Eindhoven was Philips, that’s how it used to be. But the mega-concern of yesteryear seems to be crumbling further and further. In the first part of a trilogy, Studio040 discusses what has happened to the company since Operation Centurion. “The head has been separated from the hands.”
It has been more than thirty years since the mass layoffs descended on Eindhoven under the name Operation Centurion. That reorganisation, in which 45,000 employees were laid off in the Netherlands alone, still has an impact on the company three decades later.
Then-president Jan Timmer was not averse to directly addressing the need for Operation Centurion to employees. “Employees who wanted to know after a few years when Centurion was over were disappointed: ‘Centurion will never end’,” wrote Luchien Karsten, a business expert at the University of Groningen in a 2009 academic article about the drastic reorganisation.
Centurion was essential for Philips, which had become a gigantic company. Due to the many divisions and the many branches in different countries, the company was in financial difficulty and had become virtually ungovernable. The mass layoffs were necessary to avert bankruptcy. From more than 300,000 employees in the early 1990s and 160,000 in 2004, there are now ‘only’ 67,000 Philips employees left worldwide in 2024.
Walking Around
In 2009, Karsten also wrote positively about the ‘necessary intervention’ of the Philips management. For example, it is written how director Jan Timmer ‘continuously spread the message of doom about the poor state of the company by being present at the Philips offices.’
“’Managing by walking around’. By this he meant being visibly present on the work floor and staying in conversation with the employees. Through his walking management, Timmer even remained visible as president, something that was much less the case for his predecessors,” is how the researchers describe Timmer’s management style, which continuously spread his message of doom.
With that style, Timmer followed a tradition that had been started earlier by the last true Philips scion to lead the company, says Rens van Leeuwen, who worked for 44 years in the company’s research departments and was on the Philips works council for six years. “What characterised Philips was that Frits Philips always kept his finger on the pulse on the shop floor. He walked between the lathes, so to speak.”
Amsterdam
But after Centurion, the company was in for a new blow in that respect. Cor Boonstra succeeded Jan Timmer and had completely different ideas about how the company should be run. That is why he had a move of the head office from Eindhoven in mind.
Incidentally, Amsterdam was not the intended destination of the Philips board. Then-president Cor Boonstra actually had the ambition to move to London, sources close to the company told Studio040. Because the board of directors wanted to prevent the company from disappearing from the Netherlands, Amsterdam became the compromise.
“Boonstra was partly understandable. He succeeded Jan Timmer, new leadership with more marketing experience was needed. And most people at the top thought that Boonstra should succeed Timmer, including me. He travelled around to get to know all the big clients, that was a good sign. We all thought highly of him,” says Jan Post, who as CEO experienced Boonstra’s appointment and the move to Amsterdam up close.
De Volkskrant wrote at the time: “Philips did point out in general terms the advantages of the proximity of Schiphol, and the knowledge in the capital about finance and advertising. Boonstra attaches great value to the judgment of the financial markets and is known as a marketing man.”
“The decisive reason for moving, however, is that Amsterdam is also mentally far removed from Eindhoven, where Philips management is stubbornly resisting reorganisations. Employees at the head office confirm that Boonstra expects to gain more control over the company from Amsterdam.”
Bunnies
Post confirms that “Boonstra never felt comfortable in Brabant, made few friends here. He started at Vredeoord with the board of directors. You could see the rabbits hopping in the grass there, many of us liked that setting but Boonstra got spots on his neck, he thought it was provincial.”
“That the move to Amsterdam was necessary is an interesting discussion. I studied there, lived there and was chairman of the Chamber of Commerce there. But instead of going to the Zuidas, he went to sit in Amsterdam-Oost in the Rembrandtoren. The magic of the international city, you didn’t find that there.”
Remote
Moreover, Philips made a move that other multinationals did not make. “All the big American companies, none of them were in Washington, New York or Atlanta. They were in the more remote areas. We settled in Amsterdam, we called the Rembrandt Tower Strijp-33 because half of the staff went back and forth from Brabant by train every day.”
Rens van Leeuwen believes that there was little understanding for the move from the company’s employees. “From a marketing perspective it may have been good; Arabs, Chinese people may have known Amsterdam but not Eindhoven.”
And the management, which used to be so present on the work floor, created a barrier between themselves and the rest of the staff. “The head was separated from the hands,” says Patrick Meerts, union leader of the FNV. “Where the management in Eindhoven used to be close to the work floor, which was also decisive for the corporate culture, the distance was now created very consciously. Shareholders finally got the desired grip on the company, which was still mainly focused on making short-term profits.”
Sell Crown Jewels
One of the ways to achieve this short-term profit was to sell off business units. NXP, ASML, TSMC and even the lighting division, now called Signify, were sold off one by one. What is particularly striking is that the first three, and especially ASML and TSMC, occupy important positions in the global trade of computer chips. TSMC is the largest manufacturer of computer chips worldwide and ASML also has an important position with its chip machines. NXP designs and produces chips for the automotive market itself.
“But also FEI, which made electron microscopes, MEC (Matsushita) which was set up with the help of Philips and DAP, the household appliances division that continued as Versuni, are companies that have all continued to do well,” says Van Leeuwen.
“TSMC was set up by Philips in 1987, that company now has a turnover of 88 billion dollars – that is Philips knowledge. The world revolves around TSMC, why couldn’t Philips management do that? Then they also sold all the shares they had in it in 2007. The semiconductor division was also sold in 2007 for 4 billion euros and ten years later was worth 40 billion euros under the name NXP. That is unbelievable. Those hedge funds (the shareholders, ed.) earned 36 billion euros and Philips nothing,” says Rens van Leeuwen.
Where those knowledge-intensive business units were sold to the market, Philips came up with Senseo at the beginning of the new millennium. “Boonstra (president during the move, ed.) didn’t do much good. He forced Senseo onto the market, what kind of product is that,” says Van Leeuwen – slightly indignant. “But that also became Versuni, only the name Philips is still on the product.”
Past success
The sale of the TSMC shares and the sale of NXP did bring short-term profit. “Boonstra started selling off business units. That is making money with the success of the past,” says Van Leeuwen. “For example, the semiconductor division (now NXP, ed.) was sold under pressure from shareholders. Jan Timmer also said in an interview with MT/Sprout that the restructuring was done under pressure from shareholders.
“It is easy and attractive for a CEO because you can quickly show profit. You can see from the success of the divested parts that they got a more talented management than Philips itself had. After all, the success was possible with the same market and the same products, infrastructure and so on,” says Van Leeuwen.
130 years
“Philips divested things that should not have been divested. I agree with that. Music company Polygram was a goldmine, that industry was young and booming with enormous results, but it was sold to Universal. The most complicated technologies were sold off, Boonstra did not like that. But at the same time the breadth of the company was simply a problem. Under Frits Philips, the company grew from 3 divisions to 12 divisions in a few years after the war. Wherever Frits went he said: we can do better. Philips was ungovernable,” says Post.
Interview Boonstra
Studio040 would have liked to have spoken to Cor Boonstra himself for this series of stories about Philips. However, the former Philips president passed away on Friday 23 May of this year. In the context of his passing, the NTR broadcast an interview with Boonstra in the programme ‘Het Laatste Woord’, which was recorded in 2018.
“I went to Philips because I admired Jan Timmer,” Boonstra said in that interview with the NTR. “But it was a bit more serious than I thought it was,” the former president said about the state of the company.
“At Philips we were in a situation where we had 170 different activities. Of which probably 70 were linked together and the others had grown from the period of luxury. Terribly profitable activities from the expansion of the television world etc. But there were also all kinds of things that had grown that were not doing well financially. But the decision-making was still done on the basis of a few people who were supposed to know everything. Timmer tried to bring some order to that, and that is where the fault line arose, because it was not going fast enough.”
“People still get tears in their eyes when they hear my name, I feel sorry for them. The reality is of course that the whole fuss about leaving Eindhoven, that put Eindhoven on the map in the world, when you see what has been built and grown there because of the investments.”
“The reality is that this is the environment where most discoveries are made and where a business community has grown to the brim. But they had to have a huge kick in the teeth to wake up,” Boonstra said.
Source: Studio040
For Eindhoven News: Lila Mehrez
