“My Years With General Motors,” by Alfred P. Sloan, Jr.

“My Years With General Motors,” by Alfred P. Sloan, Jr.
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Full title: My Years with General Motors

Number of pages: 472

Year published: 1964

Who it’s for:  Business historians, car buffs, anyone interested in the foundations of the modern American corporation, and Bill Gates, who called it “the best book to read if you want to read only one book about business.”

The big idea: Alfred Sloan was CEO of General Motors from 1923 to 1946, and served as board chair until 1956. He built GM from a collection of struggling car companies into the biggest company in America. If Henry Ford perfected how to make cars, it was Sloan who mastered selling them. He introduced annual models, differentiated vehicles lines, and developed and nurtured dealer networks. Along the way, he gave form and shape to the modern American corporation, creating standardized systems for accounting, purchasing, and reporting. He was a man who loved organizational charts, in which every worker had a place and responsibility, and reducing decisions to pure mathematical logic, so emotion had no place. If you admire the modern corporation, you have Sloan to thank. If you hate big business, well, Sloan is the man to blame, too.

5 things worth learning:

  1. Data matters. The importance of data seems obvious now, but in the 1920s, there was no reliable data about car sales, which made forecasting nearly impossible. Previously, GM relied on the intuition of its salesmen to predict how the next year’s sales would fare, but Sloan demanded something tangible, and in 1924 introduced a reporting system by which dealers would send sales reports every 10 days. With data in hand, GM could speed up or slow down production, and adjust inventory and employment as needed.
  2. Pick a metric. For Sloan, rate of return—the gain or loss realized from any investment—dictated almost every decision at GM. “No other financial principle with which I am acquainted serves better than rate of return as an objective aid to business judgment,” he wrote. To make it work at GM, Sloan required yet more data. Each division of the company reported monthly operating results, which where tabulated and ranked, so every manager of every unit knew where they stood in relation to their fellow managers.
  3. Customers want a choice. Ford famously quipped “you can have a Ford in any color as long as it’s black,” but Sloan knew that was a missed opportunity. He understood car buyers didn’t want the same model as their neighbors, and small differences could influence sales. GM was assembled from a handful of smaller companies, which is why it made Buicks and Cadillacs and Chevrolets, but Sloan’s insight into consumer behavior is one of the reasons those lines persist as separate and recognizable brands to this day. He invested in styling and design, and in a male-dominated world, hired female designers “to express the women’s point of view.”
  4. Plan ahead. During World War II, GM shifted its production to military vehicles, and essentially stopped making cars. Sloan recognized that after the war, there would be pent-up demand for new products. Disregarding economists’ predictions of a post-war slump, he directed his staff to make long-term studies that projected sales growth five and 10 years into the future, and committed $500 million to expand production to meet the anticipated future demand. He was right: Sales surged from 275,573 cars and trucks in 1945, the last year of the war, to 1.18 million the next year, and by 1950 they had more than tripled, to 3.8 million. Net income rose even faster, from $554 million in 1947 to $1.8 billion in 1950.
  5. Find a balance. Sloan spent his decades in charge of GM tweaking the organizational structure to be a careful balance between centralized control and decentralized decision making. He wanted the company’s various units to make decisions based on the expertise they had developed, but he needed those dozens of units to operate as part of a coordinated system, guided by a unified strategy. Sloan recognized the need for flexibility in the balance: Some situations required more control by the center, some required independence from the parts. In a 1920 letter, he defined his ideal structure by asserting that heads of the units should have total freedom to make decisions, yet central organization is essential to the company’s success. Years later, he wrote “The language is contradictory, and…its very contradiction is the crux of the matter.”

Quote it: ”I got better results by selling my ideas than by telling people what to do. Yet the power to act must be located in the chief executive.”

Read, skip or skim. Skim. The broad principles of management are useful for anyone interested in business, but the details (such as a chapter on the history of 1923’s ill-fated copper-cooled engine) can be numbing for all but true auto enthusiasts.