Alfred Sloan

"These higher purposes are sometimes called “overarching goals”97 or “unifying vision”98. Some businesses have this sense of purpose, above making enough profit to survive, or adding a few more million to the CEO’s compensation package. So Alfred Sloan’s famous description of General Motors’ mission as, “We don’t make cars, we make money,” worked fine—until…"

"Raskob then talked Pierre du Pont into replacing Durant as GM president. In the early 1920s, they partnered with Alfred Sloan to rebuild General Motors. It was Raskob who fi gured out how to beat Henry Ford at his own game by betting on a consumer credit revolution and creating GM’s installment buying arm, GMAC, which allowed car dealers to fi ll their showrooms and millions of people to aff ord GM’s more expensive and stylish cars. Th en, to motivate and maintain the loyalty of GM’s extraordinary management team, most especially the irreplaceable Alfred Sloan, Raskob devised one of the fi rst corporate stock option plans. Th e business press dubbed it Raskob’s “millionaires’ club.” Th e press was not exaggerating; dozens of GM managers would accrue GM stock worth millions (including Raskob); Sloan, who took over as GM president in 1923, eventually made hundreds of millions of dollars. Th e business elite saw Raskob as a visionary who had fi gured out how to get managers of corporate America to act like owners; instead of working only for salary they were working for a share of the company’s profi ts. Raskob’s stock option plan for top managers became conventional wisdom in corporate America."

"When Geneen began picking up the pieces at ITT in 1959, he used a lifelong study of General Motors as his model. GM’s organizer, Alfred Sloan, was his personal hero; and the job of remaking ITT became a casting job in the General Motors’ mold. Finance was made a direct reporting function throughout ITT, engineering respon- sibility was centralized, and a large technical staff began to grow into dominance. ITT managers made in-depth studies of the policies under which General Motors op- erated. “If it’s good enough for General Motors, it’s good enough for ITT,” was the new anthem; and the Geneen- directed juggernaut began to roll on that high-octane formula."

"If good decision-making appears complicated, that’s because it is and has been for a long time. Let me quote from Alfred Sloan, who spent a lifetime preoccupied with decision-making: “Group decisions do not always come easily. There is a strong temptation for the leading officers to make decisions themselves without the sometimes onerous process of discussion.” Because the process is indeed onerous, people sometimes try to run away from it. A middle manager I once knew came straight from one of the better business schools and possessed what we might call a “John Wayne” mentality. Having become frustrated with the way Intel made decisions, he quit. He joined a company where his employers assured him during the interview that people were encouraged to make individual decisions which they were then free to implement. Four months later, he came back to Intel. He explained that if he could make decisions without consulting anybody, so could everybody else."

"The desire to give the individual branch manager the power to respond to local conditions moves us toward a mission-oriented organization. But a similarly legitimate desire to take advantage of the obvious economies of scale and to increase the leverage of the expertise we have in each operational area across the entire corporation would push us toward a functional organization. In the real world, of course, we look for a compromise between the two extremes. In fact, the search for the appropriate compromise has preoccupied managers for a long, long time. Alfred Sloan summed up decades of experience at General Motors by saying, “Good management rests on a reconciliation of centralization and decentralization.” Or, we might say, on a balancing act to get the best combination of responsiveness and leverage."