Management Gurus: Alfred Sloan. Part 1.
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If it’s good for America it’s good for General Motors and if it’s good for General Motors it’s good for America.
Charles E. Wilson
Is a company as important as a country? Are the interests of a business the same as the interests of a nation? Most people would answer ‘no’ to both questions. But when you’re talking about General Motors you can’t be so sure.
Certainly, when the General Motors manager, Charles E. Wilson, said those words at a meeting with the US government in the early 1950s, nobody was surprised. At the time, General Motors was the biggest company in the world – it employed more than 750,000 people. It made some of the most famous products in the world – cars with names like Chevrolet, Cadillac and Buick. It was also the richest company in the world and it sometimes made profits of over $2 billion. But perhaps most important of all, General Motors’ boss, Alfred P. Sloan, was the most admired businessman of the last century.
Sloan was admired because his ideas were copied by every other big business in the middle years of the twentieth century. He was admired because he had created a company that was bigger and more powerful than many small, rich countries. But his colleagues knew the real reason for Sloan’s success; he was a man who always put business first.
Sloan had no children and no interests outside work. He rarely saw his wife because he often slept in a small bed at the General Motors offices. In fact, he took his job so seriously that he didn’t even allow himself to have any friends.
‘Some people like to be alone,’ he once said. ‘I don’t. But I have a duty not to have friends in the workplace.’
Sloan became the boss of General Motors in the early 1920s, at a time when the company was having serious problems. GM had been started by the US businessman, Billy Durant. Durant collected companies like some people collect stamps. He owned companies that made everything from cars to fridges. He thought that if he owned enough companies, one or two of them were certain to be successful. Unfortunately, he was wrong. Because although he was good at buying companies, he was useless at managing them. In fact, Durant was such a difficult man that he lost all his best employees, including some of the most famous names in the car business. Walter Chrysler worked for Durant for a time, but he soon left and started the successful Chrysler Corporation. Another employee was sacked because he smoked a cigarette in Durant’s office. His name was Louis Chevrolet.
By 1920, General Motors was in a mess. It employed too many people, it had too many managers, it made too many kinds of cars and it was losing lots of money. Even Billy Durant realized that it couldn’t continue. So he sold GM to one of the great names of early US business, Pierre du Pont. Du Pont could see that GM showed promise, but it needed a good manager. So du Pont turned to Alfred Sloan.
At the time, Sloan was forty-three years old and he was already a great success. He had started twenty years before, when he borrowed $5,000 from his father and bought a company called Hyatt. Hyatt did not look like a very good business. It made small metal balls that were used in trains and other vehicles and it was making no more than $2,000 a month. But Sloan was confident that he could turn Hyatt into a success. He believed that the new car business presented a great opportunity for his company’s products. So he talked to all the important people in the USA’s car business and learnt as much as possible about making cars. Before long Hyatt was making profits of over $4 million a year.
When Sloan arrived at General Motors, he saw immediately that he needed to organize the company in a new way. At that time, General Motors was producing eight different cars but had only 12 per cent of the car market. By comparison, Ford produced one car – the Model T – and had over 60 per cent of the market. What could Sloan do?
Perhaps GM should simply copy Ford’s idea and cut its number of cars from eight to one. But Sloan had different ideas. He thought that customers were getting tired of Ford’s Model T. Of course, they liked it because it was cheap and because it worked well. But customers wanted more choice. Ford advertised its Model T by saying, ‘You can have any colour you want, but it has to be black.’
It was a good joke, but it was also true. Sloan realized that he could win customers if he offered something different. So he thought carefully about GM’s position in the market and prepared his ideas.
Go to Part 2