Firings, cuts, closures, empty offices, cash savings, geniuses? It brings back memories.

The practice of massive, arbitrary worker firings is nothing new in business history.  In 1981, Jack Welch took over GE, a nearly century-old technology and innovation company, and within five years, had fired over 25 percent of its workforce, 112,000 employees.  He earned the moniker Neutron Jack.  Comparable to the effects of a neutron bomb, the buildings were left standing, but the people were gone.  The savings he kept for himself and Wall Street millionaires.  Wall Street hailed Jack Welch as a business genius.  

He largely gutted the culture of innovation, which had been a hallmark of the GE brand. Innovation is complicated. It takes too much time, can't be rushed, and requires expensive specialized talent and facilities.  After the first five years of cashing out decades of built-up value that had sustained the company through business cycles, he focused on acquiring and cashing companies out for the next fifteen years.  This led him to Minneapolis in 1999.

It wasn't Jack, but his loyal henchman, Larry Bossidy.  Bossidy was chairman and CEO of AlliedSignal after a 34-year career at GE, where he was Welch's second-in-command.  In his first eight years of running AlliedSignal, he fired workers and began acquiring companies, primarily small aerospace companies.   These companies were ripe for the cashing out strategy as they had spent years building high-quality products and had a significant installed base that could only be replaced with their flight-certified spares.  These companies had built their business on innovation that should have maintained their superiority well into the future. 

In 1999, Bossidy turned his take-over attention to Minneapolis and Honeywell, the largest aerospace components company.  (We would later discover this was part of a deal made with Jack Welch. Bossidy had to do the dirty work.   Jack was downplaying the neutron label now, focused on making GE the world's largest capital leasing company.)

AlliedSignal made an offer to buy Honeywell with a stock swap.  As part of the deal, Bossidy told Wall Street there would be a $54 million savings in synergy.  We soon learned that savings meant our research center in North Minneapolis would be closed.  We invited our CEO, Bonsignore, to face us.  At our standup meeting in the cafeteria, he acknowledged that maybe we had something to offer and would push for an investigation to find this synergy elsewhere, giving us a chance to defend our value.  Also, at that meeting, he was asked if this merger would qualify him for the $10 million bonus he would get for growing the company to $10 billion by 2000.  His quick reply, "Damn right it does!" 

Bossidy would also get his $20 million bonus for growing his company to $20 billion by 2000. The combined company would have sales of $25 billion.  We researchers understood this agreement as two people taking our salaries and giving it to themselves as a bonus.

We got the opportunity to defend our value to the company.   In November, fifty people from Honeywell and fifty from AlliedSignal came together for two weeks of meetings in Phoenix, Arizona.  Ten rooms were set up where one division from AlliedSignal would meet with a division from Honeywell to compare R&D plans related to aerospace products.  After four hours, the small divisional teams would rotate to meet with a different group.  The meetings were cordial and informative.  The one thing we all understood is that aerospace innovation took, on average, fifteen years from idea to product sales.

A trend began to appear with all the AlliedSignal presentations.  They had almost the same plans year after year.  They explained that although they planned their innovation projects, no people were available to do the work.  Those innovative employees had been let go after the acquisition.  Those savings added to the bottom line.

We repeated the meetings during the second week but now directed to identify synergy where budgets could be cut.  These meetings took an entirely different tone.  What seemed like good ideas last week now were questioned and criticized by the other division.  It was pointed out that the AlliedSignal groups had plans for innovation, but since being bought by AlliedSignal, they had no resources to deliver.  Their product line was beginning to show signs of weakness from the lack of advancements.  Discussions were tense.  We saw the research as critical for maintaining our world-class products; they saw a chance to finally have resources to get their research back alive.

As the week drew to a close, we had identified the $54 million of budget cuts, at least on paper.  The two CEOs arrived in their separate corporate jets to hear the plan.  The atmosphere was tense because both sides realized they were competitors.

We all became AlliedSignal employees on December 1, 1999.   Most of the upper management positions in Minneapolis had been eliminated and the former world headquarters closed.  The next day, the company changed its name to Honeywell.  This move seemed more like a desperate attempt to cover up its past of business disasters than a genuine step forward.

The following October, GE made an offer to buy the new Honeywell.  Jack Welch extended his planned retirement until the deal was done.  However, in July 2001, the European Union overwhelmingly denied the merger on the grounds it would lead to unfair business practices in the aerospace sector.  Welch had previously attended the EU meeting admonishing the European Union that he decides business deals, they do not.  This was not successful, Welch retired, and Wall Street lost interest in GE.

The following year, 'synergy' at Honeywell continued with the research center being closed and the $54 million pocketed.  Four Twin Cities Honeywell buildings, most evident the Headquarters along I-35W, sat empty.

But twenty-five years later, it’s useful to consider the lasting effects on our aerospace capabilities. The short-term gains of cost-cutting strategies often come at the expense of long-term innovation and growth.  Our aerospace industry is in trouble.  Business schools no longer teach the Neutron Jack style of profit harvesting as a good business practice. 

Implementing this strategy in a government is absurd.  Not only is it out of date, but history indicates that future generations can only suffer.  Unlike businesses, citizens can't just switch to a different government when things go wrong.  Governments must provide security and well-being to their stakeholders for an indefinite future.

Providing security for citizens is complicated.   As we've learned the hard way, security against disease must be obtained through a global strategy and effort.  Food security and our borders are only stable if the world has enough to eat from locally grown foods.  Environmental sustainability can only progress as an internationally coordinated effort.  Like we’ve learned with innovation, the best ideas come through teams of diverse expertise.

A cost-cutting business model for government will necessarily lead to bigger problems than nose-diving airplanes, spaceship mishaps, midair collisions, and unreliable billion-dollar fighter jets.

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