Alfred P. Sloan, Jr.

http://en.wikipedia.org/wiki/Alfred_P._Sloan

Alfred Pritchard Sloan, Jr. (May 23, 1875 – February 17, 1966) was an American business executive in the automotive industry. He was a long-time president, chairman, and CEO of General Motors Corporation. Sloan, first as a senior executive and later as the peak of the organization, helped lead (and grow) GM from the 1920s through the 1950s—decades when concepts such as the annual model change, brand architecture, industrial design, automotive design (styling), and planned obsolescence transformed the industry, and when the industry changed lifestyles and the built environment in America and throughout the world.

Sloan's memoir, My Years with General Motors, written in the 1950s but withheld from publishing until an updated version was finally released in 1964, exemplified Sloan's vision of the professional manager and the carefully engineered corporate structure in which he worked. It is considered one of the seminal texts in the field of modern management education, although the state of the art in management science has grown greatly in the half century since.

Sloan is remembered for being a rational, shrewd, and very successful manager, who led GM to become the largest corporation on earth, a position it held for many years after his death. His rationality and shrewdness are also remembered by his critics as extending even to cold, plutocratic detachment or avarice. However, the magnitude of Sloan's philanthropy suggests that he saw himself differently—a man with greater talents and greater responsibilities than others, who was thus entitled to authority but also obligated to, and committed to, beneficence.

Sloan and the management of GM in the 1930s and early 1940s—the time of the Great Depression, German re-armament, fascism, appeasement, and World War II—are part of a larger narrative, tinged with dark elements, about the rapidly growing phenomenon of the truly multinational corporation, which was still rather novel at the time. GM in America, as a corporate parent to Adam Opel AG, its German subsidiary, is remembered today for being cozy with Nazism and for profiting from German re-armament—right up until the attack on Pearl Harbor, when Germany (via its Axis with Japan) finally became a "real enemy". The war showed how nationality was not irrelevant to multinational corporations, as the national governments on both sides of the Allied–Axis divide used the industrial capacity of GM and Vauxhall (Allies) and Opel (Axis) to churn out materiel for their war efforts. Sloan's role in the 1933-1941 era, as a conservative industrialist with a dim view of the New Deal and a conspicuously amoral view of German "achievement" under Adolf Hitler, has generated controversy ever since.

Like Henry Ford—a contemporary of Sloan with a rather special relationship to him as the other "head man" of an automotive colossus—Sloan is remembered today with a complex mixture of admiration for his accomplishments, appreciation for his philanthropic legacy, and unease or reproach about his attitudes during the interwar period and World War II.

Biography

Sloan was born in New Haven, Connecticut. He studied electrical engineering and graduated from the Massachusetts Institute of Technology in 1895. While attending MIT he joined the Delta Upsilon fraternity.

He became president and owner of Hyatt Roller Bearing, a company that made roller and ball bearings, in 1899. Many automakers (large and small) sourced bearings from Hyatt during the next 1.5 decades. In 1916 Hyatt merged with other companies into United Motors Company, which soon became part of General Motors Corporation. Sloan became Vice-President of GM, then President (1923), and finally Chairman of the Board (1937). In 1934, he established the philanthropic, nonprofit Alfred P. Sloan Foundation. GM under Sloan became famous for managing diverse operations with financial statistics such as return on investment; these measures were introduced to GM by Donaldson Brown, a protege of GM vice-president John J. Raskob. Raskob came to GM as an advisor to Pierre S. du Pont and the du Pont corporation; the latter was a principal investor in GM whose executives largely ran GM in the 1920s.

Sloan is credited with establishing annual styling changes, from which came the concept of planned obsolescence. He also established a pricing structure in which (from lowest to highest priced) Chevrolet, Pontiac, Oldsmobile, Buick and Cadillac—referred to as the ladder of success—did not compete with each other, and buyers could be kept in the GM "family" as their buying power and preferences changed as they aged. These concepts, along with Ford's resistance to the change in the 1920s, propelled GM to industry sales leadership by the early 1930s, a position it retained for over 70 years. Under Sloan's direction, GM became the largest industrial enterprise the world had ever known.

In the 1930s GM, long hostile to unionization, confronted its workforce, newly organized and ready for labor rights, in an extended contest for control. Sloan was averse to violence of the sort associated with Henry Ford. He preferred the subtle use of spying and had built up the best undercover apparatus the business community had ever seen up to that time. When the workers organized the massive Flint Sit-Down Strike in 1936, Sloan found that espionage had little value in the face of such open tactics.

The world's first university-based executive education program—the Sloan Fellows—was created in 1931 at MIT under the sponsorship of Sloan. A Sloan Foundation grant established the MIT School of Industrial Management in 1952 with the charge of educating the "ideal manager", and the school was renamed in Sloan's honor as the Alfred P. Sloan School of Management, one of the world's premier business schools. Additional grants established a Sloan Institute of Hospital Administration Sloan Program in Health Administration in 1955 at Cornell University Cornell University-the first two year graduate program of its type in the US, a Sloan Fellows Program at Stanford Graduate School of Business in 1957, and at London Business School in 1965. They became degree programmes in 1976, awarding the degree of Master of Science in Management. Sloan's name is also remembered in the Sloan-Kettering Institute and Cancer Center in New York. In 1951, Sloan received The Hundred Year Association of New York's Gold Medal Award "in recognition of outstanding contributions to the City of New York."

The Alfred P. Sloan Museum, showcasing the evolution of the automobile industry and traveling galleries, is located in Flint, MI.

http://www.nytimes.com/learning/general/onthisday/bday/0523.html Sloan maintained an office in 30 Rockefeller Plaza in Rockefeller Center, now known as the GE Building. He retired as GM chairman on April 2, 1956. His memoir and management treatise, My Years with General Motors, was more or less finished around this time; but its publication was held up for nearly a decade longer by GM's legal staff, who feared that it would be used to support an antitrust case against GM. It was finally published in 1964. Sloan died in 1966.

Sloan was inducted into the Junior Achievement U.S. Business Hall of Fame in 1975.

Philanthropy

The Alfred P. Sloan Foundation is a philanthropic non-profit organization established by Sloan in 1934. The Foundation's programs and interests fall into the areas of science and technology, standard of living, economic performance, and education and careers in science and technology. The total assets of the Sloan Foundation have a market value of about $1.8 billion.

The Sloan Foundation bankrolled the 1956 Warner Bros. cartoon Yankee Dood It, which promotes mass production.

According to Edwin Black, Sloan was one of the central, behind-the-scenes founders of the American Liberty League, a political organization whose goal it was to defend the constitution. In turn, the League would finance other groups with openly more extreme agendas. One such group was the Sentinels of the Republic to which Sloan himself made a $1000 check. After a Congressional investigation into this group went public in 1936, Sloan issued a statement pledging not to further support the Sentinels.

Also according to Black, the GM chief continued to personally fund and organize fund-raising for the National Association of Manufacturers, which was critical of the New Deal.

The Sloan Foundation has made two grants, of USD 3 million each, to the Wikimedia Foundation (WMF). These are some of the largest grants that the WMF has received.

Criticism

Overly rational and profit-driven orientation

According to O'Toole (1995), Sloan built a very objective organization, a company that paid significant attention to "policies, systems, and structures and not enough to people, principles, and values. Sloan, the quintessential engineer, had worked out all the intricacies and contingencies of a foolproof system." But this system left out employees and society. One consequence of this management philosophy was a culture that resisted change, which explains many of the difficulties and troubles that the company suffered some years later.

In fact, Sloan's memoir and management treatise, My Years With General Motors, foresaw some of these problems. About them, Sloan implied that only vigilant, intelligent management could meet them successfully. He predicted that remaining at the top [of its industry and the economy] would prove a bigger challenge for GM than was getting there; and it turned out that he was right. But he also seemed confident that the management style of GM under his leadership, if continued and adapted, could meet these challenges. He said, "There have been and always will be many opportunities to fail in the automobile industry. The circumstances of the ever-changing market and ever-changing product are capable of breaking any business organization if that organization is unprepared for change—indeed, in my opinion, if it has not provided procedures for anticipating change. In General Motors these procedures are provided by the central management, which is in a position to appraise the broad long-term trends of the market. [%E2%80%A6] As the industry has grown and evolved, we have adhered to this policy and have demonstrated an ability to meet competition and the shifts of customer demand." As these words of Sloan 1964 show in juxtaposition with the words of Drucker 1946, Sloan (and his fellow GM executives) never agreed with Drucker on the lessons that Drucker drew from his study of GM management during the war. However, unlike many GM executives, Sloan did not put Drucker on his blacklist for writing the 1946 book; Drucker, in his new introduction [foreword] for the 1990 republishing of Sloan's memoir, said, "When his associates attacked me in a meeting called to discuss the book, Sloan immediately rose to my defense. 'I fully agree with you,' he said to his colleagues. 'Mr. Drucker is dead wrong. But he did precisely what he told us he would do when we asked him in. And he is as entitled to his opinions, wrong though they are, as you or I.'" Drucker related that for 20 years after that meeting, Sloan and Drucker had a good relationship, in which Sloan would invite Drucker to lunch once or twice a year to discuss Sloan's philanthropic plans and the memoir that Sloan was working on assembling (what became My Years). Drucker said, "He asked for my opinions and carefully listened—and he never once took my advice." History seems to have vindicated Drucker in his belief that Sloan's faith in rationality alone—and in the ability of other white-collar managers to be as astute as he himself was in using his style of instruments to keep the ship out of the shoals, as it were—was overardent. In the end, 40 years later, the entitled old men of the management and board of directors who had run the original General Motors Corporation into the ground by 2009 were not "in a position to appraise the broad long-term trends of the market"—or were in that position, perhaps, but not doing the job successfully therein.

O'Toole described Sloan's style as follows: "[W]hereas Taylor occasionally backs off to justify his ardor for efficiency in human terms, not once does Sloan make reference to any other values. Freedom, equality, humanism, stability, community, tradition, religion, patriotism, family, love, virtue, nature—all are ignored. In the one personal element in the book, he makes passing reference to his wife: he abandons her on the first day of a European vacation to return to business in Detroit. His language is as calculating as that of the engineer-of-old working with calipers and slide rule, as cold as the steel he caused to be bent to form cars: economizing, utility, facts, objectivity, systems, rationality, maximizing—that is the stuff of his vocabulary."

Accounting system drawbacks

In 2005, Sloan's work at GM came under criticism for creating a complicated accounting system that prevents the implementation of lean manufacturing methods. Essentially, the criticism is that by using Sloan's methods a company will value inventory just the same as cash, and thus there is no penalty for building up inventory. Carrying excessive inventory is detrimental to a company's operation and induces significant hidden costs. This criticism must be viewed in the context that it is provided in hindsight. During the period in which Sloan advocated carrying what would now be considered excess inventory, the industrial and transportation infrastructure would not support what is now known as just-in-time inventory. During this period, the auto industry experienced incredible growth as the public eagerly sought to purchase this life-changing utility known as the automobile. The cost of lost sales due to lack of inventory was likely greater than the cost of carrying excess inventory. Sloan's system seems to have been widely adopted because of its significant advancement over previous methods. In his memoir, Sloan (who would freely acknowledge that he was not a trained accountant) said that the system that he implemented in the early 1920s was far better than what it replaced (which was, in so many words, an undesigned cacophony in which financial controls mostly didn't exist). He said that years later, a professional accountant (Albert Bradley, longtime CFO of GM) "was kind enough to say [that it] was pretty good for a layman." Sloan was far from the sole author of GM's financial and accounting systems, as GM later had many trained minds in accounting and finance; but regardless of authorship, GM's financial controls—at one time considered top-notch—eventually proved to have latent drawbacks. Systems similar to GM's were implemented by other major companies, especially in the United States, and they eventually undermined the ability to compete with companies that used different accounting, according to Waddell & Bodek's 2005 analysis.

Sloan's memoir, particularly Chapter 8, "The development of financial controls", indicates that Sloan and GM appreciated the financial dangers of excess inventory even as early as the 1920s. However, Waddell & Bodek's 2005 analysis indicates that this theory was not successfully implemented in GM's practice. For all of the intellectual understanding, the reality remained slow inventory turnover and an accounting system that functionally treated inventory similarly to cash.

Streetcar scandal

During Sloan's leadership of GM, many public transport systems of trams in the US were replaced by buses in what became known as the Great American streetcar scandal. Some critics, such as Edwin Black, claim that Sloan was also instrumental in the demise of public city transport streetcar throughout the United States GM was found guilty of violating anti-trust laws, but the penalties imposed were nugatory, even for the time: a $5,000 fine for the company and $1 fines for each convicted executive.

Nazi collaboration

See History of General Motors > Criticism > Collaboration with Nazi Germany.

http://en.wikipedia.org/wiki/History_of_General_Motors#Collaboratio...

Quotes

"The business of business is business."

"A car for every purse and purpose". (Sloan 1963, p. 438)

"I am sure we all realize that this struggle that is going on through the World is really nothing more or less than a conflict between two opposing technocracies manifesting itself to the capitalization of economic resources and products and all that sort of thing."—May 1941

"It seems clear that the Allies are outclassed on mechanical equipment, and it is foolish to talk about modernizing their Armies in times like these, they ought to have thought of that five years ago. There is no excuse for them not thinking of that except for the unintelligent, in fact, stupid, narrow-minded and selfish leadership which the democracies of the world are cursed with… But when some other system develops stronger leadership, works hard and long, and intelligently and aggressively—which are good traits—and, superimposed upon that, develops the instinct of a racketeer, there is nothing for the democracies to do but fold up. And that is about what it looks as if they are going to do."—June 1940

"Technological progress-and it is a pity more do not appreciate it-is the one sound approach to increased employment and higher wages. There is no other way." (Sloan 1941, p. 10)

"General Motors was becoming large through a process of evolution, but only because it was rendering a service to community. As its volume of business expanded it became able to do more for workers, stockholders and customers." (Sloan 1941, p 144)

“Scientific management means a constant search for the facts, the true actualities, and their intelligent, unprejudiced analysis. Thus, and in no other way, policies and their administration are determined. I keep saying to the General Motors organization that we are prepared to spend any proper amount of money to get the facts. Only by increased knowledge can we progress, perhaps I had better say survive.” (Sloan 1941)

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Alfred Pritchard Sloan Jr. was born in New Haven, Connecticut, May 23, 1875, the first of five children of Alfred Pritchard Sloan Sr. and Katherine Mead Sloan. His father, a machinist by training, was then a partner in a small company importing coffee and tea. In 1885 the family moved to Brooklyn, where it was particularly active in the Methodist Church. (Young Alfred’s maternal grandfather was a Methodist minister.) Alfred Jr. excelled as a student both in the public schools and at Brooklyn Polytechnic Institute where he completed the college-preparatory course. After some delay in being admitted to the Massachusetts Institute of Technology (which considered him too young when he first applied), he matriculated in 1892 and took a degree in electrical engineering in three years as the youngest member of his graduating class.

Mr. Sloan began his career as a draftsman in a small machine shop, the Hyatt Roller Bearing Company of Newark, New Jersey. At his urging, Hyatt was soon producing new antifriction bearings for automobiles. In 1898 he married Irene Jackson of Roxbury, Massachusetts. The next year, at age 24, he became the president of Hyatt, where he supervised all aspects of the company’s business. Hyatt bearings became a standard in the automobile industry, and the company grew rapidly under his leadership. In 1916 the Hyatt Roller Bearing Company, together with a number of other manufacturers of automobile accessories, merged with the United Motors Corporation, of which Mr. Sloan became president. Two years later that company became part of the General Motors Corporation (itself established in 1908 as the General Motors Company), and Mr. Sloan was named Vice President in Charge of Accessories and a member of the Executive Committee.

Mr. Sloan was elected President of General Motors in 1923, succeeding Pierre S. du Pont, who said of him on that occasion: “The greater part of the successful development of the Corporation’s operations and the building of a strong manufacturing and sales organization is due to Mr. Sloan. His election to the presidency is a natural and well-merited recognition of his untiring and able efforts and successful achievement.” Mr. Sloan had developed by then his system of disciplined, professional management that provided for decentralized operations with coordinated centralized policy control. Applying it to General Motors, he set the corporation on its course of industrial leadership. The next 23 years, with Mr. Sloan as Chief Executive Officer, were years of enormous expansion for General Motors and of a steady increase in its share of the automobile market.

In 1937, Mr. Sloan was elected Chairman of the Board of General Motors. He continued as Chief Executive Officer until 1946. When he resigned from the chairmanship in 1956, the General Motors Board said of him: “The Board of Directors has acceded to Mr. Sloan’s wish to retire as Chairman. He has served the Corporation long and magnificently. His analysis and grasp of the problems of corporate management, his great vision and rare good judgement, laid the solid foundation which has made possible the growth and progress of General Motors over the years.” Mr. Sloan was then named Honorary Chairman of the Board, a title he retained until his death on February 17, 1966. For many years, he had devoted the largest share of his time and energy to philanthropic activities, both as a private donor to many causes and organizations and through the Alfred P. Sloan Foundation, which he established in 1934.

Mr. Sloan, a realist as well as a humanist and philanthropist, looked upon the Foundation as an extension of his own life and work. Although he recognized the inevitability of change that might dictate a different course, he expected that the Foundation would “continue as an operating facility indefinitely in the future…to represent my accomplishments in this life.” His accomplishments during his lifetime were of the highest order, and in themselves provide the most dramatic and lasting tribute to his extraordinary talent. Through the Foundation, his accomplishments have been extended and expanded.

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