Investors may not remember Larry Bossidy, but he is one of the great business leaders of the 20th century. Bossidy worked at General Electric for over three decades where he ultimately became Vice-Chairman. He left GE in 1991 to become CEO of Allied Signal, a manufacturer that badly needed help. Bossidy's story offers tangible evidence on the power of building strong internal culture, which is a practice we value at Andvari.

A Career Built on Culture

During Bossidy’s tenure from 1991 to 1999, Allied Signal shareholders enjoyed a near-10x return. This was thanks in part to Bossidy instilling a strong culture and making sure company managers were 100% committed to it. 

When Bossidy arrived at Allied Signal, he recognized Allied had three business segments (aerospace, automotive, and chemicals) with distinct cultures. Although he did not erase the heritage of these segments, he had to instill a new performance-oriented culture. Bossidy expected Allied managers to embrace and use the concept and methods of total quality (TQ).

Allied defined TQ as “a commitment by all employees at all levels to achieve customer satisfaction through continuous improvement in the quality of all products and services.” Employees were involved in solving real business problems. Bossidy instituted rigorous internal and external benchmarking. He set lofty goals and expected them to be achieved with speed and excellence. Managers were evaluated and actively coached on areas in need of improvement. Bossidy also focused on training and promoting the best internal talent and forcing out those who could not perform or did not embrace TQ.

Regarding the adoption of the new TQ culture, Bossidy said this in a 1995 interview with Harvard Business Review:

We made a major commitment to use total quality as the vehicle to drive change. Everybody in the world has TQ or something like it. I want AlliedSignal to be the people who do it, not the people who talk about it. TQ does not replace goals; it’s the vehicle to facilitate progress toward your goals. 

Bossidy then explained the four types of people one encounters with any new organization-wide initiative:

Type 4 employees were the highest priority individuals to address according to Bossidy, because they would be testing everyone else’s resolve about accepting TQ.

Laying the Foundation for Positive Change

As a result of Bossidy’s efforts, management and employees embraced TQ. Allied had renewed vigor and a shared vision and purpose. Leadership embraced the responsibility of helping people live up to their full potential. If a leader could identify a trait that interfered with an employee’s improvement, they had “an obligation to point it out and to try to do something about it with them.”

The heavy investment into Allied’s culture preceded financial results which dramatically improved over Bossidy’s tenure. The capstone event for Bossidy was acquiring Honeywell (Allied kept Honeywell’s name) before his retirement in 1999.

Allied’s share price followed the company’s impressive results.

Andvari Takeaway

An authentic, performance-oriented culture is a key factor in whether a company produces average results or outstanding results. Bossidy instilled a culture of total quality at Allied Signal. He also protected the culture by letting go of people that didn’t care about Total Quality.

When an entire company is on the same page, everyone’s job becomes that much easier. It allows managers to train and retain exceptional leaders for the long-term. A company can grow faster for longer and provide more opportunities to its employees.

As Bossidy once stated, “I am convinced that nothing we do is more important than hiring and developing people. At the end of the day, you bet on people, not on strategies.” Andvari could not agree more. Culture is an essential component to extraordinary results.

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