would test managers to destruction through his aggressive posture and would never praise, attitudes which were a reaction to the pomposity, the financial sloppiness he had found at GEC and AEI, but were totally unconducive to growth. He couldn't bear to be criticised, often suing for libel, and suppressed one book about him.
His obsession and fear of failure led to an insistence on details – for head office was not there to help. There were no consultants for they would dilute management responsibility, and no committees either, for Weinstock dreaded meetings. His need to divide and rule meant that there was no organised liaison between individual subsidiaries and thus no scope for joint initiatives. His meanness meant that "the GEC" as he invariably called it was a by-word for delays in payment while Bond used to let applications for capital investment wait until the executives involved went ahead on their own initiative.
In theory he should have been an arch-favourite of Margaret Thatcher but, by the time she arrived, his reputation – even in the City,
formerly the centre of the Weinstock cult – had begun to fade, largely because of the build-up of his legendary cash mountain, the result of a systematic failure to invest in new sectors and new products. By that time he was regarded as one of the industrialists who demand help from government, a dependence which greatly damaged GEC because of the dilatory habits of major customers like the Ministry of Defence, the Post Office and the Central Electricity Generating Board and their refusal to take into account the export potential of the equipment they ordered. For her part Thatcher was anxious to increase competition through privatisation and to control the excess easy profits earned by defence suppliers, whose contracts were charged on a "cost plus" basis. Weinstock's problems with defence contracts came to a head with GEC's inability to produce the electronic equipment for the projected Nimrod early-warning aircraft.
But by far Weinstock's biggest failure was his inability to exploit the wealth of talent available in the group in civil electronics. He was notoriously ill at ease with technical matters and, as one ex-GEC executive told Stephen Aris (Arnold Weinstock and the Making of GEC, 1998) "There were a tremendous number of opportunities but Arnold Weinstock chickened out of all of them." Typically, his attempt to bring together all computer divisions failed to provide the dynamism would have led GEC into personal computers.
After his government-supported triumphs in the 1960s, his meanness, timidity and lack of vision prevented him from succeeding in a number of bids, for the ailing German electrical giant AEG, for Racal – which would have given him control of the infant Vodafone – and above all his failure to bid for British Aerospace in the early 1990s. At one point Plessey formed a group to bid for GEC to avoid being taken over. After a long-drawn-out struggle, GEC and Siemens jointly carved up Plessey. Typically this involved ceding management control to Siemens, for Weinstock was always much happier with joint ventures even if these left him with a minority stake and lack of management control.
Indeed, by the time he left, much of the group had been hived off into such partnerships, with the American GE over domestic appliances and with the French firm of Alcatel Alsthom on power systems and railway engineering. In the early 1990s, when well past the normal retirement age of 65, he still refused to discuss the succession. He had hoped that he would be succeeded by his son Simon, a capable merchant banker whom his father had brought onto the board. But in 1996 Simon died of a stroke in his early forties.
The death left Weinstock "physically and emotionally devastated" wrote Alex Brummer and Roger Crowe (in Weinstock, 1998) "but he buried himself in his work, refusing to take any time off until his August vacation". As he wrote himself, "It is not possible for me to accept that the world continues to exist without Simon." The idea of Simon as a business partner was a dream. Where the son did help the father was as a brilliant manager of the Weinstock-Sobell racing interests, based on his father-in-law's stable. Weinstock himself always loved racing. Indeed when told that he was "more interested in horses than human beings", he said. "I think you're right." Weinstock's racing career, based on the acquisition of the racing stable owned by Dorothy Paget was a success. His horse Troy won the 200th Derby and in 1978 he was elected to the exclusive Jockey Club (anti-Semitism had blocked his application to join Brooks Club).
Although Weinstock never showed any interest in tracing his Polish-Jewish ancestry, he was Jewish to his core and not only through his atavistic love of gambling – on horses. He and his wife paid their first visit to Israel as early as 1949, his conversation was peppered with Yiddish words and he took care to have Simon buried in a Jewish ceremony although he had married a goy. And one of his eight favourite records on his Desert Island Discs was a Mahler symphony, chosen because of its Jewish element.
Obviously Weinstock will be remembered not by his love of music but by his business record. In terms of stability this was remarkable, during the bad times of the 1970s GEC's share price and profits kept up far better than those of comparable foreign firms but at the cost of a lack of dynamism. While he was at the helm GEC's sales rose 12 times while those of Siemens leapt 41 times and in recent years its shares have performed just as well. Moreover Weinstock bequeathed only one truly world-class business, GEC-Alsthom, power and railway engineering combine and there the management was overwhelmingly French.
When he was succeeded by George Simpson in 1996 he naturally felt bitter "I've been hounded out," he remarked to one visitor – and within a few months the small band of loyalists were purged and a new forward-looking programme was successfully put in place based on the cash mountain and the high-tech talent which had remained in the group.
Nicholas Faith
NICHOLAS FAITH is one of Britain's best-known journalists. After an education at Harrow and Oxford, he has been an assistant editor of The Economist, Industrial Editor and Deputy Business Editor of The Sunday Times. He is now a Contributing Editor to the Independent on Sunday.
