Leadership and Organizational Change

Leadership Biography – Alfred P. Sloan Jr.

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Table of Contents
1. 2. 3. 4. 5. 6. 7. Introduction ......................................................................................................................................... 3 Alfred P. Sloan and General Motors .................................................................................................... 4 Sloan at his work.................................................................................................................................. 5 GM's Transformation........................................................................................................................... 6 Lessons from Sloan .............................................................................................................................. 8 Sloan in present days – an extension ................................................................................................ 11 References ......................................................................................................................................... 12

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1. Introduction
Management is doing things right; leadership is doing the right things. - Peter F. Drucker It is said that a good general is one who prevents the war to happen than winning the war . This would apply even to the current management concept of leadership. Leadership is all about doing the right things at the right time at the right place. This era has seen leaders of all sorts in business, political, social and environmental. Each has their own signature in the way of establishing their influence and prowess over others and their area of activity. This assignment is to look at one such business leader who could be seen as a symbol of leadership during their times. We would be looking at Alfred P. Sloan Jr., the iconic chairman of General Motors (GM), who had brought a transformation in the automobile industry with his innovative management approaches and customer focused production process. In this assignment we would looking at the transformation which Mr. Sloan had brought to GM in the aspects of performance, financial controls, employee relations and productivity. The values Sloan carried in his tenure that brought out these changes will be looked at in details to understand his activities during his incumbency. Of course, we would also look at the takeaways from Sloan’s leadership that would enable us in nurturing ourselves as a leader in the organization and in the society.


Art of War – Sun Tzu

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2. Alfred P. Sloan and General Motors
Sloan would be remembered well by the mid 20 century people for his contribution to the management concepts he brought in through General Motors and to the U.S industrial leaderships. His leadership abilities have transformed the company from a Good to Great organization. The transformation that GM went during Sloan’s tenure had been one of the mainstay reasons for its stellar performance in the long run. Sloan has seemed to follow the set of factors that were the key elements for a company to transform from good to great. Sloan installed his revolutionary "standard procedures" concept. His market-oriented rules for defining management effectiveness enabled GM to overtake Henry Ford's auto company. Sloan's experiences, theories and personal customer-based research inspired marketing strategy and led to the separate Chevrolet, Buick, Oldsmobile and Cadillac lines aimed at different consumer pocketbooks and tastes. Sloan’s transformational leadership traits had been instrumental in bringing the demoralized, disseminated group of departments to converge on to one single vision of transforming the company to success. General Motors was at a frail condition when Sloan was made the vice president of the company. The company was largely holding higher inventory and uncontrollable amount of debt which went unrecorded. When the management was taken over by Pierre DuPont, Sloan took over as executive president where he took the opportunity to transform the sapless company to a nimble one in responding to the ever changing customer preferences. It was under the leadership of Sloan, GM ventured into international market making its foray into European and Australian markets. Sloan was leading the organization through the turnaround and sustenance phase and has also made it to jump to the next sigmoid curve by venturing into overseas market and non-commercial vehicles. Sloan as a philanthropist has played a major role in instituting a foundation that provide grant to people who are interested in research and also to those who had performed outstandingly well in their

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graduation. Sloan strongly believed in providing support to those academic acts that would largely help in betterment of society. He had also been a key driver in the formation of the management school at his university, which currently bears his name “Sloan School of Management”, Massachusetts Institute of Technology.

3. Sloan at his work
Sloan obtained a position as draftsman in the Hyatt Rolling Bearing Company at Harrison, N.J. By this time he had married Irene Jackson of Boston. At the age of 26 he became president and general manager of the rapidly failing firm when his father and one other man bought control. Sloan quickly resuscitated the firm by moving into the manufacture of steel roller bearings for the mushrooming automobile industry. Hyatt profits ran as high as $4 million annually, but Sloan grew concerned with rumors that General Motors (GM) might produce its own bearings. Instead, William C. Durant, the energetic builder of GM, bought Sloan's firm and merged it as part of the United Motors Corporation, with Sloan as president. In 1918 he became a vice president and member of the GM executive committee. Durant lost control of GM in 1920 to the Du Ponts, but Pierre Samuel du Pont, the new president, knew nothing about automobiles and made Sloan vice president in charge of operations. Three years later Sloan became president of GM and a director of the Du Pont Company. In 1920 GM held a 12 percent share of the market; by 1956, when Sloan retired, the market share stood at 52 percent. He accomplished this not only by innovations such as four-wheel drive, crankcase ventilation, and knee-action brakes but, more importantly, by adopting the staff principle of management. He centralized administration and decentralized production and put each product in its own division and eliminated intracompany competition.

Sloan made a great philanthropic contribution in 1937, when he endowed the Alfred P. Sloan Foundation with $10 million; to 1966, his gifts totaled over $305 million. Major recipients were the Sloan-Kettering Institute for Cancer Research and the Massachusetts Institute of Technology.

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Alfred P. Sloan had been really effective as a transformational leader in making GM a successful automaker in the world. He had been a perfect Strategist in exercising his power to achieve both short and long term goals and also in bringing about organizational transformations at the right point in time. He had also been an Alchemist in bringing about social transformations

4. GM's Transformation
In this world a man must either be an anvil or hammer. - Henry W. Longfellow General Motors was founded by Billy Durant in 1908 as a company with his Buick model cars as the single product out of the company. Sloan was brought into the company by Durant by the buyout of Sloan’s Hyatt ball-bearing manufacturing company. GM grew inorganically, largely by Durant’s effort of bringing twenty five companies together. Until 1920, Durant had the auto empire running under his leadership which crumpled in huge debt due to his administrative laxness and inexperience in operational matters. Sloan, already being a part of the company and running United Motors, a part of GM, had seen this coming and was very much frustrated on the management of Durant. Sloan had the trait of learning from the elder’s, rightly learnt on how not to run a larger organization from Durant. Sloan began to develop the system of decentralized management that would later make General Motors so robust. In this system, the head of a division of a company could make certain decisions independently of the head of the corporation, provided he adhered to a set of centralized rules. These encouraged managers to take risks that could open new markets for the company. This multi-faceted approach of Sloan has brought in tight integration among the teams providing enduring and dramatic results for a very long time. This helped the organization in identifying the future leaders and also in building a responsibility among the team who had the freedom in their areas of expertise, thus leading to create a leadership brand in the market. Sloan had been more of a strategist where in he was able to frame up the vision across different parameters of the company that led the team to focus on the direction required for success. Sloan’s customer focused market strategy combined with the aim of his to produce a car “for every purse and purpose” largely brought the transformation in the outlook of automobile industry which was largely

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dominated by the Ford’s T-Model concept during that period. His innovative and future focused intuition of rightly predicting that that someday most American families would have at least two cars in every garage had brought the difference in the market which made GM to race ahead of Ford and become the market leader in a shorter period. Sloan had always believed in the collective thinking and agreement of any important policies of the organization which led him to create the co-ordination committee. The committee along with the members of the board also had people from the operations in order to obtain the internal view while making the policy. Sloan had been instrumental in creating the vision of the company by understanding the core competence and purpose of the company which is to provide people with a car for a purpose. It was Sloan’s strong belief that every activity/project is unique in its way and people need to be chosen individually for it in order to accomplish the goal. Thus every people in the office of Sloan are hand picked by him personally. Though seen as a deviation from the normal path of, this proved to be fruitful to the organization in developing leaders for the next level. Sloan shows his nature of Level 5 leadership in various aspects like picking up the right people who would fit the project requirements, in showing his humbleness in being the silent leader where he would like to work from behind the scenes. He has always credited the success of the organization to the management committee with great humbleness and has shown the unwavering determination in making sure that the committee sticks to its basic principles and policies and to notify the same when there seems to be a digression. He was more of a self-critic and has also welcomed the feedbacks on his weakness from the people around him. General Motors under the leadership of DuPont and Sloan had introduced the financial control measures for the first time which helped the organization to make monetary policies of the company in an effective way. Sloan had least rested on the status quo and has always looked for continuous improvement in the business that lead to numerous change in production policies in shorter durations. It was this state of mind that led the company to create periodic obsolete concepts where products had annual changes in its

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model. This combined with the strong customer focused nature made the company to be more customers friendly and to produce variety of cars with great agility. "Sloan's tenure at GM provides a useful reminder that great corporate leadership is mainly honest and usually brilliant." says Farber.

5. Lessons from Sloan
We have lots of lessons to be imbibed from the rich life experience of Alfred Sloan. Alfred Sloan had a compelling Vision when he entered the automobile industry. His Vision was that Automobile industry was about creating new Transportation system in the United States. As a true leader, He always had a high level of self confidence that helped him to take right decisions at right time. “Confidence and Caution formed my attitude in 1920. We could not control the environment or predict the changes precisely but we could seek the flexibility to survive fluctuations in business.” Sir Sloan always believed that Change and Growth are the key drivers to sustain in a competitive environment. “…Growth or Striving for Growth is essential for good health of an enterprise. There is no resting place for an enterprise in a competitive environment. The spirit of the Venture is lost in the inertia of the mind against change….” Sir Sloan believed that the corporation could not continue to grow and survive unless it was better organized. As discussed in above sections, He brought in the innovative management style of Decentralization with controlled co-ordination that paved way for independent & intelligent decision making by various business divisions of the company. A true leader needs to understand the power of his authority and exercise with wisdom. This is well conveyed by Sloan as below:

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“I never minimized the administrative power of the chief executive officer in principle…. I simply exercised that power with discretion. I got better results by selling ideas than my telling people what to do.” Passion for the Vision is one of the key learning from Sir Alfred Sloan. He was quite passionate about shaping up the automobile industry. In the proceedings for one of the innovative designs by his colleague following is what Sloan had to say: “Now that we are at the point of planning production of the new car, I am beginning to feel like a small boy when the long expected circus posters being to appear on the fence and to wonder how each part of the circus to appear and what act I will like best” A Level 5 Leader need to have both high professional will and high sense of humility. Tolerance,

frankness in interpersonal relationships and Giving/Receiving Feedback are the key traits of a Level 5 Leader. In the run up to the commercialization of one of the innovative designs in General Motors, there were a string of failures of the design with respect to safety factors. Also there was friction between Research and Production teams in the company. Disappointed by the turn of events, the chief design engineer offered to resign from the company. Mr. Sloan stepped in as follows: “We are writing this letter to use a language that will result in complete elimination of the worry on your part with respect to our faith in you and this work. If this language fails to create this result, then won’t you write us frankly advising in what respect we have failed?” This brings out the key learning that Humility is the key trait of a Level 5 Leader. One of the key expectations from a leader is to align his and his colleagues’ values, goals of the enterprise. In continuation with his efforts to bring in value of the organized co-operation among the divisions of the organization, Sir Sloan went on to create an organization for his chief design engineer and emphasized the need for alignment as follows: “Dear Mr. Kettering, it was called to my attention recently that there were 143 copper cooled cars out in the territory and it appeared to be desirable to withdraw them and reassemble them. In other words it was thought in view of the fact that there were more or less complaints not dealing with the engine particularly but with the care as a whole that they should be taken in and adjustment made.

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What we have to do is to make people see the thing as you see it and with that accomplished there will be nothing to the problem.”
One other key learning from Sir Sloan is his open invitation for criticism and the courage to discuss the weaknesses with his colleagues. In one of the general body meeting, following is what Sloan had to say:

“ I want to say that one of the principal points of business at the next meeting will be a contribution from each member as to what in his opinion have constituted weaknesses in procedure and policy or thought that should be eliminated…. the following are the ones that I have thought of: First: I think we have lacked and perhaps still lack courage in dealing in weaknesses in personnel. We tolerate weaknesses for a longer period of time and then regret that we have not acted before. Second: We sit around and discuss things without the facts. Third: I think we have become too superficial and not dealing with problems in detail. It is advisable not to deal with a problem rather than doing haphazardly even if lose an opportunity. It will come up again sooner or later and in long run we gain by dealing with problems thoroughly.”

Few of his below mentioned quotes inspire us to follow some values in business which he has deemed to guarantee success. “If we are all in agreement on the decision - then I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about.”

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“If you do it right 51 percent of the time you will end up a hero.” “The greatest real thrill that life offers is to create, to construct, to develop something useful. Too often we fail to recognize and pay tribute to the creative spirit. It is that spirit that creates our jobs.” “There has to be this pioneer, the individual who has the courage, the ambition to overcome the obstacles that always develop when one tries to do something worthwhile, especially when it is new and different.” Above all Sir Sloan is a true embodiment of a Level 5 Leader.

6. Sloan in present days – an extension
With the understanding of Sloan’s leadership quality and his ideologies on the business, we would like to look at what would be Sloan’s response for the current case of economic downturn and GM’s poor state. Firstly, Sloan would have foreseen the economic overheating and would have always been on the foot to minimize the risk on the company either by selling out the weak companies or by doing an internal revival process. Secondly, Sloan being an absolute car man would have predicted the current preference of the people in car and would have led the production towards that direction. He would have envisioned the competition of Honda, Toyota and other Japanese car makers and would have made a different approach in its sales and production. Certainly, Sloan being a capitalist by nature would have tried to rescue the company instead of moving towards the government bail out. “Through his business genius, his sometimes myopic social vision, and his vast fortune," says a review of Farber's biography from the University of Chicago Press, "Sloan was an architect of the corporatedominated global society we live in today."

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7. References
1) “My Years With General Motors” – An Autobiography by Alfred Sloan Jr 2) Sloan Rules: Alfred P. Sloan and the Triumph of General Motors by David Faber. 3) http://www.myhero.com/myhero/hero.asp?hero=Alfred_Sloan_06 4) www.sloan.org

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