Restoring Credibility

Jan. 27, 2005

Ed Breen, Tyco International's chairman and CEO, works to gain the trust of investors, customers, government regulators and employees.

John McClenahen

Two years ago, when television portrayed Tyco International Ltd., a Bermuda-incorporated conglomerate, the focus usually was on the alleged misdeeds of previous management. Today, Tyco still is seen on television but in commercials that positively portray the $40 billion company's core products and services. This change is a product of the leadership of Edward Breen Jr., a former president and COO of Motorola Inc. who's been Tyco chairman and CEO since July 2002.

IW: You have said that the biggest challenge you've had since your arrival has been the process of restoring trust in Tyco's leadership. Where are you now in that process?

Breen: When I arrived [just over] two-and-a-half years ago, it was clear to me that the board of directors of Tyco needed to be changed, and we did that with every single person. And the senior corporate management needed significant change, and [now] the whole corporate team is basically new. To me, No. 1 was [getting] the right leaders in place. On that task we're where we want to be. The other area we spent a lot of time focusing on was the corporate governance side, and we certainly instituted a lot of structural change. For instance, we now have an ombudsman who reports to the audit committee. We have doubled the size of our audit team, and the head of audit reports to the audit committee. And we have a head of corporate governance who looks at all our processes, procedures, [and] delegation of authority [and] who reports to the nomination and governance committee of the board. And then what we have been doing for the last two-and-a-half years is an intense amount of training about what we want our culture to be and our governance to be like. But the fact of the matter is [in] that [area] you are never done.

IW: Why, as a part of restructuring, have you closed 227 facilities, shed 8,100 people, and sold 27 businesses for $2.1 billion?

Breen: When we really analyzed how we were going [to make the company more efficient and save money], we decided that we wanted to do a pretty large restructuring in fiscal '04 [which ended Sept. 30, 2004]. That's [when] we closed those facilities and reduced the head count. Restructuring and efficiency actions will continue in this company, and, quite frankly, will contribute a lot to our profitability over the next few years. [As to] the businesses that we sold . . . we very simply did an analysis of our portfolio and wanted to make the decision on what was core and strategic to the portfolio going forward and what potentially wasn't. When I [say] strategic [I mean] did it fit in one of the four core segments we wanted to grow long term. [Our] core [segments] are fire and security; health care; electronics; and what I would call engineered products or infrastructure services. They are great industries to be in; they have great growth dynamics; and we have a leading global position in these markets.

IW: What roles are Six Sigma and strategic sourcing playing in your building Tyco into an "operating" company?

Breen: When we say we're working to become world-class in operating, what we're doing are two things internally. We are very focused on organic revenue growth -- where can we drive additional growth in our core businesses without doing acquisitions. The second area is what I would call the operating excellence or operating intensity area. And under that falls Six Sigma, strategic sourcing, the rationalization of our real estate footprint and our focus on improving working capital. [Operating excellence] is really a catalyst, and what I would say is a culture of how we want to run this company for continuous improvement.

About the Author

John McClenahen | Former Senior Editor, IndustryWeek

John S. McClenahen, is an occasional essayist on the Web site of IndustryWeek, the executive management publication from which he retired in 2006. He began his journalism career as a broadcast journalist at Westinghouse Broadcasting’s KYW in Cleveland, Ohio. In May 1967, he joined Penton Media Inc. in Cleveland and in September 1967 was transferred to Washington, DC, the base from which for nearly 40 years he wrote primarily about national and international economics and politics, and corporate social responsibility.

      McClenahen, a native of Ohio now residing in Maryland, is an award-winning writer and photographer. He is the author of three books of poetry, most recently An Unexpected Poet (2013), and several books of photographs, including Black, White, and Shades of Grey (2014). He also is the author of a children’s book, Henry at His Beach (2014).

      His photograph “Provincetown: Fog Rising 2004” was selected for the Smithsonian Institution’s 2011 juried exhibition Artists at Work and displayed in the S. Dillon Ripley Center at the Smithsonian Institution in Washington, D.C., from June until October 2011. Five of his photographs are in the collection of St. Lawrence University and displayed on campus in Canton, New York.

      John McClenahen’s essay “Incorporating America: Whitman in Context” was designated one of the five best works published in The Journal of Graduate Liberal Studies during the twelve-year editorship of R. Barry Leavis of Rollins College. John McClenahen’s several journalism prizes include the coveted Jesse H. Neal Award. He also is the author of the commemorative poem “Upon 50 Years,” celebrating the fiftieth anniversary of the founding of Wolfson College Cambridge, and appearing in “The Wolfson Review.”

      John McClenahen received a B.A. (English with a minor in government) from St. Lawrence University, an M.A., (English) from Western Reserve University, and a Master of Arts in Liberal Studies from Georgetown University, where he also pursued doctoral studies. At St. Lawrence University, he was elected to academic honor societies in English and government and to Omicron Delta Kappa, the University’s highest undergraduate honor. John McClenahen was a participant in the 32nd Annual Wharton Seminars for Journalists at the Wharton School at the University of Pennsylvania in Philadelphia. During the Easter Term of the 1986 academic year, John McClenahen was the first American to hold a prestigious Press Fellowship at Wolfson College, Cambridge, in the United Kingdom.

      John McClenahen has served on the Editorial Board of Confluence: The Journal of Graduate Liberal Studies and was co-founder and first editor of Liberal Studies at Georgetown. He has been a volunteer researcher on the William Steinway Diary Project at the Smithsonian Institution, Washington, D.C., and has been an assistant professorial lecturer at The George Washington University in Washington, D.C.