Alfred Sloan was born in 1875 in Hew Haven, Connecticut and specialized in electrical engineering. He graduated from the Massachusetts Institute of Technology in 1895. Then he started working at the Hyatt Roller Bearing Company in Newark. It was only a small factory (pressure bearings), so ambitious Sloan moved to a company dealing in the production of refrigeration equipment. After two years, not seeing the hope for the company to flourish, he returned to Hyatt. After a few months, he took up the post of chief executive. Sloan, as the plant's manager, led to its existence on the market of automotive bearing suppliers (this took place in the first decade of the 20th century). Consequently, it led to Sloan's acqaint with WC Durant (creator of General Motors), Walter Chrysler and Henry Ford.
United Motors Corporation
W.C. Durant, wanting to buy Hyatt, in 1916 called for Sloan to form a new company, United Motors Corporation, on which the management would embrace Sloan. Two years later, General Motors (GM), with the consent of both companies, took over assets of United Motors Corporations, entrusting Sloan with the position of vice-president and member of the supervisory board and executive committee of GM.
Intercompany transaction rules
Beginning in 1919, Sloan initiated the introduction of intercompany transaction rules and thus became the leading creator of the concept of organization and management at GM. Sloan based this initiation on the assumption that the profit rate is a more accurate indicator of the plant's performance assessment than the net profit. The new measure was to ensure an increase in the organization's morale, better allocation of investment capital and correct statistics of the company's performance measure.
New organization scheme
A year later, Sloan presented the Study on the organization containing further projects related to the organization structure. The guiding idea was to coordinate the functioning of the corporation by adopting an appropriate organization scheme (ie finding a balance between extreme decentralization and extreme centralization). Next to it was the concept of reducing the number of managers directly subordinate to the president. The purpose of this initiative was to relieve the President of current affairs and, consequently, to enable efficient handling of key issues for the company. According to the assumptions, the president was to be subject to three organizational units (financial and operational matters and the legal department) and two vice presidents.
In 1923, Sloan was promoted to the position of president and chairman of the executive committee of GM. Sloan's first initiative as president was the introduction of coordination by committees. The first, in addition to e.g. a technical committee or institutional advertising committee, a supply committee was created. Thanks to this solution, the level of inventory and, consequently, also savings were reduced. This committee had a certain margin of appreciation regarding the supply of characteristic materials, but the central purchasing office did not interfere with the committee's decision but implemented it. This cell operated for 10 years, and its success, however, turned out to be partial. The development has led to the normalization of parts and the transition to the purchase of standardized materials. The contact with suppliers was a factor that inhibited.
The GM's focal point was finding a golden mean between centralization and decentralization. Coordination took various forms depending on the period. The solution proposed by AP Sloan was the establishment of advisory groups. These groups analyzed the company's situation and, based on this information, constructed an opinion which in the next step was to facilitate the selection of the optimal operating strategy. The effectiveness of these groups was noticed until three years after their creation, at the same time they were renamed to the policy groups. In this way, a technical policy group and a distribution policy group were formed, and the experience gained in their years in 1934-1937 led to the creation of similar groups and their official joining the structure of the GM organization. This act, dated 1937, was for Sloan proof of the full implementation of his concepts contained in the Study on Organization.
C. Kennedy ascribes to Sloan a maneuver strengthening the innovation of the so-called creative opposition. This rule was recommended for management by, among others, T. Peters and R. Pascale.
After years of experience Sloan published "My Years in General Motors". The reading includes a turbulent history of GM's beginnings, its expansion outside the United States, Sloan's organizational rules, chapters on financial control tools, distribution and dealers, the organization of production and wage incentives, and many other observations of Sloan with his comments.
Sloan, as the manager, was considered by his subordinates to be full of coolness. Sloan's attitude was due to his conviction that it was impossible and unacceptable to be friendly at work. This image was softened by P. Drucker, the author of the introduction to the book by Sloan, presenting him as a warm, generous person as regards time and money. For the most important teaching of Sloan, he considers the message: The professional manager is in service. The position does not give you privileges. It does not give power. It imposes responsibility.
Sloan held the position of president of GM until 1946. At that time he was also appointed a chairman. From 1956 until his death in 1966, he was an honorary chairman at GM.
Examples of Alfred Sloan achievements
- In 1923, Alfred Sloan became the president of General Motors, a position he held for 23 years. Under his leadership, GM grew to become the largest car company in the world. He was a driving force behind the development of the annual model change, which revolutionized the auto industry. He also implemented the idea of different brands for different price ranges, creating a hierarchy of GM vehicles.
- In 1956, Alfred Sloan founded the Alfred P. Sloan Foundation, a philanthropic organization that provides grants to organizations and institutions in the fields of science, technology, engineering, mathematics and economics. The foundation has been instrumental in promoting the development of new technologies, such as the Internet, and has funded research in areas such as artificial intelligence and robotics.
- In 1966, Alfred Sloan was inducted into the Automotive Hall of Fame. He is recognized as one of the most influential figures in the auto industry, having changed the way cars are designed, marketed and sold. He is also credited with the development of the modern corporate structure, which revolutionized the way large companies are managed.
Advantages of Alfred Sloan approach
Alfred Sloan had many different advantages which helped him along his way to success. These included:
- His education in electrical engineering from a prestigious institute. This gave him the theoretical foundation to understand the different components of the automotive industry, and how to improve them.
- His experience working for two different companies in the same field. This gave him the practical experience to make informed decisions in the automotive industry.
- His ambition to succeed and make his mark on the industry. His drive to succeed helped him to make the most of the opportunities he was presented with.
- His acumen in business. He had a sharp eye for recognizing potential in the industry and the ability to capitalize on it.
- His ability to form relationships with influential figures in the automotive industry, such as WC Durant, Walter Chrysler and Henry Ford. This enabled him to make connections and collaborate with other influential figures in the industry.
Limitations of Alfred Sloan approach
Alfred Sloan was an ambitious man who was successful in his career, but he had some limitations. These limitations included:
- His lack of experience in automotive engineering; Sloan had only studied electrical engineering and had no knowledge of the automotive engineering industry.
- His limited resources; as CEO of Hyatt Roller Bearing, Sloan had limited financial resources to invest and expand the business.
- His lack of connections in the automotive industry; Sloan had to rely on his own connections to build relationships with the major players in the industry, such as WC Durant, Walter Chrysler, and Henry Ford.
- His limited knowledge of the automotive industry; Sloan had to learn about the industry through trial and error, having no prior experience.
Overall, Alfred Sloan was a successful businessman, but his lack of experience and resources in the automotive industry limited his abilities to succeed.
Alfred Sloan was a key figure in the development of the automotive industry at the beginning of the 20th century. His career involved a number of approaches, including:
- Establishing strong relationships with key players in the automotive industry, such as W.C. Durant, Walter Chrysler and Henry Ford. During this time, he also worked to ensure the success of the Hyatt Roller Bearing Company, which supplied parts to these automotive giants.
- Developing innovative engineering solutions and business strategies to ensure the long-term success of the businesses he was involved with. During his tenure at Hyatt, he was able to significantly improve the efficiency of the company's operations.
- Contributing to the development of General Motors (GM) by introducing a decentralized management structure, allowing for different divisions to operate independently. This allowed for better decision-making and increased specialization.
In summary, Alfred Sloan was a key figure in the development of the automotive industry at the beginning of the 20th century, and his career was marked by the establishment of strong relationships with key players, the development of innovative engineering solutions and business strategies, and the introduction of a decentralized management structure at GM.
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