Lewis Campbell, chairman of Textron, runs the conglomerate from its headquarters in Providence. Campbell’s strategy, which includes instituting new management techniques, and anticipating customer needs and marketplace forces, has helped revive the company’s fortunes.

THE PROVIDENCE JOURNAL / Bill Murphy

Engineers aren’t known for deviating from the norm.

They analyze a problem, find a solution and stick with what works.

Chief executives aren’t much different.

Generally, they get on track to the corner office early on in their careers. They figure out how things work at a company — where the power centers are, who the right mentors are.

They put their heads down, sharpen their elbows and bull their way to the top.

When they get to the pinnacle, rarely do they throw out everything they’ve learned along the trek.

Lewis B. Campbell did just that.

In 2001, faced with figuring out why the stock price of Textron Inc. — the Providence company he heads — was falling off a cliff, he tossed aside the operating manual.

He woke up Textron’s sleepy management and pushed the decentralized holding company toward a unified future.

“It takes a little bit of a leap of faith,” said Campbell, the chairman, chief executive officer and president.

Five years after that leap off the precipice, Campbell — and the workers who followed — are back on solid ground. In May, Textron’s stock closed in on its all-time high and six months later remains near its peak.

Campbell is not the first Textron executive to take it in a new direction.

The company’s beginning remains a milestone in American corporate annals.Industrialist Royal Little created the modern conglomerate when he created the diversified industrial corporation.

Little, who died in 1989 at the age of 92, was considered an industrial and financial genius — an innovator who dreamed up new methods of corporate finance.

Having founded Special Yarns Corp. in 1923, Little envisioned a new kind of company that could weather the ups and downs of any one industry, and Textron was his crowning achievement.

In 1956, Little wanted to buy Bell Helicopter. He sought legal advice from a Wall Street firm, which assigned a young lawyer named G. William Miller to advise the Rhode Island client.

Little hired Miller to help transform the 30-year-old textile company into a new business model.

The former Coast Guard officer and marine engineer spent 22 years at Textron, helping build the company into a multibillion-dollar powerhouse with businesses in aerospace, consumer goods and industrial equipment. Little and Miller teamed to buy 65 companies by 1965.

Little retired from the company in 1961, but kept his hand in corporate finance until his death.

Miller, an Oklahoma native, became Textron’s chief executive officer in 1968 and its chairman in 1974.

The diversification strategy, coupled with tight cost-controls, helped Textron weather the post-Vietnam War recession that hit the United States.

In 1978, President Jimmy Carter tapped Miller to be chairman of the Federal Reserve Board and later secretary of the treasury. Miller died earlier this year, at 81.

James F. Hardymon, Campbell’s immediate predecessor as Textron CEO, was no slouch, either.

A Kentuckian, Hardymon had a reputation as a nuts-and-bolts manager with his eye on the bottom line. He was expected to focus on costs and productivity

In January 1992, just three weeks after he took over as CEO, Hardymon swung for the fences and spent $600 million to buy Cessna Aircraft Co.

Last year, Cessna and Bell accounted for more than half of Textron’s $10 billion in revenues, with Cessna accounting for 35 percent and Bell accounting for 21 percent.

Campbell grew up in Winchester, Va., — about 75 miles west of Washington, D.C. He earned an engineering degree from Duke University in North Carolina in 1968 and took a job that year as an engineer with General Motors Corp. in Dayton, Ohio. He worked on GM’s first air bag and was awarded a number of patents, including one for a non-spill ice tray.

Campbell spent 24 years with GM, rising to become general manager of the truck division.

He was one of GM’s hottest rising executives in 1992 when he surprised auto-industry insiders by leaving the Detroit automaker to become second in command at lightly regarded Textron.

“I would have viewed Textron in the 1990s as a very sleepy company,” said Michael C. Mankins, a managing partner at Marakon Associates, a management consulting firm. “I don’t think that’s true anymore.”

Royal Little’s creation spawned a group of high-profile companies such as AlliedSignal, Altria Group, International Telephone and Telegraph, Ling-Temco-Vought (LTV), Tyco International and United Technologies.

The stocks of conglomerates sold at high prices in the 1960s. Low interest rates and a repeating bear/bull market allowed conglomerates to buy companies, sometimes at temporarily deflated values. As long as an acquired company kept profits higher than interest on the loans used to buy them, a conglomerate’s return on investment appeared to grow.

Wall Street dubbed Textron “Miscellaneous Inc.” The Providence company ran steamships, crafted silverware, made staplers and plywood and plastic shower curtains, forged engine blocks and sold insurance.

The recession of the 1970s forced the conglomerates to rethink their strategy. The giants had become unfocused — too diverse for their own good. They fell out of favor with investors, who couldn’t make heads or tails out of the balance sheets.

To clear up the confusion and regain the confidence of Wall Street, the conglomerates spun off companies throughout the 1980s, and Textron followed suit.

After the Cessna purchase, Textron reduced the degree of diversity in its financial holdings, selling business units that were either less profitable or did not fit Textron’s core manufacturing focus. Greeting cards and other consumer lines were sold. Whole divisions were jettisoned.

The company focused on three manufacturing areas — aircraft, automotive and industrial — and finance. The company makes E-Z-Go golf carts, windshield washer systems, electricians’ hand tools in addition to the jets and helicopters for which it is better known.

From the beginning of 1995 to the end of 1998, Textron bought or sold 37 businesses.

In 1996, it sold two divisions — Textron Aerostructures and the Paul Revere Corp. insurance company.

In 1998, just a month after Campbell was named CEO, Textron sold consumer lender Avco Financial Services for $4 billion.

There were no blockbuster deals like the Cessna acquisition, but the company bought a series of “bolt-on” businesses — companies it could add to its existing operations. Only eight purchases exceeded $70 million, with the largest being $435 million.

In 1998, it acquired British golf-equipment and turf company Ransomes for $284 million. Ransomes’ utility vehicles and other products fit in with a Textron lineup that included E-Z-Go golf carts.

That year, Textron also bought automotive-fasteners manufacturer Ring Screw Works, as well as David Brown Group and Midland Industrial Plastics.

Campbell became chief executive officer at Textron in July 1998. The following January, he succeeded Hardymon as company chairman.

The game plan worked well for a long while, with Textron’s stock price and its earnings per share tracking steadily upward. The shares ended 1992 at $22.37 but rose to $97 in mid-1999.

“We thought we had the business model figured out for the next century,” Campbell said. “We’d been buying and selling companies in a smart way.”

The company was seeing earnings growth of 15 percent year over year. Through mid-1999, Textron’s stock price and its earnings per share tracked each other “in almost and uncanny fashion,” Campbell said.

Then things went off track.

Profit plummeted 75 percent between 1999 and 2001. The stock price fell earthward, losing half its value in that time.

“The stock fell like a stone,” he said. “As an engineer by background, I sensed a little bit of a disconnect between EPS and stock price, but at the time I wasn’t exactly sure what the cause was.”

It was Campbell’s job to figure out why the company wasn’t performing and how to fix the problem.

No one expected him to suggest Textron had to transform itself from a decentralized holding company into a leaner, nimbler operation.

“There was a recognition that a huge number of things had to change,” said Mankins, the management consultant.

Textron, Campbell decided, could no longer afford to be a caretaker of compartmentalized companies. Instead, it had to become a network of units that adjusted to, and even moved ahead of, customer needs and marketplace forces.

In an Oct. 19 interview in his Providence office, Campbell outlined the strategy that has directed Textron’s transformation over the last five years.

After four decades of living outside the South, the lanky Virginian still speaks with a slight Southern drawl.

“We were a buyer and seller of companies,” Campbell said. “That’s not a core competency that we think makes sense for a modern company.

“Your main focus has got to be the people that build the products and the companies that buy ’em.”

To do that, the company would develop two core functions — portfolio management and enterprise management — sharing resources and services.

As the company remade the way it does business, it rebuilt its financial performance.

Operating income was $516 million last year, up from $498 million in 2001 and $302 million in 2003. Operating profit margin of 11.4 percent last year was above the 9.1 percent and 8.2 percent posted in 2001 and 2003, respectively.

Textron’s stock has climbed back into rarified air, flirting with $100 for much of the spring. Shares hit a 52-week high of $98.96 on May 11 before drifting down over the summer. Textron closed at $90.40, up 20 cents, on Friday.

“When we launched the transformation, we were trying to establish a new way of thinking about running the business,” he said. “At its very core it’s all about changing the entire business model of the company.”

He laid out his ideas in January 2001 in West Palm Beach, Fla., at Textron’s annual management meeting — efficiency and networking would be the watchwords.

Forget about chasing earnings per share, return on invested capital — getting the most out of every dollar — would be the measuring stick.

Business functions that customers didn’t care about, but were costing Textron money, would be pared down or farmed out to vendors.

Payroll, health-care plans and data processing were whittled down. Where once there were 1,500 payroll systems now there are three. Health-care plans dropped from 52 to one. More than 100 data centers were consolidated to three, and soon to just two.

As a “networked enterprise,” Textron would move people, equipment, work processes and money to wherever they made the most sense. Managers would transfer from unit to unit to gain a better sense of the broad company and apply their skills where they were needed.

“We had to face up to the music that we were too ‘silo-ed’ and were not taking advantage of things that didn’t matter to the customers at all and we didn’t have any good ways to move our people around,” he said. “It did not mean that Bell helicopter engineers were going to engineer Cessna’s jets.”

Incentive pay was tied to overall company performance to help persuade managers that caring about what happened at a business unit half a world away was important.

The company adopted one method — Six Sigma — for measuring improvements.

Six Sigma is a method for cutting down on defects — mistakes that cost time and money. After getting introduced to manufacturing at Motorola in the 1980s, Six Sigma has become a widely used process-improvement tool. The method allows for only 3.4 defects per million outputs — whether those outputs are drill bits or jets, payment processing or spreadsheets.

It forces organizations to focus on the customer experience and expectations.

In the case of the Armored Security Vehicle, which the company makes at its Textron Marine & Land division in New Orleans, applying Six Sigma led to the decision to rebuild a factory wrecked by Hurricane Katrina, which scattered the division’s work force and left many employees homeless.

But the Army needed the ASVs for the troops in Iraq.

The goal was simple: get production up to full speed as fast as possible.

Within a week, company executives figured out that cleaning up the factory would be quicker than replacing it, or moving the work elsewhere. They also decided bringing in trailers to house the workers and their families — 270 of them — was better than renting hotels or apartments.

As workers filtered back, they were put to work sorting the debris, keeping only essential material. Next, the material was organized and cleaned using a standard method and schedule.

Within months, the factory was churning out ASVs faster than before the hurricane.

“Six Sigma is just one of the tools,” said Brian Melka, who has completed the Six Sigma training program at Textron. Harmonizing policies across the business units, consolidating suppliers and other techniques propelled Textron forward, said Melka, director of product management at Textron’s Jacobsen unit, which makes turf-maintenance equipment.

The company created a training system to teach managers how to use Textron’s version of Six Sigma, LEAN manufacturing methods and other management techniques, and to instill in them Textron’s new strategic principles.

Textron University, launched last year, evolved out of the effort. The school includes 25 classroom programs and 100 online classes.

“Textron University is not bricks and mortar, it’s a strategy,” for unifying the company, said Gwen Callas-Miller, executive director for leadership development.

“Now we’re talking the same language, not only business to business, but function to function,” Melka said. “The old silos are gone.”

Employees get a simple promise when they put aside their duties to enter Six Sigma training classes.

“You’re probably not going to get your old job back,” Campbell said. “All I said is: ‘As CEO, I promise you will get a job’.”

There’s also twice-a-year performance review for managers: a midyear check on whether they are on track to meet their annual goals, followed by an end-of-the-year checkup that assesses how they did and sets objectives for the coming year.

Not everyone could function under the new rules, he said.

“Some people just didn’t want to, so then we had to ask them to leave the company,” he said. “A few people came to me and said ‘Lewis, I’m just not comfortable in this new environment’.”

But there was no going back to the old Textron.

He let them know, “We’re going this way, and nothing’s going to stop us.”

Five years on, the proof that the “transformation” is working is in the proxy.

The annual filing tracks $100 invested in Textron between the last trading day of 2000 and the same day last year and compares it to the S&P 500 and the company’s industry peers — blue-chip companies such as General Dynamics, Honeywell International and Rockwell International.

An investment in Textron was up 88 percent during the period, the industry peers were up 13.5 percent and the S&P just 2.7 percent.

The work to turn around Textron has simply prepared it to compete in a global economy, Campbell said, it hasn’t assured Textron of success over the long haul.

“If we’d have had to start now and face up to the competition that’s springing up all over the world . . . I don’t think we’d have had much of a chance,” he said. “Transformation is a resounding success, but if you liken transformation to climbing [Mount] Kilimanjaro we might be approaching base camp . . . maybe.”

Marching orders for Textron’s 37,000 employees will continue to go out from Providence, where the company’s headquarters will remain for the foreseeable future.

The trim-looking 60-year-old said he plans to be around to lead Textron on the next part of its journey.

“The good lord willing the board will let me stay,” Campbell said. “I’d love to stay to 65.”