ITT

Implementation Program: 1997-1998

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Background:

  • ITT Industries was a portfolio of over 25 separate businesses.  Investors viewed the company as an automotive supply manufacturer, despite significant positions in Water and Defense.  Recent investments to diversify away from Auto and reduce earnings cyclicality did not improve shareholder returns which had been lagging those of its peers for several years
  • The CEO, Travis Engen, was looking for a management framework and approach to create a more integrated operating company and deliver above average shareholder value growth
  • After a series of top management sessions which discussed the keys to successfully managing shareholder value, the company committed to a formal program to maximize sustainable shareholder value growth

Actions:

  • After a comprehensive review of the corporate portfolio and the economics and trends in the markets the company served, management embarked on a significant restructuring of the business portfolio:
    • Divested the economically unprofitable automotive businesses
    • Recycled proceeds from divestments to acquire attractive additions to the economically profitable Water & Defense businesses, followed by a systematic program to improve the operational efficiency of the new businesses
    • Followed by a systematic program to improve the operational efficiency of the new business
    • Standardized a consistent strategy, resource allocation and performance management process across all remaining businesses
    • Implementing a value-based training and management capabilities development program to reinforce the new management discipline

Results: (subsequent 5 year performance)

  • 152% increase in shareholder value vs. 14% decline in average industry peers and a 17% decline in the S&P 500