Alfred Sloan

Alfred Sloan, the chief executive at General Motors for 35 years believed that no one should be called by their first names. It was always Mr. or Mrs. He practiced this style even to his top executives. He even called the president of GM, who was later Alfred’s successor, Mr. Wilson. They did not go by first name basis. He was known for his acts of kindness, of help, and for his of advice, and just warm sympathy when people were in trouble, but he had no friends within GM when he reached his old age. Sloan did not want any friends from GM because, GM was a business and friends should not be confused with business.

The Alfred Sloan’s management style is a case in which management principles are discussed and analyzed. The case deals with communication and a variety of different management styles. Rarely has a chief executive of an American corporation been as respected and as revered as Alfred P. Sloan, Jr. , was at General Motor during his long tenure at the top, which was from 1920 until 1955. Many GM managers, especially those that grew up during that same time as he did, felt a deep personal gratitude to him for his quiet, but decisive acts of kindness.

Sloan kept to himself and from the entire managerial group at GM. He never called anyone by their first name and wanted to be addressed as “Mr. Sloan” even to the top executives. This way to his life was a reflection to his upbringing. He was born in the 1870s. Unlike most of the people from his generation, he also addressed the African-American race as “Mr. ” and “Mrs”. Sloan had always frowned on the use of first names. When Sloan was young he was a keen outdoorsman, but all his hiking, camping, and fishing companions were with his close friends and not people from GM.

Above everything, Mr. Sloan had no friends within GM. He was a warm and kind man until deafness cut him off from easy human contact. Mr. Sloan did have many close friends, but he outlived them all, since he lived well into his nineties. All of his friends were outside of General Motors. The one friend who had been with GM, Walter Chrysler, did not become a personal friend of Alfred’ until after he had left GM. Walter started his own competing car company, Chrysler, upon Sloan’s advice. As Sloan grew older, he felt increasingly isolated as his close friends died.

He never invited any GM associates to his house unless it was a business meeting that had a clear business agenda. Alfred did not even sit down to have a meal with people from GM. He never accepted invitations to any of their homes or even on business trips to their hometowns. Only after his retirement in 1955, when his advancing old age made it more difficult for him to travel, did he start to invite GM people to his home in New York. When Alfred did invite these people to his house, he only wanted them to talk to him about business.

They would only discuss business in the office wing of his house, since he was still a GM director and member of the top committees in GM. So the question arises, was Sloan’s management principles the correct way to handle GM? In the following paragraphs, you will find the understanding and the management principles applicable to this case. The management principles identified in this case is corporate management, centralized operations, and forecasting and planning. Corporate management is responsible for creating policies and procedures for the business organization.

The enforcement of these policies and procedures ensure employees understand the corporation’s mission and vision. Alfred Sloan’s most famous policy was not calling people by their first name. People within the GM Company (directors, officers and managers) built corporate relationships with other people on both business and personal levels. Theses people would often travel to the estate of Henry Francis du Pont, a cousin of the boss at GM during the 1910s’, but Sloan would never go, even though he was invited every single time.

While other employees at GM built these relationships, Alfred did not, and it was shown in his older age. These relationships help the employees know each other better and create a better working environment. Another big management principle that covers this case study is that he centralized administration and decentralized operations. GM adopted the strategy of “a car for every purse and purpose”. Sloan divided the vehicle market into price segments ranging from the low-price to luxury and targets each of GMs’ brands and models to a distinct segment, something no other manufacturer had ever done.

Alfred Sloan grouped together items that had a common relationship. He also realigned the company’s products so that one brand of automobiles did not conflict with another brand. Each product, whether it was cars, electric or iceboxes, was set apart in its own division with its own unique characteristics. This management theory moved GM into the leader of the car companies for many years. (www. smallbusiness. chron. com) The third and final management principle that is shown in this case study is forecasting and planning.

Forecasting and planning are found in this case study, because Alfred Sloan was examining the future, drawing up a plan of action, and laying the foundation for the elements of his strategy. This was seen at GM, since he realigned the company’s products so that one brand of automobiles did not conflict with another brand. Like I stated above, GM was the first car company to adopt the strategy of “a car for every purse and purpose”. Sloan divided the vehicle market into price segments ranging from the low-price to luxury type vehicles.

Mr. Sloan was also planning for the next person to take over his position by making Mr. Wilson only call employees by their last name. In Case 26, many management principles are found, but not explained in detail how they relate to the case. In the following paragraphs I will do an analysis on the management principles I found. Corporate Management played a huge role in the growth of GM. Sloan invented the art of managing a large corporation. First he created a corporate office, whose job was to allocate resources and coordinate the company’s operating divisions but not to run them.

From corporate, every division got whatever it needed–money, factories, sales forces, etc to operate separately. Sloan turned the old system that every car company was use to on its head by creating a multi-divisional structure with dozens of divisions, each operated by a chief executive responsible for the operations, marketing, and finance of their business unit. Secondly, he created a series of cross-divisional committees that forced high-ranking executives to regularly communicate with one another and be greater in touch with the company at large. (http://www. economist.

com/node/13047099) Not only did Alfred Sloan bring corporate management into GM, he also brought centralized administration with him to GM. He perfected innovations such as market segmentation, car loans, annual product cycles, decentralized operations, centralized financial controls, management incentives, and public relations. To link the divisions, Sloan spread a set of “standard procedures” for budgeting, hiring, forecasting, reporting sales, etc. , and also created interdivisional councils where executives and staff could share ideas. Sloan got his new ideas just right.

GM had the right amount of central control, the right amount of divisional independence, and plenty of ways to share ideas. (http://www. economist. com/node/13047099 ) In addition, Alfred Sloan created structure so people could be more creative with their time and have it be well spent. He came up with the idea that executives should exercise some central control, but should not interfere with the decision making of each operation. It is difficult to describe many of Alfred Sloan’s ideas because most of them would seem like common concepts of a business, yet they were new and innovative at the time of the 1930s’ and 40s’.

(www. inventhelp. com) In Case 26, the non-evident management principles found involve lack of communication, equality, and that knowledge is messy. Alfred Sloan had a lack of communicating with the employees at GM. Sloan would only talk to the people at GM about business, not about their personal lives. Later in his age, Alfred realized that he did not have many friends. I believe that if he would have talked to his employees on a more personal level, he would have had more friends. Communication is the bond that holds organizations together.

Communication assists organizational members to accomplish both individual and organizational goals and greatness. As the chief executive, one of the most important things you must be able to do is be able to communicate with people in your company. The chief executive should be able to communicate on a business level and a personal level with people within the company. Improving your communication skills is an ongoing process. A great communicator will never stop getting better at their communication skills and can achieve great things. (www. polaris. umuc. edu) The second most important skill for a chief executive is equality.

Alfred Sloan treated everyone the same. He did not call certain people by their first names. He called everyone by their last name. It did not matter if you were working on the floor or as a top executive, black or white. We have to put into prospective the time he was the chief executive for GM. Alfred was the CEO for GM from 1920-1955. Back then, everyone was not treated equal like they are today. Mr. Sloan treated everyone the same. A perfect example of this is seen in the case when he addresses an African-American that worked the elevator inside the GM building the same way, calling him by his last name.

He could have out down the African-Americans that worked lower paying and deserving jobs at GM, but he was not that type of person. He was taught that everyone should get respected. The last important skill that was shown in this case is that knowledge is messy. Sloan did not want to know everything about everyone. With less knowledge about each person, it made him not think about how that person was as a person, and he focused on how good they performed at work instead. In addition to knowledge is messy, Alfred Sloan lead with power and influence. Power represents the capability to get someone to do something.

Mr. Sloan used his power to get employees to call him by his last name and not by his first name. Obtaining and using power is very helpful to influencing the people you work with and their behaviors. Having power does not make you a leader though. In this case study, I believe that Alfred Sloan used his power to become a great leader. GM dominated the car industry and grew in many areas when he took over as the chief executive. In conclusion, Sloan’s management style can be summed up by the following two quotes: “Gentlemen, I take it we are all in complete agreement on the decision here,” and everyone nodded their heads in agreement.

“Then,” he went on, “I propose we postpone further discussion of this matter until the next meeting to give ourselves time to develop disagreement, and perhaps gain some understanding of what the decision is all about. ” Mr. Sloan also stated about his management style, “it is the duty of the chief executive officer to be objective and impartial. He must be absolutely tolerant and pay no attention to how a man does his work, let alone whether he likes a man or not. The only criteria should be performance and character.

A chief executive officer, who has friendships within the company, has social relation with colleagues or discusses anything with them except the job, cannot remain impartial, or at least which is equally damaging, he will not appear as such. ” Bibliography * http://www. economist. com/node/13047099 * http://smallbusiness. chron. com/centralized-vs-decentralized-organizational-structure-2785. html * http://polaris. umuc. edu/~busilane/tman636/articles/12prin. pdf * http://www. inventhelp. com/Alfred-Sloans-Concept-of-the-Corporation. asp * Management Cases by Peter F. Drucker