Woodward Governor Co. Business Information, Profile, and History

History of Woodward Governor Co.

Woodward Governor Co. is the world's oldest and largest manufacturer of controls for prime movers, which are machines that convert either heat or hydraulic energy into mechanical or electrical energy. The company designs and manufactures controls for all types and sizes of steam and diesel engines, hydraulic turbines, aircraft propellers, and industrial and aircraft gas turbines. Woodward Governor is also distinguished by a unique and proven management philosophy.

The company that would become Woodward Governor was founded in 1870 by Amos W. Woodward. Woodward was descended from the Woodward family that helped to settle Watertown, Massachusetts, in the 1630s. Born in 1829 in Winthrop, Maine, Woodward attended Kents Hill Academy for only one term. In that short time, however, he mastered higher mathematics and physics and was considered by many to be a genius. Woodward eventually went to work in a factory in Massachusetts before migrating to the Midwest in 1856. An inveterate tinkerer and inventor, Woodward managed to earn a modest salary by selling his innovations. He also held various mechanic jobs. It was through one of those positions, in fact, that he became intrigued with a major dilemma of the day: how to control the speed at which waterwheels turned.

Woodward solved the problem by designing a mechanism--the mechanical noncompensating waterwheel governor--in 1869. He received a patent for the device in 1870 and started a company to manufacture the governors. Despite the usefulness of Woodward's invention, the new company struggled. Besides lacking capital, Woodward also lacked the desire to build a profitable business. Like many other inventors, he was more interested in developing new ideas. Fortunately, his son Elmer Woodward had a greater knack for business. Elmer had started working in his father's shop as a boy and had, like his father, shown himself to be gifted in math and physics. On one occasion, for example, Elmer devised a contraption that automatically controlled the cutting speed and feeder of a machine that he was operating. Elmer was caught reading a book while the machine worked away.

Elmer Woodward's desire for learning stemmed from what he considered a poor formal education. To make up for the deficiency, he spent years studying technical books after dinner until midnight. As he got older, he became increasingly involved in the company's business affairs. It was then that the enterprise began to prosper. In 1891, the business had three employees and was selling about $8,000 worth of governors annually. During the 1890s, though, the company grew and even expanded into a larger manufacturing facility. At the same time that he was helping to run the business, Elmer Woodward, like his father, continued to invent. Importantly, in 1898, when he was 36 years old, Elmer received a patent for a governor that was an improvement over the one his father had designed. The breakthrough device gave the company an important advantage in the burgeoning market for governors needed to control new hydro power electric generators.

In 1902 Amos and Elmer Woodward incorporated as Woodward Governor Company. By that time they were employing 25 men at their Rockford, Illinois, manufacturing facility. As the hydro electric power market surged during the 1910s and 1920s, so did Woodward Governor's sales. The company also expanded overseas into Europe, Japan, New Zealand, and elsewhere throughout the world. Indeed, by the 1920s the company was making more than 35 percent of its sales to foreign buyers. In 1910 Woodward Governor moved its operations to a new five-story plant. Elmer Woodward continued to tweak and improve the company's governors in an effort to meet new needs in the marketplace, helping the company's revenues to climb. Amos Woodward died in 1919, a few years short of his 90th birthday, and his son continued to lead Woodward throughout the 1920s. Early in 1929, when he was 67 years old, Elmer Woodward hired son-in-law Irl Martin to take over day-to-day operations, while he continued to design new products and make pivotal contributions to the company well into his 70s.

By 1929, Woodward Governor was employing 50 workers and had established itself as a leader in the design and manufacture of prime mover controls. Unfortunately, the company's fortunes were about to change for reasons outside of its control. The stock market crash of 1929 quashed demand for Woodward's waterwheel and hydro power governors. Martin was faced with a crisis, his handling of which would demonstrate his legendary management abilities and philosophies. Rather than lay off staff, Martin called all of the workers together and offered them a choice: either fill existing orders and hope for more, or keep everyone on the payroll at 20 hours per week and at a cut in pay until business improved. The workers elected to scale back hours and pay. Until the crisis was over, Elmer Woodward paid much of their wages out of his own pocket--a practice that was, and still is, almost unheard of in any kind of corporation. It was later discovered that Woodward had borrowed against his own life insurance to meet the payroll.

The company's shipments began to pick up in 1932 and 1933, although the company was still lagging. Woodward and Martin realized that the company would be forced to find new sources of revenue to supplant lost demand. To that end, Woodward began developing a governor to control diesel engines that were being used at the time as auxiliary systems in hydro-electric plants. Under his supervision, the company perfected a governor for diesel engines in 1933 that would become the core of the company's product line for several years. The pivotal breakthrough provided an important boost to the company's sagging bottom line. In fact, Woodward Governor's elated workers were soon making up for lost time with 60-hour weeks. Unfortunately, the Federal government, concerned with underemployment, forced the company to cut them back to 40 hours. Martin feared that the company would be unable to meet demand, but their workers, realizing the urgency of the situation, continued to work 60 hours per week at only 40 hours of pay.

Woodward Governor introduced another major product breakthrough in 1934: a governor that could control the pitch of an airplane propeller. An aviation company had approached the company about creating such a control, and several of the company's younger members had gone to work to design the contraption. Unable to solve the problem, they eventually called on 73-year-old Elmer Woodward to finish the job. Within several months his team delivered a perfected governor that would give Woodward Governor a much-needed entry into the aviation industry.

Although sales surged during the mid-1930s as a result of the new innovations, the company's equipment and facilities had depreciated by the end of the decade. Rather than borrow the cash to renew the plant, Martin again called the employees together. They all agreed that everyone in the company should forego a pay raise in order to pay cash for new equipment. Thus, Woodward Governor emerged from the Depression with a broader product line, new equipment, little debt, and a family-like bond between labor and management that would distinguish the company in American industry.

Much of Woodward Governor's success in the 1930s, and even throughout the mid-1900s, was attributable to Martin's unique management techniques. In the 1930s, for example, Martin realized that some of his skilled machinists and mechanics were not producing as much as he believed they could. He believed the problem was psychological and was attributable to the workers' poor self image. To solve the problem, he instituted a dress code that included a tie and smock, and began requiring that all employees remain neatly shaven. The workers also agreed to begin keeping their work areas extremely clean and neat. Worker productivity improved greatly and, according to Martin, the workers began to realize the true value of their contribution to the company and society. Among other of Martin's management innovations was aptitude testing, which was used to help determine where a worker would perform most effectively and happily. He also introduced a cutting edge health insurance program that focused on personal preventive medicine.

On December 31, 1940, 78-year-old Elmer Woodward, or "Pops" as he had come to be called, worked a full day, returned home, and then died of a heart attack. His exemplary service to the company spanned 64 years. Among other attributes, the soft-spoken Elmer was known for treating all men as his equal, regardless of position or stature, as well as for earning the respect of all those who knew him. Irl Martin assumed complete leadership of the company after Elmer's death, just as Woodward Governor was entering the greatest growth phase in its history. Indeed, WWII placed huge demands on the company's production facilities as orders for its advanced propeller controls boomed; the advantage that the controls offered was that they reduced vibration in airplanes and ships by synchronizing and phasing the propellers of two or more engines.

Woodward Governor continued to innovate during the war, introducing, for example, the first aircraft turbine control in 1943, and sales skyrocketed. Amazingly, the company's ranks swelled from just 50 in 1935 to more than 1,600 during the war's peak. The explosive growth virtually changed the face of the company, which had moved its operations into a large new factory at the very start of the war. Again, Martin consulted his workers about the new facility and they all agreed to forgo some compensation to build it. The facility was completely state-of-the-art, and was designed with worker productivity and satisfaction in mind. The plant became much less crowded after the war, when the work force shrank to a more manageable 500. Although demand faded during that period, sales growth resumed in the wake of the postwar economic boom of the 1950s and 1960s.

During the late 1940s, Martin instituted what would become one of his most noted management schemes; The Corporate Partnership. This plan lead to a number of innovative management solutions. For example, Martin was concerned about the problem of determining equitable pay rates for everyone in the company, including himself. After much thought, he decided to present a solution to the employees. Under the new system, every employee, or "member," would receive no more and no less than ten times that of the least valuable category of worker. In addition, a bonus system was put in place. At the end of each year, workers and management would rank everyone in their department according to a given set of criteria. The rankings were combined and every employee then received a ranking within the entire company. That rank was used, and continued to be used in the 1990s, to determine an employee's percentage of the aggregate annual bonus.

During the mid-1950s Woodward Governor expanded its product line to include main fuel controls for aircraft gas turbines and electronic analog controls. Among the recognized innovations during the 1950s and 1960s were: the electrical cabinet actuator in 1957; the first truly electric governor in 1960; fuel valves for aerodrive turbines in 1962; control for turboprop engines in 1964; and a unique new electronic control system in 1965. As demand for the company's products increased, Martin expanded the company. In 1955 Woodward Governor built a new factory in Fort Collins, Colorado. Subsequently, Martin oversaw the installation of production facilities throughout the world in The Netherlands, England, Japan, and Australia. By the late 1960s, Woodward was generating annual revenues of about $70 million.

Although the 65-year-old Martin officially retired from the presidency in 1960, he remained as chairman of the board and led Woodward Governor into the 1970s. The company continued to introduce new products during the early 1970s and to strengthen its Corporate Partnership program. In fact, Martin became a sought-after speaker in the Midwest by groups wanting to hear about his unique management philosophy. Unfortunately, Martin's health began deteriorating in 1975. He resigned in March 1976 and died on April 22 after 55 years of service to Woodward Governor.

Martin was succeeded by Calvin C. Covert. Covert had joined the company in 1942, going to work in the lowly 'snagging' room, where he shaved rough spots off of castings. One day Mr. Martin came out and said, 'Sonny boy, you made,' Covert recalled in the January 1988 Rockford Magazine. Covert continued, "I said, 'made what.' And he said, 'I gave you one of the dirtiest jobs. Now what the hell do you want to do?"' That began Covert's rise up the corporate ladder. By the time he took the helm in 1976, he had been working in top management for most of his career. Under his direction, Woodward Governor continued to create new products and to refine its management techniques. Major new products in the 1970s included an eight-bit microprocessor synchronizer and a digital synchronizer for aircraft. Covert also stepped up Woodward Governor's international expansion in 1977 with a new plant in Brazil.

The company thrived under Covert's leadership. It experienced a downturn in its important turbine division in the early 1980s, but by the mid-1980s its sales were approaching the $200 million mark. That improvement was accomplished with the help of Robert Pope, who was brought in from outside the company in 1983 to act as president, while Covert remained at Woodward Governor as chairman of the board. Under Pope's leadership, the company whipped its internal operations into shape and stepped up its growth pace in the mid-1980s. Indeed, $100 invested in Woodward Governor in 1976 would have grown to nearly $1,500 by 1988. That growth was largely the result of an economic upswing and increased demand from defense and aerospace industries during the mid- and late 1980s. Woodward Governor's sales leapt 13 percent in 1987 to $275 million as net earnings rose 37 percent to $24 million. By the end of the decade, moreover, the company was generating more than $300 million in revenues annually.

Although Woodward Governor was helped by strong markets during much of the 1980s, its success was also attributed to its proven management style, which was getting increased attention within American industry as a result of the company's ability to compete with Japan and other countries. As it turned out, Woodward Governor had long been practicing management techniques (such as employee empowerment and performance-based incentives) that were emerging as major trends in the 1980s. For example, the company's president received only $247,000 in total salary and bonuses in 1986, in keeping with the company rule of not making more than ten percent of the lowest job category. Likewise, new Woodward Governor employees were brought into the company by way of a solemn ceremony; other employees attended, and even joined in prayer, as the new employees were inducted into the Woodward "family." And, while Woodward Governor's workers received only about 80 to 90 percent of the salary of their U.S. industrial counterparts, their bonuses consistently placed them well above the national average in compensation.

Woodward Governor entered the 1990s with record sales and profits; revenues hit $362 million in 1991. Unfortunately, waning defense and aerospace markets were beginning to take their toll on the company's bottom line. Woodward Governor had been trying to reduce its dependence on the aircraft market since the mid-1980s, when over 60 percent of sales were attributable to that sector. But by the early 1990s the company was still getting more than 50 percent of its revenues from the aircraft market and was scurrying to beef up its activity in other sectors. Similarly, the company had seen the percentage of its sales attributable to defense markets fall from 20 percent in 1990 to less than 15 percent by 1993. To make up for the shortfall, Woodward Governor began concentrating on its industrial controls division, its only major segment other than aircraft controls.

Sagging key markets hurt Woodward Governor in 1993 and 1994. Sales slipped to $333 million in 1994, and the company posted its first loss since 1940. By that time, John Halbrook had been brought on board as president and chief executive. Under his leadership, the company instituted aggressive cost-cutting measures in 1994 that resulted in a $24 million restructuring charge, which pinched its net earnings. The charge also forced the company to cut its aircraft division work force by 20 percent, resulting in one of the biggest layoffs ever conducted by the organization. Covert passed away in December of 1994 at the age of 70, and Halbrook assumed his position as chairman, announcing his commitment to continue cutting costs and improving the company's market stance.

Despite setbacks going into the mid-1990s, Woodward Governor continued to research and introduce new products. It brought out innovative new digital controls in 1992 and 1993, for example, and had several advanced devices for both aircraft and industrial markets under development. With facilities throughout Illinois, Woodward Governor's aircraft controls division remained a leader in the production of high quality fuel controls and control systems for aerospace customers in both commercial and military markets. Similarly, its industrial controls division was supporting offices and plants throughout the United States and Europe, as well as in Japan and Singapore. Moreover, Woodward Governor was a top global supplier of hydromechanical governors and analog controls for products including off-road machinery, locomotives, gas and steam industrial turbines, hydroelectric machinery, and more.