Manage-Wise

The new breed of corporate managers

Alfred P Sloan, Jr, is one of America’s first corporate executive success stories, an individual who amassed millions of dollars by earning a high salary and receiving stock options. Before Sloan, the only way to achieve great individual wealth in America (other than through finance on Wall Street like JP Morgan or by family inheritance like the Rockefellers) was by inventing a product or process.

In addition, Sloan was one of the first of the university graduates (MIT class of 1895), a small but up-and-coming group of college-educated men who would start the twentieth-century tradition that only people with a college degree demonstrated the intelligence to be a corporate executive.

Sloan studied electrical engineering at MIT, and his general thinking was organised along the logical lines of an engineering project. This systematic thinking process, which would flower and realise itself in the coherent plan for restructuring General Motors, was a definite educational corollary to Sloan’s masterpiece, the Organisation Study, written in 1919.

Sloan perceived himself as being a new breed of manager in the growing category of self-made, educated men. However, Sloan—whose father was a successful coffee and tea merchant who provided an upper-middle-class existence for the family in New Haven and later, in Brooklyn, New York—never tried to peddle his rise to riches as a poor boy’s Horatio Alger tale.

Alfred P Sloan Jr’s belief in professional management as an organised system that could be taught and replicated was witnessed by his donating $5 million to his alma mater for the creation of the MIT School of Industrial Management. In 1965, the university’s trustees changed the school’s name to the MIT Sloan School of Management to honour its founder.

The lessons of his planning genius

It must be remembered that what Sloan accomplished 85 years ago seems commonplace today—it is almost taken for granted—but the corporate system did not exist in its entirety until he assumed the presidency of General Motors.

From the moment he took on the mantle of leadership, the structure of the corporation in the United States, and then the world, would improve dramatically.

Sloan put into practice new ideas and concepts to improve all aspects of company organisation. From his earliest days after MIT, as a new hire at the Hyatt Roller Bearing Company, his inquisitive mind searched for methods to improve upon outmoded American business practices. These are the key elements in Sloan’s revolutionary system:

• Facts and data are the main and only determinants of decision-making
• The company should encourage dissent and differences of opinion
• Organise via committees a decentralised system with centralised power and control
• Staff with the most competent people without thought to friendship
• The president or CEO acts as the absolute ruler though consensus

Sloan presented the integral part of the reorganisation system in the Organisation Study. The report is a brilliant example of clarity and subtle persuasion. Sloan despaired of the old system of despotic authority, of management decisions by intuition, and of hiring by cronyism.

Sloan demanded that the new corporate order be guided by two main principles: granting independent authority to the heads of divisions within the corporation for decision-making, but also requiring them to report to a central authority for financial endorsement and guidance in the macroeconomic areas of business.

Essentially, the successful American corporate organisation that would dominate the world’s business communities began to take shape when General Motors followed Sloan’s innovative ideas. After him, all public and private institutions would attempt to transform their organisations into the General Motors style, with a clearly defined decentralised structure and effective leader or president.

The lessons of his genius in practical matters

The template for Sloan’s reorganisation turned General Motors in a new direction of increased profitability. In addition to the reorganisation, Sloan introduced practical business decisions that are the hallmark of his genius:

• Offer wide customer choices
• Promote a positive corporate image through institutional advertising and public relations
• Realise the need for international sales and marketing through overseas manufacturing or export
• Find ancillary businesses beyond the corporation’s core product or service

It is interesting today to remember generations past when the nation received most of its information from newspapers and weekly magazines like Life, Look, Colliers and The Saturday Evening Post. Immediately after World War II, within the pages of these and other magazines, automobile manufactures paraded their lineup of new cars. And no parade was as eagerly anticipated as the five popular models from General Motors—each one markedly different but all recognisable in the distinct “Body by Fisher” General Motors styling mould.

Excerpt from ‘The Leadership Genius of Alfred P Sloan : Invaluable Lessons on Business, Management, and Leadership for Today’s Manager’ by Allyn Freeman. Reproduced with permission © 2006, Tata McGraw-Hill Publishing Company Limited. E-mail: vishwanath_mum@tatamcgraw-hill.com