The Leadership Genius of Alfred P. Sloan




McGRAW-HILL                  2005


Front cover

Visionary business leader Alfred P. Sloan (1875-1965) revolutionized the world of the American corporation like no else had ever done before him – or would ever do again. From his groundbreaking approaches for leadership by consensus, encouraging dissent, employing facts and data, and managing consumers, Sloan not only created the General Motors powerhouse during his 30-year tenure – his brilliance as CEO there is legendary – but he also influenced the strategic vision, leadership style, and operational discipline of today’s most successful companies.

In The Leadership Genius of Alfred P. Sloan, Allyn Freeman explains why Sloan’s principles have stood the test of time, remaining the basic building blocks of effective managerial leadership in organizations large or small. He demonstrates how these innovative principles are playing out in business today, taking you through their successful application at GM and distilling lessons that all managers can use as guideposts in their business.

Freeman also provides illustrative examples from top companies across a wide range of industries – from Coca-Cola, Marian Labs, and Nike to the Smithsonian, Heinz, and Hallmark – to demonstrate how they are effectively implementing Sloan’s concepts.

You’ll learn how to duplicate Sloan’s methods and reap the benefits of:

v  Implementing and controlling dissent and disagreement within your organization

v  Offering customers the right amount of choices

v  Using only facts and statistics for decision making

v  Selecting the right people for a brilliant, enterprising staff

v  Starting or acquiring complementary businesses

v  Developing a strong corporate image through smart, memorable promotion

v  Capitalizing on doing business internationally

Delivering proven advice that continues to shape the way business works, The Leadership Genius of Alfred P. Sloan is the ultimate rulebook for companies who want to achieve high levels of success.

Preface by Allyn I. Freeman

Too often we fail to recognize and pay tribute to the creative spirit.

Alfred P. Sloan, Jr.

At the completion of a television program on the Public Broadcasting System, the credit states: “Sponsored by the Alfred P. Sloan Foundation.” Who is this Alfred P. Sloan who amassed such large sums that he, along with well-known wealthy families like the Rockefellers and Carnegies, could fund an entire PBS documentary?

To answer that question you might go to the Web site to discover that the foundation started in 1934 and its philanthropic work covers a range of science, economic, educational, and cultural areas. At the end of 2003, the current value of its assets totaled an astounding $1.3 billion.

More research indicates that Sloan cofounded the Memorial Sloan-Kettering Cancer Center in New York City in 1946, one of the world’s leading cancer care and research centers. He is the same man who endowed the prestigious Sloan School of Management at the Massachusetts Institute of Technology. Finally, the list ends with the Alfred P. Sloan Museum – Flint, Michigan’s center for historic automobiles and regional history.

In the Web site’s biographical section, it is revealed that Alfred P. Sloan, Jr., generated all his money as an employee while serving as president and chief executive officer of General Motors Corporation during most of six decades at GM. His accomplishments are universally considered the pinnacle of managerial and leadership achievements, a corporate career success unparalleled in the 20th century of American business.

The elemental truth is that when Alfred P. Sloan, Jr., took the reins of General Motors, he transformed the concept of the modern corporate organization forever.


Format of this book

This work is composed of two elements: the managerial intelligence of Alfred P. Sloan, Jr., arranged in distinct chapters, and numerous examples of other companies and organizations, large and small, that have demonstrated the wisdom of his instructive and innovative practices.

Sloan’s leadership and managerial lessons – derived from his two autobiographies and from other writings, most notably, by management guru Peter Drucker – provide a history of the first successful applications of the modern American corporation. These are basic, commonsense Sloan solutions to general and specific organizational and business situations of the past that can be applied today.

The case histories come from a wide range of diverse companies and organizations that reinforce or highlight some aspect of Sloan’s particular business lesson. These actual cases demonstrate the success of adhering to one of Sloan’s business concepts. Further, a few of these examples illustrate what happened when the Sloan principle was ignored.

Alfred P. Sloan, Jr., provided a dynamic new vision of how to lead and operate the modern corporation; and he did it with insights and rare good judgment. This book’s contention is that a look at the historical Sloan GM experience represents a study in practical and logical thinking that can instruct a manager on the path to success.

Chapter 1: The Great Accomplishment: The Sloan System

Alfred P. Sloan, Jr. (1875-1965) changed the manufacturing methods, organizational structure, marketing, sales, distribution, financing, and advertising used in the automotive industry – in short, every aspect of U.S. automobile manufacture and production. Moreover, in this dramatic conversion, this complete industry makeover, he also revolutionized the world of the American corporation like no one had done before him or may ever do again.

In the beginning of his second autobiography, My Years with General Motors, published in 1963, in the chapter “The Great Opportunity – I,” Sloan wrote about the two men who invented the American system of automobile marketing and car manufacture: “Mr. Durant (GM) and Mr. Ford had unusual vision, courage, daring imagination, and foresight. They injected their personalities without the discipline of management by method and objective facts.”

The essence of Sloan’s future transformation of the corporate world was the need for discipline, method, and facts. He was ready when the opportunity occurred to put into effect the “Sloan system.” When he assumed the presidency of General Motors in 1923, he stated that “it was clear to me long before this time there was a real opportunity for great accomplishment.”

The story of Alfred P. Sloan, Jr., of General Motors is the story of leadership and managerial skill unsurpassed in the annals of American business.

Meeting Sloan

The Sloan system – an overview

General Motor’s dramatic rise to unprecedented growth, profitability, and unparalleled industry dominance occurred as a direct result of Sloan’s managerial stewardship, beginning in 1920 as vice-president of operations and continuing until his retirement as CEO in 1946 and his retirement as chairman of the board in 1956. (He retained the title of honorary chairman of the board until his death in 1966.)

In Sloan’s case, the right idea was not an invention or revolutionary discovery like Henry Ford’s automobile assembly-line Model –T car or Bill Gates’s Microsoft DOS computer operating system. Sloan’s idea was a groundbreaking practice of corporate organization, a workable and democratic method to create an effective and decentralized system with centralized authority to run a large, diverse corporation efficiently. He wrote of that early period: “In those days when the industry was new and expanding explosively, its future was shaped by a small number of individuals who took leading positions; as often is not, the capital went to these men rather than the men to the capital.”

  • Sloan’s General Motors success stretched beyond automobiles into refrigerators, locomotives, trucks, busses, auto components, and car accessories.
  • The innovation of assisting consumers in financing car purchases reaped enormous profits and generated billions of dollars for GM.


The new breed of corporate manager

Sloan was one of the first of the university graduates (M.I.T. class of 1895), a small but up-and-coming group of college-educated men who would start the 20th century tradition that only people with a college degree demonstrated the intelligence to be a  corporate executive.

  • Sloan perceived himself as being a new breed of manager in the growing category of self-made, educated men.


The lessons of his planning genius

These are the key elements in Sloan’s revolutionary system:

v   Facts and data are the main and only determinants of decision making

v  The company should encourage dissent and differences of opinion

v  Organize via committees a decentralized system with centralized power and control

v  Staff with the most competent people without thought to friendship

v  The president or CEO acts as the absolute ruler through consensus

  • 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.

The lessons of his genius in practical matters

In addition to the reorganization, Sloan introduced practical business decisions that are the hallmark of his genius:

v  Offer wide customer choices.

v  Promote a positive corporate image through institutional advertising and public relations.

v  Realize the need for international sales and marketing through overseas manufacturing or export.

v  Find ancillary businesses beyond the corporation’s core product or service.

Sloan’s legacy in print

Sloan for the ages

Guide for the book

Here is a helpful guide to the most frequently cited names and companies….

Chapter 2: Dissent, Disagreement, and Conflict

Chapter 3: Offering the Customer Choices

Chapter 4: Facts Determine Decisions

Chapter 5: The Need for International Business

Chapter 6: Building a Professional Staff

Chapter 7: Complementary and Ancillary Businesses

Chapter 8: The Decentralized Organization and Financial Controls

Chapter 9: Dealers and Distribution

Chapter 10: Corporate Image: Advertising and Public Relations

Chapter 11: Doing the Right Thing: The Sloan Way




Leave a Comment