Alfred P. Sloan: To Decide, First You Must Disagree
To Alfred P. Sloan, too much agreement meant costly mistakes. Thus he closed a too cordial management committee meeting until there was more disagreement.
“Gentlemen, I take it we are all in complete agreement on the decision. Then, I propose we give ourselves time to develop disagreement, and perhaps gain some understanding of what the decision is all about.”
To Alfred P. Sloan, too much mutual affection for an idea meant costly mistakes. Thus he closed down a management committee meeting until there was more ‘disagreement’ — revealing a peculiar management style as the fabled leader of GM from 1923 to 1956. His emphasis on the importance of diverse perspectives was a thunderstrike in a cozy corporate world that had too long relied on the collegiality of private clubs, alma maters, and golf courses.
Instead of unanimous agreement, Sloan proposed healthy disagreement to gain the upper hand in formulating good decisions.
Born on May 23, 1875, in New Haven, Connecticut, Sloan grew up in a family involved in the coffee and tea trade. Later, the family relocated to Brooklyn, where Sloan developed a distinctive Brooklyn accent that added vividness to his statements. Despite eventually becoming the chairman of America’s largest and most influential company, he was a mild-mannered yet highly disciplined leader who significantly influenced the field of corporate leadership, leaving a lasting legacy.
Sloan graduated from the Massachusetts Institute of Technology (MIT) in 1895 with a Bachelor of Science in electrical engineering. Tall and slender, he was a dedicated individual committed to General Motors (GM). Over his long tenure, he displayed no vices or extracurricular interests, always maintaining impeccable attire. A non-smoker who rarely consumed alcohol, Sloan had little enthusiasm for social gatherings, viewing activities like golf and fishing as time-wasting. His primary reading mystery reading consisted of unraveling the arcana of corporate reports, and he only showed interest in politics if it directly concerned GM.
His personal life was equally unassuming. Married to Irene for 58 years, the couple had no children and led a quiet life in a Fifth Avenue apartment in Manhattan, occasionally participating in high-society events and European vacations. Sloan was known to bring waxed-paper-wrapped sandwiches to work and occasionally used the subway for his daily commute to and from his office in New York City. Over a 70-year career spanning MIT and his passing in 1966, Alfred Sloan played a pivotal role in building the modern GM and left behind an enduring legacy.
Sloan entered a world undergoing remarkable innovations, with the telephone, electricity, and the automobile reshaping society. This fascination with innovation led him to pursue a degree in electrical engineering at MIT, where he graduated at the age of twenty, making him the youngest graduate in his class.
A turning point in his career came when he met Henry Leland, the head of Cadillac, known as the “master of precision.” Leland challenged Sloan to enhance Hyatt’s manufacturing processes to meet Cadillac’s exacting standards. Sloan embraced this challenge and made significant improvements to the assembly line.
Meanwhile, a new automotive conglomerate in Michigan was born on September 8, 1908, as a New Jersey holding company. Billy Durant and Frederic L. Smith co-founded General Motors and Chevrolet with Louis Chevrolet and founded Frigidaire. Durant was a natural-born salesman and a master of deal-making. He had already turned around a struggling Buick and became the owner of the Olds Corporation of Lansing, Michigan.
However, Durant’s management style left much to be desired. Instead of relying on data and logical decision-making, he operated on intuition, often delegating tasks without considering the qualifications of those involved.
Durant’s strategy at the time was to acquire every automaker he set his sights on, typically exchanging stock for ownership. Automakers primarily assembled components like axles, bodies, and engines during this era. Drawing from his experience manufacturing horse-drawn carts, Durant recognized the value of controlling key suppliers to ensure efficient production.
Durant acquired the Oakland Car Company, later known as Pontiac, and then Cadillac, using cash from Buick. In 1910, he lost control of GM to the bank, but after founding Chevrolet Motor Company in 1911 with Louis Chevrolet, he bought it back in 1916. In 1920, Durant agreed to resign from GM in exchange for GM president Pierre du Pont paying off his debts. In 1921, Durant attempted to run a company under his name, Durant Motors, but the Great Depression marked the end of his automotive career. His company dissolved in 1933, and Durant declared bankruptcy in 1936.
Notably, earlier in his career, Billy Durant had shown interest in acquiring a Hyatt Roller Bearing Company. Alfred Sloan, a young and promising talent, successfully convinced his board to seek a staggering $15 million for the acquisition, an initially deemed unrealistic sum. However, Durant engaged in minimal negotiation, and the final price settled at $13.5 million. This deal would be a significant windfall for Alfred and his father, who equally shared around $8–9 million, an unexpected wealth beyond their imaginations.
Legacy
Alfred P. Sloan, Jr. played a significant role in shaping General Motors (GM) during his leadership from 1923 to 1943 as President and later as Chairman of the Board from 1937 to 1956. His contributions transformed GM into the world’s largest company, influencing corporate management and serving as a model for other corporations. Sloan’s key policies included:
Compartmentalization
Sloan was a tinkerer. The toy he liked to tinker with most was GM’s organizational structure. At a time when most companies embraced a top-down approach, Sloan championed a divisional structure. Every division chief was a CEO (note today: GM is the only automotive company run by a woman). He distrusted power, realizing that smaller units fostered accountability and adaptability and would foster a culture of continuous improvement.
Consumer Focus
Sloan pioneered the art of market segmentation. He recognized that consumers did not readily embrace a ‘one size fits all’ mentality unless given no other choice. The era of Henry Ford’s “any color as long as it’s black” monopoly with the Model T was over. Sloane saw a new future.
Consumers had diverse needs, and Sloan tailored GM’s products accordingly. This led to the creation of brands such as Chevrolet, Pontiac, Buick, and Cadillac, each catering to a distinct market segment. His decentralized vision laid the foundation for modern product management.
Financial Control
Sloan also believed in the importance of controls. While his efforts at decentralization are often highlighted, many functions within GM remained centralized, including design, research and development, legal, patent management, and market research. He was the first to introduce reporting systems that allowed GM to monitor the performance of each division. This ensured GM’s resources were allocated efficiently. Additionally, Sloan implemented management incentives that tied executive compensation to performance, which led to the creation of performance-based bonuses and stock options.
Innovation
Sloan was unafraid to revise strategies and structures as circumstances demanded. This flexibility allowed GM to weather economic challenges and remain resilient in adversity. In the 1920s, during Sloan’s tenure, GM introduced the annual model change, a practice that became an industry norm. This innovation kept customers engaged and ensured that GM stayed ahead of its competitors.
Influence
Alfred P. Sloan’s impact on management science and corporate governance cannot be overstated. He was a visionary leader whose management style, innovative thinking, and steadfast habits transformed General Motors and redefined modern management. Sloan was not just a chairman but an architect of contemporary management.
Two other anecdotes are noteworthy:
In 1920, Alfred Sloan and Walter Chrysler embarked on a trip to Europe to evaluate the potential purchase of Citroen. The French car manufacturer failed to meet their standards for a well-run business. Still, it did lead the men to discuss the failings of Durant’s leadership style and acknowledged the need for better organization and management. Not only did Sloan invent the global automotive company, but he also discerned management style as a standard that would later be reset by the Japanese and Koreans and could be applied across borders.
In 1936, John D. Rockefeller, Jr. donated land for a new Memorial Hospital that opened in 1939. In the 1940s, Alfred P. Sloan and Charles F. Kettering joined forces to establish the Sloan Kettering Institute (SKI), which has since become one of the nation’s leading biomedical research institutions, built adjacent to Memorial Hospital.
Recommended reading:
