Great Leaders – Alfred Sloan

Alfred Sloan is widely regarded as the ultimate professional Manager. He was CEO of general Motors 100 years ago.

Sloan was the undisputed titan of industry, he displaced henry Ford, he invented the modern marketing system and created the concept of corporate management.

Sloan sensed that cars were more than basic transportation bestowing prestige on their owners. He gave his customers a ladder of success to climb and was the father of segmentation.

Sloan did not want any biographies written for him. He burned ,most of his personal papers when he retired from GM and GM destroyed the rest as per his wishes.

Sloan’s best customer when he ran a ball bearing unit was henry ford, followed by Will Durant. Durant was buying small auto companies to counter Ford and called them General Motors.

‘I never give orders, I sell my ideas to my colleagues if I can’-Alfred Sloan

His work was his passion, he never smoked, never drank, never partied, he read widely about his industry.

Sloan competed vs the Ford model T, which in 1925 cost $260, half the price of a refrigerator then. Ford Model T was the car a family bought first.

Sloan believed that a car signaled the owners status. Fancy cars spoke of money, power and prestige, which Henry ford didn’t practice as he drove the Model t to be the cheapest car.

Sloan said “ we will produce a car for every purse and every purpose”, thus bringing in segmentation.

Sloan developed a ladder of success:Chevy for the economy minded, Pontiac for the upwardly mobile, Oldsmobile for the discreet middle class, Buick for the country club strivers and Cadillac for the wealthy and successful.

The longer a buyer went without a new model, the more dissatisfied he became and he would end up envying his neighbor's new car. This Sloan understood.

Sloan invented modern management by getting the clutch of companies together. He applied two principles : Preserve the independence of the companies that came into the GM fold, efficient, centralized oversight that would reward success without stifling creativity.

He got it just right for GM- the right amount of central control, the right amount of divisional independence, and plenty of ways to share ideas.

He had a small corporate office, whose job was to set overall policy, allocate resources and co ordinate, not run the operating divisions.

The plan also created interdivisional councils where executives and staff could exchange ideas or find ways to exploit economies of scale.

GM, thanks to Sloan’s management practices was the only American car company to be profitable in the great depression

GM got into a fight with the auto workers Union and relented when President FD Roosevelt intervened. Sloan had to make concessions and GM came to be known as generous Motors.

Peter Drucker, the management guru accepted that a number of his management ideas came from observing Sloan.

Sloan according to Drucker believed that management principles depended on clear structures and the character and integrity of managers that ran the structure.

Sloan wrote ‘My years with General Motors’ in response to Drucker’s The concept of the Corporation. My years with GM was a runaway success, and was the first modern business bestseller.

Sloan convinced Walter Chrysler to forma car company because he felt that GM needed competition for it to stay a step ahead.

Sloan was a compassionate and people focused manager. He donated a lot , the Sloan school of management at MIT,the Sloan-Kettering cancer Institute etc.

Sloan had his own management adages.The business of business is business he saidThe whole objective of industry should be to reduce prices, reduced prices create employment.

Sloan’s management philosophy:Get the facts, recognize the equities of all concerned, realize the necessity of doing a better job everyday, keep an open mind and work hard. The last is the most important of all. There is no short cut to hard work.

Sloan felt it wasn’t a manger’s job to like people, to change them or approve of them, he felt that one must always out their strengths to work and reward good performance.

Sloan respected facts, welcomed disagreement and refused to make decisions till he had all the alternatives thought through.

After Sloan stepped down from GM in 1956, the quality of thinking, vision and open minded questioning withered away. GM executives started having pre meetings before bigger meetings and thus true debates never occurred for big decisions. The company became an ordinary company.

The Sloan way

• Question conventional wisdom

• Never ignore basic changes in your market

• When life gives you lemons, make lemonade

• As a manager, your first duty is to your company

• Managers must be prepared to make personal sacrifices for the job and the company

• Performance is the only criteria in judging people

• Integrity and character are key for leaders

Welcome disagreement, dissent is not disloyalty. A managers greatest danger is surrounding himself with yes men or yes women.