ABE UK/ GSM-Ouaga/M.E.P BUSINESS RELEASE N°3 By KOMOU Adama

19/07/2015, Sources: “Management Cases”, by Peter DRUCKER; http://www.autonews.com/article/20080914/ANA03/809150412/after-the-frenetic-durant-era-sloan-brought-order-from-chaos ; and http://fr.slideshare.net/kinshookc/ch06-8038300

Alfred Sloan’s Management Style.

In 1920, Alfred Sloan wrote a long report about the best way to organize General Motors. He showed the report, titled "Organization Study," to GM President and CEO. Fast forward to 1923: the CEO Durant is out, and Sloan's Organization Study is in. Sloan was GM's president from 1923 to 1946 and chairman from 1937 to 1956. His management techniques not only would govern GM but eventually would become the model for modern corporate America

The rise of Alfred Sloan The CEO Durant was a talented collector of businesses but a poor manager. He was an outgoing dreamer who operated on gut instincts, said William Pelfrey, author of Billy, Alfred, and General Motors. Durant was spontaneous and took risks, but financial and organization controls were foreign to him.

Sloan was Durant's opposite, soft-spoken and prudent. He believed in getting all the facts before making a decision. He never acted on emotion.

1916: Billy Durant bought Sloan's Hyatt Roller Bearing Co. 1916: Sloan became president of United Motors . 1918: Sloan became a GM vice president. 1920: Disenchanted with Durant's management style, Sloan considered leaving GM. 1920: Durant was ousted; Sloan became a key GM player and began reorganization. 1923: Named GM president (1923-46). 1937: Named GM chairman (1937-56).

The New Organization Brought by Sloan

Sloan’s Plan With Durant out, Sloan took on the task of bringing order to GM's chaotic structure. He immediately began taking on more responsibility in day-to-day management, and the board elected Sloan president on May 10, 1923. By then Sloan had put his organization chart into place.

Decentralized but controlled It was clear to Sloan that corporate governance had to be established at GM. He was "struck by the disparity between substance and form" within the corporate structure.

Sloan set out to create a system of management with accountability. GM's board adopted Sloan's Organization Study in January 1921.

The central idea was for GM to have strong central financial controls, while giving management in the field maximum leeway to run the daily business. The field people had to achieve performance goals. GM's operations outside the United States were left to run virtually independently.

Sloan also established a set of policy committees to help the central office determine the allocation of capital to GM's many business units. The committees agreed on the goals and monitored the results of the various units. Thus was born the committee system that governed GM for 60-plus years and still is important today.

Never Be Complacent In his book “Concept of the Corporation”, Peter Drucker called Sloan the father of the modern corporation's organizational structure. But Drucker noted that Sloan's model paralleled two similar organizational models: the Catholic Church and the Prussian army under Otto von Bismarck. Both had central controls.

Despite GM's success under his organization and leadership, Sloan knew the danger of complacency. So the GM boss hired Drucker in 1946 to study GM and see whether the corporation's structure should be changed further, Pelfrey said. Drucker wrote a report, but Sloan did not make any changes.

Relationships within the company Sloan had no friends within the GM group. He never called anyone by his or her first name and was “Mr. Sloan” even to top executives. Sloan also frowned on the use of first names by his top people among themselves. “It is the duty of the chief executive officer to be objective and impartial,” Sloan said, explaining his management style. “He must be absolutely tolerant and pay no attention to how a man does his work, let alone whether he likes a man or not. The only criteria must be performance and character. And that is incompatible with friendship and social relations. A chief executive officer, who has ‘friendships’ within the company, has ‘social relations’ with colleagues or discusses anything with them except the job, cannot remain impartial—or at least, which is equally damaging, he will not appear as such. Loneliness, distance, and formality may be contrary to his temperament—they have always been contrary to mine—but they are his duty.”

QUESTIONS - What do you think of this? - Would today’s successful executives agree?

The Organizational Chart of General Motors created by Alfred Sloan / The Organizational Charts in 1997 and 2002