An In-House Wasp

So the three men mainly responsible for corporate policy and planning — David Wright, Ramo, and President H. A. Shepard —seek to bring the company's four groups together as often as possible, and let their leaders develop, on their own initiative, a greater awareness of the interconnection of their interests and a closer coherence in their planning. As chief executive officer, Dave Wright, sixty-one, fully assumes and firmly exerts his ultimate responsibility for determining plans and goals. 'But this is the kind of organization,' he says, `that has to be led, not driven with a bullwhip.' Horace Shepard, fifty-three, was an Air Force general in charge of procurement and engineering at the Pentagon before joining TRW in 1951. He became general manager of company-wide operations in 1961, and president the following year, succeeding Dean Wooldridge. (Wooldridge, who retired to engage in scientific research and writing, remains a director of TRW.) In the course of their Vermont stay, Wright and Shepard, apart from the amenities of office they had to exercise, virtually slipped into the crowd and allowed others to dominate the show. Dr Ramo, fifty-three, is now free from specific administrative duties and is engaged in a continuous study of TRW's relationship to the world around it, and in keeping the company alerted and attuned to a changing environment. Ramo, who was really the architect of this year's conference, buzzed around the fringes, deliberately playing the wasp in an effort to sting the group into livelier debate.

Apart from its general objective, Vermont '66 had a very special mission. Back in 1961, when the company was doing barely $400 million in sales, the Vermont conferees, taking a deep breath  and a long look, set a goal of $1 billion in sales in 1970. It seemed an ambitious aim. But by the summer of 1966 there was every reason to think the goal would be reached in 1968, or earlier. Thus it was determined that Vermont '66 should make a start on articulating a new goal for 1975.

It was not the intention, at this meeting, to settle on a firm quantitative goal for 1975. Rather, an attempt would be made to bring out the pertinent issues, and fork over the material out of which the ultimate plan would be built and shaped. During the ensuing months individual executives would be expected to subject their respective pieces of the program to detailed study and refinement. In July 1967, the group will return to Vermont with the specific objective of constructing a definite 1975 goal.

They are gathered here, therefore, to exchange and argue out ideas, not chew over figures. And the talk runs the gamut —changes in the world power situation, limited war, supersonic planes, city planning, electronic transportation systems and Martian fly-arounds. Nevertheless, there are mountains of figures that have to be cited, comprehended, and carried about in the mind if all this brainstorming is to have substance and direction. To lead off the conference, the heads of the four operating groups take an hour each for an analysis and forecast — minimum, probable, and possible — of their respective markets. As the figures flash by on the screen, the minds of the men gradually adjust to the business dimensions that are implied by a trillion-dollar national economy in 1975. Items:

Executive Vice President Stan Pace of the Equipment group takes the conferees through an analysis of the revivified U.S. aircraft industry, with its prospects of a rise in sales of commercial and military jet engines alone from the recent $1.5 billion to $3.5 billion in 197•. Pace does not spell out, at this session, the figure his group might shoot for in 1975. He will only say that `thanks to these favorable trends, we will reach our internal growth goal for 1970 ($200 million in sales) three years early.' The rough arithmetic, including selective acquisitions, suggests that $500 million to $700 million is an appropriate outside estimate for Pace's group.

Executive Vice President R. F. (Rube) Mettler of Systems, whose principal customer is the government, is more concerned with the enhancement of his profit margins than with his rate of growth, which right now is moving the fastest of any division in the company. 'On a selective basis,' he concludes, we could do $700 million to $800 million in 1975.'

Group Vice President Sid Webb, of TRW Electronics, trying manfully not to let the color-TV boom lend too optimistic a color to his long-term judgments. 'I'm not yet ready to put a figure on our 1975 sales, but it is probably in the magnitude of five times our present size.' This would put Webb's group in the area of $300 million.

Finally, Executive Vice President Ed Riley rings in with his exhaustively researched analysis of the transportation-equipment market. A deliberate man, given to understatement, his minimum forecast, based on a 'normal internal growth rate', lives up to form — a mere $600 million. But Riley's division has recently been pursuing a vigorous acquisition program, particularly in the international field. And with a worldwide market of $62 billion in automotive parts in prospect for 1975, Riley takes a shot at TRW's possible share. The figure: $1.8 billion. (At which a voice from the back of the barn comments, 'Look at conservative Ed Riley copping on to the whole damn company goal for 1975.')

Intertwining Evaluation and Empirical Analysis (lb)

The quickest way to understand how values are handled in the method of successive limited comparisons is to see how the root method often breaks down in its handling of values or objectives. The idea that values should be clarified, and in advance of the examination of alternative policies, is appealing. But what happens when we attempt it for complex social problems? The first difficulty is that on many critical values or objectives, citizens disagree, congressmen disagree, and public administrators disagree. Even where a fairly specific objective is prescribed for the administrator, there remains considerable room for disagreement on sub-objectives. Consider, for example, the conflict with respect to locating public housing, described in Meyerson and Banfield's study of the Chicago Housing Authority (5) - disagreement which occurred despite the clear objective of providing a certain number of public housing units in the city. Similarly conflicting are objectives in highway location, traffic control, minimum wage administration, development of tourist facilities in national parks, or insect control.

Administrators cannot escape these conflicts by ascertaining the majority's preference, for preferences have not been registered on most issues; indeed, there often are no preferences in the absence of public discussion sufficient to bring an issue to the attention of the electorate. Furthermore, there is a question of whether intensity of feeling should be considered as well as the number of persons preferring each alternative. By the impossibility of doing otherwise, administrators often are reduced to deciding policy without clarifying objectives first.

Even when an administrator resolves to follow his own values as a criterion for decisions, he often will not know how to rank them when they conflict with one another, as they usually do. Suppose, for example, that an administrator must relocate tenants living in tenements scheduled for destruction. One objective is to empty the buildings fairly promptly, another is to find suitable accommodation for persons displaced, another is to avoid friction with residents in other areas in which a large influx would be unwelcome, another is to deal with all concerned through persuasion if possible, and so on.

How does one state even to himself the relative importance of these partially conflicting values? A simple ranking of them is not enough; one needs ideally to know how much of one value is worth sacrificing for some of another value. The answer is that typically the administrator chooses - and must choose - directly among policies in which these values are combined in different ways. He cannot first clarify his values and then choose among policies.

A more subtle third point underlies both the first two. Social objectives do not always have the same relative values. One objective may be highly prized in one circumstance, another in another circumstance. If, for example, an administrator values highly both the dispatch with which his agency can carry through its projects and good public relations, it matters little which of the two possibly conflicting values he favors in some abstract or general sense. Policy questions arise in forms which put to administrators such a question as: Given the degree to which we are, or are not, already achieving the values of dispatch and the values of good public relations, is it worth sacrificing a little speed for a happier clientele, or is it better to risk offending the clientele so that we can get on with our work? The answer to such a question varies with circumstances.

The value problem is, as the example shows, always a problem of adjustments at a margin. But there is no practicable way to state marginal objectives or values except in terms of particular policies. That one value is preferred to another in one decision situation does not mean that it will be preferred in another decision situation in which it can be had only at great sacrifice of another value. Attempts to rank or order values in general and abstract terms so that they do not shift from decision to decision end up by ignoring the relevant marginal preferences. The significance of this third point thus goes very far. Even if all administrators had at hand an agreed set of values, objectives, and constraints, and an agreed ranking of these values, objectives, and constraints, their marginal values in actual choice situations would be impossible to formulate.

Unable consequently to formulate the relevant values first and then choose among policies to achieve them, administrators must choose directly among alternative policies that offer different marginal combinations of values. Somewhat paradoxically, the only practicable way to disclose one's relevant marginal values even to oneself is to describe the policy one chooses to achieve them. Except roughly and vaguely, I know of no way to describe — or even to understand — what my relative evaluations are for, say, freedom and security, speed and accuracy in governmental decisions, or low taxes and better schools than to describe my preferences among specific policy choices that might be made between the alternatives in each of the pairs.

In summary, two aspects of the process by which values are actually handled can be distinguished. The first is clear: evaluation and empirical analysis are intertwined; that is, one chooses among values and among policies at one and the same time. Put a little more elaborately, one simultaneously chooses a policy to attain certain objectives and chooses the objectives themselves. The second aspect is related but distinct: the administrator focuses his attention on marginal or incremental values. Whether he is aware of it or not, he does not find general formulations of objectives very helpful and in fact makes specific marginal or incremental comparisons. Two policies, X and Y, confront him. Both promise the same degree of attainment of objectives a, b, c, d, and e. But X promises him somewhat more off than does Y, while Y promises him somewhat more of g than does X. In choosing between them, he is in fact offered the alternative of a marginal or incremental amount off at the expense of a marginal or incremental amount of g. The only values that are relevant to his choice are these increments by which the two policies differ; and, when he finally chooses between the two marginal values, he does so by making a choice between policies.'

As to whether the attempt to clarify objectives in advance of policy selection is more or less rational than the close intertwining of marginal evaluation and empirical analysis, the principal difference established is that for complex problems the first is impossible and irrelevant, and the second is both possible and relevant. The second is possible because the administrator need not try to analyze any values except the values by which alternative policies differ and need not be concerned with them except as they differ marginally. His need for information on values or objectives is drastically reduced as compared with the root method; and his capacity for grasping, comprehending, and relating values to one another is not strained beyond the breaking point.

The Way They Think at TRW

On the greensward of the drowsy old farm nestled in the Vermont hills, looms a gnarled, majestic elm that the agronomists guess must be at least two hundred and fifty years old. And lounging under its shade this summer day, in slacks and open-throat shirt, Vice Chairman Simon Ramo of TRW Inc. — some 3000 miles removed from his Los Angeles office — is conversing with a quartet of companions. For all the serenity of the surroundings the talk is pretty intense. 'We surely have to anticipate,' Ramo is saying, `that at some point there will be a major effort to break the nuclear stalemate. And it may well take the form of research in systems — in which TRW could take a prime role — that will make major use of advanced technology as a psychological and strategic tool for the enforcement of peace. For example, the development of a global, real-time orbiting system capable of detecting and destroying illegitimate intruders in space.'

Ramo and some forty-eight other top TRW executives gathered in small groups about the premises are on their annual hegira to this pastoral retreat, which is the modest ancestral homestead of Frederick C. Crawford, the company's retired chairman. Here, away from the pressures of daily operations, they spend a solid week each summer in frank and philosophical discussion of the company's problems and potentials, and in the structuring of its long-term plans and goals.

The practice, of course, is not unique with TRW. It is a common complaint of corporate managers that they are often imprisoned by their own bureaucracy, and become so involved in the multiplicity of business doings that they don't have time to draw back and think. So every so often they pick up in a body and flee. Union Carbide maintains a lodge in the Thousand Islands, and Continental Oil, a ranch in Texas, for such occasional soul-searching. Periodically, several hundred General Motors' executives take over the Greenbrier in White Sulphur Springs, West Virginia, for several days of reviewing and previewing corporate policies and plans. Each company has its own style of doing these things.

For the TRW executives, who have been holding these Vermont meetings since 1952, it must be said that the living is extremely simple, and the work load fairly full. Fred Crawford's house can sleep only four or five guests. The rest put up at various small motels and hotels in the area, and drive over each morning to answer the summons of the ancient bell that starts the session promptly at nine o'clock. The formal meetings are held, literally, in a barn. It has been spruced up some, to be sure, and is equipped with a make-do microphone, a screen for showing visuals and a lectern. For the various panel sessions and casual tete-a-tetes, the conferees usually prefer an out-of-doors setting in some nook or corner of the farm. The men take all their meals cafeteria style, carrying their plates to a tent-topped patio that leads out from the small dining room of the house. There is no cocktail hour.

Under the normal schedule, the morning sessions last until twelve-thirty, followed by lunch. The afternoons are free for recreation. Most of the men drive some twenty miles to the Mountain View Hotel's nine-hole golf course, where they stage an annual tournament of sorts, with amusing, inexpensive prizes for winners and losers. At six o'clock they return to the farm for dinner — after which, back to the barn for an evening session that lasts until about nine-thirty. Nobody wears a tie all week, and jackets are slipped on only if the night air chills.

TRW has, perhaps, a rather special need for an annual commingling of this kind. A highly diversified company headquartered in Cleveland, it is the product of a merger of two distinctly different corporate groups, based in two widely separated sectors of the country, which still have a lot to learn about and contribute to each other. The progenitor of TRW was Thompson Products of Cleveland, founded in 1901, a mass manufacturer of precision parts for the automotive and aircraft industries. In 1953, Chairman J. David Wright decided to use some of Thompson's money to back the ambitions of two young California scientists, Simon Ramo and Dean Wooldridge. Ramo and Wooldridge promptly went out and won a contract for the systems engineering and technical direction of the U.S. Air Force's entire ICBM program. In 1958 the two companies were formally merged as Thompson Ramo Wooldridge. In May, 1965, the corporate title was truncated to TRW Inc.

Today the former Ramo Wooldridge unit, together with its subsequent acquisitions in the electronics field, operates out of Los Angeles as two groups - TRW Systems and TRW Electronics. The California contingents accounted for roughly 40 per cent of the corporation's total of $665-million sales in 1965. Though Systems still handles the Minuteman program, its principal activity now is in space. It is a prime contractor or major sub-system supplier for numerous Defense Department and NASA projects - Gemini, Apollo, Pioneer, and so on - and is building a series of global satellites for Comsat. TRW Electronics produces components for both the military and industry, and is a major supplier of coils and color convergence yokes for color T V.

On the Cleveland side of the house there are also two groups. The Equipment group produces parts for military and commercial aircraft jet engines, power systems for missiles and space-craft, and Army and Navy ordnance. The Automotive group supplies valves, steering linkage, bearings, and other parts on a worldwide basis to the automobile and truck companies and to the independent replacement aftermarket'.

After a few difficult years, all four groups are prospering. Total TRW sales in 1965 increased 20 per cent over the previous year. Net income, at $29 million, was up 24 per cent, and earnings per share increased 29 per cent. For the first six months of this year sales were running nearly 30 per cent ahead of 1965 and are expected to exceed $850 million for the year. Still, the top management of TRW feels that the corporation hasn't begun to exploit the opportunities inherent in a more integrated approach of all its talents to the many massive projects - civilian and military, government and commercial - that must be undertaken in the decades ahead in response to critical national and human needs. They believe that TRW is equipped, for example, to play a three-sided role in technological programs for the solution of such pressing civic problems as urban renewal, mass transportation, and pollution and waste. TRW has the systems capability to design and direct the concept of such programs, the electronics capability to supply the required communication and controls, and — in its great Cleveland shops — the capacity and skills to furnish much of the instrumentation and structural equipment required.

Successive Limited Comparisons (Branch)

1b Selection of value goals and empirical analysis of the needed action are not distinct from one another but are closely intertwined.

2b Since means and ends are not distinct, means-end analysis is often inappropriate or limited.

3b The test of a 'good' policy is typically that various analysts find themselves directly agreeing on a policy (without their agreeing that it is the most appropriate means to an agreed objective).

4b Analysis is drastically limited:

(i)            Important possible outcomes are neglected.

(ii)           Important alternative potential policies are neglected.

(iii)          Important affected values are neglected.

5b A succession of comparisons greatly reduces or eliminates reliance on theory.

Assuming that the root method is familiar and understandable, we proceed directly to clarification of its alternative by contrast. In explaining the second, we shall be describing how most administrators do in fact approach complex questions, for the root method, the 'best' way as a blueprint or model, is in fact not workable for complex policy questions, and administrators are forced to use the method of successive limited comparisons.