Introduction. There is a lot to digest and I am still thinking this through. I will not be surprised that given the lack of attention to the business at Waltham, that some will be offended that their favorite company was not a beacon of business success.
N.B. I received an opinion from Harvard that my proposed use of excerpts from Moore’s book falls under “Fair Use”. I will append PDFs of referenced excerpts (BOLD) at the end of this article.
All excerpts taken from Timing a Century, C.W.Moore, 1945 Harvard University Press
Official History Commissioned in 1941. Moore had complete access to the Waltham archives and financial records in 1941 when he started to prepare this history. He interviewed a number of people who were involved 30 years earlier. There is no reason to doubt his accounting of Waltham as a company.
Moore makes it difficult to create a good chronology. His first several chapters present a historical timeline, but then chapters that later present an analysis introduce things that were not discussed in the historical presentation. This is a complex story that has many facets.
Robbins. The true salad days for Waltham were the 20 year period in which Robbins Sr. ran (literally) the company. Today he would be considered a slightly out of date executive who set the strategy and plan and demanded his captains execute that plan. It was this trait that led to Dennison’s release over the Ellery (soldier's watch) even though Dennison was ultimately proven right. The issue was Dennison’s going behind Robbins’ back.
This is poignantly described on Pages 46-47.
By all measures, Robbins led the company to success even during the deflationary period after the Civil War (1865-1896) during his term. At this time he had to cope with Elgin (which did in fact “poach” some of his leading lights), Swiss imports and bringing modern methods to manufacturing.
Pg 68-69
But, as other companies came into the picture, Robbins Sr. realized a new executive was needed and Fitch was appointed to his position as factory superintendent and then President. Fitch would essentially control the fate at Waltham from 1884 to 1921.
The Fitch Era. The story of Waltham for the period between 1880 and 1930 is a story of the continual search for financial survival, entrenched executive staff, provincialism of the manufacturing departments and stockholder change (manipulation?).
The problem of the Departments making unneeded parts was to plague Waltham for decades. The manufacturing departments operated as self contained fiefdoms where parts were produced with no regard to factory requirements in order to keep their people paid. These parts were carried on the books as inventory at inflated values that ultimately had to be written off the books. This is just one example of how poor management impacted Waltham's financial success.
Page 324
There were at least 4 major reorganizations of the capital and business structure. These included control of the majority shareholders, creation of new stock, and attempts to install controllers who did not have authority over executives.
Pg 296-298
As a merchandiser, Fitch tried his best to cope with the financial situation at Waltham. Fitch tried to improve the financial picture by doubling the number of grades between 1881 and 1896, cutting prices by 20% in 1891, creating the watch trust which proved to have no impact in Waltham profits, reorganizing the capital structure in 1906 by selling an additional $4 mil Common and $7 mil Preferred stock (New Company) and trying to diversify into speedometers and artillery fuses. He ultimately secured capital loans that resulted in the banks taking control in 1923. This resulted in issuance of new stock and again a loss to equity holders.
But as the table on page 324 reveals, he could not control the creation of overvalued inventory. This lack of managerial control was to be Waltham’s Achilles Heel.
Where Robbins Sr. had run the company with a firm hand in the control of the entire process (resulting in the dismissal of Dennison), Fitch does not seem to have had such ability.
Some of this can be attributed to the absence of watchmakers on the Board of Directors with the exception of Charles Fogg (ended 1893) and Ezra C. Fitch (President from1882 to 1921) who worked once as a watch repairer. The Board was dominated by lawyers, trustees, family relations and owners of non-allied business. The executives and the Board had no background in the production of a complicated machine like a watch.
While this report is from 1921 (upon Fitch’s release as President), it is likely the culture described was long developed. It depicts a culture of cronyism and family loyalty at the manufacturing department level. This may be familiar to those who have worked in large organizations where the immediate group is valued over the enterprise itself. It results from a lack of effective executive control.
Pg 114-115
It is small wonder that with a Board of entrenched relationships attempts to set the company on a positive track by changing personnel were doomed to failure.
Pg 102-104
During his reign, Fitch did encounter headwinds. The country was in a deflationary period until 1896. There was increased competition from US watchmakers. The company matured during a period in which it was the dominant force in watchmaking and was somewhat complacent.
On the other hand, the population grew as a result of immigration and westward expansion and there were periods of prosperity. And other American Watch companies prospered.
This undoubtedly led to lobbying of Board members, if not outright interference as Moore reveals in other areas. After Robbins left, Loring was brought in by the stockholders to right the ship.
However, he did not have authority over the top executives and he attempted to improve management by appointing lower ranking executives. This inevitably led to those appointees failing.
PAGE 112-115
Fitch apparently actively interfered with Board decisions that would have changed the operating structure of the company. These majority share holders was a block of small investors who bought stock during the time the Robbins brothers liquidated their holdings in Waltham. Royal jr. was the treasurer until his resignation in 1910.
This deteriorating financial picture in the early 1900s led to an attempt to change the management at Waltham by increasing the number of shares and altering the voting pattern of the Board. Several successful executives were brought in to change the balance sheet. A major obstacle for loans was the over valued inventory on the books and Waltham was finally forced to write it down.
Page 300
Another factor was that Waltham needed loans for operating capital. This was virtually unheard of. Banks provided “seasonal” loans that were expected to be repaid within a year.
By the mid twenties, Waltham had approached Elgin, Hamilton and Southbend about a merger. The problem with labor force was in full effect; the administrator complained how employees felt entitled to company assets (taking pencils home for school children, etc.). As noted in another thread, he took the loupes used by people in the balance springing department.
Page 138
The problems were directly related to the inability to control the manufacturing departments.
Page 131
Waltham was unable to fulfill orders for RRG watches because they did not have the required parts or enough skilled workers.
Page 135
Bear in mind that all of this was occurring in the early and mid 1920s. The stock market was exuberant and people were flush with money. The financial prospects in the US were all upbeat before the 1929 crash. Yet Waltham was failing.
Towards the end, one of those brought in to work with Fitch was Simmonds, of crosscut saw fame. He remained for one year and left feeling he had better use of his time. Almost all who were brought in saw it as a civic duty and were frustrated by the entrenched culture.
Finally the banks called for a complete capital restructuring of Waltham (seems like a bankruptcy but is not termed such) that completely changed the stock structure and ensured the major shareholders were part of management.
This initiated the 20 year term of Dumaine who shepherded Waltham thought the Depression and WWII.
The Trust and the 1906 Price Fixing Investigation. This merits a separate discussion. Fitch created the Watch Trust in an effort to deal with the downward spiral in prices that resulted from deflation and “excess” competition. Moore concludes, and presents data that indicate this was not successful. In fact Fitch had to cut prices by 20% in 1891. Moore contrasts this with the Oatmeal Trust which formed at the same time and was successful. He attributes this to the Oatmeal millers actually forming a holding company that withstood government scrutiny. While not mentioned, it is likely the difference is also due to the fact that cereal was a necessity compared to an expensive watch.
The 1906 price fixing investigation was seemingly independent of the Trust, which only survived for 7 years. The US DOJ could not find the smoking gun needed to prosecute, but in those days, and with the working relationships developed during the trust years, it is not surprising that no emails were found on the servers. But Table 10 on Page 81 is relevant to both topics.
Inspection shows that profits at Waltham were not markedly improved as a result of the trust. However, in the 5 years preceding the price fixing investigation profit's doubled and tapered back down after 1906.
Page 81
Source of Fitch’s “Power”. This is somewhat of a mystery. For decades he managed a company that was always in need of operating capital and was losing market share. Tables on Page 344 and 345 are revealing. Counter-intuitively, he was not a major shareholder until 1910!
As the tables show, the Robbins group (Moore’s term) held the majority of shares until the 190 shareholder revolt led by Buckley. Even then, Fitch was retained as President while the shareholders appointed Loring to work with him.
Perhaps a symptom fo how the affairs at Waltham were handled, Buckley had acquired a significant number of shares and yet his attempts to review the books were resisted in strength. When he finally did gain access, a month before the 1910 meeting, he was able to convince enough shareholders to require a change of the Board structure and the appointment of Loring as a Trustee.
Pages 344-345
Unlike Sauers, Moore does not describe the personal interactions among the major players after the Robbins Sr. era. It would seem that for some reason the Robbins group (which did have exclusive distribution rights) wanted Fitch as President.
Conclusion. This started with my interest on why Rood, Perry and Cain were so successful. Moore offers a look not only at Waltham, but at the business conditions at the time. There is obviously a point of comparison between the two companies, as there is a comparison to be made between Hampden and Hamilton.
Waltham’s experience cries out to be contrasted with that of Hamilton. During the period of financial decay at Waltham (1900 to 1910) that saw two new stock issues to raise and redistribute capital, Hamilton prospered and thrived. Rood, Perry and Cain’s formula of keeping the product line simple (936 and 974 based movements), controlling inventory flow to reduce loss, interdepartmental dependence, product and parts distribution controlled from the factory, and the focus on high technical and aesthetic quality seems to explain the difference in outcome.
Much more has been written about business at Hampden than at Waltham! Perhaps this little article provides insight to the complexity that dissuades much interest in exploring the Waltham history.
Hamilton was created under the same business conditions as these companies and had to compete with two established companies that had their retail distribution system and name recognition. During a depression! How is it that by 1910 Hamilton dominated the sales of precision watches and by the mid 1920s was immensely more successful financially than either Hampden or Waltham?
Unlike Rood, Perry and Cain, the two most important Waltham Executives during this period, the President (Fitch) and the Treasurer (Robbins Jr.) had two very different visions for the company between 1903 and 1910. Waltham seems dominated by a contest of wills at every level whereas Hamilton was conceived and matured as an enterprise built on a team approach.
Just 30 years after the factory was started, Hamilton was approached by Waltham for a merger. Given the magnitude and variety of problems at Waltham at the time, it is not a surprise Hamilton declined. And to think, a few years later, Rood once again assumed the Presidency of Hampden Watch Company. He must have felt truly vindicated at that point in his life.
N.B. I received an opinion from Harvard that my proposed use of excerpts from Moore’s book falls under “Fair Use”. I will append PDFs of referenced excerpts (BOLD) at the end of this article.
All excerpts taken from Timing a Century, C.W.Moore, 1945 Harvard University Press
Official History Commissioned in 1941. Moore had complete access to the Waltham archives and financial records in 1941 when he started to prepare this history. He interviewed a number of people who were involved 30 years earlier. There is no reason to doubt his accounting of Waltham as a company.
Moore makes it difficult to create a good chronology. His first several chapters present a historical timeline, but then chapters that later present an analysis introduce things that were not discussed in the historical presentation. This is a complex story that has many facets.
Robbins. The true salad days for Waltham were the 20 year period in which Robbins Sr. ran (literally) the company. Today he would be considered a slightly out of date executive who set the strategy and plan and demanded his captains execute that plan. It was this trait that led to Dennison’s release over the Ellery (soldier's watch) even though Dennison was ultimately proven right. The issue was Dennison’s going behind Robbins’ back.
This is poignantly described on Pages 46-47.
By all measures, Robbins led the company to success even during the deflationary period after the Civil War (1865-1896) during his term. At this time he had to cope with Elgin (which did in fact “poach” some of his leading lights), Swiss imports and bringing modern methods to manufacturing.
Pg 68-69
But, as other companies came into the picture, Robbins Sr. realized a new executive was needed and Fitch was appointed to his position as factory superintendent and then President. Fitch would essentially control the fate at Waltham from 1884 to 1921.
The Fitch Era. The story of Waltham for the period between 1880 and 1930 is a story of the continual search for financial survival, entrenched executive staff, provincialism of the manufacturing departments and stockholder change (manipulation?).
The problem of the Departments making unneeded parts was to plague Waltham for decades. The manufacturing departments operated as self contained fiefdoms where parts were produced with no regard to factory requirements in order to keep their people paid. These parts were carried on the books as inventory at inflated values that ultimately had to be written off the books. This is just one example of how poor management impacted Waltham's financial success.
Page 324
There were at least 4 major reorganizations of the capital and business structure. These included control of the majority shareholders, creation of new stock, and attempts to install controllers who did not have authority over executives.
Pg 296-298
As a merchandiser, Fitch tried his best to cope with the financial situation at Waltham. Fitch tried to improve the financial picture by doubling the number of grades between 1881 and 1896, cutting prices by 20% in 1891, creating the watch trust which proved to have no impact in Waltham profits, reorganizing the capital structure in 1906 by selling an additional $4 mil Common and $7 mil Preferred stock (New Company) and trying to diversify into speedometers and artillery fuses. He ultimately secured capital loans that resulted in the banks taking control in 1923. This resulted in issuance of new stock and again a loss to equity holders.
But as the table on page 324 reveals, he could not control the creation of overvalued inventory. This lack of managerial control was to be Waltham’s Achilles Heel.
Where Robbins Sr. had run the company with a firm hand in the control of the entire process (resulting in the dismissal of Dennison), Fitch does not seem to have had such ability.
Some of this can be attributed to the absence of watchmakers on the Board of Directors with the exception of Charles Fogg (ended 1893) and Ezra C. Fitch (President from1882 to 1921) who worked once as a watch repairer. The Board was dominated by lawyers, trustees, family relations and owners of non-allied business. The executives and the Board had no background in the production of a complicated machine like a watch.
While this report is from 1921 (upon Fitch’s release as President), it is likely the culture described was long developed. It depicts a culture of cronyism and family loyalty at the manufacturing department level. This may be familiar to those who have worked in large organizations where the immediate group is valued over the enterprise itself. It results from a lack of effective executive control.
Pg 114-115
It is small wonder that with a Board of entrenched relationships attempts to set the company on a positive track by changing personnel were doomed to failure.
Pg 102-104
During his reign, Fitch did encounter headwinds. The country was in a deflationary period until 1896. There was increased competition from US watchmakers. The company matured during a period in which it was the dominant force in watchmaking and was somewhat complacent.
On the other hand, the population grew as a result of immigration and westward expansion and there were periods of prosperity. And other American Watch companies prospered.
This undoubtedly led to lobbying of Board members, if not outright interference as Moore reveals in other areas. After Robbins left, Loring was brought in by the stockholders to right the ship.
However, he did not have authority over the top executives and he attempted to improve management by appointing lower ranking executives. This inevitably led to those appointees failing.
PAGE 112-115
Fitch apparently actively interfered with Board decisions that would have changed the operating structure of the company. These majority share holders was a block of small investors who bought stock during the time the Robbins brothers liquidated their holdings in Waltham. Royal jr. was the treasurer until his resignation in 1910.
This deteriorating financial picture in the early 1900s led to an attempt to change the management at Waltham by increasing the number of shares and altering the voting pattern of the Board. Several successful executives were brought in to change the balance sheet. A major obstacle for loans was the over valued inventory on the books and Waltham was finally forced to write it down.
Page 300
Another factor was that Waltham needed loans for operating capital. This was virtually unheard of. Banks provided “seasonal” loans that were expected to be repaid within a year.
By the mid twenties, Waltham had approached Elgin, Hamilton and Southbend about a merger. The problem with labor force was in full effect; the administrator complained how employees felt entitled to company assets (taking pencils home for school children, etc.). As noted in another thread, he took the loupes used by people in the balance springing department.
Page 138
The problems were directly related to the inability to control the manufacturing departments.
Page 131
Waltham was unable to fulfill orders for RRG watches because they did not have the required parts or enough skilled workers.
Page 135
Bear in mind that all of this was occurring in the early and mid 1920s. The stock market was exuberant and people were flush with money. The financial prospects in the US were all upbeat before the 1929 crash. Yet Waltham was failing.
Towards the end, one of those brought in to work with Fitch was Simmonds, of crosscut saw fame. He remained for one year and left feeling he had better use of his time. Almost all who were brought in saw it as a civic duty and were frustrated by the entrenched culture.
Finally the banks called for a complete capital restructuring of Waltham (seems like a bankruptcy but is not termed such) that completely changed the stock structure and ensured the major shareholders were part of management.
This initiated the 20 year term of Dumaine who shepherded Waltham thought the Depression and WWII.
The Trust and the 1906 Price Fixing Investigation. This merits a separate discussion. Fitch created the Watch Trust in an effort to deal with the downward spiral in prices that resulted from deflation and “excess” competition. Moore concludes, and presents data that indicate this was not successful. In fact Fitch had to cut prices by 20% in 1891. Moore contrasts this with the Oatmeal Trust which formed at the same time and was successful. He attributes this to the Oatmeal millers actually forming a holding company that withstood government scrutiny. While not mentioned, it is likely the difference is also due to the fact that cereal was a necessity compared to an expensive watch.
The 1906 price fixing investigation was seemingly independent of the Trust, which only survived for 7 years. The US DOJ could not find the smoking gun needed to prosecute, but in those days, and with the working relationships developed during the trust years, it is not surprising that no emails were found on the servers. But Table 10 on Page 81 is relevant to both topics.
Inspection shows that profits at Waltham were not markedly improved as a result of the trust. However, in the 5 years preceding the price fixing investigation profit's doubled and tapered back down after 1906.
Page 81
Source of Fitch’s “Power”. This is somewhat of a mystery. For decades he managed a company that was always in need of operating capital and was losing market share. Tables on Page 344 and 345 are revealing. Counter-intuitively, he was not a major shareholder until 1910!
As the tables show, the Robbins group (Moore’s term) held the majority of shares until the 190 shareholder revolt led by Buckley. Even then, Fitch was retained as President while the shareholders appointed Loring to work with him.
Perhaps a symptom fo how the affairs at Waltham were handled, Buckley had acquired a significant number of shares and yet his attempts to review the books were resisted in strength. When he finally did gain access, a month before the 1910 meeting, he was able to convince enough shareholders to require a change of the Board structure and the appointment of Loring as a Trustee.
Pages 344-345
Unlike Sauers, Moore does not describe the personal interactions among the major players after the Robbins Sr. era. It would seem that for some reason the Robbins group (which did have exclusive distribution rights) wanted Fitch as President.
Conclusion. This started with my interest on why Rood, Perry and Cain were so successful. Moore offers a look not only at Waltham, but at the business conditions at the time. There is obviously a point of comparison between the two companies, as there is a comparison to be made between Hampden and Hamilton.
Waltham’s experience cries out to be contrasted with that of Hamilton. During the period of financial decay at Waltham (1900 to 1910) that saw two new stock issues to raise and redistribute capital, Hamilton prospered and thrived. Rood, Perry and Cain’s formula of keeping the product line simple (936 and 974 based movements), controlling inventory flow to reduce loss, interdepartmental dependence, product and parts distribution controlled from the factory, and the focus on high technical and aesthetic quality seems to explain the difference in outcome.
Much more has been written about business at Hampden than at Waltham! Perhaps this little article provides insight to the complexity that dissuades much interest in exploring the Waltham history.
Hamilton was created under the same business conditions as these companies and had to compete with two established companies that had their retail distribution system and name recognition. During a depression! How is it that by 1910 Hamilton dominated the sales of precision watches and by the mid 1920s was immensely more successful financially than either Hampden or Waltham?
Unlike Rood, Perry and Cain, the two most important Waltham Executives during this period, the President (Fitch) and the Treasurer (Robbins Jr.) had two very different visions for the company between 1903 and 1910. Waltham seems dominated by a contest of wills at every level whereas Hamilton was conceived and matured as an enterprise built on a team approach.
Just 30 years after the factory was started, Hamilton was approached by Waltham for a merger. Given the magnitude and variety of problems at Waltham at the time, it is not a surprise Hamilton declined. And to think, a few years later, Rood once again assumed the Presidency of Hampden Watch Company. He must have felt truly vindicated at that point in his life.
