In Defense Of Raytheon

"Reality bites at Raytheon" (The Corporation, Nov. 15) attempts to provide a simplistic explanation for a complex phenomenon. To attribute Raytheon Co.'s recent lowering of earnings expectations to "the aggressive culture that former chairman and CEO Dennis J. Picard left behind" is wrong.

Dennis Picard managed Raytheon through a period of unprecedented challenge characterized by a steep decline in defense-related procurement and a massive industrywide consolidation. Every manager has a unique style, and Dennis was tough, tenacious, and focused. BUSINESS WEEK regularly sings the praises of "aggressive" management cultures, and to attempt to make Dennis' management style the scapegoat for Raytheon's recent earnings announcements is neither correct nor fair.

Every management transition leads to change. Dennis Picard and the board of directors went outside the company to select me in part for the external perspective I bring. All organizations can be improved, and it was expected that I would make changes at Raytheon that would necessarily involve doing things differently. That's my job, and commitments made to the prior senior management team must be reassessed in light of the priorities set by the new management team. It is wrong, however, to suggest that my forthright charge to business unit managers not to "hide behind" commitments made to the prior management team implies criticism of Dennis Picard or his team. To the contrary, it speaks instead to the need for frank and open communication among members of the new management team.

Indeed, the consolidations industrywide have been more complex than anyone inside or outside the industry contemplated. The mere fact that the surviving competitors all face similar post-consolidation issues would seem flatly to contradict author Geoffrey Smith's hypothesis that the issues facing Raytheon are somehow attributable to an "aggressive culture" under Dennis Picard.

Daniel P. Burnham

Chairman and CEO

Raytheon Co.

Lexington, Mass.

I do not agree with the premise that there was a culture of cover-up at Raytheon, and I did not "concede that Raytheon's decades-old planning process may have contributed to the current earnings problems."

I stated clearly to author Geoffrey Smith that budgets in the defense sector of the company could be adversely impacted by funding delays or cancellations, both on the domestic and international fronts. Raytheon managers were experienced in finding alternative funding sources or in accelerating existing programs so as to continue to meet sales and profit targets. Such actions are common in the defense industry and are hardly unique to Raytheon. If and when it became clear that meeting these targets was not achievable, managers were expected to stand up and say so.

I further pointed out that Mr. Burnham had taken on responsibility for Raytheon's plan process shortly after joining the company in July, 1998, and that the current plan was therefore his rather than Dennis Picard's.

The idea attributed to me that managers were not encouraged to quickly report bad news is inaccurate and is improperly linked with comments regarding the five-year planning process. During a separate part of our discussion, I clearly stated to Smith that Raytheon managers were expected and encouraged to bring forward bad news or program problems sooner rather than later so that Mr. Picard and his senior executives would have time to work on the matter.

There was a clear understanding that he and they stood ready to assist, but managers were expected to have worked out a problem at their level with their opposite numbers in the Defense Dept. and the respective armed services, rather than simply dropping it in the lap of members of corporate management for resolution.

I worked with Mr. Picard for more than 15 years. During that time, he was demanding but fair; tenacious but principled; an outstanding manager totally committed to the delivery of quality products and services. During his tenure, timely communication, accuracy, and truth were values, not casualties. To say otherwise does great disservice to him and to the thousands of the company's employees, past and present, who served with him.

Robert A. Skelly

Dover, Mass.

Editor's note: CEO Burnham declined BUSINESS WEEK's repeated requests for interviews for the story. Regarding Skelly's objections, we believe his comments were accurately characterized.