Tyco’s History

Tyco was founded in 1960 as a research company in semiconductors and a testing company for different types of materials for the government.  It became a public company in 1966, and, from the beginning, Tyco mainly grew through acquisitions.  Tyco then focused on energy conservation and technology.  In 1974, Tyco was traded on the New York Stock Exchange.  In 1992, Dennis Kozlowski became the new CEO of Tyco, and through his leadership Tyco became even more aggressive in its acquisitions.  Tyco started having growth rates of 25% per year, and the company’s stock price soared during this time period.

Although the company appeared to be able to sustain rapid growth, it was impossible to effectively run Tyco and make good business decisions while growing a company by 25% through acquisitions.  It became more and more difficult to find good companies to buy; however, Tyco’s stockowners had come to expect these growth rates and were not willing to see them fall.  Under this pressure, Kozlowski started buying completely unrelated companies and even bad companies as long as the company continued to grow by the expected 25%.  Kozlowski got the nickname “A deal a day Dennis.”  By the end of 2001, Tyco had become a 40 billion dollar company and was a large player in healthcare, electronics, security, metal products, and deep sea mining.  In 2002 Tyco was involved in a huge scandal involving its CEO Kozlowski and his unauthorized spending of the company’s money.  Kozlowski was fired and Ed Breen became the new CEO of the company.  Ed Breen had big challenges to overcome that had been left to him by Kozlowski.   He had to figure out how to save a poorly run business with a huge debt coming due, no public confidence in it, and business pieces that did not fit together in the company’s business model.

The first thing that Ed Breen did as CEO was fire the board of directors that had let this problem get so big.  He also fired any employees he thought were involved in the scandal or who knew about it and did not stop it.  He then had to go out to the market and increase confidence in Tyco and raise capital to pay all the debt that Tyco had coming due.  Tyco managed to raise enough capital to pay their debts only weeks before it was actually due, and once that had happened senior management knew Tyco would survive.  Ed Breen then started to focus on the fact that Tyco was too diverse and started working on the best way to make Tyco run as an efficient company.  Tyco began to focus in on its key businesses and to sell most of its non-key companies.  In 2007, Tyco realized that the company was still too diverse to function successfully, and Tyco initiated one of the largest company splits ever.  Tyco became three different publically traded companies: Covidien Ltd., Tyco Electronics Ltd., and Tyco International.  The new Tyco International consists of 4 different segments: ADT WW, Flow Control, Tyco Safety Products, and Tyco Electric and Metal Products.  Today over 50% of Tyco’s revenue is generated outside the U.S., and in 2009 it made more than $17.2 billion in revenue.

Ford Jordan’s Experiences at Tyco

It was really interesting to hear why Ed Breen and the senior management team decided to split up the company and how the split was the best option for Tyco’s stockholders and the company as a whole.  The main reason employees that I worked with gave for the company split was the difficulty in getting any capital investment in their segments before the split.  For example, Tyco’s medical segment needed huge research and development investments to be successful, whereas Tyco’s manufacturing segments needed short term investments and available cash to gets supplies.  The Tyco metal and electrical material profit margins rely heavily on the price of the materials it uses, which makes it profit margins extremely uncertain.  As the price of the metal goes up, its profits go down; and as the price of metals goes down, it becomes extremely profitable.  Since Tyco was such a large and diverse conglomerate, its shareholders did not realize this and complained about the metal and electrical material segment.  These are just a couple of the many reasons why Tyco decided to divide the company into separate companies.  It was very interesting to observe a real portrayal of Professors Powell’s warnings about companies losing their focus and not being able to manage themselves effectively.  Tyco refocused by creating three different companies, which made the companies much strong than when they were together.

Tyco tries to differentiate itself from its competition by having world class leadership and being an industry leader in its respective markets. They try to differentiate themselves from their competition by producing high-end, environmentally friendly products.  A campaign such as the Zero Harm program, a program that attempts to achieve zero harm to the atmosphere and its employees, is just one of the ways Tyco tries to differentiate itself from its competition.  It is important for Tyco to differentiate itself from its competition, because as soon as the product seems to be the same from company to company, the product becomes a commodity.  Commodities that force companies to have the lowest prices to sell the product destroy profit margins.  Tyco tries to get its customers not to focus on the price as much as the quality and how their customers can differentiate themselves with higher quality.

While I was working at the Tyco’s corporate headquarters in Princeton, NJ, senior leadership was constantly telling its employees about the importance of living out the company’s vital values and doing the best work one can possibly do.  Tyco does not just talk about its vital values; it lives them.  Employees are able to see that from the upper management all the way down to line workers.  Tyco’s vital values are excellence, integrity, teamwork, and accountability.  It is especially important for Tyco to make sure that a sense of morality is ingrained in its work force because of the company’s tainted past.   The result is that the new Tyco is an excellent place to work.  Senior management has become extremely confident in its workforce.  They have trained their employees to be hardworking, driven individuals that take pride and joy in their work.  Senior management utilizes a Theory Y management style, which allows its employees to grow and develop and even do things in their job that are not specifically in their job description if they are passionate about it.  Management knows they have a good workforce and do not need to micromanage their employees.

One of my favorite things about Tyco was how I was treated as an employee.  Almost everyone I met at Tyco was a high-functioning individual who was passionate about his or her work.  This was refreshing to experience as an employee for Tyco.  It meant that I could count on other people, I was confident that they would do their part of the job, and I was encouraged to work hard so that people could count on me.  I was given real responsibility and really enjoyed the tasks I was given.  My main manager was Khaliah Gordon in Sox & Compliance, and I also worked with Rich Menziuso in Treasury Operations.   Both of these managers were very willing to help me, but they were confident that since I was hired by Tyco, I was fully capable of handling a lot of work.  I would not have had it any other way, because I love working hard.  I would rather have to work 70 hours a week than work 40 hours a week but only have 25 hours of work to do.  I was given important tasks to do; last year Tyco had to hire a fulltime employee to do the job I was doing as an intern.  I had the opportunity to meet with high level management, see how public accountants interacted with companies, improve my communication skills, and test my ability to do accounting as a career.

The main job that I performed for Tyco was in the Control & Compliance group under John Davidson.  I worked about 60 percent of the time with the Sox & Compliance group, 20 percent of the time with the Treasury Ops group, and 20 percent of the time on a Six Sigma recognition program to better improve employee satisfaction and recognize employees truly living Tyco values.  I was able to succeed at Tyco because of the good work ethic that Grove City forces students to have for survival and a whole host of other skills that were taught in classes from Spec Mind to Business Communications to Intermediate Accounting.   Two of the most important classes that allowed me to be successful were Business Communications and Accounting Information Systems.  Almost all of the balance sheets, income statements, critical spreadsheets, and other documents were in Microsoft Excel.  It is essential to be knowledgeable about Excel and to be able to navigate Excel documents.  There were so many times that I needed to format an Excel document and use pivot tables, filters, if statements, and other Excel formulas that I would not have known existed without those classes.

My main job was with the Sox & Compliance department.  I helped them with effectiveness testing of the controls to make sure that the processes at Tyco are in compliance with Sarbanes-Oxley in regards to section 404.  During the beginning of the year, Khaliah, Shaka, and Nigel had evaluated all of last year’s controls to decide which controls were in scope this year and if additional controls needed to be added or removed due to the process already being protected by other controls.  Once that process was complete, they moved on to the testing controls.  The Sox & Compliance team did not have enough people to perform all of the testing needed to verify that Tyco was meeting the Sox requirements, which was why Tyco hired four interns to help out with the work load.  The 3 other interns and I would be in charge of performing a majority of the testing and Khaliah, our manager, would review our work when we were finished.

Managing my work

I discovered that controls testing has a very cyclical amount of work, meaning that in the beginning there was not a lot of work, but it soon became busy.  It was slow at the beginning because there was a lot of waiting for the documents needed to test the controls and waiting for the availability of the process owners to schedule walkthroughs.  The process then became very busy, because I received the documents at the same time that all the process owners wanted to meet with me.  Work started mounting on my desk, but I could only start working on it in between meetings.  I slowly started filling out my audit reports and documenting my findings.  Finishing the tests section by section and working on documentation became a nice steady load until I finished the particular department and had a new one assigned to me.  I performed effectiveness testing every week, so my responsibilities never really changed even as the departments on which I worked did.  As I started to prove myself, my manager Khaliah gave me more of the work she was be doing.

In general, the main challenge that I faced when performing the effectiveness tests was communication.  I came across three types of process owners.  The first type was the easiest to work with. They enjoyed talking, loved to tell me all about their process, and gave me all the documents on it that I could ever want.  The second type of process owner hated auditors and Sox & Compliance. They viewed what I was doing as a waste of time and resented me for wasting their time.  Finally, the third type of process owner was in between the first and the second. They did not hate what I was doing but they would rather not do it.  For these last two types of process owners, which were in the majority, good communication was absolutely essential.  I needed to be an active listener, take detailed notes, and know exactly what I needed before talking with them.  These process owners were not going to help me or give me anything.  I needed to ask the right questions to get what I needed.  Active listening and note taking are also important skills to have to be successful in almost every class I have taken at Grove City College.  Also, review sessions with professors and job interview preparation by career services taught me to be prepared with questions for the process owners and to research the processes ahead of time.

The second challenge I faced in my controls testing was getting the process owners to like me.  This was a challenge that I did not expect to face, but it was almost as important as communicating effectively to the processes owners.   When I talked to my manager Khaliah and other Tyco employees who worked at Big Four firms, they said the same thing.  What makes a good auditor is the ability to connect with people and get them to like you or relate to you.  One of the Tyco employees I became close to was Dan Bombaci in the FP&A department.  He used to be a senior manager at KPMG.  He has known people who were great at accounting, but horrible with people. When he would send them to meet with clients, the client would tell Dan that they never wanted to deal with his accountant again.  The people who were good at auditing and accounting failed, because they were not good at developing relationships.  The process owners did not enjoy talking to them enough to want to give then the documents they needed.  I found that people were much more willing to help me if I cared about them.  I found that I would actually get a job done faster if I spent the first 15 minutes with them talking about their kids or how the Phillies were doing, because I would get the documents faster and any follow-up questions I had would be answered much sooner.

Once I actually received the documents I could start performing the effectiveness test on the different processes.  A lot of the tests were actually quite simple, such as checking for delegation of authority or whether or not something was prepared within thirty days of the close of the quarter or month.  Other tests were actually quite difficult, like when I had to recalculate some of the numbers or tie numbers back to previous spreadsheets.  It showed me that I still had a lot to learn. For example, I tested a spreadsheet that the SEC group used to calculate their pension roll forward.  The calculations were very complicated and difficult.  The little I had learned in Intermediate helped me look through the documents, but I had a lot to learn. Shaka, who is a senior associate, had to work with me a lot before I felt comfortable saying that the spreadsheet was working effectively.   It showed me the importance of Tyco’s value of teamwork and that I could not do everything on my own.  I need other people to help me and teach me new things.  The departments or areas that I tested were Tax Accounting, Corporate Accounting, Accounts Payable, Tax Sharing Agreements, Spreadsheet Testing, SAS 70s, and Financial Planning and Analysis.

Tyco Treasury Operations

A secondary part of my job was working with the Treasury Operations department.  Due to the slow nature of controls testing for the Sox & Compliance group, there were times when my controls work would be extremely slow, which I hated.  So I decided that I would find more work for myself.  Rich Menziuso is in charge of the Treasury Operations group, and I knew him because he interviewed me before I began the internship.  We had kept in touch, and he told me if I ever wanted to see what he did or help him I should let him know.  When I mentioned that I had some free time to work on anything he needed me to, I never had free time again.  Rich brought me along to many different meetings.  The Treasury department had just created a new treasury system that would allow them to make FX trades easier and issue intra-company loans.  The system was called IT2 and it also interacted with Oracle, Tyco’s ERP system.  The treasury operations department was creating flow charts of all the different processes that were involved in the system and evaluating them with internal audits to make sure that all the proper controls were in place to protect Tyco’s financial statements from any material errors.  I also helped Rich’s department with their asbestos and contingent liability evaluation.  I was responsible for helping Rich and Mark with a lot of their meeting preparation and some of the easier supporting calculations.  Working with the treasury department taught me how accounting really is a skill and not just recording numbers.

Another responsibility that took up a large part of my time was implementing a recognition program for Tyco.  At the beginning of the summer, Tyco split the interns into four different groups and assigned us projects for the summer.  The groups worked on a YMCA outreach day, Chinese student’s orientation day, intercity career day, and an undecided group.  I was put in the undecided group where Tyco told us to come up with an idea that we thought would make Tyco better as a whole.  After much brainstorming, my group decided that while Tyco did an excellent job of living out its vital values, there should be some venue for employees to recognize one another for this.  We decided that we would develop a peer-to-peer recognition program that would allow employees to recognize each other and make good workers more visible to senior management.

We pitched the idea to Matt Olsen who worked in University Relations and oversaw the different groups.  He loved it and said we should start implementing it immediately.  Tyco is very much into Lean Management and Six Sigma, and Ketler’s Lean Management really helped me understand a lot of the terms and concepts the different employees would talk about.  Whenever a major project is going to be implemented at Tyco, there is a Six Sigma format that all employees must follow.  The employees first must find a sponsor at the senior executive level.  If that senior executive likes the idea and sponsors the program, the group will then need to find a group of champions and advisors.  Champions and advisors are employees at the Director or VP level that will help the group in their areas of expertise and act as a buffer for the sponsor.  The champions and advisors need to approve items before the sponsor hears the final presentation.

Being on the recognition project was a real blessing, because it allowed me to develop skills beyond accounting.  My responsibilities for the projected initially included interviewing several employees and recording their responses so we could gauge employee interest in the program.  I then performed extensive online research by looking at other companies’ existing reward programs.   I looked at programs from Procter and Gamble, Goodyear, JP Morgan, and Boeing.  Some programs were very successful at these companies, and I noted what behaviors the different awards were trying to encourage.  We also received access to a database at Tyco, which had specific surveys and data on the effectiveness of different types of award programs.  I also was able to further improve my communication and leaderships skills by continuing to learn how to work in a group effectively and rely on other people to accomplish goals.  I became skilled at preparing for presentations, because we had to present our recognition project to about eight different groups of people and answer all of their questions.  I was also in charge of calculating many budget items as well as designing a flow chart and much of the framework for them.   This project was a great opportunity for me to work with people in completely different departments, like HR, tax, communications, and compensation.

Another responsibility that my manager Khaliah gave me in August was to help Deloitte with its testing of Tyco’s controls.  Deloitte reads our test papers and audit reports to see what they needed to test, and in some cases it used our supporting documents for their tests as well.  I started helping one of Deloitte’s senior managers with her use of our supporting work.  She was in charge of testing Corporate Accounting, SAS 70s, and Financial Planning and Analysis.   She was having difficulty getting in contact with some of the process owners, and since I already knew them and had met with them, I tried to help her get in contact with them.  I also explained to her some of the processes that she was unfamiliar with.  It was an enjoyable experience, and I got to learn what she enjoyed about working at a Big Four company.

Ford Jordan’s Takeaway about Tyco

I loved that Tyco actually told me that one of my jobs was to learn as much as I could and talk to as many people as possible.  During my free time at Tyco I would set up lunches or meetings with people to discuss their job, how they got there, and any advice they had for me.  I had the opportunity to talk to a partner from Deloitte and PWC as well as the director of Tyco’s Internal Audit.  The people at Tyco were so friendly and inviting, and they wanted to help me in any way they could. I also got to have a one-on-one meeting with George Oliver (President of TSP), Patrick Decker (President of Flow Control), and Ed Breen (CEO of Tyco).  I learned a great deal from these meetings about setting goals and following my passions and never settling for good when I can achieve the best.

My main goal coming into my junior year was to raise my GPA above 3.2, because that is the cutoff for Big Four firms, and to get an internship that would provide me real accounting experience.  I accomplished both of these goals.  Getting the internship was really important to me because finding satisfaction and fulfillment in my job is something I have always worried about.  I have always enjoyed my accounting classes and my EXCELLENT ACCOUNTING TEACHERS.  I still felt I needed to get real world exposure to accounting to make sure I would really enjoy it if I did it for the rest of my life.   Tyco gave me that experience!  I truly enjoyed my experience and the people I worked with.  I made great relationship with the employees and other interns at Tyco.  Tyco taught me the importance of hard work and integrity. Ed Breen said, “The one thing you have is your reputation, and no one can take it away from you.  Only you can give it away.”   If people cannot trust me, I will never be able to rise up in a company because no one will be willing to give me anything important.  Another valuable lesson I learned was the importance of teamwork and leveraging other people to accomplish goals.  I learned that good leaders do not just tell people what to do, but they also create an environment where other people can voice their opinions and grow and be challenged.

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