A LFRED D . CH A N D L E R J R , .

S T RA T E G Y A ND ST R U C T U R E

o
f tbe I n du
str ia l

T HE M . I T . . P R ES S

M A S S A C HU S E T T S I NST I T U TE OF TEC HN O LO GY
Ca m bridge , Massach usetts
 COP YR I GH T 1 9 6 2 BY

M ASSAC H U SETTS INSTITU TE O F TEC H NOLO G Y

ALL R I G H TS R ESE RVED
SECON D P R INTIN G SEPTE M BE R 1 963
, ,

LIB R ARY O F CON GR ESS CATALOG CA RD N U M E R

B : 6 2 1 1 99 0
—

P R INTED N THE U NITED STATES F AM ER ICA

I O
 A C K N O WL E D G ME N T S

MA i n d i vi du als ha v e co n tri bu ted to this study by pro vi din g in

NY

fo rmation by h elp i n g me d ev el o p m y tho ughts ab o u t the meanin g of the

,

d ata by typ in g an d ch eck in g th e sev e r a l v e r sions of th e man u s cr i p t an d

, ,

fi na lly by ma k in g a v ai l abl e es sentia l time an d mone y F i r st O f a ll I w ant .

,

to than k J ohn McDo n ald an d C atha rine S te v ens w i th w hom I sta rte d ,

to l ea r n ab o u t th e w o rk ings of b i g bu siness an d to thin k ab o u t th e his

torical d e v e l o p ment of c o rp o r ate st ruc t ur e an d st r ategy I am p a r ti cul a rly .

in deb ted to Ha ro ld G M an g el s do rf an d D r G eo rg e S Gibb fo r th ei r

. . .

va lu abl e assistan c e in wo rk in g o u t th e J e r sey Sto ry an d to J ames M , .

B a rk e r w ho help ed me in m uc h th e sam e w ay on the S ea r s exp e rien c e

,
.

S i d ne y S A l e x an d e r M o rr is A A d el man B a rry E S uppl e A rth ur

.
, .
, .
,

H Co l e Fr it z R e dlich an d Ly n woo d S Bry ant r ea d a ll o r p a r ts O f the

.
, , .

man u s cr ip t an d I am in dee d gr ateful fo r thei r exc eedingly u seful com

,

m ents an d criti cisms I es p e cially w ant to than k D r R e dli c h fo r dr agoon

. .

in g me into his c am p aign ag ain st em pi ri cism in the writin g of bu siness

histo ry an d his in va lu abl e assistan c e in d e v el o p in g u seful c on c ep ts O the r .

co ll ea gu es an d a c a d emi c nei ghb o r s w ho h elp ed me wo rk o u t s p e cifi c

i d eas we r e Le l an d H J en k s Wa l t W R osto w G o rdon M J ensen J oh n
.
, .
, .
,

B R ae an d E N ea l Ha rt ley
.
, . .

I a l so w ant to O ff e r m y sin c e r e thank s to the man y bu s y c o rp o r ation

ex e cu ti v es w ho w e r e so g ene r o u s w i th th ei r time an d info r matio n an d

w ho s uppl ie d co rres p on d en ce memo r an d a an d othe r d o cuments so

, ,

essentia l to an y hi sto ri c a l st udy The fo ur c ase st ud ies p a rti cul a rly de

.

p en de d on c om p an y r e co rd s an d in te rv i ew s w ith men in v o lv e d in o rgani

z ation al c han g es Whi l e v o l u mino u s th e r e c o rd w as not a lw a y s c om pl et e
.
, .

At du Pont an d S ea r s I ex amine d I n d etai l on ly the d o cuments d ea lin g

,

with the maj o r a dminist r ati v e r eo rg ani z ations Ho w e v e r the info rma .
,

tion in the r e co rd s themse lv es an d I n a v ai l able printe d so urc es mak es me

qu ite c e rtain that contin u e d in vesti g ation in these a rchi v es w o uld a dd l itt l e
to the sto r i es set fo rth in Cha p te r s 2 an d 5 At J e r s ey S tan d a rd w he r e I ha d
.
,

a ccess to all the a v ai l abl e r eco rd s I c a rrie d the d etai l e d sto ry up to th e

,

en d of 1 2 The histo ry f the o rg a i ationa l c han g es afte r w i ll b e

9 7 . O n z 1 9 7
2

des crib e d in full in th e fo rth comin g vo lume III of th e History of th e

v ii
viii A C K NO W L E D G M E N T S
S tan dard O il Co mpan y (N ew ] erse
y) I sto p p.ed m y ana ly sis at this d ate
at the comp an y s r e qu est b e c a u se they di d not w ish to have this thi rd
’

vo lu me anti ci p ated In o rde r to in di cate the rel evan ce of the St ruct ur a l

.

changes b efo r e 1 928 to J ersey s pre sent-d ay o rgani z ation I hav e bri efly
’

o u tl ine d the sto ry fo r the y ea rs after 1 927 from info rmation av ail able in
Th e La mp an d F ortu n e T h e G en er a l M oto r s sto ry ul timat ely c ame to
.

b e b ase d on info rmation an d mate ria l s w hi c h ha d b een in the publ i c

domain b efo r e the s umme r Of 1 95 6 Y et I am confident that sho uld in fo r
.

mation not yet in the publi c domain b e come a v ai l abl e it wo uld not s ub ,

stan tiall
y a l t er the histo ry pr es ente d h er e .

Info rmation on oth er c om p ani es that w e r e st ud i ed mo r e bri efly c ame

l a rgely from ann u a l an d oth er co rp o ration rep o rts go v ernment do cu ,

m ents m aga zin e a rti cles an d th e few p ertin ent bu siness histo r ies an d
, ,

b iogra p hi es F o r a n u mb er of firms s u ch d ata were s uppl emented by in

.

terv iew s As n ew fa cts a r e c ons tantly a p p ea r in g ab o u t th ese man y ent er

.

pris es an d as so m e of th e com p ani es stud i ed are currently u n dergoing

o rgani z ationa l changes I ha v e a rb itr a r i ly set J an u a ry I 1 96 1 as th e cu to ff
, , ,

d ate fo r this histo ri c a l in v estigation The refo re fo r th e com p ani es de

.
,

s crib e d h ere I ha v e not u sed info rmation w hi c h a pp ea red afte r that d ate .

I am gr ateful to th e S loan R esea rc h Fu n d Of th e S choo l of In du st ria l

M anagement at the M assa ch u setts Instit ute of Te c hno logy an d th e J ohn
S imon Gugg enh eim M emo ria l F o u n d ation fo r p ro vi d in g es sentia l fu n d s
to rel ie ve me from tea chin g time an d to c o ver som e s ecr eta ria l an d t r a v el
co sts T h e Am eri c an Phil o so p hi c a l S o ci ety ma d e a sma ll gr ant that
.

co vere d exp en ses in curr e d in mak in g the st udy of J er s ey S tan da rd w hi le ,

th e C ent er fo r Int er nationa l S t ud i es at M I T s u pp o r t ed a s u mme r s t e

’
. . .

sea rch o n th e b eginning s of l a rge—s c a l e ente rpri se in Ame ri c an in du st ry .

I am p a rti cul a rly in deb ted to D ean J ohn E Burcha rd an d Professo r .

Ho w a rd R B artl ett of
. S choo l of H umani ti es fo r l ight enin g m y
a c a d emi c duti es so that I co uld hav e mo r e time fo r r esea rc h an d writing
an d a l so to E P Broo k s D ean Em eritu s of th e S choo l of In du st ria l
. .
,

M anagem ent an d Ho w a rd W J ohnson the present D ean fo r th ei r con

, .
, ,

tin u in g int er est an d en co ur a em ent of m y w o rk I am a l so gr at eful to a

g .

n u mb er of MI T u n dergra du ates w ho wrote p ap ers on rel ated s ubj ects

an d who l i sten ed w hi le I t ri ed to w o rk o u t som e of m y i deas in cl a ss An .

ex cell ent u n d er r a du at e th esi s by Wa y n e S t u a r t entit l ed T h D ev el o p

“

g e

m ent of In du st ria l Organi z ation T h eo ry w as of p a rti cul a r r elev an ce .

T h e l adi es w ho p ro vi d ed secr eta ria l r esearch an d ed ito ria l a ssistan c e

, ,

w e re a ll exc eedingly h elp ful an d I w ant esp ecia lly to th an k G erta Ken
,

medy R u th R o l an d R u th C r an d all an d C onstan c e B o yd J oan Go ld

, , ,
.

b e rg dese rves a sp e cia l vote of than k s fo r he r ha rd wo rk an d goo d h umo r

ACK NOWLEDGMENTS
in the typ ing an d r etyp ing the ch eck in g an d r e c he ck ing of th e man u
,

s cri p t s s ev er a l drafts
’
.

This as a ll m y othe r a c a demi c en d ea vo r s c o uld ha rdly ha v e b een p os

, ,

si bl e at all w itho u t th e en co ura gement an d u n der stan ding of my w ife ,

w ho in cons equ en c e c a rri ed fa r mo r e than he r sha r e O f nona c a d emi c re

sp o n si b ilities .

Whi l e man y contributed ,

th e fi na l pro duc t is min e an d fo r it I ta k e full
,

r esp onsi b i lity .

ALFRED D . CH A NDLER, JR .

Bro o /(lin e , Massach usetts

J ul 1 9 61
y ,
C ONTENTS

I NTR O D U CTI ON ST RA TEGY A ND S TRU CT UR E I

Motives an d Meth ods 1

S o me G en eral Prop ositio n s 7

HI S TO R I CA L S E TTI N G
Th e Begin n ings o f Busin ess A dmin istration in th e
United S tates 20

Th e Co ming of th e I n tegrated Mu ltidepartmen tal,

En terprise 2
4
I n tegration via Co mb in a tio n a n d Co n solidatio n
Orga n izatio n Bu ildin g 3 6
F u rth er G ro wth T h e Co m i n g o f th e Mu ltidivisio nal
En terprise 4 2

DU P ON T C REATI N G T HE AU T ONO MOU S

DI V I S I ON S 9

T HE C ENT R ALI Z E D S TR U CT U R E 5 2

Th e S trategy o f Co nsolidatio n 53
Creatin g th e Multidepartmen tal S tructu re 57
S tr u ctural Modificatio n s 1 9 03— 1 9 1 9 62
F u rth er Cen tralizatio n 1
9 19 67
T HES TR ATE G Y O F DIVE R SI F ICATION 7 8
In itial S teps To ward D iversificatio n 79
I n ten sified Pressu res for D iversificatio n 83
T h e Fin al D efin itio n of th e S trategy of D iv ersificatio n
NEW S TR U CT U R E F O R TH E NEW S T R ATE G Y 9 1

Ne w Pro blems Created by New S trategy 9 2

Th e Pr o blems A n alyz ed 94
A Ne w S tructu re Prop osed a n d R ejected 9 6
A C o mpro mise S tru ctu re A dop ted I OO

Crisis an d t h e A ccep tan ce o f th e Mu ltidivisio nal

S tr ucture 10
4
xii CONTENTS

GEN ERAL MO T O RS C R EA TI NG T HE
GE NER AL OFF I C E
T H DU R ANT S TR ATE G Y
E I 1
4
fD a t
’
Th S e ources o ur n s S tra tegy
T h e Crea tio n of G en eral Motors
T h e S torr o w R egime 1 20

D ura n t s
’
R etu rn an d R en e wed Exp an sio n an d

I n tegratio n 1 22

D u Po n t Co n trib u tions to D ura n t s Organ izatio n

’

Th e Crisis of 1 9 2 0 1 28

T HE S LOAN S TRU CTU RE 1 30

’
T h e S o urces o f S lo a n s S tru ctu re
”
T h e O rgan ization Stu dy 1
33
Min or Mo dificatio n s 1 0
4
P U TTIN G THE N W S TRU CTURE INTO O PERATION
E

D fi i g Di i i l B d i
e n n v s o na
4 ou n ar es 1 2

Th D l p m t f S t ti ti l
e ev e o d Fi eni o a s ca an n a n c al

Co n tr ols 45 1

Defi n in
g t h e R o l e o f t h e A dviso ry S tafi
l
1 53

Th e R o le of th e Execu tive Co mmittee 1 57

Th e Fin ish ed S tru ctu re 158

A C o mp ariso n of O rga n izatio n Bu ildin g at G en eral

Motors an d du Pon t 1 61

S TAND A R D (NEW
O IL C O MPANY
JE RS E Y )
A D HO C R E O R GAN I ZATI ON

STR U CT UR E A N D S TRATEGY B E F OR E 9 5 1 2 1 64
Th e S trategy o f Vertical In tegratio n an d Co n tin u ed
Exp a n sio n 1 70

Vertical I n tegratio n a n d th e Creatio n o f N e w F u n ctio nal

D p m
e en ts
art 1 72

Ex pa nsio n a n d th e O lder D ep art men ts

Th e G r o wth of S tafi D ep art men ts
T h e B oa r d 181

I n itial A waren ess of S tru ct u ral Wea k n esses

T H E INITIAL REO R GANI ATION Z 1
9 5 2 —1
926 1 85

Teagle s Tr o u b les
’
1 86

Th e 1 9 25 Progra m
“
1 88

Th e Co ordinatio n D epart men t a n d Co mmittee

Th e B u dget D epar tmen t a n d Co mmittee 1 93

Reorga n iz ing th e Mark etin g D ep art men t 1 96

Reorga n izing th e Ma n u fact u rin g D e

p a rt men t
CONTENTS xiii

T HE C R EATION OF T HE MU LTID IVISIONAL DECENTR ALI Z ED

,

S TR U CT URE 2 05

Co n tin uin g Diflicu lties

‘

Th e 1 9 27 C h anges 208

Workin g O u t th e New S tructure

S o me Fin al Co n sideratio n s 22 1

S EA RS R O E BU CK
,
A ND C OMP AN Y DECEN
TRA LIZA TIO N, P LANN E D A ND UN P L ANN E D
C H AN G IN G S T RATEGY A N D S TR U CTU R E 2 25

I n itial S trategy and S tr uctu re 2 26

Th e New S trategy 2
33
S tructu ral S train s Cr eated by th e Ne w S tra tegy 23
7
A B O R TIVE DECENTR ALI Z ATION 24 1

Th e Fraz er Co m mittee 2 2
4
Th e C o m mittee s Prop osals
’
243

Carryin g O u t th e Co m mittee s Pr op osals

’

Fraz er Reviews th e Ne w S tru ctu re 5

2 2

Co n tin u in g Co n fiict an d Resu ltin g Prop osals

T h e Territorial Orga n ization S crapp ed 260

EVOL U TIONA R Y D ECENT R ALI Z ATION 261

Th e Cen traliz ed R etail Orga n izatio n 26 1

D ecen traliz atio n of th e R etail Orga nizatio n 2 65

Th e G ro wth of Local R egio n al A d min istrativ e Un its

Th e Return to th e Territorial Orga n ization 2 68

Th e Fin al S tru ctu re 27 6

O R GAN I ZA TI O NA L I NNO V A TI ON A CO M
PA RA T IV E ANA LY S I S
D
T H E A APTIVE RESPONSE 28
4
Bu ilding th e F u n ctio nal D epartmen ts
Bu ilding th e Cen tral Ofl lce ‘
290

THE C R EATIVE INNOVATION 2 99

Th e Co n ditio n s for I n n o vatio n

Th e Pr ocess of I n n o vatio n 3 3
0

Th e S ig n ifican ce of th e I n n o vatio n 3 9 0

G
O R ANI Z ATIONAL INNOVATO R S 3 1
4
A n O rga n izatio n B u ilder s Perso n ality Train ing
’
an d 3 5
1

S ources of I n for matio n 3 2 0

THE S P R EA D O F T HE MU L T IDI V I S I ONA L

S TRU CTU R E
IN DU ST IES N T A CCEPTIN G T HE N W S TR U CT U R E
R O E
3 6 2

C opp er an d Nick el 3 7
2
xiv CONTENTS
S teel 33 1

A lu min u m 337
Materials 34 0

IN DU STR IES PAR TIALL Y A CCEPTIN G THE N EW S TR U CT U RE 34 2

Processors o f A gricu ltu ral Pr oducts 34 4

R u bb er 3 5 0

P etro leu m 35 2

I NDU STR I ES WI DELY A CCEPTIN G THE NEW STR U CTUR E 3 6 2

Electrical and Electro n ics

3 36
Po wer Machin ery a n d A u to m o biles 37 0

Ch emicals 3 74
V AR IATIONS O N STR U CTURAL C H ANGE 37 8
Th e Merchan disin g En terp rises 37 8
S u m mary of th e Process of S tru ctu ral C hange with in th e
E n terprise 3 8 0

C ON CLU S I ON C HA PT E RS IN T HE HI ST O RY “

THE G R EA T I ND U S TR I A L E NT E R P R I S E
Th e First C h ap tcr A ccu mu la tin g Reso u rces 3 8 6
Th e S eco n d Ch ap ter Ratio n alizin g th e
Use of Resou rces 8
3 7
T h e Th ird C h ap ter Co n tin u ed G ro wth 39 0

Th e F ourth Ch apter Ratio n alizin g th e Use

of Ex an din g Reso u rces
p 3 93

R EFE R E N C E S
NO TE S
I N D EX
 S TRA TEGY A ND S T R U CT U R E

Ch apters in th e History of th e In dustrial En terp rise

 I N T R O D UC T I O N S T RA T EG Y —

A N D S T R UC T UR E

Motives and Meth ods

This in vestigation into th e changing st r at egy an d st ruc tur e of the l a rge
in du st r ia l ent e rpris e in th e U nite d S tates b eg an as an exp e riment in the
wr iti n g of c om p ar ati v e bu siness histo ry Th e initia l tho ught w as that an
.

ex amination of th e w a y difieren t enterpr ises c a rr ie d o u t the sam e a cti vity

-w h eth er that a c ti v it y w as man u fa c t ur in g ma rk etin g pr o cur ement of
, ,

s up p l i es fi nan c e o r a d minist r ation wo uld ha ve as m uc h v a lu e as a st udy

, ,

of ho w a sin gle fi rm c a rr ie d on all these a c ti v ities S uc h a com p a r ati v e

.

ana ly sis c o uld p er mit deep e r pr ob es into the nat ur e of the f u n ction st udie d ,

an d so pro vi de mo re a ccur ate inte rpretations an d mo re meaningful ev alua n

tions of the p erfo r man ce of se v er a l d i ffe rent ente rpri ses in that a cti v ity
than co uld a w ho le se r ies O f histo r i es of in di v i du a l fi r ms It co uld th u s .

in di c ate mo r e clea rly th e w a y s in w hi ch Ame r i c an bu sinessmen ha v e

han dled that a c ti v it y o ve r the y ea r s .

O f the s eve r a l a cti v ities ca rr ie d on in Ame r i c an bu siness that Of a dmin,

istratio n a pp ea r e d to b e amon g th e most pr omisin g fo r s uc h an exp eri

m ent in comp a r ati ve histo ry Bu siness a dminist r ation has a p a r ti cul a r
.

relev an ce fo r to d a y s bu sin es smen an d s c ho l a r s The eno rmo u s exp ansion

’
.

of the Amer i c an econom y sin c e Wo rld Wa r II has le d to the r ap i d gro w th

O f a m ul tit ud e of in du st r ia l c om p ani es Th ei r e x ecu ti v es are fa c ed W
. ith
compl ex a d ministr ati ve problems that b efo r e the w a r con cer ne d on ly
those of the l a rgest co rp o r ations At the same time th e gro w th of u nits
.
,

th at c a rry on p o liti c a l mi l ita ry e duc ational m ed i c al as well as bu sine ss

, , , ,

a cti v ities has bro ught thei r a dministr ation to the attention of so cio l o gi sts ,

anth rop o lo gists e conomists p o liti ca l s cientists an d othe r s cho l a r s Y et

, , , .

th e histo rians ha v e pr o v i ded so c ia l s c i entists W ith l itt le em p i r i c al d ata on

w h i ch to b as e gen er a l i zations o r h yp otheses con cer nin g the a d minist r a

tion of gr eat ente rpri ses No r ha ve th e histo r ians fo r m ul ate d man y theo ri es
.

o r gener a li z ations of thei r o w n .

If changing de velo p ments in bu siness a dminist r ation presented a cha l

l engin g a r ea fo r c om p a rati v e analy sis the st udy of inno v ation seemed to
,
2 I N TRODU CTI O N — STRATEGY AND STRUCTURE
furnish the pro p er fo cu s fo r such an in vestigation Histo ri c ally admin is .
,

trato rs ha ve r a r ely c hanged th ei r d ai ly r o u tine an d th ei r p ositions of

po wer excep t u n der th e st rongest pressures T he refo re a study of the .

creation of n ew a dminist rati ve fo rms an d m etho d s sho uld point to urgent

n eed s an d compell ing o p po r tu nities b oth w ith in an d witho u t the fi rm .

Fo r a study of S uch fo rms th at of the o rgani zational Structure u se d to

,

a dminister th e l a rgest an d most complex of Amer i c an in du stria l enter

p ris es seemed to Oe r th e w i dest possi b i lities .

What th en has b een th e st ruct ure u s ed to a dminister s uch great enter

prises ? An d w ho wer e its inno vato r s ? A prelimina ry s urvey of the
exp er ien c e of fi ft y of th e l a rgest in du st r ia l c om p ani es in the U nited S tates
1
help e d to ans we r these que stions T his s urvey sho wed that in re cent
.

yea r s What ma y b e c alled th e m ulti di v isional typ e of o rgani zation has

b ec ome gen er a lly u s ed by in du str ia l fi rm s c a rrying on the most d i ver se
e conomi c a cti vities In this t yp e O f o rgani z ation a gene r al offi ce plans
.
, ,

coo rdinates an d a ppr aises the wo rk of a n u mb e r of o p erating d i visions

,

an d a llo c ates to them the n ecessa ry pe r sonne l fa ci lities fu n d s an d othe r , , ,

reso urces The exe cuti ves in cha rge of these d i visions in turn h a ve u n de r
.
, ,

thei r comman d most of the fu n ctions ne cessa ry fo r handling o n e maj o r

line of pro d ucts o r set of s erv i ces o ve r a Wid e geogra p hi c al a rea an d ea ch ,

of these exe cuti ves is res ponsible fo r the fi nan c i al r es ul ts of his d i vision
an d fo r its s uccess in th e ma rk et pl a ce T his a dministr ati ve fo rm often .
,
”
k no w n in bu siness p a rl an ce as th e decent r a l i zed St ructure is dep i cte d
“
,

in C h art I (p age
The fi r st comp anies to d e vi se this d ecentr a li zed fo rm a cco rd ing to ,

the prel imina ry study in clude d the E I du Pont d e Nemo ur s 8: C0

, . . .
,

Gen er a l Moto r s Co rpo ration S tan d a rd O i l Comp an y (New J e r sey ) an d

, ,

S ea r s R o ebuck an d Com p an y D u Pont an d Gen er a l Moto r s b egan to

, .

fashion th ei r n ew st ruc tur e sho rt ly after Wo rld Wa r I J er sey S tan d a rd .

sta r t ed its r eo r ani z ation in 1 2 an d S a r s sta r t ed its in 1 929 F i v e oth er

g 9 5 e ,
.

fi rms among th e fi fty st udi ed — U nit ed S tates R ubb e r B F Goo dri ch , . .

,

Union C a rb i de 8 : C a rb on Westingho u se El ectri c an d Th e Great At l anti c

, ,

8: Pa c i fi c Tea Co — initiat ed c om p a r a bl e changes b et w een 1 925 an d 1 932

. .

Excep t fo r th e l ast the A 8: P these a dmini st rati ve reo rgani zations

, . .
,
2
pro ved to b e l ess creati v e inno v ations than those in th e fi r st gro up Th ere .

fo re du Pont Gene r a l Moto r s an d Je r s ey S tand ard were s elected fo r

, ,

st u dy An d of the two inno v ato r s O f the ne w m ulti di vi sion al fo r m in th e

.

merchan d ising fi e ld S ea r s w as pi ck e d instea d of A 8: P b eca u se its ac

,
. .

tiv ities w er e mo r e complex an d b ec a u se info r mation a b o u t th e comp any

w as mo re rea di ly a vail able .

Possibly oth er large c o rpo r ations not on th e l ist of th e to p fi fty b egan

,
” ’
to set up the decent ra li ze d m ulti d i vision al st ructur e in the 1 920 s an d
“

,
INTROD U CTIO N — STRATEGY AND STRU CTURE 3
e ven ea rl ie r Bu t the fo ur se le c te d du Pont G ene r a l M oto r s J e r se y
.
, ,

S ta n d a r d an d S ea r s — We r e amon g the v e ry fi r st to initiate maj o r reo r

,

an izatio n s of th is k in d What is im p o r tant fo r this S t u d y is that the e x e c

g .

utives of these fo ur b e g an to d e v e l o p thei r n ew st ruc t ur e in d e p e n dent ly

of ea c h othe r an d of an y othe r fi rm The re w as n o imitation Ea c h . .

tho ught its pro blems w e re u ni qu e an d its so lu tions gen u ine inno v at ions ,

as bran d ne w w a y s of a d ministe r ing gr eat in du st r ia l ente rprises In t i me .

,

the inno v ations b e c ame mo de l s fo r simi l a r changes in man y Ame ri c an

co rp o r ations .

A S m y in vestigatI on of o rg ani z ationa l inno v ation in these fo ur com

p ani cs progresse d s ever a l im p o r tant fa cts b e c ame clea r F i r st a mean
, .
,

in gfu l ana ly sis of th e cr eation of the ne w a d minist r ati v e fo r m c a ll e d fo r

a ccur ate k no wle dge ab o u t the fir m s prev io u s o rgani z ation an d in fa c t
’

ab o u t its enti re a d minist r ati v e histo ry S e c on d changes in o rgani z atio nal

.
’

S t ruc t ur e w e r e intimate ly r e l ate d to th e w a ys in w hi c h the ente rpr ise ha d

exp an de d An e v a lu ation of a dminist r ati v e c hange the refo r e deman de d

.
, ,

a detailed u n de r stan din g of the com p any s metho d s O f gro w th Thi rd ’

.
,

these p atter ns of gro w th in t ur n refle c te d changes in the o v e r-a ll Ame r i

, ,

can e conom y p a r ti cula rly those afi ectin g th e ma rk et o r d eman d fo r the

,

ente rprise s pr o d uc ts F ina lly th e r eo rgani zations we r e influen ce d by th e

’
.
,

state of th e a dministr ati ve a r t in th e U nited S tates at th e time they w e re

b ein g c a rr i ed o u t The fi r st two of th ese p oints re qu i r e d fur the r in vesti ga
.

tion into the histo ry of the fo ur com p ani es s el ected The thi rd an d fo urth .

c a lle d fo r a br oa de r a w a reness of the hi sto ry of the Ame r i c a n bu siness

\

e conom y .

This n ee d to en l a rge (th e s co p e of the Stu dy ma de p ossible a broa dening

of its Obj e cti ves O ne w a y to as ce r tain the imp a ct of the mo r e gene r a l
.

e conomi c an d a d minist r ati ve d e ve lo p ments on the gro w th an d o rgani za

tio n of these in d u str ia l ente rpr ises w as to com p a re the e xp e r ien c e of th e
fo ur stu d ie d w ith that of many othe r simi l a r l a rge co rp o r ations S uch an .

exp anded com p a r ison n o t on ly co ul d mak e the pro cess of inno v ation in
the fo ur se le cte d com p anies mo re com pr ehensi ble bu t c o ul d a l so pro v i de ,

info rmation on whi ch gene r a l i zations mi ght b e ma de ab o u t the histo ry

of th e in du st ria l enterpr ise as an instit u tion an d one of th e most criti c ally
,

imp o r tant of mo de r n instit u tions at that In this w a y what b e gan as an .

exp e r iment in c omp a rati ve bu siness histo ry w as broa dene d into one in
the writing of instit utiona l histo ry .

To c a rry o u t these br oa de r o bj e cti v es the a dminist r ati v e histo r ies of

,

close to a h u n dre d of Ame r i c a s l a rgest in d u st ria l ente rpr ises w e re br iefly

’

ex amine d . T h e comp anies in clud e d the fi ft y w ith the l a rgest assets in

9 9 an d se v enty of the l a rgest by ass ets in
1 0 The l atte r gro up con
siste d of the fi fty u se d in the pre l imina ry St udy w hi c h ha d dete rmined
4 I N TRODU CTIO N — STRATEGY A ND S T R U C T U R E
w hat w as th e most mo der n a dmini st rati ve fo r m an d who w er e I ts I nno
v ato rs T w ent y of th e ne x t l a rgest w er e a dded in o rder to t a W i d r
.
ge e

re presentation in v a rio u s in d ustr ies T hese comp anies an d th ei r rel ati ve

.

si zes a re l iste d in Tables 1 an d 2 (Fo r the s econ d gro up Si ze I n 1 959 as

.
,

well as in 1 948 is in d i c ate d ) .

The info rmation on these many com p anies c ame pr ima ri ly from rea dily
a vai l abl e materia l s s uch as ann u al an d oth er com p an y rep o r ts go ve r nment ,

publ i cations a r ti cl es in perio di c a l s an d O cc asionally bu siness histo ri es an d

, ,

b iogr ap hies In eighteen of the mo r e si gni fi c ant of these comp anies inte r
.
,

vi ew s w ith s enio r exe cu ti ves he lped s u p plement the printed r e co rd T h e .

fa r mo re detai le d ana ly ses of o rgani zational inno vation at du Pont Gen ,

e ra l Moto r s S tan da rd O i l (New Jer se y ) and S ea r s R oebuck w er e b ased

, , , ,

o n the oth er han d l a rg e ly on inte r na l c om p an y r e c o r d s— bu siness c o rr e

,

s o n den ce r e p o r ts memo r an d a min u tes of meetin g s an d the l i k e These

p , , , , .

histo r i ca l do cu ments were s upplemented by interview s w ith men who ha d

p a r ti ci p ated in the o rgani z ationa l changes .

Usin g these d ata I ha ve attemp te d to sa y something ab o ut the histo ry

,

of th e l a rge in du st r ia l ente rpr ise as a b asi c mo der n Ame r i c an instit ution , .

In so doing this b oo k a l so pro vi des info r mation ab o u t the histo ry of

,

bu siness a dminist r ation in the United S tates an d ab o u t chan ges in the

l a rger Ameri c an e conomy It tell s still mo re ab o ut the histo ry of the in
.

d i vi du a l comp anies ex amine d Th e b ook attemp ts to p ro vi de this in

“

fo rmation by fo cu sin g on the inno vation an d s prea d of the mo de r n

“
decent r a l i zed fo rm of o rgani zation in Ame r i c an in du stry The maj o r .

po rtio n of the w o rk is dev oted to the a dminist r ati v e histo r ies of the fo ur
comp anies that fi r st create d the ne w fo r m A S st ud i es in o rgani zational .

inno vation th ese sto ries in d i c ate wh y du Pont Gener a l Moto r s S tan d a rd
, , ,

O i l (New Jer sey ) an d S ea r s R oebuck en l a rge d thei r bu siness took on

, , ,

n ew fu n ctions mo v e d into ne w l ines of bu sin esses an d w h y ea ch s uc h

, ,

mo ve r e qu i r e d a n ew desi gn fo r a dmini str ation T h ey t ra ce the w a y in .

w hi ch bu s y execu ti ves wo rk ed o u t often s lo wly an d p ainfully ne w meth

, ,

o d s an d means fo r coo rd inatin g a ppr aising an d pl anning th e ee ctive

, ,

u se of v ast an d va r ie d asso r tments of men money an d mate r ia l s To , , .

mak e th e c ase st udies mo r e meaningful they a re preceded by a broa d ,

s urvey of changing p atter ns in th e gro wth an d a dmini st r ation of the

l a rge enterprise in th e Unite d S tates b ased on the experien ce of many ,

of the l a rgest com p anies T h e c a se st udies a r e th en fo llo wed fi r st by a

.
,

com p a rati ve ana ly sis of o rgani zationa l inno v ation in th e fo ur com p anies ,

an d then by an extensi ve in vestigation into what othe r in du st ria l enter

”
pr is es a ccep ted O r rej ected the n ew decent ra l i ze d St ruct ure an d wh y“

an d ho w th ey di d so .

T h e sto ry of ho w ea c h of th e fo ur inno v ato r s met its ch an gin g a dmin

 I NTRODUCTIO N — STRATEGY A ND STRU CTURE 5
TA BLE 1

Th e Largest I n du st rial s —
1
9 9 O

Nu mb ers in dica t e rel a t i v e si ze acco rdin g t o 1 90 9 a sset s . A dap t ed fro m A . D H . .

Kap l an , Big Ent erpris e in a Compet iti ve Sy st em (Wash i n gt o n ,

U . S Steel
. Am lg m t d (A
a d ) C pp
a a e n aco n a o er

C o l o Fuel 8 : Iron
. Am i Sm l i g 8 R fi i g
er can e t n c e n n

Lack aw ann a Steel Pi t b g C l

t s ur oa

Repu bl i c Steel Am i C er can an

h h
Bet l e em Steel C li d i C l
o nso at o n oa

C amb ri a St eel I i lP p
n t ern at o n a a er

C rucib l e Steel Clm 8 H l

a u et c ec a

L ak e Su peri or orp C . U S Smel t i ng Refin i n g

. .
, ,
8c M i ni n g Co .

n es 8 : L au h
J o g in
l Un i ted Co pp er
N at i o n al Lead
Ph el p s, Do dge
Lehigh Co al 8 N avi gat i on :

Ameri can Wri t i ng Paper

Co pper R ange Conso l i d t ed a

Agricult ura l Processing Rubber

Am i T ber can o acco IO U . S . R u b b er
C l L h
en t ra e at er

Am 8 C
r our : o .

Am i S ger can u aR Refin in g

Sw i ft 8 : Co .

C P
o rn ro du ct s R efin in
g Co .

Am i er can Wo o len Co .

N at i o n al Bi scu i t
Di t i lle s Sec ri t ies Corp
s r u .

Un i t ed Fr i t u

Ma chinery Miscella neous

G eneral Elect ri c I n tern at i o n al Harvester 24 Du o n t (Ex p lo si es)
P v
West i ngh o u se P u ll man 26 . C
V a - aro l i n a em (Fert i l i Ch .

Sin ger Mfg . CO .

35 A m gri .A emi cal (Fert i l i
. Ch
Am i C er can ar Fo n dry
8: u
4 7 . Sears, R o eb u ck
Am i L er can oco mo t i ve 5 1 Eastman Ko ak d
All i Ch lms- a ers

In tern at i o n al Steam P u mp
Bal w i n d Lo como t i ve Work s
 IN TROD UCT IO N — STRATEGY A ND STRUCTURE
TA BLE 2

Sev en t y Largest I n d u st ria l s —

1
94 8 an d 1
9 59
Numb ers in dicat e rela t iv e size a cco rdin g t o 1 9 4 8 an d 1 9 59 asset s Dat a fo r 1 9 4 8 .

a dap t ed fro m A D H Kapla n Big Enterprise in a Compet it i ve Sy stem

. . .
,

(Wash in gt o n an d dat a f o r fr o m Fort une s Direct o ry

’
1
, 9 59
of th e
5 0 0 Largest In du st rial Co rp o ra t io n s .

1 94 8 S teel

3 U .S Steel
. A naco n da

12. h h
Bet l e em Steel Kenneco t t C pp
o er

Rep u b lic Steel Alumi n um C mp

o an y o f Am i er ca

35 J o nes 8 : Lau g l in h In tern at i o n al Ni ck el

N at i o n al Steel I n ternat i o n al P aper
f

43
49 A rmco Steel Am i Sm l i g
er can e t n an d Refin i ng
50 Y o u n gst o w n Am i C er can an

53 d
I nl an Steel Ph lp D dg
e s o e

Pi b gh Pl Gl
tt s ur a te ass

1 948 Rubber

1 St an d d O il
ar
32
. G oo dy ear 28

37 U . S . R u b b er 57
4 d d
St an ar O il 39 Fi rest o n e
39
(In d) 9 62
. B . F Goo d i ch
. r 66
So co n y -V acuu m 7
Texaco 6
G fu l O il
5
St an dard O il
C f
( al i )
Si ncl ai r O il
h
S ell O il
Ph illip s
P et ro leu m 16

A t l an t i c Refin i n g 4 5

C o n t i n en t al O il 4 8
d
St an ard O il
(Oh i o )

Electrica l a nd Electronics Auto and Power Ma chinery Chemi ca l

G en eral Elect ri c G eneral Mo t o rs Du P o nt

West i ngho u se Electri c Ford Mo tor Un i o n C

bi e ar d
RCA I tern t i o al Ha vester
n a n r East man Ko dak
IBM Ch y l
r s er A d Ch
ll ie emi cal St Dy e

Deere Ch
Do w emi cal

Alli s-Ch almers Cel an ese

Am i V i
er can sco se

M t Ch mi
o n san o e cal

[ Hercu les]
I NTRODU CTIO N — STRATEGY A ND STRUCTURE 7
istrativ e nee d s an d pro blems w hi ch r es ulted from the exp ansion of its
bu sin ess h as b een to ld as tho ugh it w e re a chap te r in the com p any s his ’

to ry Ea ch c a se study pr esents the events fr om the p oint of V ie w of the

.

bu s y men r es p onsible fo r the destin y of thei r ente rpr ise O n ly by sho w in g

.

th ese ex ecu ti ves as they han dled w hat a pp ea r e d to them to b e u ni qu e

pr oblem s an d i ss ues c an th e pro cess of inno v ation an d change b e mean
'

in gfu lly p res ented O n ly in this w a y c an the t ria l s of ha r asse d ex ecu ti v es

.

fa ced wi th no vel an d ext r emely com plex problems b e clea rly p i ct ured ,

an d th e imp a ct of s p e cifi c p e r sona l iti es an d of histo r i c a l o r a cci d enta l

sit u ations on o ve r—all change b e a de qu ate ly pr esented Mo r eo ve r if th e
.
,

ch rono l ogi c a l de ve lo p ment of the sto ry is k ep t inta ct an d if it c an b e

presente d as it a pp ea red to th e a ctor s in the sto ry the d ata Sho uld ha v e
,

mo r e v a lu e to bu sinessmen an d s cho l a r s inte r este d in the gro w th an d

g o v er nment of the gr eat in d u st r ia l co rp o r ation than if the y w e r e se l e c te d
an d a rr an ge d to deve lo p o r i llu st r ate one p a rti cul a r histo r ian s theses
’
.

At the same time by c a refully an d expl i c itly comp a r in g the se p a r ate

,

c h rono lo gi ca l sto r ies w ith one anothe r an d then w i th simi l a r d e ve lo p

ments in oth er great in d u st r ia l com p anies these sto r ies c an b e come mo r e
,

than me r e c ase st u dies in the meeting an d so lv in g of a dministr ati v e pro b

lems r es ultin g from gro w th The y c an pr o vi de othe rw ise u no b tainable
.

info r mation esse n tia l to th e u n de r stan d in g of the histo ry of on e of the

most si gni fi c ant of to d a y s instit u tions S uch a comp a r ati v e a n d in stitu
’
.

tI o n al st udy of Ame r i c an bu siness w o ul d se em to ha v e some r ea l ad

v anta ges Ove r the mo re/ traditio n al histo r ies of in d i vi du a l fi r ms o r the

mo r e gene r a l s urvey s o f the Ame r i c an bu siness e conom y Not on ly d oes
.

it per mit an ana ly sis of signifi c ant de cisio n s in fa r greate r dep th an d de

tai l than is p ossi ble even in a m ul ti v o lu me histo ry of a Sin gl e great com
p an y bu t it a l so mak es it p ossi ble to r e l ate these d etai le d analy ses mo r e
,

clea rly an d mo re prec isely to broa der histo r i c a l de velop ments O n th e 4

.

oth er han d com plex d e cisions a c tions an d events a re not ta k en o u t of

, , ,

c ontext an d pr es ented as me r e i llu str ations as they wo uld ha v e to b e in a

gen er a l histo ry of Ame r i c an bu sin ess o r of the Ame ri can econom y The y .

a r e not u s ed to i llu str ate gener a li zation s ; th ey are th e d ata from w hi ch

the gener a li zations a r e der i ved .

S o me G eneral Pr op ositio n s
If u seful comp a risons a r e to b e ma de among fo ur com p ani es an d then
fo ur s c o r e mo r e an d if d e cisions an d a c tions in these fi rms are to in di
,

c ate something ab o u t th e histo ry of the in du st r ia l enterpr ise as an in stitu

tion the ter ms an d con ce p ts u se d in these comp a r isons an d ana ly ses m u st
,

b e c a ref ully an d pr e cis ely defi ne d O th erw ise comp ar isons an d fi n d ing s
.

c an b e mo re mis l ea d ing than inst ructi ve The fo llo w ing set of gene ra l o r
.
8 INTRODU CTIO N — STRATEGY A ND STRU CTURE
theo reti c al pro p ositions attemp ts to pro vi de some so r t of con cep tu a l pre
cisio n Witho u t r efer en c e to histo r i c a l r ea l it y th ey t ry to expl ain in fai rly
.
,
”
cl ea r-cu t o ve r simpli fi e d terms ho w the mo der n decentr ali zed st ruct ur e
, ,
“

c ame into b eing .

B efo r e de velo p in g these pro p ositions the term in dustrial en terprise ,

nee d s to b e defi ne d Us ed in a br oa d sens e it means her e a l a rge pri v ate

.
, ,

ro fi t-o r ient ed bu siness fi rm in v o lv e d in th e han dl in g of goo d s in some

p
o r a ll of th e s ucces si v e in du st ria l pro cesses fr om th e p ro curement of the
r a w mate r ia l to th e sa le to the ul timate cu stome r Tr ansp o r tation ente r .

pr ises u ti l ities o r purely fi nan c ia l comp ani es are not th en in cluded in this
, ,

S t udy w hi l e thos e fi r ms c on c er n ed w ith ma rk etin g an d w ith th e ex tr a c

,

tion of r a w mate r ia ls as well as thos e deal ing w ith pr o cessing o r man u

fact u rin g do fa ll w ithin this defi nition An in du stria l enterpr ise is th u s a .

s ub sp e cies of w hat We r ne r S o mb art has des cr ib e d as the ca p ita listi c en

terp rise w hi ch as an in d ep en d ent e conomi c o rg anism is cr eate d o v er an d
“

ab o ve th e in d i vi du a l s w ho constit u te it This entity a ppea r s then as the .

a gent in ea ch of the se t r ansa ctions an d l ea d s as it w e r e a l ife of its , ,

” 5
o w n whi ch often excee d s in lengt h that of its h u man memb e r s
, .

Whil e the enterpr ise may ha v e a l ife of its o w n its present hea lth an d ,

fu tur e gro w th s urely dep en d on the in di vi du al s w ho gu i de its a cti v ities .

Ju st what then a r e the fu n ctions of the e xe cu ti ves r es p onsibl e fo r the

, ,

fo r tu nes of the enterprise ? The y coo r dinate a ppr aise an d pl an They , ,

.

ma y at th e same time do the a ct u a l buying sell in g a dver tising a cco u nt

, , , , ,

ing man u fa ct ur ing enginee r in g o r res ea rch bu t in th e mo d er n ente rpr ise

, , , ,

th e e x e cu tion o r c a rry in g o u t of these f u n ctions is u s u a lly l eft to s uch em

p ylo ees as sa l esmen buy er s pr o duc tion s up

,
e rv iso r s an d fo
,
r emen t ec h ,

n ician s an d desi gne r s In man y c ases the e xe cuti ve does not e ven
, .
,

p e r sona lly s upervi se th e wo rk in g fo rc e bu t r athe r a dministe r s the duties

of other exe cu ti ves In pl anning an d coo rdinating th e w o rk of su bordi
.

nate manager s o r s up e rviso r s h e allo cates task s an d mak es a vai lable the ,

n ecessa ry equ i p ment mate ria l s an d oth er p h y si c a l reso urces necessa ry to

, ,

ca rry o u t th e v a rio u s j ob s In a ppr aising th ei r a cti v iti es he mu st deci de

.
,

w hethe r the emplo yees o r s ub o rd inate manage r s a re han dlin g thei r task s
satisfacto ri ly If not h e can tak e a ction by ch anging o r br ingin g in n ew
.
,

p h y si ca l equ ip ment an d s uppl ies by t r ansferr in g o r Shiftin g the p er son ,

n el o r by exp an d in o r cu ttin g d o w n a v ai l a bl e f u n d s T h u s the t er m

, g .
, ,

adm in istratio n as u s ed h er e in clud es e x ecu ti v e a ction an d o rd er s as w ell

, ,

as th e de c isions tak en in coo rdinating a ppr aising an d pl anning the w o rk , ,

of the enterprise an d in a ll o c ating its r eso urces .

T h e initia l pro p osition is th en that a dminist r ation is an i denti fi abl e

, ,

a cti vity that it di e r s from th e a ct u a l buy ing se lling pro cessing o r

, , , ,

t r ans po r tin g of th e goo d s an d that in th e l a rge in du st rial enterprise the

,
I NTRODU CTIO N — STRATEGY AND STRUCTURE 9
c on c e r n of the exe cuti ves is mo r e w ith a d minist r ation than w ith th e
p e rfo rman ce of fu n ctiona l wo rk In a small fi rm th e same man o r gr o up
.
,

of men buy mat er ia l s s ell fi nish ed goo d s an d s up e rv ise man u fa ctur ing
, ,

as w ell as coo r dinate pl an an d appr aise these di ffe r ent fu n ctions In a

, ,
.

l a rge comp an y ho wever a dminist r ation u s u a lly b e comes a s p e cia l i zed

, , ,

full—tim e j ob A se con d prop osition is that the a dminist r ato r m u st

.

han dle two t yp es of a dminist r ati v e tas k s wh en h e is coo rdinatin g ap p rais ,

in g an d pl anning the a c ti v iti es of th e ent erpr is e At tim es he m u st b e

, .

con ce r ne d with the lon g-ru n hea lth of his comp an y at othe r times w ith ,

6
its smooth an d effi c ient d a y to d a y o p er ation T h e fi r st t yp e of a cti vity
— - .

c a ll s fo r con cent r ation on lon g-te r m pl annin g an d a ppr ai sa l th e se con d ,

fo r meetin g immediate pro blems an d n eed s an d fo r han dl in g u nexp ected

contin gen c i es o r cr i ses To b e s ur e in r ea l l ife the d istin c tion b et w een
.
,

th ese t w o typ es of a cti v iti es o r deci sions is often not clea r cu t Y et some .

de cisions clea rly dea l very l a rge ly w ith defi nin g b a si c goa l s an d the co ur se
of a c tion an d pr o cedures n ecessa ry to a chi eve th ese goal s w hi le oth er ,

d cisions ha v e mo r e to d o w ith the d ay to d a y o per ations c a rr i ed o u t

e — -

within the broa de r fr ame wo rk of goa l s p o l i c ies an d pr o ce d ur es , , .

The ne x t few pr o p ositions dea l w ith the Content of a d minist rati v e

a cti vities han dl e d th ro ugh the di ff er ent typ es of p osts o r p o sitio n s in th e '

mo st compl e x a dminist r ati ve St ruct ur es T h e execu ti v es in a mo der n .

“
dec ent r a l i zed com p an y c a rry o u t th ei r a d minist r ati ve a cti v iti es fr om
”

fo ur diII eren t typ es of p ositions (see Cha r t Ea ch of these t yp es w ithin

th e ente rpr i se has a die r ent r an ge of a d minist r ati v e a c ti v iti es N o r ma lly .
,

ea c h is on a d i ffe r ent lev el O f a u tho rit y At the to p is a gen eral ofiice .

f
.

The r e gen er a l executi v es an d sta ff s p ec ia l ists coo rd in ate appr ais e an d

, , ,

pl an goa l s an d p o l i cies an d a ll o c ate r eso urces fo r a n u mb er of qu a si

a u tonomo u s fai rly s el f-containe d d i v ision s Ea ch d i vi sion han dles a maj o r
, .

pro duct l in e o r c a rr ies on the fi rm s a cti v ities in o n e l a rge geogr a p hi c a l

’

a rea Ea ch d i vision s cen tral ofiice in t ur n ad minist er s a n u mb er of

.
’

, ,

dep a r tments Ea ch of th ese d ep a r tments is res p onsible fo r th e adm in is

.

tratio n of a maj o r f u n c tion — man u fa c t ur in g s ell in g pur cha sin g o r p r o , ,

du cin g of r a w mater ia l s engine er in g r esea rc h fi nan ce an d th e l i k e

, , , , .

Th e dep art men tal h eadq uarters in its t ur n coo rd inates a p p r ai ses an d , ,

pl ans fo r a n u mb er of fi eld u nits At th e lo w est leve l ea ch field u n it

.
,

ru ns a pl ant o r w o rk s a br an ch o r d ist r i ct sal es O ffice a p urch asin g O ffice

, , ,

an engineer ing o r research l ab o r ato ry an a cco u nting o r oth er fi n an ci al ,

o ffice an d th e l i k e T h e fo ur typ es of adm ini st r ati v e p o sitions in a l a rge

, .

m ul ti d i v i sion al en ter p r i se are th u s : th e fi eld u nit th e d ep a rtm enta l h ead ,

qu a rt er s th e d i v i sion s cent ral o ffi ce an d th e gen er al Offi ce T h ese term s

,
’

,
.

a re u sed th ro ugho u t thi s st udy to designate a s p eci fi c set of a d mini st r a ti ve

a cti vities T h ey do not it S ho uld b e st r es sed r efer to an enterpr is e s o ffice
.
, ,
’
I NTRODUCTIO N — STRATEGY AND STRUCTURE
bu i ldings o r rooms O ne o ffi ce bu i ldin g co ul d ho u se e xe cu ti v es resp o n
.

sible fo r an y one of the p ositions o r c on cei vably those r es p o n sible fo r a ll

fo ur Co n v e r sely the e xe cu ti ves in an y one of the p osts co uld b e ho u se d
.
,

in diff e r ent rooms o r bu i ldings .

O n ly in the fi r st the fi e l d u nit a r e the manage r s pr ima r i ly in vo lve d in

, ,

c a rry in g on o r p er sona lly s up e rvisin g da y-to—d a y a c ti v ities E ven he r e if .

,

th e v o lu me of a c tiv it y is l a rge the y s p en d m uc h of thei r time on a d min

,

istrativ e d u ti es Bu t s uc h d u ties a r e l a rg e ly o p e r ationa l c a rr ie d o u t w ithin

.
,

the fr ame wo rk of p o l i cies an d pr o ce d ur es set by de p artmenta l h eadq u ar

te r s an d the highe r offices The dep a r tmenta l an d d i visiona l Offi ces ma y
.

ma ke some long—te rm d e c isions bu t b e c a u se thei r e x e cuti v es w o rk w ithin

,

a com p a r able fr ame wo rk dete r mi ne d by the gene r a l O ffi ce thei r prima ry ,

a dminist r ati ve a cti v ities a l so ten d to b e ta c ti c al o r o p e r ationa l The gene r a l .

o ffi ce mak es the broa d St r ategi c o r ent reprene ur ia l d e cisions as to p o l i cy

an d pr o c e dur es an d c an d o so l a rge ly b e c a u se it has the fi na l sa y in the

a llo c ation of th e fi rm s r eso urces — men mone y an d mate r ia l s — n eces

’

, ,

sa ry to c a rry o u t these a dministr ati v e de c isions an d a ctions an d othe r s

ma de w ith its a ppro v a l at an y l e ve l 7
.

It se ems Wise he r e to em p hasi ze the distin ction b etween the fo r m ul ation

of p ol i ci es an d pro ce d ures an d thei r im pl ementation The fo r m ul ation .

of p o l i cies an d pro ced ures c an b e defi ne d as eithe r Str ategi c o r ta cti c a l .

S trategic d e c isions a r e c on ce rn e d w ith th e l on g-te r m hea lth of the ente r

prise Tactical de cisions d ea l mo r e w ith th e d a y—to -d a y a cti v ities ne cessa ry
.

fo r effi c ient an d smooth o p e r ations Bu t d e cisions eithe r ta cti c a l o r .

,

str ategi c u s u a lly requ i re implemen tatio n by an a ll o c ation o r r ea llo c atio n

,

of reso urces fu n d s e qui p ment o r p e r sonne l S t r ategi c pl ans c an b e

—
, , .

fo r m ul ate d from b e lo w bu t no rma lly the implementation of S uch pro

,

o sals r equ i r es t h e r eso urc es w hi c h on ly the g en er a l o ffi c e can pr o v i d e

p .

Within the broa d p o l i cy l ines l ai d do w n by that offic e an d w ith th e

r eso urces it a llo c ates the exe cuti ves at the lo w e r le ve l s c a rry o u t ta cti c a l
,

de cisions .

The e xe cu tives w ho a ct u a lly a llo c ate a v ai l abl e r eso urces a r e then th e

k ey men in an y ent erpr ise B ec a u se of th ei r cr iti c a l r o l e in the mo d e r n
.

e conom y the y w i ll b e defi ne d in this st udy as ent r e pr ene ur s In cont r ast

, .
,

thos e w ho Coo rdinate a ppr ais e an d pl an w ithin the means a llo c ate d to
—

, ,

th em wi ll b e terme d manage r s SO en trepren eurial de cisions an d a ctions

.

wi ll refe r to those whi ch a ff e ct th e a ll o cation o r r ea llo c ation of r eso urces

fo r th e ente rprise as a who le an d operatin g d e cisions an d a ctions w i ll
,

refer to those w hi ch a r e c a rr i ed o u t by u sI n g the r eso urces a lrea dy

a llo cate d .

Ju st b e c a u se th e ent repr ene ur s make some of the most signifi c ant

de ci sions in th e Ame r i c an e conomy they are n o t a ll ne c essa r i ly imbue d
,
12 INTRODU CTION — S T R A T E G Y AN D S T R U C T U R E
with a l on g—ter m st r ategi c o ut loo k In man y enterpr i ses th e executi ves .

r es p onsi bl e fo r r eso urce all o cation may very we ll con centr ate on d ay—to
d a y o p e rationa l aff ai r s gi ving little o r no attention to chan ging ma rk ets
, ,

te chno logy so urces of s upply an d other fa cto r s a ffecting the long-term

, ,

h ealth of thei r comp an y T h ei r de cisions may b e ma de witho u t fo rw a rd

.

p l anning o r ana ly sis bu t r athe r by meeting in an ad h oc w ay every n ew

S it u ation pr o bl em o r cr isis as it a r ises
, , T h ey a ccep t th e goa l s of thei r .

enterpr ise as i v n o r inh r it d C l a rly w h r e v e r nt r pr n ur s a c t l i k e

g e e e e e e e e e .

manager s wh ereve r they con centr ate on sho r t-ter m a cti v iti es to the exclu
,

sion o r to th e detr iment of l ong-r ange p l anning a pp rais al an d coo rd ina , ,

tion the y ha ve fai led to c a rry o u t effecti vely th ei r ro le in th e economy

,

as w e ll as in th ei r enterpr i se T his effecti ven ess sho uld pr o vi de a u seful

.

crite rion fo r e v a lu atin g th e p erfo r man ce of an executi ve in Ameri can

in du st ry .

As a lrea dy p ointed o u t exe cuti ves in the l a rge enter p r ise wo rk in fo ur

,

typ es of offi ces ea ch w ith his o w n a dministr ati ve duties probl ems an d
, , ,

need s The fo ur types o pe r ate on differ ent s ca les an d th ei r o ffic e r s

.
,

ha ve d iff e rent bu siness ho ri zons The manage r s in the fi e ld u nit a r e .

con c e rne d w ith one fu n ction ma rk etin g man ufa cturin g enginee r , ,

ing an d so fo r th — in one lo c a l a r ea T h e executi v es in the dep a r t

, .

mental hea dqu a rter s pl an a dmini ster an d coo rdin ate th e a cti vities of
, ,

o n e f u n c tion on a br oa d r egion al an d O ften nation al s c a l e r athe r than

j u st lo ca lly Th ei r pr ofessiona l a cti viti es an d thei r o u tsi de so urces of

.

info rmation con cer n men an d instit utions o p er ating in th e same s p ecia l
ized fu n c tion T h e d i v isiona l e xecu ti ves on th e oth er han d d ea l w ith an
.
, ,

in du st ry r ath er than a fu n ction They are con cer ne d w ith a ll th e fu nctions .

invo lve d in th e o ver-a ll p ro ces s of han dling a l ine of p ro duc ts o r se rvi ces .

T h ei r pr ofessiona l ho r i zons an d cont acts are d et er mine d by in du st ry

r ath er than fu n ctiona l int erests F in ally executi ves in th e gener a l o ffi ce .
,

h a ve to d ea l w ith se ver a l in du st r i es o r one in du st ry in s ev e r a l broa d

an d di ff erent geo gr ap hi ca l r egions Th ey set p o li cies an d pro cedures an d .

a llo cate reso urces fo r di v ision s carrying o u t a ll typ es of fu nctions eithe r ,

in di fferent geogr ap hi ca l a reas o r in qu ite di fferent pro duc t lines T h ei r .

bu sin ess ho r i zons an d interests are broa den ed to t a rige o ver nationa l an d
ev en int er nationa l economies .

Whi l e a ll fo ur types of o ffices exi st in th e most comp l ex of in du st ria l

ent erpr i ses eac h can of c o ur se e x i st s ep ar ately An in du st r ia l enter p r is e
,
.

c an in clude o n e t wo th ree o r all fo ur of th es e offi ces M an y sm all fi rms

, , ,
.

to d a y ha ve on ly a single Office managing a single pl ant sto re l ab o r ato ry , , ,

fi nan c i al o p er ation o r sal es a cti vit y L a rger c om p ani es With a n u mb er

, .

of o per ating u nits c a rry o u t a single fu n ction suc h as sa les (who lesa le
—

o r ret ai l) m an u fact ur ing purch asing o r engineering T h ei r o ver-a ll

, , ,
.
INTRODUCTION — STRATEGY AND STRUCTURE 1
3
a dminist r ati ve struct ur e compr ises a hea dqu a r ter s an d fi eld offi c es S o .

al so to d a y th er e a r e integr ated in du st ria l ente rpr ises that han dle s evera l
ec onomi c fu n c tions r ath er than j u st o n e F ina lly there a r e the great
.
,

d i ver si fi ed in du st r ia l em p i r es ca rry ing on di ff e r ent fu n c tions an d pro d uc

,

in g a v a r i et y of goo d s an d s erv i ces in a ll p a r ts of th e gl o b e .

S in ce ea c h t yp e of p osition han dl es a d i ff er ent r an g e of a d mini st r ati ve

a cti vities e ach m u st ha ve res ulte d f rom a d i ff er ent t yp e of gro w th Unti l
, .

the v olume o r te chno lo gi c a l com pl exit y of an ente rprise s economi c ’

a c ti vities h ad so gro w n as to deman d an in cr ea sing d i v ision of l ab o r

w ithin th e fi rm l ittl e time nee ded to b e s p ent on a d minist rati ve wo rk
, .

Th en the r es ulting s p e c ia l i z ation r e qu i re d one o r mo r e of the fi rm s ’

ex ecu ti v es to c on c ent r at e on c oo rd in atin g a ppr aisin g an d pl annin g these

, ,

s p ecia l i zed a cti vities When the enterpris e exp an ded geo gr a p hi c a lly by
.

settin g u p o r a cqu i r in g fac i l ities an d p e r sonne l d istant from its o ri gina l

l o c ation it ha d to create an o rgani z ation at a cent r a l h ea dqu a r te r s to
,

a d ministe r th e u nits in th e fi eld When it grew by mo v in g into ne w

.

fu n c tions a cent r a l O ffice c ame to a dministe r the d ep a r tments c a rry ing

,

on the d iff erent fu n ctions S uch a cent r a l a d mini st r ati ve u nit p ro ved
.

ne cess ary fOr ex am pl e w hen in fo llo win g th e p o l i cy of v er ti c a l integr a

, ,

tion a man u fa ct urin g fi rm b egan to do its o w n w ho lesa l in g pro cur in g ,

of supplies an d e ven pr o ducing r a w mater ia ls F ina lly w hen an inte

, .
,

g r at ed ente rpr ise b e c am e d i v er si fi e d th r o u gh purc ha sin

g o r cr ea tin g n ew
fa ci liti es an d entered ne w ( fi nes of bu sin ess o r w h en it exp an d ed its ,

se vera l fu n ctiona l dep a rtments o ve r a sti ll l a rge r geogr a p hi c a l a r ea it ,

fashion ed a n u mb er of integr ated d i v isiona l u nits a dministe red by a

gen er a l Office .

The thesis that d ifferent o rg ani zationa l fo r ms res ul t from d iff er ent
typ es of gro w th c an b e stated mo r e precis ely if the pl anning an d c a rry ing
o u t of s uch gro wt h is consi d er e d a strategy an d th e o rgani z ation devised
,

to a dmini ster these enl a rge d a cti viti es an d r eso urces a stru ctu re S trategy , .

can b e defi ne d as th e dete rmination of the b asi c lon g-te r m goa l san d objec
tiv es of an ent erpr ise an d the a d o p tion of c o ur ses of a ction an d the
,

a llo cation of r eso urc es n ec essa ry fo r ca rry ing o u t th ese goa l s D ec isions .

to exp an d th e vo lum e of a cti v ities to set up d istant pl ants and O ffices to

, ,

mo v e in to n ew economi c fu n ctions o r b ecome di ver sifi e d a l ong man y

g
,

lines of bu siness in vo lve the d efi nin g of n ew b asi c goa l s New co ur s es of .

a ction m u st b e devi sed an d reso urc es a llo cated an d reall o cated in o rder
to a chi eve thes e goa l s an d to maintain an d exp an d th e fi rm s a cti v ities in ’

th e n ew a r eas in r es p onse to shiftin g deman d s c han in g so urces of s upply

g
fliI ctu atin g economi c con d itions n ew te c hno l o gi c a l devel o p m
, ,

,
ent s an d the ,

a ctions Of c om p etito r s As the a d op tion of a ne w st rategy ma y a dd n ew

.

ty pes o f per sonnel an d fa c i liti es an d a l ter th e bu siness ho r i zons of th e

,
I
4 INTRODU CTION — STRATEGY A ND S TRU CTURE
m en r es po nsibl e fo r the ente rpr ise it can ha v e a profo u n d eff e ct on the
,

fo rm of its o rgani zation .

S tru cture can b e d efi ne d as the d esign of o r gani z ation th ro ugh whi ch

the enterprise is a dministe r e d Th is design whethe r fo rma lly o r info r
.
,

mally defi ned has two as p ects It in cludes fi r st th e lines of a u thority an d

, .
, ,

comm u ni c ation b etwe en the d iffer ent a dmi n istr ati ve o ffices an d o ffi cer s
an d se con d th e i nf o r mation an d d ata that flow th ro ugh th ese lines of
, ,

commu ni c ation an d a utho r ity S uch lin es an d s uch d ata ar e ess entia l to
.

as sure th e eff ec ti v e co o rdination appr aisa l an d pl anning so ne c essa ry

, ,

in ca rry ing o u t th e b a si c goa l s an d p o li cies an d in k nitting togeth er th e

tota l r eso urces of the ent erpr is e Th ese r eso urces in clude fin an ci al ca p ita l ;
.

p hy si ca l e qu ip ment s uch as p l ants ma chin ery o ffi ces w a r eho u s es an d

, , , ,

o th er mark etin g an d purchasin g fa ci lities so urces of r a w mater ia l s , ,

res ea rch an d en gineering l ab o r ato r i es ; an d most imp o r tant of a ll th e , ,

te chni c al mark eting an d a d ministr a ti ve s k i ll s of its p er sonnel

, , .

T h e thesis de duc ed from th ese s ever a l p ro p ositions is th en that struct ur e

fo ll o w s st r ate gy an d that th e most comp l ex typ e of struct ure is th e r es ul t
of th e con catenation of se ve r a l b a si c str ategi es Expan sio n of v o lu me le d .

to the cr eation of an a d mi ni str ativ e office to han dle o n e fu n ction in one

lo cal a r ea Gro w th th ro ugh geogr ap h ical dispersio n bro ught the n ee d fo r
.

a dep artmenta l StI II ctu re an d hea dqu ar ter s to a dministe r s ever al lo ca l

fi e ld u nits The d eci sion to exp an d into n ew t y p es of fu n c tions ca lle d fo r
.

the bui lding of a centr a l Office an d a m ultidep artm en tal str uct ur e w hi le ,

the d e velo p in g of n ew lines of p ro ducts o r contin ue d gr ow th on a nationa l

o r inte r nationa l s c al e bro ught th e fo rmation of th e m ulti d i visiona l stru c
t ure with a gener a l O ffice to a dmini ster th e diff er ent d i visions F o r the .

p urpos es O f thi s Study th e mo ve into n ew fu n ctions w i ll b e r eferr e d to

,

as a st r ategy of v ertical in tegratio n an d that of the develo p m ent Of n ew

pro du cts as a st r ategy of diversificatio n .

This th eo r eti c a l dis cu ssion can b e ca rr i ed a step furth er by ask in g t wo

qu estions : (1 ) If S tructur e doe s fo llo w Strate gy w h y sho uld the r e b e ,

del a y in d evelo p in g th e n ew o rgani zation n eede d to m eet the admin is

t rativ e d eman d s of the n ew S tr at egy ? (2 ) Wh y d i d the ne w s tr ategy ,

w hi ch c a lled fo r a chan ge in struct ur e come in the fi r st p l a ce ? ,

Th ere are at l east t wo p l a u sibl e ans we r s to the fi r st query Eithe r th e .

ad minist r ati v e n eed s cr eat ed by the n ew str at egy w e r e not p o siti v e o r

str ong eno ugh to r e qu i r e st ruct ur a l change o r the execu ti v es in vo lve d ,

w ere u naw are of th e n ew ne ed s T h ere s eem s to b e no question th at a

.

n ew st r at e y cr eat ed ne w a d mini st r ati v e n ee d s

g fo r ex p an sion th r o u gh ,

g g
eo r ap hi c a l d i sp er sion v e r ti c,
a l int egr ation an d p r o duc t d i v er si fi c,
ati on
a dded n ew r eso urces n ew a c ti v iti es an d an in crea sing n u mb e r of entr e
, ,

ren eu rial an d O pe r ationa l a ctions an d d e c i sions N e v er t h e l ess e x ecu ti v es

p .
,
INTRODU CTIO N — “

STRATEGY A ND STRUCTURE 1
5
co uld s ti ll contin u e to a d ministe r b oth the O ld an d n ew a c ti vities w ith
th e same p e r sonne l u sin g the same c hanne l s of c omm u ni c ation an d
,

a u tho r it y an d th e same typ es of info r mation S uch a dm inist r ation ho w

.
,

e v e r m u st b e come in cr easingly inefficient This pro p osition sho uld

,
.

b e tru e fo r a r e l ati ve ly sma ll firm w hose st ruct ur e consists of info r ma l

a rr angements b et w een a fe w e xe cu ti ves as w ell as fo r a l a rge o n e w hos e
si ze an d n u me ro u s a dminist r ati ve p e r sonne l r e qu i r e a mo r e fo r ma l defi n i
tion of rel ations b etw een o ffices an d officer s S in ce exp ansion cr eated the
.

n ee d fo r ne w a d m inis tr ati v e o ffi c es an d St ruc t ur es the r easons fo r d el a y s

,

in develo p in g th e ne w o rgani z ation r este d with the e xe cuti v es r es p onsibl e

fOr the ente rpr is e s l on g-r ange gr o w th an d hea l th Eithe r these admin is
’
.

trato rs w e r e too in v o lv ed in d a y —to —d a y ta c ti c a l a c ti v ities to a ppr e c iate o r

u n der stan d the lon ge r-r an ge o rgani z ationa l ne ed s of thei r ente rpr ises o r ,

e l se thei r t r ainin g an d education fai le d to sha rp en thei r p erception of

o rgani z ationa l pr oblems o r fai le d to de velo p th ei r ab i l ity to han dl e them .

Th ey may a l so ha ve resist ed a dministr ati v e ly desi r able c han ges b ec a u se

th ey fel t struct ur a l r eo rgani z ation th r eatened th ei r o w n p er sona l p osition ,

thei r p o wer o r most im p o r tant of all thei r p s ycho l ogi c a l s ecur it y

, , .

In ans w e r to th e se con d qu estion chan ges in str ategy w hi c h c a lled fo r

,

chan ges in struct ur e a ppea r to ha v e b een in r esp onse to th e o pp o r t u niti es

an d nee d s cr eate d by chan ging p o pul ation an d c hanging nationa l in come
,

an d by te chno lo gi c a l inno v a tion Po pul ation gro w th the Shift from the
.
,

co u nt ry to th e c it y an d the n to the s uburb d epr essions an d pr os p e r it y

, ,

an d the in cr easin g p a c e of te chno l ogi c a l c han ge all cr eate d n ew deman d s

,

o r cur tai led ex istin g ones fo r a fi rm s goo d s o r se rv i ces The pr os p e ct of a

’
.

ne w ma rk et o r the th reatene d loss of a curr ent one stim ul ate d geo gr ap h

i c al exp ansion ve rti c a l inte gr ation an d pro duc t d i v e r si fi cation Mo r eo ve r
, , .
,

on c e a fi rm ha d a ccu m ul ate d l a rge r eso urces th e nee d to k e ep its men

, ,

mone y an d mate r ia l s stea di ly emplo y e d pro vi d ed a constant stim ulu s to

,

loo k fo r ne w mark ets by mo v in g into n ew a r eas by tak in g on ne w ,

fu n c tions o r by devel op in g ne w pr o duc t l in es A gain the a w a r eness of

, .

the nee d s an d o ppo rt u niti es created by the changin g en v i r onment seems

to ha ve dep en de d on the t r ainin g an d p er sona lity of in di vi du a l ex e cu ti ves
an d o n thei r ab i l ity to k ee p thei r e y es on the mo r e imp o r tant en trep re
n eu rial pr o bl ems e v en in the mi d st of pr essin g o p er ationa l nee d s .

The ans w e r s to the tw o qu estio n s can b e br i efly s u mma r i ze d by

restatin g th e gen er a l thesis S t r ategi c gr o w th r es ulte d fr om an a w a reness
.

of th e o p p o r t u niti es an d need s cr eated by changing p opul ation in come , ,

an d t chno lo gy to emplo y ex isting o r exp an ding r eso urces mo r e p rofi t

e —

ably A n ew st r ategy requ i re d a n ew o r at l east ref ashioned St ru ct ur e if

.

the en l a rged ente rpr ise w as to b e o p er ated effi ci ently T h e fai lur e to .

develo p a n ew inter na l st ruct ure l i k e th e failure to res p on d to n ew

,
16 INTRODUCTIO N —
STRATEGY A ND STRUCTURE
e xte r na l o ppo r t uniti es an d n eed s was a consequen ce of o ve rco n cent r ation
,

on o p e r ational a cti viti es by th e exe cu ti ves resp onsible fo r the destiny

of thei r ente rp r ises o r from thei r inab il ity b eca u se of p ast t raining an d
, ,

educ ation an d pr esent p osition to d e v e l o p an ent r e pr ene ur ia l o u t l oo k

, .

O ne imp o rtant co ro lla ry to this pro p o sition is that gro wth witho u t
s truc tura l a dj u stment c an lead only to economi c inefficien cy Un less ne w .

st ruct ures a r e develo p e d to m eet new a dm inist r ati ve nee d s w hi ch res ult
from an exp ansion of a fi rm s a cti viti es into new a reas fu n c tions o r
’

, ,

pr o duct l in es th e techno logi ca l fi nan ci al an d p er sonnel e conomi es of

, , ,

r o w th an d si z e c annot b e r ea l i z e d No r c an th e en l arged r eso urc es b e

g .

em p l o y ed as p r o fi ta bly as th ey o th erw is e mi ght b e Witho u t a d ministr a .

ti ve Offices an d struct ure th e in di vi du al u nits w ithin th e ente rpr ise (the

,

fi eld u nits th e dep a r tments an d the d i v isions ) co uld u n do ub te dly o p er ate

, ,

as effi ciently o r e ven mo r e so (in te rms of cost p e r u nit an d vo lume of

o utput p e r w o rk er ) as in dep en dent u nits than if th ey w er e p a rt of a
l a rge r enterpr ise When eve r the exe cuti ves r esponsible fo r the fi rm fai l
.

to cr eate the o ffices an d St ructur e n ecessa ry to br ing togethe r effec ti vely

th e se v e r a l a d minist r ati v e o ffices into a u ni fi ed w ho l e th ey fai l to c a rry ,

o u t one of thei r b asi c e conomi c r o les .

The a ctu a l histo r i c a l p atter ns of gro wth an d o rgani z ation bu ilding in

the l a rge in du st ria l ente rpr ise we re not of co ur se as clea r-cut as they, ,

ha v e b een theo r eti c ally d efi ned he r e O n e str ategy of exp ansio n co uld b e
.

c a rr ie d o u t in man y w a y s an d often t wo o r th ree b asi c w ay s of e xp ansio n

, ,

wer e u n der tak en at o n e an d the same time Gro w th might come th ro ugh .

sim ultaneo u s bu i lding o r buying of n ew faciliities an d th ro ugh purchas ,

ing o r merging with oth er ente rpr i ses Occ asiona lly a fi rm simultaneo u s ly
.
-

exp an de d its vo lu me bu i l t n ew fa c il ities I n geo gr a p hi c a lly distant a reas

, ,

mo ve d into n ew fu n c tions an d deve lo p ed a d iff e rent typ e of pro duc t l ine

,
.

S truc t ur e as the c ase S t ud i es in d i c ate w as O ften S l o w to fo ll o w s tr ate gy

, , ,

p ar ti cul a rly in pe r io d s of r ap i d exp ansion As a r es ult the distin ctions .

,

b etween th e duties of th e di fferent offi ces lon g r emained con fu se d an d

on ly v aguely defi ne d O ne exe cu ti ve o r a small gro up of execu ti ves might
.

c a rry o u t at o n e an d th e same time the fu n ctions of a gene r a l office a ,

cent r a l office an d a dep a r tmenta l hea dqu a r te r s Event u a lly ho w e ve r

,
.
, ,

most l a rge co rp o r ations c ame to d e vise the s p e cifi c u nits to handle a fi eld
u nit a fu n ctiona l dep a r tment an integr ate d d i vision o r a d i v e r si fi e d
, , ,

in du str ia l emp i r e Fo r this very r eason a clea r-cu t defi nition of struct ur e
.
,

an d st r ategy an d a S implifi ed expl ana tion o r th eo ry of the relation of one

to the o the r sho ul d ma k e it easie r to compr ehen d th e comple x r ea l ities
in vo lved in the exp ansion an d management of the great in du str ial ente r
pr ises stud ie d h ere an d easie r to eva lu ate the a chie vement of the o rgan
,

iz atio n bu i l de r s.
I NTRODU CTI O N — STRATEGY A ND STRU CTURE I 7
A comp a r ati ve ana ly sis of o rgani z ationa l inno v ation deman d s howev er , ,

mo r e than an expl anation of the ter ms con cep ts an d gener a l pr op osi , ,

tions to b e u sed in ass es sing com p a rable expe r i en c es of di ffer ent enter
r i ses It al so c a ll s fo r an u n de r stan d in g of th e l a rger histo r i c a l sit u ation
.
,

b oth w ithin an d w ith o u t th e fi rm dur in g w hi ch st r ategi c exp ansion an d

,

o rgani z ationa l ch ange too k p l ace T h e ex ecu ti ves at du Pont G en er a l

.
,

Moto r s J er sey S tan d ard an d S ea r s R o ebuck di d not so lve th ei r adm in is

, , ,

trative pr o bl ems in a v a cuu m O th er l a rg e ent erpr ises w e r e me etin g the

.

sam e n eed s an d ch all enges an d seek in g to r eso lve comp a rable a d minist r a
ti v e probl ems Th ei r r esp onses ha d an im p a ct on the histo ry of th es e fo ur
.

c omp ani es j u st as th e exp er i en ce of th e fo ur aff ec ted that of man y o the r s

,
.

T h e a d minist r ati v e sto ry in ea ch of the c as e st ud i es f all s into t w o

b a si c p a r ts : th e cr eation of th e o rgani z ationa l str u ct ur e af ter th e ente r
p r i se s fir st maj o r gr o wth o r co rp o r ate r eb i r th an d th en its r eo rgani z ation
’

to meet th e n eed s a r i sing from th e str ategie s of fur th er e xp ansion In .

d evelo p ing th ei r early a dminist r ati ve s truct ures these fo ur firms w er e ,

fo llo w in g a ccep ted p r acti ces in Am er i can in du st ry Her e th e o rgani z ation .

bu i lder s co uld l ear n fr om oth er s In fashioning th e mo der n m u ltidiv i

.
,

sio n al st ruc t ur e th ey w er e on th e oth er h an d going b eyon d existin g

, , ,

practi ces Her e oth er s l ea r n ed fr om them An ev a lu ation of th e m eas ur es

. .

eac h too k to im pr o v e th e ad minist r ation of its bu sin ess r equ i r es th er efo r e

som e k no wl ed e of th e m etho d s a fi d pr a c ti c es of bu sin ess a d minist r ation

g
at th e time w h en ea c h bu i l t its maj o r struc t ure an d b egan the reo rgan
izatio n that led to th e fa shioning of th e m ul ti d i v isiona l fo r m .

O ne w a y to p r o v i de s u ch a hi sto r i c a l setting is to p r es ent a br i ef r evi ew

of th e gro w th of l a r ge-s c ale bu sin ess enterpr is e in th e Unite d S tate s As .

th e fo ll o w ing surv ey is b as ed on ly on r ea d i ly a v ai l a bl e p r int ed mat er ia l

s upplem ented by som e intervi ew s fo r on ly ab o u t a h u n dr ed of th e nation s ’

l a rgest com p anies its fi n d in gs m u st b e consi der ed p relimina ry an d tenta

,

8
ti ve Much mo r e d et ai l ed study w i ll b e n ecess ary b efo r e th e hi sto ry of
.

th e a dmi nist r ation o r go v er nm ent of Am er i c an in du s try c an b e a ccur at ely

an d fully exp l ain ed N e ver th el ess even s uch a pr el imin ary st udy in di cates
.
,

signifi c ant t r en d s in th e gr o w th an d a dministr ation of in du str ia l co rp o r a

tion s An a w a r en ess of th ese tren d s is ess enti al fo r the u n der st an d ing of
.

th e mo r e d et ai l ed c as e st ud i es p r es ent ed in this v o lu m e an d of th e su b se

quent changes in th e struct ur e an d str at egy of the l a rge Ame r i ca n in du s

t ria l enterpr ise .
 HI S T O R I C A L S E T T I N G

B EF O RE
v e ry fe w Am er i c an bu sinesses n ee ded the se rv i c es
1 85 0

of a f ull-tim e a dministr ato r o r r e qu i r e d a cl ea rly defi ne d a dm inistr ativ e

st ructur e In du stria l ente rpr ises w e r e v ery sma ll in comp a rison w i th thos e
.
,

of to d a y An d th ey w e r e u s u a lly fam i ly a ff ai r s The t w o o r th r ee men

. .

r es p onsibl e fo r th e destin y of a sin gl e ente rprise han dl e d a ll its b asi c

m
a cti viti es e conomi c an d a d inistr ati ve o pe r ationa l an d ent r epr ene ur ia l
, .

In the agr a r ian an d comme rcia l e conom y of ante—b ell um Ame r i c a bu si ,

ness a d minist r ation as a d istin ct a c ti v it y di d not y et exist In mi n in g .

,

manuf a ct urin g mark etin g an d e v en tr ans p o rtatio n th e l a rgest fi rms w e r e

, , ,

di recte d by a ge ne r a l s up e r inten dent an d a presi d ent o r tr eas ure r Th e

1
.

gene r a l s up er inten dent p e r sona lly s up e rv ise d the l abo r in g fo rce w hethe r ,

mine r s o p e r ato r s engin eer s c on d ucto r s o r station agents In th e b i gge r

, , , , .

tex ti l e an d oth e r man ufa c t urin g comp a ni es the presi dent o r the treas ur er
,

u s u ally han dled th e fi nan ces an d a rr an ge d fo r th e purchasin g of materia l s

an d th e sa l e of fi nishe d pro ducts from an d to commissione d a gents o r
oth er mi ddl emen O n the r ai lr oa d the gene r a l s up e r inten d ent c a rr ie d on
.
,

the comme rcial tr ansa ctions of the com p an y settin g r ates mak in g con , ,

tra cts w ith shi pp e r s b uyI n g mate r ia l s an d equ i p ment as w e ll as sch edu l
, ,

in g tr ains an d k eep in g tr a ck an d e qu i p ment in goo d c on dition .

In the ma rk etin g an d distr ibu tion of goo d s me rchants d i d most of th ei r

,

ow n buy in g an d se llin g Wh en the y wer e u nabl e to c a rry on th ei r bu siness

.

di rect ly th ey ha d a gents w ho han dl e d their acco u nts as w e ll as those of

,

oth er me rcanti l e enterpr ises If the amo u nt of bu siness w as l a rge eno ugh
.
,

th ese agents sometimes b ecame p a rtne r s in th e fir m p arti cul a rly w hen ,

th e ent erpr is e d ea l t w ith the t r ans po r tation an d sa l e of goo d s b et w een

di stant comme rc ia l c ente r s M erchants man ufa ct ure r s o r r ai lr oa d ofli cers

.
, ,

s pent n a rly a ll th eir time c a rry ing o n fu n ctional a ctiv ities the a ct u al
e —

buy in g an d s ellin g o r th e p e r sona l s upe rvision of th e o p e r ations of a mi ll

o r a r ai lroa d O n ly o cc asiona lly w e r e the y obli ge d to consi de r l ong-ter m
.

pl ans s uch as th e a do p tion of n ew ma chinery tak in g on anothe r l ine ,

of me rchan dise o r th e fi n d in g of a n ew p a rtne r o r a gent

, .
20 HISTORICAL SETTING

Th e Begin nings o f Bu sin ess A dmin istration in th e Un ited S tates

Y et b efo r e 1 85 0, a v ery few of th e v ery l a rgest Amer i c an e conomi c
ent erpr is es d i d d ev el o p embry oni c a d ministr ati v e str uc t ur es John J a cob .

Asto r s Ameri c an Fur Comp an y Ni cho l as B i ddle s S econ d B a n k of th e

’

,
’

United S tates an d th e state b oa rd s of publ i c wo rk s o r b oa rd s of di recto r s

,

of pr i v ate co rp o r ations that bu i lt th e m aj o r c an al s an d fi r st r ai lroa d s a ll ,

th ese ha d fi eld u nits an d a h ea dqu a r ter s Asto r s Ameri c an Fur C omp an y .

’

managed its vi r tu a l mono p o ly of th e fur tr a pp ing an d tra ding bu siness

in the v ast region west of th e Mi ssis si pp i R i ver an d th e Great Lak es
th ro ugh its Weste r n an d its No r th er n D ep a r tm ents T h e dep a rt menta l
2
.

”
hea dqu ar ter s a dmini st er e d a n u mb er of o u tfi ts ea ch h ea ded by a “

,
“
tr a der who s u p ervi sed th e w o rk of th e cl erk s at th e tr a ding p o st s an d
”

th e en gagés w ho d i d the a ct u a l tr a p p in g T h e tw o d ep a r tment h ea d s .

,

b oth v eter an fur tr a der s w er e p a r tn er s in th e comp an y B esi des sup erv is

, .

ing th e wo rk in thei r dep a rtments th ey d i d mo st of th ei r o w n buying of

,

s up pli es an d ma rk eting of fur s an d in co rr es p on dence w ith Asto r deci de d

, ,

on o ver-a ll p o l i ci es Asto r s wo rk as s enio r p a r tner in th e Fur Comp any

.
’

was not su fiicien tly time cons u min g to k eep him from managing pe r
so n ally man y o th er p r o fi tabl e v ent ur es .

B i ddle s B an k of th e U nited S tates w as l a rge an d p o werful eno ugh to

’

b ecom e a m aj o r p o liti c al i ss u e dur in g th e age of J a c k son simply b eca u se

it ha d br an ch es th ro ugho u t th e Union Ea ch br an ch office ha d a c ashie r .

a pp ointe d by h eadqu a r ter s in Phi l adel p hia an d a presi dent elected by a

3
l o ca l b oa rd of di r e c to r s T h e c a shier s as s al ar i ed empl o y ees of the b an k
.
, ,

devoted th ei r full time to its aff ai r s whi le th e b ank p resi dents w ere ,

u s u ally lo ca l lea der s with exten si ve o u t si de bu sin ess es of th ei r o w n To .

a ss ure a stea dy flo w of info rmation b etw een h ea dqu a r ter s an d twenty-fi v e

bran ch es in th e fi eld B i ddle devi sed an elab o r ate an d detai led s y stem
,

of r ep o r ts whi ch w er e s u ppl emented by in sp ection t ri p s from th e Phi l

a de l p hi a O ffice Th e wo rk at hea dqu a r ter s w as vo lu mino u s eno u gh to
.

r equ i re o n e officer to con centr ate his full time on s u p ervi sin g th e t r ans
a ctions b etw een th e br an ch o ffices an d anoth er to loo k after th e two
mi l lion do ll a r s w o r th of r ea l estate an d nine mi ll ion do ll ar s wo r th of
’ ’

b a d o r su sp en d ed deb ts B i ddle th er efo re sp ent m uch mo re of his time

.
, ,

in a pp r aising coo rdinating an d p l anni ng th e a cti viti es of his wi desprea d

, ,

ent erpr is e th an Asto r ev er d i d in man ag in th e Am e r i c an Fur Co m p an y

g .

A ltho ugh th ey w e r e th e l argest bu sin ess enterpr ises of th ei r d a y the ,

B ank an d th e Fur Comp an y h ad l ittle if an y im p a ct on th e l at er develo p

, ,

m ent of a dm inist r ati ve o rgani zation in th e l a rge in du stria l fi rms in this

co u ntry T h e Fur C om p an y w as v i r t u a lly d isso lved w h en Asto r w ith dr ew
.

from th e p ar tne r shi p in 1 834 an d B i ddle s b an k lo st its bran ch es in 1 836

,
’
HISTORICAL SETTING
f r An dr ew J a ck son vetoe d th e b i ll fo r its r echa rter M o re si gni fi cant
a te .

fo r th e l ater sto ry w as th e construction of th e E ri e C ana l an d oth e r l arge

t rans p o r tation wo rk s dur in g the 1 820 s an d 1 83o s D ur in g const ruction
’ ’
.
,
”
th e l in e of th e c ana l o r r oa d w as d i v i d ed into a n u mb er of d i vision s “

,
”
ea c h in c ha r ge of an as si stant engineer w ho w as resp on sible fo r s urvey
“

4
ing th e r o u te an d then fo r insp e ctin g th e pro gress of const ruction At .

h ea dqu a r ter s a chi ef engineer s up erv i se d th e w o rk of his assistants in th e

,

fi eld The ta sk of this o rgani z ation ho w e ve r w as mo re te c hni c a l than

.
, ,

a dminist r ati ve : it w as on ly to l a y o u t the l ine an d then to see that the

cont r a cto r s carr ie d o u t p l ans A b oa rd publ i c o r pr i v ate pro vi de d th e
.
, ,

fu n d s an d ma de th e fi n al maj o r dec isions as to th e te r mini an d gener a l

lo cation U nti l th e 1 85 o s the cont r acting fi r ms w hi ch a ct u ally b u i l t th e
.
’

t r ans p o r tation w o rk s r emaine d sma ll S in ce s uch a cont r a cto r r a r ely .

bu i l t mo r e than a fe w s ec tions of a r oa d h e co ul d easi ly s up e rv ise the ,

j o b by hims elf .

The op eratio n of a r ai lroa d p r cana l c a ll ed fo r mo re a d minist r ation

than its co n str u ctio n O ften the chi ef engineer w ho pl anned th e w o rk
.

5
b ecame the gen er a l s up er inten d ent O n a c an al w h ere he ha d no resp o n
.
,

sib ilit fo r o p r atin g the c a rr i er s o r fo r th e mo v em ent of p ass en ge r s an d

y e

frei ght h e co uld easi ly s uperv is e p er sona lly th e em p l o y ees w ho o p er ated

,

th e l o ck s c o ll ecte d the to ll s an d h a n dl ed maint enan ce an d r e p ai r E v en

, , .

on a r ai lr oa d w hi ch b efo r e th e 1 85o s w as r arely mo r e than fi ft y o r a

,
’

h u n dr ed mi l es in l ength the gener a l s up er int en dent ha d litt l e d ifficulty

,

in k eep ing cl o se conta c t w ith th e d i vi sion en gin eer s an d a ll the em plo yees
c arryin g o u t th e r oa d s bu sin ess S uch ent erpr is es ha d as y et l itt le
’
.

need fo r a s y stemati c o rgani z ationa l st ruct ure .

Bu t with th e compl etion of th e great east-w est t ru n k l in es ea rly in th e

1 8 o s a d minist r ation b ecam e a f ull ti m e tas k in Am er i c an bu sin ess T h e
’
-
5 .

Eri e th e New Y o rk C ent r a l th e P enns ylv ania th e B a l timo re 8 : O hio

, , , ,

an d the w ester n roa d s com p l et ed in that same d ec a de s uch as th e Illinois ,

C ent r a l th e M i ch i gan C ent r a l an d th e M i c hi gan S o u th er n imm ed iately

, , ,

b ec am e an d lon g r em ain ed th e l a rgest bu sin ess ent erpr i ses in th e nation ,

an d thei r o p er ation dem an ded w ho lly n ew metho d s of man agement As .

th e G en er a l S u p er inten d ent of th e E r i e Dani el C McC allu m p oint ed o u t

, .
,

in 1 85 5 :
A S u per intendent ofi fty m iles in length can give its b u siness
f a ro ad
h is p erso nal atten ti o n an d m ay b e co nstantly o n th e line engaged in th e
directio n o f its details ; each p erso n is p er son ally known to h im , an d all
qu estio ns in relatio n to its b u siness are at o nce presented an d acted u po n ;
an d an
y sy stem h o w ev er i m p er f ect m a
y u n der su ch ci r cu m st a n ces p r o v e

co m p aratively su ccessf u l .

In th e go vernm ent o f a r o ad fi v e h u ndred m iles in length a very

22 H I S TO R I C A L S E T T I N G
difi eren t state exists A ny system wh ich migh t be applicab le to th e b usiness
.

an d extent o f a sh o rt ro ad wo u ld be fo u n d entirely inadequ ate to th e wants

o f a lo ng o n e ; an d I am fu lly co nv inced th at in th e wan t o f a system p erfect

in its details, p ro p erly adap ted an d vigilantly enfo rced , lies th e tr u e secret
o f th ei r [ th e lar e r oads
] ailure; an d th at th is di spar ity o f cost p er m ile
f
’

g
in operating lo ng an d Sh o rt ro ads, is n o t p rodu ced by a difi eren ce in length ,
b u t is in p rop o r tio n to th e perfecti o n o f th e system ado pted 6
.

To McCallum the ne w s y stem meant fir st the ca reful an d detai led

, ,

defin ition of the lines of a u tho r ity an d comm u ni c ation b etween h ea d

qu arter s an d th e fi v e di visions in th e fi eld Th es e lines he i llu str ated in
.

what m u st ha v e b een one of the v ery fi r st o rgani zational charts ever

printed by an Ameri can comp an y S econ d the ne w s y stem r e qu i red a
.
,

constant flo w of detai le d r ep o r ts d ai ly weekly an d month ly fr om th e

, , , ,

d i vision s up er inten dents to th e gen er a l s up er inten dent as well as in sp ec

tion v isits from hea dqu ar ter s to th e di v isions B efo r e the en d of th e .

de c a de th e P enns ylv ania the B a ltimo r e 8: O hio an d u n do ub t edly o ther

, , ,

roa d s ha d mo del ed th ei r op er atin g o rgani z ation on the one fi r st o u tl ine d

,

by McCallum Th ei r s up e rinten d ents con centr atin g on coo rdinating

.
, ,

appr aisin g an d pl an ni n g th e wo rk of th e op erating di visions on th e

,

b asis of statisti cal d ata an d r ep o r ts s p ent fa r mo r e time in a dministr ati ve

,

a c ti viti es th an e v en N i cho las B i ddle ha d s p ent Thei r w ho l e attention .

,

mo r eo v e r w as d i r ecte d to o p e r a tin g decisions T h e p r esi dents an d th e

, .

b oard s of di r e cto r s of th ese l a rge r oa d s contin u e d fo r a r e l ati vely sho r t

,

time at l east to d et er mine maj o r Str ategi c po li cies of expansion an d com

,

petition .

As the r oa d s grew in mi leage an d as th ei r v o lume of t r affi c exp an ded

r ap i dly th e n umb e r of th ei r a dminist r ati v e p er sonn el in cr eased an d
,

th ei r o p er ating st ruct ur e ha d to b e r e defi ned Th e wo rk in volve d in .

a cco u ntin g an d in th e han dl ing of p ass enger s an d freight gr ew so l a rge

as to c a ll fo r s ep arate o ffices fo r its s up ervision At th e same time .
,

those a cti vi ties r el ate d mo re d i r e ct ly to th e mo vement of t r ains s uch as ,

th e maintenan ce of w a y an d of moti v e p o w er an d r o ll in g S to ck u n d e r ,

w ent a comp a r able dep artrn en talizatio n Whe re McCallu m of the Erie
.

ha d inno v ate d in th e bu ildin g of a structure fo r the a dministr ation of

fi eld u nits by d ep a r tmenta l hea dqu a r ter s in th e 1 85 0 s th e manager s of
’

th e P enns ylv ania R ai lr oa d p io n ee r e d in th e 1 8 6o s an d 1 8 7o s in w o rk ing

’ ’

o u t a mo r e ex tensi ve Struct ur e that defi ned the r e l ations b etween dep a rt

ments Th ey s p ell ed o u t th e l ines of comm u ni c ation an d a u tho rity
.

b etween th e maj o r an d an ci ll a ry u nits w ithin the transp o r tation dep a rt

ment an d a lso b etw een th e t rans p o rtation an d th e o th er maj o r dep a rt
7
m ents — th e tr affic an d th e a cco u nting o r fi n an ci al d ep a r tm ents T h e .

Penn sylvania a l so created a centr a l offi ce gro up consi sting of dep a r tm ent
HISTORICAL SETTING 23

hea d s w ho wo rk e d w ith the pr esi dent to c oo rdinate appr aise an d pl an , ,

the a cti vities of a ll th e d ep a r tm ents in the inte r est of the ente rpr ise as
a who le B e c a u se they wer e full-time empl o y ees an d ha d fa r mo r e
.

detai led k no wle dge u n der stan din g an d info r mation ab o u t th e a ffai r s of
, ,

the r oa d than th e memb er s of the b oa rd of d i r e cto r s the pr esi dent an d ,

the fu n ctiona l v i ce-p resi dents soon too k o ve r the ma k in g of long-te r m

ent repr ene uria l dec isions on th e P enns ylv ania an d othe r r ai lroa d s .

As th e fi r st pr i v ate ent erpr is es in th e U nited S tates w ith mo der n ad

ministr ati v e st ruc tures th e r ai lr oa d s pr o vi de d in du st r ial ists w ith u seful
,

pr e ce dents fo r o rgani z ation bui ld in g when the in du str ia l enterpr ises

g r e w to b e of c om p a r a bl e si z e an d c om pl e x it y M o r e than this the .
,

bu i l din g of th e r ai lroa d s mo re than an y oth e r sin gl e fa cto r ma de

, ,

p ossibl e this gr o w th of the gr eat in d u st ria l ente rpr ise By s p ee d i ly en larg .

ing th e ma rk et fo r Amer i c an man ufa ct ur in g mining an d ma rk etin g , ,

fi r ms the r ai lr oa d s p er mitt ed an d in fa ct O ften r e qu i r e d that these ente r

, , ,

prises e xp an d an d s ubd i vi d e thei r a c ti viti es S uch s ubd i v ision o r s p ecia l .

iz atio n in t ur n c al l e d fo r a con c entration of e ff o r t on c oo rd inatin g

, , ,

a ppr aising an d pl anning the w o rk of the s pecia li ze d u nits Exp an d in g

, .

ma rk ets a l so en co ura ge d the u se of mo r e com pl e x ma chine ry in man u

factu rin g establishments This ne w an d in cr easin gly compl i cat ed ma chin
.

e ry in t ur n s purr e d fII rth er in creases in o u tpu t an d so pro v i de d anothe r

press ur e fo r exp ansion an d c ontin u e d gro w th .

As r ai lroa d const ruc tion b oomed aft e r th e Ci v i l Wa r the nationa l ,

ma rk et in crease d v ery r ap i dly in b o th th e urb an East an d the agr i cul t ur a l

West D ur in g the 1 87o s an d 1 88o s most of the a r abl e l an d in the West
.
’ ’

w as s ett le d qu i ckly F a r mo r e S ignifi c ant w as th e s w ift gr o w th of com

.

mercial an d in du st r ia l cent er s o ld an d ne w p a r ti cul a rly afte r 1 8 80 fo r

, , ,

th e n ew c it y dw e ll e r s an d in du st r ia l w o rk er s r e qu i r e d mo r e foo d cl o thin g , ,

ho u sin g heat li ght an d othe r pr o ducts than di d th e fa r mer s B etw een

, , , .

1 8 0 an d 1 8 8 0 the urb an p o pul atio n gr e w fr om 1 1 p e r c ent of th e tota l

4 ,

8
po pul ation in th e Unite d S tates to 28 p e r cent o r 4 p e r c ent a de ca de In , .

the yea r s from 1 880 to 1 900 it r os e from 28 p er cent to 40 per c ent o r 6

, ,

pe r cent a deca de D ur ing the l ate r p e r io d ea ch p e r cent of gro w th a dde d

.
,

many mo re cu stomer s than it ha d ea rl i er In 1 8 80 the rur a l p o p ul ation .

,

stoo d at mi ll ion an d th e urb an at mi llion By 1 900 th e fi gur es .

,

wer e mi llion an d mi ll ion an d by th en a gr i cul tur a l in com e w as

,

estimate d at on ly mi ll ion o u t of a tota l nationa l pr i v ate pro duction

in come of mi ll ion .

In meeting th e need s an d s ei zin g the o pp o rt u nities cr eate d by th e new

nationa l an d in cr easingly urb an ma rk et many an Ame ri c an fa cto ry , ,

mining o r ma rk eting fi rm b egan to exp an d by m ul ti plyin g the vo lume

,

of o utpu t Very qu i ckly these ente rpr ises Sta r te d to buy o r bui ld othe r
.
,
24 HISTORICAL SETTING
u nits distant from thei r o r igina l l o cations S oon too th ey were mo v ing .
, ,

into n ew economi c fu n ctions T h ese strategI es of geo gr a p hi c a l di sp er sion

.

an d ve r ti c al integr ation ha d th ei r b eginnings b efo re th e depression of th e

1 8 o s d am p en ed in du st r ia l gr o w th fo r s ever a l y ea r s O n ly after th at de
’

7 .

pression in th e 1 8 8o s an d ea rly 1 89o s di d th e great imp er son al co rp o r at e

,
’ ’

ent erpr is es a pp ea r in an y n u mb er s in Am er i c an in du st ry A gain dur in th

g e .

1 8 go s a s ev er e ec onomi c d epr ession sl o w ed gr o w th T h en came th e y ea r s

’
.

of hi gh p r osp er ity after 1 896 w hi ch saw th e crest of th e fi r st gr eat w ave

of in du st r ia l em p i r e bu i lding in th e United S t ates Fr om th e 1 89o s on .
’

o n e of th e b asi c c ha ll en ges fa c in Am r i can in du st r ia l ist s w as ho w to

g e

fashion th e S tructures ess entia l fo r th e effici ent a dm inistr ation of newly

won bu sin ess emp i res T h ese enter p r is es fa r too l a rge to b e managed by
.
,

sma ll fami ly gro up s c ame qu i ckly to b e a dmini ste r ed by full time pro
,
-

fessio n al manager s .

In fo r ming these a d minist r ati ve st ru ctures m an y o rgani z ation bui lder s ,

fi r st c on cent r ated on th e fi el d un it an d on th e fac to ry r ath er t h an on

,

th e sa l es o r p urcha sing o ffic e o r th e min e It w as on t h i s l evel that Fr ed

.

e r i ck W Ta ylo r, Ha rrington Emer son an d the other a dvo cates of scien

.
,

tifi c man agement

”
exp en ded nea rly a ll th ei r energi es E ven b efo re th e .

wr itings of th ese men b ecame w ell k no w n in du st r ia l ists in th e steel m eat

, ,

p a ck ing elect ri c a l man ufa ctur in g an d agr i cul tur al-i m p lement in dust ri es
, ,

ha d b egu n to wo rk o u t sy st emati c designs fo r th e a dm inistration of S ingle

pl ants o r sa les O ffices L ea de r s in th es e fi elds ha d a l so b egu n by the 1 89o s
.
’

to bu i ld dep a r tmenta l st ructures fo r th e a dmini str ation of a n u mb er of

fi eld u nits an d to set up cent r a l offi ces fo r th e m ana gement of th e co m
p an y as a w ho l e By th e o u tbrea k of Wo rld Wa r I scho l a r s an d ana ly sts
.
,

were publ ishing b ook s an d a rti cles on in du st ria l o rgani zation writings ,

that dea lt w ith the st ruc ture of the l a rge-s c a le enterpr ise as w ell as with
that of a fa cto ry o r br an ch o ffice .

Th e Co min g f o th e M u t e art men ta l E n ter rise

I n tegrated
l id p , p
The coming of th e fi r st great int egr ated enterpri ses dur ing th e 1 8 8 o s ’

an d 1 89o s br o ught enti r ely n ew pr oblems of in du st r ia l management an d

’

led to th e bu i ld ing of th e fi r st si zabl e a dmini st r ati v e st ruc t ures in Amer i

can in du st ry T h e n ew a dminist r ati ve n eed s came less fr om an in crease in
.

vo lu me of o u tp u t th an from th e ta k ing on of n ew fu n ctions In th e 1 87o s .

’

nea rly a ll Am eri can in du str ia l ent er p r i ses on ly m anu factured T h ey .

b o ught thei r s up p l i es an d so ld th ei r fi nis h ed pro du cts th ro ugh commis

sio n ed agents who lesa ler s an d oth er mi ddl em en M ining enterpr ises
, ,
.

o p er ated in simi l a r fashion ; w hi le mercantil e fi rm s nearly a lw a y s han dle d

a single a cti v ity either r etai l ing o r who lesa l in g By th e en d of th e cen
,
.

t ury ho wever man y Ame r i c an in du st ri es ha d b ecome dominate d by a

, ,
HISTORICAL SETTING 25

fe w gr eat ente rpri s es that b esi de man ufa ct ur in g goo d s so ld them d i r e c t ly

, ,

to r etai ler s o r e ven to the ultimate cons u me r an d purcha sed o r e ven ,

pr o duced thei r o w n es sentia l mate r ia l s an d oth er s up p l ies By no w too .

, ,

a few me rchan d ising com p anies w e re b eginnin g to c a rry on b oth r etai l

an d who l e sa l e fu n ctions to buy di re c t ly from th e man ufa ct ur e r an d
, ,

even to c ont r o l man u fa c t ur in g pl ants .

In man u fa c tur ing the l a rge m ultifu n c tion ente rpr ise s pr an g from t w o
,

qu ite di ffe r ent st rategies of gr o w th By o n e st r ategy a S ingl e com p an y

.
,

began to exp an d an d integr ate th r o ugh cr eatin g its o w n ma rketing

o rgani z ation By the other a n umb e r of man ufa ct ur ing com p ani es w hi ch
.
,

ha d j oin ed to geth er in a ho ri z onta l c omb ination a t r a de asso ciation

—
,

p oo l t ru st o r ho ldin g comp an y — conso l i d ated th ei r man u fa c tur in g

, ,

a cti vities an d then qu i ckly mo v ed fo rw a rd into ma rk etin g o r b a ckw a rd

into pur chasing F i r ms mak in g pro duc ts b as ed on ne w techno l ogi c a l
.

pro cesses s p e ci fi ca lly fo r th e gr o w in g urb an ma rkets u s u a lly fo u n d ex ist

ing ma rk etin g channel s u nsatisfa c to ry an d so t ur ne d to th e fi r st of these
st r ategie s The secon d t yp e of str at egy w as empl o y ed m uc h mo r e often
.

in in du st r ies pr o ducing the mo r e sta pl e commo diti es by an O ld er an d l ess

comple x te chno lo gy In thes e l atte r in du str ies exp an ded o u tpu t O ften
.
,

le d to o ve rpr o duction an d then to comb ination B oth S t r ategies w e r e re .

sp o n es to the o pp o r t u nities an d pr ess ur es d e v e l o p in o u t of a r a p i dly

s g
gro w i n g nationa l ma rk et B oth w e r e a l so o cc asiona lly c a rr ie d o u t by
.

amb itio u s minin g o r ma rk etin g fi r ms .

Th e S to ry of Gu sta vu s S w ift pr o v i d es an exc e ll ent e x am pl e of an ente r

pr ise that greWth ro ugh v e r ti c a l integr ation by th e creation of a ma rk eting
o rgani z ation A N e w Engl an d w ho l esal e but c he r S wift mo ve d to Chi c a go
.
,
9
in the mi d-1 870 s Coming from M assa ch u setts he w as a w a r e of the gr o w
’
.
,

ing deman d fo r fresh meat in th e easte r n cities After the Ci v i l Wa r .

,

B oston Ne w Y o rk Phil a delphia an d othe r urb an a r eas w er e c a ll in g fo r

, , ,

m uch mo r e meat than co uld b e s uppl i ed lo c ally At th e same time gr eat .

,

h erd s of c attl e were gathe r in g on th e w ester n pl ains S w ift sa w an o p p or .

tu n ity to br in g to gethe r th e ne w s upply an d th e n ew d eman d by e xp loit

ing the ne w te chno lo gy of refr i ge r ation In 1 878 sho r tly after his fi rst .
,

exp erimental shi p ment of r efr i ger ated m eat he fo rme d a p a r tne r shi p w ith ,

his y o u nge r brothe r E dwin to ma rket fr esh w este r n meat in the easte r n
, ,

cities .

F o r th e next dec a de S w ift st ruggled ha r d to pu t into eff e ct his plans

,

fo r bu i ld ing a nationw i de d istr ibu ting an d mark eting o rgani z ation Fr om .

th e sta r t h e r ea l i z e d that the r ef r i ger ate d c a r co uld meet on ly p a r t of his

,

need s The re ha d to b e a r efr i ge r ate d Sto r age pl ant o r w a r eho u s e w i th a

.

dist r ibu tin g an d ma rk eting o rgani z ation in ea ch maj o r city Dist ri c t .

offices o r br an ch ho u s es b esi d e o p er ating the w a reho u ses cont r o lled

“

,
”
,
26 HISTORICAL SETTING
w ho lesal e an d o c casionally r etai l o u tl ets in sma ller to w ns an d vi ll ages as
w e ll as in th e maj o r cities S uch o u tlets Often c ame to b e o p er ated by
.

S w ift s o w n sa l ar i ed r e pr esentati ves T h e br an c h manager s t h u s adminis

’
.

tered th e di ff e r ent ma rk etin g a cti v ities w ithin one a r ea By a dv er tisin g .

an d o the r means th ey ha d to brea k do w n the p r ej udi ce a gainst eating

,

meat ki ll e d mo re th an a tho u san d mil es a w ay an d many week s earlie r an d

to defeat the con cer ted eff o r ts of lo ca l bu t ch er s w ho ha d re cently cr eate d ,

the N ational Bu tch er s Pr ote cti v e Asso ciation to prevent the s ale of fresh
wester n meat in th e easter n urb an mark ets At the same time S w ift ha d .
,

to comb at the b o ycotts that the r ai lroa d s ha d pl a ce d on his r efr igerato r

ca rs.

By th e en d of th e de c a de S w ift s initi al str ate gies ha d p ro ved emi

,
’

n en tly s ucc essf ul His fast-gro wing distribu tin g o rgani z ation constantly
.

c a ll e d fo r mo r e an d mo r e s uppl i es B etw een 1 888 an d 1 892 S w ift w ho ha d

.
, ,

in co rp o r ate d his enterprise in 1 885 set up meat-p a ck in g establishments in ,

O m ah a an d S t Lo u is an d afte r th e d epr ession of th e 1 900 s th ree mor e

.
, ,
’

in S t J osep h S t Pa ul an d F o r t Wo r th At the same time the c omp an y

.
, .
, .
,

s y stemati ze d the buyin g of catt le an d othe r pro ducts at the sto cky a rd s It .

exp an d e d its ma rk etin g fa ci l ities a br oa d as w e ll as in the U nite d S tates .

B efo r e th e en d of the 1 8go s S wift ha d cr eated a h uge v e rti ca lly inte gr ate d
’

in du str ia l empir e .

O the r p a ck e r s qu i ckly fo llo w e d his ex am pl e To comp ete effe c ti vely .

,

A r mo ur M o rr is C u d ah y an d S ch w a rz s chi ld 8: S ul zb e rge r ha d to
, , ,

bu i l d simi l ar ly integr ated o rgani z ations Those comp anies that di d not .

follo w the S w ift mo de l w er e d estine d to r emain small lo ca l ones T h u s , .

,

by the mi ddl e of the 1 89o s w i th the r ap i d gro w th of th ese v e rti ca lly

’

inte gr ate d fi r ms the meat-p a ck in g in du stry ha d b e come o l igop oli sti c

, .

”
The B i g F i v e ha d th e maj o r sha r e of the ma rk et ea ch w ith its fi e ld
“

u nits fu n ctiona l dep a r tments an d centr a l o ffice

, , .

T h en as ea ch fi rm s y stemati z e d th e a d minist r ation of its fu n ction al

,

a c ti viti es an d d evis ed te chni qu es to coo rd inate th e flo w of p ro ducts

th ro ugh th e diff er ent dep a r tments it a l so t ur n ed to dev elo p ing goo d s ,

that co uld f ur th er emplo y the v ast r eso urc es it ha d co ll e ct ed To b eef . .

,

th e se fi r ms qu i ckly a dded a f ull l in e of meat p r o duc t s in clud in g l amb , ,

vea l an d p o rk To mak e b ett er u se of th ei r br an ch ho u s e n etwo rk th ey

, .
-
,

b egan to ma rk et p o ul try eggs an d d ai ry pr o du cts To o b tain mo re pr ofi t

, , .

from th ei r d isa ss embling an d oth er pro ces sing o p er ations th ey w ent

“

into the leath er soa p fer ti l i zer an d glu e bu sines ses

, , , .

T h e meat p a ck e r s p ai d m uch l ess attention to t h e a d ministr a tion of

thei r b y-p ro duct o p er ations th an to thei r m ain line Wher e the ma rket .

fo r y pro ducts w as clos e to th at fo r th e pr im ary p ro ducts th e ne w

b -
,

bu sinesses — s u ch as p o ul try an d eggs — were a dm ini stered th ro ugh th e

 HISTORICAL SETTING 27

e xistin g f u n ctiona l struct ur e Whe r e the mark ets w er e v e ry di ff er ent as

.
,

in th e c ase of l eath er an d ferti l i ze r th ey w er e manage d th r o ugh s ub

,

sidiaries o r d i v isions to w hi c h the c ent r a l o ffi c e g a v e l itt l e d i r e c tion A .

seni o r exe cu ti ve w as often r es p onsible fo r a fu n ct ion an d fo r one o r tw o

by—pr o ducts an d at the same time he lp e d to ma k e st r ate gi c d e c isions fo r
, ,

the ente rpr ise as a w ho le .

In the same yea r s S w ift s sto ry w as p a r a llel e d by othe r a gr i cult ur a l

,
’

p r o cessin g in d u st ries w hos e pro d ucts were d estined fo r many urb an con
s u me r s In the tob a cco in du st ry James B D uk e w as the fi r st to app reci
.
, .

ate f ully the gr o w in

g ma rk et fo r c i g a r ettes a ne w pr o d uc t so ld a l most,

10
enti r ely in the c iti es . In 1 8 8 1 he a pplie d to th e man u fa ct urin g of c i ga
,

rettes a r e c ently d e v el o p e d ma c hine O n c e h e ha d a d a p te d the ne w te c h

.

n o lo to the ne w d m a n d he c on c ent r at ed on e xp an d in g his ma rk et by

gy e ,

extensi ve a dve rtising an d by bu i ld ing up a nationa l an d inter nationa l sal es

an d d ist ri bu ting o rgani z ation By 1 8 84 h e ha d left D ur ham No r th Ca r o
.
, ,

l ina fo r New Y o rk Cit y w he r e he set up ne w fa cto r i es sa l es hea dqu a r te r s

, , , ,

an d his cent r a l a d minist r ati v e O ffices N e w Y o rk cl ose r to h is ma rk ets

.
, ,

was a mo re lo gi c al pl a ce from w hi ch to ru n his w o rl d-w i d e in du str ia l

d omain A S h e contin u ed to exp an d his d ist r ibu tin g ma rketin g an d
.
, ,

a dv e rtisin g o rgani z ations h e a l so set up a n et w o rk of w a r eho u s es an d

,

purcha sin g offices in tob a cco gro win g a r eas In 1 890 D uk e merge d his
- .
,

comp an y w ith fi v e smaller con cer ns F i v e y ea r s l ate r the a c ti vities of all

.
,

th es e h ad b een c onso l i d ate d into th e cent r a l i zed fu n ctiona lly dep artm en ,

taliz ed o rg a ni z ation w i th ma rk etin g man u fa ct ur in g purchasin g an d

, , ,

fi nan ci al d ep a r tm ents tha t D uk e ha d fashione d ea rlie r He then w ent on .

to Ob tain cont r o l th ro ugh purchases an d m erge r s of the pr o ducer s of

, ,

ev ery othe r t yp e of to b a cc o pr o duc t exc ep t c i ga r s T hese l ate r a cqu isi .

tions were not a ll bro ught into the e x i sting st ruc t ur e S ome r emaine d .

integrated sub sidiarI es loo sely a dministe red fr om Ame ri c an Tob a cco s ’

offices at 1 1 1 F ifth A ven u e .

What D uk e an d S wift d i d fo r thei r r es p ecti ve in du st r ies J ames S B ell , .

11
an d An drew P r eston di d fo r flo ur an d fo r b ananas In 1 889 B ell too k .

on the presi den cy of th e Wash bur n -Crosby Com p an y in M i lwa uk ee an d

”
soon b ecame k no w n as th e great est me rchant mill e r in the w o rld He
“
.

created a l arge ma rk eting an d d ist r i bu ting o rgani z ation to se ll to urb an

b ak er i es a rid r etai l sto res high —gr a d e flo ur ma de from s pr in g w h eat r aise d
in th e r ecent ly o p en ed agri cul t ur a l a reas of th e N o rth w est an d pr o cesse d
by th e n ew a u tomati c-r o ll er gr a du a l-r e duction mi ll in g pro cess S imi l a rly
,
.
,

in th e b anana in du st ry Pr eston fashione d th e o rgani z ation w i th its h ea d

,

qu a rter s in B oston w hi ch in 1 890 b ec ame th e B oston Fru it Com p an y an d

in 1 899 th e Unite d Fru it Com p an y P reston l i k e S w ift ma d e u se of th e
.
, ,

n ew r efr i er ato r te chno l o y in his shi p s f r ei gh t c a r s an d w a r eho u s es

g g , ,
.
28 H I S T O RI C A L S E T T I N G
In d e vel o p ing ne w cons u mer d ur ables inno vato r s a l so fo u n d it n eces
,

sa ry to create th ei r o w n ma rk eting an d d ist r ibu ting o rgani z ations B oth .

C yru s McCo rm ick p ion eer h arv ester man u fa ct urer an d Wi ll iam Cl ark
, , ,

th e bu sin ess br ain s of th e S in ger S ew ing M a chine C omp an y fi r st so ld ,

th ei r p r o du cts t h r o u gh commi ssion a gents C l a rk soon d is c o v er ed ho w

.
,

ever ,
that sal ar i ed men wo r k ing o u t of br an ch sales o flices d is pl ayed '

demon st rated an d serv i ce d s ew ing ma chines mo r e eff ecti vely an d ch eap ly

,

than d i d th e a gents An d j u st as im p o rtant th e br an ch o ffices co uld

12
.
,

p ro vi de th e cu stomer w ith essenti al credit T h en McCo rm ick wh ile u sing

.
,

th e fr an c his ed d ea l er to han dle th e fi n al sa l es c ame to r ea l i z e th e need fo r

,

a st rong s elling an d d ist ribu ting o rgani z ation w ith w a reho u s es servi cing ,

13
fac i l ities an d a l a rge s al ar ied fo rc e to stan d b eh in d th e dealer Th u s in
, .

th e y ea r s fo llo w ing th e C i v i l War b oth t h e McC o rm ick R ea p er an d the

,

S in ger S ew in g M achin e com p ani es con c ent r ated on bu i ld ing up fi r st na

tio n al an d th en w o rld w i d e s al es dep ar tment s S in ce th ey pur ch as ed th ei r
-
.

r a w m ater ial s from only a few in du st ria l com p ani es r ath er than from
man y in d i vi du a l far mer s th ei r pur cha sing p roblem s were less co m p lex
,

an d r equ i r ed less attention than th o se of fi rm s pro cessing agri cult ur a l

pro ducts Bu t th e n et r esul t w as th e creation of a very Simi l a r typ e of
.

o rgani zation .

Enterpr i ses develo p ing techno lo gi cally a dv an ced dur able pro ducts fo r
p ro duce r s ma rkets a l so b ecame dis sati sfied with th e existing sales chan
’

n el s T h e mo st si gni fi cant of th es e enter p r i ses in th e 1 88o s were in th e

.
,
’

n ew el ec t r i c a l fi eld Within a d eca d e after T hom as E d i son s pr oof of th e

’
.

practi c a l ity of an in c an des cent l i gh ting sy stem two great co r po rations ,

Gener a l Elect r i c an d Westingh o u se — c am e to domin ate th e in du stry .

By that time b oth fi rm s wer e develo p in g elect r i cal m ach inery as a so urce
,

of po w er fo r in du st r i al an d t ran spo rt ation bu sines ses as well as fo r th e

e m ar k etin p
“
en er ati o n of l i h t T h of l c t r i l i h tin o w r m h in
g g .
g e e c
g g e ac ,

ery an d t r action eq u i p m en t w as so co m p l i cat ed t ech no l o i cally th at it

, g
deman ded high ly t r ained sa lesmen w h o u n derstoo d th e p o wer an d t rans
rtatio n n eed s of t h ei r cu st o m er s even mo r e t h o r o u h ly th an th e cu s
p o
g
to m ers th ems elv es d i d As th e s p eci fi c ati o n s fo r h ea vy eq u i p ment w er e
.

very p r eci se a n d v ar i ed w ith th e n eed s of in di v i du a l cu sto m ers th e sa l es ,

m en ha d to b e in cl o se cont act w ith th e m an u fa ct uring d ep ar tments .

Mo reo ver Sin ce th e t echno lo gi cal co m petition b etween th e tw o fi rm s w as

,

very intense coo rd in ation b etw een m ar k etin g d esigning an d engineer in g

, , ,

per sonnel w as ess enti al .

T h e r esul tin g d ep ar tment al st ruc t ure r eflec ted th e ty p es of m a rk ets in

whi ch th e p ro ducts w ere so ld Gener al Elect ri c an d Westingh o u se ea ch
.

ha d a man u fact uring d ep artment to a dm ini ster a n umb er of s cattered

wo rk s o r fa cto r i es a sal es dep a rtment to s u p ervi se a n ationw i d e spre ad
,
HISTORICAL SETTING 29

of distr i c t offices an engin eer ing dep a r tment res p onsible fo r design an d
, ,

a fin an ce dep a rtment The sa les an d enginee r ing h ea dqu a rter s in cluded

.

su bo flices to han dl e th e maj o r pr o duc ts fo r the r e w er e b asi c d i ff e r en c es in

,

the desi gnin g an d ma rk etin g of h ea vy e qu i p ment an d a pp a r at u s w hi ch

we r e ma de to detai l ed cu stom er s p ecifi c ations s uc h as l a rge gene r ato r s , ,

moto r s an d Swit ch gea r an d ligh ter pro ducts w hi c h w e re ma de in v o lume

, ,

ahea d of o rde r s s uch as l amp s w att m ete r s an d sma ll moto r s an d gen

, , ,

or ato r s .

To some ex tent steel man u fa ct ur er s b egan to tak e o v er th ei r o w n ma r

,

k etin g b e c a u se th ey too ha d t echno lo gi c ally a dvan ced pr o ducts an d an

in cr easingly br oa d ening ma rk et S te el c ame to b e pr o duce d on a l arge
.

s ca l e o nl y in th e 1 87o s an d at that time p r a c ti ca lly all th e steel pro duced

’

w en t into r ai l s In th e nex t d e c a d e as th e b asi c r ai lr oa d n etw o rk w as com

.
,

leted st ruc t ur a l ste el fo r th e n ew urb an ma rk et b e c am e a maj o r pr o d uc t

p , .

Ca r negie s decision to u se the steel pro duced at the Homestea d w o rk s

’

one of the fi r st gr eat o p en-h ea rth w o rk s in the Un ited S tates fo r struct ur es '
,
15
r a the r than rai l s s y mb o li zes the chan ge in b oth ma rk et an d te chno l o gy .
.

S ell in g ste el to contra c to r s an d bu i ld er s as w ell as to th e gr o w in g man u

facturin g comp anies in the ma c hinery agr i cul t ur a l -im pl ement an d oth er , ,

in du s tries r equ i re d a l a rger sa les fo rc e than selling to th e r e l ati vely few

r ai lroa d s As in the c ase of h ea vy ele ctr i c a l equ ip ment ea ch o rder ha d
.
,

its o w n s p e cifi c ations an d so r e qu i r e d close c oo rdination b etw een sal es an d

man ufa ct ur ing S ome comp ani es al so fo u n d it mo r e satisfa cto ry to d is
.

tr ibute an d mark et the mo r e stan d a r d items ma de in a dv an c e of sa le

”
th r o ugh thei r o w n w a r eho u sin g o rgani zations r ath er than th r o ugh
“

16
o u tsi der s As a r es ult th e l a rgest steel c om p ani es l i k e C ar n egie Ill i nois
.
, , ,
'

S tee l an d J ones 8: L a ug h lin by the 1 89o s ha d th ei r o w n ma rk etin g

’

, ,

o rg ani z ations .

In th e de c a d e b efo re the de pr ession of th e 1 8go s Ca r negie an d ap ’

, ,

p at ently th e oth er fi r ms ha d o b taine d contr o l of th ei r s uppl i es of co k e

,

an d coa l tho ugh not y et of o r e Most of the sma ll er m ak er s of steel an d

, .

those sti ll man ufa ct ur in g i ron ho w e ve r r emaine d essentially singl e-f u n c

, ,

tion ente rpr ises buy ing th ei r r aw mate r i al s fr om oth er s an d s ell ing th ei r
,

pro duc ts th ro ugh mi ddlem en It sho uld b e noted p a r enth eti c a lly that th e
.
, ,

exp e r ien ce of th e l a rge el e ct r i c a l an d stee l com p anies w as to pro v i de ex am

ples fo r th e o rgani zation bu i lder s at th e du Pont C o m p an y w he reas th e ,

creato r s of th e ea rly a u tomo b i l e fi r ms whi ch b e cam e p a r t of G ene r a l

Moto r s l ea r ne d mo r e from McCo rm ick an d C l a rk .

I n tegr atio n via Co m bin atio n an d Co n solidatio n

The mo r e common r oa d to the fo r mation of th e v e r ti c a lly int egr ated
ente rpr ise w as by w a y of ho r i zonta l comb ination an d conso l i d ation T h e .
3 0 HISTORICAL SETTING
th reat of excess ca p a city app ea r s to ha ve b een a prima ry s tim ulu s to initia l
comb inations in most Amer i c an in du st ries But wh y di d fa cto r ies ha v e .

d ifficul ty in u sin g fully thei r a v ai l able reso urces in a p e r io d of s w ift ly

gro win g ma rk ets ? T h e ans we r s eems to b e that the r ap i d in crease in th e
o u tpu t of many sma ll ente rp r ises exceede d immediate deman d Ea ch firm .

exp an ded b e c a u s e its execu ti v es hop e d p a r ti cul a rly dur ing th e b oom p e ,

rio ds aft er th e C i v i l Wa r an d ag ain afte r the d epr ession of th e 1 8 o s to

’

7 ,

pro fi t th er eby fr om th e n ew ma rk ets Th en as the ma rk et b e c ame glutted .

,

an d pri ces dro pp ed th e many manu fa cturer s b ec ame mo r e an d mo re w i ll

,

in g to c omb in e in o rd e r to cont r o l o r l imit c om p etition by s ettin g pr i c e

an d pro duction s che dules S o fr om th e mi d-1 870 s on man y small pro
.
’
,

du cers of leath er sal t s uga r w hi sky an d othe r pr o ducts ma d e from

, , ,

co r n l ins ee d an d cotton oi l b is cu it fer ti l i ze r p etr o le u m explosi ves r o pe

, , , , , , ,

an d rubb er j oine d in l a rge ho r i zonta l comb inations Yet s uch fe de r ations .

,

w e r e u su a lly sho r t-l i v ed P ro duction o r pri ce s che dules w e r e ha r d to en

.

fo rc e e ven afte r the comb inations b e c ame l eg a l entities in the fo r m of

,

t ru sts o r afte r the p aSsage of t h e New Jer s ey l aw in 1 8 89 of ho lding com

,
'
,

p an ies Anothe. r r eason w h y the y w er e u ns ucc essf ul w as S im ply that the y

fai led to emplo y fully an d eff e cti vely the ex1stin g reso urces of thei r mem
ber s .

Occasion a lly a feder ation d is so lve d into its o rigI n al p a r ts Mo r e O ften it .

conso li d at ed An d he re th e distin ction b etween lega l an d a dminist rati ve

.

deve lo p ments m u st b e k ep t cle ar The t ruly conso l i d ated enterprise o pe r at

.

ing on a nationa l s cale r equ i red b oth n ew l ega l an d ne w a dminist r ati v e

fo r ms Legally it c alle d fo r an instru ment that w o uld p ermit it to o p e r ate
.
,

in many d iff erent states A dminist r ati vely it deman de d a st ructure to

.
,

pr o vi de fo r cent r a l i ze d coo rdination a ppr aisa l an d plannin g fo r its ex , ,

t en ded pl ant an d p er sonne l .

O n ce th e o p p o r t u nit y fo r nation w i d e o p er ations app ea re d the ne cessa ry ,

lega l inst ru ments w er e not l on g in c oming T h e S tan da rd O i l Comp an y .

of O hio fo rmed th e fi rst trust in 1 8 82 an d by 1 889 New Jer s ey ha d ,

amen de d h er gen eral in co rp o r ation l aw to p e rmit o n e co rp o r ation to

p urchase sto ck of anoth er O f th es e tw o l ega l i n no v ations th e gener a l
.
,

in co rp o r ation l a w fo r ho lding comp anies w as th e mo st Signifi cant S in ce .

th e 1 85 0 s r ai lr oa d s an d o cc asiona lly othe r u ti l ities h Ame r i c an B e ll

(
’

, t e

T el ephon e Com p an y fo r ex am pl e) h ad he ld sto ck in othe r com p anies

, ,

bu t such a ction was no rm ally a utho r i ze d by a s p e cia l cha r te r of in co r

p o ratio n o r an , am e n d m e nt to it p ass e d by a stat e l eg i s
,l at ur e B efo r e .

th e N ew J er s ey am en d m ent no gener a l in co rp o r ation l aw expl i c itly

,

a llo wed a co rp o ration to ho ld sto ck of oth er co rp o r ations S ome state l aw s .

,

in fact sp eci fi ca lly fo rb a de it M o reo ver man y states p en al i zed o u t—o f

, .
,

stat e co rp o r ation s by p r ohi b itin th m f r om o w nin r a l stat in t h state

g e
g e e e e
HISTORICAL SETTING 3 1

o r s ubj e ctin g th em to s p ec ia l ta xes T h e pro v i sions fo r gene r a l in c o rp o r a

.

tion of ho lding comp ani es w hi c h oth er states soon b o rro w e d from N ew

,

J er se y p er m itted a sin gl e p a rent com p an y to ho ld th e maj o r ity of the

,

S to ck of l o c a lly c ha r te r e d s ub si d ia r ies an d so pr o v i d e d an ine xp en si v e an d

eas y w a y fo r enterprises o p e r ating o ver a wi d e a rea to a voi d th ese ob

stacles an d sti ll to r etain l ega l c ont r o l o v e r th ei r g eo gr a p hi c a lly d is p e r se d

a cti vities .

Afte r the 1 89o s a dminist r ati ve inno v ations w e r e m uch mo r e imp o r

’

tant to th e d e ve lo p ment of Am er i c an bu siness than l egal ones A comb ina .

tion b e came a dministr ati vely a conso li d ation on ly afte r its e x e cu ti v e o ffic e
b egan to do mo re than merely set pri c e an d pro duc tion s c he dul es It re .

maine d a comb ination as l on g as d e cisions on ho w to pro duc e o r ma rk et

an d ho w to a llo c ate r eso urc es fo r the pr esent an d in the f u t ur e w er e l eft

to the c onstit u ent ente rpr ises It b ec ame a d minist rati vely c onso l i d ate d
.

w hen the sma ll exe cu ti v e office w as t ran sfo fm ed into a c ent r a li zed
h ea dqu a rte r s that d ete r mine d nea rly a ll th e a cti v ities of the enterprise s ’

pl ants o r ma rk etin g u nits The fa cto r ies o r sa les offi ces fo r me rly manage d
.
,

by the h ea d s of memb e r fi r ms b e came o p e r ate d by sa l a r ie d pl ant mana ge r s

,

o r sal es r epresentati v es .

The t r ansfo r mation of a loose a ll ian ce of man ufactu rin g ér ma rk eting

fi rms into a sin gle conso l i date d o rg ani z ation w ith a c ent r a l hea d qu a r te r s
ma d e p ossibl e e conomies of s ca l e th ro ugh stan d a rd i z ation of pr o cesses an tf
stan d a r di z ation in the pro curement of mate r ia l s O f mo r e si gni fi c an ce
.
,

conso l i d ation per mitte d a con centration of pro d uc tion in a fe w l a rge

\

fa vo rably lo c ate d fa cto r ies By han dl in g a high vo lu me of o u tpu t con

.
,

sol i d ate d fa cto r ies r e d uce d the cost of mak in g ea ch in d i v i du a l u nit The y .

co uld s p ecia l i ze fur the r an d s ubd i vi d e the pro cess of man u fa ct ur in g an d

a l so w e r e often able to d e ve lo p an d a pply n ew tec hno lo gi c a l im pro vements
mo re easi ly than co uld sma lle r u nits To a l esse r extent conso l i d ations of
.
,

ma rk eting fi r ms off e r e d comp a r abl e a dvanta ges .

Ho ri zonta l conso l i d ation an d c ent r a lization imme d iately cr eate d m uch

mo r e press ur e fo r ve rti c a l integration than d i d me r e comb ination The .

hea vy fi xe d costs of enl a rged pl ants o r in the c ase of a ma rk etin g fi rm

, ,

en l a rged di st ribu tion fa ci l ities deman de d a contin u in g high vo lu me of

o ut pu t A man u fa ct ur in g comp any fo u n d it no l onge r safe to r e ly w ho lly
.

on o utsi de w ho l esa le r s o r commission a gents w ho a l so so l d goo d s of

com p etito r s Th e inte r ests of these agents di ff ere d fr om those of the
.

man u fa ct urer The who lesa le r w as often l ess con ce r ne d w ith in creasin g
.

th e v o lu me ne c essa ry fo r r e duc in g u nit man u fa c t ur in g c osts than w ith

”
ob taining a satisfa cto ry ma rkup o r commission He ha d n o p a r ti cul a r
“
.

r eason fo r pu shin g the pro d ucts of one cl ient mo r e than those of anothe r .

O n the othe r han d the man u fa ct ure r w as u nabl e to bu i l d up his o w n

,
32 H I S TORI CA L SE TTI NG
s p e ci al mar k et thr o ugh br an d nam es an d a dver ti sing Mo r eo ver coo rdi na .
,

ti on betw een the mark et er s an d th e man ufa ct ur er s an d desi gner s of

pr od u cts p ro v ed diffi cul t A S a r esul t po t enti al sa vin gs in cost w er e lost
.
, ,

an d th e d ev el o p m ent of p r o ducts mo r e n ear ly fi tt ed to th e cu s tom ers

’

w ants w as inhi b it ed In tim e too m an y p r o duce r s be came co n v in ced

.
, ,

that they co uld di st ribut e th eir w ar es mo r e Ch ea p ly than th eir agents di d .

A man uf actur er co uld assur e h imself of th ese a dvan tages h o w ever only , ,

if hi s vo lum e w as l ar ge eno ugh to supp o rt a n ation al di st ri b u tin g s y st em .

F o r th ese r ea so ns m an y co nso li dated fi rm s th o u gh c ert ai nl y not all

, , ,

began to do th eir o w n w h o les alin g an d oc casion all y ev en r et ailing T h ey , , .

c a rri ed o u t th is str ategy by cr eatin g th eir o w n selli n g o rganiz ations o r ,

mo r e oft en by co mb ini n g with o r buy in g exi stin g l arge nationwi de ma r

,

k etin g ent er p r i ses At th e sam e tim e man y set up th eir o w n p ur ch asin g

.
,

o rgani z ations O nl y a f ew comb inations s u ch as S tan dard O il an d

.
,

Uni t ed S ta tes R ubb e r h ad emb ar k ed on th i s str ategy of co n so li da tion an d

,

in tegr ati on befo r e th e dep r es sion of th e 1 89o s A m uch la r ger n u mbe r di d ’

.

so in t h e y ea r s imm edi at ely fo ll o w in T he se in clud e d fi r ms in

g
di fi eren t in du st ri es s uch as Th e Distill er s S ecuriti es Com p an y (th e li neal
,

d escen d an t of th e Di still er s an d C attl e F eeder s T ru st ) N ation al B is cuit , ,

Pit tsbur g Co a l Int er national P ap e r Alli s Chal m er s Int er national Har

, ,
-
,

v ester Am er i ca n S m elting 8: R efi nin g an d th e du Pont Comp an y

, , .

Th e sto ry of th e du Pont Co mp an y in the next ch ap t er descri bes the

p ro c esses an d sh o w s th e r ea so ns fo r th em It mi ght b e w ell ho wever to .
, ,

i v h er e t w o cont em po r ary comm en ts on w h y cer tai n ent er p ri ses mo v e d

g e

fr o m comb ination o r feder ation to con so li d ation an d in t egr ation Th e fi r st .

comes fr om th e A n n u al R ep or t of th e Natio n al Biscu it Co mp a n y for

1 90 1

Th i s Co m p an y is f o u r yea r s o ld an d it m ay be o f in terest to sh ortly r ev i ew

its hi st o ry Wh en th e C omp any S tart ed it w as an aggr egati o n o f
.
,

plan ts It is n o w an o rgan ize d bu sin es s Wh en w e loo k b ack o er th e four

. . v
y ea r s ,
w e fi n d th at a r adical c h an ge h as b een wr ou
gh t in our m eth ods o f
b us in es s . In th e p a st , th e m an ager s rpo rations
o f lar ge m er ch an disi n g co

h av e th o u gh t it n eces sary f o r su ccess t o contro l o r limi t com p etiti on So

, ,
.

wh en th is Co m pan y S tart ed it w as believ ed th at w e m u st control com pe

,

ti ti o n an d th at to do thi s w e m u s t ei th er fi gh t co m p eti ti o n o r b u y it Th e
,
.

fi r st m ea n t a ru in ous w ar o f p ri ces an d a gr ea t lo ss o f p r o fi ts ; th e seco nd ,

co nst an tl
y in cr eas in
g ca p i ta l i z a ti o n E x p e r i en ce so on p r.o v ed t o us t h a t ,

in stea d o f b rin gin g su cces s ei th er o f th o se co u rses if p ersev er ed in m us t

, , ,

b rin g di saster T h i s led us to reflect wh eth er it w as n eces sary to con tr ol

.

co m et i ti o n
p W e s
.oo n sa ti sfi e d o ur selv es th a t w i th in th e C o m p an y i ts elf

w e m u st loo k fo r su ccess .

We r
tu n ed o u r att en tion an d b en t our e nergies to imp rov in g th e in ternal
m an agem en t o f our b i
us n es s, to gett n
g i fu ll ben efi t fr o m p ur ch asin g o ur
HISTORICAL SETTING 33
r aw m ater ial s in lar ge q
i to economi zing th e expenses o f m an u
u an tit es,

f act ur e to sy st em atiz in g an d r en der in g m o r e efi ectiv e o ur sellin g dep art

,

m ent an d abo ve all th ings an d befo r e all th in gs to imp r ovin g th e qu ali ty

,

o f ou r o o ds an d th e co n di ti o n in wh i ch th ey S h o u ld r each th e cu st o m er
g .

It b ecam e th e settled p o li cy o f th is C o m p an y t o b u y o u t n o co m peti

18

Whil e bui lding u p its distr ibutin g o rgan i z ation th e comp an y chan ged ,

its po li cy fr om s elli n g to w ho l esa l er s in bulk to mar k etin g small p ack ag es

to retail er s It d evel o p ed th e v ar io u s Un eed a B is cui t br an d s T h e n ext
.
“ ”
.

”
point th e sam e A n n u al R ep or t contin u ed w as to r ea ch th e cu s tom er
, ,
“
.

T hin kin g w e h ad som ethin g that th e cu stom er w ant ed w e ha d to a dv ise ,

th e custom er of its exist en ce We di d thi s by ex t en si v e a dv er ti sing

”
. S in ce .

flo u r co uld b e ea sil y an d qui ckly b o ught in qu antit y from l arge mi lli n g

fir ms th e pur cha sin g r equ ir ements w er e l ess compl ex than thos e of m ar
,

k etin g an d c all ed fo r a sma ll er o rg ani z ation O n th e oth er h an d th e com .

,

p an y s p ent m uch en ergy aft er 1 90 1 in b etter ing pl an t l ayo u t an d m an ufac

t urin g p r o cess es in o rd er to cu t p ro duction co sts an d to imp r o v e an d
S tan d ardi ze qu al ity Th r o u ho u t the fir st d ec a d e of its hi sto ry N ation al
g .
,

B i scuit contin u ed its b asi c po li cy of centr ali zi n g man ufa ct ur ing o p er a

“ ”

tions p ar ti cul arly in its gr eat N ew Y o rk an d C hi cago p l an t s At th e s am e

, .

tim e that its ex ecu ti v es w er e s y st em ati zi n g th e o p er at ions of its f u n ctiona l

a cti viti es th ey w er e al so s etti n g u p a c entr al o mce fo r th e managem ent of

,

th e bu sin ess as a w ho l e In this w a y N a tiona l B i scuit qu i ckly t r an sfo r m ed

.
,

it self fr om a co m b in ation o r f ed er at ion to a con so li d at ed fi rm an d th en to

an integr ated m ultidep art men tal enterpr i se Sim il ar to S w ift S ing er
, , ,

S ew in g M a chin e 0 1 G en er al E l ec tri c
, .

Th e s econ d comm ent com es fr om C h arl es R Fl in t an o r ga n i z er of .

,

th e U ni t ed S t at es R ubb er Co an d oth er n ew con so li d ations Wh en a sk ed

. .

”
in 1 899 to d es cr ib e th e b en efi t s of conso li d ated man a gem ent h e r epli ed :
“

Th e n w er is o nl y difli cu lt b ecau se th e li st is so lon g Th e f ollo win g

a s .

ar e th e p r in cip al o n es : r aw m ater i al b o u h t in l ar e q u an ti ti es is secu r ed

g , g
at a l ow er p r i ce ; th e sp eci ali z ati o n o f m an uf actu r e o n a l ar e scal e i
g n ,

sep ar a te p lan ts permi ts th e f ullest u tili z atio n o f sp eci al m ach in ery an d

,

p r o cesses th us decr eas in

,_ g co s ts ; t h e s t an dar d o f qu ali ty is r ai sed an d fix ed ;

th e nu m b er o f S t yles r edu ced an d th e b es t stan dar ds ar e a do ted ; th o se

, p
plan ts whi ch ar e be st equ ipped an d m ost adv an tageou sly S i tu ated ar e ru n
co n ti n u o u sl
y in p re f er en ce t o th o s e l e s s f a v o r ed in c a se o f l oc,
a l st r ik es o r
fi r es th e w o r k goes o n elsewh er e th u s p r ev en tin g ser i ou s lo ss ; t h er e is n o
, ,

m u ltip li cati o n o f th e m ean s o f di str ib u ti o n a bett er f o r ce o f sal esm en tak es

th e p l ace o f a l ar er nu m b er ; th e sam e is tru e o f b r an ch Sto r es ; t erm s an d

g
co n di ti o ns o f sal es b eco m e m o r e u n if o r m an d cr edi ts th r o u gh co m p ari so n s
,

are m o r e saf ely

g r an t ed ; th e a gg gr e a t e o f st oc k s c ar r i ed i s
gr e a t l
y r e d u ce d ,
34 HISTORICAL SETTING
th u s vi n g i n terest insu ran ce sto rage an d sh o p-wear ; greater skill in
sa , ,

m an agem ent accru es to th e b enefi t o f th e wh o le i n stead o f th e p art ; an d ,

large adv antages are reali zed fr o m co m parative acco u nting an d co mp arative
adm inistr atio n T h e gr an d resu lt is a mu ch lo wer m ark et price
.
19
, . .

D uring these yea r s som e enterpr ises went Sti ll fur the r B esi de han dl ing
, .

th ei r o w n ma rketing an d m an ufa ct uring th ey too k o ver th e pro duction ,

an d often th e t r ans p o rtation o f th ei r r a w materia l s T his exp an ded

— .

fo rm of verti cal int egr ation u s u ally o ccurred in those enterpr ises whose
r a w mate ria ls came o u t of th e gr o u n d an d w he r e the l imited s u pply
co uld b e cont ro lled by a few fi rms S uch a S itu ation pos ed the th reat .

that th e man u fa ct ure r w o uld b e u n abl e to Ob tain his mate ria l s at a

satisfa c to ry p r i c e S tan d a rd O i l mo v e d into the pro duction of crud e
.

20
oi l in the l ate 1 88o s l a rgely to gain an ass ure d so urce of s upply In the
’
.

l at e 1 89o s th e l a rgest comb inations w hi ch b e came conso l i dations in

’
, , ,

th e fer ti l i z er in du st ry — t h e V i rginia -C a r o l ina Ch emi c a l Com p an y an d

th e Amer i c an A gr i cul t ur a l C h emi c a l C omp an y — c a rr ie d o u t a simi l a r

21
st r at e y fo r t h e sa m e r e asons S too d i d a thi rd f r ti l i r c omb ination
g o . e ze ,

th e Int er nationa l A gr i cult ur a l Co r p o r ation some w hat l at er Afte r Inte r , .

nationa l P ap er conso li d ated its mill s an d bui l t its ma rk eting o rgani z a

tion it p urch as ed cont ro l of l a rge t r acts of timb er in M aine an d Cana d a
, .

S uch d efen si v e r eason s p l a yed a p a r ti cul a rly cr iti c a l r o l e in stimul atin g

conso li d ation an d int egration in the i ron an d steel in du st ries T h e C a r n egie .

Co t ro ubl ed by th e con c ent ration of cont ro l a chie ved durin g the dep res
.
,

sion of th e 1 8 0 s in the L a k e S u p er io r i r on -minin r g ions purc has ed

’

9 g e ,

la rge ho ldings in th e Mesab i R ange O th er steel comp anies q u i ckly fo l

22
.

lo wed s u it In 1 898 Elb er t H G a ry w ith c a p ita l s u ppli ed by J P Mo rgan

.
, .
,
. .

8 : C o fo r m ed th e F ed er a l S t eel C o w hi c h c omb ine d Chi c ago s I ll inois

’
.
,
.
,

S t eel CO an d th e Lo r ain S t ee l Comp an y (w ith pl ants in Lo r ain O hio

.
, ,
?3
an d Johnsto w n P enns ylv ania ) w ith the Minnesota I ron Comp any Th e
,

n ew c om b ination soon ha d r ai lr oa d s an d a fl eet of o r e b oats to pr o v i d e

t ran sp o r tation of th e o re to th e mi ll s In th e same yea r many sma ll i ron .

,

an d st eel fi r ms in O hio a n d Penns ylv ania me r ed to fo r m the R e publ i c

g
24
a n d N ation al S t eel C om p ani es S ho r t ly th er eafter a S imi l a r comb ination
.
,

in th e S a ult S ainte Mari e a rea b ec am e th e L ak e S u p e rio r Co r p o ration .

T h ese comb inations b ega n at on c e to c onso l i d ate th ei r man u fa c t uring

a cti viti es to set up th ei r ma rk eting o rgani zations an d to ob tain con
, ,

t ro l by l ea se an d pur chas e of ra w mate ria l s an d t rans po r tation fa ci l i

ti es By 1 900 severa l s m all fi rm s m ak ing high gra de steel d i d m uch the
.
,
-

sam e t h in w h n t h ey fo r m ed th e C ruc i bl e S t eel C om p an y of Ame r i c a

g e .

Ab o u t thi s time th e l a rger establi sh ed Steel com p ani es l ike Jon es 8: La ugh
,

l in L ack aw anna an d C ambria mo ved to O b tain a mo re c ertain cont ro l

, ,

o ver thei r su p pl ies of o re an d Sim ul taneo u sly al tered thei r manu fa ctur ing
HISTORICAL SETTING 35
o r ma rketing o rgani z ations S omewhat the same p atte r n can b e d is ce r ned
.

in the co pp e r an d othe r meta l s in du st r ies .

These comb inations among the pr o duce r s of semifi n ish ed steel an d

other meta l pro ducts bro ught on b etween 1 898 an d 1 900 a w a ve of , ,

me rge r s amo n g th e u se r s of steel co pper an d oth er sem ifi n ish ed mate , ,

r ia l s In a ddition to th e th reat of buy in g from a v ery fe w r ecently com

.

b in ed pr o ducer s w ho co uld set thei r o w n pr i ces the memo r i es of u n

, ,

u se d c ap a city an d lo w pr i ces d ur ing the depression y ea r s of the 1 8go s an d ’

the p er s u a si v e a rguments of the Wa ll S t reet pr omote r s eage r fo r the pro fi ts

of comb ination stim ul ated th ese merger s Among the u s er s of i ron steel .
, ,

an d co pp er thes e in cluded Ame r i c an Tin P l ate Ame r i c an S teel 8: Wi re , ,

Am er i c an S tee l Hoo p Nationa l T ub e Am eri c an Br i dge Ame r i c an S he et

, , ,

S teel S he lby S te el T ub e Ame r i c an Can N ationa l Enamel in g 8: S tamp

, , ,

in g C o Amer i c an Ca r 8: F o u n dry Ame ri c an Lo comoti ve Inte r nationa l

.
, , ,

Ha rve ste r Inte r nationa l S team Pu m p an d Ame r i c an Br ass Co Some of

, , .

thes e ne w enterpr ises wer e comb inations of man u fa ct ur in g w o rk s bu t ,

some l i k e Inte r nation al Ha rveste r Inte r nationa l S team P u mp Amer i c an

, ,

C an an d Am er i c an Br ass w er e com b inations of a lr ea dy conso l i d ated in

, ,

tegrated com p a n ies .

Whatever thei r o ri gin most of these comb inations qu i ckly co n So lidated

,

th ei r constit u ent comp anies into single o p e r atin g o rgani z ations Man ufac .

t ur in g fa ci l iti es w e r e u nifi e d an d s y stemati ze d o ver—a ll a cco u nting p ro ce ,

dures instit uted an d a nationa l an d often wo rld-w i de d ist ribu tin g o rgani
,

z ation fo r me d S om e ev en b eg an to ass ur e th ems elv es of c ont r o l of s upply

.

by bu i lding thei r o w n ro llin g mi ll s an d bl ast fur na ces As the Amer i c an .

S tee l 8: Wi r e an d N ationa l T ub e b e gan to ma k e thei r o w n ste el th ey

/ ,
25
c an ce le d co n t r a cts w ith Ca r negie an d oth er semifi n ish ed pro duce r s .

This de velo p ment in t ur n led C a r negie to brin g fo rth p l ans to fabr i c ate
, ,

his o w n fi nishe d pr o d ucts .

The res ul ting th r eat of u nemplo y e d r eso urces an d pr i c e cu ttin g led as ,

students of Amer i can bu siness histo ry k no w so well to the fo r mation of ,

26
the U nited S tates S tee l Co rp o r ation T his b i ll ion-do ll a r merger c ame .

to in clude th e Car negie F e der a l an d N ationa l S teel com p ani es an d the

, , ,

fi r st si x of the fabr i catin g com p anies l isted a b o v e It c ontin u ed as a c om .

b ination Al tho ugh th e a c ti v iti es of the v a r io u s integr ated m ultifu n ction

.
,

s ub si d ia ri es w er e re fo r m ed an d redefi ne d th er e w as no o ve r—a ll con so l i d a

-
,

tion Un der th e c hai rmanship of one of its most a cti ve fo u n der s Elb er t
.
,

H G a ry it r emained from an a d minist r ati ve stan dp oint a feder ation

.
, , ,

of o per ating di visions loo sely cont ro lled by the ho ld in g comp any O n ly in .

th e 1 g3 o s w ell after G a ry s d eath d i d th e co rp o r ation s gen er a l o ffi ces at

’ ’ ’

, ,

7 1 Br oa dw a y b e g in e ff ec ti v ely to c oo rd inate a ppr aise an d pl an p o l i c i es , ,

an d pro ce dures fo r its n u mero u s s ub si dia r i es an d di d so th en on ly after ,

3 6 HISTORICAL SETTING
it h ad taken on a management st ruct ur e very simil a r to th e o n e Alfred P .

S l oan ha d install ed at Gen er a l Moto r s man y y ea r s ea rl ie r .

The yea r s from th e en d of th e depression of th e 1 87o s u nti l th e t ur n ’

of th e century w itness ed an eno rmo u s s urge in Amer i c an in du st r ia l o ut

t By 1 00 in du st r ia l c a p a c it y s urp asse d that of an y oth er n ation D ur
p u .
9 , .

in g this same p er io d of gro w th the most dy n ami c an d most si gnifi c ant

,

of Amer i c an in du st r ies ha d b ecome dominate d by a few great v er ti

c a lly integr ated enterpris es o p e ratin g in nationa l an d often wo rld ma r
k ets S ma ll fi rms remain ed in these in du str i es bu t to exi st they ha d to
.
,

con centr ate on a sp ecia l i zed pro duct o r meetin g the nee d s of a l o c al a rea .

In the l ast two dec a des of th e nineteenth century Amer i can in du s ,

tr i alists con cent r ated thei r imagination an d energy on the creation of

thes e in du stria l emp i res T h ey b ecame engross ed in planning the strategi es
.

of exp an sion an d in s ecur ing th e r eso urces the men money an d equi p , ,

ment ne cessa ry to meet th e need s an d chall enges of a s wift ly in

du strializin g an d urb ani zi ng e conomy T h e p o wer ful c a p tain s — the .

R o ckefeller s S w ifts D uk es G a rys an d Westingho u ses — an d thei r able

, , , ,

lie u tenants ha d l ittl e time an d often l ittle inte r est in fashioning a r ational
an d s y st emati c d esi n fo r a d minister in g eff ec ti v ely th e v ast r eso urc es th ey
g
ha d u nite d u n de r thei r cont ro l Y et th ei r st rategies of exp ansion conso l i da
.
,

tion an d integr ation deman de d S truct ura l chan ges an d inno v ations at a ll
,

l e vel s of a dministr ation .

Organ izatio n Bu ildin g

The o rgani z ation of thes e new domains w as as di fficult an d as ch allen g
in g as th ei r cr eation The ec onomi c a dv antages of integr ation an d consol i
.

d ation o u tlin ed by Cha rles Fl int w ere in no s ense a u tomati c ally con
, ,

comitant w ith in du st r i al imp e ria lism As Fl int s comments an d the 1 90 1

.
’

annu a l r ep o r t of th e N ation al B is cu it Comp an y b oth s uggest the e con ,

o mieS of s c a l e r es ul ted on ly fr om c a r ef ul attention to the a d minist r ation

of ma rk eting manufa ct ur in g an d pro curement of r aw mater ial s and

, , ,

abo ve a ll from coo rd inatin g an d integr ating th ese d iffer ent a cti vities into
,

a u ni fi ed w hol e S uch attention w as p a r ti cul a rly ess en tia l in thos e enter

.

pri ses whi ch ha d b e come l a rge initia lly th ro ugh comb in ation an d conso l i
d ation .

T h e tas k a pp ea r ed so d ifficul t that man y d o ub ted the p ossib i l it y of

bu i lding effi ci en t con so l i d ated enterpr is es After completing in 1 9 1 4 a .

S t udy of fo urteen fi nan cially u ns uccessful combinations an d con

so lidatio n s that ha d b e en fo r m ed in th e me rger mo v ement at t h e t ur n of

th e cent ury A r th ur S D ew in g l ist ed s ever a l u n d e rly in g r ea sons fo r th ei r

, .

fai lure : E very o n e of whi ch in v a rying degree sho wed th e d ifficulty of

“

, ,

ob taining a s uffi c i ently high degree of bu siness ab i l ity to manage a l a rge

HISTORICAL SETTING 37
” 27
consol i d ation of man ufa c t ur in g pl ants To Dew i n g an d many othe r
.

busin ess ana ly sts of his d a y the problem w as one of p e r sona l conta ct an d
,

in di v i du a l ab i l it y O n ly a man of eno rmo u s ene rgy an d highest inte lle ct

.

co uld k eep in to uch w ith a ll th e a cti viti es of one of th ese v ast n ew

ente rpr is es S in c e suc h ta l ent ed in d i v i du a l s w er e r a r e in d eed few ent er
.
,

prises were able to a chi ev e e conomies of s ca le D ew i n g w as qu ite r i ght A

. .

l a rge in du str ia l co rp o r ation h eld togeth er on ly by info r ma l p er sona l con

tacts co uld h ardly b e effi c ient Ho wev e r h e ga ve l ittle tho ught to th e
.
,

p ossib i l it y of bu i ldin g a fo r ma l st ruct ure w ith c a refully defi ne d lin es of

a u tho r ity an d comm u ni cation an d w ith detai l ed a ccur ate an d vo lu mi
, ,

no u s data to flo w th ro ugh th ese lines Po ssibly b ec a u se man y Ameri c ans

.

contin u ed to thin k of bu sin ess a d minist r ation p ur ely in terms of p er sona l

ab i lit y s u ch attit udes as to the a l most inevitabl e in effi cien ces o r d is
,

e conomi es of l a rge—s c al e in du st ria l ente rpr is e p er sisted lon g afte r D ew in g

wrote an d l ong after this t yp e of in du st ri al o rgani z ation ha d pro ved its
pro fi tab i lit y in terms of retur n on in vestment an d its effi ci en cy in t er ms of
c ost p er u nit of o u tput .

Th e in du st r ia l ists w ho m et th ese a d minist r ati v e cha llen ges w er e r a r ely

th e m en w ho ha d cr eat ed th e gr eat in du st r i al d omains O n ly o ccasiona lly .

w ere th ey ev en memb ers of the em p i re bu i ld er s fami ly T h e fo r m ul ation

’
.

of d esi gn s fo r th e go ver nment of a bu siness em p i r e c a lled fo r d i ffer ent

talents an d a d i ff er ent t em p er ament than d i d its a cqu isition as th e fo ur ,

c ase studies so cl ea rly i llu st r ate T h es e organi z ation bui ld er s ha d a fo rmi

.

dab le ta sk not on ly b ec a u se th ey ha d few pr ecedents to rely on bu t b e

, ,

c a u se in man y c ases th e initia l moti ves fo r exp ansion o r comb ination

an d v erti c al integr ation h ad not b een sp ecifi cally to l o w er u nit costs o r to
ass ure a larger o ut pu t p er wo rk er by effic i ent a dminist r ation of th e en
larged r eso urces of the enterpr is e The st r at egy of e x p ansion ha d c om e as
.
,

has b een st r es sed from th e desi r e to ass ur e mo re s ati sfa cto ry ma rk etin g
,

fa ci l ities o r to h ave a mo r e cer tain s upply of S to ck s r aw mat er ial s an d, ,

oth er s up pl i es in o rder to emplo y mo re fully th e ex i stin g man ufact ur ing

pl ant an d p er sonn el E ven after a comb ination ha d c on so l i d ated its
.
,

manage r s often contin u ed to thin k of cont ro l of com petition as its

pr ima ry pur p os e F ina lly m an y of the l ater m erger s w er e ins p i red an d
.
,

c a rr i ed o ut b y Wa ll S t reet fi nan ci er s an d s p ecul ato rs an x io u s to pro fi t

,

from promoter s fees sto ck w ater ing an d oth er fi nan cia l mani p ul ations
’

, , .

Whi le th e in du st r ia l i sts an d n o t th e fi nan cier s ini ti ated th e p atter ns of

conso l i d ation an d integr ation in Am eri c an in du stry th e fi nan ci er s in th e
, ,

yea r s after 1 897 O ften exploited the ne w S it u ation fo r th em selves as th ey

,

met the n ew l eg itimat e fi nan c ia l w ants r aise d by these st r ategies .

In man y of the n ewly create d ent er p r i ses w h e re a dminist r ati ve con

sol i dation o ccurred the exe cu ti ves r es p onsibl e fo r conso l i d ation bui lt th e
,
3 8 HISTORICAL SETTING
n ew structure in an info r mal u npl anne d manne r In other s o rgani zation
, .
,

bui lder s c a rr ie d o u t thei r task s mo re s y stemati c ally an d r ationa lly In .

eithe r c as e the l ines of a u tho r it y an d c omm u ni c ation e v o lve d at a ll l e vel s

,

of bu siness a d minist r ation A desi gn eithe r fo rma l o r info r ma l needed

.
, ,

to b e frame d fo r th e management of en l a rge d fa cto r ies br anch o f ,

fi ces an d oth er fi eld u nits Fu n ctiona l dep a r tm ents ha d to b e bu i l t to

, .

manage the fi eld u nits C ent r a l offices ha d to b e fashione d to coo rdinate

.
,

a ppraise an d set po li cies fo r the fu n ctiona l head qu a rte r s an d the ente r

,

pris e as a whole An d by 1 900 some of th e ve ry l a rgest of the n ew en

.
, ,

terp rises w er e a lr ea dy r es p onsi bl e fo r th e a d minist r ation of inte gr at ed

m ultifu n c tion s ub si dia ries as we ll as sin gle-fu n ction dep a rtments .

B ec a u s e th e r ai lroa d s ha d fa ce d comp a rabl e a dminist ration problems a

en er ation ea rl i er the y pro vi de d thes e o rgani zation bu i lder s w ith th ei r
g ,

only u seful prece dents o r mo de l s O f a ll the r ai lroa d s the exp e r ien ces of
.
,

th e Penns ylv ania b ec am e th e b est k no w n By the 1 88o s w hen nea rly a ll

’
.
,

th e ma j o r Ame r i c an r ai lr oa d s w ent th r o ugh a d ministrati v e r eo rg ani z a

tion the Penns ylvania ha d b ecome in the wo r d s of one exp er t in e v ery

, , ,
“

”
res pect th e stan d a rd r ai lroa d in Ame ri ca ?
In bui lding b oth d ep a r tmenta l an d c ent r a l o ffice st ruct ures the Pen n syl ,

v ania w as th e fi r st Ame ri can bu siness to wo rk o ut fully the line-an d-sta ff

con ce p t of dep a rtmenta l o rgani z ation Its b asi c problem he r e w as to defi n e .

the l ines of comm u ni c ation an d a utho r it y b etween dep a rtmenta l h ea d

qu a r te r s an d th e fi eld di visions in the c a rry in g o u t of its b asi c a cti vity
t r ans po r tation In Penns ylvania s Tr ansp o rtation D ep a r tment th e execu
.
’

tives d i r e ct ly c on cer ne d w ith mo v in g of t r ains b ec ame l ine offi ce r s an d

tho se dea l ing w ith a ux i lia ry o r se rvi ce a c ti vities staff ones The line of , .

a utho rity r an from th e presi dent to th e gene r a l mana ge r to the gene r a l

29
s up erinten dents an d th en to the d i vision s up er inten dents in th e fi eld .

By th e 1 88o s th e pr in ci ple ha d b een establ ished that l ine O fficer s at

’

h eadqu a rter s a n d in th e lo ca l d i visions ga ve the o rde r s an d ma de the d e ci

sions dea ling w ith p er sonne l whi ch in clude d those of d is ci pl ine w ages
, , ,

ho urs a ll o c ation of duties hi r ing and fi r ing Those exe cuti ves at hea d
, , , .

qu a rter s o r in the di v isions in th e fi eld w ho w e re con ce r ne d w ith th e

maintenan ce of w a y moti ve p o we r o r ro ll in g sto ck that is th e staff
,
—
, ,

o fficials — c omm u ni c ate d d i rectly with p e r sonne l on ly on matter s of

stan d a rd s an d pr o c e dur es The l ine -an d -sta ff c on cep t w as f ur the r ex t en d e d
.

to cl ar ify th e rel ations b etween the o lder t rans po rtation dep a rtm ent an d
th e n ew er t r a ffi c an d fi nan c ia l d e p a r tment s A gain the l ine o ffi cers .
,

those d i rectly in vo lved w ith th e r ai lroa d s prima ry fu n ction t r anspo rta ’

tion deal t with p eople an d the staff offi cer s with things S tation agents .
,

fo r e xam p l e recei ved inst ruc tions on the ob taining an d fo rw a rding of

,
HISTORICAL SETTING 39
fr ei ght fr om the tr affic d e p a r tment bu t the t r ans p o r tation dep a rtment
,

de ci ded thei r p a y an d d ai ly r o utine .

With contin u ing exp ansion the hea d of th e maj o r d ep a r tm ents

,

t r ansp o rtation t r affi c an d fi n an ce b ec ame vi c e-pr esi dents w ho w ith

, ,
—
,

the presi dent a dmini ste re d the enterpr ise as a who l e Th e P enns ylv ania
,
.

w as one of th e ve ry fi r st Ame r i c an bu siness enterpr ises to mak e clea r the

imp o r tant distin ction b etw een the du ties of a V i ce—pr esi dent an d a gene r a l
mana ge r in cha rge of ea c h maj o r a cti vit y T h e v i c e-pr esi dent w as to con
.

cent r ate on broa d lon g te r m entr epr eneur ia l a ctiv ities an d the gen er a l
-

mana ge r on the d a y-to d a y o p e r ation of the de p a rtment The Pen n syl

- .

v ania too w as one of the fi r st to u se stan d in g committees of the b oa rd

, , ,

es p e cia lly th e execu ti ve an d fi nan ce committee as the me di u m th ro ugh ,

w hi ch th e representati ves of the l a rge in vesto r s maintaine d some so r t of

w at c h o ve r th e full-time professiona l mana ger s in the cent r a l o ffi ce .

Not all the r ai lr oa d s to sa y nothin g of th e new e r in d u st ria l enterpr is es

, ,

fo llo we d the Penns ylv ania e x am ple E v en th e Ne w Y o rk Cent r a l long

.

r etaine d the pr a c ti c e of ha ving its O ffic ia l s in the a uxi l ia ry an d s erv i ce

a cti vities r ep o r t di r e ctly on a ll matter s to th ei r sen i o r s at h ea dqu a r te r s
r athe r than th ro ugh the l ine O fficers — the di v ision o r gen eral su p erin v

ten den tsf

"O
O n ly a fe w r oa d s ma d e the distin c tion b etw een the duties of
the vi ce pr esi dent an d gene ra l manage r O n the Penns ylvania itsel f the
-
.
,

distin c tion in time b e c ame l ess cl ea r .

E ven whe r e the in du str ia l ists loo k e d to th e r ai lroa d exp e r ien ce th ey ,

sti ll h ad m u ch creati v e wo rk of thei r o w n to d o Thei r adm in IstratIv e .

pro blems we r e mo re complex T h ei r fi eld u nits w er e often mo r e s c att er ed

.

an d less close ly connected than w er e th e c onti guo u s r ai lroa d d i v isions .

A S the v o lu me of man ufa c t ur in g an d of sa les e xp an d e d an d m etho d s b e

c ame mo r e compli c ated mo r e a uxi lia ry an d se rvi ce u nits w e re d eve lo p ed
,

in the field u nits de p a r tmental h ea d qu a r ter s an d e ven th e cent r a l o ffice

, ,

than e ve r existed on th e r ai lroa d s Mo r eo ver l a rge integr ated in dUstrial

.
,

enterpr ises c a rr i ed on a gr eate r v a r i ety of a c ti vities The r ai lroa d s pr ima ry .

’

con ce r n w as w ith a singl e e conomi c fu n ction — tr ans p o r tation — w hi le

the ne w integr ated in du str ia l enterpr ises c a rr i ed o u t at l east th r ee b asi c
fu n ctions an d some oi l steel an d meat-p ack ing fi r ms e ven too k on a
, , ,

fo urth by b ecoming r es p onsi bl e fo r m uc h of th e t r ans p o rtation of th ei r

pro ducts Di r e ct ma rk etin g an d the pro curem ent o r pro d uc tion of s up
.

pl ies an d materia l s often ca lled fo r di ff e rent ta l ents an d t r aining than

man ufa ct ur ing While ea c h maj o r fu n ctio n c ame to b e man aged by a
.

se p a r ate dep a r tment no o n e dep a rtment ha d d istin ct pr io rit y as d i d th e

,

t ransp o r tation d p a r tment on a r ai lroa d As a res ult th e l ine an d staff

e -.
-
,

distin ction co uld not b e a p pl ied in defi ning interdep a rtmental r el ations .
4 0 HISTORICAL SETTING
Not on ly w as coo rdination of dep a r tmental acti vities h arder to wo rk o u t
in th e integr ated in du st ri al enter p r is e th an on a r ailro ad but th e ap p r ai sal ,

a n d p l annin of s ev er a l d ep a r tment s w ith su ch d i sp ar ate acti v iti es pr o ved

g
a f ar m o r e compl e x tas k .

As th e c a se studies emp hasi ze some indu st ria l enterpris es met th ese ,

ch a llenges m uch mo re creati vely than oth er s By th e 1 92o s ho w e ver th e .

’

, ,

o rgani z ation bu i lder s ha d wo rk ed o u t fai rly stan d a rd designs fo r admin is

te r ing the sever a l fu nctiona l a cti viti es from dep ar tmenta l h ea dqu a rte r s
an d th e enter p r i se as a who le from a centr a l o ffi ce By th en t ra de j o ur na l s .
, ,

h an dboo k s an d even textb oo k s were beginning to d is cu ss the need s p rob

, ,

l ems an d metho d s O f man agin g r ationally a l arge single—fu n ction o r m ul

,

tifu n ctio n in du st r ia l ent erpr is e S o at th e cl os e of Wo rld Wa r I most

.
, ,

l a rge in du st rial comp anies whos e execu ti ves p ai d any attention to o rgani
z atio n al matt er s w er e a d minist er ed th r o u h m uch the sam e t yp e of o r
g
n ization — th e cent r a l i zed fu n c tiona lly d ep a r tm enta l i z ed st ruc t ur e
g a , .

B efo r e 1 920 ho w e ver o rgani z ation bui ld er s ha d yet to de vise a struc

, ,

t ur e by whi ch a gene r al office might eff ecti vely a dmini ster a n umb er of
verti c a lly integr ated s ub si di ar ies o r di visions By that time a few very .

l a rge holding comp ani es di d cont ro l a n u mb er of m ultifu n ction as w ell as

S in gl e f u n ction sub si d i ar ie s an d w er e fa c ed w ith this a d mini st r ati ve pr o b
-

lem S om e of th es e l i k e U nite d S tat es S teel d i d l itt l e mo re than fo r m

.
, ,

an o ffi ce to h elp set pr i ce an d pro duction s chedules fo r the many a lmost

comp letely au tonomo u s d i vi sion s O th er s lik e S w ift A rmo ur an d Amer i
.
, , ,

c an Tob acco h ad develo p ed carefully d efi ned fu n ctiona l dep a rtments an d

,

a centr a l o ffice to admini ster tho se dep artments whi ch han dled th ei r
prima ry l in es T he y ma de litt le attemp t ho w ever to pro vi de a st ructur e
.
, ,

to administer th ei r s ub si d ia ri es w hi ch han dl d b y pro ducts a llied l ines

e —
, ,

o r th e oth er m ultifu n ction enter p r i ses whi ch th ey h ad come to contro l

th ro ugh th e h o lding com p an y d evi ce At S tan d ard O i l long th e l argest .
,

Amer i c an in du st ri al ent erpris e an d aft er 1 90 1 secon d on ly to United S tates

S teel th e l in es of a u tho r it y an d comm u ni c ation w er e p a rti cul a rly u n cl ea r
,

an d confu s ed A t its execu ti v es O ffi ces at 26 Bro adwa y no s h a rp distin c

.
,

tion s were ma de b etween th e fu nctions of a gen eral O ffice an d th ose of a

cent r al o ffi c e o r ev en of a d ep ar tm enta l h ea d q u a r t er s Con si der th e de .

scr i p tion th e hi sto r i a ns of th e S tan d a rd O i l C omp an y of New J er sey gi v e

of 26 Bro adway sho rt ly after th e t ur n of th e cent ury :

The staf f at 2 6 Bro ad way , u p n wh i
ives relied for aid
o c h all th e e ecu t x ,

w as an u nco m m on ly h etero geneo u s m ixtu re T h e o rgan i zati o n h av ing .

,

develop ed o ver a tim e co n tin u ed to r eflect th e m élan ge o f co mpanies b ased

,

u p o n h i sto r i cal p r ecedent p er so n al p r edilectio ns state co rp o r atio n r eq u i re

, ,

m ents an d tax law s Even su ch an o r der ly m ind as th at o f S C T D o dd

,
. . . .
HISTORICAL SETTING 4 1

Co mpany d i d n o t h ave a co m lete p ictu r e o f it

G eneral C o u n sel ]
’
th e
[ s p .

In additio n to di recto rs all th e p rincip al m anu factu r ing comp anies an d

,

m any o f th e lesser o nes h ad sales agen ts at h ead qu arters for r efi ned o il

in th e do mestic trade fo r refi ned o il in th e exp o r t trade fo r lu b ricating o il
, ,

in th e West fo r lu b ricating o il in th e East an d for expo rt

,
31
.

When the mana ge r s of a fed e r ation o r comb ination of integr ated c om

p an ies d e c i d e d to c oo rd inate a ppr aise an d pl an s y st
,
emati c a lly the w o rk
,

of thei r fa r-flu n g enterpr ise th ey a l most a lw a y s conso l i d ate d th ese activ i

,

ti es into a sin gl e cent r a l i z e d f u n ctiona lly d e p ar tmenta liz e d o rgani z ation

, , .

As ha d th e d iff e r ent m erg e r s amon g the u se r s of steel s uc h as Inter nationa l ,

Ha rveste r A llis-Cha l me r s Ame r i c a n Lo comoti v e Ame r i can Ca r 8:

, , ,

Fo u n dry an d Ame r i c an Can S O man y othe r comb ination s qu i ckly d is

, ,

b an ded thei r constit u ent fi rms an d pl a ce d th e sa l es man ufa ct ur in g pur , ,

chasin g o r en ginee r in g a cti viti es o f ea c h w ithin l a rge sin gl e—f u n c

, ,

tion dep a r tments By 1 909 on ly tw o o r th re e of the nation s l a rgest in

.
,
’

du strial emp i r es r emaine d pure ho ld in g c om p anies M o re l i k e S tan d a rd .

,

O i l Ame r i c an To b a cco an d th e meat p a ck e r s c ontin u e d to b e l eg a lly

, , ,

b oth ho ld in g an d o p er atin g c om p ani es that a dministe r e d hoth fu n c

t io n al d e p a r tments an d m ul tifu n ctiona l u nits the l atter u s u a lly h a v in g the
,

l ega l fo r m of a sub si dia ry c o rpo r ation The l a rge maj o r it y ho w ev e r .

, ,

b ecame a dministe r e d th ro ugh c ent r a li zed fu n ctiona lly dep a rtmenta l i ze d ,

st ruct ures F o r u nti l A l fr ed P S l oan creat ed a ne w o rgani zation fo rm at

. .

Gene r a l M oto r s in 1 920 this st ruct ur e a pp ea r e d to b e the on ly o n e w hi ch

,

c o ul d ass ur e e ff e cti v e a dminist r ati v e cont ro l o v e r a l a rge in du st ria l con

so li d ation .

Y et the dominant c ent r a l i z e d st ruct ure ha d one b asi c w ea k ness A v ery .

fe w men w e re sti ll ent ru ste d w ith a great n u mb er of compl ex decisions .

The ex e cu ti v es in the c ent r a l ofli ce w e r e u s u a lly the presi dent w ith one
o r tw o assistants somet i mes the c hai r man of the b oa rd an d the v i c e
, ,

presi dents w ho hea de d th e se ve r a l dep a r tments The l atter w e r e often too .

bu s y w ith the a dminist r ation of th e p a rti cul a r fu n ction to d e vote m uch

time to the aff ai r s of th e ente rpr is e as a w ho l e Thei r t r ainin g pr o ve d a .

sti ll mo r e s er io u s defe ct B e c a u s e these a d minist r ato r s ha d s p ent most of

.

thei r bu siness c a r ee r s w ithin a singl e fu n ctiona l a cti vity th ey ha d littl e ,

exp er ien c e o r inte r est in u n d e r stan d in th n d s an d pr o bl ems of oth er

g e ee

dep a rtments o r of the co rp o ration as a w ho l e A S lon g as an ent er p ris e .

b el on ged in an in du st ry w hos e m ark ets so urces of r a w mater ia l s an d , ,

p ro du ction pr o cesses r emaine d r e l ati vely u n changed few ent repreneuri al ,

decisions ha d to b e r ea ch ed In th at sit u ation s uch a w ea k n ess w as not

.

critic a l but wh er e te c hno lo gy ma rk ets an d so ur ce s of s upply w e r e chang

, , ,

in g r a p i dly the d efec ts of s uc h a st ru ct ur e b e c am e mo r e o bv io u s

, .
4 2 HISTORICAL SETTING

F u rth er G r o w th Th e Co min g o f th e Mu ltidivisio n al En terprise

Th e l a st tw o deca d es of th e nin eteen th c ent ury w itness ed th e initial
ma ssi ve exp an sion of A m eri can in du st ry an d w ith it the bu ildin g of the
”
fir st gr eat int egr at ed in du s trial emp ir es Aft er 1 900 e v en tho ugh the at
.
,

t ention of in du stri al l ea der s b ecam e in cr easin gly con centr ate d on the
o rgani zation of s uch emp ires the gr o wth of in du str y an d its gr eat ente r
,

p ri ses continu ed Fu rth er exp an sion r ested fu n d am enta lly on b asi c p Op u

.

l ation an d t ech no logi ca l ch an ges Cr i ti cal ly im po rtan t w as the contin uing

.

r ap i d gro wt h of th e ci ty Urb an po pul ation ros e from

. mi llion in 1 900
to mi lli on in Th en w ith th e dev el op ment of the el e ct r i c tro ll ey
an d mo r e p a rti cul ar ly th e a u tomob ile came a r ev er se tr en d fr om the c ity
to th e suburb As Si gnifi can t w er e th e gr eat ne w te chno l ogi cally a dv an ce d
.

in du stri es b ased on th e n ew gen er ato r s of p o wer — the el ectr i c an d gaso

lin e en gi n e— an d on the s y st emati c a p p li c a tion of s cien ce to in du str ia l
p ro duction an d pro duc ts In th es e n ew in du str i es (th e el ectr i ca l a u to
.
,

m ob il e ch emi cal an d el ec tr oni c ) an d in th e o ld er in du s tr ies wh i ch w e r e

, ,

r evo lu tio ni zed by ch an gin g p o pul ation an d te chno l o gy (th e rubbe r ,

p etr o leum agri cult ur al i m p l em ent an d other po wer ma c hine ry an d the

, ,

ch ain sto r e an d m ai l —o rd er bu sin es ses h ea i ent ise e ame

-
) t e l d n g erpr, s b c
fa ced w i th in cr ea singly com p l ex admi nistr ati ve p roblems An d it w as in .

th es e in du stri es th at th e l eading fir ms t ur n ed to managing th ei r a cti viti es

”
thr o u gh th e n ew m ul ti d i v ision al d ecen tr ali zed s truct ur e
“
.
,

After 1 900 th e l arge in dustr i al ent er p r is e m et the n eeds an d o ppo rt u ni

,

ti es of an econom y gr o w ing m o r e urb an an d m o r e technol ogi cally ad

v an ced t h r o u h t h r ee t y e s of st r at e i es Gr o w th c ame eith er fr om an
g p g .

ex p an sion of th e fir m s ex is tin g li n es to m uc h th e S ame ty p e of c u stom er s

’

o r it r es ul ted from a q u est fo r n ew mar k ets an d so ur ces of s up plies in

di st ant l an ds o r fi n ally it cam e fr om th e o p ening of n ew mark ets by deve l
,

o p ing a wi de r ange of n ew pro du cts fo r di ff er ent typ es of cu stomer s The .

m et al s com p ani es an d m an y of thos e th at p ro cess agr i cult ur al p ro ducts

h a v e h eld to th e fir st of th ese S tr at egi es F o r th e p a st hal f-century most
.
,

co pp er z in c i ron St eel tob a cco meat s ugar li qu o r an d b anana com

, , , , , , , ,

an ies h a v e m ad e m u ch the sam e ty e of pr o du cts fo r m uch th e s am e t yp e

p p
o f u ser T h u s th ei r ex p an sion h as br o u ht f ew n ew ty p es of a dmi nistr ati v e
.
g
p robl em s In 1 960 most ent erpri ses in th es e in du st ri es con tin ued to be run
.

th r o u gh th e o ld er cen tr a li zed fu n ction ally d ep a rtm enta li z ed fo r m

, ,
.

In th o se in du str i es mo st aff ec t ed by th e n ew m ark ets an d n ew t ech

n o lo gy gr o wt h c am e mo r e by goin g o v er s eas an d sti ll mo r e by div ersifi
,

cation O f th ese t w o str at e i es di v er sifi c ation w as fa r mo r e r es p onsibl e fo r

.
g ,

th e a do p tion of th e
”
d ecent r ali zed st ruct ure than o ver sea s exp ansion
“
.

Di v er sifi cation c ame w h en l eading comp ani es in th es e t echno lo gi call y

HISTORICAL SETTING 43
a d v an ce d in dustr ies r ea li ze d that th ei r fa cili ties an d th e s cientifi c k no w
ho w of th ei r p e r sonne l co uld b e easi ly tr ansfe rr e d into the pro d uction an d
sa l e of ne w goo d s fo r new ma rk ets F o r those ente rpris es w hose en ergi es .

w ere con centr ated pr imari ly in merchan disin g d i ve r si fi cation c ame b e ,

c a u se of the Changin g ma rk ets in the c it y an d then in the s uburb s .

M an y chemi ca l comp anies fo r ex ampl e b e came a w a r e in th e 1 g2o s of

, ,
’

the o pp o rt u nities that l a y in fo ll o wing th e r o u te a lr ea dy cha r ter e d by the

du Pont Com p an y of gro wt h th ro ugh d i v e r si fi c ation into ne w l in es of
pro d uc ts In thes e ent erpr ises as at du Pont this Str ategy b ec ame s y s
.
, ,

tem atiz ed by th e bu i ld in g of l a rg e r esea rc h d ep a r tments w hose tas k w as

to br in g fo r th ne w pr o ducts as w e ll as to im pro v e ex istin g p ro ducts an d

pr o c esses U nite d S tates R ubb e r B F Goo dri ch an d oth er rubb er com
.
, . .
,

p a ni cs e ven b efo r e most ch emi c a l com p ani es b eg an to d i v e r sify th ei r l in es

, ,

an d to exploit th e p oten tia l s of rubb er c h emist ry Aft er Wo rld Wa r II .

,

th e rubb e r com p anies that ha d c on c ent r ate d on the ti r e al so ent er ed into

s y stemati c r esea rc h an d d e v e lo p ment an d b eg an to mak e an d ma rk et l ate x ,

pl asti cs an d oth er chemi c a l pro ducts as well as in du str ia l rubb er floo r in g

, , ,

footw ea r an d so fo r th In the p ostw a r yea r s too ga so line comp anies

, .
, ,

sta r te d on com p a r abl e str ategies of exp ansion th r o ugh d i v er sifi cation by
de vel op ing a w i de r ange of p etro chemi c a l s .

The a pplic ation of s cien ce to th e dev el op ment of ne w pro ducts th ro ugh

institutiona l i ze d r esea rch bro ught the sam e st r ategies of di v er sifi c ation in
the e le ct r i c al e le c tr oni c s and to a somewhat l es se r extent the p o w er ma
, , , ,

chine ry an d a utomob i le in du str ies The great e lect ri c a l comp ani es G en .

,

e r a l Elec tr i c an d Westingho u se b egan as ma k e r s of a f ull li n e of p ro

,

d ucer s goo d s fo r th e gene r ation an d u se of e le ct r i c p o wer an d li ght In the

’
.

1 92o s th ey mo v e d into the mass c ons u me r ma rk et by pr o duc in g an d s ell

’

ing w ashin g ma chines r efr i ger ato r s v a cuu m cleane r s sto ves an d othe r
, , , ,

ho u seho l d appl ian ces At the same time the ene rgies of thei r r es ea rch
.
,

l ab o r ato ries br o ught these comp anies into the ma k in g of pl asti c s a llo y s , ,

an d a v a r iety of pro ducts b ase d on the v a cuu m t ub e an d the s cien c e of

el e ctr onic s The a u tomo b i l e comp anies in t ur n b egan to pro d uce tr a c
.
, ,

to r s d iese l s airpl ane engines e l e c tr i c a l e qu i p ment an d e v en ho u seho l d

, , , ,

app lian ces a ll u sin g th e ne w so urces of p o w e r p a r ti cul a rly the inte r nal ,

combu stion en gine T h e a gri cult ur a l impl ement an d o th er p ow er ma

_ .

chine ry firms fo llo we d m uch the same r oa d w ith th e fi r st of them d ev e l ,

o p in g construc tion e qu i p ment an d d i es el s an d the se con d mo vin g into

a gr i cul t ur a l impl ements as w ell as hea vy el ect r i c a l equi p ment .

S omew hat l ate r th e l a rg e flo ur d ai ry an d o t he r foo d pr o c essin g an d

, , ,

m arketin g com p anies b egan to di v e r sify by dev e lo p ing a w i de v a r i ety of

br eak fast ce r ea l s prep ar ed mi xes ch ees es an d oth er en d pro ducts pr o c
, , ,

ess ed o u t of th ei r o ri gin al b asi c pro duct T h es e too b egan to a p pr e ciate .

, ,
44 HISTORICAL SETTING
the p otentia l s of res earch an d soon ha d th ei r ch emi ca l pro ducts an d
di visions By mi d cent ury other pro cesso r s of agri cul t ur a l goo d s w hos e
.
-
,

pr imary line o ff e r e d l ess of a v a ri ety of en d pro duct s s uch as th e meat ,

p a ck e r s an d th e soa p man ufa ct ur e r s mo v e d to w a rd d i ver sifi c ation p artic

, ,

u larly by emp hasi z in g c h emi c a l res ea rc h an d d ev elo p m ent .

Gro w th th ro ugh d i ve r sifi cation into s eve r a l l in es in crea sed th e n u mb er

an d complexity of b oth o p er ationa l an d entrepreneur ia l a cti v itie s even
mo r e than a wo rld w i de exp ansion of one line T h e probl ems of ob taining
-
.

materia l s an d s uppli es of man ufa ct uring an d of ma rketing a n u mb er of

,

pro duc t lines fo r di ff erent typ es of cu stomer s o r in d ifferent p ar ts of th e

w o rld ma de th e task s of dep ar tmenta l h ea dqu a r ter s exceedingly difficul t
to a dministe r s y stemati ca lly an d r ationa lly T h e coo rdin ation of pro duct .

flo w th ro ugh the s eve r a l d ep a r tments pro ve d even mo re fo rmi d able A p .

raisal c am e to in vo lv e not on ly a c onstant int ell i ent ana ly sis of th e o e r

p g p
atin g p erfo r man ce in the d i ffe rent e conomi c fu n ctions in cluding engineer ,

in g an d r es earc h as w e ll as pro du ction d i st r ibu tion t r ans p o r tation th e

, , ,

pro curement of s uppl ies an d fi nan ce bu t th e m ak ing of th ese a p pr aisa l s

, ,

in sever al very diff erent in du st ries o r lines of bu sines s Lo ng ter m str ategi c .
-

pl anning not on ly c alled fo r d eci sions an d a ction con cer ning th e fu ture
u se of ex istin g fa ci l iti es p er sonn el an d f u n d s an d th e d ev el o p m ent of
, , ,

n ew r eso urce s in the c om p an y s curr ent l ines bu t a l so in vo lv ed d ec i sions

’

on enter ing into n ew lines of pro duc ts an d drop p ing o r cur tai l ing O ld
ones .

By p l a cing an in cr easing into ler able st rain on ex i sting a dm ini st r ati ve

st ruc t ur es terr ito r i al exp ansion an d to a m uch greater extent pro duct
,

di v er si fi c ation bro ught th e m ul ti d i v isiona l fo rm D u Pont Gen er a l .

,

M oto r s J e r se y S tan d a rd an d S ear s R o ebuck fi rst devis ed th e ne w typ e

, , ,

in th e 1 g2o s R el ati vely few oth er l a rge in du st ria l enterpri ses fo llo wed
’
.

th e ex am p le of th ese p ion eer s b efo r e th e ma ssi ve economi c b oom t h at

follo wed Wo rld War II T h e dep ression by cutting s ales an d fo rcing a

.
,

cont r a ction of ac ti vity often p o stp on ed th e a do p tion of wh at s eemed to b e

,

a mo re com plex an d exp ensi ve S t ruct ur e O n th e oth er h an d by creating .

,

exc ess c a p a c it y th e d ep r ession ha st en ed d i v er si fi cation D ur ing th e w ar

, .

y ears most enterpr i ses were too con cer ne d w ith th e pro bl em s of con ver
,

sion to mi lit ary pro duction an d th en r econ ver sion b a ck to th ei r o ld l ines .

T h en w ith burgeoning ma rk ets an d s w ift ly a dv an c ing t echno l ogy of th e

”
p ostwa r year s comp an y after comp any t ur n ed to th e n ew decent r al i zed
,
“

fo rm of o rgani zation In refashioning thei r a dmini st rati ve st ruct ur es

.
,

man y were qu ite co ns cio u s ly infl uen ced by th e ex am p le of th e fo ur in

n o v ato rs st ud i ed h er e .

A S ent erp r is es in th e c h emi c al in du st ry b egan to d i v er sify th ey soon met ,

th e s am e so r t of a d mini st r ati v e st r ain s t h at du P ont ha d fel t b etw een

HISTORICAL SETTING 45
1 91 9 an d B efo r e 1 940 ho w e ve r on ly He rcules Po w de r Monsanto
1 92 1 .
, , , ,

an d o n e o r t wo oth er s ha d p atte r ne d thei r o rganiz ations on the du Pont

m ulti d i v isiona l str uc t ure Bu t afte r th e w a r mo r e an d mo r e com p anies
.
,

exp an d in g th ro ugh d i ver si fi c atio n a do pte d th e ne w fo rm S ome l ik e , .

,

A llie d Ch emi c a l an d Union Ca rb i d e w hi ch b egan thei r co rp o r ate ex isten c e

as comb inations w ere abl e to conso l i d ate th e a d minist r ation o f thei r
,

a cti vities th r o ugh this ne w typ e w itho u t e v e r ha v in g d e v el o p e d a c en

tral ized f u n c tiona lly d e p a r tmenta l i z ed st ruct ur e The gr eat maj o r it y on
, .
,

the oth er han d fo llo w e d the du Pont ex am pl e of tr ansfo r min g thei r

,

cent r a li ze d st ruct ur e into th e n ew decent r a l i ze d fo rm The l ist o f chemi c a l .

fi r ms mana ge d th r o ugh d e cent r a l i z e d d i visions an d a gen er a l o ffi c e b e

c ame lon g B esi de du Pont H ercules Po wde r Monsanto A ll ie d Chemi
.
, , ,

c a l an d U nion Ca rb i de it in cluded the Cel anese Co rp o r ation of Am er i ca

, ,

Ame ri c an V is cos e Co lu mb ia C a rb on Ca rb o ru n d u m Amer i c an C y anami d

, , , ,

K o pp er s Pittsburgh Co k e 8 : Chemi c a l Gl i dd en H eyd en N ewp o r t Ch emi

, , ,

c al S ta uff er Ch emi c al Gei gy C h emi c a l At l as Po wder Diamon d A lk al i

, , , , ,

F oo d M a chine ry an d C h emi c a l Eastman Ko d ak an d e ven the chemi ca l , ,

34
d i v isions of S h ell O i l an d Phi ll i p s P et ro leu m .

The l a rgest rubb er com p anies exp an de d th ei r r eso urces to o ver seas a reas
mo r e than d i d most ch emi c a l fi r ms bu t in rubb e r as in chemi c al s div ersifi, ,

cation r ath er than w o rld—w i de exp ansion w as clea rly th e p r ima ry r eason
fo r decent r a l i zation Again th e du Pont expe r ien ce se rve d as a mo del
. .

B efo re Wo rld Wa r II U nited S tates R ubb e r an d Goo dr i ch ha d a do p ted

,

th e n ew fo r m T h e c han ges in th e fi r st c omp a n y w e r e c a rr i ed o u t in

.

1 929 an d 1 930 u n d er the a u s p i c es of du Pont -t r ain ed ex e cu ti v es afte r th e

du Pont fami ly ha d purc has ed a l a rge blo ck of th e com p an y s sto ck

’
.

Goo dr i c h ret ur n ed u n der th e imp a ct of the depr ession to th e ol der c en

, ,

tralized st ruc t ur e bu t by 1 95 3 it ha d come b a ck a g ain to a fully decen

,

tralized o rg ani z ation The t w o com p ani es w hi ch c on cent r ated on ti r es

.
,

Goo dyea r an d F i restone di d n ot b egin to d i v e r sify se r io u s ly u nti l the

,

mi l ita ry nee d s of Wo rld Wa r II p a rti cul a rly the s y ntheti c—rubb er p ro gr am

, ,

pro v i ded them w ith ch emi c a l pl ants an d n ew te chni c a lly tr ain ed p e r son ,

n el In 1
.
95 6 G oo dy
, ea r a d o p te d the m ul ti d i v isiona l st ruct ur e to a dm in is

t er its sev er a l l ines By 1 60 F i r eston e th e l east d i v er si fi e d of the in d u s try s

’

9 .
, ,
”
b i g fo ur w as the on ly one that sti ll r etaine d the o ld e r c ent r a li ze d fu n c
“

, ,

tio n ally d e p a r tm enta l i zed str uct ur e .

In th e a u tomo b i l e an d p o w er ma chin ery in du st r ies Gener a l M oto r s ,

has b een the o rgani zationa l ex am ple The m ulti d i v isiona l st ruct ur e at .

Gen eral Moto r s d i d not come as a res p ons e to a d minist rati v e n eed s r es ult
ting fro m a st r ategy of d i ve r sifi c ation R athe r its inno v ato r s saw it as a .
,

ne w w a y of a d ministe r in g a comb ination o r feder ation of enterpr i ses .

Ho we ver its decent ra l i ze d o rgani zation not only h el ped it it to win th e

,
4 6 HISTORICAL SETTING
l a rgest sha r e of the a u tomob i l e ma rk et in the Unite d S tates but a l so to ,

exp an d an d a d ministe r s ucc essf ully its o v e r seas m an u facu rin an d ma rk et

g
in g a c ti v ities Furth er mo r e b ec a u se of its a d ministr ati ve st ruct ur e it w as
.
, ,

able to execu te br i ll iantly a broa d st r ate gy of d i ve r si fi c ation into the mak

in g an d sell ing of all types of engines an d pro d ucts u sing engines in the , ,

yea r s aft er th e a u tomob i le ma rk et fe ll o ff in th e l ate 1 92o s ’

.

S uch o u tstan d ing p erfo r man ce br o ught imitation F o rd an d Ch ry s le r .

b oth fo llo wed th e Gen er a l Moto r s ex ample aft e r the S econ d Wo rld Wa r
h ad ta k en th em into nona u tomoti ve a c ti v ities an d afte r thei r fo u n d e r s o r
immediate s uccesso r s ha d left the s cene At Fo rd imitation was the most .
,

obv io u s The re in 1 946 executi ves r e cru ite d from Gene r a l Moto r s b egan
.
, ,

to rebu i ld the comp an y by in F ortu ne s wo rd s cla pp in g th e G M or

,
’

,
“
. .

iz atio n al g a r m ent onto th e F o rd man u fa c t ur in g f r ame t r immin g the

g an ,

g a r m e nt h er e an d fi ll in g o u t the fr ame th er e Nob o dy a ro u n d F o rd mak es .

any b ones ab o u t this ” 35

. When the sma ller N ash Moto r s Comp any me rge d
in 1 937 w ith th e Kelv in ato r C o rp o ration mak e r s of refr i ge r ato r s an d ,

othe r ho u seho ld appl ian ces th e new management set up a comp a r abl e
,

m ultid i visiona l St ruc ture to a dministe r the reso urces of the c omb i n e d
fi r ms .

In 1 943 Inte r nationa l Ha rveste r the l a rgest of the agri cult ur al imp le
, ,

ment an d p o we r ma chinery enter p rises resha p e d its management struc ,

ture a long th ese same mo der n l ines A n ew presi dent who ha d c a refully .
,

st udied the G ener a l Moto r s exp erien c e di d not e ven a llo w w a r time e x ,

igen cies to inter fer e w ith th e much -n eed e d a d minist r ati ve reo rg ani z ation .

In 1 95 4 A ll i s-Cha l mer s com plete d a comp a r able r esha p ing of its manage
,

m ent st ruct ure By th en a n umb e r of othe r sma ller im plement and p ower
.
,

ma ch inery com p anies in cludin g B o rg—Wa r n er Cherry-Burr ell T h o mp

, , ,

son P ro ducts Am eri c an M a c hine 8: F o u n dry an d th e Wo r thington Co r

, ,

p o ratio n
(t h e succ e sso r to Int er nationa l S t eam P u m p ) ha d fo ll o w ed s u it , .

The General Moto r s exampl e ha d l ess of a di re c t imp a ct on the l a rge

el ec t r i c a l an d e l ec t r oni c s c om p ani es w hen th ey too t ur ne d to r efashionin g , ,

th ei r a d minist r ati v e st ruc t ur es A g ain it w as the e xp ansion into v e ry d if

.
,

feren t pro duc t l ines dur in g the 1 g2o s r athe r than the a d minist r ation of
’

thei r exten si ve o ver seas ho ldin gs that r ais ed criti c al management probl ems
an d st rains at Gene r a l Ele ct ri c an d Westingho u s e In 1 93 1 Wes tingho u se .
,

b egan a massi ve reo rgani z ation of its a d minist r ati ve struct ure At fi r st .
,

o rgani zationa l i deas an d a ctions c ame from w ithin O n ly after 1 934 w hen .
,

th e Westin gh o u s e ex ecu ti v es ha d d ec i ded on th e m ul ti d i v isiona l t y p e of

st ructure d i d th ey b egin to l ook at the exp e ri en ce of G enera l Moto r s

,

an d oth er comp ani es .

At Gener a l El ectr i c changes came on ly after the reti rement of its

,

bri lliant presi dent G er a rd S w o pe Th en in th e yea r immediately fo ll o w

, .
HISTORICAL SETTING 47
ing th e S e con d Wo rl d Wa r the comp an y u n der the gu i d an ce of R a lp h
, ,

Co rdiner set up a st ruct ur e w ith a u tonomo u s di visio n s res embl in g thos e

,

at Westingho u se o r Gene r a l M oto r s When Co rd ine r b ec am e presi dent in .

1 5 0 he c a rr ie d the r eo rg ani z ation m uc h f ur th er an d by 1 95 2 ha d cr eate d

9 ,

as int ri c ate an d as so p hi sti c ated an o rg ani z ationa l st ruct ure as ha d yet

b een devi se d fo r the l a rge in du str ia l ente rpr ise In th ese s ame p ostw a r .

yea r s the R a dio Co rp o r ation of Ame r i c a an d S ylv ania E lect ri c P r o ducts

,

set Up th eI r m ul ti d i v isiona l o rg ani z ations In 1 956 afte r an e xtensi ve .

,

di ve r sifi cation pro gr am in el e ct r oni c an d el e ct ri c bu sin ess ma chines an d

afte r th e death of its fo u n der Inter nationa l Bu siness M a chines Co rp o r a
,

tion a l so t ur ned to the same t yp e of st ruct ure .

Di ve r sifi c ation has bro ught simi l a r adm i n I stratI v e changes tho ugh ,

mo re s lo wly in some of the o lder mater ial s an d agri cul t ur a l pro c essing
,

ente rprises p a rti cul a rly those w hi c h c on c ent r ate d a l a rge p o r tion of thei r
,

reso urc es in d ist r i bu tin g an d ma rk etin g fa c i l ities Pitts burg h P l ate Gl ass .

bu i l t up its d i ve r sifi e d pr o d uc t l ine a ro u n d a l a rg e d ist r i bu tin g o rgani za

tion Ame r i c an Can an d Inte r nationa l Pa p e r too c ame to han dle a v a r iet y
.
, ,

of qu ite d iff erent pr o d ucts By 1 960 these th r ee w e r e the on ly mate ria l s

.
,

an d meta l s fi r ms st udi ed he r e that ha d a ccep te d the ne w structu re Tn th e .

a gri cul t ur a l pro cessin g in du st ries the flo ur d ai ry an d foo d fi r ms w ith , , ,

l a rge ma rk etin g an d d ist r i bu tin g o rgani z ations s uc h as G en er al M i ll s ,

Gene r a l F oo d s an d The B o rden Comp an y w er e the fi r st to d i ver sify an d

,

then to d e cent r a l i ze Anothe r N ationa l Dai ry c ame to this fo r m in the

.
, ,

same w a y as G ene r a l M oto r s ha d as a means to a d mi nister mo r e effec

\
,

tiv ely a comb ination of man y se p a r ate mi lk c heese an d othe r d ai ry in g , ,

ente rpr ises O the r agr i cult ur a l pr o cessin g fi r ms l i k e A r mo ur an d P r o cter

.
,

8: G am bl e that ha v e d i v er si fi e d e v en mo r e r ec ent ly a l so t ur n ed to the ne w ,

struc t ur e The eff ec t of th e a dminist r ati v e exp e r ien ce of du Fo n t an d G en

.

e r a l Moto r s on th ese c omp anies is by no means as clea r from the r ea d i ly

a v ai l abl e e vi d en c e as I t I S fo r the a d minis tr ati v e changes in ente rpri s es in
othe r in d u st r ies O n the othe r han d w h er e enterpr i ses l i k e S w ift S ea
.
, , ,

gr ams Ame r i c an S uga r U nite d Fru it o r th e tob a cc o com p anie s ha ve

, , , ,

sta y e d w ith thei r pr ima ry l ine the O ld struct ur e remains , .

In the p et r o l e u m in du st ry w o rld-w i d e exp ansion an d o p e r ation d i d

,

become as sign ifi can t a c a u se fo r th e cr eation of the m ulti d i v isiona l

J

struct ur e as pro duct d i ve r si fi c ation Whe r e a d minist r ati ve compl ex it y .

res ulte d fr om territo ria l exp ansion the a u tonomo u s m u ltidep artmen tal , ,

d i vision b ecame b ase d on a r e gion r athe r than on a l in e of pr o ducts In .

the oi l in d u s try the exp e r ien ce of S tan d a rd O i l (New J er s ey ) in fashion

,

in g the fi r st of s uch decentr a li zed st ruct ur es has b e en a gu i de fo r changes

in o the r comp anies S tan d a r d O i l of C a lifo r nia began to devel op simi l a r
.

r egiona l a u tonomo u s o p er atin g di v i sions befo r e the o u tbr ea k of the S ec

,
4 8 HISTORICAL SETTING
on d Wo rld Wa r an d in 1 95 4 set up a fully manned gener al offi ce B efore .

this se con d d ate Continenta l O i l ha d fashione d a full-fledged decentr a li zed

,

st ructur e u n de r the d i rection of a fo r me r J er s ey S tan dard execu ti ve Mo re .

r e cent ly S o con y Mob i l S he ll an d Te x a co ha ve o rgani zed sep ar ate au to m

, , ,

o mo u s m u ltidep artmen tal d i v isions fo r th ei r d om esti c an d th ei r fo r ei n

, g
bu siness T h es e comp ani es to gether w ith Gulf an d to some extent S tand
.
,

a rd of In d iana ha ve r e defi ned the r ol e of thei r to p execu ti ve offices SO

,
-

that the y ha ve b ecome qu ite simi l ar to th e gen er a l o ffi ce that J er se y

S tan d a rd fi r st d e v ised in 1 927 an d mo difi e d dur in g th e 1 93o s
’
.

Yet e ven in oi l ente rpr is es pro duct d i ve r sifi cation has b e en of maj or,

signi fi c an ce in br inging struc tur a l change By th e mi d-1 950 s th e mo ve .

’

into p et ro chemi c al s h ad c a u sed S h ell S tan d a rd of C a lifo r nia Phill i p s , ,

Petr o leum Tex a c o S tan d a rd (In diana ) S t an da rd of O hio an d C o n tin en

, , , ,

tal O i l to set up a u tonomo u s d i v i sions to a d mini st er th e d e v el o p ment ,

pro cessing an d ma rk eting of th ei r ne w chemi c a l p ro ducts T h e creation

, .

of these new u nits d i d m uc h to br ing the senio r execu ti ves to a r ethink ing
of the ro le an d du ties of the comp any s top a dmini str ati ve o ffices ’
.

In mai l-o rde r ho u ses chain sto r es an d oth er mass-ma rk eting ente r
, ,

pr ises te rr ito r ia l exp ansion an d o p e r ation ha ve b een imp o r tant c a u ses fo r

,

decent r a l i z ation F o r one thing a ltho ugh th ey h a v e in co rpo r ate d the

.
,

h a h
fu n c tions of b oth the w ho lesa ler an d t e ret il er t e mai l o rder ho u s es -
,

an d foo d c hains sti ll con cent r ate on one b asi c economi c fu n ction distrib u ,

tion Th u s th ey c a rry a fa r wi der v a ri ety of l ines than e ven the mo st

.
,

di ve r sifi ed m ul tifu n ction in du st ria l enterpr i se T h e r eason that the foo d

,
.

chain s han dl in g high ly p er ishable pro duct s ha ve set u p a structur e w ith

a u tonomo u s m u ltidep artmen tal d i v isions s eems obvio u s eno ugh Thei r
,
.

a d ministr ati ve decisions a r e St rongly a ffected by d a y-to—da y c hanges in the

n r a l ma rk t T h Gr eat At l anti c 8 : P a c i fi c T ea C o d e c i ded as ea rly as
g e e e e . .

9 5
1 2 to d ec ent r a l i z e its a d minist r ati ve d eci sions into r egiona l d i v isions that

wo uld b e in close r to uc h w ith lo c a l con ditions than a single centr a l o ffic e

co uld b e In mo re recent y ea r s oth er foo d chains li k e the Kr oger Com
.
, ,

p an y an d S afew a y S to res ha ve follo wed this same o rgani zationa l p atter n

,
.

Never theless it w as d i ver si fi cation into a n ew typ e of merchan di sing

,

that t ur ned S ea r s R oebuck initia lly to setting up o n e of th e fi r st mo der n

,

decent r a l i ze d struct ures Its de cision in 1 925 to s ell d i r ectly th r o ugh r etai l
.

sto res as w ell as th e mail o rde r c ata logu e created th e a dm inist r ati ve
-

st rain s that led to reo rgani zation S ea r s s maj o r competito r Montgomery .

’
,

Wa rd retained th e o lder struct ure as long as th e a u to cr ati c S ewell A very

,

r emained in cha rge Bu t on his reti rement a ne w set of execu ti ves set up a
.
,

st ruct ure in 1 956 an d 1 957 that w as a very cl os e copy of th e S ea r s o rgani

z atio n al fr ame w o rk .

In this w a y the m ul ti di v isiona l t yp e of a dminist r ati v e st ruct ure w hi ch

, ,
HISTORICAL SETTING 49
ha rd ly ex iste d in 1 920 ha d by 1 960 b e come the a ccep te d fo rm of manage
,

ment fo r the most com pl ex an d d i ve r se of Ame ri c an in d u st ria l ente rpr ises .

As the popul ation contin u es to gro w an d b e come mo r e s uburb an as te ch ,

n o lo gy b ec om es mo r e i nt r i c ate an d mo r e f ru itf ul an d as d eman d s of the ,

in du st ria l ma rk et b ecome mo r e com plex th e a cti v ities of man y l a rge ,

Ame ri c an ente rpr ises sho ul d b e come sti ll mo r e d i ve r se an d sti ll mo r e com

pl i c ate d An d so in o rde r to meet the ne w need s an d o pp o r tu nities these
.
, ,

comp an ies Wi ll u n do ub tedly a do p t some v a r iation of this m ulti d i v isiona l

struc tur e .

In othe r wo r d s exp ansion an d dive r si fi c ation ha ve r e c ently br o ught an d

,

wi ll contin u e to br ing to man y ente rpr ises the a dminist r ati v e c ha llen ges
w hi ch du Pont Gene r a l M oto r s Jer sey S tan d a r d an d S ea r s R oebuck fi r st
, , , ,

fa ce d in the 1 92o s A ltho ugh these fo ur fi r ms wer e at the time of thei r

’
.
,

r eo rgani z ation amon g the ve ry l a rgest in the nation the re a r e to d a y man y

, ,

c omp anies that a r e l a rger an d ha v e mo r e w i des pr ea d an d d i ve r sifi e d

a cti vities than these ha d in the 1 g2o s In 1 9 1 9 J e r se y S tan d a r d w as se con d
’
.
,

on ly to U nite d S tates S tee l in the si z e of its assets Gene r a l Moto r s w as .

a lrea dy the fi fth l a rgest in assets whi l e du Pont w as eighteenth an d S ea r s

,

36
thi r ty thi rd In 1 929 thei r r an k ing by the same cr ite r ion w as 3 2 1 2 an d
- .
, , , ,

2 8 r es p ec ti v e ly O the r in d i c es of the S i z e of these fo ur fi r ms a r e g i v en in

, .

Ta ble 3 Y et by 1 959 comp anies of com p a r able si ze in d o ll a r v a lu e of

.
, ,

thei r assets to Je r se y S tan d a r d Gene r a l M oto r s du Pont an d S ea r s at

, , , ,

the time th ey b e gan thei r r eo rgani z a tions w o ul d pl a c e 22 63 1 37 an d 1 3 8 , , ,

in F ortu n e s l ist of the fi v e h u n dr e d l a rgest in du st r ia l s

’
.

This br i ef histo r i c a l o ut line of th e gr o w th of l a rge-s c a le in d u st r ia l ente r

pr ises in the U nite d S tates is in no w a y inten de d to b e a com pl ete o r
ana ly ti c a l a cco u nt Its purp ose is to des cr ib e b asi c histo ri c a l t r en d s n e cos
.

sa ry to gi v e r e l e v an ce to the e v ents an d a ctions in the fo ur c ase st ud ies ,

an d to pr o vi d e furthe r meanin g to the ana ly sis of o rgani z ationa l changes

in se vent y of the co u ntry s lea d in g in du st r ia l ente rprises des cr i b ed in the
’

fi na l cha p te r T h e histo r i c a l r e c o rd c e r tain ly does s uggest that st ruct ur e

.

does fo ll o w st r ategy an d that the d iff erent typ es of e xp ansion bro ught
,

d iff e r ent a d minist r ati ve n ee d s r e qu i r in g d i ff e r ent a d minist r ati ve o rgani z a

tions Y et this brief rev i ew sa y s very l itt le ab o u t w h at w er e the a c tu a l
.

n ee d s cr eate d by exp ansion of v o lu me g eo gr a p hi c a l d is p e r sion v e r tic a l ,

,

integr ation an d pro duct d i ve r sifi cation No r c an it in di c ate w hy some

, .

e xe cu ti ves in some ente rpr ises b e c ame a w a r e of these nee d s an d othe r s

d i d not No r c an it te ll m uch ab o u t h o w th e new st ruct ure w as d e v ise d
.

an d w o rk ed o u t an d j u st w hat w as the sha p e of th e ne w l ines of a utho r

it y an d comm u ni c ation an d of th e typ es of info r mation develo p e d No r .

c an it o ffer m uch of a d es cr i p tion of the pr oblems an d d iffi culties that

a rose in putting the new st ruct ure into o p er ation S uch an u n de r stan ding .
5 0 HISTORICAL SETTING
of th e w h y wh at an d ho w o f th e chan ges in th e go ver nment of l a rge
, ,

in du str ial enterp r i ses can com e only by getting in si de the comp an ies th em
s elv es an d by o b s erving ho w th e emp ir e bui lde r s an d o rgan i zation
pl ann er s defi n ed an d execu ted n ew Str ategies an d fa shion ed n ew stru c
t ures T h e fu n d am ental p ur po se of the fo ur c as e st udies is to pr o vi de
.

s uch an in si de vi ew O n ce th e sto ry of o rgani zationa l chan ge an d in

.

TAB LE 3

Size of C o mp an ies Time o f I n i t ia l St ru ct ur a l Ch an ge s

Net Sa les Net Ea rnings Employ ees S t ockb olders
(mil lions) (mil li ons)

- est
9 4 0 .

5 6 7 -
3

-
5
t ota l income

C o mp ara t i v e Size o f C o mp an ies in O n e Y ear —

1
9 5 2

SO UR CES : Inf ormati on on G

du Fon t an d en eral Mo t o rs is r om t eir an n u al report s J ersey f h .

dat a are r o m ib b an d Kn o w l t on , Res urgen t Y ea rs p p 6 7 0 67 2—6 7 3 6 8 6 Se ars in o rmat i o n

f G -
,
.
, ,
. f
f
co mes ro m Emmet an d J eu ck , Ca ta lo ues a nd Coun t ers ,
g pp 5 9 5 6 5 0 6 57 .
, ,
.

In form ti oa n on s al es is no:
gi ven b y du P on tin its ann u al repo r t . In th e n et
sal es w ere mill i o n an d i
n et e arn n gs mi ll i on .

no v ation has b e en pr esented th en th e r easo ns fo r comp ar abl e changes

,

o r la ck of them in oth e r comp ani es can b e mo r e cl ear ly expl ain ed .

Y et a compl ete histo ry of th e c han gin g str at egy an d stru ct ur e in an y one

of th es e fo ur fi r ms w o uld be a boo k in it se lf To k eep th e cases man age .

able on ly th e initia l i n no v ations an d changes in vo lv ed in setting u p th e

,

n ew m ul ti di v isional S truc t ur e ar e d es cr i b ed in d etail T h e fashionin g of .

th e ea rli er S truct ur e an d th e pl anning of th e str at egi es l ea ding to th e

n ew w a y s of a dminis tr ation are pr esent ed in a mo r e con d ense d fo r m as ,

are th e acc o u nts of S t ruct ur a l c han g es aft er th e i ni tia l r eo rg ani zation .

Ea ch c a se not on ly vi ew s S truct ur al inno v ation by enterpr i ses in very

HISTORICAL SETTING 5 1

diff e rent in d u str ies bu t ea ch a l so co n centrates on diffe r ent as pe cts of

s uch inno v ations The ne w Stru ct ur e c alle d fo r th e cr eation of b oth a uton
.

o m o u s o p e r atin g d i v isions an d a cont r o ll in g an d a dministe r in g g ene r a l

office The du Pont an d S ears sto r ies fo cu s mo r e on the creation of the

.

di visions an d the G ene r a l Moto r s mo r e on that of the gene r a l ofi ce At .

Jer se y w he r e b oth a lr ea dy e xisted the pr imary problem w as to mak e a

, ,

distin ction b etw een the duties of ea ch These di ff e r en c es r es ul t p a rtly

.

be cau se S ea r s an d du Pont ha d b een a dministe re d pre viou s ly th ro ugh

c entr alize d fu n c tiona lly de p a rtmenta li ze d stru ctur es whi l e G en e r al M o
, ,

to r s w as manage d by a ho lding comp an y an d J er sey S tan dar d p a rtly by a

high ly de c entr a l i ze d ho lding co m p an y an d p artly by a high ly cent r a lize d
op er atin g o rga ni zation .

Th e c ases fur the r in d i cate ho w the d i ff e r ent e x e cu ti v es an d the d iff e r ent

c omp a ni es a pproa che d th e probl ems of management A d minist r ato r s at .

G en er a l M oto r s an d du Pont pro vi d e ex am ples of men w ho v ie w e d man

agem en t in a hi gh ly r ationa l an d s y stemati c manne r These men tho ught
.

in te rms of o rgani z ation an d a dministr a ti v e nee d s th at is in te rms

—
,

of c oo rdi nation a ppr aisal an d pl annin g The J e r se y exe cu tives handl ed

, , .

th ei r mana gement pro bl ems in a mo r e intu iti v e an d u ns y stemati c man

n er The y r a r e ly sa w th ei r pr o bl ems as a d minist r ati v e ones bu t r athe r as
.
,

fu n ctiona l ones — that is as pr oblems of ma rk eting man ufa ct ur in g o r

, , ,

pr o ducin g The o rgani z ation bu i lde r s at S ea r s ha d a r ationa l a ppr oa ch

.

an d saw the v a lu e of st udy in g management nee d s as a dmi nist r ati v e

r athe r than fu n ctiona l ones Bu t the y t en de d to o v e rloo k the v alu e of a
.

sub sta n ti a l a dministr ati v e staff o r a cl ea r— cu t struct ur e b oth essenti al to

,

exploit th e e conomies of Si z e S uch inte r na l diff e ren ces in o u tl oo k an d

.

approa ch a cco u nt mo r e than an y othe r fa cto r fo r th e di ff e r en c e in the

, ,

w ay the fo ur d iff e r ent in d u str ial emp i res r es po n de d to chan gin g e xtern a l
n ee d s an d o ppo rt u nities .
 DU FONT —
C REA T I N G T HE
A U T O N O MO U S D I V I S I O N S

T HE CEN TRA L IZ ED S TR U CTURE

D uring the ch i ll w inte r d ay s of Febru a ry 1 902 the a ff ai r s of the , ,

vene r able E I du Pont de Nemo ur s 8: Co w ere dr a win g to a cr isis P l ans

. . . .

fo r celebr ating its one h u n dred yea r s of explosi v es mak ing we r e a lr ea dy

u n der w a y wh en its presi dent E ugene du Pont str i ck en w ith p ne u monia
, , ,

s uddenly die d The remaining fi v e p a rtner s b e gan in de c isi vely to loo k

1
.

ab o u t fo r a s uccesso r None of thei r o w n gro up a pp ea re d to ha ve the

.

ne cessa ry qu al ifi c ations F o ur w e re eithe r too o ld o r in poo r h ea lth The

. .

fi fth A lfr e d I du Po n t at thi r t y-se ven yea r s of age seemed too in exp eri
, .
, ,

en ced an d err ati c Pe r hap s the b est thin to d o th e ld e r p a r tn r s d c i d e d

.
g e e e , ,

was to s ell th e com p an y to its an ci ent an d fri en dly comp etito r Laflin 8: ,

R an d After a ll the du Pont C omp any o wn ed a si z able amo u nt of its

.
,

sto ck an d its presi dent J Amo ry Ha sk ell tr aine d at th e du Pont c on

, .
—
,

t ro lled Rep au n o Ch emi ca l Comp an y ha d a lw a y s b een close to thei r ,

inte rests .

Al fre d du Pont d i sagreed Y o u n g an d energeti c h e w as sho cked at th e

.
,

tho ught of se lling th e comp an y his b i rth righ t to o u tsi der s If h e co uld
,
“

,
.

g et t h e s upp o r t of his c o u sin Co l eman d u P ont on c e his r oom m at e at ,

the M assa ch u setts Institu te of Te chno lo gy h e w o uld buy it himself Co l e , .

man imme diate ly ga v e A lfr e d his b a ck ing bu t he insiste d th at the y ,

” 2
m u st get Pie rre anoth e r co u sin to han dle the fi nan ces
, A lo n g-distan ce
,
“
.

telep hone ca ll bro ught Pie rre s a ccep tanc e The elder du Ponts o n lea rn in g
’
.
,

of A lfre d s a llies we re mo re than w i ll ing to sell o u t to the th ree co u sin s

’

at a qu i ckly agree d up on pr i c e of 1 2 mi llion do ll a r s .

Al fr e d wo uld ha ve ha d to loo k long an d h a rd to fi n d two b ette r

equ i p p ed bu sin ess ex e cu ti v es to he lp him mana ge th e fami ly fi rm Co l e .

man a t all broa d sho uldere d man w ith a wi d e grin ha d the tem pera
, ,
-
,

ment an d t r ainin g to create bu siness emp i res Pi erre qu iet an d st ud io u s .

, ,

ha d th e rationa l ana lyti c a l o utloo k of an o rgani zation bu i lde r I roni c ally

,
.
,

A lf re d t r aine d in th e po wder mi ll s an d most happy w he n he w as

,

5 2
THE CE NTRALIZ ED S TRU CTURE 53
p e r son ally s up e rvi s i n g wo rk on th e pro duction l ine w as fa r less pr e p a r e d ,

to re build an d a dmin iste r a gr eat i n d u strial ente rpr ise .

Co leman w as a memb e r of the Kentucky br an ch of the fami ly an d

.

ha d n e ve r b een in vo lve d in the explosi ves in d u stry Afte r gr a du ating .

from M I T in 1 885 he Sta rte d w o rk in th e Kent ucky coa l mines o w ne d

. . .
,

by his u n cl e A lfre d Vi c to r du Pont In a sho r t time he ha d tak en cha rge

, .

of the coa l com p an y ma k i ng it one of the l a rgest in the r egion Then in

, .

’
1 893 he l eft th e coa l c om p an y to j oin t w o of his u n cl e s pr ote gé s A r th ur
’

, ,

J. M o x ham an d Tom L J ohnson as g ene r a l mana g.e r of thei r ,stee l mill

in J ohnsto w n Penns ylvania These t wo — th e l atte r w as soon to b e come
, .

th e famo u s r efo r m ma y o r of C l e v e l an d ha d bu i lt w ith du Po n t fi n an c ,

x

in g s treet r ai lw a y s in a n u mb e r of Am e r i c an c ities The y ha d pu t up

,
3
.

the steel mi ll at J ohnsto w n to pro v i d e themse lves w ith r ai l s S ho rtly afte r .

Co l eman a rr i ve d the y b egan the c onstruction of a se c on d pl ant at Lo r ain

,
.

O hio one of the l a rgest an d most mo der n of its d a y

, .

As Tom J ohnson b e gan to t ur n his attention to p o litic s Co leman too k ,

o ve r mo r e of th e management of th e ne w Lo r ain S tee l Comp any He .

qu i ckly sho w e d his em pir e-bu i ldin g ten den cies by e re ctin g sho p s to mak e
st reet c a r s to gethe r w ith a ll thei r p a r ts in clu d ing b o dies w hee l s an d , , ,
4
e le ctr i c moto r s (This l ast item w as one of the most te chno lo gi cally
.

comple x pro d uc ts of th e d a y ) In 1 898 Elb e r t H G a ry b a ck e d by J

.
, .
, .

Pie rp o n t Mo rgan p e r s u a de d Co l eman an d his asso c iates to se ll th e Lo r ain

,

S tee l Com p an y to the F e de r a l S tee l Co wh i c h the tw o fi nan c ie r s ha d j u st.

,

fo r me d an d w hi c h fo ur y ea r s l ate r w as to b e come the n ucl e u s fo r the

Unite d S tates S tee l Co rp o r ation After th e sa l e Co l eman an d Mo xham
5
.
,

t urn e d thei r ene rgies b a ck to bu i lding e le c tr i c str eet r ai lw a y s y stems .

Pie rr e S du Pont ha d j oine d his co u sin in Lo r ain in 1 899 Up on gr a d

. .

u atio n from M I T in 1 8 0 he ha d r et ur ne d to the fami ly c om p an y to

9 . . .
,

tak e a j ob at its fir st smo k e less p o w de r wo rk s then b ein g c onstructe d ,

at Carn e y s Point a cr oss th e De l a w a r e R i v e r f r om Wi lmin gton When

’
.

th e cl ose of the S p an ish—Ame r i c an Wa r br o ught a r e d uc tion of a c tiv it y at

Ca r ney s Point Pie rr e sa w littl e fut ur e in Wi lm ingt o n as l on g as o l d

’

men w e r e contin uing to mana ge the fami ly fi rm in the same o ld w a y .

So he r esig ne d f rom the com p a n y to j oin Co leman At Lo r ai n he he lp e d .

tra n sfe r the p ro p e r ties to F e de r a l S tee l Co manage d those w hi ch ha d ,

.

b een r etained an d assiste d Coleman in his s tr eet r ai lw a y v entures

, .

Th e S trategy f o Co nsolidatio n
A lfre d s de c ision an d dete rmination to ho ld on to th e du Pont c omp an y
’

chan ged mo r e tha n the co ur se of its histo ry : th ey r e vo lutioni ze d th e

Amer i ca n explosi ves in d u stry At the time of E ugen e du Pont s death .
’
,

the comp an y and th e in du stry we r e b ein g manage d j u st as the y ha d b een

54 DU FONT — CREATING AUTONOMOUS DIVIS IONS
fo r mo r e th an agener ation Th e du Pont Co mpan y i tself a dmini ster ed
.

only a few bl a ck po wder pl an ts an d th e new smokel es s po wder wo rk s at

Ca r ne y s Poin t U ntil 1 902 it r emai n e d a family en te rp ris e A S one
’
.
, .

du Pont note d : The business w as en tir e ly m ana ge d by the se ni o r p a rt ne r .

” 6
The hea d of the firm w as ex oflicio hea d of th e family The .

other p artn e r s an d n e arly all th e S up ervi so ry force w ere du Ponts Ho w .

ev e r th e du Pont f am ily s con tr o l r an ged w ell b e y on d the comp an y

’
, .

It h eld sto ck in othe r firms in clu din g the Rep aun o C hemi cal Comp an y
, ,

whi ch w as fo r med in 1 8 80 by L amm o t du Pon t Pi err e s fath e r to m an u ,

’

fa ct ur e a new type of explosi ve dy namite A n d thro ugh the Gun po wde r

.
,

Tr a d e Asso ciation th e du Pont Comp an y wielded strong infl uen ce o v e r

,

th e r est of th e in du st ry .

The Gun p o wde r Tr a de Asso c iation ha d been fo rmed in 1 872 when

o ve rp ro duction r es ul ting from an in creas ed o utpu t an d a Sur plus of Ci v il
7
War po wde r thr eatene d to co ll ap se pr i ces Th e As so ciation wi th ea ch
.
,

memb er h avin g a nu mber o f v otes a cc o rdi n g to its si ze set pri ce an d ,

pr o duction s che dul es Aft er H enr y du Pont th e Comp an y s pr esi dent

.
,
’

from 1 85 0 to 1 8 89 purch ase d a contro lli n g in t er est in mo r e th an half

,

a do zen of th e l arger p o wde r comp ani es dur in g th e depr ession of th e

1 87o s h e h eld a maj o r it y of th es e v otes To a ss ure compl ian ce w ith th e
’
, .

s ch edules h e set h e wo rk e d th em o u t in close co o pe r a tion wi th the ex ecu

,

tives of th e oth er fir ms an d p ar ti cu l a rly w ith S o lomon T ur ck th e pr esi ,

dent of th e in du stry s se con d l argest comp an y Laflin 8: R an d Be ca u se

’

, .

of this clos e coo pe r ation an d b e ca u se of Hen ry du Pont s po li cy of

,
’

buy in g a sto ck inte r est in most of his maj o r com pe tito r s the As soc iation ,

r em ained mo r e stabl e an d lon ge r-li v e d than most comb inations in Amer

i can in du s try.

Hen ry du Pont an d h is s uccesso r E ugen e as pr esi dents of th e stron gest

,

fi rm in th e comb ination ma y ha v e contr o ll ed their p ro pe rti es bu t the y

, ,

ha rdly a dminist er ed them Th ey ha d a p o werful voi ce in ho w m uch

.

oth er fir ms p ro duce d an d at w hat pr i ce bu t th ey k ne w almost nothing

,

a bo u t ho w ea ch u nit car rie d on its pro duc tion an d so ld its qu otas No r .

di d they p arti cul a rly car e N ei the r th e in di v i du al comp ani es n o r th e

.

As so ci ation p ai d m uch attention to costs to im p ro vin g p ro cesses o r to

, ,

develo p ing mo r e s y st emati c purchasin g an d mar k eting t echni qu es Th er e .

w as littl e c oo rdination between th e ma rk etin g an d s elling com p anies .

With on ly a few notabl e excep tions th e man ufa ct uring fi rms so ld th ro ugh
,

agen ts w ho han dl ed th e o u tp u t of man y comp anies an d who a pp arently

8
a l so b ec am e memb e r s of th e As so ciation Eff ecti ve a dminis tr ation w as
.

im possible b eca u se neith er th e s ep arate fi rms no r the comb ination itse lf

ha d th e i nfo rmation o r m etho d s to ass ure an effici ent u se of existing
r eso urc es an d so to re duce u nit cos ts an d in cr ea se o u tpu t p e r w o rk er .
THE CE NTRALIZED STRUCTURE 55
Th ey d i d not e ven ha v e a s y stemati c w a y of ga ugin g e xistin g o r p otentia l
deman d on w hi ch to b ase thei r pr i c e an d pro duction s che dules .

The l a ck of a dminist rati v e contr o l is s uggeste d by th e fa ct that d ur in g

nea rly a ll of his ten ur e Henr y du Pont c arr ie d on singlehan de dly from
,

a one-r oom office o v e rloo k in g th e p o wde r mi ll s on th e Br an dyw ine most

of th e bu sine ss of his comp an y an d of the Asso ciation He wr ote nea rly .

9
all of th e bu siness c o rr es p on d en c e hims elf in l on ghan d T h e a d minist r a .

ti v e state of the du Pont inte r ests is fur the r in d i c ated by Pi err e s com ’

ments to his br other Irénée in F ebru a ry 1 902 con cer nin g A lfred s pro p osal ’

I th ink th er e is go ing to b e som e tall h u stl ing to get v ryth ing reo rgan
e e

iz ed We h ave n o t th e sligh test i dea o f wh at w e are

. b uying b u t w e are ,

pr b b ly
o a n o t at a disadvantage as I th ink th e o ld co mp any h ad a v ery slim

i dea o f th e p roperty th ey possess 10

.

To Co leman an d Pie rre this h u stli n g meant mo re than r e v i vin g the

,

fami ly b i rth r i ght R eo rgani z ation pr o vi d ed an o p p o rt u nity to t r an sfo r m

.

this loose feder ation of man y r e l ati vely sma ll fi r ms into a conso l i d ate d ,

integr ated c ent ra lly managed in du s tr ia l ente rpr ise Metho d i c ally th e
, .

t wo co u sins s up p o r t ed somew hat h esitantl y by A l fred emb a rk ed on

, ,

th e st r ate gy of conso l i d ation an d c ent r a l i z ation F i r st c ame a c a r ef ul .

in v ento ry of th e pr op erti es they ha d a cqu i r ed Next Co l eman con cent r ated.

,

his cha rms on p e r s u a d in g the sto ck ho lde r s in th es e an d many o the r

explosi ves con cer ns to t ur n o v e r thei r sto ck ho ld ings to the du Ponts
in ret ur n fo r c ash o r fo r sto ck in th e ne w fi rm — the E I du Pont de . .

11
Nemo ur s Po wder Co — fo rme d to tak e o v er th e comb ined p rOp erties
. .

Th en Pie rr e fo cu s ed his ene rgies on fashionin g a st ruct ure to a d min

iste r them The l ega l an d fi nan c ia l changes w e r e in his min d on ly
.
, ,

ne cessa ry pr el imina r ies to the o p er ational an d a dminist r ati v e on es As he .

s tresse d l ate r
A t th e im e w e m ade th e p u rch ase o f th e properties w e reali zed th at if a
t ,

g oo d in v estm en t w a s to b e m ad e f or u s it wo u ld n ecess i ta te a
, c o m p l et e

reo rgani zatio n o f th e m eth o d o f do ing b usiness ; th at th e adm inistrative en d

wou ld h ave to b e reo rgani zed nu mero us selling o rgani zatio ns or adm in
, ,

istrativ e o rgani z atio ns do ne away wi th an d w e wou ld h av e to estab li sh

,

a system o f co sts in o rd er th at an eco n o m i cal m an u factu r e co u ld b e in stalled

”

th r ou gh o u t th e b u siness T h at w as prevented ab solu tely by ou r lack o f

“

.
, ,

co ntr o l o f th e p ro p ert i es in w h ich w e w er e in ter ested an d w e h ad n o ,

m eans o f estab lish in g a n ew system o f o rgani z atio n in an y o f th ese co m

12
an ies
p .

The fo rmation of the Po wder Comp any th u s ma de it p ossibl e to o p er ate

th e pr o p erties in one name th ro ugh o n e set of s ell in g a gents an d u n d er
, ,
”
one managem ent o r op e r ation O n ly in this w a y co uld the costly d upl i
, .
5 6 DU FONT — CREATING AUTONOMOUS DIVIS IONS
c ation of faci l ities an d p er sonnel b e eliminated th e d iff erent fu n ctions ,

— buy in
g man, u fa c t ur in g shi pp in g a n d se ll in
g
—
, b e ec onomi c a lly an d ,

sy stemati c a lly s up e rv is ed an d the essentia l c oo rd ination b et we en fu n c tions

,

maintained .

In c a rry ing o u t th e st r ategy of consoli d ation an d in setting up the

cent ra li zed st ruct ure Pierre an d Co leman drew on thei r ex perien ce at
,

Lo rain The customer s an d competito r s of the Lo r ain S teel Comp an y

.

we re among the techno lo gi c a lly most a dv an ced an d efficiently managed

bu sinesses of th e d a y T h e impro vements in plant la yo u t an d m an u fac
.

t uring o rgani zation whi ch Hen ry C l ay Fr i ck an d C a r negie ha d r e cently

complete d at thei r wo rk s were un do ub te dly in co rp o rated in th e n ew
steel p l ant at Lo rain 13
G ener a l Elect ri c an d Westingho u se Lo r ain s
.
,
’

com petito r s in th e mak in g of elect r i ca l en gines m u st ha ve s uggeste d ,

m uch ab o u t w a y s to pu t to gether a l a rge cent r a li ze d sa les an d enginee r ing

o rgani z ation .

Th e co u sins a l so h ad a s uccessful mo del n ea r er home In 1 892 th e .

,

du Ponts pl a ced t wo en ergeti c yo u ng ex e cu ti ves in cha rge of th e dy namit e

wo rk s at Rep au n o J Amo ry Has k ell who at thi rty—o n e ha d pro ve d
— .
,

hims elf an able manager of a coa l c omp any an d Hami lton M , .

B a rk s d al e a t r aine d ci vi l enginee r who ha d wo rk ed with th e B a l timo r e

,

8: O hio R ai lr oa d
14
These two deci de d to bui ld a sa les o rgani zation of
.

thei r o w n D y namite w as sti ll a rel ati vely n ew pro duc t an d d ange ro u s

.

to u se Agents a ccu stomed to han dling black po wder often fail ed to

.

expl ain to c ont r a c to r s mini n g c om p ani es an d othe r cu stome r s ho w the

, ,

n ew p o wd er sho uld b e u s ed S o the n ew mana g e r s a pp ointe d Cha rl es L

. .

Patte r son o n e of the in du st ry s master sa lesmen to set up sa les O ffi ces in

,
’

d i ff e rent p a rts of the co u nt ry He w as al so to t r ain a fo rc e of S a l a ried men

.

in ex pl o si ve s techni qu e so that th ey might b e able to sho w cu stome r s

15
ho w to u se dy namite effi ci ent ly an d effecti vely As the deman d fo r .

dy namite gr ew Ha sk ell an d B a rk s d a l e o rgani ze d p ro duction mo r e s y s

, ,

tem atically by fo r min g a man u fa c t ur in g an en gin ee r in g an d a purc has , ,

in g d e p a r tm ent .

In 1 903 fo llo w in g thi s mo d el the th ree co u sins assi sted by Ha sk ell an d

, ,

B a rk sda le created m uch the sam e t yp e of an a dmini st rati ve o rgani zation

to k nit together th e reso urces of nea rly two —thi rd s of th e Ameri can
16
expl o si v es in du st ry F i rst th ey conso l i d ated man ufa cturing Pro duction
. .

w as co n cen trated in a few of th e l a rger pl ant s lo c at ed as a dv antageo u s ly

a s p os si bl e to th e ma j o r ma rk et s T h ey n ex t set u p th ree a d mini st r ati v e
.

d ep a r tments to c oo rd inate a pp r ai se an d pl an th e wo rk of th e pl ants

, ,

o n e fo r ea c h of th e c om p an y s ma j o r pr o ducts : bl a ck p o wd er hi h ex lo
’

g p ,

siv es (dy n amit e an smo ss o h n th fo me a nation i

) d k,el e p wd e r T e ey r d w d e .

ma rk eting o rgani zation w ith th e o ld Rep au n o s ales depa rtment s erv ing
as a n ucleu s The engin eer ing t ra ffi c an d purchasin g u nits of the ne w
.
, ,
THE CE NTRALIZED STRUCTURE 57
Po wde r C omp an y a l so d r ew on the o lde r d y namite comp an y s p er sonnel ’

an d pr o ced ures S till anoth er u nit pro p ose d by Co leman an d Pi err e w as

.

th e De v e l o p ment Dep a r tment w hi c h w as to con centr ate on im pr o v ing

,

pro duc t an d pro c ess es As it ha d no pr e de cesso r in the expl osi ves in du st ry

.
,

the du Ponts ma y ha ve b een ins p i re d by th e r e cent ly creat ed resea rc h

o rgani z ation at G ene r a l E le ct r i c F ina lly to ho u s e th e hea dqu a r ter s of
.
,

these ne w d e p a r tments Co leman o rdere d the const ruc tion of a l a rge

, ,

man y-sto r ie d office bu ilding in th e cent er of Wi l mington .

The si x men most a cti ve in cr eatin g the ne w com p an y no w too k o ver

its maj o r ex e cu ti ve p osts Co l eman as P r esi d ent b e c ame r es p onsibl e fo r
.
, ,

broa d p ol i cy an d o ve r—a ll com p an y p e rfo rman c e A lfr e d as G en e r a l .

,

M ana ge r w as gi ven gene r a l s upervi sion of man u fa c t uring a cti v iti es

,
.

Pie rr e b ec am e Tr eas urer Has k ell ha d full cha rge of selling B a rk s dale
. .

hea d e d th e l a rgest man u fa ct ur ing de p a r tm ent — hi gh explosi ves — w hi l e

Moxh am w ho ha d come fr om Lo r ain w ith Co l eman an d Pie rr e w as
, ,

gi ven gene r a l o ve r sight of th e De vel o p ment Dep a r tment In c a rry ing o u t .

thei r n ew du ties th ese m en w e r e not only con cer ned w ith ass uring
,

eff e cti v e c entr a l offi ce pl anning a ppr aisa l an d coo r dination of buying
, , ,

man ufa ct uring sa les an d othe r fu n ctiona l a cti v ities bu t th ey a l so sa w th e

, , ,

n ee d to d ev el o p d e p a r tmenta l d esi g ns fo r c oo rd inatin g a ppr aisin g an d , ,

setting p o li cy fo r ea ch of th e se v e r a l typ es of fi e ld u nits S uch a st ruct ur e .

w as essentia l the y b el ie ved if the v ast r eso urces u n d e r th ei r cont ro l

, ,

w e r e to b e empl o yed r ationa lly an d pro fi tably .

Creatin g th eMu ltidepartm en tal S tru ctu re

In settin g up th e cent r a l i zed st ruct ure Co leman an d Pi err e clea rly ,

distin gu ishe d b et ween what has in this st udy b e en c a lled entr epr en euria l
an d o p e r ationa l a cti v ities Ea ch maj o r de p a rtment c ame to ha ve its V i ce
.

P r esi dent an d its Di r e c to r The l atte r w as to b e r es ponsibl e fo r th e smooth

.

d a y-to-d a y o p e r ations of th e dep a r tment the fo r me r w as to con cent r ate,

mo re on th e l ong-ter m pl anning an d a ppr aisa l ne cessa ry to k eep the

com p an y a live an d gro wing Co ll e cti vely th e Vi ce-P r esi dents w ith the
.
,

P r esi dent a ctin g as the Exe cu ti ve Committee were to ma k e broa d p o l i cy

, ,

fo r the ente rpr ise as a w ho l e .

In d i vi du ally th e V i ce P resi dents ha d full res p onsib i l ity an d a utho r it y

,
-

in managing thei r u nits 17

T h e th r ee man u fa ct ur in g d ep a r tments o r
.
,

as the y w e r e then c a lle d the O p er ating D ep ar tments ha d b e en pl a ce d

,

u n de r th e gener a l s up e rv ision of A lfred du Pont as G ene r a l M anager .

Bu t A lf re d a l so too k the j ob of V i ce P r esi d ent in cha rge of th e Bl a ck

-

Po wder D ep a r tment an d a ct u a lly contin u e d as de facto pl ant S Up erin

ten dent at the O ld Br an dyw ine mi ll s Fr om thei r hea dqu a r te r s in th e .

l a rge n ew offi c e bu i ld in g in Wi l mington A l fre d an d th e V i ce P resi dents

,
-
5 8 DU FONT — CREATING AUTONOMOUS DIVIS IONS
an d Dir e cto r s of th e o ther two Op er ating Dep a r tments High Exp lo —

sives an d S mo k el es s Po wd er — w ith th ei r assistants an d S ta ff o fi cers

coo rdinated appr aise d an d pl ann ed goa l s an d set pro ce dur es fo r th e

, ,

wo rk carr i ed on at the s ever al pl ant s T hese dep a r tmenta l h ea dqu ar ter s

.

soon ha d o ffices fo r th e r ecruitment an d tr aining of p er sonnel fo r th e ,

ins p e ction of p ro duct an d pr o cess fo r th e maintenan ce of pl ant fo r th e

, ,

imp r o vem ent of p ro cesse s an d fo r a time fo r pl anning new construction

, , ,

an d purcha sing s upp li es oth er than r a w mater ia l s an d e qu ip ment B efo r e .

long ho we ve r th e engin eer ing an d p urchasing dep a r tments b ec ame

, ,

s ep a r ate u nits r ep o rting dire c tly to A lfr e d as the gene r al exe cutiv e in
cha rge of man ufa cturin g .

T h e lines of c omm u ni cation an d a utho r ity b et w een d ep a r tmenta l h ea d

qu a r te r s an d the plants in the fi eld we r e defi n ed in t er ms of line an d
staff T h e n ew dep a r tments clos ely fo llo w ed the p atter n fi r st fully devel
.

op e d in th e U nite d S tates by th e P ennsylv ania R ai lroa d The line of .

a u tho r ity ran from the V i ce-P r esi dent to th e D ep a r tm ent Di r e cto r an d
his assistants to th e pl ant o r wo rk s m anager an d th en to th e s up ervi so r s
, ,

an d fo remen T h e pl ant exe cu ti ves who han dl ed a uxi liary fu n ctions s uch
.

as ins p e c tion p e r sonnel o r maintenan ce we r e r esp onsibl e to the w o rk s

, ,

o r fa cto ry manage r s fo r th eir d a y-to -d a y w o rk ing o r d er s They loo k e d to .

thei r senio r s at hea dqu a r ter s on ly fo r stan da rd s an d pro cedur es Exe cu ti ves .

at hea dqu a rte r s wo rk e d at ma k ing mo r e pr e cise th e inf o r mation that

flo we d th r o ugh thes e chann el s in the fo r m of dai ly w eekly an d month ly , ,

rep o r ts an d con centr ate d p a r ti cul a rly on der i v in g mo r e a ccur ate cost
fi gur es S uch d ata not on ly pr o v i ded a che ck on pl ant p e rfo r man ce bu t
.
, ,

by p er mittin g comp a risons b etween pl ants an d b etw een s ubdi visions

w i thin pl ants ma de it easie r to l o cate w eak nesses an d inefficien cies
,
.

To impro v e commu ni c ation sti ll furth er b etw een hea dqu a rter s an d
fi eld ea ch Op er ating D ep a r tm ent h eld r egul a r meetings of its pl ant s upe r
,

in ten den ts an d h ea dqu a r ter s sta ff w he r e th e man ag er s exchanged info r ma

tion on w a y s to mak e th ei r a c ti vities mo re efli cien t an d less costly P ap er s .

r ea d at the r egul a r meeti ng s of B a rk s d a le s High Expl osi ves D ep a rtment

’

an d c i rcul ated to a ll dep a r tm ental a dminist r ati v e an d s up ervi so ry p e r

so n n el c o v er ed s uc h to p i c s as stan d a rd i z ation of p a r ts an d equ i p ment
, ,

n ew man uf ac t ur in g pr o c e dur es safety mea sur es cu stom er s compl aints ’

, , ,

comp ar ati ve costs an d sa v ing s ma de at the di ffe rent pl ants mo r a le in cen , ,

18
tiv es an d so fo r th
, .

S a l es a cti v iti es wer e as s y stemati ca lly o rg ani zed as man u fa c t ur ing The .

S a l es D ep a r tment s Di r e c to r Cha rl es L Patte r son soon instit u te d a

’

, .
,

st ru ct ure com p a rable a ltho ugh on a m u ch l a rger s c ale w i th th e one

, ,

he ha d fashioned at Rep au n o Her e th e fi eld u nits in cluded seventeen

.

sales O ffices h ea ded by br an ch manager s in di ffer ent cities in e ve ry p a rt

T HE CE NTRALIZ ED S TRU CTURE 59
of the c o u nt ry Ea ch manage r assiste d by a small sta ff s up e rv ise d the
.
, ,

a cti vities of a co rp s of fi e l d men M ost sa lesmen sp e cia li ze d in one pr o d uct

.

— bl a ck p o wd e r hi gh e xpl osi v es o r smo k el ess p o wder a ltho ugh ther e

, ,

w e r e a fe w gene r a l sa lesmen A fe w a l so so l d sma ll l ots of so lvents

“
.
,

ethe r an d othe r ch emi c a l s the by—pro duc ts of the ma k ing of smo k e l ess
, ,

p o wde r The sal esmen w ho w e re no w com p an y emplo yees completely

.
, ,

re pl a ce d the o l d o utsi d e a gents o r j o bb e r s in ma rk eti n g the com p an y s ’

pr o duc ts to r ailr oa d s mines cont r a cto r s an d ma ker s of rifle an d shotgu n

, , ,

amm u nition In a dd ition to the regiona l br an c h offi c e r s the r e w e r e at

.
, ,

hea dqu a r te r s one o ffic e s up e rv ising sa les abroa d an d t wo fo r han dl i ng

,

l a rge cu stome r s Co lonel E dm u n d G Buck ne r s M i l ita ry S a les Di vision

. .
’

so l d smo k e less p o wde r to nationa l go ve r nments w hi l e the Cont r a c to r s ,

’

Di vision so l d hi gh explosi ves an d some bl a ck p o wde r d i re ctly to l a rge

contr a cto r s .

A t sa les hea d qu a r te r s Patte r son ha d th r ee l ine assistants an d th ree sta ff

19
o fficers . T h e th r ee Assistant Di r e cto r s w e r e at fi r st r es p onsible fo r the , ,
l
a dminist r ation of th r ee geo gr a p hi c a lly d efi ned u nits the Eas ter n Cenfi ,

t r a l an d Weste r n Di visions L ate r ea ch c ame to han dl e o n e of the com

, .

n y s th ree ma j o r pr o d uc ts Patte r so n c ontin u e d to t r a in his sa l esmen

’

p a .
,

as he ha d done at Rep aun o to b e come exp e r ts in the metho d s of u sing

,

in du st r ia l expl osi ves so that the y co ul d wo rk cl ose ly w ith the cu stome r o n

his s p e cia l bl astin g pro blems S uc h t r ainin g b e c ame the r es ponsib i lit y of
.

the Te chni c a l Di v ision w hi c h a l so w o rk e d at en l a rging the mark et fo r

,

expl osi v es by stfi dyin

g p ossi bl e n ew u ses an d a ppl i c ations fo r its pr o d uc ts .

The oth er staff u nits we r e the A d ve r tising an d T r a d e R e c o r d Di v isions .

The l atte r p io n ee re d in comp i l in g statisti c s on sa l es ma de by the du Pont

Com p an y an d its com petito r s This info rmation b e c ame in creasingly .

v alu able fo r mak in g estimates of ma rk et deman d to b e u se d to set pro d uc

tion s che dul es an d then to determine w hat qu antities of r a w mate r ia l s
an d othe r s upplies m u st b e purchase d Thes e statisti c s a l so pro vi de d d ata .

on the chan gin g sha r e of the ma rk et he l d by the com p an y w hi ch execu ,

tives at hea dqu a r te r s as w e ll as the br an ch mana ge r thems elv es u se d to

che ck on th e perfo rman c e of ea c h sa les o ffic e an d of the dep a rtment as

a w ho le In time a fo urth sta ff o flice the S a les Exp ense Di vision w as
.
,
'

, ,

fo rme d to comp i le figur es on sa les costs an d to wo rk o u t metho d s fo r

reduc ing these ma rk etin g e xp enses .

Her e as in man ufa ct ur in g the rel ations b etween hea dqu a rter s an d fi e ld
wer e defi n ed on what w as essentia lly a line-an d-staff b asis The Di r e ctor .
,

Assistant Di re cto r s an d bran ch mana ge r s ha d c ha rge of men w hi l e th e

, ,

sta ff exe cu ti v es at hea d qu arte r s an d in the fi e l d w e r e res po nsibl e r athe r

fo r stand a rd s an d pro cedur es A d ve rtising w as mo r e of a l ine a cti v it y
.
,

al tho ugh the a dve rtisin g o ffice conferr e d w ith the fi eld e x e cuti ves ab o u t
 60 DU FONT — CREATING AUTONOMOU S DIVISIONS
th e natur e of th ei r programs To assist th e Di recto r an d Vi ce-P resi dent
.

of that dep artm ent in determi n ing po li cies an d th e pl ans fo r ca rry in g

th em o u t a S al es B o ard o r S a les E xecu ti ve Committ ee consi stin of the
,
g ,

Assistant D ire cto r s an d the hea d s of sta ff offices met r egul arly to deter min e ,

p r i ce sch edul es to appro ve of a dver tising programs an d to deci de com

, ,

p a rable ta cti ca l deci sions A l so th e S a les D ep a rtment a ppea r s to ha ve ha d

.

meeting s of h ea dqu ar te r s an d field officer s simi la r to those in th e man u

factu rin g d ep a rtments .

T h e fi v e o th er fu n c tiona l dep a r tm ent s r ep o rtin g d i r ect ly to th e P r esi

dent Essential M ateri al s De velo pment R ea l Estate Legal an d Treasu r
, , , ,
’
er s we r e som ewhat smaller than sa les o r o p e r ations Th e fir st b e came
20
.

resp onsible fo r th e pro cur ement an d tr ans p o rtation of r a w mate ri al s

n ecessa ry fo r pro duction In 1 906 af ter th e n ew structure w as in full
.
,

o p r ation Pie rr purchase d nit r ate pro ducing pr o p er ties in Chi le to b e as

e , e -

?1
s ured of s uppl i es of r aw mate ria l s Bu t th ese pro p erti es contin ued to b e
a dmini stered lo ca ll y not from Wi lmin gton T h e coo rdination of th e flo w
, .

of su pp l ies from Chil e an d el sewhe r e to th e du Pont pl ants b ec ame th e

j ob of the Es senti al M ateri al s Dep ar tment .

The initia l r es pon sib i lity of th e De v e lo p ment D ep artment w as to s uper

v is e th e two l ab o r ato ri es set up to im p ro v e the comp any s pro duct s an d ’

22
the w ay s of mak ing th em Th e Easte r n Lab o r ato ry fo u n ded at Rep au n o
.
‘

in 1 902 c on centr ate d on develo p ments in dy namite whil e the Exp eri
, ,

menta l S tation bu i l t th e fo ll ow ing y ea r o n th e Br an dyw ine s p ec ia li ze d

, ,

in bl a ck po wd er an d th e n ew er smo k e l ess p o wd er The l atter it mi ght .

,

b e point ed o u t w as not an ex p losi v e as w as dy namite o r bl a ck p o wde r

, , ,

bu t r ath er a p ro p e ll ant u sed fo r rifle an d shotgu n shell s o r on a much ,

l a rger s c a le fo r mi l i tary p roj ec ti les T h e D evelo p m ent D ep a rtment al so

, .

wo rk ed on broa d problems con cer ning ma rk ets o r so urces of s upply us u ,

a lly ar th e r e qu est of th e to p ex e cu ti ves in the c entra l oflice It w as fo r .

,

ex am pl e on the b a sis of this dep a rtment s in ve stigations that Pi erre ’

purchase d the Chi lean nit r ate pro p e rties .

The T reas urer s D ep a rtment pro v i ded th e cent r al o ffic e w ith e ven mo r e
’

v a lu able an d mo re r egul a r info rmation B esi d e thei r r o u tine fi nan cial .

a tc i v iti es — th e han dl in g an d s u p erv ision of th e myr ia d fi nan cial tran sac

tions in vo lved in any great in du t ri l ent r p ris

s a e e — th e fi nan c ia l execu

t iv es c on c ent r at ed on d ev el o p in g u nifo r m stati sti c s essentia l to determ in

ing o ver-all co sts in come p rofi ts an d l o ss es Th e D ep a rtm ent at fi r st

, , ,
.
,

di vi ded into th ree maj o r u nits — the Treas urer s O ffi ce an d th e A cco u nt ’

ing an d A ud itin g Di visions c ame to ha ve by th e time of Wo rld War I , ,

a dd itiona l u nits th at a d minister e d cre d it an d co ll e ctions sal a ries an d , ,

fo re casts an d ana ly ses T h e a uditing u nit gathered info rmation on genera l

.
THE CE NTRALIZ ED STRU CTURE 61

exte r na l fi nan cia l an d e conomi c con ditions as well as on the comp an y s ’

inte r na l p e rfo r man ce w hi l e the a cco u nting o ffi c e contin u e d to de v elo p

,

cost d ata fo r pro duc tion sa l es c onst ruc tion r esea rch an d o the r a cti v iti es
, , , , .

The cr eation of th ese statisti c a l o ffices lik e those in th e sa l es an d man u

,

factu rin g d ep a r tments pr o v i d e d the e x e cuti v es a dministe r in g th e du Pont

,

pro p e rties with a S tea dy flo w of a ccur ate info r mation S uch d ata wer e not .

an d in dee d co uld not b e ass embl ed u nti l Pie rr e an d Co leman ha d

, ,

create d this centr a li ze d fu n ctiona lly dep a r tmenta li z e d o p e r atin g st ruct ure
,
.

The c entr a l o flice li k e other si z abl e in du s tria l ente rpr ises w as com
, ,

pr ised of th e fu n ctiona l V i c e-P resi dents an d th e P r esi dent w ho ha d

o ne o r t w o assistants S in c e th e a d minist r ation of th e ente rpr ise as a
.

who l e w as consi de r e d to b e th e co ll e c ti v e tas k of th e senio r ex e cu ti ves ,

o ve r-all coo rdin ation a ppr aisal an d pl annin g c ame to b e fo r mally c a rr i ed

, ,

o u t in th ree committees — F inan ce Ex e cuti ve an d A dminist r ation T h e

, , .

m ak e-up an d duties of th e F inan ce an d Exe cuti v e Committees w e r e

S imi l a r to thos e in man y of the ne w c onso l i d ate d in d u str ia l fi r ms The .

F inan c e Committee at fir st in clu de d the l a rgest sto ck ho l d e r s th e th ree

, ,
-

c o u sins an d th e o lde r memb e r s of the fami ly w ho ha d r ecei ve d sto ck

p ay ment fo r thei r ho l din gs The Exe cu ti v e Committee consiste d of th e
23
.

men most r es p onsi bl e fo r fashionin g the ne w o rg ani z ation an d then ,

as time p asse d the P r esi dent an d V i ce P r esi dents in cha rge of th e fu n c

,
-

tio n al d e p a rt me n ts
24
.

From the v e ry fi r st Pierr e an d Co leman insiste d that the Ex e cu ti v e

,

Committee sho uld con cent r ate on l ong-te r m pl annin g an d appr aisal :
it m u st not b e come in v o lv e d in ma k in g d e c isions con c e r nin g the o p e r atin g
a c ti v iti es of the d iffe rent d ep a r tments S in ce pl anning th e fu t ur e u se of
.

curr ent fa ci lities an d p er sonne l an d th e de v e lop ment of ne w r eso urc es

in vo lve d the a llo c ation of fu n d s fo r b oth cap ita l an d o p e r ating exp enses ,

the Execu ti ve Committee in cr easin gly too k o ver th e fi nan cial d uties
o r iginally assi gne d to the F inan c e Committee M o r eo v e r as the o l de r .
,

memb er s of the F inan ce Committee ha d l ittl e u n der stan din g of the new
comp an y s o p e r ations an d po li ci es the Co mmitte e s a c ti v e memb er s soon
’

,
’

were on ly Pie rre an d Co leman du Pont F o r a ll pr a c ti c a l purp os es the .

F inan ce Co mmittee b ec ame tem po r a ri ly defu n ct .

The coo rdination of day-to -d a y a cti vities of th e diffe r ent d ep a rtments

was left to th e A dmi n ist r ation o r Op er ati v e Committee ma d e u p of
” “

Dep a r tmenta l Dir e cto r s Its w eekly meetin g s not on ly he lp e d to coo rdi
.

nate pl ans an d pro ce dur es bu t th ey a l so pr o v i de d a pl a c e fo r the inte r

,

change of a great deal of info r mation T h e memb er s ma de pr op osa l s to .

the Ex ecu ti v e C ommittee an d d is cu ss ed w a y s to ca rry o u t the st r ate gies

an d p o li c i es that the senio r gro up ha d agree d up on .

62 DU F O NT — CREATING AUTO NO MOU S DIVIS IONS

S tru ctu ral Modificatio n s 1 903—1 9 1 9

After its initia l Shak e do w n the st ruct ure fashione d in 1 903 remained
,

r el ati vely u n changed u nti l afte r th e en d of Wo rld Wa r I (see Cha r t

The mo difi cations w hi ch d i d o ccur affe cte d the centr a l o ffice r athe r than
the d ep a rtmenta l hea dqu a rte r s These cha n ges w e re of th ree so r ts The
. .

most imp o r tant res ulted from shifts in the comp any s to p comman d w hi ch ’

in t ur n reflected the fi na l t ransfo rmation of the du Pont Comp any from a

fami ly fi rm to a professiona lly manne d ente rprise A se cond typ e of change
.

w as the gro wth of a uxi liary dep a rtments at the centr a l offic e an d a thi r d ,

CHART 2

Du Po nt S tru ctu re, circa 1 91 1

the impro vements made in the info rmationa l d ata u se d to a dministe r the
ente rpr ise as a w ho l e .

Of the th ree co u sins w ho enginee re d the massi v e reo rgani zation of

the comp any an d the in du st ry Pi erre soon pr o v e d himse lf the most a dep t
,
25
in go v e r ning it . A lfre d preferr ed to sta y close to th e bla ck p owde r
o p er ations wher e h e ha d lon g w o rked Co leman the emp i re bu i lde r
.
, ,

qu i ckly lost inte rest in mana ging th e domains he ha d he lpe d create .

B efo re long h e ha d a cont ro ll ing interest in th e Equitable Life Ass ur an ce

S o c i et y an d p a r t ly as a r es ul t of th e c hanges he en c o ur ag e d the r e he ha d
, , ,

bu i l t w h at w as th en th e l a rgest offi ce bu i ld ing in New Y o rk He t urn ed.

too to p o l iti cs b ecoming a m emb er of the R epubli c an N ationa l Commit

,

tee in 1 908 Bu t Pi err e d ev ot ed a ll h is ene rgi es to th e a d minist r ation of

.
THE C E N TRA LI Z E D S TR U C T U R E 63

the n ew du Pont Com p any As its fi r st Tr eas ur e r he de v e lo p e d essentia l

.
,

statisti c a l d ata In 1 906 he b e came the de facto hea d of the com p any an d
.
,

in 1 909 at Co leman s re qu est too k the titl e of A cting P resi dent

,
’

, .

In J an u a ry 1 9 1 1 Pi err e with Co l eman s s up po r t r el i eved A lfre d of

, , ,
’
,

his du tie s as Gener a l Manage r an d as V i ce-P r esi dent in cha rge of th e

26
Bl a ck Po wde r De p a rtment an d a m emb e r of the Exe cu ti ve Committee .

The y r etaine d him as a V i c e—P resi dent an d ha d him r ej oin them on the
F inan c e Committee In creasin g d eafness ha d hin dere d A lfre d s e ff ec ti ve
.
’

ness His d i vo rc e an d rema rr ia ge create d intense p er sona l an d fami ly

.

tensions Bu t his fai lure as an a d minist r ato r w as the b asi c reason fo r his
.

r emo v a l He w as high ly com p etent in s up e rvisin g p er sona lly w o rk in the

.

mi ll s bu t he ha d sho w n litt l e ta lent fo r br oa de r coo rd ination a ppr aising

, , ,

an d goa l settin g .

27
A lfr e d s remo v a l bro ught y o u n ger men into to p management B a rk s
’
.

d a le b e came Gene ra l M ana ge r an d Pie rr e s brothe r I re n e e his assistant ’

, .

The n ew dep a r tment hea d s an d memb e r s of the E xe cu ti v e Committee

- Ha rry Has k ell the br othe r of
,J Amo ry Has k e ll in Hi g h E x p lo siv es f . c

R R M Ca rpenter a broth er -ln -la w of Pie rre in D evelo p ment ; Ha rry

. . .
,

Fl et ch er Bro w n in S mo k e less Po wd e r Fr an k L Co n n ab le in Bl a ck , .

Po w der ; an d J ohn J Rask ob Pie rr e s se creta ry sin c e the Lo r a i n d a y s

.
,
’
,

as Tr eas ur e r -w e r e exp e r ien c e d an d l o y a l a d minist rato r s .

In the y ea r fo ll o w in g these p er sonn el changes c ame anoth er reo rgani za

t i on T h e S u p reme Co ur t fi n d in g that the com p any ha d v io l ated the
.
,

S he r man Antit ru st A c t a ppr o v e d a pl an to d i v i d e its in d u st ria l exp lo

,

sives an d s p o r tin g p o wd er bu sin ess amon g th r ee c om p ani es th e ex istin g

du Pont C om p an y an d t w o ne w fi rm s th e H ercul es Po wder Com p an y ,

an d the Atl as Po wd e r Com p any Whi le this r eo rgani zation d e pr i ved the
28
.

du Pont Com p an y of some of its pl ant an d per sonn el it ha d l itt l e e ffec t ,

on its b asi c st ruct ure o r st r ategy T h ese man y changes d i d pro ve ho wever .
, ,

29
to b e too m uch of a st r ain on th e A ctin g P resi d ent Afte r Pi erre s h ea lth .
’

br o k e B a rk s d a le b ecame A cting P resi dent as w ell as Gene r a l M anager

, .

Then in 1 9 1 3 Co l eman ret ur ned tem po r ari ly to o v ersee th e du Pont

,

30
Com p any s a cti vities Pierr e b a ck again in the sa ddl e ea rly in 1 9 1 4
’
.
, ,

soon c ame into confli ct w ith C o l eman At th e en d of F ebru a ry Sho r t ly .

,

afte r he ha d recei ved th e title of V i ce-P r esi dent Pi err e remo v ed B a rk s d a le ,

an d p u t I re n e e in the G ener a l M anager s p ost an d at th e same time ’

, ,

a sk ed fo r th e resi gnation of Mo x ham T h e l att er tho ugh sti ll a cti ve

31
.
,

in th e du Pont Comp an y mana gement ha d b e en ma k i n g plans w ith ,

two of Pierre s brothe r s—in law to conso l i d ate s evera l of du Pont s com
’
-
’

p e tito rs into a singl e l a rge fi rm .

Co leman w as a pp a rently d ist urb e d by thes e changes an d othe r po li c ies

that Pie rr e ha d instit u te d a l tho ugh the e v i d en c e a v ai l able on this c on
,
64 DU P ONT — CREATING AUTONO MOUS DIVISIONS
tro v ersy is any thing bu t clea r When in the s ummer of 1 9 1 4 Co leman
.
, ,

w as fo rced to u n dergo a se r io u s intestina l o p er ation at th e Ma yo C lini c

in M innesota h e wr ote to Pie rr e s uggestin g that th e iss ues be reso lved
,

eith er by l ettin g him buy Pi err e o u t o r by ha v in g Pi err e purc has e h is

sha res Pierre wo uld not hea r of the fi rst a lter nati ve an d hop e d to a voi d
.

th e se con d B efo r e gi vin g furthe r tho ught to p a rtin g let u s tak e anoth er
“
.
,
”
try at it on th e o ld b a sis as yo u s ugge st that is by h a vin g Pierre again , ,

ass u me full command 32

I w i ll a ccep t th e A cting Pr esi den cy o r p erha p s
.
“

it w i ll b e b etter to ass u me yo ur du ties u nde r th e tit le of V i ce Presi dent

”
whi ch I no w ha ve Pie rre th en s uggeste d changes in th e comp an y s to p
.
’

p e r sonn el whi ch he ho p ed Co leman w o uld fi n d satisfa cto ry .

Within a few w e ek s Co leman an d th e B oa rd of Di rec to r s ha d a ccep ted

,

Pi erre s pro p osa l s w ith some mo di fi cations Pi erre w as a gain to b e A ctin g

’
.

P resi dent an d res ponsible fo r o ve r-a ll comp any po l i cy an d p e rfo r man c e .

Irén ée Pie rr e s br othe r b e c ame G ene r a l M ana ger He w as to o v e r see

’

, , .

sa les as well as o p er ations an d a l so b e c am e Chai rman of th e Executi v e

”
C ommittee Pierr e an d Irén ée w o uld th en b oth b e gene r a l O flicers
“
.

r es p onsi ble fo r th e comp an y as a who le T h e r est of the o lder men in .

the to p comman d w er e reti red J A Has k e ll B a rk s da l e Mo xham an d

. . .
, , ,

Patter son (who b e came a me m b er of th e Ex e cu ti v e Committee in

r eli eved of a cti ve wo rk wou ld contin u e w ith the comp an y on s al a ry
,
“

” $3
in a dviso ry ca p a cities w ith the titl e of V i ce P resi dent The n ew V i ce
- .

P resi dents l i k e those appo inte d in 1 9 1 1 w e r e y o u ng an d lo y a l to Pie rr e

, , ,

bu t a l so w e r e a ll exp er ien ce d an d professionally com p etent .

In c a rry in g o u t th ese changes Pie rre d el ib erately rej ec ted th e long

,

ent r en che d inhe r ite d attit ud e that th e fi rm w as mana g ed fo r th e fami ly

an d th e fami ly w as to manage the fi rm A lfre d an d e ven C o leman o r .

B a rk s d a le (w ho ha d ma rrie d a da Pont ) sho uld contin ue in to p po sitions ,

Pi erre clea rly b el i eved on ly if they contin u ed to b e eff ecti v e a dminist r a

,

to r s Pi err e d i d a pp oint fami ly memb er s (two broth er s an d a brother

.

in -l a w ) to senio r p o sts in 1 9 1 1 an d 1 9 1 4 bu t on ly after th ey ha d p ro ven ,

th em selves manager ia lly com p etent From thi s time on th e criterion fo r .

,

promotio n w as comp et en ce r ath er than fami ly b a ckgro u n d u ni ver sa l —

istic r ath er t h an p a r ti cul a r isti c Pie rr e s fo rceful br ea k w i th th e o ld er t r a d i

’
.

tion o n e wh i ch in th e nineteenth c ent ury h ad b een a ccep ted in Ame ri c a

,

as m uc h as in Fr an ce w a s u n d o ub tedly o n e r ea son w h y th e du Pont

,

C omp an y pro v ed mo r e of an in du st r i al an d a d mini st r ati ve inno v ato r th an

d i d th e few other fami ly—c ontro lled enterpr ises o u t of th e se venty l a rgest
in du stria l ent er p r i ses studie d h ere .

With the changes in to p comman d compl eted Pi err e c a refully defi ne d ,

th e du ti es of th e cent r a l o ffi ce I n so d oin g h e re-em p ha si zed h is st r on g

.
,

commitment to th e del egation of a u tho rity an d r es p onsib i lity an d ma de ,

T HE CENTRALIZ ED STRU CTURE 65

clea r his b el ief in in d i vi du a l r a the r than gro up r espo nsib i l ity fo r o p e r ating
a dminist ration The E xecuti v e Committee m u st not inte rfe r e w ith the
.

d a y-to —d a y a cti vities of th e d ep a rtments He insiste d that .

S u bj ect to th e Board o f D i rect r s o an d F in ance C o m m ittee, th e Execu tive

C om mittee h ave fu ll power in
ntro l o f th e co m pany s aff ai rs It is
th e co
’
.

desired th at th is power b e u sed o nly with discretio n in o rder to :

A r w r sp o nsi b i li ty on th e h ead s o f dep a rt m en ts wh er e o n e d ep art
( ) Th o e ,

ment alo ne is interested an d ,

( )
B T h r o w r esp o n si b i li ty on th e h ead s o f tw o o r th ree dep ar tm en ts in

matters ari sing wh ich aff ect b u t tw o o r th ree dep ar tments .

In th e latter case S h ou ld th e several h eads o f dep ar tm ents fail to b e u nani

,

mo u s th e decisio n is to b e m ade by th e C h ai rm an o f th e Execu tive Com

,

mittee .

Th u s it is xpected th at th e Execu tive Co mm ittee Sh o u ld i ssue fi nal o rders

e

o nly in cases wh er e m o re t h an th r ee d ep ar tm en ts are inter ested in th e

decision an d o n su ch oth er m atters as th e Presiden t asks th em to decide

34
fo r h im .

The Committee s j ob w as to consi der on ly pr oblems an d p o l i c ies Of

’ ‘

the Comp an y as a who le to set broa d goa l s an d p o l i c ies fo r the dep a r t

,

ments an d to coo r dinate inte r d ep a r tmenta l a c tiv ities in the gene r a l inte r
,

est Pie rr e d i d not exp e ct it to ig no r e d ep a rtmenta l wo rk : Dis cu ssion an d

.
“

cr iti cism of a ff ai r s a ff ectin g less than fo ur d ep a r tments is enti re ly pro p e r ,

he contin ued SO lon g as dis cu ssion an d cr iti cism is const ructi ve an d

,
“

gi ve n in a s p i r it to ai d the d ep a rtments inte reste d bu t it is not desi re d ,

that the re sho ul d b e fa ul t-fi n ding w he r e a b ette r so lution of a qu estion

”
is not offe r e d .

T h e F inan ce Co mmittee Pie rr e pr o po s ed w as to b e ret ur ne d to its

, ,
”
o r igina l p osition It wo uld no l onger r e po r t to the Exe cuti v e Committee
.

as it ha d in recent y ea r s bu t w as to b e consi der e d e qu a l an d e ven senio r

, ,

to the l atte r committee S ti ll its po w e r s we r e ess entia lly ne ga ti ve It w o uld

. .

a ppr o ve th e ann u a l an d semiann u a l estimates of a pp r o pr iations dr a w n up

by th e Execu ti v e Committee th ereby a utho r i zin g a gen er a l fi nan c ia l ,
“

pl an u n der w hi ch the dep a rtments ma y a c t witho u t fur the r r efe r en c e to

”
the F inan c e Committee O n ly r e quests of o ve r . w o uld b e con
sidered in d etai l The Committee s a ppro v a l wo ul d a l so b e ne cessa ry
.
’

fo r a p p ro pr i ati ons of mo r e than not in cluded in th e ann u a l

budget F ina lly it wo uld appro ve pl ans fo r pro v i din g fu n d s fo r futur e
.
,

exp en d it ur es an d it wo uld r ecommen d di v i den d s After an exchange of .

letter s Pie rr e an d Co leman dec i de d the C ommittee sho uld in clude th em

,

s elves A lfr e d an d Wi ll iam du Pont th e son of Hen ry du Pont the

, , , ,

comp any s domineerin g presi d ent of an ea rl ier gen er ation

’
.

In this w a y Pie rr e p e rmitte d th e maj o r sto c k ho lder s to r et ain a say

,
66 DU P ONT — CREATING AUTONO MOU S D IVIS IONS
in comp an y a ff ai r s witho u t interfer ing w ith maj o r po l i cy de cisions Th ey .

might if A lfre d an d Wi lliam j oine d with Co l eman rej e ct im po r tant

, ,

pro p osal s ma de by th e Execu ti ve Committee fo r th e a llo c ation of fu n d s

an d oth er r eso urces bu t even he re a ll th e d ata on whi ch th ey b ase d
,

de cisions w er e those pro vi de d by th e mo r e pr ofessiona l man ager s on

that committee S ti ll they ha d gene r a l o ve r sight of the i r i n vestment an d
.
,

co uld m ak e it clea r when they d isa ppro ved of imp o rtant p ol i cy The .

limits to even th ese p o wer s a r e s uggested by the fa c t that on ly a yea r

l ate r A lfr e d an d Wi ll iam w e r e br inging s u it against Pi erre an d oth er
35
execu ti ves o ver the sa le of Co leman s sto ck ’
.

Ju st as Pierr e w as institu ti ng these changes c ame the w a r in E uro p e ,

an d th e eno rmo u s exp ansion of th e comp any s mu nitions bu siness The ’

.

ex i sting o rgani z ational st ruct ur e p r o ved a dmi r ably s u ite d to meet the
nee d s of the r es ulting p h enomen al gro wth F ew o rgani zationa l a dj u st .

ments h ad to b e ma de Bl ack p ow der o per ations w hi ch ha d b e come

36
.
,

of rel ati vely mino r im po rtan ce wer e pl a ced in the High Explosi ve De
,

rtmen t P l an s fo r p ost w a r pr o duc t d i v er si fi c ation r es ul te d in the cr ea

p a .

tion of a M is cell an eo u s M anu fa ct ur ing D ep a r tment u nd e r Lammo t du

Pont Pi erre s brothe r
,
’
.

O f mo re signi fi c an ce w as th e gro wth of th e a uxi lia ry o r s ervi ce dep a rt

m ents T h e C h emi ca l Di vision c ame even b efo re th e w a r It w as fo rmed
. .

in 1 9 1 2 to tak e cha rge of the resea rch l ab o r ato ries w h en th e D evel o p ment
D ep a rtm ent t ur ned its en ergi es to d ev i sing a St rategy of di ver sifi cation .

After 1 9 1 4 th e Engin eering P urchasing an d T ra ffic Dep a rtments a ll

, , ,

grew eno rmo u s ly u n der the w a rtime d eman d s A dministr ati vely thes e .
,

dep artments b ecam e atta ch ed to the cent r al office w ith th ei r Di recto r s

rep o r ting di rect ly to th e P resi dent 8 0 too di d th e M il ita ry S a les Di vision
. .

T h e r el ation s b etw een the en l a rged a uxi l ia ry cent r a l o ffi c e dep a r tm ents an d

th e ma j o r Op e r ating S a l es T r ea surer s an d Essentia l M ate r ia l D ep a r t
’

, , ,

ments w e re not cl ea rly defi ned u nti l 1 9 1 9 .

T h e y ea r s j u st b efo re an d du ring th e w a r sa w contin u ed a dv an ce in

th e d ev el o p m ent of stati sti c a l d ata an d of th e pr o c edures fo r its u se .

Pi erre an d the fi nan cia l o ffices refi ned th e metho d s u sed fo r a llo c ating
fu n d s s y stemati ca lly P ro cedures fo r th e a p p ro pr iations of c a p ita l exp en di
.

tures included th e u se of gene r a l fo rec asts of economi c con ditions an d

detai led prop osa l s fo r in d i vi dua l pr oj ects Well b efo r e 1 9 1 8 the F o rec ast
.
,

an d An aly sis s ection of the Treas ure r s D ep a rtment w as assisting th e’

fu n ction al dep a r tm ent s an d the Execu ti ve C o mmittee to allo cate r ationally

fu n d s an d oth er reso urces by pro vi d ing fo recasts of prob able fi n an “

cial con d ition s ex t en d ed t w elv e mon ths in a dv an ce revised every

” 37
month . Ea ch s pecifi c r equ est fo r c ap ita l a ppro priations ha d to in clude
THE CENTRALIZED STRU CTURE 67

the p a r ti cul a r s of cost of nee d fo r an d estimated r ate of ret ur n on

, ,

in vestment fo r the p ro p osed proj e ct 38

.

Amon g th e notabl e adv an c es ma de dur ing th ese y ea r s in the w o rk ing

o u t of info rmation SO essentia l fo r cent r a l offi ce pl ann i ng coo rd ination , ,

an d appr aisa l wer e th e te chni ques that F Dona ld son Bro w n de vised fo r .

c a lcul ating th e rate of r et ur n on in vestment Bro w n t r a i ne d as an elec .

,

trical en gin eer at V i rginia Po ly t echni c In stit u te an d Co r n ell ha d j oi ned ,

the du Pont S a les D ep a r tment in 1 908 afte r s erv in g as gene r a l manage r

of th e B a ltimo re sa les o flice of th e S pragu e Elect r i c C o In 1 9 1 2 he Was
39
.
,

pl a ced on B ark sd a l e s sta ff in th e Gen er a l M an ager s o ffice an d in 1 91 4

’ ’

, ,

b e c ame o n e of R ask o b s a ssistants in the T r eas ur e r s D ep a rtment The

’ ’
.

te chni ques w hi ch Bro w n d e vise d an d w hi ch a r e sti ll u sed to d a y at the

du Pont C omp an y r e l ate d the r ate of r et ur n on c a p ita l in v est ed to t urn
40
o ve r o f c ap ita l an d to th e vo lu m e of sa les as w e ll as to p ro fi t To d o .

this Bro w n bro k e d o w n c osts in v e stments sa l es an d so fo rth into thei r

, , , ,

comp onent p a r ts C a p ita l fo r ex am ple in cluded fu n d s in vested in pl ant

.
, , ,

equ i ment an d oth er fi x ed items an d those ti ed up in w o rk in g cap iial

m
p ,

s uch as a cco u nts recei va ble fi nished pro ducts w o rk in pr o cess r a w a

, , ,

terials an d ex istin g c a sh b a l an ces The si g ni fi c an ce of Br o w n s fo r m ul a

’

, .

w as that it pro vi ded ex e cu ti v es at b oth cent r a l an d dep a r tmental h ea d

qu a r te r s with an a ccur ate stan d a rd w ith w hi ch to a ppr ais e ea c h o p er ating
u nit s p e rfo r man ce to lo c ate th e so urces of defi c i en c ies an d ina dequ a cies
’

, ,

an d to change an d a dj u st pr esent pl ans an d p o l i cies .

F u rth er Cen tralizatio n 1

9 9
1

With th e w a r s en d Pi err e bec ame con vin ce d that a ne w set of execu

’

tiv es sho uld ta k e c omman d A l tho ug h he w as S ti ll u n d e r fi ft y he tho ught

.
,

that h e an d othe r s in to p mana gem ent nee d e d an d dese rved a r est Mo r e .

impo rtant ne w challenges c a ll e d fo r yo u n g bloo d an d fr esh i d eas As

, .

Pi err e to ld th e B oa rd of Di recto r s in A pr i l 1 9 1 9 : I am fi r mly of th e ,

“

o p inion th at w e no w ha ve rea ched anothe r t ur nin g p oint in the c on duct

of a ff ai r s at E I du Pont de Nemo ur s 8: Com p an y ; the refo re it w o ul d
. .
,

s eem w i se to pl a ce r es p onsi b i lity fo r fu t ur e d e velo p ment an d manageme nt

” 41
of the bu sin ess on th e n ex t lin e of m en Pi err e ha d a lr ea d y cons ulte d .

I r ene e Rask o b Ha rry H as k ell an d o n e o r tw o other s as to p ossible

’

, , ,

r epl a cements fo r the o lder men He no w pr o p ose d that a s ubcommittee

42
.

of th e Execu ti ve Committee consisting of Dona ld son Bro w n who a yehr,

ea rl i er ha d ta k en R ask o b s pl a c e as T r eas ur er Fr e d e r i ck W Pi ck a rd w ho
’

,
.
,

at th e same time ha d b ecom e V i ce Pr esi dent in cha rge of sa l es L am mo t

,
-
,

du Pont c hief of the M is cell an eo u s M an u fa ct ur in g D ep a r tment an d

, ,
68 DU FONT — CREATING AUTONOMOUS DIVISIONS
Harry Haske ll as chai rman to stu dy an d r ecommen d w ay s to im pro v e
, ,

th e com p an y s o rg ani za tion

’
.

Haskell w as mo r e con cer n ed abo u t struct u r e than pe r sonnel an d th e ,

ch an ges b e fa vo r ed w er e essentially thos e th at wo ul d str ength en the

centr alize d o rgani zation th at ha d wo rk ed so a dmir ably dur in g the w ar
t me exp an sion As V i ce Pr esi dent in charge of the Hi gh Ex plosi ves
i - .

Dep art ment he r epli ed to Pi err e s p r opo s al fo r a tho ro ugh t ur no ver of

’

top man agement by say in g

I q it
u r wi th th e pr inciple o f adv an cing th e yo u nger men to p o sitio ns
e ag ee

o f ex ecu tiv e r esp on sib il i ty f o r I beli ev e th at o n e r easo n th e Co mp an y h as

,

been so su ccessful is th at fo r o v er twenty years th e condu ct of its [ b usin ess ]

is in th e h an ds o f you ng m en an d thi s h as serv ed to k eep 03 th e dry w t
o f con serv atism th at som etim es acco m p an ys [ sic ] too u nch anging man age

m ent O n th e o th er h an d w e h ave som etim es lost b y n o t getin g f ull valu e

.

o u t o f exp er i en ced m en — w itnes s Bar ksdal e an d J A [ Has k ell ] P er.h ap

. s .

th e n ew plan w ill be fl exib le enou gh n o t to repeat th e m istak es in th e latter

fi‘3
res ect
p

Hask ell r ecalling earli er changes a dded : I ha ve be lie ved in r eo rgani za

, ,

tion by evo lu tion r ath er than the Co mp an y s mo re u s u al cu stom by ’

r e vo lution but I guess it s a goo d thi ng to tak e a little co rpo r ate ca l ome l
,
’

on ce in a w hil e an d if w e get r i d of th e w h ea t with th e t ar es w h y w e ,

ne ver quite kn o w w heth er w e are in di vi du ally w heat o r tar e an d so

can comfo r t o ur selv es in th e b elief that maybe it is the oth er fell o w .

Then Hask ell t ur ne d to th e matte r of s truct ure urgin g Pierr e to ,

sim plify an d to c entr ali z e sti ll fu rth er th e pr esent o rg aniza tion :

Regarding m anu factur ing, I f eel very rongly th at
st m eth od o ur p resent
o f sp li tt in e r ti i t th ei p t w ith t an ff e ti v m ea ns o f c o
g p
o a o n s n o r ar s o u y e c e

o r din ati o n o f eff o rt is ineffici en t an d in d ef ensib le Instead o f cr eatin th ree

.
g
b ran d n ew op erating V ice-presiden cies, I woul d strongly adv ise on e over all
m an u f acturin g o perati o ns , wi th a v ery h igh class ass istan t, th e latter o n th e
Ex C om an d as m an y m an ager s o r directo r s as m ay b e foun d co nveni ent
. .

f o r th e sp eci ali ze d op er ati o ns of difi eren t p arts o f th e m an u f actu re It m ay .

be th at it w o u ld be bett er f o r a f ew yea rs to car ry o n th e dye b us in ess as a

sep ar ate en ti ty I th in k it w ou ld b ecaus e it is a dev elo p in g, uns tan dar di zed
.

industry an d Sh o uld m eri t in depen dent attenti o n j ust as th e Parlin ch emical

mixtu r es b usiness w as bett er b y i tself un til S tan dardi zed — w h en it w as
m erged w i th th e r egul ar sal es an d op eratin g dep artments .

At th e en d of M arch Has k ell s s ubco mmittee on o rgani z ation ma de

,
’

its r epo rt wh i ch sp ell ed o u t m o r e exp li citly th e s uggestions an d impli ca

44
tion s of what its ch air man h ad wr itten earlie r to Pi err e B eca us e of its .

a p p roa ch to th e pr obl ems of o rgan i zation an d be ca u se of its a rgum ents

T HE CE N TR A L I Z E D S TR U C T UR E 69
on the v al u e of a fun ctionally dep artmenta li zed struc t ur e this r epo rt ,

is w o rth some d etail e d st udy Its a u tho r s ha d a high ly r ational an d

.

s ystematic approa ch to th e p robl ems of a dministr ation They tho ught in .

terms of o rgani zation n ee ds an d in d es cr i b in g them use d o rgan i za tiona l

, ,

con cep ts th at ha d on ly r e c ent ly b een d e v e l o p e d Muc h mo r e than Pi err e

.

du Pont th ey w ho l ehea rt edly en d o r se d the di ct um B a rk s d a l e ha d ma de

,

y ear s b efo r e on the v al u e an d impo rtan c e of o rgani zation : He perfo r ms “

his du ty best w hen he s ucc eed s in wo rking o u t an o rgani zation — a

s chem e of o rgani za tion — an d then pl a cing in ea ch po si tion to be fi ll ed
the best a vail abl e m an an d then en d ea v o r in g to see that in a gene r al Way
the obj e ct s so ught fo r by th e o rgani zation an d by th e p er sonn el a r e
” 45
a chie ve d .

M an y w o rd s an d i d ea s in the Co mmitt ee s r epo rt in di cate its a w a r en ess

’

of curr ent i d eas co n ce r n in g lar ge-s ca l e o rgani za tion Its m em ber s as .

,

con cer ne d w i th pr a cti c e as w ith th eo ry ex ami ne d the expe r i en ce of o th er

,

comp an ies Besi d e talkin g in di v i d ua lly to o u tsi d e execu ti v es they sent

.
,

an assist ant to st udy fo ur c om p ani es w ith sim l ar p r o bl m s

i e — Ar mo ur ,

Wi lso n 8: Co m p an y (bo th meat p a ck e r s ) Inter nation al H arv este r an d

, ,

Westingho u se E l e ctri c .

Th e Commi ttee s r epo rt b e gan w i th a c a r ef ul d efi nition of t er ms fo l

’

lo we d by a len gth y statement of a dministr ati v e theo ry H er e the b asi c .

po in ts d ea l t w ith th e purpo se of o rg ani za tion

Th e i deal conditi o n is o n e in whi ch every u ni t in a gro u p is so coo rdin ated
an d co ntr o ll ed th at each f uncti o ns to th e best adv an ta ge with r es pect to

its o w n wo r k an d th e wo r k o f th e wh o le Co m p an y .

Th e o bj ect o f o rganiz ati o n m ay be defi ned as th e attain m ent o f m aximu m

o f r esul ts w i th a m inimu m o f eff o rt If w e h ave n o t eno u gh m en o f th e
.

righ t so rt, maximum resul ts wo uld be impo ssib le If w e h ave too m an y

.

men , th e results w ill be ob tained at u n n eces sary expen se 46

.

N ext came an en u n ciation of tw o p rin ci pl es b ase d on ”

th e com p an y s ’

experien c e The fi r st r este d on the belief that :

.

Th e m ost efi cien t r esu lts are ob tai ned at least expen se wh en w e coo rdi
nate related effort an d segregate u nrelated efl ort For example, pu rch ase of
.

m ateri al s is u nr el ated to th e sal e o f a fin ish ed p r odu ct in a m u ch greater

degree th an m anu fact ure an d sal es, or m an uf acture an d pu rch as ing; an d
legal wo r k is st ill m o r e u nrelated to eith er o f th o se befo r e m enti o ned .

Thi s do es not mean the r e po rt contin u e d as it is so often sai d that

, ,
“

,
”
goo d o rg ani za tion r esul ts from putti n g lik e things to geth er It th en .

ga v e an ex am ple
Fo r instance it is natu ral to th ink th at all engineers an d engineering work
,

S h o ul d b e gr o u ped in o n e en ineer in d ep artm ent No w su rv eying a farm

g g .
, ,
7 0 DU FONT — CREATING AUTONOMOUS DIVISIONS
designing an d b u il ding a b ridge ru nn in g a loco m otiv e or operating a , ,

power h ou se are all engineering b u t it is qu ite o bvious th at th ey are so

,
“

,
”

un related th at to gr ou p th em un der o n e h ead w o u l d b e u neco no m ical O n .

the o th er h an d th e o p erati o n o f a bo il er h o u se at C ar ney s P o in t is S im ilar

’

in n am e an d reali ty to th e o p eratio n o f a b o iler h o u se at Hask ell yet o n e

“

wou ld n o t th in k o f gro u ping th em u nder o n e h ead in exch an ge fo r th e

a u th o r i ty exer cised o v er each o f th em b y th e p lant su p er inten dent .

Th e b asi c p r in cipl e w as r athe r that it is r el ated eff o r t whi ch sho uld be

“ “

coo rd inated an d not li k e thin gs In fa ct it is oft en mo r e necessa ry to com

‘
.
’

”
b ine r el at ed eff o r ts w hi ch are u n l ik e F o r example th e r epo r t note d as .
, ,

h ad Has k ell in his l ette r that th e pr es ent dy e-st uff bu sin es s li k e the ch emi
, ,

c a l mix tur e bu sin ess a few y ea r s b efo r e w as not y et stan d ardi ze d T he re

-
, .

fo r e it wo uld b e w is e to ha v e it maintain
One indivi du al in co ntro l o f b o th pro du ctio n an d sales b ecause th e relatio n ,

o f th e p r o d u ct an d its q u al i ti es is so m ix ed u w i th th dem an ds o f th e
p e

m ark et fo r th e p ro du ct th at to d iv o rce th em an d segregate th e b usiness

into a Clearly defi ned p ro du ctio n dep artment an d an indep endent sales
dep ar tm ent wo u ld b e detrimental to th e b u siness L ater o n wh en th e
, .

pro du ctio n o f dyes b ecom es stan dardized it w ill n o do u b t fo llow th e ev o lu

ti o n o f o th er p o r tio n s o f th e b u siness .

The p r in ci pl e of coo rd inatin g r el ate d eff o r t no r ma lly c a ll ed fo r pl a cin g

th e d i ff er ent br oa d fu n ctiona l a c ti v iti es into s ep a r at e a d minist r ati v e u nits .

A s econ d u n d erly ing p r in ci p l e w as th at of gi vin g ea ch execu ti ve in

cha rge of a set of coo rdin ate d o r r el ated e ff o r ts full a u tho r it y an d respo n
sib ility This w as th e C ommitt ee st r esse d th e on ly w a y to ass ur e fl exi b i l it y
.
, ,

an d a dj u stment in th e face of con stant ch ange H er e th e r ep o rt rep eated .

an d ma d e mo r e e xpl i cit th e con c ep t of d el e ation of in d i v i du a l reS on

g p
sib ilit an d a u tho r it y w hi c h Pi err e ha d so of ten str ess ed
y

Th e prin iple
c indivi du al responsib ility an d u ndivided au th ority h as
of

b een recogni zed by th e Co m p any an d co nsistently follo wed in th e cases of

its estab li sh ed d ivisio n s A u ni t o nce defi n ed — for exam ple th e S ales De
.
,

t m t o r th e D ev elo p m ent D ep ar tm en t — i p l d in ch ar e o f th e
p ar en s a ce g
b est available individu al w h o as h ead o f th at departm ent is h eld responsible
,

f o r resu l ts an d h e can in h is o ffici al cap acity arrange every detail o f h is

,

department acco rdin g to h is b est j u dgment su bj ect o nly to th e alternative ,

o f h av in
g so m eo n e r ep l ace h im if h is o ffi ci al j u d gm en t is n o t goo d T h e .

sam e p r incip le is fo llo w ed in tu r n in th e case o f b r anch o ffice m ana er s o r

g
plant su perintendents w h o are individu al ly respo nsible fo r th e co ndu ct o f
,

th at p a rt o f th e C o m p any s b u siness o v er w h i ch th ey h av e ch arge su bj ect

’

o nl
y to th e b u sin ess b ein co n du cted acco r din t o th e p r in ciples an d m eth o d s
g g
lai d do w n by th e au th o r i ty next h igh er u p It is to th e r eco gnitio n o f th is .
THE CE NTRAL IZ E D S TRU CTURE 7 1

prin iple th at
c w e m ay in large measu r e attrib u te th e C omp any s ph eno m ’

en ally su ccessfu l perfo rm an ce du ring th e recent ab no rm al years .

This pr in cipl e ha d not b een fully eff ec ti ve ho w ever the r ep o rt , ,

contin u e d fo r th e E x e cutiv e Co mmittee ha d ten ded to ma k e de c isions

,

con ce r nin g dep artmenta l a cti vities desp ite Pi err e s ea rl i er st r i c tur es T h e ’
.

r es ul t ha d b een a d an ge ro u s tr en d to w a rd committee management an d

a w a y from in d i vi du a l r es p onsib i l it y It m u st b e r ecogni zed the r ep o rt
.
,

w ent on that ,

We h ave defeated th e pr in ciple to a p arti al extent by allo wing th e Execut ive

Co mmi ttee to act for th e p r esi dent as th e imm ed iate su p er io r in an execu tive
w ay to wh om th e dep ar tmen t h eads are h eld respon si ble T h e interpo sition .

o f a co mm i ttee ch ar ed w ith th e du ty o f p erfo rm in x ecu tiv e acts b etter

g g e

do ne b y an individu al is w e b elieve r espo nsi ble fo r m o st of th e m ino r

, ,

ineffi ci encies in co nveniences wasted efi ort an d u nnecessary duplicati o n

, , ,

wh ich are matters o f co mmo n kno wledge to th o se engaged in carrying ou t

th e d ai ly r o u tine T h ese are usu ally sm all m att er s w i th r el atio n to th e
.

b u siness as a wh o le an d fo r th is reason rarely impo se th emselves o n th e

,

attentio n o f th e h i h er o fficers Nev erth eless in th e a r t th ey a e o f n o

g gg g e a. e r ,

m ean imp o rt ance .

On th eb asis of th ese tw o pr in ci ples the Committee ma d e its reco m ,

men datio n s F i r st it s uggested that most of the comp an y s a cti v ities b e

’
.
,
”
s egr egat ed into fo ur fu n c tio n a l gran d d i visions th e P r o duc tion S a l es
“

, ,

D evel op ment an d Tr eas ur er s Dep a r tm ents ea ch hea d ed by a Vi ce-P r esi

,
’

dent T h e P ro duction Dep a rtm ent fo r ex ample wo uld in clud e not on ly

.
, ,

man ufa ct urin g a cti v ities bu t a lso purchasing engin eer ing const ruction , , ,

r esea rch c h emi c a l pro cess cont ro l an d a n u mb er of oth er se rvi c e fu n c

, ,

tions T h e r emaining few j oint fu n c tions s u ch as t r affic me d i ca l et c

.
“

, , , .

”
sha ll b e assign ed by o r on a utho r ity of the fi r st V i ce P r esi dent In o th er
- .

wo rd s th e d a y-to -d a y a dministr ation of a ll du Pont a cti v iti es w as to b e

,

con cent r ate d in th e hea dqu a r ter s of fo ur fu n ctiona l de p a r tm ents The .

“

”
obj e c tion has b een a dv an ced th e r ep o r t a d mitte d that som e of th e
, ,
“

gran d divisions a r e too l arge an d too di v e r si fi e d to b e u n de r the c o ntro l

of o n e in d i vi du al T h e ans wer is th at th e cont ro lli ng in d i v i du a l n eed not
.

k no w every det ai l of th e bu sin ess bu t r equ i r e on ly a goo d min d so u n d

, ,
”
u d m en t a n d k no wl edg e of g en er a l bu sin ess pr in c i pl es T h ommit
j g C
‘

,
e .

tee th u s so lv e d the pr o blem o f th e r el ati ons b et w een th e a u xi l ia ry d e p a r t

ments in the c en tr a l o ffice w i th th e maj o r fu n c tiona l d ep a r tments by

me rely in co rp o r ating the fo rm er into th e l atter T h ey wo uld no w b e staff .

units at d e p a rt menta l hea d qu a r te r s r athe r than in th e cen tr a l o fli ce .

The centr al office itself w as O the rw ise littl e change d The F irst V i ce .
72 DU FONT — CREATING AUTONOMOUS DIVIS IONS
P r esi dent (a new position ) an d not the E xe cu ti ve C ommittee w as ma de
, ,

s pe cifi ca lly r es p o n sibl e fo r ap p r aisin g an d co o r din atin g th e wo rk of the

maj o r dep art ments an d fo r ho ldin g their c hief s a cco un tabl e fo r thei r
pe rfo rman ce O n this point Has ke ll an d his co ll ea gu es cited th e experi
.
,

en ce of th e fo ur comp ani es in v estigated as w e ll as that of th ei r Own com

p y In all fo r A rmo ur Wil son Inter national Ha rv ester an d West
an . u —
, , ,

in gh o use ex ecu ti v e contr o l w as defini te ly centr al i zed un de r a gene r al

“

”
office r an d in no cases w er e di visions o r dep a rt ments r es ponsibl e to a
,
“

committ ee The P r esi dent s du ties wer e not sp e c ifi ca lly o utl ine d bu t they
.
’

pr ob ably r emaine d th ose of fo r m ul atin g br oa d po li cy .

The Execu ti ve Commi ttee w as to b e con cer ne d wi th po li cy p l anni ng

an d o ve r—a ll a p p raisa l Th e p rop er fu n ction of th e Ex ecu ti ve Co mmitt ee
.
“

the r e po r t r ea d is to exercis e gener a l s u pe rvi sion o ver th e comp any s

,
“ ’

afi airs ; to d e c i d e all qu estions of p o licy an d in g ene r al to a ct in the ,

B oard s stea d an d to see that all con duct of b u siness is in a cco r d an c e

’

,
'

”
w ith th e w ishes an d po li cies l ai d do w n by th e B oar d Th e s ub commi ttee .

on o rgani z ation tho ught it w o uld b e b etter to star t wi th a smal l Ex ecu ti v e

“

Commi ttee a dding one o r t wo memb er s to it later sho uld it app ear that
,

some po rtions of th e fo ur gr an d di v isions wer e not b ein g a de quately

r ep r esented Th e Commi ttee contin ued to r ely on th e dep art ments fo r
”
.

info r mati on on w hi ch it b as ed its decisions Ex ce p t fo r th e d ata p ro vi ded .

by th e fi nan cia l offi ces th e c entr al o m ce ha d no so urc es of info r mation

,

o u tsi d e of th e dep ar tment o r w ay s to ch eck th ei r d ata N o r di d t he .

central office yet ha v e th e r es ponsib ility fo r coo rdin atin g th e fo r e casts

ma de by the M an ufa ct ur ing S ales an d P urchasing D ep art ments even , ,

tho ugh s uc h coo rdination w as n ecessary if th e mo vement of pro duct fr om

o n e d ep a rt ment to anothe r w as to b e smoo th an d stea dy .

Wh il e th e fo ur m en signing th e rep o rt agreed that th ere sho uld be

a F inan ce Co mmi ttee th ey differ e d as to its ro l e an d mak e-up S ome
,
.
,

r e cal ling its o p er ations b efo r e 1 9 1 4 tho ught it ag ain sho uld be a br an ch ,
“

of th e Ex ecu ti v e h eld that matt er s fi nan cial sho uld

”
b e se gr egate d fr om th e Comp an y s o th er a cti v ities an d that as w as ’

, ,

fi nally r ecomm en d e d th er e conti n u e to b e t wo se p ar ate committees

,
.

Th e o p inion w as u na n imo u s th e r epo rt contin u ed on the desi r a b i lit y

“ ” “

, ,

of ha v in g as man y membe r s in common as possibl e on bo th committees .

The r epo rt w as th en sent to Pi err e fo r st udy The Pr esi dent li k e d its .

gene ral o utlin es bu t as h e to ld a s pe cial m eeting of th e B oard th e

, , ,

s el e ction of men m u st to a ce rtain extent p r ecede th e choi c e of fo rm

” 47
of o rgani zation The stru ct ur e sho uld b e bu il t ar o u n d m en r athe r
.

than fi tting the men in to an i deal struct ur e as B ark s da le ha d earli er ,

s uggeste d Pie rr e r ecommen de d the promotion of yo un ger ex ecutives an d

.

pro posed that th e pr esent Ex ecu ti ve Commi ttee membe r s b e mo ve d to th e

THE CENTRALIZED STRU CTURE 73
F inan ce Committee w he r e they wo ul d se rv e in a broa d a dviso ry cap a cit y
, .

A c t u a lly they w e r e to ha v e mo r e of a semi r eti re d position si mi l ar to that

of J A Hask ell B a rk s d al e an d Patte r so n afte r th e 1 9 1 4 changes
. .
, , .

Pierr e then listed his c hoi ces He w o uld r eti r e as P r esi dent b e coming
.
,

Ch ai rman of the B oa r d w ith nomina l d u ties Irén ée w o uld b e P r esi dent .

an d L ammot Chai r man of the Ex ecu ti v e Committee This Committee

,
.

wo uld in clude b esi des Donal d son Br o w n an d Fre de r i ck Pi ck ard Six

, ,

r e l ativ e ly y o u n g bu t ex p er ien ce d mana ge r s on ly one of w hom w as a

du Pont o r r e l ated to the du Pont fami ly The E x e cu ti v e Co mmittee .

an d then the B oa r d imme diate ly a ppr o ve d Pie rr e s r e commen d ation s 48 ’

.

Within a sho rt time th e new Ex e cu ti v e Committee ha d a cc ep te d w ith

,

some mo difi c ations the r e commen d ations of the Has k e ll r ep o rt The .

maj o r diffe ren c e w as that the P urch asin g (in clud in g Tr affi c ) C hemi c a l , ,

an d En gin ee r in g De p a rtments con tin u e d as se p a r ate u nits a l tho ugh the

sin gl e P r o d uc tion De p a rt ment d i d ha v e its o w n l a rg e S e rv i c e De p ar tment

ma d e up of th e Te chni c al the We lfa r e an d th e M ate r ial s an d P r o ducts

, ,

”
Di visions (see Cha rt 3 ) I This d e c ision l eft u nans w e r e d the nat ur e of the
r e l ationshi p b etween thes e mo re serv i ce -lik e d ep a rtments an d the maj o r
o p e r atin g ones So the Chemi ca l an d the Enginee rin g as w ell as the ne w
.

Pe r sonn el an d th e o l d e r L ega l an d R ea l Estate Dep a rtments no w b e came

expl i c itly a dv iso ry sta ff o rgan izatio n s
“so
The y w o rk e d to d e ve lo p stan d a r d s
.

an d pro ce d ur es fo r the comp an y as a who l e an d to a dv ise b oth the d ep a r t

menta l an d central offic e r s Bu t thei r ex e cu ti ves w e r e not to gi v e o rde r s
.

to p er sonne l in th e line d ep a r tments P urchasin g w hi ch no w han dle d .

,

th e pr o cur ement of r a w mate r ia l s an d the o b tai n in g of s uppli es fo r al l

the com p any s fa ci li ties c ontin u e d to mak e th e maj o r buy in g de cisions

’

an d so r emaine d lik e P r o d uc tio n S a l es an d fi n an c e a line r athe r than

, , , ,

st aff o flice .

O n c e the r e v ise d struct ur e ha d b een a gree d up on the n ew E x e cutive ,

Committ ee memb e r s too k up thei r posts as dep artment hea d s Wi lliam .

C S pru an ce b e c ame V i c e-P r esi d ent in cha rg e of P r o d uction Wa l te r S

.
, .

Ca rp ente r Jr (R R M Ca rp ente r s y o u nge r brothe r ) too k o ve r th e

,
.
, . . .
’

De vel o p ment Dep a rtment J B D E dge w as pu t in cha rge of P urchasin g

, . . .
,

an d Br o w n an d Pi ck a r d remaine d the hea d s of the T r eas ur e r s an d the ’

S a les Dep ar tments The sta ff d e p a rtm ents

. Chemi cal an d Engineerin g
w e r e not repr es ented on a committee The th r ee r emai nin g Execu ti v e .

Committee memb e r s ha d cha rge of the maj o r s ubdi visions of th e P ro duc

tion Dep a r tment Explosi ves Ce llulose P r o d ucts an d Paints an d Chemi
, ,

c al s This hea vy r epr esentation of pro d uc tion men on th e Ex e cu ti v e

.

Committee em phasi zes the comp any s contin u e d con cent r ate d con c e r n ’

with man ufa ct uring an d that at do Pont in 1 9 1 9 pro duction w as S til l

l oo k e d o n as a mo r e b asi c economi c fu n c tion tha n mark etin g 51
.
DU FONT — CREATING AUTONOMOUS DIVISION
“

C HA R T 3
THE CENTRALIZED STRU CTURE 77

D u Pont Sales Department

, 1 9 1 9 -1 9 2 1
7 8 DU FONT — CREATING AUTONOMOUS DIVIS IONS
By th e s umm er of 1 9 1 9 th e du Pont Comp an y w as r ea dy to meet
,

th e pos t war w o rld w i th a ne w bu t ex p e ri en ced an d season ed set of to p

m ana ger s an d a simp lifi ed m an agemen t st ruct ur e F ew mo r e r atio n ally .

pl an n ed an d tho ro ugh ly tested d esi gns exist ed fo r coo rdin ating ap p rais ,

in g an d p lann i ng th e a cti vi ti es of a gr eat v erti ca lly in te gr ated in d u st rial

,

ent er p r ise. Th e Dep a rtm en tal Dir e cto r s a dministe r ed th e o per ation al
a cti viti es in ea ch maj o r fu n ction at th ei r h ea dqu art er s w hil e th e Vi ce ,

P r esi den ts in char ge of the fu n ction al dep artm ents an d two general
o ffice r s m eetin g co llecti v ely as th e Execu ti v e Co mmi ttee ma de the
, ,

s trategi c an d en trepr en eurial decisions .

Y et al m o st at on ce the comp an y b egan ha v in g o rgani zation al p r obl ems .

Wi thin tw o y ear s the careful ly wo rk ed-o u t centralize d fun ctio n a lly

, ,

depa rtm en tal iz e d structur e h ad to b e scr ap p ed T h e o rgani za tio n al fo rm

.

whi ch h ad so efi ectiv ely S too d th e test of ph enom en al ex p ans ion an d

whi ch w as th en fur th er r ation ali ze d w as un ab l e to m eet th e n eeds cr eated
by th e comp an y s post w ar str ategy of p r o duct di ver sifi ca tion T h e stru c
’
.

tu r e b u il t to m anage a singl e lin e of pr o ducts p ro v ed in su ffici en t to h an dl e

the a dm i ni stration of se v er al differ ent lin es of go o ds .

T HE S TRA TEG Y OF DI VER S IF I CATI ON

Fr om th e tim e of its con so li dation in 1 902 u ntil 1 9 1 8 th e gr o wth of the ,

du Pont Co m p an y s a cti viti es h ad r es ul t ed fr om exp an din g the o u tpu t of

’

a singl e lin e of pro du cts Bu t from th e en d of Wo rld War I until th e

.

p r esent da y th e comp an y s S tr a tegy of gr o w th has b e en to d ev elo p new

,
’

p ro du ct lin es in quite difi eren t in du s tri es As th e du Pont ex ecu ti v es

.

qui ckly di sco v ered th e n ew str at egy of di v er sifi cation cr eated a gr eat
,

n umb e r of a dm in i str ati ve difficu l ti es Wh y th en di d th e comp any d eci de

.

t o l ea v e th e kn o w n an d w ell-ch art ed w a y s of gr o wt h fo r a co ur se that

f ew Ame ri can fi rms ha d yet emb ar k ed on ? A n d ho w w as s uch a no v el

s trategy p lan n e d an d execu t ed ?
T h e du Pont Comp an y ha d a ct u a lly tak en som e tenta ti v e ste ps to w ard
di v er sifi cation b efo r e Wo rld Wa r I Y et in 1 9 1 3 onl y 3 p e r cent of
.
, ,

its b usi n ess w as o u tsi d e of ex p l osi v es

52
It w as th e eno rmo u s gr o wth
.

of th e co m p an y s p h y si cal fi n an ci al an d pe r sonn el r eso urces during th e

’

, ,

w ar th at in t ensifi ed th e s ear ch fo r n ew l in es of bu sin ess In p l a nni n g .

an d ca r ry in o u t th str at gy of m o v in g in to in d u s t ri es b a se d on th e
g e e

t ech n o l o gy of ni tr o c ell ul o se c h em i stry th e bo ld fi n an ci al an d l egal m an

,

en v er s o f th e O ld er em p ir e b u il d er s l ik e a Co l eman du Pont h ad r el a

tiv ely li tt l e r el ev an ce F ar m o r e ap p ro p ri ate w er e th e r ational ca lc u la tin g

.
,

w a y s of a Pi err e du Fo n t an d hi s t ech ni call y S kill ed as soci ates Mo r eo v er .

,

p lanni ng an d ca rryin g o u t th e n ew str a tegy of di v er sifi ca tion r equi red

THE S TRA TE GY O F DIVERSIFICATION 79
mo r e compl ex an d mo r e n u me ro u s st r ategi c decisions than d i d th e o lde r
o n e of c onso l i d ation inte gr ation an d exp ansion w ithin a sin gl e in du st ry
, , .

I n itial S tcp s To ward D iversification

The du Pont Comp any ha d r ej ected an o p p o r t u nit y to d i ver sify sho r tly
after its r eb i r th in 1 902 an d 1 903 prefe rr ing to con cent r ate on its pr ima ry
,

l ine At the time of th e conso lid ation one of th e constit u ent fi r ms the
.
, ,

Inte r nationa l S mo k el ess Po wd er 8: Ch emi c a l C o of Pa rl in New Jer se y .

, ,

w as c a rry in g on a small bu sin ess in so lv ents ethe r an d l a cqu er s l a rgely

, , ,

as a b y—p r o duc t of its smo k e less p o wde r man u fac t ur in g T h e conso l i d ate d .

co m p an y contin u ed this mixe d c hemi c a l bu sin ess bu t l oo k ed on it on ly ,

as a sma ll s econ d a ry a cti v it y an d not as o n e to b e dev e lo p ed into a maj o r

ne w line As I re n e e du Pont l ate r pu t it : We ma d e an excell ent qu al ity
.
“

an d most att r a cti ve mater ia l bu t the v o lu me w as too small to ma k e a

,
” 53
goo d in du st ry o u t of it .

The fi r st pl anne d mo v e b ey on d expl osi ves came in 1 908 an d w as initia lly ,

l i k e the l ate r d e velo p ments a r es p onse to a th reat of excess ca p a c ity

,
54
.

T h e d an ge r of i dl e pl ant an d p e r sonne l a r ose w h en the go v er nm ent

temp o r a r i ly c an cel ed a m aj o r p ar t of its o rder s fo r mi l ita ry p o wde r The .

1 0
9 3 c onso l i d ation ha d g i v en th e d u Pont Com p an y a mono p o ly of the
man u fa ct ur e of mi l ita ry p o wder an d p o l iti c a l pr otest w as not lon g in
,

comin g In 1 906 Con gr es s pro vided fu n d s fo r the A rm y to bu i ld a small

.
,

pl ant as a ch eck on th e costs of ma k in g p o wder Tw o y ea r s l ate r afte r .

,

th e go v e r nment ha d in stit u t ed an antit ru st c as e a gain st th e du Pont

C omp an y th e Ho u se an d S enate am en d ed a N a v a l A ppr o pr iations B i ll to

,

r ea d that no p a r t of the a ppr o pr iations co ul d b e s p ent fo r th e purchase

“

of p o wder from an y t ru st o r comb ination in r estr aint of t r a de o r fr om

an y co rp o r ation ha vin g a mono p o ly of gu n p o wder in th e U nited S tates ,

55 ”
exce p t in the e vent of an ext r ao rd ina ry eme rgen cy T h e N a vy th en .

bu i l t en l a rge d fa ci l iti es at its In dian R i v e r pl ant in M a ryl an d w hi le th e

A rm y complete d a fa cto ry at its Picatin n y A r s ena l This const ruction .

d o ubl ed the co u nt ry s smok el ess p o wder c a p a city In 1 908 w e ll b efo r e

’
.
,

its completion th e du Pont Com p an y close d d o w n one of its th r ee smo k e

,

l ess p o wder p l ants an d k ep t th e oth er tw o ru nning at r educe d v o lu m e 56

.

T h e l i k el ihoo d of o ur ha v ing a c onsi d er abl e i d l e c a p a c it y at o ur

“

smo k el ess p o wd er pl ant s

”
led th e C om p an y s Ex ecu ti v e Committee to
’

a p p oint a s ubcommitte e in D ecemb e r 1 908 to in v estigate an d r ep o r t on

, ,

what ste p s a r e a lr ea dy b ein g ta k en an d w hat a dditiona l ste p s the y

“

wo uld recomm en d in the d i rection of d evelo p ing f urth er u ses fo r gu n

,
” 57
cotton o r an y of th e oth er pr o duction s of o ur smo k el ess p o wder pl ants .

T his loss of o rd e r s a l so t ur n ed th e c om p an y s to p ex ecu ti ves to a mo r e

’

g ene r a l r e v ie w of th e v a lu e of t h e g o v er nm e nt bu siness I f u nem pl o y ed .

80 DU FONT — CREATING AUTO NOMOUS DIVISIONS
r eso u rces mi ght b e t ur ned to n ew u s es p ossibly even p l ant an d pe r sonnel
,

sti ll o per ating on go v e r nment wo r k co uld b e sh ift ed to mo re p r ofi tabl e

a c ti viti es As Pi err e wr ote his co u sin Wi ll i am du Pont in th e fo llow ing
.

s p r in g : R evi ew ing th e w ho l e Go vernment po wder bu siness it h as no t

“

p ai d us to go in to it bu t havin g gone in w e can not l et it go Th e situ ation .

h as led u s to in v estigate o ther lin es w hi ch mi gh t o c cup y th e m an ufactu r

in g cap a city w hi ch is no w o ccu p ie d in G o ver nment bu sin ess ” 58
Th u s .
,

w hil e pr ess ur es an d n eed s cr eated by ch anges in th e m ar k et t ur n ed th e

p o li cy ma k e r s to th e n ew s t r at eg y it a l so ma d e th em mo
, r e a w a r e of th e

o ppo rt u ni ti es it o ffer e d .

Pi err e pl a ced his br oth er Ire n e e w ho ha d al so r ecei ved h is tech ni ca l

,

tr ain in g at in ch arg e of pl anni n g th e ne w pr o gr am by pu tt in g h im

at th e h ea d of the D eve lo p men t Dep artment an d on th e Ex ecutiv e Co m
mi ttee 59
O n the b asis of some of the D ep ar tment s s up erfi c i al earli er ’
.

surv ey s I re n e e d eci d ed to con c entr ate his att ention on th e potentia l s of

,

th e th r ee in du st r i es w hos e pr o ducts ha d nitr o c e llul os e as thei r b asi c ingr e

di ent ar tifi cia l l eath er arti fi ci al si lk an d pyr oxyli n (Ce llul oi d—typ e)
, ,

pr oducts in cludin g p hotogr ap hi c fil m A cco rdin g to th e D ep ar tment s .

’

r ep o rts th e tota l r e qui r em ents of th ese thr ee in du stri es w as clos e to

,

po u n ds of nitr o ce llul os e o r a littl e mo r e than do ubl e th e amo u nt

,

no rmally t ak en by th e A r my an d N a vy in p r evio u s y ea r s - 60
.

Whi ch of th ese p otential fi eld s then off e r e d the broa d est oppo rt u nity
, ,

to u se th e comp any s e xis tin g r eso ur c es ? P yro xylin pro ducts enj oy e d a
’

l a rge m ar k et bu t their m an ufa ct ur in g r aise d difliculties In vestigation .

in di ca te d that it w o u ld b e ne cessa ry to engage in a gr eat amo u nt of

‘‘

d etail m an uf a c t ure to s ucc essfully com pete w i th th e la rge comp an i es at

pr es ent en gaged i n thi s bu siness w ho s ell th ei r pr o ducts l a rgely i n fi ni shed
fo r ms of comb s co ll ars k n i ckk na c k s et c o r in sh eets in h u n dred s of
, , , .

”
difi eren t thi ck n esses an d co lo r 61
As w as still true of th e mi x ed ch emi cal
.

bu si n ess at P ar lin the v o lu me of ea ch pro duct w as too sma ll to be a

,

pr ofi tabl e bu sin ess S o instea d of attem p tin g to comp ete w ith the pyro xy lin
.

pr o ducer s the D ep ar tment r e commen de d that the comp an y co n tin u e to

,

in vesti gate th e p os sib i lity of su pp ly ing thos e comp ani es w ith r aw materia l s
by devel op ing nit ro cellul o se fr om sho r t fi br e cotton w hi ch w
‘‘
oul d b e
”
s uitabl e fo r celluloi d man ufa ct ure .

A mo ve into th e a rtifi cia l si lk in du s try pr esented oth er typ es of prob

lem s As nothin g in this lin e h ad as yet b een don e in th e Un ited S tates
. ,

a r eal o ppo r t u nity existed But it d immed when th e Chardonnet Co m

.

p an y s ucc essful man u fa ct ur e r s of a rtifi c ial silk by the ni tro cellulose o r

,

p yr oxylin metho d in Fr an ce an d Italy ask ed too high a p ri ce fo r th ei r ,

p at ents Mo r eo ve r th e comp any s l ea din g ch emi sts b eli eve d that th e

.
,
’
THE STRATEGY O F DIVERSIFICATION 81

r e cent ly dev e lo p ed v i scose pro cess might soon s u p er sed e the pyr o xyl in
62
metho d of man ufa ct ure .

A r ti fi cia l leath er on th e oth er han d not on ly r equ i red l ess initi al

, ,

cap ita l than di d a r tifi c ia l si lk bu t it a l so pro vi de d a fi eld wh er e the

,

c omp an y s techno logi ca l exp eri en ce t r ainin g an d r e so urc e s co uld p a y o ff

’

, , .

S in ce a r ti fi c ia l l eath er ha d b een man u fa ct ur ed in thi s c o u nt ry f r om nit r o

cellulos e fo r on ly ab o u t a deca de it w as sti ll the D evelo p ment D ep a r t
, ,

ment r ep o rte d of p oo r qu a lit y a ltho ugh th ere ex i sts an u ns ati sfi ed

,
” 63
deman d fo r the high gr a de a r ti cle T h e c om p an y w as in an ex cell ent
.

p o sition to im pr o ve pro cess as w ell as pro duct an d a l so to fi n d t ech ,

no lo gical ans w er s to the in du stry s maj o r u n so lved pr o bl em th e effi c ient

’

r e co very of so lvents Mo reo ver a r ti fi cia l leath er li k e ex p losi v es bu t u n l i k e

.
, ,

pyro xyl in a rti cles w as a r e l ati vely hi gh vo lu me u n diff er entiate d pro duc t
,

th at w as so ld in bulk to o th er man u fa ct urer s fo r fur th er pro ces sing .

To b e mo r e ce r tain wh eth er a sati sfa cto ry a r tifi cia l l eath er c an b e

“

pr o duce d at a r easonabl e cost as w ell as to deter mine w h eth er th e so lvents

”
u sed in th e man u fa ct ure c an b e r e co v e red th e D ep ar tment s et up a ,

sma ll p i lot pl ant in the cl ose d do w n smo k e less po wder wo rk s in the fa ll

-

of 1 909 T h e o p er ation p ro v ed s uccessful an d on th e D ep a rt m ent s reco m

.
,
’

m en datio n th e Ex e cu ti v e Committee a gree d to go into the bu sin ess

,
.

This decision immedi ately r ais ed anothe r qu estion S ho uld the com p an y .

sta r t by bu i ld in g its o w n a r ti fi cia l leathe r pl ant s close to the existin g ,

nit ro cellulo se c a p a city o r sho uld it l ea r n mo re ab o u t the bu sin ess by

,

purcha sin g a go in g con cer n ? D eci d in g on the s econ d a lter nati ve th e

x
,

c om p an y in 1 9 1 0 purchas ed fo r l a rgely in du Pont s ecur ities ,

one of th e l ea d in g fi r ms in th e fi eld th e F abr i k oi d Co w hi c h ha d its , .

,

main pl ant in Newburgh New Y o rk 64

, .

F o r a sho r t p e r io d afte r 1 9 1 0 th e Execu ti ve C ommittee di d l ittle to w a rd

,

fu rth er d i v e r si fi c ation Na va l exp ansion plu s th e l a ck of inhib iting

.

amen d ments in l ate r appro priations b i ll s again bro ught l a rge go v er nment
o rde r s fo r smo k e l ess p o w d e r A l so as th e F ab rik o id v ent ur e pr o v e d p ro fit
.

a ble the Comp an y exp an d e d its o u tpu t of a r tifi cia l l eathe r tr ansferr ing
, ,

some of its smo k eless po wder fa cil ities an d p e r sonne l to N ewburgh T h e .

De velo p ment Dep a r tm ent contin ued to w o rk on enl a rgin g th e c omp an y s ’

l in e in this fi eld an d soon t ur ne d o v e r its initia l w o rk in p atent l eathe r s

an d one of t w o other pr o ducts to th e Op er ating an d S a les D ep ar tments
65
fo r furth er de ve lo p ment T h en in th e s u mmer of 1 9 1 3 excess c a p a cit y
.
, ,

a gain b ec ame a problem G o v e r nm ent o rder s dr o p p ed o ff aft er Con gress

.

r educed mi l ita ry a ppr o pr i at i ons i n 1 9 1 1 an d again in 1 9 1 2 The du Pont .

Execu ti ve Committee again as k e d th e D evel o p m ent D ep ar tment to

“
in vesti gate u ses othe r than those w ith whi ch w e a re a lr ea dy fami l ia r
, ,
82 DU FONT — CREATING AU TONOM OU S D IVISI ONS

o f ni trocellulos e i n a ddi tion to o u r p resen t sal es .

” 66

De v elop m ent D ep armi en t in 1 9 1 3 r ecommen d ed th at th e comp a ny

Th e
ca rr y o ut th e p lan s it h ad st ar t ed to w o r k on i n 1 1 0 fo r mak in py o x l i
9 g r y n

from ni t rocell ul ose ba sed on short sta p l e cot ton Th e De par tmen t ha d -
.

b ecom e m o st en th u si ast i c ab o u t th e p rosp m f o r such a p r o du ct 67

First .
,

( h s
eets, ro ds , fo r fin i sh ed p r o du cts w er e all in cr ms mg
an d t u b es) , an d i

r a i dl y S eco d h i i o t s k p t fo r i o m p ti tion d
p n . s
pp g n c s , e o u e
gn c e an so t

h el ped pr ov i d e a p r o t ect ed mar k et F ina lly th e com pa n y s lar ge op era tio ns

’
.
,

ex e r en c
p i e th a t co u ld be o
c n cen t a e r t d on fi n din g w ay s to l ow er cost and

F u rth er in v esti ga tio n , h o w ev er, sh ow e d that th e c om pan y w oul d ha ve

br ot h er, R . R M . . Carp en t er , r ecen tl y ap poin ted V i ce-P r esi den t i n ch a rge

firms w oul d fr om o utsi d ers b ecau se th ey w oul d sacrifi ce th e

b uy
“
n ot

rf ect co n t r o l an d su p ervi sion of t h eir p r o du ct th r o u gh o ut its m an u f a c

p e
68 ”
tu r e w hi ch th ey n o w en j o y Th e on l y w ay to r etai n s uch con t r o l w o ul d
.

b e to i nstruct us in th e d etail s of m anu fa ctur e o r co m posi tion of ch a r a c

“

”
t er of th eir p r o du ct A s s uch in fo rm at ion w as amon g their most
.

v al u abl e t r ade secr ets th ey w o u ld h ar dl y i v e it o u t to a o t en tial co m

g , p
ti t r I th r w o r ds by q i i s uch cl o o rdi n a t ion b et ween
p e o n .o e r e u r n g se co ,

g r at io n a b usin ess n ecess t i y If . th e du P ont C om pa n y w as to develo p

cell ul ose o n a lar g e en o u g h scal e to mak e it p rofi tabl e it w oul d h av e to
,

fi ni sh ed p r od u cts .

On ce th e Ex ecu tiv e C om mi tt ee agr eed to go in to th e pyr o xylin b u siness ,

th e n ext questi on a ai n w as w h eth er to do so by b uildin g a p lan t o r by

g
b u in g o ut a go in g co n cern O n th e b asis of an oth er of Wal ter Carp en
y
.

t er s r ep o rts th e C o mm i tt ee thi s tim e ch o se th e fir st al t ern ati v e Th e

’
.
,

a dv an ta e o f p ur cha sin h r a d r p u i d i im a e k no w l edge

“

g g t e t e e ta t on an n t t , ,

co m pa n y w as o u t w ei gh ed by t h e
”
o f th e m an uf actu r e of an exi st in
g
b en efi ts o f clo ser in tegr ati o n wi th th e co m p any s p r esent p r o du ction
’

t echn i cal kn o w -h ow th at w o ul d
a ccrue fr om th e buil di ng of a n ew pla nt
a t th e Hask ell S m o k eless P o w d er Wo rks Th is p lan t co ul d use cur r en tly .

i dle eq ui p m en t an d p er so nn el It w o ul d afi o rd an o ppo rt un i ty f o r .
“

em p lo yi n
g t o
goo d a d v an t a
g e t h e t ech ni cal an d m a n u fa ct urin g ab ili ty of
THE S TRA TE GY o r DIVERSIFICATION 83

the smo k el ess p o wd e r o rgani za tion th u s ta k in g a dvantage of th e fa ci l iti es

,

an d c ap ab i l iti es r en der e d s up erfl u o u s by decr easing smo k el ess p o wder

” 69
bu siness G i ven its l o w er cost of r a w mate r ial s its pr ob ably gr eate r
.
,
“

”
k no wle dge of cellulose w hi ch w o uld mak e p ossible fur the r contin u e d
impro v ement in pro duc t an d pro c ess es an d its l a rge sa les fo rce the com , ,
”
p an y w ith its n ew pl ant c o ul d meet p o w e rful comp etition an d sti ll “

”
mak e a gene r o u s r et ur n of tw ent y p e r cent on ca p ita l in v este d th e
“

Co m mittee tho ught

The o utbreak of the w a r in E uro p e mo d ifi e d th e pyro xylin pro gr am ,

fo r in th e fa ll of 1 9 1 4 the du Pont Co mp an y b egan to r e cei v e h uge o rd ers

,

fo r smo k e l ess p o w d e r fr om the Al lies The Ex ecu ti v e Co mmittee as it .

,

t urne d its attention to the n ew sit u ation a gr ee d not to ab an don p l ans ,

fo r a pyro xylin pl ant bu t instea d to bu i l d an d o p e r ate a sma ll p i l ot one at

the Exp er imental S tation r athe r than at th e Has k ell pl ant At th e sam e
70
.

time th e d ep a r tment b eg an its fi r st se rio u s study of the p ossib i l ities of a

,

mo v e into p hoto grap hi c film Ho w e v e r u nti l the l ate s pr ing of 1 9 1 5 th e

71
.
, ,

comp an y p ai d litt le attention to matte r s oth er than th e con st ru ction of

the eno r mo u s pl ant an d othe r fa cil ities nee ded to meet the w a r o rde r s .

I n ten sified Pressu re: f or Diversificatio n

Wa rtime exp ansion w as to in cr ease gr eatly th e pr o blem of excess
c ap a cit y in the smo k e l ess p o w de r o p e r ations fo r th e giant E uro p ean ,

o r der s w er e l a rgely fo r smo k e l ess p o wder to pro p e l sh ell s r athe r than

fo r high ex p losi ves that a cco u nte d fo r th e li on s sha r e of the com p an y s ’ ’

no rma l bu siness S ta r tin g w ith a c a p a city of

. p o u n d s a y ear th e ,

th ree exi stin g pl ants at Car ney s Point Has k ell an d Paa ’
,a ll in N ew ,

J r s y in cr ea sed to a pro duction of

e e — p o u n d s a y ea r by th e
en d of By Apr i l 1 9 1 7 this ha d r ea che d , p o u n d s a y ea r ,

o r fifty—fo ur times that of th e Octob e r 1 9 1 4 r ate M o r eo ve r in 1 9 1 5 M aj o r .

, ,

Wi lliam G R amsa y an d his En ginee r ing D ep a rtment c ompl ete d in r e co rd

.

time the const ruction of th e l a rgest gu n cotton pl ant in the w o rl d at Ho p e

we ll V i rgi nia At the same ti me at Rep au n o an d othe r pl ants d e vote d to
, .
,

mak in g hi gh explosi v es fo r com me rcial p u rp oses the r e w as a sma lle r ,

bu t by o lder stan d ard s sti ll extr eme ly r ap i d exp ansion in th e pr o duction

of T N T an d othe r expl osi ves b ase d on to lu ene tetryl p i cr i c a ci d am
. . .
, , ,

mo n iu m nit r ate an d ammoni um p i cr ate S imi l arly the o u t pu t of s p e cial

, .
,

expl osi v es an d a cc esso r ies li k e c a p s fu s es an d i gnition p e llets gr ew

, ,

eno r mo u s ly .

A l so b ec a u se of the u nexp e cte d in cr ease in v o lu me the du Ponts b egan ,

to man u fa ct ure mo r e of th ei r raw mate r ia l s than th ey h ad in th e p a st .

In th ese y ea r s the comp an y pr o duced v ast qu antiti es of s ul p h ur i c nit r i c , ,

an d l a cti c a ci d s a lcoho l to lu ene an d s uch ne w items as di p h enyl amine

, , , ,
84 DU FONT — CREATING AUTONOMOUS DIVISIONS
ammoni um p i cr ate an d an alin e as w ell as p ur ify ing cotton linter s an d
, ,

making i ce ma chinery to r eco v er a lcoho l an d a ci d s Th e new deman d led .

th e comp an y s r es ea r ch l a bo r ato r i es to c on cen t r at e on impr o v in g its s up

’

p li es of a ci d s an d semi raw m ateri al s as w ell as mak ing its pro cesses mo re

efi cien t .Th e ne ed fo r as sur ed s uppli es d em an d ed in cr easin g v e rti ca l
in tegr ation .

A lmost fr om th e b egin n ing Pi err e du Pont the comp an y s Pr esi dent

, ,
’

w as con cer n ed abo u t th e im p act of this eno rmo u s deman d an d exp ansion
on th e fu t ur e of th e du Po nt o rga n i z ation Wr iting Co leman sho rtly afte r.

th e w o rk on th e fi r st w a r o rd e r s ha d b egu n b e e m p hasi zed : ,

We m u st b e car ef ul th at ou r po in t of view is n o t entirely warped o u t o f

line b y th is tem p o r ary si tu atio n It w ill tak e v ery car ef ul th o u gh t an d
.

m aneu ver in g to r etu rn to f o rm er co n ditio ns Th e Engin eer ing D ep art ment .

h as exp an ded b eyo nd o u r w il dest dr eam Th o se in th e S m o k eless O perating

.

D ep artm ent h av e sei zed m en fro m o th er dep artments in o rder to qu ickly

m eet deman ds T h e oth er departm ents all h ave r esponded splendidly an d
.

h av e do ne th eir u tm ost to adj u st th em selves to th e n ew co nditio ns 73

.

Not on ly di d th e n ew dem an ds mean a gr eat exp ansion in p l ant ca p a city

bu t a l so in th e n u m b er of tr ain ed p e r sonnel an d in th e amo u nt of ca pital
74
empl o y ed . T h e to tal n u mb er of m en w o rk in g fo r du Pont r os e from
in th e fall of 1 9 1 4 to o ver in th e fa ll of 1 9 1 8 whi le the ,

mana geri al o r a dm i ni str ati v e gr o u p (m en recei v ing s al a ri es of or

mo re) gr ew from 94 to 25 9 T h e gro ss ca p ita l emplo yed by th e com p any
.

in cr ea sed from in 1 9 1 5 to $309 ooo ooo by th e en d of 1 9 1 8, , .

Pro fi ts — w hi ch grew comp ar ably p ro vi ded am pl e fu n d s fo r an y p r o

—

gr am develo pe d fo r th e po stw ar u se of this greatly en l ar ge d pl ant an d

per so nnel .

Th e com p an y b eg an to consi der the detai l s of s uch a p r ogr am as soo n as

po wd er pl ant con struction w as far eno ugh a long to ass ur e the fi lling of
-

mili ta ry o rders An enl a rged D evelo p ment D ep a rt ment ha d th e re

75
.

s pon sib i lity fo r pl anni n g the po st w ar di v er sifi c ation bu t th e fi na l str ategi c ,

d ecisions on w h ere an d w h en to mo v e w e re those of th e Exe cu ti ve Com

mi rtee Fr om th e fir st all a gr eed th at th e Dep artm ent m ust fo cus its
.
,

att ention on in du str ies whos e pro cess es w ere b as ed on th e s ci en ce of

ch emistry The r e the com p an y w as te chno logi cally str on g an d the mark et
.

”
o p p o rt u niti es p a r ti cul arly in viting In m ech ani ca l m an ufa ct ures th e
.
“

D evel o p ment D ep a rtment pointed o u t the United S tates is fa r in ad

,
“

v an ce at p resent of an y co u ntry in th e w o rld In ch emi c a l man ufa cture .

” 76
German y is u n do ub te dly in a dv an ce of an y co u ntry in th e wo rld An d .

th e w a r ha d cl os ed th e Am er i ca n ma rk et to G er man goo d s .

T h e pl anning of po stw a r d i v er si fi c ation w ent t h ro u gh t wo d istin ct

T HE S TRATE GY O F DIVERSIF ICATION 85

stages F ir st the D ep art ment s n ew E xcess P lant Utilization Di vision con

.
,
’

cen trated on fi n din g u ses fo r th e gr eatly enl arg e d smo k e l ess p o wd e r fa

cilities sin c e on ly a p o rtion of the pr esent e qui p ment w i ll be u seful afte r

“

,
” 77
th e E ur o p ean Wa r s a r e s ettl e d Then in 1 9 1 7 th e D ep a r tment b egan to
.
, ,

consi d e r its r eso urc es as mo r e than p h y si ca l pl ant an d fa cilities Its pl an .

ner s b egan to th in k ab o u t th e u se of its l ab o r ato r i es its sal es o rgani zation , ,

an d p a rti cul arly its p e r sonn el tr aine d in th e com pl ex pr o c ess es of nit r o

ce llulose te chno l o gy an d in th e a dministr ation of gr eat n um b e r s of men

an d l arge amo u nts of mon ey an d mate r i al s .

The r es u l tin g di ver sifi c ation pro gr am in to chemi cal —b as ed in du strie s

d e vel oped a lon g th ree lin es F i r st th er e w as exp ansion in in du str i es in
.
,

w hi ch the comp an y ha d a lr ea dy ente r ed — artifi cial l eathe r (F abr i k oi d )

an d pyr o xylin Gr o w th in th e pyr o xylin fi eld w as hasten ed w h en the
.

Ar lington Comp an y ma k er s of Pyralin a high—gr a d e pyr o xylin ap

, , ,

p ro ach ed th e du Pon ts w ith an o ff e r to se ll

78
Thei r mana g ement w as o l d .

an d h ad b een t r o ubl e d by inte r n al d iss ensions as w ell as l ab o r an d c om

p e ti ti v e d iffi cul ti es T h e du Pont

. C om p an y qu i ckly a cc ep te d t h e O ff er fo r ,

the A rlin gton fi rm one of th e l a rgest ce llul oi d pr o ducer s in th e co u ntry

, ,

w as an inte gr ated fi m w i th v a lu abl pr o pe r ti es an d a w ll establi sh ed

r e e —

name Its pl an ts at Arlington New Jer s ey Po ughk eep si e New Y o rk

.
, , , ,

an d To r onto Cana d a w e r e w ell l o c at ed fo r e asy c oo rd ination w ith th e

, ,

e xisting du Pont o p e r ations Mo r eo v er its p a p er mi ll in New Yo rk an d

.
,

cam p ho r pl antati on in Fl o r i d a ass ur ed it of s up p l i es w hi ch the E ur o p ean

w ar w as maki ng di fficult to ob tain In th e fo ll o w in g y e ar th e du Pont .

,

Com p a n y en l a rg ed its F ab rik o id pr o duction th r o u gh th e purchas e of th e

F airfi eld R ubb er C om p an y in F airfi eld Conn ec ti cu t a con cer n w hos e , ,

maj o r pr o duc t w as rubb er c oat ed a u tomob i le an d ca rr i age to p s In J an

— 79
.

u ar y 1 9 1 7 to ass ur e its elf of a dequ ate suppli es it mo v ed fur the r to w a rd

, , ,

v e r ti ca l integr ation by p urch asin g th e Maro k en e C omp an y of E li zab eth ,

”
N e w Jer s ey mak er s of th e gr ay goo d s b as e fo r th e F abr i k oi d pr o duc ts
,
“
.

S econ d th e comp an y ent er e d a r eas w h er e th e E u r o p ean w a r ha d

,

ca u s ed cr iti c a l s c ar cities O f these th e most im po r tan t w as dy es The

.
, .

du Pont Comp an y w ent into dyem ak ing h esitantly e v en tho ugh m an y of

its pr o ducts s uch as di p hen yl amin e an d anth r a cene w er e u se d as inter
, ,
“

”
m ediates in dye man ufa ct ur in g D esp ite urging s of the tex til e in du stry .
,

the A meriGan go ver nm ent an d the A lli e d po w e r s th e Dev elop m ent

, ,

Dep a r tm ent as l ate as De cemb er 1 9 1 5 ma d e a dv e r se reco mm en da , ,

tio ns Th e comp an y at th e moment h ad n eith er th e exp er i en ce no r pl ant

.

cap a cit y to go into dye pro duc tion Walt er Ca rp ent er as Dir ecto r of D e .
,

v elo p m en t note d t h e s p ecifi c r easons : F ir st as all o ur pl ant ca p a cit y “

, ,

is fully o ccup i ed w e wo uld ha ve to bui ld a com p l ete n ew p l ant fo r the

,

pr o duction of inte r medi ates S e con d : D u e to the s c ar city of crude mate

.
86 DU FONT —
CREATING AUTO NO MOUS DIVIS IONS
” 8°
riaLThird : Du e to the ti me o f _o ur t echni cal m en bein g full y oc cu pied .

Carpen ter fur ther co mm en ted th a t Pi err e du Pont di d not al to get h er

d eci ded tha t a sta r t sho ul d be ma d e Wi th . th e assi stan ce of Ge rma n dy e

ti on w asup at Dfi p w ater N ew Jer se y wh er e se v er al new a ci d plants

set , ,

81
h a d be en bui l t Th e d e v el op m en t of a sati sfa ct o ry prod uct w as sl o w as
.

w as th e d ev el op m en t of p la nt an d p er so nn el D yest u ff s contin ue d to be .

a co stly dr ain on th e com p an y s tr eas ury u ntil lon g after th e en d of the

’

w ar .

Thir d th e De v el op men t D ep a rtmen t co n tin um to stu dy a v ariet y of

,

n ew pr o d ucts that co uld use postw ar cap a cit y At fir st it ho pe d to do .

,

this by man u fa ctur in g chemi cals w hi ch t h e com pan y w as mak in g o r “

”
co u ld mak e with v er y slight expen ditur e an d w hi ch sh oul d ha v e a wi de
-
mar k et as r a w materials in th e rubber an d ch emi cal in dustri es ? Q ui ck l y 2

it d eci ded that th e d em an d fo r th ese co ul d not empl o y man y of th e exist

ing r eso ur ces .

Th en it began to in v esti gate indi vi dua lly th e smo k el ess po wder plan ts
in o rd er to d etermi ne j ust wh at w er e the spe cifi c a dv an tages of ea ch in
l oca tion equi p men t an d per so n nel After m uch study th e De v elo p men t
, , .
,

Dep artmen t expe rts s ugg est ed that th e Hopew ell plan t w as en tir ely too
83
b i g Whil e that plan t hel d po ss ib ili ti es fo r th e pr oducti on of w ater
.

so lubl e chem i cal s fer tili zer s o r pa per an d o ther pr od ucts usin g w oo d an d
, ,

co tton pulp it w as al most impo ss ibl e to fin d an y one in dustry ca pab le of

,
“

84 ”
usin g a plant of this si ze thr o u gh a l on g period of time In Ma y 1 9 1 6 .
, ,

th e d ep a rt men t s ub mi tt ed a d et a i l ed r epo rt on th e fut ur e use of th e o ther

smo k el ess po wd er w o rks A cc o rdi n g to thi s r epo rt t h e De epw ater Wo rks

.
,

ofi er ed the best comb in ation fo r the ne w dyest ufi s an d al l i ed o rgani c

chemi ca l pr odu ct s ; fa cili ti es an d per so nn el at Carn ey s Point co ul d be ’

turne d to the d ev elo p men t of cast o r linseed an d other v egetabl e oils to

, ,

be used as ra w materials for F abrik oi d pain t an d varnish p r od uction ; , ,

an d Hask ell a ppea r ed b ett er s u it ed to the m an u fa ct uri n g of mo r e fi nished

85
pr o ducts s uch as F ab rik oi d pyr oxylin an d other plastics Hask el l also
, , .

mi ght be th e pla ce to b egin w o rk on a rt ifi cial silk .

Th e Par lin w o rks their repo rt on plan t utiliza ti on contin ued co uld be
, ,

u sed to d ev el o p v a rn ish es fo r whi ch ther e w as a wi d e an d gr o w in g

m a rk et V arnish of differ ent k in ds is u se d in larg e qua ntiti es by man u

“
.

fa ctu r er s of fur n i t ur e l ea ther goo d s et c w h ile th er e is a similar l arge

, , ,

cons um p ti on of v ar nish by n u m er o us co ns um ers ea ch r equ i rin g r el ati vel y

small am o u nts V a r nish is h an dl ed by e v ery pai n t sto r e an d used by e v er y

.

pai n ter in th e co u ntry Bo th typ es of v ar ni sh s p irit an d oil wo ul d

.
”
— —

u se as r a w mat erials the pr od ucts of oth er p la nts an d so pr o vi ded n ew

THE STRATEGY O F DIVERSIFICATION 87

o u tl ets fo r pr o duction from e xistin g c ap a c ity Mo r eo v er a l tho ugh th ey .

,

wo uld not u se e x a ctly th e same e qu ip ment the manufa ct ur in g pr o c ess , ,

the ma chine ry u s ed an d the techni c a l s k i ll s nee ded w er e clos e eno ugh

,

to those em plo yed in the pl ant s curr ent o p e r ations to p er mit th e u se of

’

s urplu s e qu ip ment an d t r ain ed p er sonnel 86

.

In this rep o r t th e D evelo p ment Dep a r tm ent mi ght ha v e p ai d mo r e at

tention to ma rk etin g fo r the sellin g of sma ll p a ck age d cons u me r goo d s
,

was ce r tain ly qu ite d i ff erent from th e t yp e of ma rk e tin g to whi ch th e

du Pont Comp an y w as a ccu stome d Bu t it m er ely noted that : .

V arnish m anu facture would give th e C ompan y a more complete b usiness

wh ich wo u ld m ake it easier to m eet trade co nditio ns T h e p resent sales .

o rgani z ati o n cou ld u n dou b tedly h an dle th e v arn ish es to a lar ge exten t b y

th e sam e salesm en an d f o rce in general as in th e case o f pyro xylin so lu tio n s

an d th er eb y r edu ci n ellin xp n o r b o th
87
g t h e s g e e se f .

Pa rlin s pro ximity to New Y o rk w as a gr eat a dv antage a se con d r ep o r t

’

p ointe d o u t Mo r eo v e r it w as a l o gi ca l p oint fo r a ve ry sma ll p a ck a ge

88
.
,
“

bu siness an d tin c an com p an y du e to the e xistin g pr o duc tion of ethe r an d

”
pyr o xyl in so lutions O n ce Pa r lin ha d ma de goo d in v a r nish it co uld
.
,

easi ly mo v e into th e man u fa c t ur in g of p aint .

S in ce th e Ex ecu ti v e Committe e l oo k e d w ith fa vo r on these pro p osa l s ,

p a r ti cul a rly those fo r the Pa rlin Wo rk s th e De v elo p ment Dep a r tm ent , ,

dur in g th e s pr in g an d s um m er of 1 9 1 6 con c entr ate d on its in v estigations

,

of v a r nish an d p aint w i th detai l ed consi de r ation of v a r io u s pr o ducts pr o c ,

ess es o u t pu t an d pr i ce tr en d s an d te c hni c al d ev e l o p m ents L at er in th e

, , .

y ea r th e Execu ti ve Co mmittee de c i ded on the b asi s of D evelo p ment De

, ,

rtm en t S t ud i es to into th v a r nish an d p aint bu sine ss on a l a rge

p a
go , e
89
s ca le T h e mo ve r equ i r ed only a sma ll in v estment the Co mmittee
.
,
”
a gr eed b ec a u se of anti ci p at ed exc ess pl ant T h e com p an y enj o y ed the
,
“
.

a dv antages of ve r ti c a l integr ation sin c e it co uld s upply its o w n a lcoho l ,

p igments r esin an d o th e r m at er ia l s P r o duced on a hi gh -vo lu me b asis

, , .
,

th ey co uld b e del i ver e d to th e com p an y pl ants at a l o we r pr i c e than most

sma ll er p aint fi r ms curr ent ly p ai d fo r s uc h s u p pli es
90
ex istin These
g .

b enefi t s wo uld b e in cr eas ed w h en the oth er pl ants p a r ti cul arly those in ,

clud ed in th e p l a ns fo r th e n ew D eepw at er dy est u ff o p e r ations d e v el o p ed ,

r a w mater ial s fo r p aint s l i k e li n se ed oi l c hemi c a l co l o r s an d o rgani c

, , ,

c h emi c a l s S uch adva ntages sho uld pl a ce th e comp an y in a goo d comp eti
.

ti ve p osition an d ass ur e a satisfa cto ry r et ur n on in v estm ent .

T h e Ex ecu ti ve Committ ee ga v e e v en l ess attention to th e pr obl ems of

ma rk eting th an ha d the De velo p ment D ep a r tm ent It d i d a cc ep t the De .

p ar t m en t s
’
r e c ommen d ation to a cqu i r e by p urc
“
hase o n e o r mo r e s u ita bl e
goin g con cer ns if ob tainable at fi gur es in di c ating a pr ofi tabl e r et ur n on
,
88 DU P ONT — CREATING AUTO NOMOUS D IVIS IONS
in v estm en t with a vi ew to tr an sf er of o per atio ns to Parl in at th e fi rst
,

oppo rt u n e momen t Y et ev en here the n eed to buy exp e r i en ce in

”
.
, ,

man ufa ct urin g a ppear s to ha v e b een co nsi der ed much mo r e impo r tant

this d ecision an d p artl y beca use of th e continuin g nee d fo r basi c ch emi

ca ls an d oth er s upp lies th e du Pont Co m pa n y late in 1 9 1 6 bo ught th e
, , ,

Harr iso n Br os 8: Co a large in tegrated co n cern with plants in Philadel

. .
,

p hia N ew ark an d Chi cago w hi ch bes i d es ma king paints had a large

, , , ,

sul p h ur i c ca p a ci t y an d a l so co n tro ll ed b a ux it e an d sul p h ur mi nes i n th e

So u th Ho w e v er th e n eed to ass u r e s u pp li es of essenti al ma t erials a dd e d

.
, ,

to th e d esir e fo r di v ersifi ca ti on ga v e du Pont per so n n el an d fa cil iti es in ,

th e p aint in dus try that w er e t oo ext ensi v e to b e easi ly tr an sfer r e d to the

smok el ess po wd er w o rk s af t er the w ar .

Tire F in al D efin ition o f t /ze S trat egy o f D iv ersificatio n

Th e e p aint b u siness h elpe d to bri ng th e De velo pm en t De
ntry into th e

r tm en t an d th e Ex ecu ti v e Co m mitt ee to a r ea pp r aisal of th e o bj ecti v es

p a

of their di v er sifi ca ti on po l i ci es Up to this time the em p hasis ha d been on .

,

th e b est use of exi sti n g p l an t ca p a city I n v est igati on co nti n u ed to sh o w .

th e difficul ty of fi n di n g o n e p r od uct o r gr o u p of p r o ducts tha t co uld ta k e

up th e a vail able ca p acity Th er efo r e th e Depa r tm ent s se nio r office rs .

,
’

R R M Car pe nt er an d Wal ter S Car penter d eci d ed tha t th e co m pan y

. . . .
,

sho u ld in v esti gat e busi n esses w hi ch w o uld p u t t o u se all t yp es of r es o ur ces

— ta l ents e qu i p m ent an d ca p ital — in th e w ho l e du Pont o r an iza tion

, , g
r ath er th an prima r i ly th e facil iti es of indi vi dual p l ants Th e r ea so ns fo r .

th e ch an g e in po l i cy ar e best s u mm ar iz e d in a r eso lu tion w hi ch R R M . . .

Car pe nter r ecomm en ded an d w hi ch th e Ex ecuti v e Co m mitt ee p asse d in

F ebruary , 1
9 7 1 :

“
WHEREAS ,
th ep m e D ev l pm e o en t D
n t h as , durin g th e past eigh teene ar t

m on ths , been en gaged in th e m att er of fin din g in dustri es alli ed an d o th er

w ise t o o ur o rgan iz a ti o n whi ch w ill be ca p ab le o f u til iz in g o ur mil i tar y

po w der p l an ts aft er th e w ar, an d

WH EREAS th is , st u dy dev el ops th e f act r

th at th e e ar e n o in dust ries
whi ch will be lik ely t o us e m o r e th an 2
57 0 to 3 0 % o f th e v al u e (cos ts ) o f
th es e pl an ts, an d
WHEREAS it h as been dev el oped tha t th ere ar e in dustries which can
,

u til iz e m u ch m o r e ext en si v el o ur r i za ti n an d a t t h e s am e tim e O ffer

y o gan o

g oo d ret ur ns ;

RE S OL V ED th at it is th e sen se o f th e Ex ecu ti v e Co mm itt ee, an d th at

th e D ev el o
p m en t D e
p art m en t be ad vi sed as f ollo ws
Th a t fr o m th e st u di es m ade an d r epo rt ed in deta il t o th s i Co mm i tt ee,
th e Ex ecu ti v e Co mm i tt ee ar e o f th e o p ini o n th at th e en e rgi es o f th e De v el
THE S TRATEGY O F DIVERSI FI CATIO N 89
op m en t D p r tm nt h
e a ld th r f r b i th di r ti n
e S ou e e o e e n e ec o o f e m p lo y i n g ou r

organi zatio n to th e fu ll an d th at th ei r effo rts b e co n fi n ed especially , as to

fu tu re acti o n to th e develop m ent o f th e f o llo w in g in du stri es

,

I D yestu ff an d allied o rganic ch em icals

2 V egetab le o il indu stry
3 P a in t an d V a r ni sh

4 W a ter S o lu b le C h em i cals

In d u str i es r elated to C ellu lo se an d C o tto n p u r ifi cat io n

5 .

This n ew d efi nition of th e comp an y s p o l i cy of d i v er sifi c ation led to th e

’

contin u in g purchase of p aint fi rms dur ing the s pr in g of 1 9 1 7 fi rms w hi ch ,

in cluded th e B ecton Ch em i ca l Com p an y man ufa ctur er s of l itho p one , ,

an d C awley Cl a rk 8: Co b oth of N ew a rk an d th e Br i dgep o r t Woo d

, .
, ,

F inishin g Com p an y in Co nne cti cu t Des p ite l o w p r ofi ts an d a c t u a l loss es

.

in the p aint bu siness the De ve lo p ment De p a r tment in the s pr in g of 1 9 1 8

,

r e commen d e d th e contin u in g of bu i ldin g of a full l ine of p aint pro ducts ;

an d th e Ex e cu ti v e Committee a ppr o v ed th e purchase of pl ants at Fl int ,

M i chigan an d in E v erett M as sa ch u s etts Th e fi r st of th es e con centr ated

, , .

on s upp ly in g th e a u tomob i l e t r a de ; the s econ d l i k e th e Br i dgep o r t con ,

cer n han dl ed v a r ni sh es fo r inte r io r w o rk L ate r in th e y ea r pl an s fo r fur

, .
,

th er exp ansion an d conso l i d ation in th e p aint bu sines s w er e dr o pp e d b e

92
c a use o f in cr easin g ma rk etin g d ifficul ti es an d contin u ing losses .

Excep t fo r exp ansion in the p aint in du stry the ent ry of th e U nit ed ,

S tates into th e w a r s l o w ed d o w n th e d i v er si fi c ation pr o gr am Ene r gi es .

wer e a gain t ur n ed main ly to in cr e asing explosi ves pro duction N ev erth e .

l ess by No vemb e r 1 9 1 7 th e D ev elo p m ent D ep a rtment r ep o r te d some

, , ,

93
pro gr ess in oth er a r eas b esi d e p aint The dy estuff s o p e r ations at Deep
.

w ate r h ad b een t r ansferr ed from the De v e lo p m ent D ep a r tment to an

o p er ating dep a r tment New pl ants ha d b een a dd ed at th e D eepw at er
.

Wo rk s B oth th e D ev elo p ment an d th e o p er a ting d ep a r tments w er e con

.

cen tratin attention on o r ani c c h mi ca l s ot h er th a n tho se u s ed s ecifi

g g e p
c a lly fo r dyes A cream of ta r ta r pl ant ha d b een set u p at Ho p ewell Wo rk
. .

ha d b egu n on w ater-so lubl e c hemi ca l s an d a ci d s at Ho p ewell Ha rr i son , ,

an d o th er r ecent ly pur ch as ed p aint pl ants T h e D ep a r tm ent ha d d eci ded .

to con centr ate its w oo d pul p an d p ap er-pr o duc t dev e lop ment at Hop ew e ll
- .

O n ly the vegetabl e—oi l gr o up S till r emain ed in the in vestigating stage T h e .

D ep a rtm ent a l so contin u e d its st udy of th e p ossi b i l iti es of mo ving into

a r ti fi cia l si lk Negotiations w ere o p ened w ith the Amer i c an V is co se C o m
.

p an y bu t wer e dro pp ed b ec a u s e of th e ex t r ao rdina ry pr i ce a sk ed fo r “

” 94
g oo dw i ll an d bu siness o pp o r t u nit y F o r t h e tim e .b ein g th e c om p an y ,

ma d e no eff o r t to loo k into other chemi c a lly b as ed fi e ld s fo r exp ansion .

In D ecemb er 1 9 1 7 th e du Pont C om p an y purchas ed

, , p er c ent of

th e a v ai l abl e G en er a l M oto r s sto ck T h e mo ti v es fo r this purchase b ec ame

.
9 0 DU FONT — CREATING AUTO NO M OUS DIVISIONS
a m aj o r i ss u e in th e r ecent du F ont-Gen eral Moto r s anti tru st sui t Evi .

d en ce p r esen ted at th e trial fai ls to in di cate that an yone b esi des Joh n I .

R ask ob th e co m p an y s T r eas ur er saw the m att er as mo r e th an an in

’

, ,

v est ment fo r w ar profi ts an d a pl a ce to l o cat e some m an ageri al personnel

w h o mi gh t not b e ab so rbe d by th e exp an sion i nto chemi cal -b ased in du s
tri es Th e s uggesti on fo r th e p ur ch ase of G en er al Moto r s st o ck came from
.

R ask o b an d th e T r eas u r er s D ep artm ent T h e D evel op m ent Depa rt

95 ’
.

m en t w hi ch h ad p la y ed the criti ca l r o l e in d et ermin in g th e dir ection of

,

th e di v er sifi ca tion pr o gr am h ad no p art in thi s mo v e an d in fa ct a pp ear s

, , ,
96
to h av e b een str on gly a dv er se to it .

At th e en d of the w ar an d wi th th e r ap i d con tr a cti on of th e exp l osi v e

b u sin ess th e comp an y con tin u e d to m o ve in to th e n ew in du st ries o ut
,

lin ed in th e 1 9 1 7 r eso lu tions B ecau s e u tilizat ion of th e Ho pew ell Wor ks

.

co n ti n u ed to p r esen t di fii cul ti es t h e comp an y fo r m ed a sub si di ary in 1 1

9 9
‘

to ll its p r o pert i es th ere “ i th th at sal e th e w at er so lub l e o r h ea vy

se
$7 V .
,
-

chemi cal p r o gr am w as somew hat curtail ed an d th e w oo d-pulp an d pap er ,

p lan s dr op pe d Furth er in vesti gation in di ca ted th at th e v egetab l e—o il in

.

dustry wo uld not pr o vi de a goo d r etu r n on in v estm en t 8 0 by th e sp rin g .

,

of 1 9 1 9 th e du Pon t Co m p an y w as firml y es tablish ed in th e ch em i cal

, ,

p ain t an d varnish pyr o xy lin (Cellul oi d) an d artifi cial l ea th er busi n ess as

, ,

w ell as exp lo si ves Dy estufi s w er e s ti ll in t h e dev el op m ent sta ge La ter in

. .

th e y ear the E x ecu ti v e Co m mitt ee fi nal ly d eci ded to tak e th e plu nge
,
98
i n to th e m an u fa ctu rin g of artifi ci al silk o r r ayon .

By 1 9 1 9 th en th e du Pon t Co m p an y w as r ap i dly ch an gin g th e nat ure

, ,

of its b u sin ess Wh er e b efo r e th e w ar it h ad still con centr ated on a Sin gle
.

lin e of goo ds by th e fir st y ear of p ea ce it w as f abri cati n g m an y differ en t

,

p r o du cts w h o se m an ufa ct ur e w as cl o sely r elated to th e mak ing of nitro

cell ul o se for smo k el ess po wder b u t w hi ch so ld i n m an y v ery differ ent
m ark ets an d in som e cases u sed n ew ty pes of sup p li es an d m a terials .

Thi s st r at egy of p r o du ct di v er sifi ca ti on w as a di r ect r es pon se to th e th r eat

of h av in g un used reso ur ces Th e n eed to fin d n ew w o rk fo r exi sti n g re
.

so ur ces b e i nn i n w i t h th l o ss of o v er n m en t o rd er s i n 1 0 8 an d gr eatly
,g g e g 9
in t ens ifi ed by th e co mi n g of Wo rl d Vh r I m a d e seni o r ex ecut i ves in ,

creasely a w are of th e po ten ti aliti es of n i tr o c ell ul o se t ech no l o gy fo r th e

d evel op men t of n ew p ro du cts th at mi gh t em p lo y exi sti n g p l an t an d per

so n n el m o r e p r o fi tably th an th e m aki n d sellin g of ex p l o si v es T hes e
g an .

p o tenti aliti es b eca me cl ear er as th e comp any s top comm an d cam e to ’

r ealiz e th at th eir per so n n el tr ain ed in th e t ech ni q u es of ni trocell ul os e

,

t ech n o l o y an d in th e m etho ds of adm ini str at in g fa r fl u n g i n d u strial ac -

g
tivi ti es w as an ev en m o r e v al u abl e r eso ur ce th an th ei r p h y si cal pl ant an d
,

eq u i p m en t Y et in ca rry in o u t a po li cy of di v er sifi cati on to assur e th e

.
g ,
 NE W S TRU CTURE F O R THE NE W S TRATEGY 9 1

l on g te rm u se of exis tin g r eso ur ces the s am e ex ecuti v es fail ed to see a

-
,

r e la tion betw e en str ate gy an d s tructu r e Th ey r ea li ze d cl ear ly that struc

.

t ur e w as essentia l to comb in e an d in tegr ate th ese s ev er al r eso urces in to ef

fective pr o duction bu t the y di d not r aise the qu estion of w hethe r a stru c
,

tur e created to mak e an d s ell a sin gl e line of goo ds wo uld b e a dequ ate to
'

han dl e se ve r al ne w an d difi eren t pro ducts fo r n ew an d differ ent ma rk ets .

NEW S TRUCTURE F OR THE New S TRA TE GY

The essential difficul ty w as th at di v e r sifi cation gr eatly in cr ease d th e

d eman ds on the comp an y s a dmi nis tr ati v e o ffi ces No w th e diff er ent d e
’
.

r tmen tal h ea d qu art er s ha d to c oo rdi n at e a ppr aise an d pl a p o l i c ies

p a , n ,

an d pr o ce dur es fo r pl an ts o r s al es o fi ces o r purch as in g a g ents o r te ch n i c a l

, , ,

la bo r ato ri es in a n um be r of qu ite differ ent in du s tri es The d e velop m ent .

of p lans an d th e appr aisal of a cti vi ti es w er e ma d e h ard e r b e ca u s e ex ecu

ti y es with expe r ien ce prim arily in explosi ves w e r e mak in g decisions ab o u t
p ain ts v arn ish es dy es c hemi ca l s an d pl asti c pro ducts Coo rdi n ation b e
, , , , .

came mo r e co mpli cate d b e ca us e difi eren t p r o du cts ca lle d fo r differ ent

typ es o f stan d ar ds pr o ce d ur es an d p o l i cies
99
, , F o r a l tho ugh the tech n ologi
.

cal an d a dmi n istr a ti ve nee ds of the new lin es ha d m an y fu n d am enta l

simi la ri ties ther e w er e cr i ti ca l dissimil ar ities
, .

The central o fi ce w as e ven mo r e o v erw he lm ed than the dep artments

by the in cr ease d a dmi n istr ati v e nee d s r es ul tin g from di ve r sifi cation Br oa d .

go als an d p o li cies ha d to b e deter min ed fo r an d r eso ur c es all o cate d to

fu n ctional a cti vi ti es not in one in du stry bu t in se ver al Appr ais al of d e
, .

p a rt m e n ts pe r fo r min g in di v e r se fi e ld s b ecame e xc ee d in gly c om pl ex Inte r .

dep a rtment al coo rdination gr ew comp ar ably mo r e tr o ubl esome Th e .

man ufa ctur ing pe r sonn el an d the m ark eter s ten d ed to lo se conta ct w i th
ea c h oth er an d SO fai l ed to w o rk o u t pr o duct im pr o v ements an d m o difi ca

tions to meet ch an gin g deman ds an d comp etiti v e d e v el op m ents Co ordi .

natin g the s che dul es of pro duction an d purchasin g on th e b a sis of mar

k et dem an d w as mo r e difi cu lt fo r se v er al lin es th an fo r on e p ar ti cul ar ly ,

when the statisti cal offic es at du Pont ha d no exp e r i en ce in estimatin g

t yp es of mark ets other th an exp losi v es an d w hen litt le of th is sort of
an aly sis ha d been tr ie d by anyone in th e in du s tri es du Pont ha d ente r e d .

Al so in I 9 I 9 no one in the du Pont Com p an y ha d b een assi gn ed the o v er

,

all r es po nsib i l i ty fo r com p i l in g an d a ctin g on th es e fo r ec asts in o rd e r to

ma in tain an even an d stea dy use of comp an y f acilities by pr eventing th e

p il in g up of ex cessi v e in vento r ies in an y one d ep a r tment Ea ch of th e .

th r ee maj o r d ep a rt ments — P ur chasin g M an ufa ct u rin g an d S al es

, ,

ma de its o w n estimates an d set its o w n s ch edules .

9 2 DU FONT — CREATING AUTO NOM O US DIVISIO NS

New Pro blem: Created by N ew S trategy

Wh il e th ese dmini str ati v e s tr ai ns b ecam e qui ck ly app ar ent, th e a dop
a

tion of a n ew str u ct ur e cam e o nl y wh en th e sh ar p dep ression of 1 920 an d

1 2 1 m ad e its n eed p ain q o bv io u s T h e p oo r pe rfo r man ce of so m e of
9 y .

th e co m p an y s n ew v ent ur es p r o v i d ed th e fir st w ar n in g of th ese difficul

’

ti es E ven in th e b o om y ear of 1 9 1 9 m any n ew p ro du ct s h ad fai l ed to r e

.
,

t ur n th e exp ect ed p rofi ts P ai nts w er e a ct u ally sh ow ing ser io u s l o sses In

. .

th e com p an y r eco rd ed a l o ss of on a g r o ss s al e of
9 7
1 1 ,

in it s p aint an d v ar ni sh bu sin ess on a gross

. In 1
9 8 ,1th e l o ss w as

of an d I n 1 9 1 9 th e fin a l ,
Sho w a still l arger r ec k o n in g w as to
lo ss on a l arger gros s on The mo r e p aint an d “

” 1 0°
v ar ni sh w e so ld o n e r ep o rt wry ly noted th e mo r e mon ey w e lo st
”
, ,
“
.

S u ch p erfo r m an ce w as esp ecially di st urb in g b ecau s e th e du P onts ha d

ass u m ed that l ar ge v o lume w o uld br in g p r o fi t s th r o ugh l o w er in g u nit

co st s Thi s w as in d eed o ne r eason w h y th ey ha d mo v ed so r ea dily into

.

th e p ain t bu sin ess T h e in du st ry at that t im e w as m ad e u p of man y small

.
,

nonintegr at ed hi gh ly comp etiti ve fir ms S h erw in-Wi lli ams w as t h e o nl y

, .

l arge integr at ed enterp ri se D u Pont h ad anti ci p ated an op po rt u ni ty fo r

.
“

con so li d ation an d economy in s uch an in du s try as th er e w er e no p artic ,

ul ar s ecr et p ro cess es p atents o r o th er ca u s es whi ch w o uld inte rfer e w ith

, ,

a n ew con cer n en a i n g in that bu s in ess bu t that th e adv an t a e s of car e

g g g ,
”
f ul bu sin ess m an agem ent on a l arge s cal e wo ul d b e fully r eali z ed Y et .

in 1 9 1 9 w h en th ey w er e l o sin g mon ey m an y of th e sm all er p aint oo m

, ,

p ani cs wer e enj o y in g o n e of th ei r m o st p ro fi t abl e y ear s .

Wh il e th e sto ry in oth er n ew bu sines ses w as l ess bleak p rofi ts w ere sti ll ,

w ell b elo w ex p ect ation s Thos e p ro duct s whi ch lik e p aints w er e so ld in

.
, ,

sm all l ots to r etail er s o r ul tim at e con sum er s w er e t ur nin in th e p oo r est

g ,

sho w in
g F o r ex am p.l e th e sm all r et ur n on fi
, ni sh ed a r ti cl e s h e l pe d br in g
th e estim at ed r et ur n on in v estm ent in th e du Pont s p yr o xy lin bu sin ess
’

do w n from an e stim ated p er c ent in 1 1 6 to

9 p e r c ent in 1 9 7
1

an d c nt i
p er e n

S ell in g n early all agr eed r ais ed th e most d iffi cul t p r obl ems T h e man u
, , .

facturin g of th e n ew lines u s ed man y of th e s am e m at er i al s an d p r o ces ses

as exp losi ves bu t th er e w as little simi l arity in th eir m ar k etin g B efo re the
, .

en d of th e s umm er of 1 9 19 Fr eder i ck W Pi ck a rd th e V i ce Presi dent in , .

,
-

cha r e of S a l es ha d a lr ea dy o u t lin ed th e p r o bl em to th e E x ecu ti v e C o m

g ,

mi tt ee Th e ex p an sion of th e du Pont o rgani zation into v ar io u s lin es of

“
.

a cti vity l ogi ca l from th e man u fact uring st an dp oint Pi ck ard wrote h as ,
”
,
“

pro duced a s ales con dition wh i ch com pe ls consi deration of a wi der v a ri ety
of pro ducts wh i ch ha ve no l ogi cal sal es connection wi th o n e ano the r ” 1 02
.

The great est problems ha d r es ul ted Pi ck a rd b elie ve d from t ry in g to ad ,

NE W S TRU C TURE F O R THE NE W S TRATEGY 93
minister d iff e r ent k in d s of ma rk eting a cti v ities T h e clea rest line of .

dema rc ation s eems to b e b etween m erchan d isin g an d tonnage distrib u

tion as enti r ely d i ff erent m etho d s of s ell ing are a pp l i ed to th ese t wo
,
” “

”
gene ra l cl ass es of d istr ibu tion B efo re th e w a r Pi ck ard contin u e d 95 %
.
, ,
“

of the bu siness w as d ist ribut ed w h eth er to con su m er s o r dea ler s on a

, ,
”
tonn age b a sis With th e mo ve into ne w l in es p a r ti cul a rly th r o ugh th e
.
,

purcha se of the Ha rr ison p aint an d v a r nish an d th e A rl in gton cellulose

pr o duc ts bu sin ess es th e comp an y ha d tak en o ver th e s ellin g of a v a r i ety
,

of sma ll p a ck aged goo d s fo r u se by th e ul timat e con su m er T h e r es ult

, .

”
of th is fo rcible int ro duction to the merch an d ising game th e S a l es D e
“

,
”
m c hi f a d mitte d to d at has b n n ati v r ath r than p o siti v e
“

p ar t en t e e ee , eg e e .

To r edr ess the b a l an ce wo uld not b e eas y T h e ma rk eting of c on su mer

goo d s deman ded a n ew an d mo r e extensi ve t yp e of adv er tisin g with a
.

”
d i rec t a ppea l to th e cu stomer an d th e cr eation of an en l arge d nationa l
,

dist ri bu tin g o rgani z ation in clud in g p ossibly even r etai l o ut l ets , ,

.

P r o d uc t d i ver sifi c ation O ffer e d the comp any th ree ma rk eting a lt er na

tiv es Pi ck a r d r easone d It c o uld ene rgeti c ally pu sh th e exp ansion of
“

, .

”
me rchan d ising eff o r t on a nationa l s ca l e fo r th e n ew l ines of cons u mer
goo d s It mi ght w ith dr a w an d s ell o u t th es e l in es to o u tsi der s o r it might
.
,

retain its pres ent mi ddle of the r o ad p o l i cy n am ely ; contin u ing to

‘ ’

me rchan di se thos e of o ur l ines w hi ch are no w h an dled in that w ay bu t

w itho u t ex ten ding th ei r s co p e o r en dea vo r ing to devel o p oth er l in es .

T h e fi r st c o ur s e w o uld b e e xp ensi v e The V i c e-P r esi d ent in cha rg e of .

S a l es p oint ed o u t that a nationa l a dv er tisin g c am p ai gn al on e c o uld ru n

from th r ee to fi v e yea r s at a c ost of th r ee to fi v e mi ll ion d o ll a r s a y ea r In .

a dd ition this a lter nati v e w o uld r equ i re a l arge exp en dit ur e fo r s p ecia l
,
“

p a ck in g pl ants sto r ag e w a reho u ses an d d istribu tin g fa ci l ities T h e w o rk

, , .

”
ing c ap ita l a cco u nt of the comp an y w o uld b e t r emen do u sly in cr ea sed .

T h e s econ d co ur s e a mo r e c ons erv ati v e one mi gh t k eep th e c om p an y

, ,

from pro fi tabl e ar eas an d fr om ma k ing th e mo st of its pr o duction faci l i

ti es its t r ained p er sonnel an d oth er r eso urces T h e th i rd a lter n ati ve
, , .
,

Pi ck a rd r easone d co uld on ly be tem p o r a ry : Li k e most compr omises it

,
“

is th e ea si est w a y an d m y p er sona l feel in g is that exc ep t as a tem p o r ary

, ,

exp edi ent it is u n so u n d economi ca lly an d if a do p ted sho uld b e fo r th e

, , ,

pur p ose of ex p er im ent an d ob se rv ation to en able u s to r ea ch mo r e ac

”
cur ate con clu sion s a y ea r o r tw o hen ce than w e c an a rr i ve at no w .

To deci de b et w een s u ch a lter nati ves p r o v e d exceed ingly d ifficult Th e .

execu ti ves w ithin the S a l es D ep a r tm ent ha d b een u n able to com e to a

con clu sion on a satisfa cto ry co ur se of a ction M o reo ver s u ch a deci sion .

w as of maj o r S igni fi c an ce fo r th e fu t ure of th e com p an y Pi ck ard th ere .

fo r e urged th e Executi ve Committ ee a p p oint a s ubco m mittee of rep re

sen tativ es of the fo ur r an d d i v isions P r o duc tion a l s T r eas ur e r s an d
’

g S e , , ,
 94 DU FONT — CREATING AUTONOM O US DIVISIONS
Dev elop m en t — to mak e a tho r o ugh stu dy o f th e prob lems an d p ossibl e

Th e P r o blem s A n aly z ed

o h eads of th e S al es T reasur er s an d Devel o p m ent Depart men ts

f th e ,
’

P i ckar d Do na lds o n Br ow n an d W al te r Car p en t er

,
—
,an d A F elix du .

Th ese m en, too b usy to gi v e t h e n ecessar

y a tten tion to th e criti cal pro b
lem s , t h en sel ected a su b—sub co mm i tt ee of o n e ab l e r ep r esen tat i v e from

on March 1 6, T h ei r w o rk an d th e r esul tin g r eport h ad an impa ct f ar

t im e a n ew form of m an agem en t stru ctu r e w as pr o p osed .

m an n er that ha d becom e a hall mar k of th e du Pon t w ay of doin g busi

to d efin e j ust w h at th ey m ean t by m er chan dise i n dustrial an d j obb ers , ,

t r ad e Th en th ey m ad e a da ail ed stu dy of o u tsi d e e xp e ri en ce A Mr B o yd

. . .

”
b r i ef diss ert a tion on a dv ertisi ng an d m er cha n disin g in gen eral . N ext ,

wi th th eir o w n , th e m emb er s 01 th e sub—sub co mm i t ee t deci ded to study

en t e rp rises . T h es e in cl u d ed Arm o ur an d In tern ational Harv est er w hi ch ,

th e Hask ell C ommi ttee h ad l oo k ed in to t h e pr evi o us wi n t er an d also ,

Pr oct er S: Ga mb le , Co lgat e is Comp an y , an d Uni ted S tat es T ir e Com

pa n y .

Th e in t erv i ew s fail ed to p r o vi de m u ch sp fi fi c data u seful fo r an sw er

in g th e du Po n t Co m p an y s imm ediat e p r ob l ems fo r n o n e of th ese co m
’
,

pa n i cs h a d so di v ersifi ed a p r o du ct lin e as du Pon t s But th e su rv ey did ’

.

fu rn ish so m e u sef ul gen eral in form ati on In gen er al w e con clude d t ha t .

“

ea ch com p an m t h i t w n p r o b l em an d t ha t in man a em en t
y see s o av e s o
g
th ey t en d t o f o llo w a sin le co n tr o llin h d o v er th eir m an u fa ct urin d
g g ea g an
”
sal es d e art m en ts Th b—S ub co mmi tt ee m em b er s also fo un d th at thos e
p e su .

fi rm s w hi ch p r o d u ced b o th semifi nis h ed an d fini sh ed go o ds t ransf err ed

t h e b ulk d h fi ni shin g di v isi o n ei th er at a fix ed pr o fi t o r at m ar k et
“

g oo s t o t e
”
p ri ces Th i s qu est i o n h ad been r ai se d b ecau se di v er sifi cat ion h ad m a de
.

in ter di visional b illing a m u ch m o r e com p l ex p r ob l em at du Pont sin ce th e

di vi si ons m aki n g fin i sh ed p ro d u cts b o ugh t m an y of th ei r raw mat e rial s ,
NE W S TRU C TURE F O R THE NE W S TRATEGY 95
s uch as nit ro c ellul os e an d chemi c a ls fr om oth er u nits w ithin the com
,

p an y F ina lly th e manager s of the v i sit ed comp ani es u su a lly str es sed the
.
,

need fo r ve ry c a reful attention to the min u test detai l an d the ex ercis e

“

of consi de r able p atien c e an d p e r se ver an ce in fo llo w ing every it em ”

.

With its b a ckgr o u n d st udi es com p l eted th e s ub -s ub committ ee th en ,

t ur ned to con si d ering Pi ck a rd s a l ter nati ves In det er mining w h eth er to

’
.

exp an d cont r a ct o r contin u e the comp an y s m erch an d i sin g bu sines s it

, ,
’

de ci d ed to l oo k at the d i ff e r ent l ines in d i vi du a lly an d to con cent r ate on

pyr oxylin ch emi c a l s p aint an d v a r nishes E xplosi ves an d F abr i k oi d
, , , .

pro ducts w er e curr ent ly pro fi table an d w ere so ld a l mo st enti rely by b ul k ,

whi le dy es w e r e sti ll not devel o p ed eno ugh co m mercia lly to mak e an in

v estigatio n w o r th w hi l e In its r ec omm en d ations on the in d i v i du a l l in es
.
,

this committee deci ded that a retur n of 1 5 p er c ent on tota l c a p ita l in “

” ”
vested w as to b e consi der e d an i dea l pr ofi t In d ete r minin g pr o fi t the
“
.
,
“
tr ansfe r of pr o ducts from bulk to a rti cle br an ches [ that is th e t r an sfe r
from r a w o r sem ifi n ish ed mate rial s to the fi na l man u fact ur ing u nit s]
”
sha ll be b ase d on the ma rk et pri ce w ith some a dj u stm ent O n the b asis .

of th e r es ul tin g ana ly sis a n u mb er of detai l ed r e comm en d ations w er e

,

ma d e as to w hi ch l ines sho uld b e maintaine d dr o pp e d o r e xp an ded , , .

The mo r e gener a l fi n d in g s of the com mittee w e re of greate r si gni fi c an c e .

F i r st cost an d othe r statisti c s cl ea rly d emon st r ate d the cr iti c a l di ffer en ce

,

b et ween tonna ge an d me rchan dise sa les N ea rly a ll the sem ifi n ish ed .

pr o ducts Pyralin r o d s an d sh eets pyro xyl in p igments a ci d s an d hea vy

—
, , ,

chemi c a l s an d bulk p aint Shi p ments ma de a r easonable pr o fi t w hi le

,
—
,

a lmost a ll of the fi nish ed p ac k aged pr o ducts fo r the ul timat e cons u mer

r et ur ned l ess than 1 5 p er cent on in v e stment man y of them even Sho w in g ,

a h ea vy net loss 1 04
. S e con d exc e p t fo r c ellul oi d cu ff s an d c o ll a r s these
, ,

same fi n ish ed—goo d s bu siness es — p aints va r nishes Ce lluloi d a rti cles , , ,

p ha r ma ceu ti c a l s eth er an d Pyralin ch emi c a l s ho u seho ld c em ent an d

, , ,

so lvents — wer e at this time pros p er o u s In oth er w o rd s w h ere du Pont .

,

w as l o sin g money othe r s wer e ma k in g pr ofi ts

, .

O n the b asis of thes e fi n d in g s th e s ub -s ubcommittee c am e to th e c on

,

clu sio n ea rly in 1 20 that th e u n d erly in g pr o bl em w as not o n e of sellin

9 g
bu t o rgan iz ati on In the p aint an d v a r ni sh bu sines s a n d in th e m ak in g of
.

fi ni she d Cellul oi d a r ti cles th e com p an y s com p eti to r s ha d no a dv anta ge

’ “

o ve r u s in th e purch ase of r a w mater ial s an d no secr et pro cess no p at ent s

, ,
”
prev entin g u s fr om u sing th e b est m etho d of man u fact ure The refo r e .
,

th e s ub -s ubc ommitte e con clud ed th e fa c to r o r fa c to r s ma k in g this gr eat

“

differen ce b etw een O l ir S uccess in th e a rti cles an d p aint an d v a rnish l ines

”
a r e enti rely w ithin o ur selves .

“
The metho d of c arrying on th e bu sin ess is th r o ugh its o rgani z ation ,

th e c ommitt ee contin u e d in its fi na l r ep o r t In th e du Pont C omp an y s

’
.
9 6 DU P O NT —
C REATING AUTO NO M O US DIVISIO NS
p aint an d a r ti cl es bu sin ess it fo u n d an excell ent li ne of r esponsib ility fo r
carry ing on ea ch of th e fu n ction s of th e bu sin es s bu t w e h a v e b een un ,
“

abl e to fi n d th e ex a ct r es p onsib ili ty fo r p ro fi ts In oth er wo rd s th e activi

”
.
,

ti es of each line w ithin ea ch fu n ctiona l dep artm ent wer e eff ecti v ely man
aged bu t no on e w as r es p on sibl e fo r admini st er ing th em so as to
,

a ss ur e a p rofi t on ea ch in di vi du al lin e of p r o du cts :

We do fi n d an y co m p etito rs w h o ar e carry in g on th es e tw o b u sin esses
n ot

in thi s sam e m an n er in whi ch w e ar e do ing, th at is, in n o case do th ey h ave

a di vi ded co n tr o l, an d in all ca ses h av e a cen tr al co n tr o l A r e w e p r ep ar ed .

th eref o r e to say th at o ur m eth o d o f o rgani z atio n is su it ab le to th ese

b usinesses ?
In th e dev elo p m ent within th e du Pont Comp any of n ew p r o duct s lik e
dy es an d in th e pr ev io u s f ew mon th s artifi ci al si lk r es p onsib i li ty b oth fo r
, , ,

m anuf act uring an d sal es h ad b een comb in ed in o rder to m eet n ew an d

di ff er ent p r obl em s Wer e not th e p aint an d ar ti cl es lin es al tho u gh estab
.
,
“

lish ed bu si n ess es som ewh at in th e sam e p o sition in r esp ect t o th e du Pont

,

Com p an y ? Wi ll not th e sam e tr ea tm ent fo r a tim e at l east assi st in , ,

so lv in
g t h e p r o bl em ?
”

A N ew S tr u ct ure Pr o p osed an d R ejected

Th er eu po n th e s ub —s ubco mm i ttee r ecomm en d ed st ron gly a fu n dam en
,

t al chan ge in stru ctur e : m ak e p r o du ct r ath er than fu n ction th e b asis of

th e o r gan i z ation ; t ak e th e o ffi ces h an dl in g p ur ch asin g man uf act ur ing , ,

m ar k eting an d a cco u nti n g fo r p ain ts an d v a r ni sh es an d fo r Pyralin an d

,

C ell u l oi d ar ti cl es o u t of exi sting o fi ces an d p l ac e each of th e two l in es

u n d e r o n e ex ecu ti v e r espo n si bl e fo r all fo ur f u n ction s as w ell as fo r

p ro fi t an d p erfo rm an ce T h e com m i tt ee th en dr ew u p an o rga n i zation

.

ch ar t to in di cat e ho w th es e t w o di v i sions co uld b e p r acti ca lly self-co n “

”
t ain ed u nit s In ea ch u ni t th e m an agin g d i r ecto r w o u ld h av e h is o w n
.
,

p ur ch asing acco u nting m an uf actur i n g an d sal es dep ar tm en ts T h e l ast

, , ,
.

t wo offices th e co mm i ttee subdi vi d ed into m er ch and i sing an d bulk O p er a

tion s each h eaded by an assi stant m an ager (see C h ar t
,

U n der th e n ew p l an th e Ex ecu ti v e Co mm ittee w o uld h av e gen eral

,

s u p ervi sion o v er th e m an ager s of th e p ro p o sed d i vi si o ns T h ese n ew .

u ni ts wo uld b e lin e o rgani z ations ; th at is th e l in e of au th o ri ty wo uld ru n

,

from th e P r esi d ent to th e d i vi sion s G en er al M an ager an d th en th ro u gh

’

h im an d h is a ssi stant s to th e h ead s of th e fu n cti o n al u ni ts w i th in th e

d i vi sion T h e staff d ep ar tm ent s in th e cent r al O ffice wo uld h ave an ad
.

vi so ry r el ation sh i p to th e n ew di vi sion s In th e wo rd s of th e r ep o r t :
.

Th e Man agin g D ir ect or o f each o f t he b ran h es

c will r epo rt dir tly ec to th e

Execu ti v e C o m m i ttee in su c h m an n er as th ey m y par e r i b e ; sc an d th e

9 8 DU FONT — CREATING AUTO NOM O US DIVISIO NS
relati ons o f h is Comp any (or D iv isio n ) to th e D ev elopm ent Ch emi cal , ,

Engin eer ing an d S erv ice D ep artments w ill be entirely th r o u gh th e Man ag

in g D ir ecto r an d th es e gener al d ep art m ents will be used at th e discr eti o n
o f th e Man agin D ir ect o r A n ad d i ti onal exp enditu res for th e bus iness
g y .
,

th at i s fu rth er exp er im en tal w o rk o r l oo kin g well to th e fu tur e ar e general

, ,

ch arges an d w ill b e h an dled at th e di scr eti on o f th e o m mi tt ee o u t o f th e

C
pro fi ts tu rn ed in b y th e part icul ar su b-com p an i es o r su b -divisi ons as th e
Co m p an i es m ay b e We wo uld lik e to see as f ar as po ssib le a m onthl y
.

co m p il ati o n o f th e stan din o f ea ch b us in ess w i th r es pect to its o w n b ala nce

g
sh eet if p o ssi b l e SO th at wi thi n a w eek o r so af t er th e fir st Of ea ch m o nth
,

th e G en eral Man ager will kn o w th e exact co n diti o n o f hi s b usin ess in

r esp ect to th e profi ts for wh ich h e is r esp o n sible .

Th ese r eco mm en d ations m a de by r el ati vely y o un g bu t expe ri en ced

dep artmen tal ex e cuti v es pr o vi ded th e b asi c con cep tion not o nl y fo r th e
pr esent du Pont man agement s tru ct ur e bu t fo r th e mu l ti di vi sional Stru c
t ur e th at h as b e come wi d ely u sed in Am er i can in dus t ry Bu t a y ea r an d .

a h alf ha d to p as s b efo r e th e prop o sal s w er e a c cep t ed an d pu t into a ction .

M emb er s of b oth th e s ub commi tt ee on th e mark etin g p robl em an d th e

Ex ecu ti ve Commi ttee itself ha d s tr on g obj ec tions to th em O n e s enio r .

memb er ma de his vi ew s clear in p en ci l ed no tation s on th e mar gin of th e

r ep o rt In this criti c s o p inion th e p r op o sed S t ruct ur e r an co un t er to th e
.
’

,
“

th eo ry of o ur p r esent o rgan i zation b ase d as it w as on fun ct ion al sp e ciali ,

z atio n S e con d th e s ubco mmitt ee h ad fail ed to sho w ex a ctly : Wh er e is “

.
,
”
th e b en efi t of th e r eo rgan i za tion ? A w eek l at er h e o r anoth er cr iti c , ,

s ai d : Th e r ep o rt cit es th e a gen cy fo r so lv ing ill s (nam ely change in o r

“

g an i z ati on ) tho ug h d oes not c ite il l s o r ho w [ th ey ar e

] to b e cur ed by
” 1 05
a ch ange in o rgani zation .

Mo r eo ver this ex ecu ti ve w as c ert ain th at the r ecent l o ss es w er e th e

,

a lmost in evitabl e r es ul t of mo ving in to n ew business es an d that th ey

wo uld b e r e ctifi ed w ith the d evel op m ent o f p ro p e r admi ni str ati ve p ro ce
d u r es an d r eliabl e info r mation We h ave ca rr i ed excessi v e sto ck h e
.
“ ”
,

not ed w e ha v e ma d e sev er al u nfo r t un at e gu esses on th e p ur ch as e of

,
“

r a w mat er i al s o r ha v e b een wo r king against o rd er s r ath er than setting

”
,
“

u p app rop r i at e sto ck s S ellin g ex p ens es h a v e b een too high th e comp an y

”
.
,

h as ta k en too man y smal l o rd er s a n d w hil e o ur bu sin ess h as be en l ar ge

“

eno u h fo r ec onomi cal business w e ha v e b een s catt er ed v e r a

g , [ ]
sic w i d e
fi eld F i n ally th e r ation ali zin g an d s y st emati z ing of th e n ew m an u fac
.
,

t uring p ro c es ses h ad b een exp en si ve an d w er e sti ll not co m p l et ed Our .

“

rea rr an gem ents r ep ai r s r en ew al s a n d rep l acem ents of p l ants h av e be en

, , ,

hi gh Th e r e w er e sti ll mi scell an eo u s sh o rt com ings in fa ct o ry o pe r ations

”
.
“

s u h a poo r ro u ting an d ineffici ent p i ece wo rk p y s ch dul e

c s ,
a e s sh o rt ru ns
- -
, , ,

etc .
NE W S TRU CTURE F OR THE NEW S TRATE GY 99
Th e an s w e r w as not r eo rg ani z ation bu t b ette r inf o r mation an d kno wl
e dge It w as not th e d evel o p m ent of new o fi ces an d new lines of a u tho r it y
.

an d r es po nsib ilit y bu t r ath er the fas hio ni n g of mo r e eff e ct i v e in v ento ry

cont r o ls , o r mo r e a ccur ate v o lumes, s al es , an d mark et fi gu r es, an d of othe r

data to flo w thr o ugh e xistin g l ines of comm un i cation S uch inf o r ma

th e .

tion wo uld h elp pr ev ent u nn e cessary pur ch asin g an d m ak e it po ssibl e to

fi n d j ust w he r e the hi gh m an ufa ct urin g an d s ellin g exp ens es w er e l o cat ed .

B e ca u se of these view s the s ubcommi ttee s senio r m ember s del ete d all
,
’

of the s ub-s ub commi ttees analy s es an d r e commen d atio n s on o rgan i zation

when it fo rw ard ed th e r epo rt to th e Ex e cu ti v e Commi tte e 1 06
.

Ne ve r th el ess the s uggestions ma de by th e mo r e j un io r m en w er e dis

,

cusse d amon g th e comp any s ex e cu ti ves an d w ithi n a few w eek s the Execu
’

ti v e Comm itt ee a ppo inte d an o the r s p e c ial commi tt ee ma d e up of Dona ld ,

so n Bro w n William S Spru an ce — th e V i ce-P r esi den t in charge of

, .

P r o duction — an d Pi ck a rd to st u dy th e who le qu estion of o rgan i zation

,
.

By Ju ne th ese th r ee s eni o r execut i v es ha d come to s ub stan tially th e s ame

,

po sition as ha d th e s ub -s ub co mmi ttee O n July 8 1 920 th ey r ecommen ded

.
, ,

an e xten sion of th e early pr o po sa l s fo r the p aint an d pyr o xy l in bu s in esses

to a ll of the comp an y s lines R e l at ed pr o ducts in one in du stry w er e to b e

’
.

gathe r e d togethe r into s elf-containe d segr egate d u nits ea ch u n d e r a sin gl e

gene ral m an ager who ha d the a u tho r it y fo r all o p e r ations an d w as re
s po nsibl e fo r pr ofi ts This fo r m of o rg ani z ation not o nl y w o uld pr o vi d e
.

th e essen tial coo r din ation b et w e en purc hasin g pr o duction an d sa l es bu t

, , , ,

as th e commi ttee s tr esse d a ff o r ds mo r e dir e ct an d lo gi ca l contr o l of the

,
“

”
in v est ment of Wo rk in g Cap i ta l whi ch co uld no w b e s ep ar ate d fo r ea ch
,
1 07
of th e maj o r lines .

The ne w committ ee on o rg an i zation als o sp ell ed o u t in mo r e d etail the

r el ations b etw e en th e pro po se d pr o duct di visions an d th e aux ili ary d ep art
ment at hea dqu arter s Whil e th e ex e cu ti v es in th e stafi dep artmen ts w er e
.

to ha v e no dir e ct a utho rity o v e r di v isional a cti v iti es the y w er e still to ha v e,

a p art in the a dmin istr ation of the n ew di visions

D irectors of stafi sh o l d b e ab le to estab lish an d m ain tain general po li ies
u c ,

p rocedures an d co rrelati on of th e f un ti nal activi ti es of lik e nam ed u nits

c o -

of th e dep art mental o r ani zati o n s to a d e r ee s ffi i ent t o in sure p r op er

g g u c

f rmi ty an d efficiency
un i o It is assum ed th at advi so ry fun cti o n al staff
.

o ffici als w ill em p lo y per i o di cal an d spe ci al m eetin s o f app r op ri at e O fi cial s

g
of th e l in e d ep art m en ts t o estab lish an d m ain tain n er al l i ci es an d
g e p o

p rocedures , an d [ w il l ] di scus s an d a dv i se r e
gar d in g sp ec i a l m aj o r
p ro blem s .

P resi dent Ire n ee du Pont r ai sed obj ec tion s to th e fi n dings in thi s r epo rt .

He di s lik ed ab an donin g th e pr o v en p r in cipl e of sp eci ali zation

“ ” 1 08
Th e .
I OO DU FONT — CREA TING AUTO NO M O US DIVIS IO NS
stea dy gr o wth of th e comp any s effici en cy ha d r es ul ted h e m aintaine d
’

, ,

from ha ving s p ecia li sts in charge of the va r io u s dep a rtments 8 0 h e ”

.

t ur ne d th e r ep o r t b a ck to the committee fo r fur th er study When that .

b o dy res ub mitted an en l a rged r ep o r t w ith s ub stanti ally th e same pro p osal s

in No vemb er 1 920 the Presi dent tr a ditionally h a ving th e fi na l say on
, , ,

o rgani zationa l matter s again vetoe d th em , .

I re ne e ha d str ong j u stifi c ation fo r his p o sition Th e o ld w ay s ha d u nti l .

,

ve ry recently wo rk ed ex cep tiona lly Well An y professiona l wr ite r o r ex

, .

p er t o n o rgani z ation of that d a y wo uld h av e en do r s ed h is v iew s com

p le t el
y , as in d eed
, d i d man y m en in, th e c om p an y in clud in g b oth his ,

bro th er s Pi err e an d L amm o t Mo r eo ver as Pr esi dent h e not th e m en

, .
, , ,

pr o po sing th em wo uld ha ve to ca rry th e r esp onsib i lity fo r these fu n dam en

,

ta l changes .

A Co mp r o mise S tru ctu re A dop ted

F a ced with s uch sk ep ti ci sm ab o u t th e r a di ca l n ew pl an Pi ck a rd an d ,

oth er execu ti ves b egan to s eek w ay s to a dmini ster mo re eff ecti ve ly th e

a cti viti es of those u nits th at han dl ed th e s ame line of p ro duc ts in th e
di ff erent fu n ctiona l dep artm ents D ur ing th e fa ll Pi ck a rd an d Wal ter .
,

C a rp ent er h ad en co ur aged th r ee men — one fr om the S a les Dep a rtment ,

anoth er from the M an u fa ct ur ing an d a third from the Deve lop ment ,

D ep a r tm ent to meet u no ffi c ially an d w itho u t p o r tfo lio to con

“ ”

si d er w ay s of impro ving th e comp any s p erfo rman ce in th e p aint bu si ’

O n e of th e th r ee Fr an k S MacG rego r ha d b een th e De vel o p

109
n ess .
, .
,

m ent D ep ar tm ent s rep resentati ve an d ch ai r man of th e s ub s ubcommitt ee

’
-

th at h ad m ade th e initia l p ro po sa l s fo r r eo rgani zation T his info r mal .

“
co u n ci l as th e th ree c a ll ed thems elves h ad wo rk ed u p some detaile d
,
”
,

pl ans by No vemb er 1 920 T h en at th e Execu ti v e Co mm ittee m eeting of

, .
,

th e 2 3 rd of that month fo ur d ay s after Ire n e e h ad t ur n ed do w n fo r the

,

secon d time th e o rgani z ation committee s r ecom men d ations Pi c k a rd ’

s uggested an d th e Ex ecu ti ve Committee agreed to fo rm a li z ation of this

p aint co u n ci l O n D ecemb er 1 0 Pi ck a rd fo rw ard ed th e r ep o r t of the
“
.
,

g r o up to th e E x ecu ti v e C o m mitt ee .

T h e co u n ci l s r ep o r t d i d not c on cer n its elf expli cit ly w ith o rgani zation

’
.

In stea d it w as en co ur agin gly ti tl ed A Pl an to M ak e 1 0 % on Our Paint

“

an d V a rni sh Net S ales T h e r ep o rt b egan by p ointing o u t th at in 1 9 1 9 th e

.

com p an y h ad l ost n early “

in actu a l ca sh in a ddition to an ex
ected r et ur n on in v est m ent of n ea rly w h i c h m d tota l l o ss
p a e a

of in come to th e C omp an y of n early a mi llion an d th at most of th ese

”
,

los ses w er e on o ver th e-co u nt er m er ch an d i sin g sal es T h e p erfo rm an ce fo r

- .

t h e curr ent y ea r w as l i tt l e b et ter an d th e fo r ecast fo r 1 92 1 in d i cat ed a

,

prob able loss of T h e c o u n c i l th en s uggeste d a n um b e r of s pe c ifi c

NE W S TRU C TURE FO R THE NE W S TRATEGY
w a y s by whi ch to t ur n this loss into a pr ofi t It pro v i ded excellent detai le d .

figures on the costs of r a w mat er ia l s an d pr o d uction an d se ll in g exp enses ,

an d in di c ate d j u st ho w th ese might b e cu t S uch a ction ho wever wo uld .

, ,

requ i r e that the r es p onsib i l it y of pro fi ts an d th e cont ro l of th e bu sin ess

b e in [ th e ] s ame p l a ce an d this pl a ce sho uld b e a co u n ci l comp o sed of
” “

the p aint sa les di re cto r the p aint pro duction assistant di re c to r an d a

, ,

n eut r a l memb er .

The Ex e cu ti ve Committee a pp a rently impr ess ed by the s p ec ifi c nat ur e

,

of the s uggestion s a ppro ve d th e pl an It is not s urpr ising that the same

, .

m en w ho ha d wr itten the r e p o r t w er e a pp oint ed to the ne w co u n ci l o r as ,

it c ame to b e c a lled the Paint S t ee r ing Committee MacG rego r as its

,
.
,

chai rman w as gi ven full r esp onsib i l ity fo r du Pont s p e r fo rman ce in the
,
’

p aint an d va rn i sh bu siness .

O n ly a w eek after the Paint S teer in g C ommittee ha d b een ap p rov ed ,

Pi ck a rd an d his asso ciate on the s ubcommitt ee on o rgani z ation Wi ll iam ,

S pru an ce br o ad en ed th e co u n c i l i d ea t o in clud e most of th e c om p an y s

’

110
a cti v iti es . A gain the y d i d not r ais e th e qu estion of o rgani z ation but ,

r ather ma de th ei r r ecommen d ations in a rep o r t on statisti cal c ont ro l s .

That Octob er Tr eas urer Dona ld son Br o w n the thi rd m emb e r of ,

th e s ubc ommitt ee on o rg ani z ation ha d p oint ed o u t that the gr o w in g

,

p ost w a r r eces sion w as sho w ing d efi c ien ci es in curr ent statisti c a l metho d s .

The se b ad after a ll b een d evelo p e d to me et th e requ i rements of th e ex

, ,

plosi ves in du st ry not thos e of the ne w bu siness es In vento ry cont ro l b as ed

, .

on th ree-month fo r e c asts ha d fai led to prevent l oss es from o ve rbuy in g of

r a y g oo d s fo r F abr i k oi d pr o duc tion an d fr om S imi l a r o v er sto ck in g of
g
b oth r a w mater ia l s an d fi ni sh ed goo d s in othe r pro ducts Mo reo ver sev .
,

er a l ex ecu ti v es ha d b een in sistin g that the c om p an y s pr esent n e ed w as

’

fo r b etter info rmation r ath er than fo r a n ew o rgani z ation At Bro w n s .

’

urgin g S pru an ce an d Pi ck a rd w e r e assig ned to st u d y the ex istin g statisti

,

c a l cont ro l s Br o w n d i d not j oin thes e men in th ei r fi na l r e po r t to th e

.

Exe cu ti ve Committee on De c emb er 22 fo r he w as th en prep a r in g to lea ve ,

th e c om p an y to j oin Pi err e da Pont w ho th r ee w ee k s ea rl ie r ha d ta k en

,

o ver the pr esi den cy of Gen er a l Moto r s A S th ei r c o llea gu es u n do ub te dly .

expe cted Pi ck a rd an d S pru an ce insiste d that the rea l pr oblem w as not

,

statisti c s b u t o rgan izatio n .

T h e curr ent d at a w e r e a d equ ate eno ugh bu t w er e not pro p erly u ti l i zed ,
.

T h e channel s fo r the flo w of this info r mation fo r th e di ff e r ent pr o duct

l ines w ere not yet clea rly defi ne d This w as prima r i ly b eca u se ea ch maj o r
.

fu n ction al dep a rtm ent deve lo p ed its o w n statisti c s .

q
T h e stati stical sch em e, so far as u ar terly fo recasts are co ncer ned, rests u p o n
th ree indep enden t ser ies o f calcu latio n s, i e , th e sales fo r ecast, th e fo recast. .

o f th e m anu factu r in
g p r o gr am , an d t h e esti m ated co st o f m ater i als wh i ch
 DU FONT — C REATING AUTO NO M O US DIVIS IO NS
wi fi be m m u m ed mm ymg om d e m
rr i f
an u a ct u d n
g p mgram Th ese mk u

r ecogni ze d p rocedure f o r th e co ns i dera ti on o f th ese cal cul at o ns i j oin tly by

th e t h r ee in ter est ed departmen t s th er e has beem an d th ere is lik ely to b e,
a f ail ur e on th e pa rt of man agem en t to f oreca st or t o m rr y oo t a n rfied
u
b u si ness p rogram , as well as t o ta k e a d v an ta
ge pr o
p er l y o f ch an ges i n the

b u si n itu ti
ess s a on as t h ey f
af ec t th e ro r am
p g o f on e o r m ore o f ou r indus

Also un der th e 1 9 1 9 plan , th e lvi a n uf act uri n g Depart me nt h ad be en

po in ted o u t, m ust be bilit y of all three depar tmen ts

th e j oin t p
r es o n si .

Th er ef o r e in or d er to ob tai n th e m axim um ben efit f ro m the statis ti cal

“

,
” ”
sch em e th e tw o m en p r o po sed th e cr ea ti o n of i n dust ry co un cil s f or
“

ea ch m aj o r d u ct si milar t o th e o n e al r ea d t ar t ed in i ts Ea c h
p ro y s po n .

r elat ed li n e of oo ds w o u l d be m an a ed b y a Di vi si o n al Co un c il tha t
g g
w o u l d i n cl u de th e ex ecu ti v e i n th e S al es Man u fa ctu rin g an d Pu rc has , ,

i n g De par tm en ts m ost co n cern ed w i th th at line :

Dp e men ts i n th ei r o w n sp h er es of action , can m ercise th e n ecessar y

ar t

j i t
o n co n tro l o f th e b usin ess r o r am wh ich is em b od i ed in th e q ua rterly
p g
f o r eca sts an d h arm o n i ous ly an d efi ecnv el y car ry it ou t
'

To c h eck Di v isi onal Co un cils w o rk an d to r eso lv e an y issu es

on the
’

arisi n
g am on
g th e j u n i o r ex ecu t i v es P i ckar d an d S pruan ce f urt h er p r o
,

po se d simila r co u n cil s o f De pa rt m en t al Dir ect o rs an d W ee-P r esi de nt s .

Th e p lan O I Di vi si o n al Co u n cils w as th us un d er at t empt to redefi n e

L
'

th e ch an n el s o f au th o r i ty an d co mm u n i ca ti o n i n o rd er to assu r e m o r e

efi ecti v e a dmi n i strati o n of th e co m pa ny s di v er sifi ed p r o du ct lin es

’

P i ck ar d an d S p ruan ce p r o po se d tha t

su fi ci en t au t m em bers o f th e Di visi on al Co u n cils

h orit y b e del egat ed t o the

to p e rmi t th em wh en th er e is co mp l ete agreem en t to settl e p ro bl ems

,
.

co n cer n i n th i mm di co n tr o l of th e a rti cular i n du st ry I n rea chi g

g e e a te p n
.

a co n clu si o n it w o u l d b e th eir du t t ll r o ri ate in di v i dua ls i n

y o ca u
p o n a pp p

u rer
(F o recast an d A nalysis) , th e Eco n omi c S tatisti cian , th e A ss is tan t Di rce

tor of Ma terials an d Pr od ucts Divi i o

f th e Ser i ce Dep artm en t, or the s n o v
v
De el op m en t, Ch emi cal , or En gin eerin g Dep art m en t s rep resen tat iv s w h en ’

th es e r e resen ta ti es w ere n ee ded

p v .

Wh er e th e m ember s disa gr ee d af ter co nsul tin g th e st aff ex ecu ti v es th e

, ,

m att er w as to g o t o th e De p ar t m en tal an d if n ecessa ry to th e V i P s

,
ce - re i
,
NE W STR UCTURE F O R THE NE W STRA TEG Y 3
10

dential Co un c ils In thi s w a y th e Co un c i ls in m uch th e same w ay as the

.
,

di visions pr op ose d ear li er by the s ub s ubco mmi tt ee on mark etin g pr ob

-

l ems w e r e to ass ure coo r dination of the diffe r ent f un c tional a cti v ities fo r
,
”
ea ch in du stry o r maj o r pro duc t line The y w er e to b e r es ponsible fo r
“
.
,

e xampl e fo r the coo rdination of pro duct flo w thr o ugh the d ep ar tm ents
,

by de ci din g th e l e v e l of in vento r ies an d v o lume of o r de r s w ithin ea ch

fun ctional dep a rtment s hea dqu a rter s ’
.

Th e Co u n cil s w e r e to appr aise an d to pl an as w ell as to coo r dinate .

They w e re to d e v e lo p an d a pply stan da rd s of contro l s o v e r c ap ital exp en

ditures a pply budget s y stems fo r cont ro llin g o p e r atin g exp ens es o u t l ine
, ,

pl an s fo r ch emi cal an d en gin ee r in g exp er imental wo rk an d devis e a ddi ,

“

”
tio n al pl ans fo r e xp an sion of the bu sines s In fa ct Pi ck ard an d S pru an ce .

be lie ve d the in terfu n ction al pr o d uc t committees co ul d a dmi nister all the

c omp an y s o p er ation al a cti v ities an d m ak e most of its ta cti ca l de cisions
’
.

These committees co uld h an dle nearly all th e r o utine matte r s con ce rni ng
immedi ate c on tro l of ea ch in du stry w i th th e mi nim u m of d el a y e d d eci ,
”
sions o r failur es to a gr ee on a ction an d w o ul d fur the r ens ur e the desira
,
“

bl e d e gree of exchan ge of i deas an d i nf o r mation of m u t u a l di r e ct an d

”
in dir e ct inte r es ts .

The thr ee memb e r s of ea ch Di visional Co u n ci l w e r e to meet fre qu ently ,

in fa c t d aily if possibl e A p e r man ent se cr etary w o uld k eep a r eco rd of

, .

the meetin gs an d mak e br ief month ly r ep o rts to th e Ex ecuti v e Committ ee

on im po rtan t de cisions ta k en d ur in g the pr e vio u s months on gene r al cur ,

rent c on dition s an d on th e o utloo k fo r the fu tur e The Co un cil s diff er e d

, .

from the Pain t S teer in g Co mmi ttee an d fr om the di visions pr op ose d

earlie r in that no dep ar tmenta l repr es entati v e w as ma de chair m an o r
gene r a l man age r of th e Co u n ci l an d in that the memb er s w e r e u n der
,

the s upervision of thei r senio r s r athe r th an gi ven full a u tonom y The .

Co un ci l s in dee d wo uld cr eate a t ype of commi ttee go ver nm ent fo r most

, ,

of the du Pont Company s a cti viti es ’

.

The Ex e cu ti v e Co mmi ttee imme diat ely a ccep te d the Pi ck a r d an d

S pru an ce pr o p os al s As 1 92 1 o p ene d the du P o nt Comp an y w as b e gin
.
,

nin g to mo v e to w ard a de facto s truct ur e b ase d on pr o duct di visions r ath er

th an f un ctiona l dep art ments The senio r e xe cu ti v es soon came to con
.

si de r the new Di v ision al Co un cil s (High Expl osi ves Bl astin g Po wde r , ,

Bl astin g S uppli es Comme rcia l S mo k eless Co lo r s an d Pigm ents Pyralin

, , , ,

A ci d s an d Ch emi ca ls Pyralin Chemi cal s an d F abr ik oi d ) th e Paint an d

, , ,

V a r nish S teer in g Committe e an d the D y estuff D ep ar tm ent as simil a r

,

u nits F o r ex am pl e in M ar ch 1 92 1 all of th ese gr o up s w er e as k ed to s ub

.
, , ,

mi t th e same t yp e of u nifo r m month ly r e p o r ts 111

.

O f the n ew coo rdinati n g commi ttees the Paint an d V ar ni sh w as th e ,

most a cti ve an d this w as b e c a u se o n e man a lon e ha d full r e sp on sib i lity

,
10
4 DU FONT —
CREA TIN G A UTONO M O US DIV I S I ON S

fo r its w o rk MacG rego r b egan by m ak in g a n um ber o f o rgan i zati o n

.

h
c g an es — elimi n atin g an d co mb inin g o ffi ces in t h e se cti o n s d eali n g wi th

p ain ts i n th e S al es P r o ducti on, an d P u r ch asin g D epartmen ts

,
“ :2
U n d er
thi s co n tr o l th e p ai n t an d v ar n i sh b u si n ess b egan to impr o v e A t l east, th e
, .

l osse s l essen ed N everth el ess n o o n e sugg est ed dur in g th e w in t er an d

.
,

sprin g o f 1 92 1 th at th e exampl e o f th e p ai nt u n i t be f o ll o w ed by gi vi n g a
,

sin gl e ex ecu ti v e f ull r espo n sib ili t y f or an f th i C u ci l s I

y o n e o e n n e o n n .

f act th e s ubco mmi ttee on o rgani za ti on agr eed in May th at th e n ew

,

Co un cil sy stem w as w orkin g w ell an d o n its r ecomm en dati o n th e Execu ,

ti v e Co mmi ttee v o t ed t o co n tin u e th e curr en t sch em e f or at l ea st a y ea r .

Cri sis an d f th e MA ccep ta fzge

u l tid i vis i o na l S to
ru ct urth e
e

Thi s com pr omi se struct ur e last ed h o w ev er o nl y un til S ep tember Th e , , .

com pan y s fi n an ci al st atem en t f or th e fir st h alf of 1 m pr o vi d ed th e sh ock

’

9
th at fi n all y pr eci p i tat ed a m aj o r r eo rgan iza ti o n In th o se six m on ths as th e .
,

p o st w a r r ecess i o n b ec o m e i n cr eas i n gly se v e r e t h e co m p an y h a d l o s t ,

m on ey o n ev ery pr o duct ex cep t exp l o si v es A t t h e en d of th e fi r st .

m on t h s t h e pr o fi ts f r om expl o si v es h ad be en cl o se t o
, b ut th e
l o sse s f or th e ot h er pr od u cts ha d been o ver Th e lar gest
defi ci t o v er a mi lli on came fr om th e Dy estuffs D epartm en t Pain ts
, , .

a dd ed a l o ss of cellul ose pr o du ct s an d F abr i k o i d

M en o th er i tem s s uch as in ter est w er e tak en in to acco un t th e

, , ,

to tal n et l o ss f or th e six m on th per i o d w as -

Th e Ex ecuti v e C omm ittee s r egul ar r evi ew o f th e semi an n u al o per atin g

’

stati sti cs br o ugh t h om e t o it th e n eed f or s tru ct ur al ch an ges Half way .

m eas u r es w er e cl ear ly n o t en o ugh Th e six m on th p erf o rm an ce h ad been .

-

o n e o f th e w o r st i n th e co m p an y s l o n g hi st o ry T h e st r ategy o f div er sifi

’
.

cati o n seem ed t o pr omi se li ttl e m o r e th an difficul ti es an d defi ci ts .

Pi ck ar d s op en in g r em ar k s at th e Ex ecu ti v e Commi t tee m eetin g o f A u

’

gus t 2 r eveal ed a sen se of crisi s He urg ed th e appo in tmen t of a di cta .

“

He h ad l o n g b een advocatin g a n ew l on g term sch em e of re

”
114
tor .
-

o r ani z at i o n th i r s l s e x cu ti v r em in d ed t h e Co mm i tt ee b ut
g e sen o a ,e e e ,

thi s w as n o tim e to ma k e such a co m pli cated ch an ge R ath er th e co m .

,
”
p an y n eed ed a sin gl e man wi th ab so lut e j u risdi cti on o v er per so nn el an d “

wi th fu ll au th o ri ty to do wh at h e co uld to m eet th e crisis What is .

“

h e in s is ted is decisi on an d a cti o n an d th at yo u get fr om an in

”
n eed ed
“

, ,

di vi du al an d n ot f r om an o rgan iza ti on o f tal en t such as is seat ed aro un d

Th e o th er m em ber s agr eed Ev en Spruan ce w h o f el t th a t th e
”
thi s tabl e . .
,

Co un cil sy st em s h oul d be gi ven m o r e o f a tri al f el t th at w hil e it h ad

“

impr o v ed ma tt ers it ha d fall en sh ort of wh at sh o ul d be acco m plish ed by

,

Th e Co mmi tt ee dis cu sse d th e al ter n ati v es fo r so m e t im e

”
o th er m eans . ,
NE W STR UCTURE F O R THE NE W STRA TE G Y 10
5
th en d eci ded to tak e n o acti o n u n ti l its n ext r egul ar m eeti n g wh en th e
Pr esi den t w h o w as ou t o f to w n w o uld b e b ack in Wi lm i n gto n
, , .

B efo r e th at m eeti n g h o wev er H Fl etch er Br o w n m an ag er o f th e

, , .
,

S m o k el ess Po wd er D ep artm en t f ro m 1 9 1 1 to 1 9 1 9 h ad wr i tten a l etter ,

b ased o n h is seco n d th o ugh ts an d pr o b ably th o se o f so m e o f h is co l

leagues 115
His letter cl early o utl i n i n g th e situ ati o n an d th e al ter n ati v es
.
, ,

b ecam e a gui de fo r th e to p co mm ittee s m aj o r d eci si o n s in th e f o ll o wi n g

’

week s A fter go i n g o v er th e co m p an y s fi n an ci al p o si tion Bro wn em

.
’

h zed th at : Th r o ubl e w i th th e C o m p an y is r i gh t h er e in Wilmin g

“

p asi e t

ton an d th e f ai lur e is th e f ail ur e o f ad m i n i str ati o n fo r wh i ch w e as D i

, ,
”
recto r s are r esp o n si bl e D u Po n t h ad h ad li ttl e tr o uble u n ti l it b egan
, .

“
to d i ver si fy A ft er th e w ar it m ad e m o n ey fo r a y ear b ec au se o f a t em
.

p o rar
y spur t in bu si n es s It is n o w l o
. si n g m o n ey v ery f ast p art ly o n ac ,

co u n t o f i n ven to ry lo ss es wh i ch sti ll con ti n u e p art ly o n acco u n t o f o u r ,

in exp er ien ce in th e dy es tu ff s bu si n ess an d p artly b ecau s e of th e fai lur e

,
”
o f o u r o rg an i za ti o n to adju st i t self to pr es en t c o n d iti o n s T h e adj u stm en t .
,

Bro wn co n ti n u ed c alled fo r tw o r em edi es T h e cen tr ali z ed f u n cti on all y

, .

dep artm en tali zed o rgan i z ati o n s tructur e sh o uld b e co m pl et ely r epl aced
by th e o n e r ecomm en ded in th e pr ev i o u s y ear S eco n d th e Ex ecuti ve .
,

Co m mi tt ee sh o uld n o t b e m ad e up o f o p er ati n g ex ecu ti v es .

T h e Execu ti v e Com mi ttee w as w eak Bro wn b eli ev ed l argely b ecau se it , ,

co uld n o t b e o bj ec ti v ely cr iti cal an d an al yti c al an d b ec au s e its m em b er s

were u n able to get an o ver-all p i cture o f th e Co m p an y s n eed s an d pro b ’

l em s
Th e Ex ecu ti v e C o mmittee h as failed an d w ill co n tin u e to fail b eca u se,
alth o u gh it is h eld resp on si ble fo r r esu l ts, it is n o t pr op er ly con stitu ted an d

it lack s au th o ri ty With th e excep ti o n o f th e Ch ai rm an , all m em b ers o f th e

.

Execu ti ve Co mmi ttee are H ads

D ep artm en ts, an d in acco rd an ce w ith
e of

cu sto m th e m em b ers u su all y r ef rain f r o m d iscu ssin in t h eir m eeti n gs th e

g
afi airs o f an y on e D ep art men t T h e Co mm ittee m emb er at th e h ead o f
.

an y on e Dep artmen t is m o r eover in n o p o si ti on to in v esti ate o r cr i ticize

g
th e w o rk o f an o th er Dep ar tm en t It h as n ev er b een fo u n d pr acticab l e f o r
.

th is C o mm ittee to discuss an d co n tr o l th e con d u ct o f affairs o f an y o n e

Dep art men t Fu rth erm o r e it is u n reaso n ab le to exp ect th at a m aj o rity o f

.

th e m emb er s w ill b e ab le to su b j ect th eir o w n D ep a rtm en ts to su ch self

exam in ati o n an d criticism so th at th e C o m p an y a s a w h o le w ill o p erate

efi cien tl y T h e v ario u s Dep artm en ts o f th e C o mp an y lack an adequ ate

.

directin g an d co —o rdin atin g force at th e presen t tim e, w ith o u t w h ich su ccess

is i mp ossib le Th e Execu ti ve C omm ittee f u rth erm o r e lack s au th o ri ty Its
. .

carefu l stu dy o f o u r o r an i zati on la st y ea r r esu lted in a w ell th o u h t-ou t

g g
plan fo r m an agin g th e vario us in du stries Th e plan w as vetoed b y o u r .

Presi den t w h o, acco rdin g to ou r cu sto m, e e c ses th e xri prero gative o f decid
1 06 DU F O N T — CREA TI NG A UTO NOM O US DI V I S I O N S

in g al l q u estio n s rgan izatio n T h e Executive Co mmittee m ay w ell

of o . find
itself un ab le to produce satisfacto ry results u n der su ch co n ditions an d

limitatio n s .

We h ave h an ded ver th e details o f m an agemen t o f th is b u sin ess to th e

o

t h i rd-lin e m en w h o f o rm o u r D ivisio n al Co u n cils T h ey h av e co m e u

p .

a ai n st t h e sto n e w all O f excessiv e co st an d extrav a an ce an d h ave app ealed

g g
to us f o r h elp .

Th e presen t emergen cy Bro wn co n cluded dem an ded th e ab o li tio n o f

, ,

t h e pr esen t F i n an c e an d Ex ecu ti ve Co m mi ttees an d th e app o i n tm en t o f a

n ew sm all co m b i n ed to c m m itt T h is c m m i t t s h uld b f fi ve

p o ee o . ee o e o

m en n o o n e wh om sh all b e th e H ead o f an y D ep ar tm en t o f th i s Com

“

p an y In th i s w ay th e Dep ar tmen t H ead wo uld b e able to gi ve h is

.
“

”
u n di vi ded atten ti o n to th e detai ls o f h is o w n Dep artm en t an d th e ,

Execu ti ve Co m mi ttee w i ll d i rect an d co n t ro l th e o p er at ion s o f th e Co m

”
p an y as a wh o le .

O n A ugu st 22 1 92 1 n early all th e s en i o r ex ecu ti ves in th e com p an y

, ,

m et at a j o i n t m eeti n g o f th e Execu ti ve an d F i n an ce Co mm i ttees Even .

Pi err e du Pon t an d Rask ob l eft th ei r bu sy G en er al M oto r s aff ai r s to at

116
ten d T h e gr o up qu i ckly agreed o n Flet ch er Bro w n s s ugges tio n s an d
’
.

th en ask ed h im to dr aw up w ith Pi ck ard an d S pru an ce memb er s o f th e

, ,

O ld s ubco m m itt ee o n o rg an i z ati o n pl an s fo r a structur al r eo rg an i z ati o n

, .

T h e th r ee i m medi ately bro ugh t fo r th f ro m th e s ubco mmi ttee s fi les th e

’

earli er pro p o s al s fo r d i v i d i n g th e c o mp an y i n to fi v e pr o duct or In du s tr i al

D ep ar tm en ts an d ei gh t staff o r A ux i l i ary D ep artm en ts plu s th e T r easurer s

’

D ep ar tmen t T h e o nl y add i ti o n al ch an ge pro p o s ed w as to r esh ap e th e

.

Execu ti ve Co m m i ttee in th e w ay Bro w n h ad o u tl i n ed (see Ch ar t

T h ei r fi n al r ep o r t f ully d es cr i b ed th e fu n cti o n s o f th e pr o p o s ed d i vi
117
si o n s an d th e n ew gen er al o fiice T h e r ep o r t d i d n o t fo llo w Bro w n s
.
’

s uggesti o n o f u n iti n g th e F i n an ce an d Executi ve Co mm ittees b u t rath er ,

sp eci fi c ally r eco mm en d ed th at th ey r em ai n sep ar ated T h is w as pr o b ably .

b ec au se Pi err e an d o th er du Po n t o ffici als an d l arge sto ck h o lder s n o

,

lo n ger acti vely co n n ected wi th day-to day aff ai r s o f th e co m p an y sti ll

-
,

w an ted to h ave a pl ace to ch eck o n its acti vi ti es an d p erfo rm an ce No .

dep artmen t h ead o r o th er executi v e wi th o p er at in g resp o n sib il iti es w as

to Sit o n th e n ew Ex ecu ti v e Co mm i ttee for th e v ery r easo n s Br o wn h ad

ro e red N o r w as an m m b er exc ep t fo r its C h ai r m an to sit o n th e

p .
y e

F i n an ce Co mm i ttee T h e Execu ti ve Co m m i ttee w as to co n cen tr ate o n th e

.

ad m i n i str ati o n O f th e C o m p an y as a w h o l e an d w as to b e r esp o n si bl e

fo r its ul tim ate p erfo rm an c e .

Wh i le th e m emb er s o f th e n ew co m m i ttee wi th n o di rect o perati n g ,

duti es were to co n cen tr ate o n o ver-all pl an n i n g apprai sal an d co o rdi n a

, , ,

ti o n each w as also to h elp o versee o n e set o f f u n ctio n al acti vi ties in all

,
NE W S TR UCTURE F O R THE NE W STRA TE G Y 1 07

fi vef th e n ew pr o duct d i v isi on In c arryi n g o u t th ese l ast du ti es, th e

o .

committee m ember s wer e to act on ly in an adv iso ry w ay In th e r ep o r t s .

’

wo rd s :
It is pin io n f urth ermo re th at n o memb er o f th e Execu tive C ommittee
ou r o , ,

S h o u l d h ave th e direct in divid u al au th o r i ty or r esp on sib ility w h ich h e w o ul d

if h e w as in ch arge O f o n e or m o re fu n ctio n al activities o f th e C o mp an y .

His relation s to such f un ctio n s sh ou ld b e advi so ry o n ly Fo r exam ple o u r .

,

plan provides th at on e memb er of th e Execu tive Co mm i ttee w h o m ay b e ,

b est fi tted by exp er ien ce for h is du ty w i ll co -o rdin ate th e sales fun cti on b y
,

h o ldin g regu lar meetin gs with appr opriate represen tativ es o f th e fi v e In du s

tr i al Dep artm en ts A t th ese m eetin gs sal es p o li cies w ill b e discu ssed an d
.
,

co— o rd in ated su b j ect to th e Execu tive C o m m i ttee as th e fi n al au th o ri ty

,
.

B esi de a memb er for s al es th er e wo uld b e a seco n d o n e fo r purch asi n g

, ,

a thi rd fo r m an uf act ur i n g an d a f o ur th fo r b o th c h em i cal an d en g i n eer

,

in g d evelo p men t wo rk T h e Ex ecu ti v e C om mi ttee w o uld th er efo r e t ak e

.

o ver s o me o f th e c oo rd i nati o n o f f u n c ti on al acti v i ti es w h i ch earl i er rec

o mm en datio n s h ad pr o p o s ed sh o uld b e i v en to t h e st aff d ep ar tm en ts

g .

T h e r ep o r t n ext too k up th e duti es o f th e G en er al M an ager s o f th e

n ew D ep ar tm en ts :

A cco rd in g i plan th e h ead Of each In du strial Dep artmen t w ill h ave full
to th s ,

au th o ri ty an d r esp o n si b ilit f th p r ti f h i i n du stry su b j ect o n ly

y o r e O e a o n o s ,

to th e au th o r i ty o f th e Execu tive Co mm i ttee as a wh o le He w ill h ave .

u n der h im m en w h o w ill exercise all th e lin e f un ction s n ecessary f o r a

co mp lete in du stry i n clu din r ti d p ecial p u rch asin m a n u factu r e

g
, o u n e a n s g , ,

sales m i n o r co n stru cti on n o rm al an d lo ical ch em ical an d en in eer o p er a

, , g g
tive an d exp er i m en tal lab o r ato ry activi ti es w o rk su pp li es co st k eep in g ro u
, ,
-

tin e an d an alysis fi n ish ed pr o du cts stan d ard s an d co mp lai n ts o rd er s w o rk

, , ,

plan n in g rou tin e tr affic trade reco rds an d sales exp en se

, , .

A G en eral M an ager was to r ep o r t to th e Execu ti ve Co mm itt ee whi ch ,

on a r egul ar s ch edule w o uld an alyz e d ep ar tm en tal r ep o r t s an d d i scu ss

th em w ith th e m an ag er an d his assist an ts T h e M an ag er s w o rk w as to b e

’
.

ev alu ated o n th e b asis o f fi n an c i al p er fo r m an c e in t er m s o f r et ur n o n

i n vestm en t as defi n ed by Do n ald s o n Br o wn s fo r m ul a T h er efo r e i n ter ’

.
,

di visi o n al b i lli n g app ear s to h av e b een b ased o n curr en t m ark et pr i ces as

fir st pr op o s ed in th e s ub -s ubcomm i ttee s r ep o rt o n M erch an di si n g v er s u s
’ “

”
To n n age S ales .

With th e G en eral Man ager s h an dli n g day-to—day adm i n is tr ati o n an d th e

Execu ti ve Co mm ittee ch arged with o v er-all c o o rd i n at i o n appr ai sal an d , ,

p o li cy pl an n i n g th e duti es o f th e ei gh t m o r e sp eci ali z ed f u n c ti o n al

,

d ep artm en ts n o w b ec am e wh o lly to th e pro vi si o n o f advi ce an d servi ces ,

to b o th th e d i v isi o n al an d gen er al o ffic es T h e ei gh t d ep ar tm en t s i n clud ed

.
 DU P O NT — CREA TI NG A UTO NO M O US DI V I S I O N S

C HA R T 5

Military and Dyestuffs Pyralin articles Paints

commercial and sheeting
smok eless
Intermediates Varmshes

powder Pharmaceuticals Paper stock Pigments

Dry colors

Heavy chemicals

Hask el l Philadelphia
'
Carney s Point Deepwater
NE W STR UCTURE F O R THE NE W STRA TE G Y 9
IO

Pro po sed O rgan iz ati on fo r th e Du Po n t C o mp an y, A u gu st 3 1 , 1 92 1

AUX ILIARY DEPARTMENTS

I IO DU F O NT —
CREA TING A UTONOM O US DI V I S I O N S

L egal , P urch asi n g, D evelo pm en t, En gi n eer i n g, Ch emi c al, S ervi ce, T r affic,
an d A dver ti si n g :

Th e eigh t A u xili ary Dep artm en ts w ill act as co n su ltan ts an d w ill also
perfo rm staff an d service fu n ctio n s fo r th e C omp an y as a w h ole an d fo r
o th er d ep ar tm en ts, an d in additio n w ill co n du ct w ith in th eir dep artmen t s

su ch activities as m ay, w ith th e co n sen t o f th e In du strial Dep ar tmen t Heads

or th e Execu ti v e C o mm i ttee, b e so h an dled in th e in terests o f eco n o my an d

efiicien cy Th e Execu ti ve C o m m ittee sh all secu re p rop er co—

. o rdin ati o n an d

avo id an u n j u stifi able degree o f sp ecial ization in th e tech n ical, serv ice,

an d o th er f un ctio n s with in th e In du strial De a rtm en t s E ac h A u x il i ary

p .

Dep artmen t rep o rts i n divi du ally to th e Execu tive Co mm ittee .

O n ly th e T r eas urer s D ep artm en t

co n ti n u ed to have s o me li n e autho rity
’
.

It w o uld set o ver-all acco u n ti n g pr acti ces an d prescri b e th e fo rm s fo r

s tati sti cal an d o th er regular repo rts Ho wever th e d etai l s o f co st acco un t
.
,

in g w er e to b e l eft to th e G en er al M an ager s .

Th e d i scu ssi o n o n th is r ep o rt fo cu sed o n the r o l e o f th e tw o d ep art

m en ts th at c o uld sti ll c arry ou t m o re th an sim ply servi ce fu n cti on s
T r easury an d Purch asi n g — an d es p eci ally o n th e mak e-u p o f th e n ew
to p c o m mi ttee G r o up c o n tr o l th r o ugh an Ex ecuti v e Co mm i ttee o f gen
.
,

eralist s w i th n o o p er ati n g du ti es w as a r adi c al d ep artur e f ro m p ast

,

pr eceden ts an d from th e o rgan i zati o n th eo ry o utlin ed in th e H ask ell

rep o rt o f M arch 1 9 1 9 In th e di scu s si o n o v er th e Executi ve C o m mittee
, .
,

th ere w as early agr eem en t th at th e Presi den t an d T r easurer as o fficer s ,

with a gen eral vi ew sh o uld b e added to it T h e l atter w h o wo uld still

, .
,

r ep o r t to th e F i n an ce Co mm ittee co uld supply th e stati sti cal an d fi n an ci al

,
1 18
i n fo rm atio n n ecessary fo r an y m aj o r po li cy d eci si o n .

Th ro ugh o u t th ese m eeti n gs in l ate A ugu s t an d early S ep tem b er 1 92 1 , ,

Ir en ee du Pon t r em ai n ed sk ep ti cal ab o ut th e u n d erlyi n g con cep t o f th e

co m mi ttee He disli k ed th e ab an do n i n g o f adm i n i strati o n by fu n c ti on al
.

s p eci ali sts an d h e w as u nh appy ab o u t th e pro sp ect o f gro up m an agemen t

,
”
at th e to N m h x cu i v mm i h sai d at o n e m eet
“

p . O a n o n t e E e t e C o ttee e ,
”
in g w as to h ave i n d i vi du al r esp o n si b i l i ty
, T h i s l ack o f r espo n si b i li ty
.

wo uld c au se difii cu lties h e felt D esp i te th is in defer en ce to th e stro n g

, .
,

o p i n i o n o f th e m aj o r it y o f h is c o ll eagu es h e v o ted at th e sam e m eeti n g to

i n s titu te th e n ew co mmittee 119

Po ssi bly Irén ée s pr o test en co ur aged th e
’
.

app o i n tm en t o f th e P r esi d en t to th e Execut i v e Co m m i ttee for th e Pr esi ,

d en t co n ti n u ed to b e th e i n di vi du al en tru sted wi th th e fi n al r esp o n si b i li ty

an d au th o r i ty fo r th e c o m p an y s aff ai r s
’
.

O n c e th e r o le o f th e Co mmittee an d th e T r easur er s D ep ar tmen t w as

’

deci ded th e o n e o th er p o i n t at i ssue w as purch asi n g Ir en ee Lammo t

’

, .
, ,

an d mo st o f th e o th er m em b er s o f th e ex i sti n g to c o m m i ttees agreed t h at

p
NE W STR UCTURE F O R T HE NE W S TRA TE G Y
”
th e G en er al Man ager s s h o uld h av e f ull co n tro l o ver th ei r purch asi n g .

O nl y Edge th e V i ce—Pr esi d en t in Ch arge o f P urch asi n g an d T r affi c m ad e

, ,

a stro n g plea fo r con ti n u i n g cen tral i z ed purch asi n g th r o ugh th e ex i sti n g

o rg an i z ati o n D ur i n g a w eek b etw een m eeti n g s o n th e n ew pl an h e h ad

.
,

o n e o f his assist an ts st udy th e purch asi n g pr ac ti c es o f el ev en l arge co m

p an i es as w ell as th o s e o f N ew Yo rk C it y an d th e f ed er al g o v er n m en t .

A ll th e i n stitu ti on s i n v esti gated Edge r ep o rt ed h ad o r w er e ab o u t to

, , ,
1 20
i n stit ute cen tral i zed purch asi n g Edge s argum en ts c on vi n ced th e
’
.
,

Commit tee an d th e P urch asi n g D ep ar tm en t w as m ade a s ep ar ate u n it

,

s omewh at s imi lar to th e T reas ur er s Dep artmen t H o wever it w as to ’ ‘

.
,
“
clo s e n o co n trac t aff ecti n g an y Dep ar tmen t exc ep t with th e appr o val of
” 1 21
th e G en er al M an ag er an d/ o r th e A ssistan t G en er al M an ag er If th e .

dep ar tmen t h ead was cer tai n h e co uld buy to b etter advan tage an d w as
u n able to con v i n ce th e Purch asi n g Dep artm en t th en th e qu esti on wo uld ,

g o t o th e E x e cu ti v e C o mm it t ee fo r d ecisi on .

S i n ce th er e w as gen er al agr eem en t o n all m atter s exc ep t purch asi n g th e ,

n ew pl an w as qu i ckly ado p ted T h e Ex ecu ti v e Co mmi ttee appr o v ed it o n

.

”2
S ep temb er 8 an d th en vo ted th e m en for th e n ew p o st s Tw o w eek s .

later th e B o ard of Di r ecto r s appro ved all ch an ges In S ep temb er I 92 I .

, ,

th e du Po n t Co mp an y pu t i n to eff ect this n ew struc tur e o f au to n o mo u s ,

m ultidep artmen tal d i visi on s an d a gen er al o ffi ce w i th staff s p eci alists an d

gen eral executi ves Each di visio n h ad its fu n cti o n al d ep artm en ts an d its
.

o w n cen t r al o ffi c e to ad mi n ist er th e s ev er al d ep ar tm en ts .

Un en cumb er ed by o perati n g duti es th e s en i o r executi ves at th e gen eral ,

O ffic e n o w h ad th e time i n f o rm ati on an d m o r e o f a p syc h o l o g i cal co m

, ,

m itmen t to carry on th e en t repr en euri al ac ti vi ti es an d m ak e th e strat egi c

decisio n s n ecess ary to k eep th e o ver-all en terpr is e ali ve an d gro wi n g an d
to c o o rd i n ate appr ais e an d pl an f or th e w o rk o f th e d i v isi o n s A s th e
, , .

Ex ecu ti ve Co mm i ttee n o t ed in th ei r r ep o r t to th e B o ard o f D i recto r s o n

th e pr o p o s ed ch an ges th e memb er s o f th e n ew c o mm i ttee c o uld g i v e all
“

thei r ti me an d eff o r t to th e bu si n ess of th e Co m p an y as a wh o l e B ei n g .

co n n ec ted w i th n o d i v i si o n th ey w i ll b e abl e to c o n si d er all qu es

[ ] ” 1 23
,

ti o n s o r pro blem s wi th o u t b i as o r pr ej udi ce .

If th e gen er al o fficer s w er e b etter equ i pp ed to h an dl e o v er-all str ateg i c

decisio n s th e d i vi sion m an ager s h ad full au tho r i ty an d th e n ecessary faci li
,

ti es to m ak e t h e day-to-day t acti c al o n es A s each co n tr o lled th e fu n cti o n al .

ac ti v iti es n eed ed fo r m ak i n g an d s elli n g o n e m aj o r li n e o f pr o ducts ,

each co uld d etermi n e w i th i n th e f r am ew o rk set an d f u n d s all o tted by th e

,

Ex ecu ti ve Co mm ittee th e mo st effi c i en t w ay s t o u se th e r eso urces at h is

,

co mman d Th is typ e o f r eo rgan i zation fi x es r es p o n si b i li ty th e fi n al

.
“ ”
,

rep o r t to th e B o ard co n ti n ued Wh en a m an is m ade r esp o n sible for

.
“

result h is i n ter est is sti m ulated — h ard an d eff ecti ve wo rk fo ll o ws wh i ch

, ,
1 12 DU FONT —
CREA T I N G A UTO NOM O US DI V I S I O N S

brin gs s uccess We be li ev e th at th e ado pti o n of th is plan will bring a

.

”
tr em en do us impr o v em en t in th e m o r al e o f th e du Po n t em plo y ees This .

w as in ci d en ta lly th e fi r st tim e t h at th e plann er s ha d sugg est ed tha t th e

, ,

n ew t ype o f o rgan iza ti o n m i gh t im pr o v e m ana eria l psych o l o y

g g .

T h e st ruct ur e accep ted in S ep tem ber 1 92 1 h as serv ed th e du Po n t , ,

Co mp an y efi ect iv ely ev er sin c e Lo sses w er e soo n co nvert ed in to pr ofi ts

.

an d n ev er ag ain — n o t ev en i n th e m i ddl e o f th e d epr e s si o n of th e 1 g3o s

’

di d th e co m p an y fa ce a cr isis as se v er e as th at of 1 92 1 S in ce that year .

,

n ew In du s tri al Dep artm en t s h av e been a dd ed T h er e w er e tw elv e in 1 60

9 .
,

an d o ld er o n es h av e been r ed efi n ed an d r esh ape d In th e la st quart er .

cen tur y o n ly th r ee m o r e A u xiliar y De part men ts h av e been f o rm ed

,

Em pl o y ee R el ati o n s P ubli c R elat i on s an d F o r ei gn R elati o n s

, ,
1 24
A s Ir enee .

du Fo n t an d th e o th er s h ad an ti ci pa t ed purch a s in g qui ckly be cam e l ess ,

cen tr al ized an d th at d ep art m en t s r o le becam e in cr easin gly an adviso ry

’

an d serv i ce on e T h e stafi also in cr ea sin gly r el i eved th e Ex ecu ti v e Co m

.

mitt ee o f th e tas k o f coo rdin at in g f un ct i on al a ct i vi ti es i n th e di fi er en t

pr od u ct di vi si o ns O n th e wh o le h o wever th er e w as li ttl e ch an ge at du
.
, ,

P o n t af ter 1 92 1 — m uch l ess th an o ccurr ed af t er th e ini ti al r eo rganizati on

at G en er al M ot o r s j er se y S tan dard an d S ea r s R oebuck Th e G en eral
, , , .

M anagers th e A u xili ar y S tafi an d th e top co mm i tt ees st ill perf o rm m uch

, ,

th e sam e du ti es an d are co n sti t ut ed i n m u ch th e sam e f o rm as th ey w ere

in S ep temb er 1 92 1
, .

A t du P on t th en st ru ct ur e f oll o w ed s trat egy T h r o ugh a strat egy of

, , .

co n so li dati on an d in tegr ati on th e th r ee co usi ns h a d o b tai n ed admi ni st ra

,

ti v e co n tr o l o v er th ei r wi d espr ea d h o ldin g s o f plan ts mark eti n g fa cili ti es , ,

an d labo r ato ri es as w ell as o v er a poo l o f tr ai n ed pe r so n n el Th e rati o n al .

an d effi ci en t u se o f th ese r eso urces ca ll ed f or th e creati on o f f un cti o n al de

p ar t m en ts w i th h ea dqu a rt er s i n W i l mi n gt on t o a dmi ni s ter th e man y

un i ts in th e fi eld an d a cen tral o ffice t o coo rdin ate appr ai se an d set th e , ,

go al s an d po li ci es of th e f u n cti o n al depa rtm en ts in th e in ter est o f th e

en terpr ise as a wh o l e .

Th e pr ess ur e to k eep exist in g r eso urces o per ati n g effici en tly an d st ea di ly

al so pr o vi d ed a sti m ulus f o r t h e st r ategy o f di v er si fi ca ti on With th e .

l o ss of go v er n m en t o rd er s in 1 908 an d wi th th e h uge exp ansi on o f plant

an d pe r so nn el dur in g Wo rld War I th e se n i o r o fii cer s at du Po n t ass ist ed
, ,

by th e De v el o p m en t Depa rtm en t w ork ed o ut a str ategy th at wo uld assure

,

t h e co n tin u ed us e o f th ese r eso urces w h en th e d eman d f or th eir cur

r en t o utpu t d eclin ed A t fir s t th ey search ed f or n ew uses for exi stin g

.
,

p h ysi cal fa ci li ti es b ut th en d eci ded th at fin din g empl o ym en t f or trained

, ,

highl y s ki ll ed per so nn el w o uld pr o ve m o r e pr o fi tabl e uch S r e-em plo ym en t .

o f r eso urces in th e n ew l in es o f bus in ess in t ur n of ten r equi r ed th e ac , ,

cum ula ti o n of n ew plan t an d per so n n el .

NE W STR UCTURE F O R T HE NE W S TRA TE G Y 11
3
Th e s tr ategy o f d i v er si fi c ati o n qu i ckly d em an d ed a r efash i on i n g o f th e
co m p an y s adm i n i strati v e structure if its r eso urces o ld an d n ew w er e to
’

, ,

b e u sed effici en tly an d th erefo r e pr o fi tably ; fo r d i ver si fi c ati o n gr eatly in

ten sifi ed t h e ad m i n i str ati v e l o ad c arr i ed by th e f u n c ti o n al d ep ar tm en ts

an d th e c en tr al o ffi c e O n ce th e f u n c ti o n al n eed s an d acti v i ti es o f sev er al

.

r ath er th an o f o n e pr o duct l i n e h ad to b e co o rdi n ated o n ce th e wo rk o f

,

sever al v ery d i ffer en t l i n es o f bu si n ess h ad to b e appr ai sed o n c e p o l i ci es

,

a n d pr o cedur es h ad to b e fo rm ul ated fo r d i v i si o n s h an dli n g a w i d e

vari ety o f pro ducts an d fi n ally o n ce th e cen tr al o ffice h ad to m ak e

, , ,

criti cal deci si on s ab o ut wh at n ew li n es o f bu si n ess to develo p th en th e ,

o ld S t ruc tur e qu i ckly sh o w ed si g n s o f s tr ai n T o m eet th e n ew n eed s

.
,

th e n ew o rg an i z ati o n al d esi g n pr o v i d ed sev er a l cen tr al o ffi ces each ,

r esp o n si ble fo r o n e li n e o f pro ducts A t th e n ew gen er al o ffi ce th e Execu

.
,

ti v e C o m m i tt ee an d staff sp ec i al i sts c on c en tr ated o n th e o v er-all adm in is

tration o f w h at h ad b eco m e a m ulti i n du stry en terpr i se A n d in t r an s

- .

fo rm i n g th e h igh ly c en tr ali z ed f u n cti o n ally d ep ar tm en tali z ed structur e

,

i n to a decen tr al i zed m ulti d i vi si o n al o n e th e m aj o r ach i evemen t h ad

,
”
,

b een th e creati o n o f th e n ew d i vi si o n s .

In th ese v ery sam e y ear s o rg an i z ati on bu i ld er s at G en er al M o to r s h ad

,

a l so b een p i o n eer i n g in th e cr eati o n o f th e n ew m ul ti d i v i si o n al St ruc tur e

al th o ugh th ei r ad m i n i str at i v e n eed s an d pr o bl em s w er e v ery d i ff er en t .

A t G en er al Mo to r s th e au to n o m o u s m ul ti f u n cti o n al d i vi si o n s h ad alw ay s
,

ex i sted T h er e th e c h all en ge w as n o t th e bu i ld i n g o f th e d i v i si o n s b u t
.
,

th e f o rm atio rf o f a g en er a l o ffi c e .
 G ENERAL MO T O R S —
CREATING
THE G ENE RAL OFF I CE

O n N o v em ber v ery day th at th e du Po n t Co m pan y s

th e
’
1 9, 1 92 0,

Ex ecuti v e Co mm i tt ee sat d o wn to di scuss f o r th e seco n d t im e th e pr opo sal

t o d ecen tr ali ze al o n g pr o du ct lin es th e du P o n t Fin an ce Co mmi ttee w as
,

m eetin g in em erg en cy sessi o n i n N ew Yo rk Ci ty A f ew day s bef o r e .

,

Wi lli am C D ur an t f o un der o f th e G en er al M oto rs Co rp o r ati on h ad

.
, ,

ask ed Pi err e S du Po n t an d J oh n I R ask ob th e Ch ai rm an o f th at

. .
,

co rpo r ati on s B oard an d its seni or fi n an ci al o fi cer to co nf er wi th him

’ 1
, .

He w as in seri o us tr oub l e S t o ck m ark et pri ces h ad be en crum bl in g sin ce

.

summ er an d n o w h e o w ed o v er $ 0 mill i o n i n br o k er s a cco un t s an d

’

, 3
l o an s th at h e h ad used in an attem p t to m ain tai n th e pri ce of G en er al
M oto r s S to ck Un l ess som e a cti on w as tak en qui ckly h e wo ul d b e f o rced
.
,

in to b an k r up tcy an d h is gr eat bl ock o f G en eral Mo to r s sto ck w oul d be

dum pe d o n th e m ark et T o pr ev en t th i s D ur an t Pi err e an d R ask ob
.
, , ,

m et wi th r epr esen tati v es o f th e o th er l ar g e in v est o r I P M o rgan 8 : Co , . .

,
.

an d t o g eth er th ey cr ea t ed a c o m p an y fi n an ce d by th e du P o n ts an d
,
2
M o rgan t o tak e o v er D u r an t s o bli gati o ns an d h is G en er al M oto r s st ock
,
’
.

Th e n ext day N o v embe r 20 D ur an t r esi gn ed as Pr esi d en t of G en er al

, ,

M o to r s an d t en d ay s l ater Pi err e du Po n t t oo k hi s place as ch i ef ex ecu ti v e

, ,

o f th e au t om o b i l e co m p an y .

S h ortly af ter th e Ex ecu ti v e Co mmi tt ee s m eetin g on N o v em be r 1 9 in

’

Wilm in gt o n Ir en ee du P o n t agai n turn ed do wn th e pr oposal f or a

,

m ul ti di vi si o n al d ecen tr al ize d stru ct ur e at th e du Po n t Co m p an y But

“
.
,

w i thi n l es s th an a m o n th aft er th e F in an ce C o mm i ttee s em er g en cy

’

ses si o n in N ew Y o rk P i err e du Po n t ad op ted f o r G en er al M o to r s an

,

o rg an i za ti o n al pl an sub mi tt ed t o h im by A lfr ed P S l o an Ir wh i ch h ad .
, ,

st r ik i n g simi lar i ti es t o th e o n e Ir e nee h a d r ej ect ed Ea ch plan ca ll ed f o r .

au to n o m o u s o er a ti n g di v i si o n s an d a g en er al o ffi ce cons is ti n g o f g en er al
p
ex ecu ti v es an d st a ff spe ci ali sts Desp i te th e app ar en t simi lari ti es o f th e
.

pr o po sals Pi er r e as h as be en po in ted o u t suppo r ted Ir en ee in hi s o ppo s i

, , ,

1 14
T HE D URA NT STRA TEG Y 1 15

tio n to i n tr o duci n g th e o rg an i zati o n al ch an ges at du Po n t A ct u ally it .

,

seem s qui te d o ub tf ul th at ei th er Pi erre o r Ir en ee co n si d er ed th e tw o

plan s in an y w ay co mp ar abl e Each h ad b een desi gn ed to m eet sp eci fi c
.

n eed s ar isi n g fr o m a v ery difi eren t set o f m an ag em en t pr o bl em s A t .

du Po n t it w as th e attem p t to h an dl e th e co m p an y s v ar i o u s n ew pr o duct
’

li n es wi thi n th e o lder cen tr ali z ed f u n cti o n ally d ep artm en tali zed struct ure
wh i ch cau s ed th e di fficul ti es A t G en er al M o to r s th e pr o bl em h ad b een
.
,

th e i n tegr ati o n an d c oo rd i n ati o n o f m an y almo st c o m pl etely i n d ep en d en t

o p er ati n g di v i si o n s .

T o u n der stan d th e pr o bl em s facmg Pi err e du Po n t at G en er al M o tor s

in D ecemb er 1 920 r equi r es a br i ef r ev i ew o f th e co rp o r ati o n s h i sto ry ;
’

, ,

an d u n til 1 20 this h is to ry w as l arg el y th e s to ry o f its f o u n d er s str at egy

’

9 ,

o f exp an si o n th r o ugh c o m b i n ati o n an d i n t egr ati o n A m o n g th e early .

au to m o b i l e m ak er s H en ry F o rd an d Wi ll i am C D ur an t w er e th e st r o n g
,
.

est b eli ev er s in th e en o rm o u s p o ten ti al m ark et exi sti n g f o r th e m o d er ate

pr i ced car Wh er eas H en ry F o rd th e m ech ani c m et th e m ark et pri m ar i ly

.
, ,

by enl argin g h is existin g i n du s tr i al pl an t D ur an t th e salesm an did it by , , ,

'

co m b i ni n g wi th i n a si n gl e h o ldi n g co mp an y m an y scattered f ac il iti es for

m ak i n g an d selli n g o f au to m o b i les p ar ts an d a cc esso r i es Th r o ugh t h i s
, , .

s trategy th e co mb i n ed assets o f D ur an t s G en er al M o to r s h ad c o m e t o
,
’

m ak e it th e fif th l ar gest o f all i n du str i al en terpr i ses in th e Un i ted S tat es

by 1 9 1 9 D uran t h ad seen h is o pp o r tu n i ty an d h e h ad m o v ed wi th sp eed
.
,

an d d ec i si on t o cr eate th e i n du s t i al em p ir e n ec essary to m eet it Bu t h e

r
.

p ai d littl e o r n o atten ti on to fash i o n i n g a structur e t o go v ern h is spr awli n g

do m ai n s .

B efo re 1 920 tw o gr o up at G e er al Mo to r s b o th r epr esen ti n g l arge

,
s n —

i n vesto r s h ad attemp ted to bui ld som e so rt o f gen er al o ffice to admi n

—

i ster this v ast co ll ecti o n o f m en m o n ey an d m ater i al s Neith er m et with

, , .

m u ch s ucc ess T h i s w as p art ly b ecau se n early all th e ex ecu ti ves in ch arge

.

o f th e m an y sub si di ar i es as w ell as D ur an t h i m s elf saw littl e v alu e in

o r n eed f o r g en er al admi n istr ati v e co n tr o l an d p art ly b ecau se n o o n e in ,

ei th er o f th e tw o fi n an ci ally i n ter ested gro up s to o k th e ti m e t o f o r m ulat e

a r ea li sti c ad m i n i str at i v e S truct ur e Th en in 1 20 c am e th e sh arp p o stw ar

9 .

depressio n th at m ade clear th e n eed for o v er-all admi n i str ati v e sup ervi si on
an d at th e sam e tim e br o ugh t a ch an ge in co mm an d T h e n ew m an ag e
, , .

m en t qui ckly ado p ted th e structur al desIgn A lfr ed S l o an h ad alr eady

wo rk ed o u t to fill th e n eed .

Th e S o urce: f D ura n t s S trategy

’
o

D u r an t w as p art i cul arly w ell equi pp ed to carry o u t h is c o n v i cti on s

ab o u t th e f utur e o f th e au to m o b i l e m ar k et In 1 08 th e y ear in w h i ch h e
9 .
,

fo rm ed G en er al Mo to r s an d H en ry F o rd pr o duc ed th e fir s t M o del T ,
1 16 G E NERA L M O TO R S

D ur an t w as lr eady th e l argest auto m o b i le m an uf actu rer in th e Uni ted

a

S tates an d h ad l o n g b een o n e o f its m aj o r carr i age m ak er s T h e p o li ci es .

h e u sed to b u i ld G en er al M o to r s w er e th o se th at h e h ad alr ea dy tested an d

pr o v ed in th e c arri age bu si n ess an d at B u i ck .

In 1 8 85 D u r an t a tw en ty fo u r—y ear-o ld i n sur an ce sal esm an in Fli n t

, ,
-
,

Mi ch igan pur ch ased a p aten t fo r m an ufactu ri n g tw o -wh eel car ts for

,

He th en j o i n ed I D all as D o r t a y o u n g h ardw ar e sal esm an to f o rm

.
, ,

th e D ur an t—
D o r t C arr i age Co m p an y th e tw o p art n er s co n tr acti n g w i th
,

a lo c al carr i age bu i ld er t o m an uf actur e th e car ts S i n c e Fli n t at th i s ti m e .

, ,

w as alr eady o n e o f th e l arg est c en ter s fo r v eh i cle m an uf actur e in th e

Un i ted S tates th i s co n tr acti n g w as easi er an d r eq u i r ed m uch less cap i tal
,

th an bu i ld i n g th ei r o w n w o rk s In stea d D ur an t an d D o r t c o n cen tr ated

.

o n selli n g in th e exp an d i n g n ati o n al m ark et B esi d e m aki n g s al es th em .

selv es th ey ch o se d eal er s an d d i str i b u to r s in all p art s o f th e c o u n try t o

,

m ark et th ei r pr o du cts In r u r al ar eas th ey r eli ed o n m en w h o w er e alr eady

.
,

sellin g f arm im pl em en ts ; in th e c iti es th ey t en d ed to set U t h ei r o w n

p ,

4
deal er s .

T h ei r m ark eti n g eff o r ts so i n cr eased th e d em an d fo r carts an d carri ages

th at D ur an t an d D o r t d eci d ed to er ec t th ei r o w n m an uf a c tur i n g pl an t ,

th at is to i n tegr ate b ackw ard T o m eet th e v o lum e r equ i r ed th ey f o u n d

, .
,

it easi er an d ch eap er to bui ld a pl an t wh i ch assem bl ed al r eady fi ni sh ed

p arts an d accesso ri es m ade el sewh er e r ath er th an o n e wh i ch m an ufactur ed
th e carr i ag es f r o m scr atch T h e n ew Fli n t f ac to ry u si n g l o c al s uppli er s
.
, ,

w as so o n tur n i n g o u t o v er tw o h u n dr ed c arr i ag es a day an d p ayi n g an ,

an n u al w ag e r o ll o f o v er $ m i lli o n Bu t as pr o ducti o n exp an d ed adequ ate

3 .
,

suppli es b ecam e an i n cr easi n gly ser i o u s pr o bl em a n d th e tw o p art n er s ,

en c o ur ag ed th e setti n g up o f sp eci ali zed pl an ts in Fl i n t w h i ch m ad e

b o di es wh eel s up h o l stery p ai n t v arn i sh axl es an d spri n gs O n e co m

, , , , , , .

p an y bui lt n o th i n g b u t wh i p so ck ets D ur an t an d D o r t n o t o n ly fi n an ced

.

m an y o f th ese establ i sh m en t s b u t ac co rdi n g to C arl C r o w : D ur an t

“

p er so n ally o rg an i z ed a n u mb er of th em in o rder to m ak e c ertai n th at h is

assem bly l i n e w o uld h av e a d ep en d abl e supply o f p art s
” 5
He even .

pur ch ased stan d s o f h i ck o ry an d h ardwoo d in di stan t areas With i n tegr a .

ti o n ca m e an i n cr ease in D ur an t s o ff eri n g s By th e t ur n o f th e c en t ury

’
.
,

h is fa cto ri es w er e m ak i n g a w i d e v ar i ety o f buggi es c arr i ages an d spri n g , ,

wago n s all so ld u n der th e Blu e Ri bb o n t r ad em ark

, .

D ur an t s d ev el o p m en t o f th i s h i gh v o lu m e i n tegr ated b u si n ess m ad e

’
-
,

h im a m i lli o n ai r e b ef o r e h e w as fo r ty L i ttl e i n ter est ed h i m self in th e

.

d etai l s o f o p er ati o n s h e pl ac ed co m p eten t lo cal m en in ch arge o f th e

,

c arri age co m p an y an d b efo re 1 900 m o v ed h is p er so n al h eadqu arters to

,

New Y o rk Th ere as h e w atch ed I P Mo rg an an d o th er bu si n ess ti tan s

.
, . .
THE D URA NT STRA TE G Y I I
7
r eo rgan i zi n g A mer i c an i n dustry h e b eg an to l o o k fo r n ew i n dustri al
,

em p i r es t o co n qu er .
-

Th e au to m o b i le th en offer ed an o bvi o u s o pp o r t u n ity fo r a n ew bu si n ess

j u st as it w as a th r eat to h is exi sti n g o n e By 1 900 R an so m E O ld s an d .
, .

o n e o r tw o o th er s h ad sh o w n au to m o b i l e m an u factur i n g to b e co m

m ercially pro fi table In th at year a v ar i ety o f sm all co m p an i es h ad

.
,

pro duced car s in th e Un i ted S tates In 1 904 o n e o f th ese ti n y .

,

ven tures th e Bui ck Mo to r Co wi th a sm all facto ry in Fli n t f ai l ed

, .
, .

D uran t n eeded li ttle urgi n g f ro m its cr edi to r s to tak e o v er th e d ef u n c t

au to m o b i l e c o m p an y .

Retur n i n g to Fl i n t in Decem b er 1 904 D ur an t b eg an i m m ed i ately to , ,

pl an th e creati o n o f an auto mo b i le co m p an y alo n g l i n es Si m i l ar t o th o se

o f h is c arr i ag e bu si n es s
6
He r edesi gn ed th e car bu i lt l arge as sembl i n g
.
,

plan ts in Fli n t an d t h en in n earby J ack so n A t th e sam e ti m e h e wo rk ed .

,

h ard to bu i ld up a n ati o n al d i str i bu ti n g an d d ealer o rgan i z ati o n S elli n g .

au to m o b i l es w as mo r e c o m pl ex th an m ark eti n g c arr i ag es T h e i n i ti al .

demon str ati o n by th e dealer m ean t m uch m o r e in getti n g a cu sto m er

as d i d effici en t serv i c i n g in k eep i n g h im T h e l atter r equ i r ed am o n g .
,

o th er th i n g s th at th e d eal er s to ck th e n ecess ary p ar ts an d acc es so r i es f or

,

r ep ai r s an d r epl acemen ts In th e rur al areas esp eci ally in th e West

.
, ,

D ur an t gr an ted f r an ch is es co veri n g a l arge terr i to ry to di str i but o r s w h o ,

th en pu t to geth er th ei r o w n dealer an d servi ce s y stem s In New Y o rk .

an d o th er l arge c i ti es h e set up h is o w n r etai l o ffic es to sell d i r ec t ly to

,

th e c o n su m er T h e m aj o r p ar t o f D ur an t s m ark eti n g h o wev er w as

’
.
, ,

h an dled th ro ugh th e co m p an y s br an ch o r d i str i c t o ffices T h ese wh o lesale

’
.

di stri buto r s arr an ged wi th th e deal er s fo r t h e n u mb er o f car s an d th e

p arts an d acces so ri es each wan ted saw to it th at each r ecei ved wh at h e ,

o rd er ed , an d m ai n tai n ed so m ew h at o f a g en er al o v er si g h t o v er th e

p erfo rm an ce o f th e diff er en t dealer s In bui ldi n g b o th h is m an ufacturi n g .

an d s ell i n g o rg an i z ati o n D ur an t r el i ed h eav i ly o n th e c arr i age co m p an y s

’

pl an t an d p er so n n el In m o vi n g fro m c arr i ages to au to m o b i les D ur an t

.
,

w as assur i n g th e co n ti n u ed u se o f m an y o f th e r eso urc es h e h ad dev elo p ed

in h is earl i er bu si n es s .

A s sal es gr ew in vo lu m e th e au to mo b i l e m ak er en co ur ag ed th e pro duc

,

ti o n o f p ar ts an d a cc ess o r i es in Fl i n t M an u fac tur i n g at B u i ck an d i n d eed

.
,

at n early all o f th e au to m o b i le c omp an i es o f th e da w s l argely an

y a ,

assemb l in o p er ati on S i rd r t ur th ry suppl i es fo r

y g o n o e . o ass e e n ece ssa

h is m an u facturi n g o p er ati o n s h e t ur n ed m an y o f th e co m p an i es h e h ad
,

h elp ed to o rg an i z e an d fi n an ce fr o m m ak i n g p ar ts fo r carr i ages to d o i n g

au to m o b i l e w o rk .D ur an t w en t ev en f arth er afi eld F o r ex am ple h e .
,

bro ugh t Ch arl es S Mo tt s Westo n M o tt Co m ak er s o f axl es a n d wh eel s

.
’
-
.
, ,
118 G E N ERA L MOT O RS

to Flint f r om U ti ca i n 1 905 an d A lf r ed Ch am pi on s spa rk plug com pan y

,
’

f rom Bos to n in 1 908 .

Dur an t s en ergy an d cr eati v e ab il i ty w er e r efl ected in Bui ck s o utput

’ ’
.

In 1 9 03 th e Bui ck Co p rod uced 1 6 car s an d in 1 904 3 1 ; b u t in 1 906

, .
,

it m ad e an d i n 1 08
9 In f o ur y ear s B u i ck b ecam e th e l ea din
, g ,

aut om ob i l e pr o du cer in t h e Un i ted S tates In 1908 t he fi r st y ear o f th e

7
,
.

Mo del T F o rd h ad b ecom e th e seco n d largest wi th

, v eh i cles an d
Cad i llac th e t h ird wi th A rth ur P o un d gi v es th e mo st cr edi t f or
,

Bui ck s impr ess i v e gr owt h to th e cr eati on of a sal es o rga ni zati on T h er e

’
.
“

,
”
er h aps wr i s h l M r h r Mr D ur g ’
G
’ “

p , t e t e en er a ot o s i st o i an w as an t s reat , .

8 ”
est co n tributi o n to th e tech n i qu es o f aut o m ob i l e a dmi ni st r ati o n .

gr eat er autom o ti v e en terprises h e l ef t , m o r e an d m o r e of th e admi n istr a

t i on of B u i ck in th e com p et en t h an ds of Ch arl es W N ash fo rm erly t h e .
,

P Ch ry sl er,
. soon wo rk ed o ut a f air ly stan dard ce n tr ali zed st ructur e wi th

f or th e a dmini st r ati on of th e r ap i dl y gr o win g B ui ck Co Th e sal es depart .

9

m en t wi th its br an ch es, war eh o uses, an d o th er di stri b u tin g f acili t i es Game

to carr y on th e wh o l esal e f un ctio n wh i ch in clud ed a dver ti si n g th e Bui ck

admin ist er ed th e expan di n g facto ri a A f t er Chry sl er t oo k th e h el m h e .

,

co n cer n ed h i m self l arg ely wi th o b taini n g th e be tt er cost an d o th er dat a

A ppar en tly h er h e n or o th er s at Bui ck ma de an y co n cert ed efi ort t o

n ei t

com p il e an d anal yze th e data on sal es ex pe nses an d ma rk et p erf o rm an ce .

Th e st ru ctur e th at N ash an d Ch rysl er buil t at Bui ck appea r s t o h a v e

h a v e b een simil ar to th at used at F o r d, S t ud ebak er, Fr an klin , an d oth er
r ap i dl y gr o wi n g au tom ob il e con cern s in th e y ear s j u st befo r e Wo rld
War
Th e Cr eatio n f M oo t or s G en eral
Dur an t s imm edi at e su ccess wi th B u i ck co m in g as it di d on top of h is
’

earli er experi en ce wi th th e car r iag e com pa n y f urth er con vi n ced hi m o f ,

th e p o ten t ia l m ark et f o r th e h o r sel ess ca rri ag e B y 1 9 08 h e w as al r ea dy .

,

Th e explo i tati o n o f such a

11
pr edi ctin g th e sal e of car s a y ea r .

m ark et d em an d ed a ma ssi v e expa nsi o n o f f a cil i ti es an d perso nn el f or the

maki n g an d sellin g o f aut o m ob il es Th e qui ck est an d pr oba bly th e .

ch ea pest w a t b t i th d d p ci ty w f r a n umb e r o f existin g

y o o a n e n ee e ca a as o

car m an uf a ctur er s to co m b in e E arly in th e sum m er o f 1 08 D ur nt

.
9 a , ,

Bri scoe a m an u
1 2
w i th Be n j ami n Br is co e b eg an to plan al on g thi s lin e
,
.
,

f actur er o f m etal stamp in g an d p arts h ad b a n o n e o f th e o ri ginal ,

THE D URA NT STRA TEG Y 11
9
b ack er s of B ui ck b ut h ad w ith draw n in 1 903 to fo rm th e M axwell
,
‘

Bri sco e Moto r Co A ft er ob tai n i n g s uppo rt fro m p artn er s in I P

. . .

Mo rgan 8: Co th e tw o m en t r i ed to get H en ry F o rd an d R an s om E
.
, .

O ld s n o w o f Reo to j o i n th em F o rd s d em an d for $3 mi lli o n in cas h

’
.
, ,

defeated th at sch em e Br i sco e an d D ur an t n ext pu sh ed fo rw ard a pl an to

.

co mb i n e th ei r o w n tw o fir m s T hi s pr op o sal came to an en d accordi n g .

,

to Br i sc o e wh en Fr an ci s L S tetson M o rg an s l eg al sp eci alis t b e cam e

’

, .
, ,

co n vi n ced th at D u ran t w as buyi n g up Bu i ck sto ck in an ti ci p ati on o f

th e m erger .

D ur an t th en d eci d ed to go ah ead w i th o u t Br i sco e an d th e Mo rgan

p art n er s Fr
. e d er i ck L S m i th an d h i s O ld s M o to r W
. o rk s h e f el t w o uld , ,

do j u st as w ell S o o n S ep tem b er 8 1 908 D ur an t f o rm ed th e G en er al

.
, , ,

Mo to r s C o m p an y a h o ldi n g co m p an y wh i ch by th e en d of th e y ear
, ,

o wn ed sto ck in B u i ck O ld s an d th e W F S tew art Co m p an y b o dym ak ers

, , . .
,

in Fli n t Wi th i n th e n ex t ei gh teen m o n th s l argely th r o ugh exch an gi n g

.
,

G e n er al M o to r s sto ck for th e sto ck o f th epurch ased c o m p an i es D ur an t ,

c ame al so to con tro l all o r si z abl e bl o ck s o f sto ck of C adi ll ac O akl an d , ,

Six o th er aut o m o b i l e c o m p ani es th r ee truck fir m s an d t en p art s an d

, ,

a ccesso ry c o m p ani es .

In c o m b i n i n g G en er al M o to r s D ur an t f o ll o w ed th e s am e str ategy o f
,

vo lum e pr o ducti on an d v er ti cal i n tegr ati on h e h ad u sed so effecti v ely

at Bu i ck an d th e c arr i ag e c o m p an y O n ly fo ur o f th e d o m esti c sub si d i ar i es .

an d th e o n e in C an ad a h ad m aj o r m ark eti n g an d d eal er o rg an i z at i o n s ;

an d n o m an k n ew b ett er th an D u r an t th at buy i n g an au to m o b i l e co m

p an y wi th o ut a m ark eti n g o rg an i zati on m ean t buyi n g li ttl e m o r e th an

a p aten t o r pl an t an d equi p m en t Cadi ll ac an d O ld s lik e Bu i ck h ad .
, ,

well-establi sh ed o rg an i zati o n s an d r epu tati o n s O akl an d o wn ed an d .

,

m an aged by Edw ard M Murp h y h ad o nl y j u st b een fo rm ed ; b u t Murp h y

.
, ,

o n e o f th e m o s t succ essf ul c arr i ag e m an uf act ur er s in Po n ti ac Mi ch i g an , ,

h ad l arg e m an uf actur i n g pl an ts an d a goo d sal es o rg an i z ati o n 13

Th e .

sam e w as tru e o f th e McL au h lin M ot o r C ar Co L t d i C an ad a

g n .
, .
, ,

an o th er pr o sp er o u s c arr i ag e m ak er T h ese fi ve an d th ei r exten si v e r eso urc es

.

fo rm ed th e b asi s o f G en er al M oto r s In purch asi n g th e b an krup t R ai n i er .

Co m p an y an d th e m o r e s o lv en t Wel ch an d Ew i n g co m p an i es D ur an t ,

w as buy in g pl an t an d e q ui p m en t wh i l e in o b t ai n i n g th e C artercar an d ,

E lm o r e com p ani es h e appear s t o h av e b o ugh t li ttl e m o r e th an p aten t s

,
.

Mo r e si gn ifi c an t th an such mi n o r car co m p an i es w er e th e fi rm s m ak i n g
b o di es en gi n es gear s tr an smi ssi o n system s l amp s r im s an d steeri n g
, , , , , ,

m ech ani sm s M an y o f th ese r em ai n ed o p er ati n g uni ts in th e G en er al

.

Mo to r s Co mp an y l o n g aft er th e l esser auto m ob i le sub si di ari es h ad dis

“
app ear ed D ur an t h ad purch ased th em to assur e h i m self o f suppli es
.

en o ugh to m eet t h e n eed s o f h is sev er a l as sem bly pl an ts .

1 20 G EN ERA L M O T O R S

In carryin g ou t exp an si o n by co m b in atio n an d v erti cal in tegr ati o n ,

D u r an t n ev er pr ep ar ed fo r n o r h ar dl y ev en c o n si d er ed po ssi bl e a t em
d cl i n e in d em an d an d so f ail ed to bu i ld up hi s cash r es erv es He
p o rar
y e .

m ade n o att em p t to co ll ect in f o r m ati o n ab o u t o u tpu t an d dem an d in

o rd er t o m ak e adj u stm en t s in pr o duct i o n th at mi gh t pr o v e n ecessar y .

N or w as h e in ter ested in buildi n g an o rg an i zati o n al stru ct ure to gi ve h im

inf o rm ati o n ab o u t an d co n tr o l o v er h is o pe r ati o n s o r t o h elp h im ach i ev e
po ten ti al eco n o mi es o f in tegr ati on an d co m b in ati o n .

A s a r esul t th e sli gh t bu s in ess r ec essi o n in 1 9 1 0 f o rc ed D ur an t o u t o f

,

?5
th e G en er al M o t o r s m an agem en t B etween 1 90 8 an d 1 9 1 0 in co m e fr om ,

sal es , an d m o st o f th ese cam e f r o m Bui ck h ad alm o s t do ubl ed f rom

, ,

o v er $29 m i lli o n t o $49 mi lli o n Bu t wh en s al es p arti cularly Bui ck s

’
.
, ,

dr o pped b elo w sch edul ed pr od ucti o n D ur an t tem po r arily l ack ed f u n ds

,

to p ay hi s supp li er s an d w o rki n g f o rc e M o r eo v er m u ch o f th e in v en to ry
.
,

t h at B u i ck an d o th er s h ad sto ck ed in an ti cip ati on o f co n tin ui n g r ap i d

exp an si o n w as b ec o m i n g o b so l ete be ca u se o f ch an ges in car d esi gn To .

m eet thi s em ergen cy D ur an t o b tain ed $ 1 5 m ill i o n f ro m a b ank i n g

,

sy n di cate ,i n cludin g Lee Hi ggin so n 8 : Co m p an y of B o ston I

, W , . .

S eli gm an 8: Co an d th e Cen tr al T ru st Co m p an y bo th of N ew Y o rk
.
, , .

In r etur n D ur an t h ad to tur n o v er th e m an agem en t o f th e co m p an y

,

to th e b an k er s an d o n N o v em b er 1 0 1 9 1 0 h e si gn ed a fi v e-y ear v o tin g

, , ,

t ru st agr eem en t Un d er thi s arr an gem en t D u r an t r em ain ed a V i c e Pr esi

.
-

den t an d D i r ect o r b u t h ad li ttl e say in t h e co m p an y s affai r s ’

.

T /ze S to rr o w R egi m e
Th e b an k er s co n cern ed wi th stea di er pr esen t pr ofi ts r ath er th an w i th
,

exp an di n g f u t ur e pr o sp ects p ai d m o r e att en ti o n t o in ter n al o rg ani zati on

,

th an to ex ter n al exp an si o n
16
Th ey m o ved o n tw o f r on ts fi r st th e co n
.
,

so li d ati o n o f m an y su b si di ar i es an d th en an att em p t to set up a gen

17
er al O ffic e f o r th ei r a dmi n i str ati o n .In co n so li d ati on th e O bj ect w as ,

to co n cen t r a te pr o d u cti o n in a r elati v ely f ew l arg e uni ts Th ey i n t egr at ed .

so m e o f th e sm all er car m ak i n c ti v i ti es w i th th e l ar ger o n es co m b in ed

g a ,

th e th r ee tr u ck co n cer n s i n to th e G en er al M o to r s T ru ck Co m p an y a n d ,

u n i ted sev er al o f th e p ar ts a n d acc esso ry pl an t s P r o d u cti o n o f en gi n es

.
,

fo r ex am pl e w as br o ugh t to geth er in th e l arge an d hi ghl y spe ci ali zed

,

pl an t o f th e N o r th w ay M o to r 8: M an uf actur in g Co A t th e sam e ti me .
,

G en er a l M o to r s Exp o r t Co m p an y w as set up to h an dl e sales abr o ad .

I n attem p ti n g to d ev el o p so m e so r t o f o v er all a dmi n i str ati v e struct u re

-
,

th e b an k i n g gr o u p an d th ei r sp o k esm an Iam es I S to rro w n ew Ch ai rm an

,
.
,

o f t h e F i n a n ce C o mm i ttee h a d n o i n ten ti o n o f pl aci n g all o f G en eral

,

Mo to r s a ct i vi ti es w i th i n o n e cen tr ali zed o rgan i zati o n But it di d w an t

’
.
THE D URA N T STRA TEG Y 1 21

m o r e co o p er ati o n b etween an d m o r e c o n tr o l o v er th e au to n o m o u s su b
sidiaries A s a fi r st step
. S to rro w h ad th e g en er al o ffices m o v ed f ro m
,

New Y o rk to D etro i t T h en h e bro ugh t N a sh f ro m Fl i n t to D etr o it t o

.

b e th e co rp o r ati o n s Pr esi d en t T o d eter m i n e br o ad p o l i cy an d to m ak e

’
.

a b egi n n i n g o f co o rd i n ati o n an d appr ai sal h e fo r m ed a B o ard o f M an ag er s

,

m ad e up o f th e h ead s o f th e m aj o r sub si d i ari es a b o ard th at m et r eg u ,

18
larly w i th th e P r esi den t an d h i m self .

S to rro w n ex t set up th r ee p erm an en t o ffices at gen er a l h ead q u ar ter s to

assi st in th e o v er -all ad m i n i str ati o n : a n ew purch asi n g o ffi ce w as t o

ach i ev e so m e o f th e ec o n o m i es th r o ugh buy i n g in l arg e v o lu m e f o r all

\

s ub si di ari es ; an acco u n ti n g o ffice w as to b egi n at o n c e to S tan d ardi ze

a cc o u n ti n g pr o c edur es th r o ugh o u t th e co rp o r ati o n s sub si d i ar i es in o rd er
’

th at accur ate i n fo rm ati o n o n co sts pr o fi ts an d l o ss m igh t b e d ev el o p ed ;

, ,

an d a n ew pr o ducti o n o ffi c e Wh i l e o th er h o ld i n g c o m p an i es l i k e Un i t ed
.
,

S tates S teel c am e to h av e S i m i l ar acco u n ti n g an d pur ch asi n g o ffi ces

, ,

S to ro w s th i rd offi ce
r
’
— an en gi n eer i n g o r pro ducti o n u n i t w as m o r e
“
—

o f an i n n o v ati on .

T o h ead th i s d ep ar tm en t th e Ch ai rm an o f th e F i n an c e C o mm i ttee
,

br o ugh t to D etro i t T r acy L yo n a sen i o r ex ecuti ve in Westi n gh o u se s

,
’

M an uf acturi n g D ep ar tm en t as D i r ecto r o f Pr o ducti o n to i m pro ve th e

,

qu al i ty o f th e m ateri al s th e stan d ard o f wo rk m an sh ip , an d th e d esi gn

,
” 19
o f o u r m o to r c ar s . T h e D i r ecto r w as, acc o rd i n g to th e A n n u al R ep o r t
of 1 1 1 b g i v g r l f f m c h i c l n g i n eer s g l i
“
.

9 , to e en a en e a s t af o e an a e a so ne ,

en gi n e en g i n eer s desi gn er s, pro ducti o n exp er ts an d o th er exp er ts n o t

, ,

attach ed to an p r ti cul r f c t ry bu t w h s dv i c d s rv i c s w uld

y a a a o , o e a e a n e e o

alw ay s b e av ai l abl e, to adv i se w i th an d assi st th e n ec essar i ly m o r e li m i ted

”
staff o f each i n d i v i du al f ac to ry A s p ar t o f th i s staff o rg an i z ati o n
.
,

S torro w h ad th e A r th ur D L i ttle In c, o f C am br i dge set up l arg e testi n g

.
,

l ab o r ato ri es in D etr o it .

T o pr o vi d e for m o r e c er tai n c o mm u n i c ati o n an d c o o rd i n ati o n b etw een

th e m an y sub si d i ar i es S to rro w an d N ash t o o k step s to o rgan i ze fo r m al
,

i n terdi v i sio n al co mm i ttees or b o ard s In May, 1 9 1 3, Nash br o ugh t to geth er

.

th e di ff er en t P urc h asi n g A gen ts in o rd er t o g i v e th em an o pp o r tu n i ty

“

to b ec o m e b etter acqu ai n ted an d to d i scu ss t o p i c s o f c o mm on i n ter est

” 20
r el atin g to th ei r br an ch o f wo rk
,
T h e m eeti n g s s o o n b ec am e r egul ar
.

m on th ly aff ai r s wh er e pur ch asi n g pr o cedur es w er e o u tl i n ed fo r all t h e

s ub si di ari es an d wh er e n o tes w er e co m p ar ed o n th e pri ce an d p erfo rm
an c e o f m an y ar ti cl es T h i s b o ard h ad a ch ai rm an an d secr etary bu t n o
.

p erm an en t staff alth o ugh th e secretary di d co m p i le a goo d b it o f i n fo rm a

,

ti o n o n co mm o n ly u sed i tem s In sp i te of th e fact th at th e b o ard b egan

.

wo rk i n g up gen er al co n tr acts fo r purch ases o f b asi c item s by th e co m

 1 22 GENERA L M O TORS

p an y wh o l e r el ati vely few such co n tracts h ad b een agr eed up o n by

as a ,

1 9 1 5 N ash m ay po ssi bly h av e i n sti t u ted S im i l ar b o ard s fo r o th er f u n cti o n s

.
,

such a s en gi n eer i n g an d sal es .

N ei th er th e i n terdi vi si o n al gr o up s lik e th e P urch asi n g B oard or t h e

B o ard o f M an agers n o r th e m o r e p erm an en t u n i ts in th e gen er al O m ce

w ere succ essf ul in pr o vi di n g even a m o di cum of o v er all admi n i strati ve -

co n tro l T h e b o ard s r em ai n ed li ttl e m o r e th an pl aces to exch an ge info r

.

m ati o n H en ry G P earso n wr i ti n g o n th e b asi s o f th e S to rrow co rr e

. .
,

s o n den ce ugg s t t h d i fficul ti t h t w r i v lv d i i ti t u ti g

p s e s e, es a e e n o e n n s n

c en trali zed acco u n tin g an d describ es th e str on g r esi stan ce p u t up by th e

,

carm ak i n
21 ”
g u ni t s o n th i s i n v a si o n
“
o f t h e i r i n d e p e n d en c e T h e c e n t r al .

P ur ch asi n g O ffi ce n ev er b ecam e m o r e th an an i n f o rm ati o n cen ter an d , ,

af ter t w o y ear s as D i r ecto r o f Pr o ducti on T r a cy L y o n r etur n ed East

, ,

a br o k en b u t w i ser m an acc o rd in g t o D av i d F E dw ard s th en on e o f

, .
,
”
N ash s assi stan ts Ch ry sl er at B ui ck H en ry L el an d at C a di ll ac an d o th er
’
.
, ,

m an ag er s w er e n o t th e typ e o f m en to acc ep t th e suggesti o n s o r ev en ,

o rd er s f r o m th e g en er al o ffi c e p art i c u l arly w h en as in t h e c ase o f C h ry sl er

, ,

an d L el an d th ei r o pe r ati on s acco u n ted f o r n early all o f t h e c o m p an y s

’

pro fi ts Wh en S to rro w an d N ash l eft G en er al Mo to r s in 1 9 1 5 th e gen er al

.
,

o ffi c e w as d esp i te th ei r eff o r ts li ttl e b ett er equ i pp ed t o a dmi ni ster th e

, , ,

r eso urces o f a h uge i n du stri al en terpr i se th an that of t h e o rdin ary h o ldi n g

co m p an y o f th e da I t d i d ll c t e th e f u n d s for cap i tal expen di t ur es
y a o a
.

an d d i str i bu te th e pr o fi ts m ad e by it s sub si d i ar i es b u t th er e is li ttle ,

ev i d en ce th at ev en th i s w as d o n e in a v ery sy stem ati c an d r ati o n al w ay .

D u ra n t s R etu r nd Ren ew ed Exp an sio n a n d I n tegratio n

’
an

S to rro w an d N ash l eft b ecau se D u r an t h ad co m e b ack T h e s to ry o f .

th e fo u n d er s r et ur n is a co m pli cated o n e th at n eed n o t b e r epeated

’

h er e 23
. Wh at is n ecessary fo r th i s acco un t is to expl ai n th at befo re th e ,

v o ti n g tru st agr eem en t with th e B o sto n an d New Y o rk b ank ers h ad

exp i re d in No v em b er 1 91 5 D ur an t h ad acqui r ed a m aj o r i n tegr ated
, , ,

vo lum e pro ducti o n au to m o b i le co mp an y in Ch evr o l et as w ell as sub stan

-

ti al fi n an ci al all i es in th e du P o n t s o f Wi l mi n g to n He u sed b o th to .

o b tai n f u ll c o n tr o l o f G en er al M o to r s In A ugu st 1 1 6 af ter th e r esi g n a

9 .
, ,

ti o n o f S to rro w an d th en Na sh D ur an t b ec am e Pr esi d en t an d Pi err e S

,
.

du P o n t C h ai rm an o f th e B o ard S i n c e Pi err e du Po n t w as i n v o lved so

, .

com pletely in gui di n g th e du Pon t Co mp an y th r o ugh its war time exp an

si o n D u r an t w a s l eft w h o lly o n h is o w n at G en er al M o to r s
, .

A ft er h is r etur n struc tur e w as f o rgo tten f o r str ategy D ur an t carr i ed

,
.

o n ev en m o r e i n ten si v ely h is b asi c o r i gi n al p o li cy o f pr o duc i n g m o d er ately

pri ced car s fo r a v o lum e m ark et He r em ai n ed co n vi n ced o f th e en o rm o u s

.

ex i sti n g d em an d f o r th e au to m o b i l e In f act i n cr eased v o l um e b ecam e

.
, ,
T HE D URA NT STRA TE G Y 1 23

fo r D ur an t, an en d in i tself, m o r e cru ci al ev en th an p ro fi ts T h er efo r e

211
.

h e co n cen trated o n exp an d i n g o u tpu t of exi sti n g carm ak in g u n i ts an d o n

pro vi di n g th eir pl an ts wi th t h e n ecessary p art s, equi p m en t, an d m a
t erials .O f th e s co r e o f co m p an i es h e purch as ed b etw een 1 9 1 6 an d
1 920, o n ly tw o actu a lly assem bl ed c ar s an d n eith er o f th ese app ear s t o

h ave h ad a di stri bu ti n g o r a d eal er o rg an i z ati o n o f an y S i ze T h e r est .

m an uf actur ed co m p o n en ts, acc ess o r i es , or m ater i al s A s b efo r e, D ur an t .

p ai d li ttl e atten ti o n to dev el o p i n g a li n e o f c ar s to m eet m o re eff ecti vely

th e di ff er en t n eed s an d d em an d s o f th e ev er—gr o w i n g au to m o b i l e m ark et .

He gave ev en l ess th o ugh t to eff ec ti n g an o ver-all m an agem en t structure

or to bui ld i n g a gen er al o ffi c e so n ec essary fo r co o rd i n ati n g an d s up er

vi sin g th e acti viti es of h is r ap i dly exp an di n g i n du stri al em p i r e D ur an t .

dr o pp ed S torro w s B o ard s o f M an ager s an d Pur ch asi n g A gen ts as w ell

’

as th e g en er al purch asi n g o m ce an d m o v ed h is o w n o ffi ce an d th e

,

com p an y s s m all fi n an ci al u n its b ack to New Y o rk Ci ty His T r eas ur er

’ 25
.

an d Co m p tr o ll er m ad e ev en l ess eff o rt to S tan d ard i z e acco u n ti n g a n d

fi n an ci al pr o c edur es th an di d th o s e of S to rro w Mo st o f th e l eg al w o rk .

w as gi ven to an o u tsi d e fi rm alth o ugh th e c o rp o r ati on d i d con ti n u e to

,
26
h ave a p aten t u n i t From 1 9 1 5 u n til 1 9 1 8 th e gen eral o ffice at G en er al
.
,

M o to r s in cluded li ttl e m o r e th an D ur an t an d tw o or th r ee p er so n al
assi stan ts .

D ur an t w as able to m ak e a s tart o n hi s gr eat exp an si o n pr o gr am

b efo r e th e i n terrup ti o n of A meri ca s en tr an ce i n to Wo rld War I In th e
’
.

spr i n g o f 1 1 6 aft er h e h ad r eg ai n ed c o n tr o l o f G en er al M o t o r s bu t
9 , ,

b efo r e N ash an d S torro w h ad r esi gn ed D ur an t o rgan i z ed a h o ldi n g ,

co mp an y Un i ted M o to r s Co rp o r ati on — to buy o u t s ever al l eadi n g p art s

an d acc esso r i es c o m p an i es i n clud i n g H y att R o ll er B ear i n g Co mp an y an d
,

N ew D ep ar ture M an uf actur i n g Co b oth m aj o r pr o ducer s o f b all b ear i n g s

.
, ,

R em y El ec tr i c al Co mp an y an d th e D ayt o n En gi n eer i n g L ab o r ato r i es

,

Co m p an y k n o wn as D elco b o th mak er s o f star ti n g li gh ti n g i gn iti o n

, , , , ,

27
an d o th er el ectr i c al equ i p m en t an d th e P erlrn an R im Co rpo r ati on
,
.

No t o n ly di d th ese pur ch ases h elp assur e a steadi er v o lum e of ess en ti al

suppli es f r o m d i ff er en t so urc es b u t th ey al so br o ugh t a n u m b er o f abl e
,

m en i n to th e G en er al Mo to r s o rb i t O n e o f th ese A lf r ed P S l o an Ir.
, .
,
.
,

o w n er an d man ag er o f H y att R o ll er B ear i n g D ur an t m ade Pr esi den t ,

o f th e n ew U ni ted M o to r s C o rp o r ati o n .

28
O u r en try i n to th e w ar t em p o r ar i ly d el ay ed D ur an t s pl an s Co n ti n u ed
’
.

au to m o b i l e pr o ducti on w as m en ac ed by m i li tary o rd er s pl an t c o n v er si o n s , ,

pri o ri ti es an d th e di fficul ty o f o b tai n i n g m ater i al s Excess c ap aci ty th r eat

, .

en ed , f o r th e i n ter n al -c o m bu sti on en gin e h ad n o t yet b eco m e a v i tal

i n strum en t o f w ar S o th e G en er al Moto r s Pr esi d en t turn ed to d ev el o p i n g
.

n ew pr o ducts L i k e H en ry F o rd h e b eg an to m an uf act ur e t r acto r s T h e

. .
,
1 24 G EN ERA L M O T O R S

s udden call fo r m o r e fo o d h ad gr eatly in cr eased th e dem an d fo r thi s

r el ati v ely n ew agr i cul tur al impl em en t Th us tr acto r pro ducti o n co ul d .

co n ti n u e if au to m o b i l e bui ldin g w as curt ail ed an d its m an uf act ur e co uld ,

k eep b u sy so m e o f th e assem bly pl an ts an d po ssibly deal er s in rur al , ,

ar eas F o r simi l ar r easo n s D ur an t d eci d ed t o buy th e G u rdi an F ri erato r

.
, a g
Co rpo r ati o n A s o n e o f hi s assi stan ts l ater testifi ed r efr i ger ato r s co ul d
.
,

b e m ark eted th ro ugh th e car di vi si o n s if aut o m o b il e pr o duct i o n w as

29 ”
S to pp ed an d so k eep h is dealer s ali ve A f ter th e w ar bo th th e tr act o r
“

, .
,

an d r ef r i g er ato r o p er ati o n s w er e r etai n ed th e fi r st w i th D ur an t s en th u

’

siastic suppo rt th e seco n d

, r ath er be cau se o f urgin g by so m e o f h is
,

co ll ea gu es .

Imm edi ately after th e A rmi sti ce D ur an t fi n al ly br o ugh t hi s pr o gr am ,

i n to f ull s wi n g N o t o n ly w as th er e an o bvi o u s po stw ar d em an d for

.

a u t o m o b il es b u t al so th e du Po n t s an d th e du Po n t Co m p an y i tself h ad
,

pro vi d ed cap ital by i n vesti n g o ver $5 0 milli o n o f th eir pro fi ts in G en er al

Mo to r s? Th e year 1 9 1 9 w as th en o n e o f m assi ve exp an si o n O lder
“
, , .

pl an ts wer e enl arged an d n ew o n es p art i cu l ar ly assembly pl an ts wer e

, , ,

set up in di ff er en t p art s o f th e c o un t ry A t th e sam e tim e D ur an t pur .

,

ch ased co n tr o l o r a si zabl e blo ck o f S to ck in m an y p ar ts an d equi p m en t

c o mp ani es Parti cul arly im p o rtan t w as th e l arge i n v estmen t h e made
.

in th e F i sh er B o dy th e T W War n er (gear s) an d th e Buff al o M etal

, . .
,
31
G o o ds (br ak es) co m p ani es In th e ear ly m o n th s of 1 9 1 9 h e h ad
.
,

studi es m ad e o f h is l o n g ter m n eed s an d av ai l abl e suppli es in alum in um

-
,

l eath er pl ate gl ass ti r es an d p etr o l eum He al so l oo k ed i n to th e avai l

, ,
32
, .

ab ili t y o f wh eel s S to r ag e b att er i es m agn eto s g ear s m ach i n e t oo l s an d

, , , , ,

S i m i l ar i tem s A f ter i n v esti g ati o n

. h e d eci d ed to Si gn a con tr act w i th
,

th e A lum i n um C o m p an y o f A m er i ca t o assur e a c o n ti n u i n g supply o f

alum i n u m He al so m ad e a sub st an ti al h alf mi lli o n —d o ll ar in v estmen t in

.
-

th e G oo dy ear T ir e 8: R u bb er Co m p an y an d ev en sti ll l arger o n es in th e

G en er al L eath er Co m p an y D o eh l er D ie Castin g Co m p an y an d th e
, ,

Br w Li p e Ch ap i n Co in o rder to b e c ert ai n o f hi s tir e l eath er casti n gs

o n - -
.
, , , ,

an d gear suppli es O th er studi es w er e b egu n o n th e av ail ab i li ty o f l abo r

. .

D ur an t al so sp en t ti m e an d a g oo d sum o f m o n ey t o d ev el o p h o u si n g
f aci li ti es at Fli n t D etr o i t an d el sewh er e
, , .

In th e sam e y ear to o G en er al M o to r s A cc ep tan c e Co rpo r ati o n w as

, ,

fo r m ed to assi st d ea l er s in th e fi n an ci n g o f G en er al Mo to r s pr od uct s an d
t o h elp cu sto m er s fi n an ce r etai l sal es T o R ask o b r ath er th an D ur an t .
, ,

goe s th e cr edi t o f d evi si n g thi s b asi c i n n o v ati o n th at h elpe d m ak e p o ssibl e

th e m ass m ark eti n g o f co n sum er dur abl es by m ean s o f i n st al lm en t o r

ca rry i n g p aym en ts 33
.

Th r o ugh o u t th ese y ea r s o f exp an si on D ur an t co n ti n u ed to Sh o w al m o st ,

n o co n c er n fo r o rg an i zati o n struct ur e I n th e summ er o f 1 1

9 7 h e did .
,
T HE D URA NT STR A TEG Y 1 25

r
t an sfo rm G en er al Mo to r s fro m a h o ldi n g to an o p er ati n g co m p an y by
turn i n g th e vari o u s car accesso ry an d p arts sub si di ari es i n to d i vi si o n s
, , .

Th e n ext y ear Ch evr o l et Un i ted M o to r s an d G en er al M o to r s o f C an ad a

, , ,
?4
wer e br o ugh t i n to G en er al M o to r s an d b ec am e o p er atin g d i vi sion s
T h is w as h o w ever v ery l i ttle m o re th an a l eg al ch an ge G en er al Mo to r s
, ,
.

r em ai n ed adm i n i str ati vely a lo o sely k n it federati o n of m an y o p er ati n g .

en terpr is es .

T h e r el ati o n s b etween o p er ati n g di v i si o n s an d b etw een th e d i vi si on s

an d th e g en er al o ffice b ec am e m o r e h ap h az ard l ess c o o rd i n ated an d l ess , ,

s up ervi sed th an th ey h ad b een u n der S to rro w an d N ash M aj o r decisioh s .

,

such a s pl an t exp an si o n c ap i tal i n vestm en t o u tpu t an d pr i ce wer e

, , , ,

deci ded by D uran t an d th e h eads o f th e o p er ati n g di vi si on s in o cc asi o n al

co n fer en ces or in i n di vi du al talk s S o m eti m es th ey w er e m ade by D ur an t
.

with n o co n sultati o n at o th er ti m es by th e d i vi si o n m an ager after o n ly

,

35
th e m o st c asu al r ef er en c e o r c o n t ac t w ith D ur an t s o ffi ce Furth ermo re ’
.
,

the o rg an i z ati on al statu s o f th e m an y o p er ati n g u n i ts v ar i ed S o m e acc es .

s o ry an d p arts di v i si o n s were in th e Un i ted Mo to r s Co rp o r ation ; o th er s

s tayed wi th Ch evro let o r Bu i ck ; an d Sti ll o th er s li k e No rth way an d ,

th e C h am p i o n Ign i ti o n Co m p an y r em ai n ed i n dep en d en t di vi si o n s in
,

36
th e l arger G en er al M o to r s C o rp o r ati o n A g ai n s o m e w er e i n tegr ated
.
,

en terpr i ses o th er s j u st c arr i ed o n a si n gl e ec o n o m i c f u n cti on

, .

D u P o n t Co n trib u tio n s D u ra n t s O rga n izatio n

’
to

A l th o ugh th e l ack o f an y eff ec ti v e o v er-all adm i n i str ati v e structur e

clear li n es o f auth o r ity an d comm u n i c ati o n an d accur ate i n fo rm ati o n
ab o u t th e c o rp o r ati o n s o p er ati o n s — f ai l ed to d i sturb D ur an t, it d i d
’

tr o uble th e du Po n ts T h ey p ai d so m e atten ti o n to en l arg i n g th e g en er al

.

staff an d a l so app o i n ted th e fi r st g en er al o ffi c er s, in add iti o n to D ur an t,

wh o se co n cer n sh o u ld b e fo r th e co rp o r ati o n as a wh o l e r ath er th an for

an y o n e o f its p ar ts L i k e th e b an k er s b efo r e th em, th e du Po n t s w er e
.

i n terested in pro tecti n g a si zabl e i n vestm en t Even m o r e th an th e fi n an .

ci er s wer e th ey aware o f th e v alu e o f defi n i n g cl early th e o rg an i zati on al

structur e .

T h e du Po n ts m ad e th ei r i n iti al m o ve at a B o ard m eeti n g in F ebru ary ,

1 1 8 a f ew w eek s after th e du Po n t C o m p an y h ad m ad e its fi r st m aj o r

9 , ,

i n vestm en t in G en eral Mo to r s T h ey th en d efi n ed th e m ak e-u p an d

37
.

duti es o f th e to p co mm i ttees in m uch th e sam e w ay th at Pi err e h ad d o n e

earl i er fo r th ei r o w n c o m p an y A n Ex ecu ti v e Co mm i ttee li k e S to rro w s
’
.
,

B o ard o f M an ager s con si sted o f th e h eads o f m aj o r di vi si o n s Bu t u n li ke

, .

th e o ld er b o ard it w as sp ec i fi cally g i v en f ull au th o r i ty an d r esp o n si b i l i ty

,

fo r o ver all o p er ati n g p o l i ci es an d p erfo rm an c e T h e C o m m i ttee d i ff er ed

-
.
‘

fro m th at o f th e du Po n t Co mp an y in 1 9 1 8 b ec au se its m em b er s h eaded

1 26 G E N ERA L M O TORS

m ul tidep art men tal pr oduct di visi ons r ath er th an sin gl e-fu n cti on d epart
m en ts .

Th e F in an c e C ommi tt ee, co ns ist in g o f Ir en ee an d H en ry F du Po n t, .

I. A m o ry H as k e ll D ur an t , an
, d w i th R as k o b as it s C h a ir m an , w as t o

f o rm ulate g en er al fi nan ci al po li ci es s uch as th e am o unt o f di vi den ds to

be d eclar ed an d t o mak e plan s f or th e i ssu an ce an d sal e of secur i ti es an d
,

so f o rth Th e F inan ce Comm ittee w o uld al so set th e sal ari es o f t op

.

ex ecu ti v es appr o v e th e an n u al an d semi an n ual

, estimat es f or ca p ital

expen di tur es , an d au th o r i ze th e r egul ar budgets o r plan s un d er w h i ch

“

th e d ep artm en ts m ay a ct wi th o u t f urth er r ef er en ce t o th e F in an ce Co m
” 38
m ittee . Th e Commi tt ee r equ i r ed d etail ed acco un ts o f appr o pri ati ons
esti m ates o nl y o n th o se i t em s th at co m mi tt ed th e co rpo r ati o n t o an

ex pe n se o f m o r e th an

Next th e du Po n ts in cr eased th e n umbe r o f se n i o r o fficer s in th e

,

gen er al off i ce R ask ob r esi gn ed as T r easu r er of th e du Po n t Co mp an y

.

t o d evo t e fu ll ti m e t o G en er al M o to r s fi n an ces A t th e sam e ti me,

’
.

I. A m o ry H as k e ll ,
w h o h a d n o t r ea l ly b een ac ti v e in d u P on t afi ai rs
sin ce 1 0 b e gan t o cl r n ti on t o th e au tom ob il e co m p an y s
’

9 7 , p y
a o se a tt e

b us in ess He an d D ur ant w er e th e o nl y m en o n both th e F in an ce an d

.

Ex ecu ti v e Com mi tt ees 39

Th e co m in g of th ese tw o g en er al o fficer s to
.

G en er al M oto r s h o w ev er f ail ed to mak e an appr eci abl e difi er en ce in

, ,

th e co rpo r ati o n s b asi c po l i ci es R ask ob , co n c en tr atin g o n fin an ces w as

’
.
,

as op timi sti c abo u t th e f u t ur e o f th e au to m ob il e as w as D ur an t an d,

lik e h im w as m u ch m or e con cern ed wi th exp an si o n th an w ith sys

,

t em ati c o rg an i zati on H ask ell wh o se duti es w er e vagu e an d w h o w as

.
,

n o w an eld er l y m an f ai l ed t o push f or o rg an i za ti o n al impr o v em en t s

,
.

D ur an t h im self str o n gly sup p o rt ed by R ask o b an d H ask ell di d t ak e o n e

, ,

cri ti cal step t o enl arg e th e gen er al o ffice by appo in tin g Ch ry sl er to act
as g en er al m an ager in ch ar g e o f th e car di vi si on s
40
H o wever m uch to
.
,

Chr ysl er s an n o y an ce D ur an t co n tin u ed t o m ak e n ear ly all th e im po rtan t

’

d eci si on s co n c er nin g th ese di vi si on s By th e en d of 1 9 1 9 Chry sl er, co m

.
,

p l etel
y f ru s tr at ed ,
qu i t t h e c o rp o r a ti o n in an g er .

In addi ti on to cr eatin g Ex ecu ti v e an d F i n an ce Co m mi ttees an d to

appo in tin g tw o g en er al o ffi c er s th e du P o n ts l ik e th e b an k er s b ef o r e th em
, , ,

h ad h o ped to im pr o v e o v er-all a dmi ni st r ati o n by enl argi n g th e S taff

a cti vi ti es at g en er al h eadqu ar t er s D ur in g 1 9 1 9 th ey m ad e th eir fi r st
.

att em p ts t o b ett er th e fi n an c i al an d a cco un ti n g pr o c edur es by addi n g

r o n n el to th e g en er al fi n an ci al o ffic es an d l ate in th e y ear by pl ac in g

p e s , ,

o n e o f th ei r y o u n g er ex ecu ti v es, h L P r t i D ur
I o n ee a t, as as s st an t to an t

an d as ch ai r m an o f a n ew A ppr o pri ati o n s Co m mi tt ee

41
.

Th e du Po n t Co m p an y al so m ad e so m e o f its o w n S taf f av ail abl e t o

D u r an t Ear ly in 1 9 1 9 th e G en er al M o to r s Pr es i d en t wi shin g to in v es
.
, ,
THE D URA NT STRA TEG Y 1 27

tigate s everal p arts an d accesso ry plan ts th at h e w as co n si deri n g buyi n g

an d n eed i n g i n fo r m ati o n o n th e a v ai l ab i l i ty o f m ater i al s an d f u el s ar ,

ran ged with th e du Po n t C o mp an y to m ak e th e n ecessary

Th e r es ul t w as th e fo rm ati on o f a sm all Mo to r D evel o p m en t S ecti o n in
du Po n t s D evelo p m en t D ep artm en t A S it w as pl ac ed u n der P r att s
’ ’
.

co n tro l it gave th at executi ve h is i n iti al co n tact with D ur an t S im i l ar

,
.

arr an gem en ts fo r adv i ce an d Study w er e m ad e w i th th e du Po n t Per s o n n el

43
D ep ar tm en t h eaded by I E S qu i r es
,
F i n ally th e s erv i ces o f th e l arge
. . .
,

du Po n t E n gi n eer i n g C o m p an y wh i ch h ad bu i lt th e gr eat w ar pl an t s
, ,

were n o w m ade av ai l able to G en er al Mo to r s No n e too sati sfi ed with th i s .

arr an g em en t D ur an t t r i ed in t h e s pr i n g o f 1 9 1 9 to get Pr att an d S qu i r es

,
44
to c o m e to N ew Y o rk an d h an dl e th e G en er al M o to r s w o rk th er e The .

f5
du Po n ts th em selv es l o o k ed o n it o n ly as a tem p o r ary p rop o sitio n
‘

, ,

Bu t n ei th er S i d e to o k step s to ch an ge th e si t u ati o n .

No r di d an yo n e fro m du Po n t s uc ceed in o b tai n i n g b etter adm in is

t rativ e co n tr o l o v er fi n an c es P r att d escr i b ed th e S i t u ati o n sh o r tly after h e
.

arr i v ed to h elp i m pr o v e pr o c edur es : No o n e k n ew j u st h o w th e mon ey

“

h ad b een appr o pr i ated an d th er e w as n o co n t r o l o f h o w m uch m o n ey w as

,
” 46
b ei n g sp en t D ur an t w as l argely to bl ame Pr att m ai n tai n ed Th e
.
, .

Ex ecu ti ve Co mm i ttee co n sis ted o f D i vi si o n M an ag er s an d

Wh en h em h ad a pro j ect, w h y h e w o u ld get th e v o te o f h is fello w

on e o f t

m emb ers ; if th ey w o u ld vo te fo r h is pro j ect, h e w o u ld v o te f o r th eirs .

It w as sort o f a h o rse tradin g In additio n to th at, if th ey didn t get en ou gh

’
.

mon ey, Mr Du ran t, w h en v isitin g th e plan t, wo u ld tell th em to go on an d

‘

sp en d w h at m o n ey th ey n eed ed w ith o u t an r e rd f it b i m d
y co o e n
g a e .

A l th o ugh P r att s c o mm i ttee w as to br i n g s o me k i n d o f o rder i n to th e

’

appr o pr i ati o n s pr o c edur es h e r ep o r ted th at dur i n g Mr D ur an t s r eg i m e

“ ’

, .

We wer e n ever able to get th e th i n g u n d er c o n tro l .

T h e o n e i m po r tan t add i ti o n to th e staff b efo r e 1 92 1 w as th e i n gen i o u s

C h arl es P Ketter i n g th e i n v en to r o f th e sel f-star ter an d o th er au to m o ti v e
.
,

i n n o v ati o n s wh o m D ur an t an d Pi err e da Po n t pr ev ai l ed up o n to d evo te

,

f ull t i m e to tech n i c al r esearch 47

T o o b tai n Ketter i n g s servi ces th e co r
.
’

oratio n agr eed to t ak e o v er h is bu si n ess i n ter ests in D ay to n i n clud i n g

p
th e D el co L i gh t C o m p an y f a rm l i gh ti n g pl an ts an d th e D ay to n Wr i gh t
—
( )
A i rpl an e C Om p an y .

T h e du Po n ts w ere th er efo r e r ath er m o r e successful th an S to rro w in

, ,

pro vi di n g so m e so rt o f o rgan i z ati o n at th e gen er al o ffice to co o rdi n ate ,

appr ai se an d sup erv i se th e d i v i si o n s Bu t th ey f ai l ed to m ak e G en er al

, .

Mo to rs i n to m o r e th an an exp an d i n g agglo m er atio n o f diff eren t co m

p an i cs m ak i n g au to m o b i les p ar ts acc esso ri es t ruck s t r acto r s an d even
, , , , ,

refriger ato r s T h i s fai lur e came l argely b ecau se n o o n e co n n ected with

.
1 28 G EN ERA L M O TO RS

th e da Po n ts h ad th e ti m e o r th e f acts o r th e i mm edi ate i n ter est n ecessary

to an alyze G en er al M o to r s n eed s an d pr o bl em s T h e acti v e du Pon t
’
.

ex ec u ti v es w er e f ully i n v o lv ed w i th th e p o stw ar ch an ges in th ei r o w n

co m p an y Pi err e after l eavi n g th e du Po n t presi den cy co n si dered h im self

.
, ,

in sem i r eti r em en t an d t ur n ed to en j o y i n g a l ess str en u o u s lif e at Lo n g

wo o d h is Pen n sylv an i a estate R ask o b an i n du str i al im p eri al i st h ad
, .
, ,

sh o w n alm o st as li ttl e c o n c er n fo r struct ure as D u ran t B efo r e th e en d .

o f 1 20 th e l ack o f a clearly d efi n ed a d m i n i str at i v e S t ruct ure w as t o b e

9 ,

pro v ed di sast ro u s T h e cri si s o f 1 920 pr ecip i tated by th e sudden imp act

.
,

o f th e p o stw ar r ec essi o n o n th e co rp o r ati o n n o t o n ly led t o D ur an t s

’

r eti rem en t b u t m ad e p o ssi ble th e creati on o f an o ver-all admi n i strati ve

stru ctur e at G en er al Mo to r s .

Th e Crisis o f 1 9 20

T h e fi r st m o n th s o f
wer e S ti ll o n es o f pro sp er i ty th e tail en d o f
1 92 0 —

th e w ar-en g en d er ed b o o m B o th d em an d an d pr i ces w er e sti ll r i si n g an d

.
,

n ew a u to m o b i l es co n ti n u ed to b e in S h o r t supply T h e d i v i si o n m an ager s .
,

app ar en t ly an x i o u s o v er sh o r tages o f m ater i als i n fl ati o n an d a gr o w i n g , ,

m ark et co n ti n u ed to exp an d th ei r pl an t m ach i n ery an d o th er c ap it al

, , ,

e q u i p m en t In 1 920 th e co rp o r ati o n sp en t $79 mi ll i on o n pl an t an d

.
,

pro p erti es T h e m an ager s al so sto ck ed up o n i n ven to ry to assure th em

48
.
,

selv es o f su pp li es th ey n eed ed b ef o r e i n fl ati o n a n d sc arci ti es fo rc ed pr i c es

E ach th o ugh t o n ly o f h is o w n i m m ed i ate si tu ati on gi vi n g

49
sti ll h i gh er .
,

li ttle atten ti o n to th e pro bl em s o f th e co rp o r ati o n as a wh o l e o r p ossible

l o n g term eco n o m i c ch an ge
-
.

T h ei r call s fo r m o n ey b ec am e i n cr easi n gly stri d en t S o o n M ar ch 1 9 .

,

R ask o b i n fo r m ed th e du Po n t F i n an c e Co mm i ttee t h at G en er al
9
1 20 ,

M o to r s r equ i red 864 mi llio n of addi ti o n al capi tal A t th i s ti me h e

50
.
,

seem ed l i ttl e w o rr i ed ab o u t th e i n cr easi n g exp en di tur es a n d seem ed co n

fi den t o f h is ab i li ty to get th e m o n ey I P Mo rg an 8: Co an d th e No b el s
’
. . . .

Expl o si v es T r ad es L td h ad sh o w n an i n ter est in th e i ssu e A ssu m i n g

, ,
.

th at th e fu n d s wo uld b e easi ly r ai sed an d t h e d em an d fo r au to m o b i l es

wo uld co n ti n u e D u r an t in th e sam e m o n th presen ted to th e Execu ti ve

, , ,
“

C o m m i ttee a sch edul e o f pro p o sed pr o du cti o n m ad e p ossi bl e by th e

” 51
co n str u cti o n an d exp an si o n pr o gr am th en w ell o n t o w ard s c o m pl eti o n .

B y May R ask ob an d p o ssibly D u r an t h ad b eco m e m u ch m o re tro ubled

, , ,

by th e gro w i n g exp en di tures o f th e di vi si o n s T igh ten i n g credit fo r .

52
i n stall m en t b u yi n g i n di cated a p o ssi bl e d ecli n e in dem an d A l so th e .

C h ai r m an o f th e F i n an ce C o m m i ttee w as h avi n g m o r e d i fficul ty in r ai si n g

n ew cap i tal th an h e h ad an ti ci p ated O n May I 3 b o th t h e Ex ecu ti v e an d .
,

F i n an ce Co m mi ttees at G en eral Mo to rs n o ted th e co n ti n ued i n crease in

th e pur ch asi n g o f i n v en to ri es
53
By th e en d o f A pri l th ese h ad r each ed a
.
T HE D URA NT STRA TEG Y 1 29

v alue o f Rask o b th en w ar n ed th e d i vi si o n m an ag er s o f th e
n eed to m ai n tai n c o n t r o l o ver th ei r purc h a ses A t h is s uggesti o n an In .
,

v en to ry A ll o c ati o n C o mm i ttee w as fo r m ed to all o t eac h d i v i si o n it s sh ar e

-

o f th e $ 1 5 0 m i ll i o n th at R ask o b an d h is asso c i ates esti m ated w as av ai l abl e

for i n v en to ry purch ases duri n g th e n ex t y ear A t th e sam e ti m e th e car .

,

pro ducti o n sch edul e fo r th e year A ugu st 1 920 to A ugu st 1 92 1 w as , , , ,

reduced .

Y et even w i th sm all er pr o duc tio n quo tas th e d i v i si o n m an ager s m ad e ,

li ttle eff o rt to Stay with i n th e li m its set by th e In ven to ry A llo c ati o n C o m

m ittee T h ese execu ti v es h ad f ull co n tr o l o f th e f u n d s in th ei r d i vi si on s
54
. .

T h ey co uld b o rr o w m o n ey as w ell as pl ac e o rd er s fo r m ateri al s an d

equ i p m en t No o n e ch eck ed to see h o w th ey sp en t th e mo n ey th ey
.

r ecei ved o r wh at m ater i al s th ey purch ased an d u sed Wh i le th ey co n ti n u ed .

to buy suppl i es th e d em an d fo r th ei r c o m pl eted pr o duc ts fell o ff p recip

,

ito u sly
55
By early O cto b er Pratt w as app o i n ted ch ai rm an o f an i n ven to ry
.
,

co m mi ttee th at w as to t ry to g ai n so m e c o n tro l o v er th e sit u ati o n

56
Wi th .

fewer sales i n v en to ri es co n ti n u ed to gro w an d at th e en d o f O cto b er

, ,
,
,

th ei r v alu e h ad r each ed a to t al o f cl o se to $2 1 0 m i ll i o n an d as th e 1 922 ,

A n n u al Rep o r t added exceed i n g by $60 m i ll i o n th e all o tm en t s o f th e

“

Execu ti ve an d F i n an c e C o m mi ttees T h i s excess acco u n ted fo r ab o u t

.

f h o rr o w i n g at t h at ti m e
7 %
0 o t e b .

B y th en to o th e au to m o b i l e m ark et h ad co ll ap sed T o m eet th e cr i si s

, , .
,

58
F o rd slash ed h is pri ces o n S ep tem b er 2 1 by 20 p er cen t to 30 p er cen t .

D ur an t supp o r ted by h is d i vi si o n sal es m an ager s attem p ted fo r a ti m e

, ,

59
to m ai n tai n pr i c es But by th e en d o f O cto b er th e si tu ati o n h ad b eco m e
.
, ,

so ser i o u s th at m an y G en er al M o to r s m an ager s w er e h av i n g d i ffi cul ty in

fi n di n g c ash to co ver such i mm ed i ate n eed s as i n vo i ces an d p ayro ll s F o r .

No vem b er s al es dro pp ed b elo w

, o n e-fo ur th o f w h at th ey h ad b een

in early su mm er an d by th e n ex t Ian u ary pr o duc ti o n r eac h ed a r eco rd

, ,

60
lo w o f v eh i cles fo r th e m on th B efo re th e du st settled $84 m i llion
.
,

in i n ven to r i es an d o th er co mm i tm en ts h ad to b e wr i tten o ff as d ead

61
lo ss.

D uri n g th e cr i si s th e pr i ce o f G en er al Mo to r s s to ck plum m eted T h en

, .

c am e D ur an t s di sastro u s attem p t to su stai n th e pri ce by buyi n g G en er al

’

Mo to r s Sto ck o n credi t wh i ch led to h is fi n an ci al diffi culties an d to h is

,

reti rem en t as Pr esi den t o n No vemb er 20 1 920 T en d ay s l ater Pi erre , .

,

da Po n t too k o ver th e pr esi d en cy He d i d so w i th s o m e r eluct an ce as .

,

h e h ad h o p ed to co n ti n u e h is m o r e r el ax ed sem i r eti rem en t Y et in t h i s .

ti m e o f cr i si s it w as o bv i o u s to h is asso c i ates in b o th G en er al M o to r s an d

du Po n t th at o n ly h e co uld co m m an d th e r esp ec t an d co n fi d en ce o f t h e
“

b an k s th e i n vesti n g publi c an d th e G en er al Mo to rs C o rp o r ati o n s p er

,
’

” “2
so n n e l .
1 30 G ENERA L M O TORS

O n ce h e greed to serve Pi erre acted qu i ckly an d fi rm ly T h e day after

a ,
.

h e to o k office h e b egan a s y stem ati c revi ew o f th e co rp o rati o n s p o siti o n

’

an d pro bl em s
63
A n d o n e o f h is v ery fi r st acts w as to appro ve th e pl an
.

wo rk ed o u t by A lf red S lo an wh i ch defi n ed an o rgan i zatio n al s tructure

for G en er al Mo to r s .

THE S L OA N STRU CTU RE

S lo an s pl an appro ved by th e B o ard o f Di rec to r s o n D ecem b er 29

’

, ,

64
wen t i n to effect i mm edi ately T h e structur e it cr eated r em ai n s to day as .

th e co rp o r ati o n s b asi c o rg an i z ati o n It l asted b ec au se it tr an sfo rm ed

’
.

G en er al Mo to r s fro m an agglo mer ati o n o f m an y bu si n ess u n i t s l argely ,

au to m o ti v e i n to a si n gl e
,
co o rdi n ated en terpri se Th is it di d by su c
,
.

cessfu lly cr eati n g a g en er al o ffic e to co o rd i n ate appr ais e an d set br o ad , ,

goal s an d p o l i ci es fo r th e n um er o u s o p er ati n g di vision s .

S lo an h ad d evi sed h is pl an so m e m o n th s b efo r e th e cr i si s o f 1 920

demo n strated vi v i dly t e e h ssen ti al n eed f o r suc h o v r all co o rdi n ati o n
e -

an d c o n tr o l D uran t h ad r evi ew ed th e pro p osal bu t h ad fai led to act

.
,

o n it T o th i s bu i ld er o f em p i r es th e d etai l s o f o rg an i zatio n seem ed

.
,

u n im p o rtan t Bu t to A lfred S lo an th i s l ack o f atten tio n s eemed in excu s

.
,

abl e H is r ati o n al pr eci se m i n d fo u n d th e pr o m o ter s w ay s o f o p er ati o n

’
.
,

wasteful i n effici en t an d dan gero u s

, , .

'
T/ze S o u rces o f S lo a n s S tructu re
T h e d i fferen c e b etween th e appro ach es o f th e tw o men to th e pro blem s
o f ad m i n i str ati on r efl ec ts c o n tr asti n g p er s o n al i ti es , educ ati on , an d exp e

ri cu ce D ur an t w as a sm all l i vely, w arm m an Nearly everyo n e c alled

.
, .

”
h im B i lly Mr S lo an w as tall qu iet an d co o l In creasi n g deafn es s
“
. .
, , .

h ei gh ten ed h is r eserv e N early everyo n e c alled h im Mr S loan E ven h is

. . .

” ” “ 5
clo sest asso ci ates r arely if ever r eferr ed to h im as A I o r A lf , ,
“ “
.

Wh i le D uran t wen t di rectly fro m h igh sch o o l i n to busi n ess S lo an h ad ,

66
so ugh t tech n i c al tr ai n i n g L i k e Pi err e du Pon t an d so m an y o f th at
.

D el aw ar e f am i ly h e atten ded th e M assach u setts In stitu te o f T ech n o lo gy

, .

T h er e h e d em o n str ated h is academ i c ab i lity by co m pleti n g th e co ur s e

in el ectri cal en gi n eer i n g in th r ee y ear s Wh er e D ur an t s i n i ti al ach i ev e
’
.

m en ts h ad b een in m ark eti n g S lo an s were in pro ducti on In 1 899 th e

’
, .
,

M I T gradu ate assi sted fi n an ci ally by h is father purch ased fo r

. . .
, ,

th e H y att Ro ll er B ear i n g C o m p an y w i th a pl a n t in H arr is o n New ,

Ier sey H e h ad
. st ar ted t o w o rk fo r H y att i m m ed i ately aft er gr adu ati n g

in 1 895 b u t left it temp o r ar i ly for an u n successful ven t ure in elect ri c

,

refri gerato r s O n tak i n g o ver H yatt S lo an b egan i mmedi ately to develo p

.
,
T HE SLO A N STR UCTURE 131

th e n ew m ark et for his p ro duct whi ch h ad b een cr eated by th e i nf an t

a uto mo bi le i n du stry .

Hyatt exp an ded with th e n ew in dustry V o lume pro ducti on preci si on

67
.
,

m an ufac tur i ng an d pr om p t del i very b ecame S lo an s m aj o r pro blem s

’
.
,

With such a flo uri sh i n g dem an d m ark eti n g to o k l ess co n si dered tho ugh t
,

.
,

Un lik e D uran t S lo an w as selli n g o n ly to o th er pro ducer s n o t to th e

, ,

m ass con sum er mark et an d h is b est cu stomer s wer e th e l argest o n es

, .

A fter 1 908 th e F o rd o rd er alon e w as app ar en t ly l arge en o ugh to r equ ir e

,

sp eci ali z ati on an d subd i vi si on o f th e m an uf acturi n g ac ti viti es an d w ith ,

sp eci ali z ati on c am e th e n eed to cr eat e a d esi g n to c oo rd i n ate appr ai s e , ,

an d pl an for th e subd i v i d ed u n it s T h e r esult app ear s to h av e b een t h e

.

mo re n o rm al typ e o f cen tr ali zed structur e u s ed in admi n is ter i n g en ter

pri ses that m an ufact ured go o ds pri m ari ly fo r a few l arge cu sto mer s Th e .

li n e o flices wer e th o s e di r ectly co n cer n ed with m an uf acturi n g an d th e ,

staff o ffi ces w ere th o se h an dli n g en gi n eer i n g p er so n n el an d purch asi n g , , .

Mark eti n g r equ i r ed o n ly a very few m en an d mo st o f th e s elli n g ac ti v iti es

,

w ere h an dled by a p ar tn er Peter S teen strup o r o ften by S lo an hi m self

, ,
.

S ti ll th e n eed to pro vi d e d ep en d abl e s ervi ce as w ell as pu n c t u al d eli ver i es

led S lo an to fo rm an en gi n eer i n g s ervi c e offic e in D etro it .

Hyatt grew so r ap i dly th at S lo an w as abl e in 1 9 1 6 to s ell to D uran t

for m i lli o n th e fi rm th at h e h ad purch as ed fo r in 1 899 .

A t D ur an t s r equ est S l oan b ec am e Pr esi d en t o f Un i ted M ot o r s — th e

’

p ar ts an d accesso r i es comp an y o f w hi ch H yatt b ecame a s ub si di ary .

Here S lo an s m an ageri al duti es broaden ed His maj o r tas k n o w w as

’ 68
.

to bu i ld a gen er al o ffice to c o o rdi n ate an d exp an d th e ac ti v iti es o f th e

diff eren t o p er ati n g co m p an i es A s each u ni t w as in c ap able h an d s h e

.
,

fel t li tt le n eed to co n cer n h i m s elf w ith detai led ad mi n is tration exc ep t ,

fo r a co n ti n ui n g i n ter est in H yatt In stead h e set up u n i fo r m acco u n ti n g

.
,

pro cedures an d saw to it th at his co m pan ies h ad th ei r r ecord s in pr o p er “

sh ap e
”
. With th e res ulti n g co mp arable s tatisti c s h e w as u n do ubtedly ,

abl e to ev alu ate th e pro fi tab i li ty o f h is o p er ati n g d i v i si o n s an d o f U n it ed

Mo to r s as a wh o l e mo r e accur ately th an th e co rp o r ati o n s New Yo rk ’

o ffi c e c o uld do fo r th e m aj o r o p er ati n g d i v i si o n s A s h is sub si d i ar i es w er e .

prim ari ly m an ufacturi n g o rgan i zatio n s l i k e H yatt S loan al so co n cen ,

trated o n b u i ld i n g a U n i ted M o to r s S erv i c e In c to h an dl e s ales an d ,

.
,

s ervi ce th ro ugh o u t th e n ati on fo r sever al o f h is pro duci n g u n it s This .

o rg an i z ati o n as sur ed b etter coo rd i n ati o n b et w een m ark eti n g an d m an u

facturin g p erm itted h is di vi sio n s to expl o it th e r eplacemen t t r ad e m o re

,

effecti v ely an d h el p ed pr o vi d e G en er al M o to r s d eal er s w ith a r el i abl e

’
,

s upply o f p arts an d accesso ri es T h is l ast facto r w as an i n valu able ass et

. ,

si n ce th e ab i li ty to gi v e go o d qu i ck s ervi ci n g an d r ep ai ri n g w as b eco mi n g
,

an i n cr easi n gly i m p o r tan t co m p etiti v e w eap o n With th e creati on o f a .

1
3 2 GENERA L M O TO RS

l arge-scale m ark eti n g o rgan i zatio n S lo an s o ffi ce at Un ited Mo to r s to o k

,
’

o n m an y o f th e du ti es o f a c en tr al o ffi ce in a m ul tif u n cti o n en terpr i se .

Y et b ecau se o f di ff er en ces an d co mpl exi ti es ar i si n g fr o m m aki n g v ar i o u s

,

pro ducts fo r m uch th e s am e m ark et th e pl an ts o f th e sever al d i vi si o n s

-

were n o t co mb i n ed in to a si n gle man ufacturi n g dep art men t A l so at .

Un ited Mo to rs S lo an h ad th e resp o n sib ility of plan n in g exp an sion O n his

,
.

i ni ti ati ve th i s acti ve G en er al Mo to rs sub si di ary purch ased en terpri ses ’

li ke H arr i so n Radi ato r an d th e Kl ax o n Co m p an y .

Wh i le f ash io n i n g an admi n i strati ve o ffice at an d setti n g o ver all po li cy -

fo r Un i ted Mo to r s S lo an b ecam e i n cr easi n gly con cer n ed by th e l ack o f

,

struct ur e a n d s y stem in G en er al Mo to r s o v er -all o rg an i zati o n

6 9’
He w as .

n o t cert ai n j u st h o w h is o w n o rg an i z ati o n fi tted i n to th at o f th e l arger co r

p o ra tio n n,o r j u st h o w th e d i ff er en t o p er ati n g d i v i si on s an d t h e c o rp o r a

ti o n s g en er al o ffic e c o mpl em en ted o r s upplem en ted o n e an o th er In th e

’
.

su mm er o f 1 1 8 h e wr o te I A
9 , H ask ell o f h is wo rri es p o i n ti n g o u t th at
. .
,

h e h ad b een w o rk i n g on sever al pl an s in o rd er to h elp k eep o u r o rg an

70 ”
izatio n li n ed up A s ti me p ass ed h e b ec am e so tr o ubled by th e co n
.
,

ti n n i n g l ack o f sy s tem ati c structur e at G en er al M o to r s th at h e ser i o u sly

co n si d er ed resi gn i n g fro m th e co rp o ratio n in o rder to accep t an i n vi tatio n

o f L ee H i g i n so n C m p y t b m p r t r d i du tr i l
, g o a n o eco e a a n e an n s a co n
71
su ltan t . Bu t b efo r e tak i n g th i s dr asti c step h e d eci d ed to co m pl ete h is ,

pl an s to r ati o n ali ze th e co rp o r ati o n s structur e ’

.

S l oan l ater testi fi ed th at h e r ec ei v ed n o assi stan ce in dr awi n g up h is

72 ”
O rgan i z ati on S tudy i n si stin g th at h e di d it wh oll y on h is o w n
, .

C er tai n ly n o o th er ex ecu ti v e in th e co rp o r ati o n n eith er H ask ell R ask o b , ,

Ch ry sler n o r th e o th er car d i vi si o n m an ager s n o r ev en D ur an t — w as

, ,

in a b etter p o si ti on to r ec o g n i ze an d u n d er stan d th e co rp o r ati o n s o rgan

’

izatio n al n eed s S l o an h ad bui lt an d m an aged an o p er ati n g u n i t an d

.
,

o f m o r e i m p o r t an ce h e w as th e o n ly o n e o f th ese ex ecu ti v es w h o h ad
,

cr eated an adm i n i str ati ve o ffice fo r the m an agem en t o f a n um b er o f such

o p er ati n g u n i ts S i n c e U n i ted M o to r s so ld to n early all th e G en er al M o to r s
’
.

assem bli n g d i v i si o n s an d al so to th e i n du stry at l arg e S l o an c am e to h av e

,

a m o r e c o m pl ete V i ew o f th e o v er all si t u ati o n at G en er a l M o to r s th a n

-

di d an y o th er ex ec u ti ve wi th th e p o ssibl e excep ti o n o f D ur an t .

No r co uld S lo an h av e r ecei ved early in 1 920 m uch h elp o u tsi d e o f th e

co rp o r ati o n T h e du Po n t ex ecu ti v es f o r ex am pl e co uld h av e pr o vi d ed
.
, ,

li ttl e m ea n i n gf u l a dvi ce O n ly th e y ear b efo r e th ey h ad attem p ted to

.

so lve t h ei r pr o bl em s by f ur th er c en tr al i z ati o n o f a n alr eady ti gh tly co n

tro ll ed o rg a n i z ati o n A n b o k s an d pr o b ably an xp er t o n m an age

y o .
, y e ,

m en t wo u ld h ave advo c ated th e sam e typ e o f fu n cti o n ally d ep ar tm en tal

ized stru ctur e th at H arry H ask ell h ad d efi n ed fo r du Po n t in 1 1 an d
9 9
th at Ir e
’

n ee du Po n t w o uld co n ti n u e to m ai n tai n u n ti l th e f all o f 1 2 1

9 .
T HE SL O A N STR UCTURE 1 33

Mo r e u seful to S lo an wo uld h ave b een a s tudy o f th e exp eri en ce o f o th er

h o ldi n g co m p an i es such as Un i ted S tates S teel Bu t f ew i n du str i al h o ldi n g
, .

co mp an i es h ad b een able to tr an sfo rm th ei r fi n an ci al o ffi ces i n to gen er al

ad m i n i str ati ve o n es u n l es s th ey h ad g o n e th e w h o l e w a d cr t d
, y an ea e a

cen tr ali zed f u n ctio n ally d ep artm en tal i zed structur e

, .

F or th i s r easo n G en er al M o to r s o w n exp er i en ce w as pro b ably th e m o s t

’

valu abl e so urce o f i deas fo r S lo an He w as aware o f th e attem p ts o f

.

S to rro w an d th e du Po n ts t o set up so m e k i n d o f a gen er al o ffi c e to

co o rdi n ate appr ai se an d pl an pro gr am s an d p o li ci es fo r th e d i vi si o n s
, ,
73
.

His b asi c aim w as to bui ld a gen er al o ffice or as h e c all ed it a cen t r al ,

“

”
o rgan i z ati o n o f gen er al o fficer s an d st aff ex ecu ti v es to d efi n e th e li n es ,

o f au th o r i ty an d co m m u n i c ati o n b et w een thi s n ew o ffi c e an d t h e d i v i si o n s ,

an d to d ev el o p a c cur ate an d u sef ul d ata to fl o w th r o ugh t h ese l i n es .

S lo an s o bj ec ti ve w as a l arger an d m uch mo r e acti v e gen er al o ffi ce th an

’

ei th er S to rro w o r th e du Po n t s h ad en v i si o n ed His b asi c i n n o vati on s .

i n cluded th e fo rm ati o n o f a m uch m o r e co m pr eh en si ve staff o rgan i zati o n

an d th e app o i n tm en t o f gen er al ex ecu ti v es to sup ervi se gr o up s o f d i v i si o n s

with o n ly advi so ry an d n o t l i n e au th o r ity .

Th e Orga n iz atio n S tu dy
In h is lysi s o f G en eral Mo to r s o rgan i z ati o n al n eeds S l o an b eg an
an a
’

with th e assum p tio n th at th e o p er ati n g di visi o n s m u st r etai n th ei r au ton

o m y O bv i o u sly
. a c en tr ali z ed struc tur e w a s o u t o f t h e qu esti o n
, Ev en .

th e m i lder typ e o f gen er al sup erv i si on wh i ch S to rro w h ad attem p ted

h ad m et w i th gr eat r esi stan c e Mo r eo v er S l o an fi rm ly b el i ev ed th at d i vi

.
,

sio n al i n d ep en d en c e en c o ur aged i n i ti ati v e an d i n n o v ati o n A t th e s am e .

ti m e th e ac ti v i ti es o f th ese d i v i si o n s h ad to b e c o o rd i n ated an d c o n tr o ll ed
,

in th e i n ter est o f th e c o rp o r ati o n as a wh o le A co n ti n u ati o n o f D ur an t s

’
.

a lm o st an arch i c al d ec en t r ali z ati o n w o uld b e even m o r e u n s ati sf act o ry

th an to o m uch c en tral co n tro l .

S l oan th er efo r e b eg an h is pr o p o sal s by say i n g : T h e o bj ec t o f th i s study

, ,

is to suggest an o rg an i z ati o n fo r th e G en er al Mo to r s Co rp o r ati on wh i ch

wi ll d efi n itely pl ace th e l i n e o f au th o ri ty th r o ugh o ut its ex ten si ve o p era
ti o n s as w ell as to co -o rd i n ate each br an ch o f its serv i c e at th e s am e ti m e ,

destro yi n g n o n e o f th e effecti ven ess wi th wh i ch its w o rk h as h ith erto fore

74 ”
b een co n ducted .

T h e study w o uld th en b e b as ed o n tw o pr i n ci ples

1 . Th e resp o n sib ility attach ed to th e ch ief execu tive of each op eration sh all in
n o w ay b e lim i ted Each su ch o rgan iz ation h eaded b y its ch ief execu tive
.

sh all b e co m p lete in ev er n es s ry f tio d en ab l t o ex erci se its

y ec a u n c n a n e

f u ll in itiative a n d logical dev elo pm en t .

1 34 G EN ERA L M O TO RS

2 . C ert ain r
cen t a rganizatio n fu n ctio n s are ab so lu tely essen tial to
l o th e lo gical
developmen t an d pr o p er co n tro l o f th e Co rp o r ati o n s activities
’
.

Wi th s pr in cipl es
th e e as a b asis , S lo an th en li sted th e a1m s o f h is st udy .

Th ey w er e :

I . To defi n itely determin e th e fu n ctio nin g o f th e vario u s division s co n stitu tin g

th e Co rp o ration s activities n o t o nl y in r elatio n to o n e an o th er b u t in
’

, ,

relatio n to th e cen tr al o rgani zatio n .

2 . T o determin e th e sta tu s o f th e cen tr al o rgan iz atio n an d to co ordin ate th e

op er ati o n o f th at cen tr al o rgan iz ation w ith th e Co rpo r atio n as a w h o le

to th e en d th at it w ill p erf o rm its n ecessary an d lo gical p lace .

3 . T o cen tr aliz e th e con tr o l o f all th e execu tive f u n ctio n s o f th e Co rp o r atio n

in th e Pr esiden t as th e chi ef ex ecu tiv e o ffi cer .

4 . T o lim it as f ar as pr actical th e n u m be r o f execu tives r epo rtin g dir ectly to

th e Pr esid en t th e o b j ect be in g to en ab le th e Pr esiden t to b etter gu ide th e
,

b r o ad p olicies o f th e C o rp o r ation w ith o u t com in g in co n tact w ith pr ob lems

th at m ay s af ely b e en tru sted to execu tives of less impo rt an ce .

5 . T o p ro vide m ean s w ith in each b r an ch w h er eb y all o th er ex ecu tive b r an ch es

are r epr esen ted in an adviso ry w ay to th e en d th at th e d evelo p m en t o f

each b r an ch w ill b e alo n g lin es co n stru ctiv e to th e C o rp o ratio n as a w h o le .

S l o an pl ann ed to r each th ese go al s by fo ur ro u tes He wo uld r egro up .

th e o pe r ati n g di vi si o n s ; w o uld i n clud e 1n th e g en er al o ffi c e ex ecu ti v es to

a dmi ni ster th e ac ti v i ti es o f d i ff er en t gr o up s o f di v i si o n s wo uld exp an d ,

th e s taff f u n c ti o n s 1n th e g en er al o ffi ce an d u n i te th e o ffi c es carry i n g o u t
”
th ese f u n cti o n s i n to a si n gl e A dv i so ry S taff an d fi n ally w o uld en l arg e
“

th e acti vi ti es o f th e fi n an ci al an d acco u n ti n g u n i ts (see C h ar t

In o u tl in i n g th i s pr o gr am S l o an b eg an by d efi n i n g th e r o l e an d du ti es
,

o f th e F i n an c e an d Ex ecu ti v e Co m m i tt ees T h ese h e l eft m uch as th ey

.

h ad b een o u tl i n ed by th e du Po n t Co m p an y early in 1 9 1 8 Th e fi r st .

co mmi ttee wo uld co n ti n u e to set di vi den d r ates an d th e sal ari es o f to p “

o ffi c i al s t o r ai se f u n d s an d to d eter m i n e o th er fi n an ci al p o li c i es It w o uld
, , .

”
h av e g en er al c o n tr o l o ver th e co rp o r ati o n s fi n an c es an d acco u n ti n g
“ ’

an d w o uld p ass o n m aj o r appr o pr i ati on s r ec o mm en d ed by th e Ex ecu ti v e

Co mmi ttee Th e secon d c o mm i ttee w o uld r etai n its en tir e sup erv i si on
“
.

o v er th e o per ati on s si d e o f th e Co rp o r ati o n s ac ti v i ti es c on sti tu ti n g as a

’

,
”
wh o le practi c ally th e en ti r e o p erati n g staff Each o p er ati n g di vi sio n .

wo uld b e r epresen ted in th e Ex ecu ti v e Co mmitt ee m aj o r o p er ati o n s ,

“

car an d tru ck
[ ] by a s i n gl e r epr esen t ati v e sm all er o p er ati o n s b ei n g
,

gro up ed to geth er o n e execu ti ve r epr esen ti n g sev er al such m i n o r o p er a

,
”
ti o n s T h e Pr esi d en t s pri m ary r o le wo uld b e to i n terpr et th e p o li ci es o f
’
.

th e to p c o m m i ttees an d to see th at th ey w er e ca rr i ed o u t In t h i s h e w o uld .

,

co n ti n u e to h ave th e assi stan ce o f h is exi sti n g p erso n al staff i n cludi n g ,

 THE SLO A N STR UCTURE 1 35

th e m
recen tly cr eated A ppr opr i atio n s Co mitt ee ch ai r ed by J oh n L Pr att , . .

S lo an th en str ess ed th e co n ti n u i n g auto n o m y o f th e o p er ati n g di v isi on s

, ,

wh o se m an ager s wo uld r etain f ull auth o r i ty an d r esp o n sib i li ty :

Th e G en eral Man ager f o rm u lates all th e p oli cies o f h is p arti cul ar uni t
su b j ect o n ly to th e execu ti v e co n tr o l o f th e P r es iden t T h e r esp on sib ility o f
.

th e h ead o f each u n it is ab so lu te an d h e is lo o k ed u p on to exer ci se hi s f u ll

in i tiative an d ab ility in develop in g p articu lar o perati on to th e f ullest

h is
p o ssible exten t an d to a ssu m e th e fu ll r esp o n si b il ity o f success or failu r e .

Th en , to cl ar ify r el ati on s b etween th es e au ton om o u s u ni ts t o each

th e

o th er an d to th e g en er al o ffi c e S lo an assi g n ed each d i v i si on to o n e o f fo ur
,
”
G r o up s C ar A ccess o ry Par ts an d M is c ell an eo u s T h o se pl aced in th e
“

, , , .

C ar G r o up i n clud ed th e di v i si o n s whi ch m an uf actur e an d s ell c o m pl ete

“

m o to r c ar s purch asi n g p ar t of th e comp o n en t p ar ts fr o m o utsi de so urc es ,

p art fr o m o th er d i vi si o n s o f th e Co rp o r ati on an d m an u factur i n g p ar t w ith

”
th ei r o w n f ac i liti es T h e m o st i m p o r tan t ch an g es c am e in th e o rg an i z a
.

tio n s o f th e m an y accesso ry an d p ar ts d i vi sio n s an d th o s e m aki n g alli ed

pr o ducts T h ei r o rg an i z ati o n al statu s h ad r em ai n ed m o st co nf u sed S o m e
. .

wer e wi th i n th e Un ited M o to r s s tructur e ; o th er s w er e p ar t of Ch evr o let

o r Bu i ck ; an d sti ll o th er s r ep o r ted d i r ectly to D ur an t S l o an pl ac ed all .

th ese u n i ts i n to ei th er th e A cc esso ry or th e Par ts G r o up T h e fir st w as to .

i n clud e th o se s elli n g o v er 60 p er c en t o f th ei r pro ducti o n o u tsi d e o f th e

co rp o r ati o n an d th e secon d th o se w h o tur n ed o v er at l east m o r e th an 40
,

r c en t an d u su ally m uch m o r e o f th ei r o u tput to o th er G en er al M o to r s

p e

di vi sio n s Th e fo rm er h ad co mm on pr o bl em s S l o an n o ted s uch as

.
“

, ,

sal es an d adv er ti si n g p o li c i es c o m p eti ti v e c o n d iti o n s

, pr o p er pl aci n g o f ,

Co rp o r ati o n cap i tal to eff ect th e b est r es ult s to th e Co rp o r ati o n as a wh o l e

an d m an y o th er qu esti o n s o f a Co mm erc i al n at ur e wh i ch do n o t en ter
”
i n to th e o th er o p er ati o n s withi n th e Co rp o r ati o n T h e fo ur th gr o up .

mi scell an eo u s — i n cluded th e tr acto r an d r efr i ger ato r o p er ati o n s fo r eign ,

acti v i ti es an d th e n ew fi n an c e c o m p an y
, th e G en er al M o to r s A cc ep tan c e

Co rp o r ati o n .

T h e A ccesso r i es G ro up w as to b e h ead ed by a G r o up V i c e-Pr esi d en t .

His fu n cti o n s wer e to b e en ti r ely advi so ry an d fo r th e purp o se of refl ect

“

in g to th e v ar i o u s o p er ati o n s i n d i v i du ally th e p o li cy o f th e P r esi d en t o f

th e Co rp o r ati o n an d o f th e D i r ec to r s F i n an c e an d Ex ecu ti v e Co m m it
,

tees
”
. Here fo r th e fi r st time S loan o utli n ed th e du ti es o f a n ew t yp e o f
”
co rpo r ati o n o fficer — th e G r o up Executi v e G r o up Ex ecuti ves wer e to
“
.

h av e n o sp ec ifi c day to day o p er ati n g r esp o n si b i liti es In di v i du ally an d in

,
- - .

an advi so ry c ap ac i ty th ey sup erv is ed th e w o rk o f sev er al d i v i si o n s

,
an d ,

co ll ec ti v ely th ey h elp ed set t h e o v er -all p o li ci es o f th e c o rp o r ati o n No t .

o n ly c o uld th i s n ew p o s t h elp to assur e m o r e effici en t c o o rdi n ati o n an d

G ENERA L MO TO RS

C HA RT 6
T HE SLO A N STR UCTURE I
37

In i tial Plan Reo rgan i zatio n f or G en eral Mo to rs

’
S lo an s of , 1
9 20
1
3 8 G ENERA L M O TO RS

a ppr ai sal o f th e wo rk o f a n umb er o f di vi sio n s but al so it wo uld cut do wn,

th e n u mb er o f ex ecu ti v es w h o r ep o r ted di r ectly to D ur an t at th at t i m e ,

b etween th i rty an d fo rty By pl aci n g th e au to mo b ile di vi sio n s i n to o n e

.

gro up an d by car efu lly d efi n i n g th e advi so ry ro le o f th e G ro u p V i ce

Pr esi d en t S lo an u n do ub tedly an ti ci p ated th e p o si ti o n o f a G ro up V i ce
,

Pr esi d en t fo r th e auto mo b i le d i vi si o n s A t th e ti m e o f h is r ep o r t h e
.
,

en v i saged th e day w h en th e tr ac to r an d agr i cul tur al i m pl em en t b u si n ess -

wo uld so gro w as to co n stitute o n e m aj o r gro up presi ded o ver by a

“

,
”
V i ce Pr esi d en t o f th e C o rp o r ati on rep o rti n g to th e Presi d en t
-
, .

T h e si n gl e—f u n cti o n u n i ts in th e Parts G ro up w ere o n th e o th er h an d , ,

co mb i n ed i n to th ree r egio n ally defi n ed d i vi si on s each u n der a G en er al ,

Man ager Th e di vi sio n s in th i s gro up are pro ductio n an d man ufacturi n g

.
“

”
o p er ati on s pure an d simple S lo an po i n ted o u t an d are o rgan i zed
, , ,
“

sep ar ately r ath er th an c o n n ected w i th a m aj o r d i v i si o n for th e purp o se

, ,
”
o f ec o n o m y o r con v en i en ce in m an u fac tur e In co mb i n i n g th es e plan ts
.

i n to th ree geo gr ap h i cal d i vi si o n s S lo an sti ll h o p ed to k eep au th o r i ty an d

,

r espo n si b i li ty as far do wn th e l i n e as p ossible T h e r esp on sib i lity for .

th e succ ess or fai lur e o f each i n d i v i du al o p er ati o n w i th i n th e gro up l i es

en ti r ely as w i th ev ery o th er o p er ati o n b e it great o r s m all wi th th e

, ,

G en er al M an ager o f th at p arti cul ar o p er atio n w h o fo r m ul ates all th e

detai led p o l i ci es s ubj ect o n ly to co n trol in an advi so ry w ay by th e G en eral
”
M an ager o f th e gro up .

B esi des gen er al execu ti ves th e cen tral o rgan i zatio n r equi red staff
,

sp eci al i sts In o u tl i n i n g th e w o rk o f th e G en er al F i n an ci al an d A cco u n ti n g

.

S taff S l o an str essed th e i m p o r tan ce o f u n i fo rm acco u n ti n g as a b asi c

,

ad m i n i str ati v e to o l as S torro w h ad d o n e earli er H o w ev er in o rd er n o t

, .
,

to en cro ach o n th e au to n o m y o f th e D i v i si o n M an ager s S lo an added ,

h w h i l h F i c i l i c Presi d en t p erfo rm s all fi n an ci al an d

“
t at , e t e n an a V e-

acco u n ti n g f u n c ti o n s th at p er tai n to th e Co rp o r ati on as a w h o l e th e ,

acc o u n ti n g wi th i n each i n d i vi du al u n i t [ wi ll ] b e s ubj ect to th e co mpl ete

“

”
co n tro l o f th e Ch ief ex ecu ti ve o f th at u n it .

In h is study S l o an p ai d m o r e atten ti o n to th e cr eati o n o f an advi so ry

,

staff o f sp ec i al i sts th an h e d i d to en l argi n g an d st r en gth en i n g th e fi n an c i al

sec ti on s at th e pr o p o sed n ew g en er al o ffic es It w as h er e th at h e m ad e as

.

i mpo rtan t a co n tri buti o n to th e future of th e co rp o r atio n as in th e develo p

m en t o f th e G r o up Ex ecu ti v e It w as th e f ash i o n i n g o f th ese s taff faci liti es
.

an d th e app o i n tm en t o f th e G r o up Ex ecu ti v es th at d i ff er en ti ated th e

gen er al o ffice at G en er al Mo to r s fro m th at at Un ited S tates S teel U n ited ,

C o pp er Un i o n C arb i d e A lli ed Ch emi c al an d o th er i n du str i al h o ld i n g

, , ,

co mp an ies o f th at day an d m ade po ssible th e t ran sfo rmati o n o f th e

,

co rp o r atio n fro m a federatio n i n to a co n so li d ated en terprise with o ut

cr eati n g a c en trali zed f u n ctio n ally dep artmen tali zed s tructure
, .
THE SLO A N STR UCTURE 1 39

T h e G en eral A dviso ry Staff [ Slo an wr o te ] is to con stitu te in reality a

g r o u p o f o r an izati o n s or dep ar tm en ts, large in so m e cases, small in o th ers,
g
depen din g u po n th e n ecessity o f each in dividu al lin e o f w o rk T h e p u rpo se .

o f th is staff is to advi se th e ch i ef execu tives o f th e O per ati o n S taff con cer n

in g pro b lem s o f tech n ical an d co m m ercial n atu re w h ich are th emselves so

b ro ad an d r eq u ire so m uch stu dy as to b e ou tside o f th e sco p e o f a sin gle
o p er ation an d w h ich w ill b e wh en dev elo p ed o f i m po r tan ce to th e gu id
, ,

an ce o f all o p erati o n s .

At th si p o i n t S lo an str es sed th at th e ro le o f the staff mu st be o n ly

adv i so ry A n o p er ati n g d i v i si o n is to b e h e r em i n d ed h is r ead er s i n de “
.
, ,

p en den t an d m ay accep t o r r ej ect th e advi ce o f th e A dvi so ry S taff as its

j udgmen t m ay di ctate subj ect to th e gen er al s up ervisi o n o f th e Presi
,
”
den t .

S lo an n ex t li sted th e n ecessary st aff offi ces an d o u tl i n ed th ei r duti es .

Th e n ew st aff i n clud ed Ketter i n g s En gi n eer i n g an d Research o rgan i z a

’

ti o n an d th e existi n g M an ufacturi n g an d Plan t Lay-o ut S ec tion wh i ch h ad ,

its o r i gi n in th e T ech n i c al L ab o r ato ry set up by A D Little in 1 9 1 1

’

. . .

In add iti o n th e co rp o r ati o n w as to h ave its o w n Pl an t En gi n eer i n g

, ,

Per s o n n el an d Dev el o p m en t offic es T h e f u n cti o n o f th e l ast w as to study

, .

n ew l i n es an d pro duc t s t h at m i g h t b e d ev el o p ed an d n ew p ar t s an d

acc ess o ry fi r m s t h at m i gh t b e purch as ed S l oan al s o r eco mmen d ed th e .

”
setti n g up o f s taff o ffi ces o r s ectio n s for th ree o ther acti vities on e
fo r purch asi n g si m i l ar to th e o ffice th at h ad ex i sted in S to rro w s ti m e
’

, ,

an o th er fo r s al es an d a t h i rd to adv i se th e o p er ati n g d i v i si o n s r egardi n g “

,
”
all m atter s p er tai n i n g to t r affi c T h er e w as to b e a L eg al o ffic e as w ell as
.

th e ex i sti n g Paten t o n e T h e r ep o r t fur th er n amed a n u mb er o f n ec ess ary

.

”
h o u sek eep i n g s ecti o n s i n cludi n g Real Es tate T ax es G en er al O ffi ce
“

, , , ,

an d In sur an c e .

Fi n ally S lo an w an ted to h ave tw o o ffices toh an dle his sp eci al co n cer n s

,

— o rg an i z ati o n an d i n terd i v ision al s c h edul es T h e O rgan i z ati o n S ec ti o n .

w as S loan wr o te :
,

T o m ake dy of an d at all times to b e th oro u gh ly familiar w ith th e

a stu

Co rp o ratio n s vario u s o rgan izatio n s ; h ave co mplete reco rds o n h an d p er

’

tain in g th ereto i n clu din th r i ty h a r ts ; to advi se w h en called u p o n o f

g au o c

an y o p er ati on o f th e b est fo rm o f o r an iz atio n f o r ettin cer tain d esired

g g g
resu lts an d do su ch o th er developmen t w o rk referrin g to fo rm o f o rgan ,

izatio n as m ay b e desi red .

Th e c
se o n d w as to h elp ass ur e an e en e v r flo w o f pro duct by develo p i n g
with p r o f t h e in dividu al o p er ation s i n fo rm atio n p er tain i n g
th e co o e atio n

to th e pr op o sed p r o d u ctio n sch edu le to th e en d th at all o p er atio n s co n trib u

ti ng to su ch sch edu le are pro p erly advi sed as to th ei r r es on si b ili ties an d

p
1 40 G E NERA L M O TO RS

to properly distribu te th e pr odu ction o f th e Parts an d A ccesso ries G ro u p s to

th e en d th at prop er pro visio n m ay be m ade fo r all dem an ds an d th e
‘

m o st effective r esu lts th ereby o b tain ed .

In th i s w ay S lo an o utl in ed a com plete o rgani zati on s tru ctur e fo r th e

,

co rp o r ati on as a wh o le He h ad tak en th e auton o m o us part s as gi ven b u t

.
,

after gr o up i n g th em r ati o n ally h e pro p osed to a dmi ni ster th em th r o ugh

,
”
a c en tr al o rg an i zati o n o f g en er al o ffic er s an d s taff ex ecu ti v es The
“
.

gen eral officer s in di vi du ally were to supervi se an d co o rdi n ate di ffer en t

gro up s o f di vi si o n s an d co ll ect i v ely wer e to h elp m ak e p oli cy fo r th e
co rp o r ati o n as a wh o le T h e staf f executi v es wer e to advi se an d serve b oth
.

th e d i v i si o n m an ag er s an d th e g en er al o fi cers an d pr o vi d e bu si n ess an d

fi n an ci al i n fo rm ati o n n eces sary fo r appr aisi n g th e p erfo rm an c e o f th e

i n di vi du al un i ts an d fo r fo rm ul ati n g o v er-all p o li cy .

Min or Medifications
Wh en Pi err e du Po n t pu t S lo an s plan i n to o p eration h e m ade o n ly
’
,

mi n o r m o di fi c ati o n s Th e m ost impo rt an t w er e th e en l argem en t o f t h e

.

Fin an ci al S taff an d th e cr eati o n of th e O p er ati on s Co mmi ttee Th e75

.

Fi n an ci al S taff w as to in clude th e T ax es an d In sur an ce S ecti o n wh i ch ,

S lo an h ad pl aced in th e A dvi so ry S taff an d an Em plo yee B o n u s an d a

,

S tati sti cal D ep art men t A l so th e Co m p tr o ll er s o ffice w o uld b e d i v i d ed

’
.

i n to th ree u n i ts — G en er al Co st an d A ppr opr i ati o n A ccou n ti n g De

, ,

p art men ts .

T h e n ew O p er ati o n s Commi ttee a l arg e gr o up m ad e up o f m an ager s

o f th e m aj o r di v i si o n s an d th e d i r ec to r s o f t h e imp o rt an t staff uni ts

w as to advi se an d assi st th e Ex ecu ti v e Co mmi ttee, n ow co n si sti n g o f o n ly

fo ur m en Pi err e du Po n t R ask o b I A H ask ell, an d S l o an
, , , . .
76
S lo an .

b e ca m e V i Pr esi den t in ch arge o f th e A dvi so ry S taff an d H ask ell th e

ce-
,

V i ce-Pr esi d en t in ch arge o f o p er ati on s In a v ery sh o rt ti m e th ese po si

.
,

ti on s w er e r ev er sed an d S l o an b ec am e th e s eni o r o p er ati n g o ffic er T h e

,
.

Ex ecu ti v e Co m mi ttee w as exp ected to br i n g th e co rp o r ati o n th r o ugh its

cri si s by con cen tr ati n g att en ti o n o n m aki n g th e n ecessary criti cal en tr e
ren eu rial an d st r ategi c d eci si o n s t h at w o uld r ev i v e th e str i ck en en ter
p
pri se T h e o p er ati n g di vi si on s, wo rk i n g th ro ugh th e O p er atio n s Co mm i t
.

tee an d wi th th e n ew gen er a l staff w er e t o t ak e ch arge o f m o st o f

,

th e day-to -day w o rk It is m y b eli ef, Pi err e co m m en ted in th e m em o

“
.

ran dum an n o u n ci n g th e ad o p ti o n o f th e n ew structur e th at 90 70 o f

“

a qu esti o n s ari si n g wi ll b e settled wi th o u t r efer en c e to th e Ex ecu ti v e

ll
Co mmi ttee an d th at th e tim e o f th e Ex ecu ti v e Co mm i ttee m em b er s m ay
b e fu lly em pl o yed to study gen er al r o u ti n e an d lay d o w n gen er al p o l i ci es
fo r th e Co rp o r ati o n l eavi n g th e burd en o f m an agem en t an d th e carryi n g
,
” 77
o u t o f i n struc ti o n s to th e L i n e S taff an d F i n an ci al D i vi si on s
,
.
THE SLO A N STR UCTURE I 4 ]:

Th e year 1 92 1 w as o n e o f o rg an i zati on bui ldi n g at G en er al Mo to r s T h e .

n ew P r esi d en t app o i n ted g en er al o ffi c er s to sup erv i se tw o o f th e gr o up s

78
th e A c cesso r i es an d th e Par ts — with Pr att tak i n g ch arge of th e fi rst .

S lo an s pro p o sed M i scell an eo u s G r o up w as dro pp ed Fr i gi d ai r e b eco m i n g

’

p art o f th e A ccesso ri es G ro up an d th e A ccep tan ce Co rp o r atio n p art

,

o f th e fi n an ci al staff In a sh o r t t i m e th e T r acto r D i v i si o n w as li qu i d ated

.
, ,

wh i l e th e Exp o rt Co rp o r atio n w as en larged an d subdi vi ded to b ecom e ,

th e Exp o r t G r o up adm i n i ster ed by s ti ll a n o th er gr o up ex ecu ti v e .

T h e bu i ld i n g o f th e F i n an ci al an d A dvi so ry S taff c all ed fo r th e o p en i n g

o f sti ll m o r e o ffi c es an d th e app o i n tm en t o f m an y m o r e execu ti ves in th e

co rp o ratio n s n ew gen er al o ffi ces F Do n ald so n Br o w n th e fo rm er T r eas

’
. .
,

u rer o f th e du Po n t Co m p an y too k th e p o st o f F i n an c i al V i c e-P r esi d en t

, ,

bri n gi n g with h im stati sti ci an s an d eco n o m i sts to s taff a n ew S tati sti c al

D ep ar tm en t A ssi sted by A lb er t Br adl ey a t r ai n ed eco n o m i st as w ell
.
, ,

as by an exp er i en c ed tr easur er an d a r el i abl e c o m p tr o ll er Bro wn w as ,

soo n m eeti n g th e fi n an c i al an d i n v en to ry cr i sis

80
J o h n T S m ith a lawyer. .
, ,

lo n g co n n ected wi th D ur an t an d h is ac ti vi ti es w as bro ugh t in to set ,

up th e L egal D ep artm en t 81
.

O n th e A dv i so ry S taff co m p eten t m en co n ti n u ed in o r w er e r ecru i ted

,

fo r th e di ff eren t p osts Ketter i n g r em ai n ed in ch arge o f th e Research

.

S ecti o n an d th e m an ager s o f th e M an u factur i n g an d Pl an t L ay-o u t

,

S ecti on an d th e P aten t D ep ar tm en t w er e u n ch an ged 82

A B C H ardy . . . .
,

a cl o se a sso c i ate o f D ur an t si n c e th e C arr i age C o m p an y d ay s w as th e ,

ch ief o f th e n ew A dv i so ry Purch asi n g S ectio n fo r a sh o rt tim e b efo r e

h e to o k o v er th e O ld s D i v i si o n N o rv a l H awk i n s fo r m an y y ear s F o rd s
’
.
,

bri ll i an t sal es m an ager w as app o i n ted th e h ead o f th e S al es A n aly si s an d

,

D evelo pm en t S ecti o n By th e en d o f th e y ear o th er staff o ffic es h ad b een

.
,

m an n ed .

In th ese sam e m o n th s th e Ex ecu ti ve C o m m i ttee w as m ak i n g ch an g es

,

in th e o p er ati n g d i vi si o n s T h e m an ager s o f O ld s O akl an d C ad i ll ac

.
, , ,

an d C h evr o l et d i v i si o n s w er e r epl aced T h e i m m ed i ate c au se fo r th e

.

di sm i ssal o f tw o o f th ese ex ecu ti ves w as a co n t ro ver sy o ver th e dr awi n g “

” 83
o f m o n ey f r o m th e C o rp o r ati o n w h i ch w as n o t pr o p erly au th o ri z ed .

T h e m o st i m p o r tan t r esul t o f th e d ep ar tur e o f th ese st ro n g an d i n d e

p en den t m an ager s an d th i s r esult seem s to h av e b een qui te u n i n ten ti o n al
, ,

w as to m ak e m uch easi er th e r eg ai n i n g o f c o n tro l o v er th ese d i vi si o n s

a n d th e i n sti tu ti n g o f u n i fo rm a c co u n ti n g an d stati sti cal m eth o d s Ju st as .

th e d ep ar tur e o f A l fr ed an d C o l em an du Po n t h a d assi sted in co m

p le tin
g t h e t r an sfo rm ati o n o f th e du P o n t C o m p an y f ro m a f am i ly

fi rm i n to a gr eat i m p er so n al i n du str i al en terpri se m an n ed by pr o fessi o n al ,

ad m i n i str ato r s so th e d ep ar tur e o f th o se ex ecu ti v es w h o h ad pl ay ed a n

,

i mp o rtan t p art in th e m an agem en t o f th e au to m o b il e d i vi si o n s fro m th ei r

1
4 2 G ENERA L M O TOR S

ea rli est year s h elp ed to assur e th e m etam o rph o si s o f G en eral Mo to r s from

a co m b i n ati o n o r fed er ati o n o f fi r m s i n to a si n gle i n tegr ated en terpr is e .

A t th i s ti m e t oo so m e sm aller d i vi si o n s w er e co n so li d ated an d o th er s
, ,

84
dro pp ed T h e tw o car di vi si on s th at D ur an t h ad purch ased after th e
.

w ar — th e S h er i d an an d th e S cr i pp s B o o th
- — were li qui dated as w as th e ,

T r acto r Di vi sio n wh i ch h ad su ff er ed h eavi er l o sses than an y o th er si n gle

,

u n i t duri n g th e 1 920 c atastr o p h e .

By th e en d o f 1 92 1 mo st o f S lo an s pro po s al s h ad b een carr ied o u t

,
’
.

No w th e gen er al O ffi ce w as m uch mo re th an th e p er so n al h eadqu arter s

o f th e P r esi d en t No w th e n ew gen er al o fficer s assis ted by th e s taff
.
,

sp eci al i sts h ad m o r e ti m e to c o o rd i n at e appr ai se an d m ak e p o li cy fo r

, , ,

th e d i ff er en t d i v i si o n s an d fo r th e c o rp o r ati o n as a wh o l e Th e n ew an d .

expli c i t d efi n i ti o n o f th e r o l e o f th e g en er al o ffic e an d o f th e auto n o mo u s

o p er ati n g u n i ts an d o f th e r el ati o n s b etw een th em m ad e it p o ssi ble fo r ,

th e fir st tim e to i n tegr ate eff ec ti v ely th e r eso urc es — m an ager i al an d

,

tech n i cal as well as p h ysi cal — o f th e agglo mer ati o n o f pro duci n g ass em ,

blyin g m ark eti n g an d en gi n eer i n g faci l iti es an d p er s o n n el t h at D uran t

, ,

h ad ass em bl ed Y et th e co rp o r ati o n s l eaders wer e sti ll to h ave a gr eat

’
.

deal m o re wo rk to do b efo r e th e S lo an plan resulted in a sm o o th-ru n n i n g

o rgan i z ati on N o t u n ti l 1 2 d i d S l oan an d h is asso c i ates feel co n v i n c ed
.
9 5
th at th ey h ad an effici en t an d i n tegr ated admi n i str ati ve structure at G en
er al M o to r s .

PUTT I N G THE NEW S TRU CTU RE 1NTO O P ERA TI ON

A s th e i r executi ves at G en er al Mo to r s p u t th e n ew structure i n to

sen o

o p er ati o n d u r i n g th e fo ur y ear s fo llo w i n g 1 2 1 th ey h ad to d evo t e

9 ,

co n stan t careful th o ugh t to th r ee areas : th e defi n itio n o f di vi si o n al activ i

ti es so th at th e wo rk o f each d i vi si o n wo uld m o re eff ecti vely co m pl em en t
th at o f th e o th er s ; th e d ev el o p m en t o f accur ate an d eff ecti v e i n fo r m ati o n

to fl o w th r o ugh th e n ew stru ctur e ; an d th e bu i ld i n g o f f ur th er ch an n el s

o f c o m m u n i cati o n w h i c h w o uld br i n g to g eth er m o r e effic i en t ly th e effo rt s

o f th e gen er al staff an d th e o p er ati n g ex ecu ti v es In c arry i n g o u t th i s w o rk

.
,

S l o an w i th h is on ly sup er i o r o ffic er Pi err e du Po n t an d h is tw o cl o s est

, ,

asso ci ates D o n ald so n Bro w n an d j o h n Lee Pr att r ev eal ed a c o n ti n u i n g

, ,

di sp assio n ate r atio n al c alcul ati n g an d essen ti ally pr agm ati c appr o ach
, , ,

to th e pr o bl em s o f m an agem en t .

D efin in g D ivisio n al B o u n da ries

T h e fi r st o bro ad pr obl em s th at o f defi n i n g th e b o u n d ari es fo r
f th ese ,

t h e a c ti v i ti es o f each d i vi si o n w as cl o sely r el ated to m ark et s tr ategy

,
.

Co n c er n ed pri m ari ly w i th exp an d i n g o u tpu t Dur an t h ad m ad e l i ttl e ,

 P UTTI NG THE NE W STR UCTURE INTO O P ERA TI O N 14
3
atte mpt to rati on al pro duct lin e Th e di ff er en t di visi o n s com
develo p a .

p ered with o n e an o th er T h e co rp o r ati o n as yet h ad r eally n o lo w -pri ce

.

car fo r Ch evr o l et w as sti ll pr i c ed w ell ab o v e F o rd

85
, In 1 9 1 9 C h evr o let .
,

so ld o n ly p assen ger car s o r 7 p er cen t of th e total m ark et ; wh i le

,
86
Fo rd s o u tpu t w as c n t o f th e t o t al h fi gur
’
or
4 p
0 er e In 1
92 1 t e es .
,

were 4 p er cen t fo r Ch evro let an d 55 p er cen t for Fo rd Bu i ck a m o r e .

,

exp en si v e car w as o bv i o u sly as m uch th e m ai n st ay o f th e G en er al M o to r s

,

lin e in 1 92 1 as it h ad b een in 1 908 In 1 92 1 m o r e Bu i ck s th an Ch evr o l ets

.
,

wer e s o ld C adi ll ac whi l e pro duci n g th e l o west n um b er o f c ar s o f th e

.
,

fi v e m aj o r di vi si o n s m ade th e m o st exp en si ve pr o duct It i n di c ated its

, .

str en th by th e r el ati v ely s m all d ec li n e in o u tpu t dur i n g th e p o s tw ar

g
r ecessi o n O n th e oth er h an d th e pr o ductio n of b o th O ld s an d O akl an d
.
,

fell in 1 92 1 to less th an 1 p er c en t o f th e au to mo b i l es m ark eted -

.

Th e i n iti al step th en w as to br i n g th e qu ali ty o f th e pro ducts o f o th er

, ,

di vision s up to th o se o f Bui ck an d Cadi ll ac an d at th e s am e ti m e to , ,

place th e o ff er i n gs o f th e d iffer en t di visio n s in so m e k i n d o f r ati on al

relatio n sh i p T h is seco n d s tep w as don e by fo rm ul ati n g a p o li cy o f
.

bracketi n g th e m ark et th at is of h avi n g each di vi si on pr o duce for a

, ,

s p eci fi c pr i ce m ark et A s th e 1 923 A n n u al R ep o r t r eco rd ed : In 1 92 1 a

.

defi nite p ol i cy w as ado p ted Th e Co rp o r ati o n sh o uld establi sh a co m pl ete

.

li n e of m o to r c ar s f r om th e lo west to th e h i gh est pr i ce th at wo uld j u stify

” 87
quan tity pr o ducti o n O r as S l o an l ater d escr i b ed th e Str ategy :
.
,

Th e lin e o f pr o du cts th at w e h ad w as very defecti ve G en eral Mo to r s h ad .

a li n e o f car s, an d o f co urse it w as in a hi ghl y co m p eti tiv e p osi ti on It .

seem ed to m e t h at th e in telligen t appr o ach w o u ld b e to h ave a car at

ev ery price p o sitio n , j u st th e sam e as a gen er al co n du ctin g a cam p aign

w an ts to h ave an army at ev ery p o in t h e is lik ely to b e attack ed .

We h ad too m an y car s in some places an d n o cars in o th er places .

O n e o f th e fi rst th in gs w e did w as to develop a lin e o f pr o du cts th at m et

co m p etitio n in th e v ario u s p o sitio n s in w h ich co m p eti tion w as o fi ered
88
.

s am e A n n u al Rep o rt n o ted th at by 1 923 th e pr o duct l i n e h ad b een

Th e
“
r eali gn ed an d adj u sted an d comp eti ti on wh i ch h er eto fo r e existed with i n
th e car m an uf ac t ur i n g d i v i si on s h as b een large eli m i n at ed S uch a p o li cy
g .

mak es p o s si bl e coo rdi n ati o n n o t o th erwi se pr acti cal in en gi n eeri n g , ,

” 89
m an uf actur i n g an d p ar ti cularly in di str i bu ti on
, .

Th e pl ace o f th e di v i si o n s w as n o w pr etty w ell d efi n ed Cadi ll ac s o ld .

in th e h i gh est pr i c ed p o siti o n Bu i ck th e n ext fo llo w ed by O akl an d an d

-
, ,

th en O ld s w i th C h evr o l et in th e l arg est—v o lum e l o w est-pr i c e m ark et

, ,
.

T o pr o tect its p o si ti o n an d b ec au se o f an en o rm o u s p o ten ti al m ark et fo r

“

a car o f qu ali t y at a pr i c e b etw een th at o f th e Ch evr o l et an d th e O ld s

"

90
mo b i le th e co rp o r ati o n in 1 925 br o ugh t o u t th e six cyli n der Po n ti ac
,
- .

Wi th th e devel opm en t o f th e Po n ti ac th e G en er al Mo to rs b asi c li n e w as ,

1 44 G ENERA L M O TORS

s
e sen ti ally completed Th e en terpr is e w as appro achi n g its go al of i n cludi n g
.

”
in its l i n e a car fo r every pur se an d purp o s e
“
.

T h e n ew m an agem en t p ai d clo se atten ti o n to th e supp o r ti n g as w ell

as th e f r o n t l i n e d i v i si o n s By early 1 92 1 it b ecam e co n v i n c ed th at G en er al
.
,

Mo to r s sh o uld n o t exten d th e O ld D uran t str ategy of verti c al i n tegrati o n

to i n clud e o wn er sh i p o r c o n tr o l o f so urc es o f th e m o re b asi c suppli es an d

m ateri al s T h e A n n u al Rep o rt d ated M arch 26 1 92 1 p u t it th i s w ay :

.
,

T h us : mp ar atively sm all p o rtio n o f th e to tal tires pro du ced are co n

a co

su m ed b y th e au tom o b ile m an u factu rer, th e l arger p er cen tage b ein g so ld

directly to u sers of cars fo r replacemen t pu rp oses ; th e greater p art o f th e

pro du ctio n of sh eets an d o th er fo rm s of steel is co n sum ed b y trades o th er
th an th e au to m o tiv e in du stry, th er efo re in v estm en t in th ese fi elds h as n o t

b een m ade By th e p u rsu it o f th is po licy, G en eral Mo to rs C o rp o ratio n h as

.

b eco m e firm ly en tren ch ed in lin es th at rel ate dir ectly to th e co n str u ctio n o f
th e car, tr uck o r tr acto r, b u t h as n o t in v ested in gen eral i n du stries o f w h ich
a co m p ar ati vely sm all p art o f th e pr o d ucts is co n su m ed in th e m an u factu r e

o f cars
91
.

G en er al Mo to r s expli citly deci ded n ot to imitate th e str ategy H en ry Fo rd

w as d ev el o p i n g th at is to co n t r o l an d m ak e n early everythi n g th at
, ,

wen t i n to th e Mo del T Th ere wo uld b e n o great pl an t at G en er al Mo to r s

.

co mp arable to th e o n e th en r i si n g o n th e Ri ver Ro uge .

Next a p o li cy o n i n terdi visi o n al b i ll i n g w as establish ed Wh eth er th e

, .

pro ducts o f a di vi si on wen t to o th er G en er al Mo to r s di visi o n s o r o u tsi de ,

th ey w er e so ld at th e go i n g m ark et pr i c e NO l o n ger w er e pri ces b etween

.

d i vi si o n s to b e n ego ti ated ; i n si d er s wo uld p ay th e sam e as o u tsi der s .

“
Wh ere th ere are n o sub stan ti al s ales o utsi de Do n ald so n Brown p o i n ted
,

o u t in 1 2 such as w o uld establi sh a c o mp etiti v e b asis h buy i ng

“

9 7 , t e ,

di vi sio n determi n es th e co mp eti ti ve p i ctur e — at ti mes p ar ti al r equi re

m en ts are act u ally purch ased fro m o utsi de s o urces so as to p erfec t th e
com p eti ti ve S i tu ati o n ” 92
Un less such co mp etiti ve co n di tion s exi sted h e
.
,

co n ti n u ed it wo uld b e di fficul t to evalu ate th e p erfo rm an ce of th e p arts

,

an d acc ess o r i es d i v i si o n s If th e pr i c e wh i c h o n e d i v i si o n ch arged an o th er

.

w as h i gh er th an th e pr i ce in th e o p en m ark et it s uggested th at th e selli n g

,

d i vi si on w as in eflicien t o r th at it w as i n creasi n g its pro fi t at th e exp en se

o f th e buy i n g d i v i si o n In th e l atter c as e th e fi n an ci al r eco rd in term s o f
.
,

r eturn o r i n vestmen t — th e b asi c cri teri o n in appr aisi n g di vision al p er

fo rm an ce — w o uld n o t r eflect accur ately th e u se o f th e r eso urc es o f ei th er
di vi si o n A s a furth er ch eck th e Execu ti ve Co mmittee as early as O ctob er
.
, ,

1 2 1 ask ed eac h d i v i si o n to m ak e a d etail ed r ep o r t o f its r eas o n s fo r m ak

9 ,

in g o u tsi d e purch as es of i tem s wh i ch co uld h ave b een b o ugh t w ithi n th e

93
co rp o rati o n .
P UTTI NG T HE NE W STR UCTURE INTO O P ERA TIO N

Th e D ev elop m en t f
o S tatistical an d F in a n cial Co n tro ls
S uch r efi n em en ts in th e apprai sal o f di vi si o n al p erfo rman ce co uld o n ly
co m e h o wever af ter th e co rp o r atio n h ad so lved o n e o f its to u gh test ch al
, ,

len ges — th e d ev el o p m en t o f accur ate u n i fo r m d ata o n c o sts pr o du cti o n

, , ,

i n co me an d so fo r th T h e man m o s t resp o n si bl e fo r m asteri n g th i s ch al

, .

len ge w as D o n ald so n Bro wn th e fo rmer T r easurer o f th e du Po n t Co m

,

p an y wh o m Pi err e du Po n t h ad br o ugh t with h im to G en er al Mo to r s .

T h e bu i ld er o f m an y o f du Po n t s b asi c fi n an ci al an d stati sti c al co n tro l s

’

Bro wn in 1 92 1 w as pro b ably as well v er s ed as an yo n e in th e Un ited

’

S tates in th e d evelo p men t an d u se o f th ese n ew adm i n i str ati v e to o l s His .

pi o n eeri n g achi evemen t s at G en eral Mo to r s th u s pr o vi d e a u seful i llu s

tr atio n o f th e cr i ti c al p ar t th at r ep o r ti n g an d st ati sti c al p ro c edur es pl ay in

th e desi g n by wh i ch c o m plex m o der n i n du str i al en terpr i ses h av e b eco m e

,

ad m i n i ster ed .

Bro wn an d h is gen er al fi n an ci al staff c arri ed o ut th ei r wo rk in tw o

stag es .In 1 92 1 an d 1 922 th ese execu ti v es co n cen tr ated o n d evelo p i n g
,

data an d pro cedur es es sen ti al to th e gen eral o ffice if it w as to o b tai n s om e

so r t o f a d m i n i st r ati v e surv ei ll an ce o v er th e m an y d i v i si o n s T h e l ack o f .

suc h i n f o r m ati on in b o th th e gen er al o fli ce an d th e d i v i si o n s h ad b een o n e

c au se fo r th e 1 920 cri si s T o r es to re o rder an d at th e same ti m e to preven t

.

si m i l ar d an ger s in th e f utur e Bro wn an d his assi stan ts b egan by bu i ld i n g

,

i nfo rm ati o n al pro cedur es to co n tro l th e pur ch asi n g an d pro ducti o n sch ed
ul es o f each di vi si o n Nex t th ey devi sed m eth o d s fo r th e mo re s y stem ati c
.
,

allo c ati o n o f c ap i tal an d o th er r es o urc es an d f or th e m o r e effec ti v e u se o f

exi sti n g s uppli es o f c ash D ur i n g th i s fi r st stag e th ey w er e al so w o rk i n g

.
,

ac ti vely to i n sti tu te u n i fo r m acco u n ti n g pr o c edur es .

A ft er 1 922 th e fi n an ci al staff co n cen tr ated m o r e on r efi n i n g th ei r d ata

,

an d o n perfec ti n g th ei r i n fo r m ati o n a n d meth o d s D ur i n g th i s sec o n d .

s tage th ey p ai d mo r e an d mo r e atten tio n to th e d evelo p m en t o f d ata

,

an d co n tr o l s d eali n g w i th an ti ci p ated c o n d iti o n s ra th er th an to p ast o r

curr en t p erfo rm an c e T h e co o rdi n ati o n o f pro duct flo w fr o m th e purch as e

.

o f suppl i es to th e fi n al sal e to th e cu sto mer th e all o c ati o n o f r eso urc es th e

, ,

fo rm ulatio n o f o th er p o li ci es an d ev en th e appr ai sal o f th e p erfo r man ce o f

,

th e d i v i si o n s a n d th e co rp o r ati o n as a w h o l e all r ested i n cr easi n gly o n in

,

fo rmatio n ab o u t esti m ated o r fo r ec asted co n d iti on s G en eral M o to r s .

mo ved f ro m b asi n g admi n i str ati ve d ec i si o n s an d ac ti o n s o n pr esen t o r p ast

p erfo rm an ce to mak i n g th em o n d ata co n cer n i n g an ti ci p ated co n ditio n s in
o rd er to i n t egr ate its i n ter n al a ct i v iti es w i th ch an gi n g m ark et an d o th er

ex ter n al co n d iti o n s w i th mo r e c er t ai n t y .

B ec au se an i n ven to ry cr i sis h ad pr ecip i tat ed th e c al ami ti es o f 1 920 ,

Bro wn s i n iti al mo ve w as to i mpro ve con tro l s o ver purch asi n g an d p ro

’
1 46 G E NERA L M O TO RS

ducti o n sch edules an d to co o rdi n ate th ese mo re clo sely with m ark et
dem an d Even b efo re h e an d Pi err e du Po n t h ad mo ved to G en eral
.

Mo to r s Step s h ad b een taken to r egai n co n tro l o ver th e i n ven to ri es In

, .

O c to b er 1 920 after th e m ark et h ad d i si n tegr ated an d wh en c ash suppl i es

, ,

o f th e c o rp o r ati o n w er e b eco m i n g d an gero u sly lo w Jo h n L ee Pr att h ad ,

b een placed in ch arge o f an I n ven to ries Co m mittee He w as gi ven 94

.

broad p o wer s His co mm i ttee w as to ex am i n e th e i n ven to ries o f all di vi

.

si o n s an d if it f o u n d an u n i t w i th a surplu s o f goo d s th at u n i t w as to
, y ,

m ak e n o mo r e pur ch ases wi th o ut th e Co mm i ttee s appro v al Pr att h ad

’
.

th e sam e au th o r i ty o v er p ayr o ll s T h e co rp o rati o n w as ru n n i n g sh o r t

“
.

”
o f ca sh Pr att l ater testi fi ed an d w e w er e try i n g to preserve th e c ash
, , .

O n e o f Pi err e s very fi r st acts after tak i n g th e presi d en cy w as to en l arge

’

th e m em b er sh i p an d th e du ti es o f P r att s c o mm i ttee
95
Wi th Bro wn an d
’
.

M L Pren sk ey th e G en eral Mo to rs T reasurer as n ew mem b er s th e

. .
, , ,

C o mm i ttee w as to co mpute th e wr ite-do w n o f ex is ti n g i n v en to ry an d to

adj u st th e ex is ti n g sch edules so th at each d i v i si o n w o uld pur ch ase o n ly

wh at w as i mm edi ately n ecessary F i n ally th e C o m mittee w as to r ecei ve

.
,

fro m each di vi sio n an esti m ate o f s al es fo r th e n ext fo ur m o n th s an d to

revi ew all th ese esti m ates each m o n th T h ese fo rec asts s o o n pro vi ded th e .

i n fo rmatio n wi th wh i ch co n tro l o ver i n ven to ry co uld b e mai n tai n ed T h i s .

,

in tur n p erm i tted th e d i sso lv i n g o f Pr att s co mm i ttee in A pr i l

’

, ,

S u ch fo rec asts sy stem ati c ally d evelo p ed b ec am e th e b asi s fo r a l arge

, ,

p ar t o f th e stati sti cal co n tro l s at G en er al Mo to r s T h e di vi sio n s esti m ated .

th e sales fo r each o f th e n ex t fo ur m o n th s an d th e v o lu m e o f pr o du cti o n

a n d pr o b abl e exp en d i tur es for go o d s an d l ab o r n eed ed to m eet th ese

sch ed u l es O n ly after th e gen er al o ffi c e appr o v ed th e fo r ec ast co uld th e

.

d i vi si o n pur ch ase th e n ecessary suppli es T h e actu al estim ati n g selectio n .

,

o f suppl i es an d purc h asi n g l i k e th e pl an n i n g o f fl o w an d all o cati o n o f

, ,

sto ck r em ai n ed th e r esp o n si b i l i ty o f th e d i v i si o n m an ag er s By 1 2
, 9 3 th ese .
,

fo r ec asts sub m i tted o n th e 25 th o f each m o n th c o v eri n g th e curr en t m o n th

an d th e succ eed i n g th r ee h a d co m e to i n clud e th e amo u n t o f i n v estm en t
“

,
” 97
at th e en d o f each m o n th in pl an t an d in c ap i tal w o rk i n g i tem s as w ell ,

as th e esti m ates o f i n ven to ry o u tpu t an d n ec essary purch ases T o suppl e

, ,
.

m en t th ese r ep o r ts th e d i v i si o n s w er e so o n sub m i tti n g o th er s m o n th ly

,

98
wh i ch co vered curr en t fi n an ci al p erfo rm an ce .

D ur i n g th ese sam e m o n th s th e to p ex ecu ti v es at G en er al Mo to r s fi n ally

,
99
t i t ff c t y t m ti c pr c dur f th ll c ti n o f cap i tal f u n d s
p u n o e e s s e a o e es o r e a o a o .

A ppr o pri ati o n r eq u ests n o w as earl i er in th e du Po n t C o m p an y h ad to

, ,

i n clud e d etai led pl an s o f th e bu i ld i n gs equip m en t an d m ateri al s r equ i r ed

, , ,

th e am o u n t o f cap i t al n eed ed fo r a n d th e esti m ated sa vi n g s to b e ach i ev ed

,

by th e r equ est A G en er al Man ager s sig n atur e w as su fficien t au th o riz a

.
’

ti o n fo r a r equ est b el o w a c er tai n am o u n t A b o ve th at su m th e si g n ature .

P UTTING THE NE W STR UCTURE INTO O P ERA TI O N 1
47
o f th e G ro up Execu ti ve an d Presi den t as w ell as th e M an ager w as re
qui red L arger am o u nts s ti ll called fo r th e appro val o f th e Executi ve
.

Co mmi ttee an d even greater o n es th at o f th e F i n an ce C o mm i ttee A ll th e .

large proj ects were fi r st s ubj ect to revi ew by an A ppro pri atio n s Co m
mittee, th e d i r ec t d esc en d an t, u n do ub tedly, o f t h e A ppro pr i atio n Co m
m ittee th at D uran t h ad ask ed P r att to c h ai r wh en th e l atter fi r st c ame to
G en eral Mo to r s . com i n g to fi n al decision s th e A ppr o pri atio n Co m
In ,

m ittee an d th e gen er al o ffice rel i ed o n co n s tan t ly i m pro v ed fo rec asts o f

th e o v er -all fi n an c i al an d ec o n o m i c si tu ati o n .

Wi th ren ewed co n tro l o ver lo n g-term an d s h o rt-term exp en ditures ‘

c ame a sim i l ar co n tro l o f th e co rp o ration s c ash r eso urces In stead o f each

’
.

d i visio n h an dli n g its o w n c ash as it h ad do n e b efo re 1 92 1 it n o w pl aced

, ,

i n co mi n g recei p ts in o n e o f m o re th an a h u n dred b an k s in wh i ch th e
co rp o rati o n h ad pl aced dep o si to ry acco u n ts in vari o u s p arts o f th e co u n
1 00
try . T h e d i vi si o n s h ad n o co n tro l o v er th e d ep o si to ry acco u n ts an d all ,

di sbur sem en ts fro m them were h an dled by th e F i n an ci al S taff in th e gen

er al o ffic e U n d er s uch a sy s tem th e tr an s fer o f f u n d s f ro m o n e p art o f
.
,
/

th e co rp o r atio n an d th e c o u n try to a n o th er w as ex tr em ely easy an d alm o st

au to m ati c Wh en ev er d ep o si ts in o n e b an k exc eed ed a set m ax i m u m th e

.
,

surplu s w as au to m ati c ally tr an sferr ed by telegr ap h to o n e o f sev er al

b an k s selected to h o ld th ese surplu s acco u n ts an d wh en ever a d i vi si o n ,

n eed ed f u n d s it w o uld n o ti fy th e gen er al o ffic e w h i c h w o uld t h en t el e ,

graph a tr an sfer fro m o n e o f th es e reserve o r surplu s acco u n ts S uch a sys .

tem h ad sev er al adv an tag es bu t th e m o s t i m p o r t an t w as th e co n

,

st an t avai l ab i l i ty o f a l arg e p o o l o f c ash A t th e s am e ti m e i n terd i v i si o n al

.
,

b i lli n g w as m ade m uch easi er O n e di vi sio n b i ll ed an o th er o n a wh ite sli p

.
,

wh i ch th e selli n g di vi si o n sen t to th e Co m ptr o ller w h o ch arged th e buyer ,

an d cr ed i ted th e s ell er T h i s p er m i tted sett l em en t w i th o u t an y exch an g e

.

o f c ash.

Th e cr i sis m ade p o ssi ble o n e f ur th er adv an c e to w ard sy stem ati c gen er al

sup erv i si o n A t l ast u n i fo r m acc o u n ti n g pr o c edur es w er e i n sti tu ted in a ll
.
,

p arts o f th e co rp o ratio n A Di vi sio n al Co mp tro ller wh i le rep o rti n g to h is

.
,

G en er al M an ager o n ro u ti n e m atter s n o w fo ll o w ed th e gu i d an ce o f th e
,

fi n an c i al o fficer s in th e gen er al o ffi ce o n s tan d ard s pr o cedur es an d m eth , ,

101
o ds. A fter 1 92 1 th e n ew Co st A cco u n ti n g S ecti o n drew up acco u n ti n g
,
£

pro cedures fo r all di vi si o n s D ata fro m th es e pro c edures gave th e di vi sio n

.

man ager s as w ell as th e gen er al o ffi c e a rel ati v ely reali sti c p i c tur e o f j u st
wh at were co sts an d th erefo re pro fi ts No w fo r th e fi rst ti m e th e gen er al
.
, ,

o ffi c e h ad th e b asi c i n fo r m ati o n n ec essary fo r d eter m i n i n g w h eth er c o sts

were in li n e with m ark et pri ces an d wh eth er each u n i t w as m ak i n g a

sati sf acto ry r etur n o n its i n v estm en t
1 02
.

But accur ate acc o u n ti n g w i th its r eal i sti c ev alu atio n o f pr o fi t an d lo ss

1 48 GENERA L M O TORS

requi r ed m or e th an un ifo rm pro c edur es an d im pro v ed data In th e auto .

mo b il e in dustry wi th its h i gh vo lum e its r elati vely h i gh un i t pri ce an d

, , ,

its gr ea t pl an t cap ac i ty th e co st o f a sin gl e un i t v ar i ed dir ectly wi th

,

vo lum e of o u tpu t Un til full cap aci ty w as r each ed th e m o r e car s pr oduced

.
, ,

th e lo w er th e uni t co sts ; wh il e th e l o wer th e v o lum e th e h i gh er th e co sts , .

Co sts an d th er efo r e p ri ce an d pr ofi t w er e dir ect ly ti ed in wi th vo lume

, , .

V o lum e in turn w as dir ectly r el ated t o th e d em an d for au to m o b il es

, , ,

whi ch fl uct u ated wi dely fr o m seaso n to seaso n an d fr o m y ear to year , .

T o d eter min e co st s in th e f ace o f fl uct ua tin g d em an d Br o w n us ed th e ,

co n cep t o f stan dard v o lum e o r in hi s wo rds th e establi shm en t of a

, ,
“

pe rc en tage r epr es en tin g an assum ed n o rm al aver age r ate of pl an t opera

” 1 03
ti on ,o v er a l o n g per i o d o f t im e .

This determ in es B r
mm en ted early in 1 9 2 4 ] th e so—called stan dar d
[ ow n co

volum e w h ich is accep ted as th e b asis u po n w hi ch co sts w ill b e m eas u r ed ,

an d u po n w h ich th e m argin o f pro fi t is d etermi n ed as n ecessary to affo rd

a giv en av erage r ate o f r eturn o n cap ital em p l oy ed Th e estab li sh ed percen t .

age m ust r efl ect th e u n av o ida ble flu ctu a ti o ns o f b us in es s w hi ch r en der an

ev en r ate o f pr od u ctio n impo s sib le, an d, as f ar as pr acticab l e, sh o u ld r e re

p
sen t th e eco n o mi c situatio n o f th e in dus try , r a th er th an an y ab n o rm al S it ua

ti o n w hi ch mi gh t be r eco gniz ed as p ertain in g to a giv en p lan t .

A t G en er al Mo tor s Br o wn co n ti n u ed stan d ard vo lum e w as set at 80

, ,

c n t o f pl an t cap aci ty M n u f act ur i n g co sts or d rd f c o ry

“

p e r e a . s tan a a t
”
burden an d h er e th e cri ti cal co sts wer e th ose th at v ari ed p ar ti ally wi th
,

si z e o f o u tpu t co uld be est im ated at stan d ard v o lum e If a ct u al v o lume

, .

w as bel o w stan dar d co sts w o uld th en b e ch arged again st profi ts as un ab

,
”
so rbed burden By thi s g en er ally accep ted m eth od Br o wn s as sist an t
.
“

,
’

A lbert Br adl ey wr o te in 1 926 th er e is av o i d ed th e di sto rt i on o f co sts an d

“

, ,

in v en to ry v alu es wh i ch w o uld r es ul t f r o m s pr eadin g a fix ed o v erh ea d o ver

” 1 04
a fl uct u atin g v o lum e In 1 924 l ess att en ti on w as p ai d t o m ar k et in g
.
,

expen ses th an to m an uf ac turi n g co sts H er e Br o w n m er ely u s ed a s tan d .

”
ard all o w an c e f o r co mm erci al expen ses o f 7 p er cen t o f sal es b ase d o n
“

p ast expe ri en ce ”5
Wi th co sts for a stan d ard vo lum e of pro ducti on an d
.

a St an da rd all o w an c e f o r co mm erci al purpo ses Br o w n an d hi s asso ci ates ,

” ”
w er e abl e to determi n e fo r each pro duct a stan d ard o r b ase pri ce by “ “

wh i ch to see wh eth er co sts w er e in l in e wi th th e act u al go i n g m ark et

pri c e .

V o lum e afi ected co sts an d pro fi ts in still an o th er w ay It al ter ed th e .

r ate o f tur n o v er o n in ves ted cap i tal If sal es wer e h i gh th e cap i tal used
.
,

in th e pro duct i o n o f each u n i t co ul d b e tur n ed o ver m o r e r ap i dly th an if

t h e d ea l er s w er e h av in g difi cu lties 1 n m o v i n g th ei r pr od uct s Th e o v er -all .

r ate o f r eturn d epen ded as Br o wn h ad realized much earlier at du Po n t

, ,

o n bo th th e r ati o o f s al es to pr o fi ts an d th e r ati o o f s al es t o i n v estm en t .

P UTTI NG T HE NE W S TR U CTURE I NTO O P ERA TI O N 1
49
In fi gur in g pro b abl e in co m e , an a ccur ate estimate o f sa e l s h ad be co m e all

S in c e th eplan ni n g o f fi n an ci al r equir em en ts (th e all o cati o n o f f un ds f or

wo rki n g an d cap ital expen di tur es ) depen ded o n an ti ci p ated in co m e th es e ,

f act o r s lik e th e settin g o f pr o duct i o n sch edul es l abo r n eed s th e purch as

, , ,

ing o f suppli es an d th e al l ocati o n of o th er r eso urc es h ad co m e t o d ep en d

, ,

o n a ccur at e an d l on g-t er m f o r ecasti n g In early 1 2 th l g -t er m est i

9 4 e o n .
,

m ates at G en er al Mo to r s w er e stil l cal cul ated w ith littl e pr eci si o n Br o wn .

descri be d th e m eth od in th i s w ay in o n e o f a ser i es o f arti cl es o n th e ‘

admi ni st r ati o n o f G en er al M o to r s th at h e an d o th er ex ecu ti v es wr o t e m

1 92 4 in th e pe ri o di ca l Ma n a emen t a n d A dmin istra tio n :

g ,

In De cem ber o f e v ry year

e , ea ch division
pr es en t an o u tlin e is r equ ir ed to

o f its v iew o f pr o b ab le o er atio ns f o r th e su cceedi n y ea r em b o dyin g

p g ,

estim ates o f sal es ear ni n s an d cap ital r equ ir em en ts T h ese o u tl i n es ar e in

g , , .

”
th r ee f o rm s simi sti c r pr g m i im m x
“
ie : ti ectation
p es, . e
. esen n a n u e
, p ,

co ns erv ativ e r epres en tin g w h at is con sider ed a lik ely con dition an d
“

, ,
”
op tim istic repr esen tin g w h at th e n am e imp li es w ith p r odu ction an d sal es
, ,

cap acity as a limi ta ti o n

1 07
.

A s th e V i ce-Pr esi d en t in c h ar ge o f F in an ces str es sed th es e ,

an n u al lik e ,

th e sh o t -te
r rm f o ur m on th s ’
f o r ecasts, w er e
r z d by th e cen tral o ffi ce an d co m p ar ed w ith cu rr en t an d p ast p er
sc u tin i e

f o rm an ce att en tio n o f th e pr op er o m
, cial s be in
g ca ll ed t o an y ab n o rm ali ti es

or m ar k ed deviatio ns fr o m w h at m i h t b e d eem ed a co n s erv ativ e sal es ex

g
p ec t atio n E x.
p e r i en ce h as l ed t o th e es t ab li sh m en t o f st an d ar ds o r w o r k in g
cap ital r eq u ir em en ts in r el ati on t o v ol u m e o f b us in ess an d th e f o r ecasted

in v estm en t in r eceiv ab l es an d in v en to ry ar e car efu lly ch eck ed agains t su ch

stan d ar ds all o w an ce be in m d f o r season al fl u ctu atio n s T h e ten den cies o f
, g a e .

m an u f actur in g co sts an d o f sell in g an d adm in i str ativ e exp en ses ar e o b

serv ed an d r o fi ts ar e an alyzed w ith r f r t th pri i licy l aid
, p e e en ce o e ,
c n
g p o

dow n as go vern in g th e op eration s o f a giv en div ision .

At very tim e th at Br o wn w as wr itin g hi s ar ti cl es in wh i ch th e

th e ,

tr em en do us im po rt an ce o f a ccur ate estim atin g w as em p h asi z ed an ,

expe ct ed slum p in th e au to m o b il e m ar k et i n di ca ted a cr iti cal w eak n ess in

th e co rpo r atio n s f o r ecasti n g m eth o ds In th e spr i n g an d summ er o f 1 924

’
.
,

car pr o ducti on dr o pp ed Off an d m o r e f o r G en er al M o t o r s th an f o r m o st

,

com p ani es Th e fi r st h alf o f 1 923 h ad witn es sed th e co rpo r ati o n s A n n ual

.
,
’

R epo rt f o r 1 924 expl ain ed an u npr eceden ted d eman d fo r th e C o rpo r a

“

ti on s pr o ducts an d an in ab ili ty t o m eet thi s d em an d Thi s r esu l ted in

’
.

th e lo ss o f sal es an d so m e di ssati sfa cti o n o n th e p art o f th e Co rp o r ati o n s

’

1 08 ”
deal er o rg an i zati o n o n a c co u n t o f failur e to mak e adequate d eli v ery .

So o u tput w as k ep t h i gh an d s al es f or 1 923 w er e th e l ar g es t in G en er al
,
1 50 G ENERA L M O TORS

Mo to r s h i sto ry In an ti cip ati o n o f a l arge spri n g dem an d pro ductio n w as

’
.
,

m ai n tai n ed at c ap aci ty dur i n g th e fi r st qu arter o f 1 924 .

A s th e seco n d qu ar ter p ass ed S lo an b eg an to su sp ect th at supply w as

,

b egi n n i n g to exceed dem an d In May h e deci ded to i n vesti gate by t ak

.
,

in g a tr i p west C r o wded d ealer l o ts in S t Lo u i s an d th en in K an sas Ci ty

. .

1 09
co n vi n ced h im an d h e o rdered i mm edi ate cuts in pro duc tio n
, .

T h e fai lur e t o an ti ci p ate a dro p in d em an d an d th en to act qu i ckly o n it ,

a fai lur e th r eaten i n gly r em i n i sc en t o f th e f all o f 1 20 bro ugh t sw i ft acti o n

9 , .

O n July 2 after r ep o rti n g o n h is tr i p w est to a m eeti n g o f G en er al Mo to r s

,

purch asi n g agen ts S lo an to ld th em th at m ach i n ery is b ei n g set up to

,
“

h ave th e pro ducti on sch edules pr o p erly co n tro ll ed an d co n tro l i n si st ed

” 1 1°
up o n . T h e n ew po l i cy c all ed fo r ten day r ep o r ts f ro m all th e co rp o r a -

ti o n s d ealer s Fr o m th ese r ep o r ts existi n g fo r ec asts c o uld b e qu i ckly ap

’
.
,

pr ai sed an d pro ducti o n adj u sted to an y sudden ch an ges in dem an d S lo an .

pro vi ded a furth er ch eck o n th e actu al p erfo rm an ce o f th e m ark et by

o b tai n i n g p er i o d i c r ep o r ts f r o m R L Po lk an d Co m p an y o n n ew car . .

111
regi str ati o n s By pr o vi di n g r egi str atio n fi gures o n all m ak es o f n ew
.

car s th ese rep o r ts pr esen ted a cl ear p i ctur e o f j u st wh at sh ar e o f its

,

m ark et each o f th e di ff er en t G en eral M o to r s d i vi si o n s en j o yed an d if

an d h o w thi s sh ar e w as ch an gi n g .

T h i s co n stan t flo w o f accur ate i n fo r m atio n al so s uppli ed a mo r e realis

tic b ase fo r sub s equ en t fo r ec asts In o u tl i n i n g G en er al M o to r s m eth o d s
.

to th e A m er i c an M an agem en t A sso c i ati o n early in 1 926 A lb er t Br adl ey , ,

descri b ed th e n ew tech n i que s ucci n ctly :

T h e fi rst an dr in ci p
con tr o llin
l i n t h es t b li sh m n t f G en er al Mo to rs
g p e e a e o

pro du ctio n sch edu les is th at th ey sh all b e b ased ab solu tely u po n th e ab ility
o f its distr ib u to r s an d d ealers t o sell cars to th e p u b lic Each car d iv isio n .

n o w r eceiv es fr o m its d ealer s ev ery ten d ays th e actu al n u m b er o f car s

delivered to co n su m ers th e n u mb er o f n ew o rder s tak en th e to tal o rders

, ,

o n h an d an d th e n u m b er o f n ew an d u sed cars on h an d
, Each ten -day .

p erio d th e actu al resu lts are co mp ared w ith th e mo n th s fo recast an d each ’

m o n th as th ese fi gu res are received th e en tir e S itu atio n is carefu lly an aly zed
, ,

to see w h eth er th e o r i in al estim ate w as too h i h o r too lo w If it is deci ded

g g .

th at th e estim ate w as too h igh th e pr o d u ctio n sch edu le is imm ed iately

,

redu ced If o n th e o th er h an d it is fo u n d th at th e retail dem an d is greater

.
, ,

th an h ad b een estim ated th e p ro d u ctio n p r o gr am is in cr eased p r o v ided t h e

, ,

p lan t cap aci ty p e r m its In th is w a y t

.h e p r o d u c t io n r
p g o r am is co m p a r ed

m on th b y m o n th in f act ten day p erio d b y ten -day p erio d an d th e meces

, ,
-
,

sary a dj u stm en ts in th e r o du ctio n sch edu le an d in th e estim ates o f t h e

p
year s v o lu m e D iv isio n al In dex ) are m ade In o th er w o rds in stead o f
’
.
,

attem tin
p g t o l a y d o w n a h a rd a n d f a st pr o d u c ti o n r
p g o r a m a y ea r ah ea d

an d stick to it r e ar dless o f th e r etail dem an d th e C o r o r atio n n o w fo llo w s

g p ,

th e p o licy o f k eep in g p r o d u ctio n at all tim es u n der co n tr o l an d in co rrect

P UTTI NG THE NE W STR UCTURE I NTO O P ERA TI O N I
S I

align men t w ith th e in dicated an n u al retail d em an d , an d w ith th e m in im u m

accu m u latio n o f fi n ish ed pr o du cts in t h e h an ds o f dealers fo r seaso n al re
q u irem en ts, w h ich th e flex ib ilit
y o f th e p r o d u ctio n
'

sch ed u le p erm it s
1 12
.

No w th e gen er al o ffi ce b eg an p cl
too s er atten ti o n to th e v al i d i ty an d
ay

accur acy o f th e lo n g-ter m d i v i si o n al fo r ec as ts an d to m ak e up i n d i c es fo r

,

th e co rp o r ati o n a s a w h o l e By 1 925 th e d i v i si o n al an d g en er al o ffice staff s

.
,

wer e dr awi g up co mpreh e si ve o ver all pl an s fo r all o p er ati n g u n i ts

n n -
,

pl an s b ased o n c arefully th o ugh t—ou t lo n g—term fo r ecasts Th es e an n u al

,
.

”
Pr i ce S tud i es so o n b ec am e o n e o f th e m o st eff ec ti ve w ay s by w h i ch th e
“

gen er al o flice co uld o ver see an d ch eck th e acti vi ti es o f th e di vi sio n m an

ager s w i th o u t ser i o u s ly i m p i n gi n g o n th e l atter s au th o r i ty an d res o n sib il
’

p
ity A gai n A lb ert Bradl ey pro v i d es th e b est d es cr i p ti o n
.

Th e practice o f G en eral Mo to rs Co rpo ratio n is fo r each car divisio n so me ,

tim e p rio r to th e b egin n in g o f th e sales year t o su b m it to th e Execu tive ,

”
C o mm ittee a so -called Pr ice Stu dy w h ich em b o dies th e D ivisi o n s esti
“ ’

m ates o f sales in u n its an d in do llars co sts pro fi ts cap ital r eq u ir em en ts

, , , ,

an d r etu r n o n in v estm en t b o th at S tan d ard V olu m e an d at th e f o recast

,

rate o f o peratio n s fo r th e n ew sales year all o n th e b asis o f prop osed price

,
.

Th is Price S tu dy in ad ditio n to servin g as an an n u al fo recast also develo p s

, ,

t h e S tan d ard pr ice o f each pr o d u ct ; th at is th e pr ice w h ich w ith th e p lan t

, ,

o p er atin
g at s t a n d a rd v o l u m e w o,u ld pr o du ce th e adj u d ged n o rm al av er a e
g
rate o f retu rn o n cap ital w h ich h as b een referred to as th e econ om ic retu rn
atta in ab le
. Pro po sed prices can th erefo re b e d irectly co m p ared w ith t h e
stan d ard prices w h ich ex ress th e C o r o r atio n s f u n d am en tal p o licy an d a
’

p p ,

m eans is th ereb y pro vided fo r th e m easu rem en t o f dep ar tu res f ro m th e

po licy w h ich are n ecessitated b y co mpetitive co n ditio n s an d o th er practical
co n sid er atio n s
113
.

As Br adley p o i n ted o u t th e estim ate o f th e year s do m esti c sales o n ’

wh i ch th e pri ce studies rested depen ded o n at least fo ur m aj o r facto r s

,

th e gro w th o f th e i n du stry seaso n al v ar i ati o n th e c o n d i ti o n s o f g en er al

, ,

bu si n ess an d acti vi ti es o f co mp eti to r s With th ese f acto r s in m i n d th e

, .
,

i n i ti al sales esti m ate dep en d ed o n th e n u mb er o f c ars wh i ch are li k ely

“

”
to b e so ld to th e publ i c by th e en ti r e au to m o ti v e i n du stry an d th i s fi gur e

w as b ased pri m ar i ly up o n ac tu al exp er i en ce fo r th e l ast th r ee y ear s after

“

gi vi n g c areful co n si derati o n to th e pr o b able n um b er o f au to m o b i les

n eeded to r epl ac e th o se w h i ch w i ll b e w o r n o u t o r o th erw i se d estr o y ed

duri n g th e co m i n g y ear an d an appr ai sal o f th e gen er al bu si n ess si tu a

,
” ”
tio n fo r th e c o m i n g y ear T h en f ro m th is fo r ec as t a D i vi si o n al In d ex
“
.
,

w as dr aw n up b as ed o n th e exp ec tati o n s for each d i v i si o n tak i n g i n to ,

co n si der atio n th e to tal am o u n t o f bu si n ess av ai l able wi th in its resp ec ti ve

pr i ce gro up an d th e co mpeti ti ve situ ati o n T h u s Br adley exp ected th at :
.
,
1 52 GENERA L M O TORS

A fo recastin g pro gram sh oul d serve tw o sep ar ate an d quite distin ct gen
eral u rpo ses In its b r o ades t as ects th e f o r ecast afi or ds a m eans o f
p .
p , g gau

in g an op eratin g pr o gram in term s o f th e fu n dam en tal po licy o f th e Co r

o ratio n r e ar din g t h e r at e o f r etu r n on ca ital in v es tm en t a s r el ated t o th e
p g p ,

p r icin
g o f th e
p r o d u ct an d th e co n ditio ns u n der w i ch a dditio n al ca ital
, h p
w ill be pro v ided f o r exp an sio n T h e seco n d an d th e mor e fr equ en t use o f
.
, ,

a f o r ecast is as a too l f o r co n tr o l o f cur r en t o p er atio ns

114
.

B eca u se o f th e h eav y i n v estm en t in in v en to ry becau se o f th e sev er al stages ,

i v lv d
n o e in t h e o v er all m an uf a ctur in g an d sel li n g o f th e m ass-pr od uced
—

au to m o b i l e an d b eca u se o f th e r el ati v ely l arg e i n v es tm en t in p lan t equi p

, ,

m en t an d p er so nn el at ea ch stage sch edu li n g an d o th er d eci si o n s co n

, ,

c ern in g th e coo rdi n ati o n of pr o du ct fl ow at G en er al M o to r s cam e t o r est

o n an ti ci p at ed r ath er th an o n pr es en t co n di ti o n s wh i l e th e act u al fl o w ,

cam e to be adj us ted ev ery ten d ays to actu al m ark et dem an d By th e sam e .

t o k en th e l o n g term all o ca ti on o f r es o urces as w ell as th eir curr en t us e

,
-

w as in cr easi n gly set by an estim at e o f th e f u tur e si tu ati o n F o r eca st s .

,

th er efo r e b ecam e essen ti al to strategi c pl ann in g an d at th e sam e tim e

, , ,

pro vi ded th e g en er al O ffi ce an d th e di vi si o n al ex ecu ti v es t o o wi th a

, , ,

m ean s to appr ai se o per ati n g a ct i viti es .

In th i s w ay th en b etw een 1 92 1 an d 1 925 G en er al M o to r s h ad w o rk ed

, ,

o u t h i gh ly r ati o n al an d sy stem ati c pr o c edur es th at p er m i tted it o n th e ,

o n e h an d t o c o o rdi n at e an d appr ai se th e o p er atin g di v i si o n s an d t o pl an

,

po li cy for th e co rp o r ati o n as a wh ol e an d o n th e oth er h an d to assu r e , , ,

a sm oo th pr o duct fl o w f r o m su ppli er to co ns um er an d a f ai rly stea dy use

o f pl an ts f aci li ti es an d p er so n n el in an i n du stry wh er e th e m ark et fl u c

, ,

tu ated r ap i dly E a ch di v i si o n s a ct u al co st s an d pr o fi t s c o ul d b e vi ew ed
’
.

ag ai n st a st an d ar d o r a v er ag e co st an d pr o fi t an d w i th tr ul y co m p ar abl e , ,

fi gur es th e p erf o r m an c e o f o n e di vi si o n co uld b e accur ately m ea sur ed

,

wi th th at o f an oth er Th u s th e g en er al Offi ce w as pro v i d ed wi th o bj ecti ve

.

cri teri a by wh i ch to evalu ate an d appr ai se th e wo rk o f th ei r di vi si o n

m an ager s S i mi l arly as Br o wn an d B r adl ey i n di ca ted th e d etai led r epo r ts
.
, ,

fr o m th e d i vi si o n s w h i ch m ad e po ssibl e accur ate an aly ses o f th e cri ti ca l

,

r ev en u e an d co st fact o r s d eterm i n i n g th e r at e o f r etur n o n i n v estm en t ,

pe rmitted th e ex ecu ti v es at th e to p o ffices t o l o cate so ur ces o f str en gth s

a n d w ea k n esses o f a d i v i si o n A s l o n g as th er e w as a co n st an t fl o w o f su ch
.

i nf o rm ati o n th er e w as li ttl e n eed fo r th e g en eral o ffi cer s to b e co n cern ed

,

wi th th e sp eci fi c d etai l ed wo rk wi th i n th e di vi si o n s .

B esi d e pro vi di n g essen tial d ata fo r sup er v i si o n an d apprai sal th e n ew ,

fi scal an d fi n an ci al pr o ced u r es f aci li tated f o r w ard pl an n i n g a n d p o li cy

fo r m u l ati o n Fr o m th i s sam e i n f o rm ati o n th e gen er al o flflcers c o uld d eter
.

m i n e in br o ad ter m s th e pri ce ra n ges an d pro du cti o n sch edul es w i th i n

, ,

wh i ch ea ch d i vi si o n c o uld o per ate O f gr eater si g n ifi can ce a m o r e r ati o n al

.
,
 P UTTING T HE NE W STR UCTURE I N TO O P ERA TIO N 1
53
a llo catio n o f f un ds fo r c ap ital exp en di tur es w as m ade p o ssibl e an d d eci ,

si o n s as to w h er e th e co rp o r ati o n sh o uld exp an d c o n tr act o r m ai n t ai n it s , ,

acti v i ti es w er e m ak e easi er .

Fi n ally th ese syn ch r o n i zed pro c edur es by assur i n g a cl o se co o rdi n ati o n

, ,

o f fl o w f r o m purch asi n g th r o ugh pr o duc ti o n to m ark eti n g h elp ed to ,

i n crease o p er ati n g eflicien cies By k eep i n g its v ar i ed acti vi ti es ti ed t o geth er

.

clo sely an d r el ated di r ectly to day to -day ch an ges in m ark et dem an d th e-

,

co rpo ration w as able to m ak e a r eal r educti o n in co sts M an uf actur i n g .

,

pl an t an d sales faci l iti es co uld b e uti li zed at a f ai rly even an d r egul ar

, ,

cap aci ty B o th th e m an ufactur i n g an d sal es fo r ce w er e assur ed o f steadi er

.

em pl o y m en t O u tsi d e suppli er s to o
. c o uld k eep th ei r pl an ts o p er ati n g
, ,
1 15
m o r e ev en ly By r educi n g th e am o u n t o f i n v en to ry n eeded th i s car eful
.
,

coo rdi n ati o n cut do wn th e co st of wo rk i n g cap ital lo w er ed exp en ses o f ,

s to ri n g ca rryi n g ch arges an d so f o r th It is h ard to see h o w exp en ses

, , .

co uld n o t h ave b een r educed by s uch r ati o n al co n tr o l o r h o w wi th o ut it , ,

co sts co uld o n ly h av e i n cr eased .

By 1 925 th e wo rk o f th e F i n an ci al S taff at th e cen tral h eadqu art er s h ad

,

b ecom e less o f a creati ve an d m o r e o f a r o u ti n e acti vi ty T h e fi n an ci al ex .

ecu tiv es co n stan t ly c h eck ed to see wh eth er th e r ep o r ti n g an d c o n tr o l

p ro

cedu res th at h ad b een d ev el o p ed c o n ti n u ed to w o rk pr o p erly T h ey m ad e .

certai n th at th e gen er al ex ecuti v es an d th e o p er ati n g m an ager s r ec ei v ed

inf o rm atron pr o m p tly A n d th ey c o n ti n u ed to r efi n e an d d ev el o p th e
.

statis ti cal an d i n fo r m ati o n co n tr o l s .

S tati sti c al an d fi n an ci al d at a an d pr o c edur e alo n e h o w ev er d i d n o t , ,

assur e adm i n i str ati v e c o n tr o l an d c oo rd i n ati o n If S l o an an d Br o w n .

n eed ed an y r em i n d er o f th i s f act th e o v erpr o duc ti on in th e spr i n g o f

,

pr o v i d ed it T h e c o rp o r ati o n s gen er al o ffic er s so o n c am e t o sp en d

’
1 2
9 4 .

m uch tim e o n th e r o ad v i si ti n g pl an ts seei n g suppli er s an d m o st o f all

, , ,

116
ta lki n g to d eal er s E v en so S l o an an d th e o th er gen er al ex ecuti ves
.

ca me in ti m e to r ely as much o n th e g en er al staff as o n th e fi n an ci al

an d stati sti c al r ep o r ts an d v i si ts t o th e fi eld t o pr o v i d e th em w i th essen

ti al i nf o rm ati o n T h e A dvi so ry St aff pl ay ed a cr i ti cal r o l e in p erm i tti n g

.

th e gen er a l o ffice to adm i n i ster th e sep ar at e di v i si o n s an d th e co rp o r a ti o n

as a w h o l e .

Defin in g ih e R o le o f th e A d v isory S tafi

Th ero l e o f th e A dvi so ry S taff li ke th at o f th e F i n an ci al S taff w as to
h elp co o rdi n ate appr ai se an d pl an p o l i cy T h e staff carr i ed o u t th ese
, , .

duti es p ar tly by pr o vi din g th e d i vi sio n m an ager s an d th e g en er al o fficer s

w ith e xp ert adv i ce an d assi stan c e wh i ch w as u sed to i m pr o v e curr en t o p
eratio n s an d to fo r m ul ate f u tur e pl an s K etter i n g s research sect i o n w o rk ed
’
.

o n irn ro v ed en g i n es p art s b o d i es f u el s a n d o th er t ech n ic al i m pr o v em en ts

p , , , ,
1 54 G EN ER A L M O TO RS

?”
to b etter au to m o ti ve co mf o rt an d effi ci en cy H awk i n s sales u n it ’

pl an n ed bro ad adv erti si n g camp ai gn s r etai l selli n g pro gram s sh o wr oom , ,

di spl ays an d so o n T h e F acto ry S ecti o n dev el o p ed an d tested n ew m eth

,
.

o ds o f pr o duc ti o n co st a n aly si s w a ste pr ev en ti o n salv ag e f a cto ry l ay o u t

, , , , ,

desi gn an d so fo r th T h e Purch asi n g S ectio n advi sed o n wo rk co n tr acts

,
.

th at i n vo lv ed m o r e th an o n e d i v i si o n a s si sted in i n terd i v i si o n al buy i n g

, ,

an d en co ur aged c o o p er ati o n b et w een th e p u r ch asi n g d ep ar tm en t s o f th e

m an y o p er ati n g u n i ts In c arryi n g o u t th ei r advi so ry du ti es th e advi so ry

.
,

staff w as al so abl e to k eep a ch eck o n th e d i vi si o n s to suggest w ay s to ,

i mpro ve curren t m eth o d s an d to see h o w v ar io u s p o li ci es were b ei n g fo l

,

lo we d In th i s w ay th ey pro vi d ed th e gen er al o fli ce wi th a steady fl o w o f

.

i n fo rm ati o n o n o p er ati n g acti vi ti es wh i ch l i ke stati sti cal d ata pro vi ded by ,

B ro wn s fi n an ci al staff w as relati vely free o f an y d i vi si o n al b i as

’

, .

A lo n g w i th pl an n i n g an d ch eck i n g acti vi ti es staff ex ecuti v es w er e ,

exp ec ted to h elp c o o rd i n ate pr o gr am s an d pr o cedur es so th at th e v ar i o u s

fu n cti on al d ep ar tm en ts in th e d i v i sio n s c o uld p erfo rm th ei r r o u ti n es in ap

pro xi m ately th e sam e w ay Essen ti ally th i s m ean t th at th e staff assur ed an
.

ex ch an ge o f i n fo r m ati o n o n sal es pr o ducti o n acco u n ti n g en gi n eer i n g

, , , ,

an d r esear ch b esi d e o ften pr o v i d i n g d ata an d wo rk i n g up pl an s to assi st

,

th e d i v i si on m an ag er s an d g en er al o fli cers in o u tli n i n g m o r e gen er al

pro cedur es By spr eadi n g i deas an d i n n o vati o n s o f b o th the staff an d l i n e

.

ex e cu ti v es th r o ugh o u t th e o rg an i z ati o n S lo an h o p ed to expl o i t wh at ,

m i gh t b e c all ed th e adm i n i str ati v e eco n o m i es o f sc al e to m ak e th e mo st

eff ec ti v e u se o f th e tal en t s an d tr ai n i n g o f th i s l arg e b o dy o f ex ecu ti v e an d

sup erv is o ry p er son n el .

V ery so o n S l o an as O p er ati n g V i c e-Pr esi d en t fo u n d th at th e staff w as

, , ,

h av i n g di ffi cul ty in c arry i n g o u t its adv i so ry r o l e eff ecti v ely T h e o p er at .

in g execu ti v es o ften lo o k ed o n th e staff m en as i n ter fer i n g o u tsi d er s an d

t h eo r i sts F o r ex am pl e Ketter i n g s m o st i m p o r tan t pr o j ect w as th e d ev el
’
.
,

o p m en t o f a r ad i cally n ew typ e o f en gi n e A cco rd i n g to th e 1 22 A n n u al

9 .

Rep o r t th e m o to r w as co o l ed by m ean s o f co pp er fi n s br az ed d i r ectly

“

to th e cyl i n d er w all s th u s d o i n g aw ay w i th r ad i ato r w ater pu m p an d

, , ,
”
water j ack et 1 18
N o t b ei n g subj ec t to fr eezi n g o r o verh eati n g it w as
.
,

li gh ter m o r e p o werful an d u sed l ess fu el th an a co n v en ti o n al m o to r

, , .

T h e o p er ati n g d i vi si o n s w er e f ar m o r e sk ep ti c al ab o u t th i s en gi n e th an
w er e Ketteri n g s san gui n e staff m en Its i n tro ducti o n wo uld m ean pro duc
’
.

ti o n h ead ac h es th at th ey pr eferr ed to a vo i d A fter m i ll i o n s o f d o ll ar s h ad .

b een sp en t o n it th e pr o j ect w as ab an do n ed Ketteri n g bl am ed t he

, .

fai l u r e w h o lly o n th e r esi stan ce o f th e d i vi si o n al en gi n eer s an d pro duc

ti o n m en w h o f ai l ed to see th e p o ten ti al i ti es o f th e n ew d esi g n A S Ket .

terin g s r esp o n se sugg ests th e l i n es o f co mm u n i cati o n b etw een th e staff

’

a n d o p er ati n g ex ecu ti v es h ad bro k en d o w n .

P UTTING T HE NE w STR UCTURE I NTO O P ERA TI O N 1
55
By th e t i me of th e rej ecti o n o f th e c o pp er-co o l ed en gi n e in th e summ er
of 1 2 S l oan h ad b egu n w o rk o n a sch em e to r efo r m th e li n es o f co m
9 3 ,

mu n icatio n so th at th e staff m igh t f ulfi ll its ro le mo r e eff ecti vely To as .

s ure clo s er co n tact b et ween li n e an d s taff an d b etween di vi sio n s them

s elves h e settled o n th e i n terdi vi si o n al co m mi ttee L i ke s o m e of th e fi r st
s tati sti c al an d fi n an ci al co n tro l s th is co mm ittee d i d n o t em erge fro ma
.
,

lo n g-ran ge pl an b ut r ath er resulted f ro m th e n eed fo r m eeti n g i m medi ate

problems .

T h e gen esis o f th e pl an w as th e pro blem o f purch asi n g an d th e fi r st ,

i n terd i visio n al co m mi ttee dealt with th at fu n ctio n Wh en Slo an r evi ewed .

th e acti v iti es o f th at c o m m i tt ee in 1 924 h e wr o te : ,

It h as sh o w n th e w ay or w h at I b elieve to b e
rdin atin g th e w ay of co -o

to th e stock h o ld er s b en efi t th e f u n ction al activities o f ou r d iffer en t O p er at

’

in g Division s w ith o u t in an y sen se tak in g aw ay fro m th o se Division s th e

respon sib ility of th ei r in dividu al activities In o th er w o rds expressed o th er .
,

w ise I feel th at in all o u r fu n ctio n al activities like p u rch asin g m an uf ac

, ,

tu ri n g en gin eer in g an d sales a gr eat deal can b e acco mp lish ed b y pro p er

, , ,

co- o rdin atio n an d in m y j u dgm en t it is o n ly a q u estion o f tim e w h en th e

, ,

develo pm en t o f th e au to mo tive in du stry w ill fo rce u s due to th e econ o m ics ,

o f th e f u tu re p ictu r e in to j u st su ch t h in s T h e G en er al P u rch asin C m

g , g o .

m ittee h as I b elieve sh o w n th e w ay an d h as d em o n str ated th at th o se r e

, ,

sp o n sib le fo r each f u n ction al activity can w o rk to geth er to th eir o w n pr o fi t

an d to th e p ro fi t o f th e sto ck h o ld ers at th e sam e tim e an d su ch a p lan o f ,

co o rdin atio n is fa r b etter f ro m ev ery stan dp o in t th an tryin g to in j ect it

i n to th e operatio n s fro m so me cen tral activity 119

.

S lo an fi r st urn ed to th e i n terdi visi o n al co m m i ttee as a m ean s o f im

t

pro vi n g co mm u n i cati o n an d co o rdi n ati o n in th e spr i n g o f 1 922 wh en th e

d i vi sio n m an agers w ere expr essi n g th ei r s k epti ci sm ab o u t h is s uggesti o n
fo r mo re cen tr ali z ed purch asi n g He b eli ev ed th at th e com p an y co uld s ave
.

fro m to an n u ally if th e purch asi n g s taff in th e g en er al

O ffi c e dr ew up c o n t r act s o n item s th at w er e w i d ely u sed by th e c o rp o r a

1 20
ti o n as a wh o l e T h e d i vi sio n m an ager s o ff er ed m an y O bj ecti o n s
.
1 21
.

S o m e fear ed it w o uld ten d to c an cel a d i v i si o n s l o n g exp er i en ce in buyin g

’

for its p ar ti cul ar n eed s O th er s emp h asi zed th e di ver se r equ i r em en t s o f

.

th e v ario u s o p eratin g u n i t s S ti ll o th er s th o ugh t th at th e l o ss o f c o n tr o l

.
g

o ver purch asi n g w o uld s er i o u sly i n fr i n ge o n th e au th o r i ty an d res o n

p
sib ility o f th e m an ager .

A s a r esult o f th ese o bj ectio n s S loan pro p o sed th at th e co n tr act s b e ,

dr awn by a co m mittee o f purch asi n g agen ts r epr esen ti n g th e di ff eren t

1 22
di vi si o n s B esi des wr iti n g sp eci fi c ati o n s th e co mmittee w as exp ected
.
,

to defi n e br o ad er buyi n g p o l i ci es an d pr o cedur es It h ad a p er m an en t .

secretary w i th an o ffic e o f h is o w n His job w as to prep are l i sts an d .

15 6 G ENERA L M O TO RS

a gen da fo r th e m eetin g s an d to mak e detai l ed Stu dies an d r epo rts Th e .

a ct u al specifi ca ti o n s o f th e co n tr act s an d th ei r w o rdin g w er e l eft to th e

p u rch as in g Ofli ce at h ea dquart er s .

A tf er t h e d i sco n ti n u an ce o f th e co ppe r -coo l ed pr o gr am h ad m ade cl ear

d b
th e n ee f o r e tt e r l in e—an d-Stafi coo r din a ti o n in o th er a r eas S loan f o rm ed ,

a G en er al T e ch n i ca l Co mmi tt ee t o coo rdi na t e en gin eerin g an d o th er t ech

ni cal acti vi ti es a Co mm i tt ee f or Ins ti t uti o n al A dv ertis in g

,
an d th en a ,

G en er al S al es Co mm i ttee
”3
S h o rtly af t erw ar d h e add ed a Wo rks Man
.
,

ag er an d a P o w er an d M ain t en an ce Co mm i tt ee .

Th es e f un ct i on al co mmi ttees l i k e G en er al P urch as in g h ad th ei r o w n

, ,

secr etari es th eir o w n o ffices an d app ar en tly th ei r o w n budg ets In th i s

, , , .

w ay th ey differ ed r a di cally f r om th e P urch as in g Bo ard set up earli er by

,

S to rro w an d N ash o r th e in terd ep artm en tal Co un ci l s f o rm ed at du Po n t

in D ecem be r 1 92 0 T h ey in clud ed r epr esen tati v es f r o m th e co m p ar ab l e
, .

fu n ct i o n al d ep art m en ts in ea ch o f th e fi v e car di vi si o ns an d occas i o n ally

fr o m so m e of t h ose o f o th er o pe r atin g un i ts A t fi r st th e staff d ep art m en t .
,

h ea ds w er e j us t co mmi tt ee m em be r s b u t so on th ey be cam e th e secr etar i es ,

124
o f th e in t er di v i si o n al co mm i tt ees d eal in g di r ect ly wi th th ei r spec i al ti es .

Th u s B G K oeth er h ea ded th e S al es S ed j o n in th e g en er al Oflice an d w as

. .

al so S ecr eta ry o f th e S al es Co mmi tt ee J am es Ly n ah S ecr etary of the .

,

Pu r ch asin g Co mm i tt ee w as th e m an a ger o f th e P urch asin g S ecti on

, .

H ar ry Cr an e th e P r esi den t s t ech ni cal advi ser w as th e Secr etar y o f th e

,
’

G en er al T ech n i cal Co mm i tt ee Un d er Cr an e s supervi si on ca me Ketter

’
.

in g s r esear ch l abo r ato ri es th e Pr o vi n g G r o un d Paten ts an d F o r ei gn

’

, , ,

En gi n eeri n g Li ai so n S ecti o n s Th e St aff d ep artm en ts n o t as si gn ed to th e

.

in terdi vi si o n al f un ct i o nal co mmi tt ees — such uni ts as r ea l est ate h o usin g , ,

trafi c in dust ri al r el ati o n s o fli ce b u il di n g s an d so f orth — w er e co mb in ed

, , ,

125
in to th e G en er al Se rvi ce S taff un der a V i ce Pr esi d en t
- .

G en er al om cer s sat wi th st af f speci al i sts an d o pe r ati n g ex ecu ti v es o n

th e in t erdi v i si o n al co mm i tt ees S l oan w h o h ad be co m e Pr esi d en t in May

.
,

1 92 3 w as o n all th e co mmi tt ees an d w as at diff er en t ti m es Ch ai rm an o f

,

th e G en er al T ec h ni cal th e Wo rk s M an ag er s as w ell as th e P ur cha sin g

,

”6
Co mmi tt ee A t l east o n e m emb er o f th e Ex ecu ti v e Co m mi ttee be si des
.

S l o an sa t o n each co mm i tt ee Br o wn ch ai r ed th e G en er al S al es Co mmi tt ee
.
,

an d Pr att cam e t o h ea d th e G en er al P urch asi n g Th e co m mi tt ees th er e .

,

f o r e pr o vi d ed a sy stem ati c an d r egul ar m ean s by whi ch th e lin e st afi an d

, , ,

gen er al o ffi cer s co uld m eet m o n thl y o r ev en m o r e Oft en to ex ch an ge in

fo rm ati o n an d to co n si d er co mm on pr obl em s Th e sp i ri t o f th ese m eet in gs .

is ca ugh t in a l ett er fr o m S l o an to K ett er in g wr i tten in Iul y 1 924 : ,

I gr ea tly r egr et tha t y o u h av e b ee n f eelin g v ery w ell an d th at y ou w ere

n ot

u nab l e to att en d th e m eetin o f th e T echn i ca l Co mm i ttee in O sha w a last

g
w eek . We ha d a splen did meetin g n o t o nl y so far as th e m eetin g itself wen t
P UTTING T HE NE W S TRU CTU RE . I NTO O P ERA T I O N

b u t th e b o ys stayed o ver Satu rday an d so m e o f th em Su n day an d so m e

w en t fi sh in g an d o th er s p layed go lf an d th at h elp s a lo t in b rin gin g m en
w h o are th in kin g in th e sam e dir ectio n m o r e clo sely to geth er I can t h elp
’
.
,

bu t feel, co nsiderin g th e m agn i tu de o f o u r p ictu r e a n d all th at so rt o f th in g ,

th at th is co op er atio n in en gin eerin g is w o rk in g o u t j u st sp len didl y We .

m ust b e p atien t, b u t I am su re th at as tim e go es o n w e ar e go in g to b e

f ully r ep aid fo r th e w ay w e h av e h an dled it as co m p ared w ith a m o r e
mili tary style w h ich I do n o t th in k w o u ld ev er p u t u s an yw h er e 1 27
.

Th e R ole o f th e Execu tive Co m mittee

Th e i n terdi vi si on al co m mi ttees m o st i m p o r tan t f un cti o n s w er e to m ak e
’

reco mmen d ati o n s to th e Ex ecu ti ve C o m mi ttee an d to pr o p o se n ew p o li ci es

an d pr o c edur es o r r ev i si o n s an d m o d i fi c ati o n s o f o ld o n es in th ei r m aj o r

fu n cti o n al ar ea 1 28
Excep t for th e P urc h asi n g Co mm i tt ee n o n e of t h e
.
,

co m mi ttees m ad e fi n al deci si o n s wh i ch w er e left to th e d i vi si o n m an

,

ager s o r to th e Ex ecu ti v e Co mm i ttee A s i n d i vi du al m em b er s o f th e

1 29
.

Ex ecu ti ve Co m mi ttee w er e a l so o n th e i n terdi v i si o n al c o m m i ttees th ey ,

to o k p ar t in th e d i scu ssi o n s l eadi n g to th ese r eco mm en d ati o n s an d so

wer e abl e to presen t th e pr o p o sals a n d th e r eason s fo r th em to th ei r fell o w

m emb er s wh en d eci si o n s w er e r equ i r ed .

T h e Execu ti v e Co m mi ttee th u s r em ai n ed th e go v er n i n g b o dy at G en
er al M o to r s O n ly o n m at ter s o f v ery br o ad o p er ati n g p o l i cy p ar ti cul arly
.
,

if m aj o r exp en d i tur es w er e i n v o lv ed d i d th e d eci si o n s o f th i s Co mm ittee

,

n eed th e appr o v a l o f th e F i n an c e Co m m i ttee o r o f th e B o ard i tself O n c e .

t h e cr i si s h ad b een s urm o u n ted Pi err e h ad en l arg ed th e s m all em erg en cy

, ,

Execu ti v e Co mm i ttee th at h e h ad cr eated in l ate 1 920 T h en aft er S l oan .

,

b ec am e Presi den t an d Pi err e C h ai rm an o f th e B o ard in May 1 923 st ill

, , , ,

o th er ex ecu ti v es w er e add ed to th e C o mm i ttee In 1 2 it i n clud ed t en

9 5 .
,

m emb er s .
130
By 1 924 th e o th er sen i o r co mm ittee — th e O p er ati o n s C o m
,

mittee co n si sti n g o f th e m aj o r o p er ati n g di vi si o n s an d Staff d ep ar tm en ts

,

— h ad b een r edu ced to i n clude o n ly th e g en er al m an ag er s o f th e car

13 1
di vi si o n s . Its f u n cti o n app ear s to h av e b een li ttl e m o r e th an th e dis
cu ssion o f c o mm o n pr o bl em s an d th e exch an g i n g o f i n fo r m ati o n Th e .

Execu ti v e Co mm i ttee cl early m ad e th e S i gn i fi can t en tr epr en eur i al an d

str ategi c d ec i si on s .

T h e m emb er s o f th i s co mmi ttee h ad th e ti m e an d p sy ch o lo gi c al co m

mi tm en t as w ell as th e n ecessary i n f o r m ati o n to co n cen t r ate o n br o ad str a
tegic m atter s U nl i k e th e c o m mit tee dur i n g D ur an t s r eg i m e n early all its
’
.
,

m emb er s wer e n o w g en er al o ffic er s w i th o u t an y d etai l ed o p er ati n g d u ti es .

Po ssi bly r ecalli n g th e exp er i en c e o f th e D ur an t p er i o d an d r eali zi n g wh at

h ad h app en ed at du Po n t af ter h e h ad l eft th e co m p an y D o n ald so n ,

Br o wn u n do ub tedly expr essed th e feel i n g o f G en er al Mo to r s to p ex ecu ’

ti ves wh en h e c o mm en ted in 1 2 th e d an g er s o f m an ag em en t by
9 4 o n
1
5 8 G ENERA L M O TO R S

o per ati n g ch i ef s A l th o ugh such co mmi ttee m an agemen t di d allo w th e

.

gen er al m an ager s to h ave a say in b asi c p o li cy fo rm ul ati on Bro wn ,

po i n ted o u t th at fo r th i s very reason th e r esulti n g po li cy w as lik ely to b e

a co mpr o mi se b etw een i n t er ested p a rt i es S uch Ex ecuti ve Co mmi ttee .

m em b er s c o uld n ot v i ew pr o bl em s i m p arti ally n o r pr o b ably l o o k at th em

in th e i n ter ests o f th e co rp o r ati o n as a wh o l e Po li ci es sh o uld b e d ea lt
“
.

wi th fro m an im p art i al u n der stan di n g o f th e o p er atin g asp ect Bro wn ,

wr o te an d in th e ex erci se of th e du al fu n cti o n [ as di visi o n h ead an d

,
“

m em b er o f th e Co m mi ttee ] it is diffi cult f o r th e i n di vi du al t o di vo rce h im

” 132
self f r o m th e d ep artm en tal v i ewpo i n t A l th o ugh th er e wer e so m e
.

exc ep ti o n s g en er al o ffic er s r ath er th an di v isi o n m an ag er s c arr i ed o n th e

,

133
b asi c en trepr en euri al acti vi ti es at G en er al Mo to r s .

Th e Fin ish ed S tr u ctu r e

By 1
9 5 2 th en , th e S t
ruc t ur e i n iti
, ally d esi g n ed by S l o an b ef o r e th e cr i si s

o f 1 20 an d p u t i n to eff ect early in 1 2 1 h d b w rk d u t so as to

9 9 a een , o e o

assur e eff ec ti v e ad mi ni str ati on o f th e m an y an d v ar i ed i n du str i al r eso urc es

th at D uran t h ad co llected (see Ch art T h e o rgan i z ati o n bui ld er s at

G en er al Mo to r s h ad pl aced th e di vi si on s in l o gi c al r el ati o n to o n e an o th er .

Th ey h ad i n s titu ted a l arge o v er -all adm i n is tr ati v e o ffi c e wi th gen er al

ex ecu ti v es assi sted by staff sp eci ali sts to c o o rd i n ate appr ai se an d set , ,

p o li cies fo r th e m ultifu n cti o n au to n o m o u s o p er ati n g di vi si o n s Th e li n es .

o f au th o r i ty an d co mm u n i cati o n b etw een th e g en er al o fli ce a n d th e di v i

si o n s h ad b een c ar efull y d efi n ed an d th en suppl em en ted by th e fo rm ati o n

o f th e In ter di vi si o n al Co mm i t tees F i n ally a m ass o f acc u r ate d ata b o th

.
, ,

o n i n ter n al p er fo r m an c e an d ex ter n al c o n d i ti o n s h ad b een d ev el o p ed to ,

flo w th r o ugh th ese co mm u n i cati o n ch an n el s Nearly all acti vi ti es o f G en .

er al M o to r s h ad b ec o m e k ey ed to f o r e ca st ed m ark et d em an d an d esti

m ated fi n an ci al an d ec o n o m i c con di ti o n s S u ch d ata c om p i led r egul arly

.
,

by th e di vi sio n s an d th en ch eck ed an d supplem en ted by th e gen er al o fli ce ,

m ade u n n ec essary S lo an s o ri gi n al suggesti on fo r a sp eci al staff o ffi ce

’

devo ted to i n terdi vi si o n al sch eduli n g .

T h e n ew o rg an i z ati o n al structur e serv ed G en er al M o to r s w ell Fr o m .

h C rp r i h r f h m r v h i cl e m ark et r o se
’
1 92
4 to 9 7
1 2 t e , o o at o n s s a e o t e o to e

fr o m p er c en t to I n th e f o ll o w i n g y ea r its pr o fi t s sto o d at an ,

i mpr essi ve Fr o m th en o n G en er al Mo to r s h as m ai n tai n ed

,

th e l ead i n g p o si ti o n in th e i n d u stry T h e Cl early a n d r ati o n ally d efi n ed

.

S t ru ctur e b ec am e i n cr easi n gly v alu abl e as th e d em an d fo r au to m o b i l es

l eveled o ff an d co mp eti ti o n i n ten si fi ed T h e i n du stry h ad so ld

. m i ll i o n
p assen ger car s in By 1 925 th e n ew p assen ger c ar s pr o d u ced in a
,

y ear r each ed m i lli o n an d fo r th e n ex t fo ur y ear s th e d em an d fo r n ew

,

c ars aver aged so m ewh at u n d er fo ur m illi o n a year T h en wi th th e dep res .

,
P UTTING THE NE W STR UCTURE I N TO O P ERA TI O N

C H A RT 7

G en eral Mo to rs S tr u ctu re, 1

9 4
2

C S . . Mo tt
,
r
O gan iz in g a G r eat In du strial, Man agem en t a n d
A dmin istration , M
( y
a , 1 9 24 )

G E N E RA L MO TO R S C O RP O RATIO N
ORG A NIZ AT IO N
1 60 GENERA L M O TORS

i
s on , t h e ca ll f o r n ew car s d eclin ed r ap i dly Wh il e th e satur ati o n o f th e .

m ark et h ad r el ati v ely li tt l e im p act on G en er al M o to r s pr o fi ts, it pr o ved

’

di sast r o us f or H enr y F o rd S l oan s m aj o r com peti to r an d an em pire

,
’

bu ild er w h o in h is later y ear s r ar ely th o ugh t in term s o f struct ur e o r even

str ategy F o rd s sh ar e o f th e m ark et plumm eted f r o m cen t in
’
.
p er

c en t in 1 w h en hi s s al es w er e f ar be h i n d Ch ry sl er s
’
1 92 1 t o p e r 94 0
”7
r c en t o f th e m ar k et an d G en er al M o to r s c A d
’

p e pe r ent n .

af t er 1 26 F o rd s pr o fi t r eco rd w as i n d eed di sm al
’

9 ,
.

B eca use o f G en er al Mo to r s succ ess, its u n d erly in g struct ur e r em ai n ed

’

r el ati v ely un ch an ged H o w ev er A lfr ed S l o an , Pr esi den t u n til 1 937 an d

.
,

Ch ai rm an o f th e B o ard un til 1 95 6, w as co n stan tly adj u s ti n g an d m o dify

in g th e rgani zati o n Th e r el ati o n s b etw een op er atin g staff an d gen er al
o .
, ,

o fficer s w er e a dj u sted pr im ar i ly to m eet ch an gi n g m ark et co n di ti on s ,

p a rti cul arly duri n g th e depr essi o n an d after Wo rld War II In th e mi ddl e .

o f th e d epr es si o n fo r ex am pl e G en er al Mo to r s t em po r ar ily co m b i n ed
, ,

Bui ck O ld s an d Po n ti ac in to o n e di vi si o n in o rder to cu t do wn admini s

, ,

”8
trati v e co sts Bu t th e m ul ti di i si o n al decen tr ali zed structu re re “
.
v

m ai n ed in t act .

Pr o b ably th e m o st si gn ifi can t st ru ctu r al ch an ge aft er 1 925 cam e in

th e mi d—1 93 0 s w i th th e abo li ti o n o f th e In ter -di v i si o n al Co mmi tt ees an d
’

th e f o rm ati o n sh o rtly th er eaft er o f th e Po li cy G r o up s co n si sti n g o f gen

139
er al an d staf f ex ecu ti v es in t h e g en er al o fli ce Th r o ugh th ese gr o up s .
,

th e g en er al o ffice b ecam e ev en m o r e expli ci tly r espo n si bl e fo r S tr ategi c

d eci si o n s an d th e di vi si o n s fo r ta cti cal o n es Th e staff gr ew in im po rtan ce .

as it t oo k o v er th e In terdi v i si o n al Co mm i tt ees duti es o f coo r di n ati n g ’

th e f un cti o n al a ct i v i ti es o f th e m an y di v i si o n s an d b eg an to pl ay a l arger

r o l e in po li cy f o rm ul ati on Th ese ch an ges are too co m plex to be co n

.

sider ed in d etai l h er e Wh il e si gn ifi can t th ey w er e m u ch l ess f un d am en t al

.
,

th an th o se th at t o o k pl ac e b etw een 1 920 an d 1 925 .

T h e adm in i str ati v e ch an ges at G en er al Mo to r s b etw een 1 92 0 an d 1 925

h ad an im p o rt an ce be y o n d th ei r co n tribu ti o n to th e su ccessf ul m an age
m en t of th e au tom o b il e co m p an y f o r th e i n n o v ato r s adv erti sed th ei r ac
,

co m lishm en t s Pr o ud o f w h at th ey h ad ach i ev ed th y d scr i b ed th ei r

p . e e ,

n ew o rg an i zati o n a l m eth o d s an d tech ni qu es in ar ti cl es ap ear i n g in

p
pr o fessi o n al j o ur n al s an d in p ap er s deli v er ed at th e m eeti n gs o f th e
A m er i ca n M an agem en t A sso ci ati o n In th ese essay s th ey al so set fo rth th e
.
,

” ”
n ew
“
pri n ci pl es o r ph il o so ph y o f m an agem en t th at th ey b eli eved th ei r
“

expe ri en c es to d em o n str ate D o n ald so n Bro w n m ad e th e m o st pr eci se

.

st at em en t o f th i s n ew p hi l o so p h y o f d ec en tr al i za ti o n in a p a er o n D
“
e
p
”
c en trali z ed O p er ati o n s an d Respo n sib i li ti es wi th Co o rdi n ated Co n tr o l
th at h e r ea d b ef o r e th e A m er i c an M an ag em en t A sso ci ati o n in 1 2
9 7 H er e .

Bro wn m ad e th e di sti n cti o n betw een po li cy an d admi ni str ati ve co n “

P UTTING T HE NE W STR UCTURE I NTO O P ERA TI O N 1 61

Th e Ex ecuti v e Co mm itt ee assi sted by a g en er al st aff w as respo n

” 14°
r l
t o .

sible fo r se tt l i n g th e l o n g-r an ge p o li ci es wi th i n wh i ch th e di vi si o n s o p
erated Th e h ead s o f th e au to n o m o u s di v i si on s, r esp on si bl e fo r th e m ak i n g
.

an d s elli n g o f au to m o b i l es an d o th er pr o duct s, en j o y ed admi n i str ati v e

co n tr o l Bro wn s statem en t o n th e n at ur e o f d ec en tr ali zed o p er ati n g

.
’

r es p o n sib i lities an d cen tr ali ze d po li cy fo rmul ati on m ark s th e r eal b e

i n i n g in th e U n i ted S tat es o f th e publi cati on o f m an y ar ti cl es b o o k s
g n , ,

an d p am p h l ets ab o u t a dmi n i str ati v e d ec en tr ali zati o n Ju st b ecau s e G en .

er al M o to r s ex ecu ti v es d es cr i b ed so en th u si asti call y th e struct ur e th ey h ad

’
.

bui lt th e co rp o r ati o n b ecam e m o r e th an th at o f an y o th er co m p an y th e

, , ,

mo del for sim il ar s truct ur al ch an g es in o th er larg e A mer i can in du stri al

en terpr is es .

A Co mp ariso n o f Organ izatio n Bu ildin g at G en er al Moto rs

a n d du P o n t

Th e tructur e th at S l o an an d h is ass o ci ates d evel op ed cam e to b e lik e

s

th e o n e w o rk ed o u t at du Po n t Y et each w as cr eated qui te i n d ep en d en tly

.

o f th e o th er an d f or d iff er en t r eason s A t du Pon t th e n eed t o pl an f o r

.
,

th e po stw ar u ses o f exi sti n g r eso urc es led to th e strat egy o f d i v er si fi cati o n

wh i ch in t ur n dem an ded a n ew structur e A t G en eral M oto r s th e p o l i cy

, , .
,

o f i n tegr ati o n an d exp an si o n h ad led to th e accum ul ati n g o f t ech n i ca l

an d m an ager i a l ski ll s as w ell a s a w i d e r an g e o f p h y si c al pl an t equ i p

, ,

m en t an d f aci li ti es Bu t th ese m an y an d v ar i ed i n strum en ts o f pr o duc ti o n

, .

an d di str i bu ti o n c o uld n o t b e f ully u sed u n ti l a pl an t o u n i f y th em h ad

b een wo rk ed o u t .

Th e n ew pl an s o f o rg ani z atio n at th e tw o co mp an i es d efi n ed o r r ed e
fi n ed th e l i n es o f au th o r i ty an d c o mm u n i c ati o n b etween th e g en er al
o ffice an d th e d i v i si o n s an d o u t li n ed th e typ es o f i nf o r mati o n
, d etai l ed
r ep o r ts stati sti cs an d o th er p er ti n en t d ata — th at sh o ul d fl ow th r o ugh
, ,

th ese ch an n el s T h e cri si s in th e affai r s o f G en er al Mo to r s duri n g th e

.

fall o f 1 920 d em o n str ated dr am ati c ally th e d an ger s i n h er en t in a l ack

o f stru ct ur a l d esi g n fo r o v er-all adm i n i str ati on T h e du Po n t exp er i en c e
.
,

o n th e o th er h an d sh o w ed th e difli cu lties r esul ti n g f r o m m an ag em en t

,

o f sev er al li n es o f pr o ducts th r o ugh a struc tur e in wh i ch th e c h an n el s o f

au th o r i ty an d c o m m u ni ca ti o n th o ugh cl early d efi n ed w er e t o o l on g an d
, ,

too c o m pl ex t o assur e eff ec ti v e admi n i str ati o n — co o rd i n ati o n appr ai sal , ,

an d pl an ni n g — for th e n ew pr o duc t l i n es b ei n g so ld in v ery di ff er en t

m ark ets T h e r eo rgan i z ati o n th er e ca lled l ess fo r n ew k i n d s o f o p er ati n g

.

r epo rts an d d ata an d m o re fo r n ew ch an n el s o f co mm u n i cati o n th ro ugh

,

wh i ch exi stin g pr o cedures fo r deter m i ni n g co sts an d pr o fi ts an d for

fo r ec asti n g m ark et an d br o ader econ o m i c co n di ti o n s co uld b e u sed effi
cien tl
y .
1 62 G EN ERA L M O TO RS

At b o th comp an ies th en structur e soon fo llo wed strategy A fter th e

, , .

du Po n t C o m p an y th r o ugh co n so l i d ati o n h ad co m e fi r st to ad m i n i ster

, ,

rath er th an j ust to co n tro l fi n an ci ally th e m aj o r sh are o f th e A m eri c an

explo si ves i n du stry it i n sti tu ted d ep ar tm en tal h eadqu ar ter s S tructur ed o n
,

a l i n e-an d staff b asi s an d a c en t r al o rg an i z ati o n to c o o rd i n ate appr ai se

-
, ,

an d set br o ad p o l i c i es fo r th e f u n c ti o n al de artm en ts T h en by gr eatly

p
‘

i n cr easi n g th e adm i n i strati ve duties o f b o th th e d ep artmen tal h eadqu ar

ter s an d th e c en tr al o ffic e th e st r ategy o f d i v er si fi c ati on br o ugh t t h e
,

cr eati o n o f th e n ew m ulti di vi sio n al decen tral i zed structure With”

.

G en er al Mo to r s th e d i ff er en t au to m o ti ve en terpr i ses th at co m p o sed it

,

exp an d ed so r ap i dly to m eet th e d em an d s o f th e n ati on al m ark et th at

th ey to o set up f u n cti on al d ep ar tm en ts o n a li n e—an d-st aff b asi s as well as

cen tr al ad m i n i st r ati v e o ffic es O n ly aft er th e dep artur e o f its fo u n der

.
,

h o wever d i d th e co rp o r ati o n acqu i re a gen eral o ffice to ad m i n i ster th e

,

m an y o p er ati n g d i vi si o n s th at D ur an t h ad c o llected in h is s tr ategy of

ver ti c al i n tegratio n an d con stan t exp an si o n .

T h e cr eati o n o f th e n ew fo r m s at du Po n t an d G en er al Mo to r s spran g
fr o m th e fact th at th e sen i o r ex ecuti ves w h o fo llo wed th e em p i r e bu i ld
ers, Co l em an du Po n t an d B i lly D ur an t appr o ach ed th e pro blem s o f ,

m an agi n g th ei r wi d espr ead do m ai n s rati o n al an d s y stem ati c ally T h e .

defi n i tio n o f th e duties o f th e gen er al o flicers th e staff sp eci ali sts an d , ,

th e d i vi si o n m an ag er s th e o u tl i n i n g o f th e ch an n el s o f a u th o r i ty an d
,

co mm u n i catio n an d th e dev elo p m en t o f i n fo rm ati o n al d ata an d p ro ce

,

dures di d n o t co m e auto m ati cally but requ i red co n cen tr ation of th o ugh t ,

ti m e an d en ergy Pi err e du Po n t an d h is as so ci ates th en th e n ex t gen

, .
,

eratio n o f m an ager s at du Pon t A lf r ed S l o an an d th e du Po n t—t r ai n ed

, ,

D o n ald so n Br o wn an d J o h n L ee P r att all fo cu sed th ei r atten ti on o n th ese

m atter s In an alyzi n g th ei r adm i n i str ati ve n eed s th ey studi ed th em mo r e
.
,

a s pr o bl em s o f o rg an i z ati o n th an as th o se o f m ark eti n g m an uf actur i n g , ,

o r en gi n eer i n g A n d b ec au se th ey d i d struct ur e f ai rly qu i ckly fo ll o w ed

.
,

str ate y
g .

Y et th e appr o ach o f th e o rg an i z ati o n bu i ld er s at du Po n t an d G en eral

Mo to rs w as n o t n ecessari ly th e n o rm al o r accepted o n e in A m eri can in
du stry in th e 1 g2o s T h ei r appr o a ch m u st b e co m p ar ed w i th th at o f th e
’
.

ad m i n i str ato r s o f o n e o f th e o ld est a n d m o st c o m pl ex o f A m er i c an i n du s

tr i al en terpr i ses — th e S tan d ard O il C o m p an y (N ew J er sey ) T h ere l i ttl e .

atten ti o n w as p ai d to o rg an i z ati o n u a o rg an i z ati o n A s a r esul t S tru c

q .
,

tur al adj u stm en t an d ev en str ateg i c exp an si o n cam e in m o r e o f an i n t u i

ti v e u n sy st em ati c a d h oc w ay
, , .
 S T A N D A R D O I L C O MP A N Y
( N E W J E R S E Y )
A D HO C REO RG ANIZAT I ON

B Y THE mid-1 920 s, th e S tan dard O il C o m p an y (New J er sey ) w as

’

faci n g m an agemen t pro blem s si m i lar to th o se th at du Po n t an d G en er al

Mo to rs h ad co n fro n ted earli er Li k e G en er al Mo to r s, it h ad b een fo r s om e
.

ti me co mm i tted to a pro gr am o f verti cal i n tegr ati o n In th e sam e y ear s, it

.

h ad to m eet th e d em an d s o f th e n ew an d r ap i dly exp an d i n g m ark et

created by th e com i n g o f th e au tom o b i le T h e str ategi es o f v erti cal i n te
.

ratio n an d th e n eed s o f th e g aso li n e bu si n ess c all ed f o r th e ac q u i si ti o n o f

g
n ew r es o urc es an d th e exp an si o n a n d r ew o rk i n g o f o ld o n es V er ti cal
.

i n tegr ati on r ai sed cr iti c al pro bl em s in th e c o o rdi n ati o n o f pro duct fl o w .

T h e add i ti o n o f n ew f u n cti o n s an d n ew pr o duc ts an d th e gr o w th o f o ld

o n es i n ten si fi ed th e difli cu lties i n v o lv ed in appr ai si n g th e p erf o r m an c e

o f th e d i ff er en t o p er ati n g ac ti v i ti es an d in eff ec ti v ely allo c ati n g f u n d s,

p er so n n el an d o th er r eso ur ces am o n g th em
, .

In r esp o n d i n g to th e n eed s cr eated by exp an si o n an d v er ti cal i n tegr a

ti on , th e ex ecu ti ves at Jer sey r arely th o ugh t of th ei r pro blem s as o rg an i z a
tio n al o n es Wi th o n e o r tw o n o tabl e exc ep ti o n s, th ey w o rk ed o u t n o
.

br o ad s tudi es o f o rgan i zati o n pro blem s, n o detai led r ep o r ts o n o rgan i z a

tion al n eed s, n o expl i ci t statem en t s o f o rg an i z ati o n al th eo r i es o r c on c ep ts.

A u th o ri ty an d r esp o n si b i l i ty d i d b eco m e m o r e c ar efully d efi n ed an d

ch an n el s o f co mm u n i c ati on an d au th o r i ty mo r e cl early o u tl i n ed , wh i l e

detai led an d mo r e eff ecti v e stati sti cal an d fi n an ci al data wer e develo p ed
to as sur e b etter co mm u n i c ati o n an d adm i n is tr ati v e c o n tr o l S ti ll th ese
.

defi n iti o n s c am e m o r e as r es p o n ses to i mmedi ate sh o r t-term pr es sur es in

th e m ark eti n g, r efi n i n g, an d pr o duc i n g o f o il th an f r o m an aw ar en ess

an d u n d er st an d i n g o f l on g—ter m S truc tur a l n eed s Ju st b ec au se o f th e dif

.

feren t appro ach , th e an sw er s cam e m o r e sl o wly, l ess pr eci sely an d l ess ,

cl early th an th ey di d at G en er al Mo to r s an d du Po n t .

Fo r th i s v ery r easo n , th e ad m i n i str ati v e exp er i en ce o f th e J er sey Co m

p an y dem on str ates ev en m o r e fo rc efully th an th at o f G en er al Mo to r s o r
du Po n t h o w th e f ai lur e to adj u st s tr u ctur e to str ategy cr eated ad m i n i str a
ti v e str ai n s an d h o w th e t rai n i n g, tem p er am en t, an d d ai ly acti v i ti es o f

1 63
1 64 S T A N DA R D O I L CO MPA N Y (N E w I ERSE Y)
th e res po n sible executi ves del ayed st ruct ural adj u s tmen t F or J er sey di d .

exp an d its acti vi ti es swi ftly fr o m 1 1 2 u n ti l 1 2 T h e v alu e o f its asset s

9 9 5 .

— its p h y si cal an d fi n an c i al r eso urces — r o se al mo st ex actly a b i ll io n do l

lar s duri n g th o se 1 3 year s from $3 69 265 ooo to

, , , Y et u n ti l
1 92
5 t
, h e J er sey c o m p a n y c o n ti n u ed to ad m i n i ster its r eso urc es w ith m uch

th e s ame struc tur e th at it h ad ev o lved after its d i smemb erm en t by th e

S upr em e C o urt in 1 9 1 1 fo r v i o l ati o n o f th e S h erman A n ti tru st A ct .

Th en b etween 1 925 an d 1 927 u n der th e pr ess ure o f o verpro ductio n an d

, ,

fall i n g pro fi ts its sen io r ex ecuti ves wer e fo rced to r eadj u s t al mo st si m ul

,

tan eo u sly th e st ruc ture o f th e th ree m aj o r typ es o f ad m i n i str ati ve o ffices

an d th ei r m u tu al r el ati o n s Wi th much s tr ess an d str ai n

. dep ar tmen tal ,

h eadqu ar ter s wer e t r an sfo r med f ro m a co mmittee type o f structur e to

o n e b ased m o r e o n a l i n e-o f-c o m man d co n c ep t New d i v isi o n s w i th th ei r
.
,

o w n cen tr al o ffi ces w er e fo rmed to c o o rd i n ate appr ai se an d pl an p o l i cy

, , ,

fo r fu n c tio n al dep ar tm en ts F i n ally th e gen er al o ffice w as r esh ap ed to

.
,

pro vi de mo re eff ecti ve admi n i stratio n o f all th e Jer s ey pro p er ties T h e en d .

resul t o f such u n pl an n ed ad h oc ch an ge w as in ti me a m ulti di vi sio n al

, , ,
”
“
decen tr ali zed structur e quite si mi lar to th at of G en er al Mo to rs o r du
Po n t .

S TRUCTURE A ND STRATEGY 9 5
B EF ORE 1 2

T h e ad mi n i str ati ve h i sto ry o f th e mo der n (N

S tan d ard O il Co mp an y
ew

Jer sey ) b egi n s pro p erly in 1 9 1 2 T h e ch an ges m ade in the co mp an y s

.
’

ac ti vi ti es after its d i sm em b er m en t by th e S upr em e C o ur t rul i n g w as in

m an y w ay s as sh arp a br eak in its h i sto ry as th e co n so li d atio n o f th e du

Po n t pro p er ti es in 1 902 a n d 1 903 w as in th e h i sto ry of th e explo si ves fi rm .

Un lik e th e case o f th e o lder du Po n t Co m p an y h o wever Stan dard O i l s , ,

’

predecesso r h ad adm i n i stered di rectly r ath er th an m erely co n tro lli n g

fi n an ci ally m an y an d v ari o u s o p er ati n g o rgan i z atio n s T h erefo re S t an d ard .

O il i n h er i ted a w i d er v ari ety o f ad m i n i str ati ve pr ac ti ces an d pro cedures

th an d i d th e mo d er n du Po n t C o m p an y .

Th e o ld S tan dard O il Co mp an y h ad b een an i n du str i al en terpri se o f

great si ze an d di versi ty Un ti l th e fo rm atio n o f Un ited S tates S teel it w as
. ,

th e l argest in th e co u n t ry an d r emai n ed th e sec o n d l arg est ev en after 1 902 .

Un li ke Un ited S tates S teel b efo re th e 1 93o s the o ld S tan dard O il Co m ’

p an y w as legally b o th a h o ldi n g an d an o p er ati n g co m p an y an d admin is ,

tratively p ar tly a fed er ated an d p ar tly a c o n so li d ated en terpr i se Fro m .

its o ffices at 26 Bro adw ay in New Y o rk Ci ty it admi n i ster ed b o th th ro ugh

dep artm en ts an d sub si di ar i es wi dely scattered refi n eri es sal es o flices crude , ,

o il fi eld s p i p e l i n es an d tan k er s in all p ar ts o f th e wo rld T h e s en i o r execu

, ,
.

tiv es at 26 Br o adw ay h ad to ad m i n i ster n o t o n ly th e ac ti v iti es o f suc h

si n gle-fu n ctio n u n i ts b ut also th o s e o f l arger multifu n ctio n s ub si di aries

STR UCTURE A ND S TRA TEG Y EE EO RE 1
9 2 5 16
5
that han dled th ei r o w n m ark eti n g refi n i n g an d o ften t r an s po rtati o n , ,

faci liti es A m o n g th e l atter were th e S tan d ard O il Co m p an i es o f In

.

di an a an d o f New Yo rk A tlan ti c Refi n i n g V acuum O il an d Im p eri al

, , ,

O il o f C an ad a T h r ee m o re S tan d ard O il Co mp an i es o f Cal i fo r n i a an d

.
,

2
Lo u i si an a an d th e R u m an Ian sub si d i ary also prod uced crude o il A n , .

o th er sub si d i ary G i lb er t 8: B ark er m an u fac tur ed an d so ld l am p s pu m p s

, , , ,

an d o th er equ i p m en t to o ut si der s as w ell as to J er s ey c o n tr o ll ed en ter -

pris es .

Th e d esig n by wh i ch th i s vast em p i r e w as adm i n i ster ed w as an y

th i n g b u t cl ear—cu t A s th e quo tati o n gi ven in th e fi r st ch ap ter i n di c ated
.
,

it w as th e r esul t o f h i sto r i cal evo luti o n p er so n al pr eferen c es leg al re , ,

q u irem en ts an d j u st h app en stan c e

, S o m e atten ti o n h ad b een g i v en to.

J er s ey s o ver-all structure in earli er y ear s b u t fo r mo re th an a dec ad e

’

b efo re 1 9 1 2 n o o n e h ad attemp ted to defi n e in an y fo rm al o r expl i cit w ay

th e li n es o f c o m mu n i c ati o n an d au th orrty w i th i n th e c o mp an y No r d i d .

an yo n e do so i mm ed i ately after th e di sm em b er m en t o f th e c o m p an y in

1
9 12 .

If l ack o f co n cer n fo r s y stem ati c s tructure w as o n e i n h eritan ce fro m

a

th e o ld c o m p an y an o th er an d mo r e cr iti c al o n e w as t h e u se o f co m
,

m ittees in ad mi n i str ati o n J er sey s ex ecu ti v es h ad l o n g adm i n i ster ed fro m

’
.

26 Bro adw ay th r o ug h c o mm i tt ees th e sev er al u n i ts o p er ati n g w i th i n o n e

3
si n gle fu n c ti o n T h er e w er e co m mi ttees fo r tr an sp o rtati o n p i p e l i n es
.
, ,

pro ductio n m an ufacturi n g exp o r t trade dom esti c trade an d fo r th e pur

, , , ,

ch ase o f supp lies In co o rdi n ati n g app raI SI n g an d m ak i n g po li cy fo r th e

.
, ,

v ario u s u n its wi th i n th ei r fu n ctio n al acti vi ty th ese co mm i ttees o ften b e ,

c ame i n vo lved in m ak i n g detai led o p er ati n g deci sio n s such as th e am o u n t

o f crud e o il to ru n r da in a sp ec i fi c r efi n ery o r th e am o u n t o f k er o sen e
p e y
a br an c h o ffic e o r sal es s ub si d i ary s h o uld sell C o mm i ttees ad m i n i st er ed .

n o t o n ly t h ese f u n c ti o n al u n i t s b u t al so th e en terpr i se as a w h o l e T h e .

Di rec to r s w h o d evo ted th ei r f ull t i m e to th e affai r s o f th e S tan d ard O il

Co m p an y met r egul arly u su ally dai ly as an Ex ecu ti ve C o mm i ttee th at
, ,

appr ai sed c o o rd i n ated an d pl an n ed for th e d i ff er en t si n gl e f u n c ti o n an d

, ,
-

m ultifu n c ti o n u n its an d for th e o v er-all en terpr i se B ec au se th e li n es o f .

au th o r i ty an d r esp o n si b i l i ty w ere n o t cl early d efi n ed th at c o mm i ttee O ften ,

b ecame deeply o ccupi ed in o p er ati n g detai l s o f c ertai n acti vi ties an d p ai d

l i ttl e o r n o atten tio n to th e ad m i n i str atio n of o th ers .

A fter its d i smemb er men t th e J er sey Co m p an y co n ti n u ed to b e a p ar tly

,

fed er ated an d p ar tly c o n so li d ated en terpr i se B ecau se it al s o r em ai n ed a .

h o ld i n g as well as an o per ati n g co m p an y its m ul ti fu n cti o n d i v i si o n s w ere ,

leg ally sub si di ar ies o r in th e p arlan ce o f th e J er s ey executi ves affili ates

, .

( I n th is c h ap ter affi l i ates th en r efer to w h at w er e ad m i n i str ati v ely m ul ti

, ,

fu n ct i o n d i visio n s S ub si d i ary refer s to wh at w er e admi n i str ati vely pr i

.
1 66 S T A N DA R D O I L CO M P A N Y (N E w I ERSEY
)
mar i ly i gl f un cti o n u n its wi th s ep arate legal i dentities s uch as a pi pe
s n e- ,

li n e o r m ark eti n g co mp an i es ) .

D esp i te legal an d admi n i strati ve si mi lar ities th e n ew co mp an y w as ,

qui te di ff eren t fro m th e o ld No t o n ly w as it s maller bu t it h ad lo st

.
,

m ost o f its crude-pr o duci n g t r an spo rtati o n an d domesti c m arketi n g , ,

faci li ti es It b ec am e essen ti ally an A mer i can r efi n i n g co mp an y th at s o ld its

.

pro ducts in fo r eign m ark ets In 1 9 1 2 o u t o f an average o f b arrel s

'

.
,

ru n ea ch da by J r y -c o n tr o ll ed r efi n er i es w r by r fi r i s in
y e se e e r u n e n e e ,

th e Un i ted S tates an d
4
by fo reign o n es Mo st o f th is o utput wen t .

abro ad as th e ear n i n g s f ro m m a rk eti n g acti vi ti es i n d i c ate In 1 1 t h

, 9 3 e .

return w as m i llio n f ro m sal es abro ad an d o n ly m i lli o n fro m th e

do m esti c mark et .

Th e mo st n o ti ceabl e ch an ge in o rgan i zati o n b etween th e o ld an d th e

n ew S tan d ard O il Co m p an y w as th at in th e n ew o n e th e s en i o r ex ecu ti ves ,

th at is th e B o ard o f D i r ecto r s ten d ed to i n cr eas e t h ei r ad m i n i st r ati ve

, ,

c o n tro l o ver th e si n gle fu n ctio n dep artm en ts o r s ub si di ari es an d to de

-

crease th ei r co n tact wi th th e i n tegrated m ultifun ctio n affili ates T h e lat .

ter i n clud ed St an d ard O il C o m p an y o f L o u i si an a th e Im p er i al O il Co m ,

p an y o f C an ada (wh i ch th ro ugh its L atin A meri can s ub si di ary th e

, ,

In ter n ati o n al Petro l eu m Co m p an y Ltd c am e to pro duce crud e o il as well .

,

as to r efi n e an d m ark et as c om p an i es th at p i p ed an d m arketed
) sev er al
g ,

n atur al
g as on a l o c al s c a l e a n d G i lb er t 8x,B a rk er th e m ak er s an d s e ll e r s ,

5
o f bur n er s tan k s an d pu mp s
, , A t fi r st Imp er i al h ad a d i rec t co n tact w ith
.
,

gen er al h eadqu arter s fo r Wal ter C T eagle th e able yo u n g an d very

, .
, , ,

6
ac ti v e D i r ec to r in ch arge o f F o r ei g n S al es b ecame its Presi den t But , .

wh en T eagle too k o ver th e presi den cy o f Jer sey in 1 9 1 7 n o o ne at 26 ,

Bro adway ei th er in th e di recto rate or i n _th e dep artmen tal o ffices w as

assi g n ed to w at ch o v er th e aff ai r s o f Im p er i al o r an y o f th e o th er m ulti

f u n cti o n sub si d i ari es exc ep t fo r L o ui si an a Fr ederi ck W Well er th e . .

,

sen i o r ex ecu ti v e o f Lo u i si an a r em ai n ed a D i r ec to r o f th e p aren t c o mp an y

,

u n til 1 920 b u t h e c arried o n n early all h is wo rk in B ato n Ro uge A fter

,
.

1 920 J am es A
,
Mo ff ett Jr fo r merly o f th e Lo u i si an a Co mp an y b ecame
.
, .
, ,

th e o n ly B o ard m em b er to o v er s ee d i r ec tly th e ac ti v i ti es o f t h at af

filiate Mo ff ett h o wev er al s o h ad th e r esp o n si b i li ty fo r th e adm i n i st rati o n

.
, ,

o f sh i pp i n g an d th en o f sal es .

T h e New Y o rk o ffi c e r ecei ved r ep o rts fro m th e affil i ates an d th e B oard ,

sti ll h eld th e pur se str i n g s Bu t an y allo c ati o n o f f u n d s o r o t h er r es o urces

.

w as b ased o n i n fo rm ati o n pro vi ded by th e affil i ates th emselves T h e p aren t .

m ad e li ttl e eff o r t to ch eck o n th e w ay th ey em plo yed th ei r reso urces .

T h ei r r el ati o n s to 26 Bro adw ay c am e to b e m uch l i k e th at o f th e G en eral

Mo to rs d i vi si o n s to th ei r gen er al o flice duri n g D uran t s time
’ ’
.

T h e si n gl e-fu n c tio n ac ti vi ti es o n th e o th er h a n d w ere m o re clo sely an d ,

S TR UCTURE A ND S TRA TEG Y BEFORE 1 9 2 5 16
7
fo rm ally dm i n ister ed by New Y o rk T h e C ar ter O il Co m p an y wh o se
a .
,

presi den t h ad h is p erman en t o ffices at 26 Bro adway w as r esp o n sible in ,

1 9 1 2 fo r all th e d o m esti c pr o duc i n g ac ti v i ti es exc ep t t h o se o f th e L o u i si an a

Co m p an y Pi p e li n es ag ai n exc ep ti n g th o se o f L o u i si an a soo n c am e
7
.
, ,

to b e m an ag ed t h r o ugh two sub si d i ar i es th e O kl ah o m a Pi p e L i n e C o m

,

p an y fo r th e li n es in th e n ew mid co n ti n en t fi elds an d th e T u sc aro ra

—

Co m p an y in th e o ld er A pp al ach i an fi eld s A s th e h i sto ry o f th e J er sey .

Co m p an y p o i n ts o u t : Th e pr i n ci p al o ffi cer s an d sever al d i recto r s o f th ese

“

co m p an i es h ad th ei r oflices in New Yo rk h o wever an d to p p o li cy w as , ,

“

fo r m ul ated th er e wh er e t h e essen ti al co o rd i n ati o n wi th o th er o p er ati o n s

,
” 8
co uld b e mo st readi ly wo rk ed o u t .

M arketi n g w as admi n i ster ed by tw o s ep ar ate u n i ts a sm all Do mes ti c ,

M ark eti n g D ep artm en t an d an Exp o rt T r ade D ep ar tmen t B ec au se th e _

.

di sso lu tio n decree h ad depr i ved the co m p an y o f m uch o f its ho m e m ar

k et th e D i r ecto r s d eci ded to dro p th e o ld Do mes ti c M ark eti n g C o mm it
,

tee T h e M ark eti n g D ep ar t m en t h ad a gen er al m an ager an d tw o br an ch

.

man ager s o n e w h o sup ervi sed fi eld o ffi ces at New ark an d t h e o th er

,

th e o n e at B al ti m o r e
9
A t h eadqu ar ter s th e m an ag er h ad as si stan ts to
.

h an dle th e m ai n pr o duc ts o f k er o s en e f u el o il an d gaso l i n e as w ell as

, ,

o n e fo r sp ec i alt y pro duc ts an d an o th er fo r lubr i c an t s B o th fi eld o ffi ces .

h ad a st ruct ur e c o m p ar able w i th th at at h eadqu arter s w i th th e br an ch ,

m an ager an d h is assistan ts co n cen tr ati n g o n th e pr i m ary pro duc ts an d ,

th e o th er tw o execu ti ves m an ag i n g th e m ark eti n g o f lubr i c an t s an d

sp ec i alty pr o duc ts T h ese fi eld m en r ep o r ted d i r ec tly to th ei r pr o duc t

.

m an ager at 26 Br o adway T h er e is l i ttle evi d en ce o f th e d ev elo p m en t o f

.

aux i l i ary o r staff o ffic es as l ate as 1 1 8 n o t ev en fo r adv er ti si n g at de

9 , ,

artm en tal h eadqu ar ter s I 8 th t w fi ld ffi c d m i i t r d

p n 1
9 1 . e o ,
e o es a n s e e a

to tal o f 8 0 bulk d i str i bu ti n g stati o n s an d 1 80 s m aller s ub stati o n s b esi d e

a sm all s al es fo rc e A s th e l arg e n u mb er o f sub st ati o n s i n d i c ates

. th e ,

di stri bu ti n g o rgan i zatio n w as sti ll k eyed to th e sale o f k ero sen e by h o r se

an d w ago n

Fo r th e adm i n i str ati o n o f fo r ei g n m ark eti n g th e o ld Exp o r t T r ad e ,

Co m m i ttee w as r etai n ed b u t an d th i s is si g n i fi can t fo r l ater d evelo p

, ,

men t s th e actu al adm i n i st rati o n o f its acti v i ti es c am e to b e al m o st co m

,

p le te ly in th e h a n d s o f th e se n i o r d ep ar tm en tal ex e cu ti v es a n d n o t o f
th e Co m m It tee T h e wo rk o f th i s d ep ar tm en t d i ff er ed f r o m th at o f th e
.

do m esti c m ark eti n g an d o f th e m ark eti n g dep artm en ts in th e o th er co m

,

p ies st ud i ed h er e in th at it sup erv i sed a n um b er o f sub si di ar i es each

a n , ,

o p er ati n g in a d i ff er en t co u n try r ath er th an br an c h o ffic es w i th i n t h e sam e

n ati o n J er sey h ad a m ark eti n g sub si d i ary in n early ev ery Eur o p ean c o u n
.

try as w ell as tw o in L ati n A m er i c a an d in ti m e o n e in t h e F ar East ,

.
,

Di ff er en t l aw s cu s to ms lo c al n eed s as well as m i n o r i ty sto ck h o lder i n ter

, ,
1 68 S T A N DA R D O I L CO MPA NY ( NE w j ERSEY )
es ts n ot o n ly m ade s uch sep arate legal o rgan i zatio n s n ecess ary but
requi red th at thei r m an ager s be gi ven a fai rly free h an d in o peratio n s .

Wh ile th e h eads of these lo cal sub si di aries man aged mo st o f th e o pera

tion al ac ti viti es th e Exp o r t T r ad e Dep ar tmen t an d th e Di r ecto r in ch arge
,

o f M ark eti n g appr ais ed an d co o rd i n ated th ei r w o rk Co o rd i n ation in .

cluded th e allo c ati o n o f supplies fro m th e A meri can refi n eries A b o ve all .
,

th e h o m e o ffi ce pl an n ed an d help ed to c arry o ut o ver-all m ark et s t r ategy .

A l so b ec au s e th e small o utput o f r efin eri es abro ad w as mark eted th ro ugh

th ese sub si di ari es th e Exp o rt T rade Dep ar tmen t al so admin istered th e
,

Euro p ean r efi n eri es In 1 9 1 2 th e Di recto r in ch arge o f F o rei gn Mark et

“
.
,

in g w as th e th i r ty-fo ur-y ear-old Walter C Teagl e T eagle k ept in co n stan t

”
. .

co n tact with Fr ederi ck D A s ch e th e M an ager o f th e Dep artmen t an d

.
, ,

D L Harp er w h o too k o ver th e Dep ar tmen t wh en A s ch e wen t on th e

. .
,

B oard o f Di recto r s in 1 9 1 4 T h ese th ree men wo rked clo sely with o n e an

.
fi

o th er an d w i th th e co m p eten t h ead s o f fo r ei gn co mp an i es bu t th ey ,

r arely met fo rm ally as a committee H ere th e ch ai n o f co mman d from .

,

Teagle to A s ch e to H arp er to th e ch i efs o f th e sub si d i ar i es w as clearly ,

10
defi n ed A s so m uch o f th e o p er atio n al wo rk an d th e tacti c al d ec isi on s
.

were h an dled l o cally there seemed l ittle n eed to develo p auxi li ary o r
,

s ervi ce o ffices in the headqu arter s o f th i s dep artmen t A dvertisi n g fo r .

,

ex am pl e co uld o bv i o u sly b e t ak en c are o f mo r e effecti vely lo c ally th an

,

f rom 26 Bro adway .

If th e committee fo rm of m an agemen t fell aw ay in fo r eign mark eti n g ,

it co n ti n u ed to do mi n ate the admi n i st ratio n of th e J er sey Co mp an y s ’

o th er pr i m ary ac ti v i ty — refi n in g T h e M an u factur i n g Co mmittee m ai n

.

t ain ed a ti gh t con t ro l o ver 90 p er c en t o f th e co mp an y s r efi n i n g c ap ac i ty

’

— o v er t h e m ammo th B ayw ay th e o ld er B ayo n n e an d th e s maller Eagle

, ,

refi n eri es all in New J ersey acro ss th e ri ver fro m New Yo rk o ver th e
, ,

refi n eries in B al timo re an d Park er sburg West V i rgi n i a an d o ver s mall , ,

o n es in L ati n A mer i c a an d l ater s o me in th e Far Eas t Its r esp on si b i liti es .

were bro ad A s th e Co mmittee itself po i n ted o ut in th e l ast an alysis

.
,
“
,

all qu esti on s o f meth o d o f ru n n i n g n ew pro duct s an d equ i p men t an d

, , ,

maj o r pro blem s co me b efo re th e Man u fact ur i n g Co mmi ttee fo r determi

” 11
n ati o n . It revi ewed an d recommen ded to th e B o ard all esti m ates fo r
ru n n i n g expen ses rep ai r s an d n ew co n structio n an d h ad the fi n al say
, ,

o n exp en d i tures u n d er a cer t ai n l i mit T h ese r ec o mm en d atio n s i n cluded . ,

fo r example tho s e deali n g w ith wh en an d wh ere to bu i ld n ew refi n er ies

,
.

Fi n ally th e Co mmittee w as respo n sible fo r th e co o rdi n ation of pro duct

,

flo w th ro ugh th e maj o r fu n ctio n s pro ductio n tran spo rtatio n man ufac , ,

t urin g an d mark eti n g It allo c ated the u se o f current reso urces in refin
, .

in g acti vi ti es an d pl an n ed fo r th e em plo ymen t of th es e an d add iti on al

reso urces in th e fut ure .
S TR UCTURE A ND S TRA TEG Y BEFORE 1 9 25 16
9
T h e r efi n i n g o rg an i z ati o n at J er s ey in th ese year s pro vi d es an ex tr eme
e x a m pl e o f gr o up r esp o n si b i l i t y in a l a rg e-s c al e i n du str i al en terpr i se
The .

dep ar tmen t w as in real ity a feder atio n o f r efi n er s w h o co o rdi n ated th ei r

a c ti v i ti es in th e M a n u fac tur i n g Co mm i tt ee Eac h m aj o r r efi n ery h ad its
.

G en er al Man ager wi th an o ffic e o n th e sev en th flo o r at 26 Bro adw ay .

Each o f th ese ex ecu ti v es w as r esp o n si ble fo r th e o p er ati o n o f h is o w n

refi n ery C o llecti vely, th ey m ad e p o l i ci es an d set pro gr am s fo r all m atters
.

co n cer n i n g th e m an u fac t ur i n g o f Jer sey s pro duc ts Q u i f t c h

’
. te o en ea

ten ded to p u t h is o w n n eed s an d i n ter est s b efo r e th o se o f th e D ep ar tm en t

as a w h o l e D ep ar tm en t al p ol i cy an d ac ti o n w as wo rk ed o u t o r n ego ti ated
.

in th e Man ufac t ur i n g Co mm i ttee 5 Ro o m 707 Execu ti ves o f Jer s ey S tan d

’
.

ard, in fa ct, r eferr ed to th e D ep ar tmen t s d ec isi o n s an d a c ti v i ti es as t h o se

’

” ”
of th e Ro o m T h e Roo m, n o t th e C h ai r m an o f th e Co mm i ttee, m ad e
“ “
.

th e execu ti v e d ec i si o n s, b o th in t h eo ry an d in pr acti ce .

O n l y in sc h edul i n g an d co o rd i n ati n g th e flo w o f p et ro l eu m th ro ugh

th e r efi n eri es d i d th e w o rk o f th e M an u fact ur i n g C o m mi ttee co me to b e

h an dl ed by an i n d i vi du al r ath er th an by a gro up S i n c e it w as r es p o n si ~
.

b le fo r s ch edulin g ru n s at all J er s ey —co n tro lled r efi n er i es, th e Co m

mittee h ad to d eci d e o n h o w m uch wo uld b e run , wh ere an d wh en ; it al so
h ad to b e sure th at th e r efi n er i es r ec ei v ed d el i ver i es o f crude o il an d t h at
th e tw o m ark eti n g dep ar tmen ts w er e n o ti fi ed o f th e av ai l ab i l it y o f s up

pl i es Th i s m ean t that it came to h ave ch arge o f th e allo c atio n to th e

.

r efi n eries o f crude tak en f ro m C ar ter O il an d purch ased fro m o u tsi der s .

In co o p er ati o n w i th th e D o m esti c T r ade D ep ar tm en t I t al so allo tt ed re

fi n ed O il to I ts o w n bulk stati o n s an d to th o se o f l arge cu sto m er s, an d
th r o ug h th e Exp o r t T r ad e Dep ar tm en t to fo r ei g n sub si d i ar i es T h e im .

m ed i ate day-to -day d ec i si o n s n ecessary to k eep th e fl o w mo vi n g c ou ld

h ardly b e h an dled by a gro up , and so th e M an u factur i n g Co mm i ttee s
’

S ecr etary i n creasi n gly too k ch arge o f th e ad m i n i st rati o n o f th e co o rd i n a

ti o n o f p ro dtI ct fl o w
‘

T h e M an u f acturi n g C o mm ittee an d th e o th er f u n c ti o n al u n i ts w er e re
sp o n si bl e to th e B o ard o f D i r ecto r s T h e B o ard , l i k e th at o f th e o ld J er sey
.

Co m p an y , co n si sted l argely o f f ull-ti m e execu ti ves T h e D i recto r s o f 1 9 1 2

.

12
h ad en j o y ed lo n g an d v ar i ed serv i ce S o m e h ad h elp ed to bu i ld th e o ld
.

co mp an y O th ers h ad m an aged th e l arge m ultifu n ctio n affi li ates T h ese

. .

men w ere gen eralists r ath er th an fu n cti o n al s p ec i al i sts Y et b ec au se o f

“

th ei r lo n g a n d v ar i ed exp er i en c e, th ey w er e o ld in y ear s In th e p er i o d .

i mm edi ately fo llo wi n g 1 9 1 2, th ey were replaced by yo u n ger m en wh o se

bu si n ess experi en ce h ad b een co n fi n ed to o n e fu n ctio n al acti vi ty .

T eagle, w h o b ec am e P r esi den t in 1 9 1 7, set th e p atter n In 1 9 1 2 h e w as .

,

o n e o f th e v ery few Di r ecto r s sp eci fi c ally in c h arge o f a f u n cti o n al a c ti v i ty .

A ll th e Di r ecto r s w h o w ere app o i n ted dur i n g th e fi r s t year s o f h is term,

1
7 0 S T A N DA R D O I L CO M P A N Y (N E w j ER SEY )
h o w ever, were t ak en f ro m f u n cti o n al d ep artm en t s an d each w as gi ven
th e ti tl e o f D i r ec to r in ch arge o f h is sp eci al ty S uc h D i r ecto r s c o n ti n u ed
.

to b e en gr o ssed in th e m an agem en t o f th e sp ec i al ac ti v i ti es in wh i ch each

h ad lo n g wo rk ed T h i s w as o n e r easo n w h y th e D i recto r s o f th e n ew
so .

co m p an y i n cr easi n gly co n cen tr ated o n th e si n gle fu n ctio n dep artmen t s -

an d by th e s am e to k en p ai d l ess an d l es s atten ti o n to th e ad m i n i st r ati o n

, ,

o f m o re d i stan t m ul ti f u n c ti o n affi l i ates .

In so m e w ay s th e structur e at J er sey in an u n pl an n ed w ay b ec ame

,

si m i l ar t o th at o f th e du Po n t C o m p an y b efo r e 1 2 1 an d in o th er w ay s
9 , ,

li ke G en er al Mo to rs b efo re its reo rgan i zatio n T h e s en io r o flicers were .

r esp o n si bl e i n di vi du ally for th e o ver—all adm i n i str atio n o f th e fu n ction al

dep artm en ts wh o se o p erati n g detai l s were h an dled by a dep artmen t h ead ,

exc ep t in th e c ase o f th e M an u fac tur i n g C o m m i ttee w h er e th e w h o l e ,

co m m i ttee m an aged C o ll ecti v ely w i th th e Pr esi den t an d th e Ch ai rm an

.

o f th e B o ard th e sen i o r O ffi cer c oo rd i n ated appr ai sed an d set p o l i c i es

, , ,

fo r th e d ep artm en ts an d th e c o m p an y as a wh o le Bu t u n l i k e th e du .

Po n t Ex ecu ti ve C o m m i ttee th ey h ad al so to allo cate f u n d s to an d m ak e

,

deci si o n s (o n r el ati vely li ttle i n fo rm atio n ) ab o u t a n u mb er o f m u ltifu n c

ti o n en terpr i ses J er sey w as th u s ad m i n i str ati v ely b o th h i gh ly c en tr al i zed
.

an d h i gh ly d ecen t r al i zed M o r eo v er th e c h an n el s o f au th o r i ty an d co m
.
,

m u n icatio n b etween th e sen i o r executi ve gro up an d th e dep artm en t s o r

th e m ul ti f u n cti o n su b si d i ar i es w er e n o t d efi n ed at all cl early T h i s l ack o f .

an expl i ci t d esi g n w o uld pro b ably h av e c au sed l i ttl e d i ffi cul ty if J er sey s
’

bu si n ess h ad rem ai n ed rel ati vely stable an d if th e m aj o r admi n i str ati ve

ch an ges h ad b een o n ly th o se c au sed by th e n o rm al tur n o ver o f top p er
so n n el Bu t th ese y ear s w er e o n es o f r ap i d gro w th fo r J er sey G r o w th in
. .
,

ti me fo r ced cl ari fi c ati o n an d r edefi n i tio n o f th e structur e o f th e d ep art

,

m en ts an d o f th e co m p an y as a wh o l e .

Th e S trategy o f V ertica l I n tegration an d Co n tin ued Expa nsio n

A fter J er sey s str ategy o f gr o w th c am e essen ti ally as a r esp o n se to
’
1 2,
9 1

tw o pr essur es T h e fi r st th e r esul t o f its d i sm em b er men t w as th e d esi re to

.
, ,

o b tai n a b etter b al an ce b etw een th e d i ff er en t f u n cti o n s o f th e o il bu si n ess .

T h e seco n d w as th e n eed to adj u st to th e r ap i d ch an ges an d exp an si o n

o f th e m a rk et cau sed by t h e app ear an ce o f tw o o f th e gr eatest mo der n

tech n o lo gi c al i n n o v ati o n s el ec tr i c p o w er an d th e g aso l i n e en g i n e

,
.

T h e c o m i n g o f th ese tw o n ew gen er ato r s o f p o w er al o n g w i th th e ,

o p en i n g o f h ug e n ew o il fi eld s in T ex as an d C al i fo r n i a w as rev o lu tio n iz ,

in g th e p atter n s o f supply an d d em an d in th e o il i n du stry ev en b efo r e

th e br eakup o f th e o ld S tan d ard O il C o m p an y By r epl aci n g k ero sen e as .

th e m aj o r so urc e o f a r ti fi ci al l i gh t h ere an d abr o ad el ec tr i c ity w as r ap i dly ,

S TR UCTURE A ND S TR A TE G Y BEFORE 1
9 2 5 1
7 1

curtail i n g th e dem an d for th e i n du stry s maj o r pro duct A t th e s ame time ’

.
,

th e i n sati abl e d eman d o f th e au to mo b i le fo r g aso li n e an d lubr i c an t s an d a

so m ewh at l es ser c all for f uel o il fo r s h i p s an d in i n du st ry mo r e th an m a de

13
up fo r th e decl i n e in th e m ark et fo r k ero s en e G aso l i ne wh i ch h ad t aken .
,

c en t o f J er s ey s d el i v er i es in 1 1 2 in 1 92 cc o u n t ed fo r
’
1
5 p er
9 7 a 4 p
1 er
,

cen t By th en acco rdi n g to T eagle it pro vi ded mo re th an 60 p er cen t o f

.
, ,
14
th e i n du stry s r etur n o n r efi n ed pro duc ts Fo r th ese sam e year s k ero sene
’
.
,

h ad dro pp ed f ro m 44 p er cen t to 1 1 p er cen t o f th e to tal r efi n ed pr o ducts

th at Jer sey m an ufactured Mo r eo ver wh i le th e n at ur e o f th e m ark et w as
.
,

ch an gi n g th e o ver-all d eman d w as qu i ckly i n creasi n g T o tal deli veri es

, .

o f th e c o m p an y s r efi n ed pr o duc ts qu a drupl ed b etw een 1 1 nd 1 2

’

9 4 a
9 7 ,

fr o m j u st u n d er 40 mi lli o n b arr el s to o ver 1 70 m i ll i o n .

T h e ever-exp an d i n g d em an d fo r p etr o l eu m pr o ducts c au sed co n cer n

fo r J er s ey ex ecu ti ves abo u t th e av ai l ab i li ty o f suppli es at r eason able pr i ces .

T h i s co n c er n grew as n ew co m peti to r s l argely pro duci n g co m p an ies , ,

such as G ul f t h e T ex as C o rp o r ati o n an d S h ell bu i l t r efi n i n g an d m ark et

, , ,
'

in g o rgan i z atio n s Jer sey w i th its acti vi ti es co n c en tr ated in r efi n i n g

.
, ,

h ad to r ely o n o th er s fo r its raw m ater i als an d fo r th e m ark eti n g o f its

pro ducts O f th e daily aver age o f
. b arrel s o f crude ru n by its refi n
er i es in th e U n ited S tates an d C an ad a in 1 1 2 its d o m esti c sub si d i ar i es
9 ,

an d affil i ates s uppl i ed o n ly b arr el s ; whi le in th e y ear s after 1 9 1 2 on e ,

co mp an y (Stan dard O il o f New Yo rk ) too k 40 p er cen t o f th e gas o li n e

Jer sey so ld in th e Un i ted S tates F i n ally th e d ism emb ermen t left Jersey
15
.
,

wi th few tran sp o rtatio n faci l i ti es Fro m 1 9 1 2 u n ti l th e co mi n g o f th e

.

great depressio n o f th e 1 g3o s th e co mp an y s b asi c o bj ecti ve w as to h ave

’

,
’

its r eso urces l ess c o n c en tr ated in th e m an u factur i n g br an ch an d b etter

deplo yed in th e o th er s ec to r s of th e o il i n du s try .

To c arry o u t th is f u n d amen tal p o li cy o f v er ti c al i n tegrati o n an d to meet

th e dem an d s o f th e f u el o il a n d g aso l i n e m ark et J er sey S tan d ard w as ,

fo rced to add n ew an d to exp an d ex is ti n g r es o urces o f equ i p men t pl an t , ,

an d p er s o n n el It h ad to bu i ld n ew f u n c ti on al d ep ar t m en ts to ad m i n i ster
.

th e n ew ac ti v i ti es T his gr o w th in t ur n br o ugh t n ew task s an d pr o blem s

.
, ,

to th e ex i sti n g fu n c ti o n al u n it s p ar ti cul arly man u fact ur i n g an d d o m esti c

,

mark eti n g It called fo r i n cr easi n g sp eci ali zatio n an d fo r th e fash i o n i n g

.

o f n ew s erv i ce an d aux i l i ary d ep ar tm en ts It m ade mo r e an d mo r e .

co mplex th e co o rdi n atio n apprais al an d pl an n i n g o f th e acti vi ti es w i th i n

, ,

an d b etw een th e d i ffer en t ad m i n i st r ati v e u n i ts F i n ally exp an si o n led .

,

to th e purch as e o f n ew affi l i ates an d th e gro w th o f th e o ld er au to n o m o u s ,

mul ti fu n cti o n o n es an d so r ai sed an o th er r an ge o f adm i n i str ati ve pr o b

,

lem s Y et des pi te th ese steadi ly m o u n ti n g pr essur es m an y years w ere to

.
, ,

p ass b efo re T eagle an d h is asso ci ates p ai d ser io u s atten ti o n to th ei r co m

m g m t t ruc t ur
’

p y
a n s an a e e n s e .
1 72 S T A N DA R D O I L CO M P A N Y (N E w I ER SE Y)

exp an si o n in th e yea rs immedi ately f

a te r 1 91 1 f oll o w ed an y e xpli citl y

i n ter est ed i n buil din g up

r plan t person n el an d o ther r eso urces in
th ei , ,

tra n s p o rt a ti on an d i n th e pro ducti on of cr ude o il th an in d evel o p in g

m ark er f a ciliti es Th ey appar en tl y f el t th at th ey co uld r el y on o utsi ders

.
,

o f N ew Y o rk , to m ark et th ei r r efi n ed pr od ucts b ut n ot t o pr o vi de th em

gr ati n g ba ckw ard rath er th an f o rward w as un do ub tedl y th e rapi dl y

ex pa n di n g m ark et Just be ca use th e o ut put o f t h e r efi n eri es qu i ckly f o u n d
.

custom er s ther e w as dan ger that th e co m pa n y co ul d m eet thi s dem an d

,

qu an ti ty of suppli es wh en th e r efin er i es w ere r eady t o pr o cess th em .

H o wever J er sey s con cen trati on on o b tai n in g cru de oil rath er tha n
,
’

o n d ev el op i n g h er m ar k eti n g o rgan i zati on di d r esu l t i n a dan gero u s

Tw o x c i v es Wal ter
e e ut , C T eagl e
. an d Ev erit J . S adl er, th e la tter on e

r d o v er th eir co m pan y s d epen d en ce on o u tsi ders f or suppli es an d

ce n e
’

shi ppi n g T h ey st r on gly suppo rted th e mo v es m a d e durin g Wo rld War I

.

t o expa n d t h e o utput an d r eso urces of th e do m mti c afi lia tes th e Car ter ,

O il Co m pa ny an d S tan da rd Oi l o f L o uisia na 17
I n 1 9 1 5 Ca rt er m o v ed .
,

f r om th e A ppal a ch i an t o th e mi d—co n tin en t fi elds an d b egan aggressi vely

to purch ase an d dev el op n ew fi el ds S i mul t an eo usly th e Lo uisi an a Co m .
,

pan y in cr ea sed pr o du cti o n as l ar ge fi el ds w er e o pen ed up in th e vi cin i ty

o f its r efin ery Ev en bef o r e th e w ar Im peri al m o v ed thr o ugh its sub
.
,

si diar y In tern ati o nal t o pro du cti o n o f crude i n P eru an d aft er th e w ar

, , , ,

in Co lumb ia .

Ea rly i n 1 9 1 7 Sa dl er b egan t o m ak e cl ear his vi ew s o n p ro du cti o n

,
.

Wh a t w as n eed ed h e in si st ed w as a pr ecise po li cy of expansi o n an d th en

, ,

an o rga n iza ti o n t o a d mi n is t er th e pr o p erti es a cqui r ed th a t is an ex pli ci t , ,

st r ategy an d a d efi n i t e st ru ct ure f o r p rod uct i on a cti v i ti es R ap i dl y in creas .

in g co m pe ti ti on f o r th e w o rld s o il supply i n th e f a ce o f an ex pa n di n g
’

m ar k et f o r r efi n ed pr o du ct s m ad e such plan ni n g an d o rgan iz ati o n im

r ativ e In March S adl er w r o t e S eth B H u n t th e T r eas ur er an d
p e . 1 9 7
1 , ,
.
,

D i r ect o r in ch a rg e o f pr o ducin g acti vi ti es :

I do k no w
not th a t a defin it e po licy as to expans io n an d f o reign p roduc
in g b usin ess h as ev er b een decided o n b y o u r C om p a n y If it h as n o t , it .
STR UCTURE A ND S TRA TEG Y BEFORE 1 9 2 5 17
3
w o u ld see m tobe v ery im p o rtan t qu estio n w hi ch migh t be b etter dis
a

cus sed in prin ciple r ath er than bein g co nsidered o nl y in cases w h er e isolated
fi elds or p ro po siti o ns ar e co mi n g u p fo r o ur co nsideratio n .

I feel th e r eal so u r ce o f p o w er in th e o il b us in ess is co n trol o f pr o du cti o n ,

an d it does n o t seem th at o ur C o m p an y is su ffi cien tly fo rtifi ed in th is r esp ect .

In th e Uni ted Sta tes p ossib ly w e h ave so m e pr o tection in pro du cti on an d

tran sp o rta tio n f acili ties co n tro lled b y fr ien dly co n cer ns Th is m ay o r m ay .

n o t b e su ffici en t f o r our pr odu cti o n b u t in an y ev en t f o r ei gn pro du cti on is

, ,

alm ost exclusively in th e h an ds o f ou r com petito r s

18
.

O ne r es ul t of S adler s pleas suppo rted as th ey w er e by T eagl e w as a

’

, ,

dri ve after th e en d o f Wo rld War I to o b tai n pro duci n g faci li ti es p ar ,

ticu larly o v er s eas By pr o vi di n g n ew s o urc es o f s uppli es o v er s eas fi eld s

.
,

wo uld p ermi t an exp an si on o f th e s mall r efi ni n g cap acity of J ers ey s ’

fo r ei gn affi li ates s in ce th e gr eater po rti o n of th e r efi n ed pr o ducts so ld i n

,

Eu ro p e an d L ati n A meri ca w as still expo rt ed fr o m J er sey s A m eri can

’

r efi n eri es .

A t h om e th e mo st si gn ifi can t m o v e w as th e purch ase in J an u ary

, ,

9 9
1 1 , o f a c o n t r o ll i n g i n t er est in H u m bl e O il 8 : R efi n i n g Co m p an y o n e ,

o f th e l arg est pr o duc er s in T ex as Th e d efen si v e n atur e o f th is acqu i si ti o n

.

s h o uld b e stressed F o r H um bl e th e alli an ce pr o vi ded u seful cap i tal an d

.
,

a f ri en dly cus to m er A s fo r J er s ey its h is to ry po i n ts o u t th at J er sey

“
.
,

S tan d ard n o t o n ly w as as sur ed o f a gr eater act u al an d po t en ti al d o m esti c

cru de pro ductio n b u t ob tai n ed th e s ervi c es o f an abl e purch asi n g o rgan
,

iz atio n to r em edy th at d an ger o u s d ep en d en c e u p o n n o n -J er sey crud e

” 19
suppli er s t o w h i ch S adl er h ad p o i n ted w i th al ar m a y ear ear li er
[ ]
sic .

P artly b ecau se H um bl e en j o y ed an excep ti o n ally abl e m an agem en t an d

p artly b ec au se of T exas law ag ain st o utsi d e con tro l th e J er sey Co mp an y ,

m ade n o eff o rt to d evelo p an y m an agem en t co n tr o l s o v er its T exa s

afi liate T h e purch as e o f th e H u mbl e sto ck w as co n si d er ed in 1 1
.
9 9 as
20
essen ti ally an i n v estm en t an d a f o r m o f i n sur an c e .

In 1 9 1 7 S adl er argu ed f urth er fo r an o rgan i za ti o n to carry o u t th e

mo r e pr eci sel y d efi n ed str ategy of ob tain in g an d pr o duc in g crude By .

a ssur i n g b ett er pl an n in g c oo r di n ati o n an d appr ais al pr o p er o rg an i z ati o n

, , ,

co uld m ak e pro ducti o n m o r e eflicien t A s h e to ld H u n t .

It al so see ms v th e wo rk w hi ch w e ar e n o w do in g in fo reign fi elds

e en

sh o u l d b C h an dled b i l d p r t m t th t h fi l d d t h av
y a s n g e e a en so a eac
, e oes n o e

to do its o w n ex erim en tin b t dr w f r m mm l r i h o us e

p g u , ca n a o a co on c ea n g
f o r in f o rm atio n Thi s w o u ld pr even t comp eti ti o n betw een th e v ar i o us
.

fi elds f o r m en an d w o uld prev en t u n desir ab le m en fr om b ein g empl oyed in

o n e o f o u r f o r ei n fi elds aft er an o th er
g .

A very im po rtan t advan tage in f o r eign w o rk w o u l d be f r equ en t visits to

all fi el ds b
y o n e o r m o r e m en f r o m h ea d q u a rt e r s t o get in c l o se t o u ch w i th
th e pr o b lem s to b e so lv ed an d to car ry th e best i deas fr o m o n e fi eld to an
17
4 S T A N DA R D O IL CO M P A N Y (N E W J
’

ERSE Y)
oth er I th ink it n o exaggeration to say th e diff er en ce betw een th e best
an d th e av er a e r d i t l t m w ll b i v tm t i dif
g p o u c n
g a en ay e e on n es en n

feren t f oreign fi el ds Th e o rdin ary drill er, u n der su ch co n di tions, is n o t

.

co m p e ten t an d m ust be cl ose ly w atch ed }

;1

Tw o y ear s l ater after b e r epeated h is pl ea s th e Bo ard of Di r ect o rs set

, ,

up a F o r ei gn Pr od ucin g D ep art men t an d br o ugh t S adl er fr o m h an dlin g

pr od ucti o n acti vi ti es in M exi co to 26 Br o adway t o b eco m e its h ea d Th i s .

dep art men t coo rdin ated an d supe rvi sed J er sey s ex pl o rati o n an d prod ucin g ’

acti vi ti es in E ur o pe A si a t h e N ear Eas t A fri ca an d La tin A m eri ca

, , , ,

”
o u tsi d e o f P eru an d Co l o mb i a wh er e Im per i al s In ter n ati on al oper ated
’

, .

A F Co rw in Pr es i d en t of Ca rter c o n tin u ed to adm in i ster d om esti c

. .
, ,

producti on acti vi ti es fr om his ofli ces at 26 Br oa dway By 1 9 1 9 Co rw in s .

,
’

un i t h ad a cl ear-cu t lin e-an d—stafi St ru ct ur e wi th tw o o per atin g se cti on s ,

th e Western f o r th e mi d-co n ti n en t fi elds an d th e East er n f o r th e A p pala

?
ch i an fi elds Th e staff at h ea dquart er s in cluded a geo l ogi st a st ati sti ci an , ,

an d a fi n an ci al O fli cer A V i c e Pr esi d en t h ea d ed ea ch o f th e tw o r egi o nal

.
-

o ffi ces .He h a d un der h im a G en er al S uperi n ten d en t wi th oth er l in e

ass ist an ts an d S taff ofi cers at th e r egi o n al h ea dquart er s an d D i visi o n

S upe ri n ten d en ts w h o m an aged th e act ual o p erati on s i n th e fi eld .

S adl er h ad a m uch br o ad er ta sk th an Co rw in N o t o n ly di d h e h av e .

th e wh o l e gl o b e as a fi eld f or expl o r ati on ; b u t al so his fi eld un its w er e ,

l ik e th o se of th e Expo rt T ra de D ep artm en t sub si di ari es in difi er ent co un ,

t ri es r ath er th an br an ch u ni ts wi thin th e s am e n ati o n Th ey h ad to a dj ust .

t h ei r i n t er n al o rg an i za ti o n t o l o cal diff er en ces bo th l egal an d soci al ,

.

Bu t as a wh o l e th e st ruct ur e o f S adl er s d ep artm en t w as m uch l ik e th at

’

o f Co rw in s I n 1 20 it adm i ni ster ed sub si di ar i es wi th o ffi c es in V en ezu el a

’
.
9 , ,

Bo li vi a N o rth A f ri ca M exi co an d R um ani a In tim e th e Dep artm en t

, , , .
,

set up an O ffice in P ari s w hi ch h elpe d t o h an dl e th e pr o ducti o n act i vi ti es

th r o ugh ou t m o st o f E ur o pe A t 2 6 Br o ad w ay S a dl er h ad hi s l in e assist ants ,

f o r th e su pe rvi si o n o f m aj o r g eo gr aph i cal ar eas an d his small st aff o m

.

ces .

He al so k ept th e Bo ard m o r e cl o sely i nf o rm ed o f h is d ep artm en t s

’

a ct i vi ti es th an di d Co rwi n In r egul ar r epo rts app ar en tly m ade o n hi s

.
,

o w n i n i ti ati v e h e r evi ew ed th e ex i sti n g si t uati o n

,
appr ai sed th e eff ecti v e ,

n ess o f curr en t o pe r ati o n s an d o u tl i n ed pl an s f o r f ut ur e exp an s i o n Th e

,
.

purpo se o f th i s system ati c pl an ni n g w as S adl er exp lain ed t o hi s co ll eagu es

, ,

to gi v e an i d ea o f th e si g n ifi can ce o f co mmi tti n g o ur selv es t o a pr ogr am

“

S imi l ar t o t h at o u tli n ed an d to pr o v o k e g en er al di scuss i o n

,
an d ev en ,

24 ”
t u all y a d eci si o n as t o po li cy al o n g br o a d l i n es S in ce h e f el t it meces .

sary t o po i n t o u t so expli ci tly th e n ee d o f thi n k i n g in ter m s o f str ategy

a n d str u ct ur e h e w a s u n d o ub t edly o n e o f th e fi r st ex ecu ti v es at J er sey t o

,

see th i s n eed .

In th e y ea r s fo ll o w in g th e di sso lu ti o n J er sey S tan dard r ap i dly ex ,

S TR UCTURE A ND STRA TE G Y BEFORE 1
9 2 5 1
75
d ed its tr an s p o r tati o n f aci liti es as w ell as its pr o duc i n g ac ti v iti es
pan .

Wh i le its fo rei gn affil i ates , p ar ti cul arly th e G erm an an d Itali an co m p an i es,

h ad sm all fleets, Jer s ey h ad n o tan k er s o f its o w n in 1 9 1 2 It fo u n d ch ar ter .

in g sh i p s to b e u n cer tai n an d o ften co stly fo r th at r easo n Ev en b efo r e .

Wo rld War I m ade i m p erati ve th e acqui siti on o f n ew sh ip s, th e O il

c o m p an y b egan to h av e tan k er s bu i lt In 1 9 1 7, J er sey o w n ed 44 sh i p s, o v er
.

h alf o f wh i ch w er e less th an th r ee year s o ld, wh i l e its sub si d i ar i es h eld

il
t t e to 27 .

A s th e fleet gr ew so d i d th e o ffices an d p er sonn el o f th e n ew F o r ei gn

,
‘

S h i pp i n g D ep a rtmen t T h e D ep ar tm en t arr an ged th at th e c o m p an y an d

.

its affili ates h ad th e n ecessary sh ipp i n g at th e r i gh t ti m e an d in th e r i gh t

am o u n t It pl an n ed for f u t ur e as w ell as curr en t sh i pp i n g n eed s pr o p o s
.
,

in g th e am o u n t o f n ew to n n age th at sh o uld b e bu i l t an d th e am o u n t to b e
ch ar ter ed A fter th e w ar th e D ep ar tm en t w a s th o r o ugh ly r eo rgan i zed
.
, .

Ro b ert L H agu e fo rm er ch i ef o f th e Co n stru cti o n an d R ep ai r D i v i si o n

.
,

o f th e U n i ted S tates S h i pp i n g B o ard w as app o i n ted by th e D i r ec to r s t o

,

h ead wh at b ec am e th e M ar i n e D ep ar tm en t B esi d e i m pr o v i n g th e m o r al e .

o f th e m en an d o ffic er s o f th e fl eet H agu e c o n cen tr ated o n fi n d i n g w ay s

,

to m ak e m o r e effici en t u se o f J er sey sh i pp i n g .

By th e m id—1 920 s J er sey h ad m o ved well alo n g th e r o a d to a b etter

’

b al an ce b etween fu n cti o n s Wh er e th e to tal cr u d e pr o ducti o n o f J er sey

.

affi li ates an d sub si d i ar i es in 1 1 2 w as 1 1 p er c en t o f to tal r efi n ery o u tp u t

9
an d o n ly 1 6 er cen t in 1 1 8 it h ad r eac h e d er c en t by 1 2 ; w h i l e
p 9 44 p , 9 7
to tal crud e pr o duc ti o n r o se f r o m b arr el s a day in 1 9 1 2 fo r
th e d o m esti c u n i ts ) to in 1 9 1 6 in 1 920 an d , in ,

A l th o ugh th e si z e o f J er sey s fl eet r em ai n ed ab o u t th e sam e after Wo rld

’

War I (3 8 s h i p s in th e fl eets o f its affil i ates o v er w h i ch it h ad ,

gen er al sup ervi si o n co n ti n ued to gr o w

, .

Exp ansion an d th e O lder D ep art m en ts

As descr ib ed ab o v e , th e str ategy o f v er ti c al
i n tegr ati o n h ad led to th e
addi ti on o f n ew r eso urc es an d h ad pr o vi d ed f o r th ei r a d m i n i str ati o n .

Th e r esul t h ad b een th e setti n g up o f tw o n ew f u n cti o n al d ep ar tm en ts

an d an en l arg em en t o f a th i rd C ar ter In all th r ee th e li n es o f au th o r i ty
, .
,

an d c o m m u n i cati o n w er e cl ea rly dr a w n on a li n e an d staff b a si s A t th e - —

.

sam e ti m e b o th th e str ategy o f i n tegr ati o n an d th e exub er a n t gro w th o f

,

th e g aso l i n e m ark et p ar ti cul arly in th e p o stw ar y ear s w er e h av i n g a

, ,

p o werf ul i mp act o n th e o lder dep artm en ts T h er e wh er e th e li n es o f .

,

au th o r i t y an d c o m m u n i c ati on h ad n ev er b een t o o d i sti n ct gro wth led ,

i n creasi n gly to admi n i str ati ve co n fu si o n an d d ifficulti es .

O f th e o ld er d ep ar tm en t s th e Exp o r t T r ad e w as th e l east tro ubl ed

,

by th e co m p an y s r api d exp an sio n Euro p e an d Lati n A m a ica wer e less

’
.
1 76 S T A N DA R D O I L CO M P A N Y (N E w I ER SEY )
f
af e te c d th an th e A m er i can m ark ets by th e co min g o f th e i n ter n al -com
b u stio n en gi n e . N or did th e dr i ve to o b tai n n ew s o urces o f crud e h ave
too m uch eff ec t on E uro p e, fo r few pro ducti v e fi elds h ad as yet b een fo u n d

th er e, an d r efin ery ca p ac i ty h ad n o t yet b een exp an d ed to u se th e

crude pro duced elsewh er e Mo r eo v er, th e co m p eten t, en ergeti c, an d well

.

tr ain ed ex ecu ti v es in th e D ep art men t an d in th e fo r ei g n mark eti n g s ub

sidiar ies w er e w ell equ i pp ed to m eet n ew ch an ges an d ch all en ges Nev er .

th eless, by 1 924, it h ad b eco m e cl ear th at in cr easi n g adm i n istr ati v e de

m an d s c all ed fo r ch an ges in th e o v er seas sal es o rgan i zation .

Th e m ark eti n g p i ct ur e at h o m e w as far less s ati sfacto ry th an th at

abr o ad H er e l es s abl e an d less aggr essi v e ex ecu ti v es w er e try i n g to h an dl e
.

a m o r e c o m pl ex si tu ati o n N o t u n ti l th e exp an di n g d em an d fo r p etr o l eum

.

pro ducts lev eled O ff in th e mid-1 920 s di d th e J er s ey B o ard b egi n to p ay’

ser i o u s atten ti on to d o m esti c m ark eti n g n eed s an d str ategi es Eld erly .

ex ecu ti v es in th e D o m esti c S ales D ep ar tm en t c o n ti n u ed to co n duct th ei r

bu si n ess m uch as th ey h ad b efo re th e 1 9 1 1 di sso lu ti o n T h ey pr eferr ed .

to c o n cen tr ate o n pr o fi tabl e bul k sal es th at r equi r ed m uch l ess eff o r t an d

im agi n ati o n , an d c alled for fewer r earr an gemen ts o f exi sti n g d i str ibuti n g
f aci li ti es an d fo r l ess d evelo pmen t o f n ew o n es th an d i d th e m ark eti n g
o f gaso li n e o r f u el o il fo r u se by th e ul ti m ate c o n su mer Fuel o il co n .

ti n n ed to b e so ld in bulk to m aj o r sh i pp i n g an d i n du str i a l co mp an i es ,

an d a l arg e sh ar e o f J er sey s r ap i dly gro w i n g g aso li n e pr o duc ti o n w en t

’

to fo r m er S tan d ard O il fi r m s th at w er e pr i m ar i ly m ark eti n g c o mp an i es .

B etw een 1 9 1 2 an d 1 9 1 8, S tan d ard o f N ew Yo rk to o k alm o st as m uch

gas o li n e f ro m th e Jer sey refi n eri es as di d th e wh o l e o f th e latter s o w n ’

D o m esti c M ark eti n g D ep ar tm en t 27

.

In 1 9 1 9, th e J er sey D i r ec to r s m ad e an i n iti al attemp t to i m pro v e th ei r

A m er i can m ark eti n g o rgan i z ati o n In s tead o f pro fiti n g f ro m th e exp eri
.

en c e o f th e Exp o r t T r ad e D ep artm en t, th ey f ell b ack o n t r ad i ti o n an d

cr eated a D o m esti c M ark eti n g Co mmi ttee to appr aise an d pl an p o li ci es

fo r th e D ep ar tmen t A t th e sam e ti m e, th ey fo rm ed a sep arate u nit to
.

adm i n i ster th e fac i li ti es an d p er so n n el w h i ch h ad gr o w n to m eet th e

gr eatly en l arged dem an d fo r f uel o il whi ch Wo rld War I h ad sti m ul ated .

T h ey al so appo i n ted tw o s en i o r s al es ex ecu ti ves to th e B o ard, o n e fro m

Jersey an d o n e f ro m Lo ui si an a Th ese ch an ges h ad li ttle o r n o effect o n
.

m ark eti n g p o li cy C E Yo u n g th e n ew Dep artmen t H ead made n o

. . .
, ,

r ep o r ts o r r ecommen dati o ns as to fu ture pl an s an d pr o gram s co mp ar able

wi th th o se th at S adler w as w ri trng as h ead o f fo rei gn pr o ducti on T h e .

n ew c o mm i tt ee o f w h i ch Yo u n g w as C h ai r m an i n clud ed abl e m ark eti n g

, ,

ex ecu ti v es — H arp er o f Exp o r t T r a d e ; M o ffet th e D i r ec to r fr o m Lo n i ,

si an a ; C G S h effi eld th e h ead o f th e n ew Fu el O il D ep ar tmen t ; J o seph

. .
,

H S eni o r h ead o f th e l argest L ati n A meri can sub si di ary ; an d F H

.
,
. .
S TR UCTURE A ND S TRA TEG Y BEFORE 1 9 2 5 1
77
28
B edfo rd Jr w h o sup erv i sed sales o f lubri c an ts abro ad Bu t th ese men
, .
,
.

were far to o bu sy wi th th ei r r egul ar du ti es in o th er areas to gi ve do m esti c

m ark eti n g m uch atten tio n Yo u n g a m an in h is six ti es w h o h ad h eaded
.
,

th e New ark br an ch o ffice si n c e 1 890 w as h ardly th e o n e to acc ep t n ew ,

ch allen ges Never th el ess it w as fi v e y ear s b efo r e T eagl e an d th e J er sey

.
,

B o ard too k f ur th er s tep s to i mpro ve do m esti c m ark eti n g s tr ategy an d

struc tur e .

A ft er Wo rld War I J er s ey s r ap i d exp an si o n cr eated ev en mo re

’

str ai n s o n it s m an u fac tur i n g th an o n its m ark eti n g o rg an i z ati o n In th e .

o il c o m p an y s o ld est an d l arg est d ep ar tm en t v erti cal i n tegr atio n h ad

’

i n creased th e n eed fo r b etter co mm u n i c ati o n an d co o rd i n ati o n b etween

its a cti vi ti es an d th o se o f th e o th er d ep ar tm en ts T h e u n pr ec ed en ted .

gro wth o f th e g aso li n e m ark et bro ugh t n ew an d mo re co m pl i c ated refi n

in g pro cesses It led to such an exp an si o n o f r efi n i n g f aci l i ti es th at to tal
.

deli veri es o f refi n ed pro ducts ro se fro m m i ll i o n b arr el s in 1 9 1 6 to

mi lli o n in 1 920 an d to mi lli o n in In cr ease in o u tpu t an d
tech n o lo gi c al c h an ge al so o cc asi o n ed th e gr o w th o f serv i c e o r aux i l i ary

dep artm en ts wh i ch in tur n br o ugh t n ew pro blem s o f c o m m u n i c ati o n

, , ,

an d co o rd i n ati o n .

A s th e vo lu m e o f o p er ati o n s exp an d ed th e M an u factur i n g C o mm i ttee s

’

resp on si b i li ty fo r th e co o rdi n ati o n o f pro duct flo w b ecam e i n creasi n gly

heavy Crude o il w as n o w avai labl e fro m m an y m o r e so urc es an d as
.
,

th e c h em i c al c o n si sten cy o f crud e f r o m ea ch n ew fi eld d i ff er ed f r o m th e

o th er s each c all ed f o r so m ew h at d i ff er en t pr o c es si n g A s th e J er sey sh i p

, .

p i n g fleet grew it b ec am e ev en m o r e es sen ti al to u se th e sh i p s s teadi ly

,

an d effi ci en tly A s th e d em an d fo r th e d i ff er en t pr o duc ts c h an ged an d

.

exp an d ed so th e r efi n er i es h ad to m ak e add i ti o n al adj u stm en t s in th ei r

,

pro cessi n g o p er ati on s F i n ally as sh ifts in dem an d c au sed th e di ff er en t

.
,

mark eti n g u n i ts to c all fo r co n s tan tly ch an gi n g am o u n ts an d gr ad es f r o m

th e r efi n er i es o th er d ep ar tmen ts b esi d e M an u fa ctur i n g b ec am e co n c er n ed
,
30
with pro duct flo w D o mesti c S al es Exp o r t T r ade Fo r ei gn Pro duci n g
.
, , ,

an d C ar ter all app o i n ted ex ecu ti v es to b e r esp o n si bl e fo r th e fl o w w i th i n

,

th ei r o w n u n i ts In evi tably these d i ff er en t d ep artm en ts ten ded to d efi n e

.
,

pro duc t flo w in t erm s o f th ei r o w n i mmedi ate an d p arti cul ar n eeds O ften .

th ere w as a breakdo wn of co mm u n i cati o n b etween d ep artm en ts co n cer n

in g curr en t an d f u ture r equ i rem en ts an d th e av ai l ab i l i ty o f suppli es .

Th e G ro wth o f S tafi D ep artmen ts

Th e gro w th of Staff dep artmen ts bro ugh t o th er diffi culti es I n co o rdi n a

ti o n T h ese auxi liary
. an d serv i c e o rg an i z ati o n s ar o se l arg ely f r o m th e

n eed s created by th e en l arg em en t o f r efi n i n g f a c i l i ti es an d p er s o n n el .

1
7 8 S T A N DA R D O I L C O M P A N Y (N E w J
’

ER SE Y)
D u rin g th e 1 do m esti c m ark eter s b egan to p ay m o r e atten ti o n
9 20 s th e
’

to adv erti sin g b u t it w as m an y y ear s bef o r e th ey f o r m ed ad di ti o n al stafi

,

o fli ces t o an aly ze m ar k et pe rf o rm an ce an d expe n ses comp ar abl e w i th t h e

o fi ces set up at du P o n t be f o r e Wo rld War I Th e pr o duc ti on d ep artmen t s .

cam e to h av e a gr o w i n g st aff o f g eo l o gi sts a n d pet r o l eum en gi n eer s t o

ass i st in exp lo r ati o n an d dr i llin g b u t n ei th er th ey n o r th e t r an spo rtati o n

,

un its n eeded to enl arge auxili ary o r staff o ffices T h e greatest pr o lif er ati o n .

o f S taff acti vi ti es co m e in m an uf ac tu r in g Th er e exp an si o n an d an in .

cr eas in gly co m pl ex tech n o l o gy led in 1 1 d i r ct ly t th f o r m ati on o f

9 9 e o e, ,

th e fi r st r esear ch an d d ev el o p m en t d ep art m en t in an A m er i can o il co m

p an y to th e enl argem en t o f th e en gin eerin g acti vi ti es t o th e bui ldin g

, ,

o f a sep ar ate pur c h asin g o rgan i z ati o n an d m o r e in dir ect ly to th e , , ,

estab li sh m en t o f a l abo r r el ati on s o ffice .

T h e d em an d f or g aso li n e w as r espo n si bl e f o r th e f o rm ati o n o f th e

D ev el op m en t D ep ar tm en t Un ti l th e co mi n g o f th e au to m o b i le ga so lin e
.
,

h ad b een co n si d er ed o nl y a min o r b y pr o d u ct o f k er o sen e Th en as th e -

.
,

fir st d ecad e o f th e tw en ti eth cen t ury p assed th e in du stry be g an t o co n ,

c en tr ate m o r e an d m o r e o n o b tai ni n g a hi gh er po rt i o n of th ese li gh ter

fr acti o n s o f crud e whi ch w as used for gaso lin e F i n ally in 1 9 1 3 D r .
, , .

Willi am M Burt on of In di an a S tan d ard p aten ted a pr o cess fo r cr ack in g

.

a r el ati v ely lo w v al u e o f gas o il an d o th er mi ddl e di stil l ates i n to th e

valuable li gh t fr acti o n s A s a r esul t a m uch hi gh er am o un t o f gaso li n e

.
,

31
co uld b e o b tai n ed fr o m th e same am o u n t o f crude .

Th e Jer sey Dir ecto r s w er e w illi n g at fi r st to p ay r o y al ti es o f 25 p er

cen t o f t h e pr o fi t f or th e us e o f th e Burt on pr o c ess an d d u r in g th e ,

Wo rld War I p eri o d Burt on pr essur e stil l s w er e b ei n g co n struct ed ,

th o ugh r ath er sl o wly at th e m aj o r J er sey r efi n er i es A ft er T eagl e b e cam e

, .

Pr esi d en t h e d eci d ed th at th e tim e h ad co m e f o r S tan d ard to d ev el o p

,

its o w n pr o cesses f o r cr ackin g g aso l in e an d t o impr o v e its autom ot i v e

lubr i can ts 8 0 l ate in 1 9 1 8 h e h ir ed E dg ar M Cl ark S uperin ten den t
.
, , .
,

o f In di an a S tan d ard s Woo d R i v er r efin ery to t ak e ch arge o f J er sey s

’ ’

B ayw ay r efi n ery C l ark w h o br o ugh t wi th hi m able an d sci en tifi ca lly

.
,

tr ai n ed r efi n er s b egan to a dv o cate mo r e l o n g term pl an n i n g in m an u

,
-

f act urin g b esi d es exp er im en tin g wi th n ew pr o c esses .

Un l ik e th e com p an y s o ld er r efi n er s C l ark too k a k een inter est in

’

d ev el o p m en ts o n petr o l eum tech n o l o gy In try i n g to k eep abr east o f

32
.

curr en t tren d s C l ark wro te r egul arly to Fr an k A H o ward a yo u n g

,
.
,

Ch i cag o p aten t l awy er w i th an en gi n eeri n g d egr ee fr o m G eo rge Wash

in gt o n U n i v er si ty w h o h ad d o n e so m e o f th e l eg al w o rk o n th e B u rto n
,

pr o cess A fter l oo k i n g o ver Cl ark s co rr espo n den ce wi th Ho ward T eagle

.
’

began wri ti n g to th e yo un g l awy er h im self B efo r e l o n g at T eagle s

’
.
,
S TR UCTURE A ND STRA TEG Y B EFORE 1 9 2 5 17
9
r equest Cl ark as k ed Ho ward to o utli n e a g en eral pl an fo r car ryi n g o n
,

res earch an d dev elo p m en t at J er sey .

T eagl e by n o w str o n gly c o mm i tted to th e i d ea saw th e po ssi b i li ti es

, ,

o f u si n g a r esearch d ep ar tmen t for f o rw ard pl an n i n g in m ark eti n g as

well as m an uf actur i n g A s h e wro te A Co tto n B edfo rd Ch ai r m an o f th e

. .
,

B oard in Ju n e 1 9 1 9 :
, ,

S in ce yo u h ave b een aw ay I h ave felt m o r e th an ev er b efo r e th e n eed f o r

a th o r o u ghl y o rgan ize d an d co m p eten t r esear ch dep artmen t u n der an ab le

x v
e ecu ti e, su ch a dep artm en t n o t to b e co nfi n ed m erely to ch emi cal resear ch ,

b u t to gen eral r esear ch in con n ecti on n o t o nl y w i th th e pr o du cti on an d

refin in g o f our pro du cts b u t w i th th e sales en d o f th e b usin ess as w ell T h er e
, .

ar e I am co n vin ced a n u m b er o f pro du ct s th at co u l d b e m an uf actur ed in

, ,

ad ditio n to th e lin es w h ich w e ar e at pr esen t m an uf actu r in g an d th e m an u ,

f actu r e o f th o se pr o du cts u n do u b tedly w o u ld r esu lt in en h an ced pr o fi ts t o

t h e comp an y Th e G en er al Electr ic an d o th er co n cer n s o f a lik e ch ar acter
.

lay a great str es s u p o n th eir r esearch d ep artm en t Th ey co n si der th i s de

.

p ar t m en t o n a p a r ity in im p o r tan ce w ith th e m au f actu rin

g an d s al es en d
o f th eir b usin es s O u r r esea r ch d ep a rtm en t u t o d ate is a j o k e p u r e an d
.
p ,

sim p le ; w e h av e n o su ch th in n d on y o u r r etu rn h er e I am an xi ou s to
g a ,

discuss with yo u th is en tir e qu estio n 33

.

As result o f th e i n ter est o f C l ark an d T eagl e in s y stem ati c r es earch

a ,

H o ward cam e to Jersey to set up a n ew dep artmen t His D evelo p m en t

34
.

D ep artm en t b eg an w o rk by c on cen tr ati n g pr i m ar i ly o n im pr o v i n g exi st

35
in g pr o duct an d pr o c esses r ath er th an o n d ev el o p i n g n ew o n es Th e .

im po rt an t t ask H o w ard r eas o n ed w as to apply th e alr eady k n o w n b ack

, ,

lo g o f sci en ti fi c k n o wl edge to p etr o l eu m tech n o l o gy r ath er th an to

att em p t f u n d am en tal r es earch Hi s u n i t so o n h ad f o u n d a pr o c es s to t ak e
.

th e pl ac e o f th e Bur ton p aten t s an d by 1 927 th e J er sey M an uf ac tur i n g

,

D ep ar tmen t w as abl e to get t wi c e as m uch gas o li n e fr o m a b arr el o f

crude th an it h ad a d ec ade earli er Co n cen tr ati n g as th ey di d o n im pr o v
.
, ,

in g th e m an uf actur e o f gaso li n e n ei th er H o w ard n or C l ark gav e an y

,

atten ti o n t o d ev el o p i n g m ark et o r c o mm erc i al r esearc h N eith er d i d .

an y on e in th e M ark eti n g D ep art m en t .

A l th o ugh H o w ard s o rg an i z ati o n gr ew o u t o f th e M an ufactur i n g C o m

’

mittee s n eed s its adm i n i str ati ve r el ati o n s h i p s wi th th e o lder u n i t w er e

’

c o nf u sed H o w ard b ecame a m em b er o f th e M an uf acturi n g Co mm ittee

.
,

an d th at Co mm i tt ee suppli ed f u n d s for h is co n struc ti o n w o rk a n d f o r

sal ar i es Ho wever h e repo r ted di rectly to T eagl e an d th e B o ard an d

.
, ,

T eagl e s o ffice s upp li ed th e m o n ey fo r speci al li n es o f i n vesti gati o n T h i s

’
.

l ack o f a clear—cu t co n n ecti o n h elp ed to i n ten sif y th e co n fli ct b etw een th e

n ew st aff sp eci ali st s an d th e r efi n er s fo r s ev er al o f th e l att er w er e sk ep ti c al
,
1 80 S T A N DA R D O I L CO M P A N Y (N E W j ER SEY )
o f Ho ward s ra ti o n al ’

, i
sc en t ifi c approa ch to wh at th e y St ill cons i de red to

r ela ti ons b etween th e o th er st aff un i t s Engi neerin g Perso n nel

Th e , , ,

an d P urch a si n g an d th e refi n er s w er e j u st as impr ecise an d u n clear

, .

Ch arl es H Ha up t th e man ager o f th e o ld est of th ese o fi ces th e G en eral

.
, ,

t ee, r epo rt ed dir ectly to th e Boar d Si n ce 1 9 1 3 hi s dep ar tment h ad

b ut l
a so .
,

b een r esp on sibl e f o r sp eci al r efi n ery con st ru cti on m ar k etin g ins tallati o n s , ,

”
impr o v em en ts i n apparat u s an d f or n ecessary t est s an d ex p erim en ts ? 6

th e Man ufa ct urin g D epa rtm en t th an di d H o ward Y et j u st b ecause of .

H aup t s con ser vati sm th e latt er s depa rtm en t h ad to tak e o ver Engin eer
’ ’

i n g s r ol e in impr o vin g appa r at u s an d pr o cesses

’
.

If Haupt pai d l i ttl e att en ti o n to f o rw ar d plan n in g C lar en ce J Hi cks , .

,

J ersey s lab o r r elati o ns expert di d Hi ck s h ad been br o ugh t in to th e

’

, .

co m pa n y i n 1 1 r s l t f l b r t r ubl s durin g th e pr evi o u s t w o

9 7 as a e u o a o o e

y ear s Af ter 1 9 1 7 h e wo rk ed o ut an in du stri al r epr esen tati on an d j oint

.
,

m an agem en t-labo r co nf er en ce pr ogr am d ev el o ped ann u it y an d b en efit s ,

p lans an d establish ed a P er so nn el an d T r ai ni n g Depa rtm en t t o cen tr al ize

,

”
th e h i rin g an d fir i n g o f per so nn el Hi cks office whi ch soon h ad a .
’

M edi cal an d S af ety D i vi si on w as placed dir ectly un der T eagl e? Hi cks

,
8
,

al th o ugh n ot a m emb er o f th e Man u f a ct uri n g Co mmi tt ee w as able to ,

r edu ce som e of th e an tagoni sm s of th e r efi n ery superin ten den ts an d

m an agers t o hi s pr o gr am thr o ugh h is ex t rao rdin ary tact an d pa tien ce .

A f ter 1 92 1 th e Pu rch asin g De partm en t Oft en cam e in to co nfl i ct wi th

,

m uch o f th e qui pm en t o u t of th e h a n ds o f th e
buyin g o f m ateria l s an d e

r efi n eri es an d to p ut it in to an exp an ded an d r eo rganiz ed purch asin g

depar tm en t Th is dif ficul t t as k w as gi v en tem po r ari ly t o C G S h effield
. . .
,

th e co m p eten t ex ecut i v e w h o h a d b een r ecrui ted f r o m th e Uni on O il

C o m pa n y o f Cal ifo rni a in 1 9 1 9 to tak e ch arg e o f o rga ni zin g th e n ew

Fr o m th e start th e coo rdin ati on of th e w ork of th ese n ew a uxi liar y

,

an d ser vi ce sect i ons wi th th at of th e o ld er o p eratin g d epa rt men ts pr o ved

difi cu lt On ce acquir ed th e tal en ts of t h ese st afi speci al i sts w er e n ot f u lly

.
,

o r efi ecti v el
y util i z ed N o rm al l in e an d St aff t
. en si o ns w er e in ten si fi ed at
- -

J er sey by th e f ailur e to o utli n e pr ecis ely th e ro l e an d dut i es o f th e Staff

s fi alists S in ce T eagl e an d m os t o f h is asso ciat es seem ed t o bel i ev e that
p .

th e co nfli ct s occurr ed f r o m p er so n al i ty di ff er en ces al o n e th ey di d li ttl e ,

t o d efi n e m o r e cl early th e staff ex ecu ti v e s osi ti o n A n o th er r eason th at

’

p .

th e Bo ard t oo k li ttl e a cti on to impro v e lin e—an d staff r el ati o ns w as th at its -

in di vi d ual memb er s ten d ed to b e too in vo lv ed in th ei r o wn fun cti on al

S TRU CT URE A ND STRATEGY B EFORE 1 9 25 1 81

duti es to thi nk or act a o b ut th e pro blems o f i n terdep art men tal co o rdin a
ti on .

Til e B oard
A s h as b een po in ted o u t alr eady th e J er s ey B o ard dur i n g th ese y ear s ,

w as co min g to b e m ad e up o f s peci ali sts r esp o n si bl e fo r th e act i v i ti es o f

th ei r f un cti o n al a c ti v i ty In 1 9 1 9 tw o d o m es ti c m ark eter s T J Wi lli am s
.
, , . .

an d J am es A Mo fi ett Jr h ad j oi n ed th e B o ard In 1 92 1 S adl er C l ark

.
'
, .
, .
, , ,

an d Ch arl es G Bl ack h e l att er l o n g th e Ch ai r m an o f th e M an uf actur i n g

(t .

Co mm itt ee) w er e app o i n ted S adl er b ecam e D i r ecto r in ch arg e o f Pro .

‘

39
ducti on an d th e o th er tw o Dir ecto r s in ch arg e o f M an uf actur in g Tw o ,
.

o th er ac ti v e d i r ec to r s in th e early 1 20 s w er e pr i m ar i ly fi n an ci al m en
’

9 .

B etw een th em an d A Cott on B edf o rd Ch ai rm an of th e Bo ar d from 1 9 1 7

.
,

to 1 925 th e T r easur er s po s t w as h eld f r om 1 9 1 0 to It sh o uld b e

’

str ess ed th at th e o ffices whi ch th es e men sup erv i sed th e T r easur er s—

’

an d Co mp tr o ll er s D ep ar tmen ts — w er e ess en ti ally h o u s ek eep i n g un i t s

’
.

Th ey h ad rio t d ev el o p ed as h ad D on alds o n Br o wn s d ep artmen t s at

’

du Fo n t an d G en er al M o to r s th e fi n an ci al an d statis ti ca l d ata so ess en ti al

,

for th e adm ini strati o n o f a f ar—flu n g in du stri al emp i r e .

S uch spe ci al ists h ad li ttl e tim e fo r inf o rm ati o n ab o u t o r i n ter est in , ,

th e a dmi n i str ati on o f th e c o m p an y as a w h o l e No r c o uld th ey f ully .

appr ec i ate th e n eed s an d pr o bl em s o f th ei r co ll eagu es o n th e B o ar d O n ly .

T eagl e an d po ssi bly A Co tton B edf o rd as Ch air m an o f th e B o ar d saw

.

th e pr o blem s f r o m a c o m p an y r ath er th an a d ep ar t m en tal v i ewpo i n t .

B edfo rd h o wev er di d littl e m o r e th an lo o k after th e co m p an y s r el ati o n s

, ,
’

with th e publi c an d go v er n m en t T ea gl e w as con s tan tly o n th e firi n g

41
.

lin e h elp in g to m eet n ew situ ati o n s an d ch all en ges in pr o ducti o n refi n

, ,

in g an d fo r ei gn m ark eti n g D eeply c ommi tted pr eferr i n g acti o n t o

, .
,

r eflecti o n J ersey s Pr esi den t con cen tr ated o n carryi n g o u t th e str ategi es
,
’

o f exp an si o n A l th o ugh h e o ft en g av e too li tt l e att en ti on to l o n g-r an g e

.

go al s his talen ts an d t emp er am en t w er e th o s e of a builder of em p ir es

,
”
r ath er th an o rgan i zati on s L ik e Bill y Dur an t an d Co lem an du Po n t h e
.
,

exc ell ed in th e accum ul ati o n o f r es o urc es L ik e th em to o h e h ad l i ttl e .

, ,

in ter es t in er ecti n g th e structur e n ec essary to assur e th e m ost effi ci en t u se

o f th ese r eso urc es .

By 1 924 a r ati o n ally d efin ed structur e h ad b eco m e a p ar am ou n t n eed

,

at J er sey S tan d ard If th e c o m p an y w as t o em pl o y its r es o urc es o ld an d

.
,

n ew effic i en tly
, it n eed ed to m ak e s truct ur al ch an g es in fo ur ar eas
, .

Th e B o ard m emb er s m us t pr ev en t o p er ati n g acti vi ti es f r o m i n terf er i n g

with l on g-term en tr epr en eur i al plann i n g an d appr ai sal B etter m ean s fo r .

coo rdi n atin g th e acti vi ti es o f th e di ffer en t dep ar tmen ts w er e cl early

es sen ti al Th e c o n f us ed lin es o f au th o r i ty an d c o mm un i cati o n w ith in
.
1 82 S T A N DA R D O I L CO M P A N Y (N E W j ER SEY )
so me p erati n g dep artmen ts deman ded redefi n i n g Fi n ally closer adm i n
o .
,

istrativ e ti es w i th th e l arg er m ulti fu n cti o n affil i ates w er e c all ed fo r if th e

,

o v er all reso urc es o f all J er sey h o ld i n g s w er e to b e eff ecti v ely m o b i l i zed

-
.

I n itial A w aren ess o f S tr u ctu ral Weak n esses

A l th o ugh Jer sey executi ve saw h is co m p an y s o ver-all o rgan i zatio n al
no
’

n eed s in ex actly th ese ter m s th o se w h o h ad sh o w n th e m o st c o n cer n

,

wi th stru cture (C lark H o ward an d S adler ) b egan by 1 924 to p o i n t

, ,

o u t cr i ti c a l o rg an i z ati o n al w eak n esses T h e fi r st tw o m en w er e d i sturb ed

.

o ver th e i n ter n al o rg an i z ati o n o f th e m o st i m p o r tan t f u n c ti o n al ad m i n

istrativ e u n i t th e M an u fac tur i n g Co mm i ttee w h i l e S adler w as aw ar e o f

, ,

th e n eed fo r clo ser co o rd i n ati o n o f all th e J er sey acti v i ti es .

C l ark an d H o w ard h ad b eco me p ar ti cul arly d i str essed ab o u t th e diffi

cu lties i n v o lv ed in i m pr o v i n g th e r efi n er y pro cesses an d th e qu ality o f
th e fi n i sh ed pr o du cts T h ei r pr o bl em s th ey b el i eved wer e cau sed p ar tly
.
, ,

by th e r esi stan ce o f th e O lder refi n er s to n ew tech n i ques T h e co m p an y s .

’

h i sto r i an s h av e p o i n ted o u t h o w th e M an u facturi n g C o mm i ttee b ec ame

b adly split in 1 922 wh en th e G en er al S up eri n ten den t at B ato n Ro uge
con ti n u ed h is o w n exp erim en ts o n b atch -typ e cru de di sti ll atio n s ti lls in
“

alm o st co m pl ete d efi an c e o f C l ark s c o n ten ti o n th at eff o rt sh o uld b e

’

Y et C l ark an d Ho w ard
43 ”
cen tered in p erfecti n g co n ti n uo u s pro cess u n i ts -
.

came to bl ame th ei r pro blem s fully as m u ch o n th e l o o se co n fu sed o rgan ,

iz atio n o f th e m an ufactur i n g act1v 1t1es T h er efo r e in 1 923 at C l ark s

’
.
,

sugg esti o n Ho ward made a car eful study o f th e m an agem en t structure

,

o f th r ee o th er o il co m p an i es — S tan d ard o f In d i an a S tan d ard o f C ali ,

fo rn ia an d th e U n i on O il Co m p an y o f C ali fo r n i a Early t h e n ext y ear

, .

C l ark sen t a pr el i m i n ary r ep o r t to G eo rge W McK n igh t w h o h ad b een .

,

C h ai rm an o f th e Man ufactur i n g Co m m i ttee si n ce A week l ater ,

Ho ward fo llo wed up w i th a mo re detailed acco u n t th at an alyzed th e

Man ufacturi n g Co m mi ttee s o rgan i zatio n al d efects suggested reaso n s
’

fo r its curr en t di ffi cul ti es an d pro p osed so luti o n s

, .

T h e d efects H o w ard b eg an w er e th reefo ld T O O m u ch ti m e w as sp en t

, , .

o n o p er ati n g r o u ti n e to o m u ch en ergy in r each i n g gr o u p d eci si o n s an d

, ,

too l i ttle u se m ad e o f staff d ep ar tm en ts In H o w ard s w o rd s :

’
.

I . respon sible execu tives are b adly o verb u rden ed w ith w o rk T h is is

A ll .

th e real ro o t o f m ost o f th e tro u b les m et w ith .

2 T h ere is a v ery large an d u n n ecessary am o u n t o f p ap er w o rk

.
— m ere
p assin
g o n o f letter s a n d r ep o r ts t h r o u gh v a r iou s h an d s — w h ich t ak es

tim e very n eed ed fr o m tr u e m an a em en t fu n ctio n s w ith o u t acco m p lish in g

g
in itself an y u sefu l p u rp o se .
STRU CTURE A ND STRATEGY BEFO RE 1
9 2 5

3 . In m very
an y m atters th e Man u factu rin g D ep ar tm en t do es n o t f u n ctio n

as a u n it, eith er with in itself o r in its dealin gs w ith o u tsid e dep ar tm en ts o r

with th e Bo ard o f Directo rs It fu n ctio n s rath er as a lo ose federatio n

. .

T h m er e eff o r t to secu re th e desired u n if o rm ity o f p o li cy an d o f m eth

4 . e

o ds req u ires an u n d u e pro p o r tio n o f th e C o m m ittee s tim e

’
.

5 . M axim u m u se is n o t m ade o f th e advice an d exp eri en ce o f th e tech n ical

an d o p er atin g staff s in aidin g o n e an o th er an d th ere is in so m e i n stan ces ,

u nn ecessary f rictio n an d r esu ltin w a ste o f en er y an d tim e in r eco n cilin g

g
g
co n flictin g vi ew s o n tech n ical

D upli c ati o n o f eff o r t an d l ack o f co o p er ati on p arti cul arly b etween th e

,

refi n eri es in th e New Y o rk ar ea as well as th e lo ss o f valu able tim e h ad

b een th e result .

T h ese ser i o u s w eak n esses w er e H o w ard r easo n ed

Th e i n evitable resu lt
i n creasin g complicatio n o f th e b u sin ess o f m an u fac
o f
tu r in g m an agem en t f ro m every an gle No t o nl y h ave th e b u rden s o f t h e
.

Man u factu rin g Dep artm en t o n p u re m an u factu rin g lin es b een en o rm o u sly
in creased b y th e C o m p an y p o licy w h ich m ak es man u factu rin g act as a fly
w h eel fo r variatio n s in q u an tity an d q u ality o f cru de pr o du cti on m ark ets , ,

an d p ip e lin e an d fleet r eq u ir em en ts ; b u t o n to o f th ese b u rd en s th er e h av e

p
co m e th e creatio n o f staff d ep ar tm en ts req u ir ed to m eet ch an gin g co n d i

tio n s Th e m o st imp o r tan t o f t h ese staff dep artm en ts are: in du str ial r ela
.

tio n s en gin eerin g an d d ev elop m en t T h e co o rdin atio n o f p o licies an d f u n c

, , .

tio n s o f th ese th r ee staff dep ar tm en ts w ith m an u factu rin g pr o p er w ou ld

h ave b een in itself an en o rm o u s b u rden w ith o u t th e o th er ch an gin g con di
ti o n s w h ich h av e b een m et at th e sam e time .

Ho ward reco mm en ded th at th e li n es

u th o r i ty an d r esp o n sib i l ity
o f a

wi th i n th e Man ufacturi n g C o m m ittee b e m ade cl earer an d th e Co mm ittee

b eco m e in fact a dep ar tmen t A t all t h r ee o f th e co mp an ies wh i ch h e
.

h ad stud i ed th e r esp o n si b i l ity fo r m an u fac tur i n g acti vi ti es in pr acti ce

, , ,

if n o t in th eo ry w as c en tr ali z ed u n d er a si n gle ex ecu ti v e w h o w ith a

, ,

staff d i v i d ed al o n g f u n cti o n a l l i n es ad m i n i ster ed th e r efi n er i es in th e

,

fi eld A lth o ugh Ho w ard agr eed th at th e M an u fac turi n g C o m m i ttee co uld
.

n o t b e ab o l i sh ed at J er sey S tan d ard h e d i d feel it s o rg an i z ati o n c o u ld b e

,

m o di fi ed alo n g th e li n es suggested by th e exp er i en c e o f th ese o th er

th ree co m pan i es .

He pro p o sed fi r st th at th e Ch ai rm an o f th e M an u f acturi n g C o m m i ttee

”
b eco m e ex o fli cio G en er al M an ager o f th e M an u facturi n g Dep artm en t .

Nex t h e r eco m m en ded ch an ges in th e du ti es O f th e C o m m i ttee m emb er s

, .

In stead o f r epr esen ti n g sep ar ate w o rk s o r r efi n er i es th ey sh o u ld t ak e ,

ch arge o f di ff er en t acti vities such as emplo yee rel ati o n s appro pri atio n s , ,

en gi n eer i n g a cco u n ti n g
, develo pm en t bui ldi n g an d po w er pro cessi n g
, , , ,
18
4 S T A N DA R D O I L CO M P A N Y (N E W j ER SEY
)
an d i n sp ecti o n . T h u s th e
po sitio n o f r efi n ery G en er al M an ager with o f
fi ces in New Yo rk wo uld b e ab o l ish ed an d Resi den t S up er i n ten d en ts ,

wo uld b e th e sen io r m en in ch arge o f th e r efi n eries T h ese Resi den t .

S u p er i n ten d en ts as w ell as th e h ead s o f th o se s taff u n i ts m o st clo sely

co n n ected wi th th e detai l s o f m an ufacturi n g— Plant En gi n eeri n g th e ,

m
Exp eri e t al Di vi si n an d In sp ecti o n
n o —
, wo uld repo rt di rectly to Roo m
E a c h C o m m i ttee m em b er w o uld th en h av e th e au th o r it y an d res o n
7 7
0 .
p
”
sib ility fo r th e a c ti ve sup erv i si o n o f o n e o r p o ssi bly tw o sp ec i fi c f u n cti o n s
“
.

In o th er w o rd s H o w ard pro p o sed to tr an sfo r m th i s fed er ati o n o f r efi n er s

,

i n to a dep ar tmen t wh ere th e fi eld u n i ts rep o rted to th e dep artm en t h ead ,

a n d th e l atter s i mm ed i ate assi stan ts an d th e C o mm i ttee m em b er s to o k

’

ch arge o f sp eci fi c aux i l i ary f u n cti o n acti vi ti es H o w ard w as n o t t

y e p r o .

po si n g a clear-cu t li n e-an d—staff dep artmen tal structure Th e b eads o f th e .

fu n c ti o n al u n i ts wo uld h av e d i r ect co n tact w i th th ei r co u n terp arts in th e

r efi n eri es in th e fi eld as Ho ward h ad fo u n d at S tan d ard o f C al ifo r n i a
, .

Mo reo ver th e Co mmi ttee wo uld sti ll h av e th e fi n al say in all m an u

,
”
factu rin g acti vi ti es T h er efo re wi th a vi ew to th e savi n g o f ti m e in
“
.
, ,

h an dl i n g th e day to day d eci si o n s th e fo ur sen i o r m emb er s o f th e C o m

— —
,

m ittee were to wo rk en ti r ely in New Y o rk m eeti n g d ai ly to take ,

ca e r o f th e b u lk of th e Man u factu rin g

Dep artmen t s p ap er w o rk T h e
’
.

f o u r j u n io r m emb ers o f th e C o m mittee co u ld b e reliev ed fro m th ese daily

m eetin gs an d h ave time to devo te th eir atten tio n to th eir sever al dep artmen ts
a n d th e New Yo rk w o rk s ; to m eet with th e Man u factu ri n C o m m ittee as
g
a w h o le, n o t to exceed o n e day p er week in New Yo rk , an d p erh ap s o n e

day p er w eek at w o rk s design ated b y th e C h ai rm an .

Ho ward s plan s ’
co n verti n g th e M an ufacturi n g C o mmi ttee i n to a
fo r
sy stem ati c ally o rg an i zed d ep ar tm en t w er e u n d o ub tedly d i scu ssed by th e

B o ard o f D i r ecto rs but n o actio n w as t ak en at th at time Po ssibly T eagle

,
.

a n d h is c o ll eagu es th o ugh t th e pl an to o r ad i cal Mo re lik el y th ey were .

to o bu sy w i th o th er m atter s to p ay m uch atten ti o n to a pr o bl em n o t

r eq u i ri n g i mm edi ate atten ti o n .

Ho ward m ade n o sp eci fi c suggestio n s fo r ch an gi n g th e Man ufacturi n g

C o mmi ttee s m o st i m p o r tan t S i n gl e task th at o f c o o rd i n ati n g pro duc t
’

Ho w alth o ugh h e d i d r em i n d McKn igh t th at th e allo c ati o n o f crud e o il

, ,

a ssi g n m en t o f tr an sp o r tati o n an d d i str i bu ti o n o f r efi n ed pr o d u c ts w er e

,

b eco mi n g i n cr easi n gly co m pli c ated In Ju n e 1 924 h o w ever S adl er reco m .

, , ,

m en d ed an d th e B o ard agr eed th at a defi n i te o rgan i z ati o n sh o uld b e

establ i sh ed to c o n tro l th i s allo c ati o n m ade up o f c o m p o n en ts r epr esen ti n g
,

th e pro du ci n g p i p el i n e m ar i n e m an u fac tur i n g an d m ark eti n g i n ter

, , , ,
” 4“
S adl er pro p o sed a co mmittee o f d ep artmen tal r epresen t ati ves to
“
ests .
T HE I NITIA L REO RG A N I ZATION —
1 9 2 5
— 1
9 2 6 18
5
deci de qu esti o n s o f grade an d qu an ti ty o f crude to b e ru n at wh at wo rk s ,

wi th a co mp reh en si ve vi ew o f all dep artm en ts i n ter ested an d wi th th e

mi n i m u m o f ch an ges r esulti n g in th e eco n o m y o f th e gr eatest p o ssi ble
,

u n ifo rm i ty o f o p erati o n ; an d in addi ti on it wo uld pro b ably gi ve u s a

”
depen d able pi cture to gu i de u s in mak i n g th e purch ases o f pro du ct s .

He p arti cul arly h o p ed th at its wo rk wo uld r es ult in th e sub o rdi n ati o n o f

“

th e d ep ar tmen tal i n ter est to th e i n ter est o f th e New J er sey Co m p an y as

” 47
a wh o le .

T h e D i r ec to r s d i scu ssed th ese pro p o sal s dur i n g th e fi r st w eek o f July

.

deb ati n g wh eth er th e sep ar ate co o rdi n ati n g o rgan i z atio n m i gh t b e m ade
a d ep ar tm en t r ath er th an a c o m mi ttee If a c o m m i ttee S h o uld it i n clud e
.
,

s en io r or seco n d l i n e executi ves ? S adl er plead ed fo r th e co mmi ttee r ath er

-

th an d ep ar tm en tal typ e o f o rg an i z ati o n S i n c e h e felt th at t h e o bj ecti o n

,

to th e fo r m ati o n o f a d ep ar tm en t is t h at i mm ed i ately a d ep ar tm en t is
“

fo rmed th e co n tac t o f th e m emb er s w i th th e detai l s o f th e v ar i o u s br an ch es

,

o n w h i c h th ey g i v e i n fo r m ati o n is l ess i n ti m ate so th ey do n o t br i n g to

,

th ei r d i scu ssi o n suc h cl ear k n o wledge o f th e eff ec t o f th e c h an ges o n th e

”
dep artm en t th ey repres en t S adler fur th er favo red a commi ttee made
.

up o f th ree Di recto r s wi th th ree al ter n ates fro m th e B o ard He preferred .

D i recto r s to th e m o re j u n i o r m en b ec au se th ey w o uld h ave a bro ader

V i ew o f th e C o m p an y s n eed s an d pr o bl em s T h i s n ew du ty h e m ai n
’
.
,

tain ed sh o uld n o t b e too m u ch o f a burd en o n th e D i r ec to r s ti m e si n c e

’

th ey , in th e o rd i n ary co ur se o f th ei r bu si n ess are in clo s e to u ch w i th

,

mo st d etai l s wh i ch m u st n ecessari ly b e b ackgr o u n d fo r an i n telli gen t

.
\

”
di scu ssio n o f th e qu estio n s i n vo lved T h i s Statem en t i n ci den tally
.
, ,

reveal s h o w m uch th e J er sey Di recto rs were i n vo lved at th at ti me in

o p er at i o n al r ath er th an en tr epr en eur i al a c ti v i ti es .

A l th o ugh it d i scu ssed th o ro ugh ly th e pr o p o sal fo r b etter co o rd i n ati o n ,

th e B o ard to o k n o acti o n B efo re a sec o n d m eeti n g o n th e m atter T eagl e

.
,

h ad already l eft for Eur o p e to tak e c ar e o f m ark eti n g pro blem s Wh en .

h e r etur n ed th er e w er e o th er m atter s o f m o r e i m medi ate co n c er n T h e

, .

pr o p o sal li k e th e s uggestio n s o f Ho w ard an d C l ark wo uld h o wever

, , , ,

b e bro ugh t fo rw ard agai n wh en th e n eed fo r stru ctur al ch an ge cr eated by ,

th e st r ategy o f v er ti c al i n tegr ati o n a n d exp an si o n an d by th e n ew d em a n d

fo r g aso li n e b ec am e cry stal clear .

T HE IN I TI A L REORG A N I Z A TI O N I
9 5 2 —
1
9 26

Itto o k an i n ven to ry cri si s to pro vi d e th e n eeded cl ari ty an d so to bri n g

o rg an i z ati o n al c h an ge to J er sey T h e ser i es o f d i ffi cul ti es r esul ti n g fr o m
.

th e cr i si s fi n ally fo rc ed T eagl e an d th e B o ard to cl o ser atten ti o n to

p y
a

suggesti o n s fo r o rg an i z ati o n al i mpr o v emen t m ad e by S adl er a n d H o w ard .

1 86 S T A N DA R D O I L CO M P A N Y (N E W j ER SEY
)
In ten sifi ed m ark eti n g pro blem s m ade th e Presi den t an d h is asso ci ates
acu tely aw ar e o f th e n eed fo r cl o ser c o o rd i n ati o n b etw een an d m o re

eff ecti v e ad m i n i str ati v e sup erv i si o n o v er th e c o mp an y s d i ff er en t acti v i ti es

’

as w ell as fo r b etter l o n g t er m pl an n i n g for th e pr esen t an d f u tur e u se

-

o f th ei r m an y r eso urc es T h e cr i si s al so br o ugh t a r eali z ati o n o f th e

.

weak n esses in th e exi sti n g i n ter n al structure o f tw o o f th e m aj o r fu n c

tio n al d ep a r tm en ts Do m esti c M ark eti n g an d M an ufac tur i n g T h e stru c
, .

tur al ch an ges i n i ti ated by th e fall i n g o ff o f d em an d in 1 925 w er e c arr i ed

sti ll f ur th er in 1 2 w h en th e o p en i n g o f n ew fi eld s bro ugh t fo r th a

9 7
deluge o f crude O il an d so created a seco n d cri si s T h e th r eat o f i dle .

r eso ur ces r esulti n g fro m o verpro du ctio n o f refi n ed pro ducts in 1 925 Started
a r eo rg an i z ati o n o f th e f u n cti o n al d ep ar tm en ts It al so led to th e cr eati o n
.

o f n ew staff o ffic es at 26 Br o adw ay to assi st in th e s h o r t-ter m c oo rd i n ati o n

o f pr o du ct flo w a n d th e l o n g -term allo c ati o n o f r eso urc es Wi th th e o v er .

pro d u ctio n o f cr u de in 1 927 dep artm en tal reo rgan i z atio n w as co mpl eted
, ,

th e m aj o r do m esti c f u n c ti o n al d ep a r tm en ts w er e co m b i n ed i n to a S i n gl e

m ultifu n cti o n al di vi si o n o r affil i ate an d a gen er al o ffice w as set up to

,

ad m i n i ster th i s an d o th er r egi o n ally d efi n ed i n tegr ated affil i ates By th e .

en d o f 1 92 J er sey S tan d ard h ad fash i on ed a m ul ti d i v i si o n al struc t ure

7 , ,

co m p arabl e wi th th at at G en er al Moto r s an d at du Po n t to adm i n ister its ,

vast i n dustri al h o ld i n gs .

Teagle s Tr o u b les
’

Teagle s
’
t o r ubles cro wded o n e o n an o th er as th e deman d fo r gaso
l i n e b egan to S l ack en Th e r ap i d exp an si o n an d th en th e level i n g o ff o f
.

th e g aso l i n e an d lubr i can t m ark et fo ll o w ed cl o sely th e p atter n o f n ew

car co n stru cti o n in th e I 20 s Fro m th e en d o f th e p o stw ar r ec essi o n o f

’

9 .

1 92 1 u n ti l 1 925 th e co n su m p ti o n o f r efi n ed pr o du cts p ar ti cul arly g aso li n e

, , ,

grew ph en o m en ally in th e A meri can m ark et In 1 922 J ersey deli vered .

,

m i ll i o n b arr el s to th e do m esti c m ark et T h e n ex t y ear del i ver i es ro se to

.

m i ll i o n an d in 1 924 to a p eak o f m i ll i o n T h en as pr o ducti o n

.
,

o f n ew a u to m o b i les fell o ff so d i d J er sey s o u tpu t In 1 925 o n ly

’

,
.
,

m i llio n b arr el s w er e d eli ver ed a fi gure th at ro se S l o wly to

,
an d
48
resp ecti vely in th e n ext tw o year s
, .

T h e level i n g o ff o f d em an d m ean t th at in I 925 J er sey S tan d ard an d

th e o th er p etr o l eu m c o m p an i es su ff er ed fr o m ex cess r efi n i n g c ap ac i ty .

A dvan ces in m an u facturi n g m eth o d s wh i ch exp an d ed th e amo u n t o f

gaso li n e pro d u ced fro m each b arrel o f crude i n creased th at c ap aci ty sti ll
f ur th er T h e pr o bl em o f th e i n du stry w as n o t yet th at o f h avi n g to o m uch
.

crude avai lable In fact duri n g m o st o f 1 925 T eagle w as Sti ll co n cern ed

.
,

wi th p o ssi ble crude sh o r tages In 1 926 an d 1 927 th e o pen i n g o f th e

49
.
,

great n ew field s in O kl ah o m a an d Texas wo uld glu t th e m arket fo r

T HE I N ITIA L REO RG A N I ZA TION — 1
9 2 5
— 1
9 2 6 1 87

crude ; bu t in 1 925 th e pro bl em s were pri mari ly th o s e r elati n g to mark et

,

in g th e r efin er i es o u tpu t Excess refi n i n g c ap ac i ty led to i n cr easi n g an d

’
.

aggr essi ve co m p eti ti o n b o th h er e an d abr o ad A t th e s am e ti m e it in ten .

,

S ifi ed th e qu esti o n s ab o u t sto r age an d tr an s p o r t ati on i n vo lv ed in co o rdin

ati n g th e flo w o f p et ro leu m f r o m w ell to m ark et .

In th e su mm er o f 1 925 T eagle b c e , a m e aw re a o f l g s tan di n g u n derly

o n -
,

in g di ffi culti es In Ju n e acco m p an i ed by y o u n g bu t exp er i en c ed O rvi lle

.
,

Harden S ecret ary o f th e M an ufact uri n g Co mm ittee h e made an ex

, ,

ten d ed to ur to vi ew J er sey s h o ldi n gs in th e West an d in C an ad a O n

’ 50
.

h is retur n to 26 Bro adw ay h e s p en t sever al week s wi th th e M ark eti n g

,

Dep artmen t wo rk i n g o u t a bro ad n ew s ales p o li cy to m eet th e ti gh ter

, ,

mark et By A ugu s t T eagle fully appreci ated th e cr iti c al n eed o f i mpro v i n g

.

th e o ver -all c o o rd i n ati o n o f pr o duc t H o w an d th e ab i l i ty o f th e Man u fac

turi n g an d Do m esti c M ark eti n g Dep artm en ts to m eet r ap i dly ch an gi n g

co n di tio n s .

Wh at h ad s urpri sed Teagle mo st o n h is western tri p w as th e s wiftly

gro wi n g supply o f crude s to ck s desp i te i n ad equ ate Sto r age faci liti es an d
a dr o p in d em an d at th e r efi n er i es an d f ro m th e m ark et L ack o f o p er a .

tio n al plan n i n g w i th i n th e J er sey gro up h ad cr eated exc es si v e i n v en to r i es

all al o n g th e li n e C a r ter . T eagl e r eal i z ed w as co n ti n u i n g to pro duce

, ,

with o u t a clear u n der stan di n g o f th e r equ i r em en ts o f th e r efi n eri es ; wh i le

th e l atter w er e g i v i n g to o l i ttl e atten ti o n to th e n eed s o f th e d i ff er en t

m ark ets F o r th es e r easo n s as Teagle wr o te C l ark w h o w as th en in

.
, ,

Euro pe th e co mp an y h ad b een u n successful in curtai l i n g r efi n ery pro duc

,

ti o n in th e fac e o f a m ark et n o l o n g er exp an d i n g r ap i dly Un fo rtu n ately .

“
,

We are o bl i gated to ru n a m uc h l arger qu an ti ty o f sw eet C rud e th an

w e h ave an y r eal n eed fo r an d whi ch w e h ave h ad to ru n as w e
” 51
h ave pr ac ti c ally n o sto r age in th e fi eld wh ere it can b e accu m ul ated .

T h e co n feren ces th at T eagle h eld o n h is r etur n fro m th e West to 26

Bro adw ay wi th th e do m esti c m ark eter s deal t wi th th e pro bl em s o f sti ffen
in g co m p eti ti o n an d ti gh ten i n g dem an d T h e J er sey Presi d en t ask ed n o t
.

o n ly th e m em b er s o f th e M ark eti n g C o m m i ttee an d th e to D ep ar tm en t

p
ex ecu ti ves to atten d b u t al so sen i o r s al es ex ecu ti v es f r o m th e Lo u isi an a
,

C o mp an y T h e m ark eter s w er e to Study w ay s an d m ean s to ease th e

“
.

”
C o mp an y s burd en o f exc es si ve i n v en to r i es in th e f ace o f fall i n g pr o fi ts
’

52
an d a d ecl i n i n g sh ar e o f th e m ark et S i n ce th e w ar co m p eti to r s p ar
.
, ,

ticu larly th e T ex as C o rp o r ati o n an d G ulf h ad b een aggr essi v ely bu i ld i n g

,

retai l di stri bu ti n g faci l i ti es an d exp an di n g m ark eti n g perso n n el T hey .

h ad i n creased th ei r r etai l o u tl ets th ro ugh a l ease an d li cen se pro gr am “

by wh i ch h i th erto i n dep en den t statio n o w n er s leased th ei r statio n s to th e

co m pan y an d th en o p er ated th em u n der a li cen si n g agr eemen t to s ell its
pro ducts exclu si vely To attr act dealer s th e co m p an i es o ff ered to s upply
.
,
I 88 S TA N DA R D O I L CO M P A N Y (N E W j ERSEY
)
gaso li n e p u m p s an d bui ldi n gs an d to gi v e gen ero u s m argi n s belo w
pr evai li n g tan k w ago n o r wh o l esale pri ces En ergeti c com peti to r s an d an .

ap ath eti c sal es d ep art men t at J er sey c au sed th at c o m p an y s sh ar e o f th e

’

gaso li n e bu si n ess in its r el ati vely sm all do mesti c m arketi n g terr ito ry to de
cli n e f r o m 8 er c en t in 1 1 t c t i I t h umm r f
5 p 9 9 o
47 p er en n n e s e o

J r y M rk i g D ep ar tm en t h ad m ad e it s fi r st m o ve to m eet th e
’

9 4
1 2 , e se s a et n

gro w i n g th r eat b u t th e L egal D ep artm en t feari n g th e r esp o n se o f th e go v

, ,

ern m en t s Ju sti ce D ep ar tm en t r efu sed to let th e m ark eter s m eet th e com

’

p eti ti o n th ro ugh a lease an d li cen se pro gr am Th e mi sgi v in gs o f th e .

l awy er s h o wever di d n o t pr ev en t T eagle an d th e sales executi v es fr o m

, ,

exp an d i n g th e bu i ldi n g o f co m p an y -o w n ed serv i ce stati o n s .

T h e exc essi v e i n ven to r i es o f th e fo ll o wi n g summ er em ph asi z ed th at

acqu i r i n g r etai l o u tl ets w as n o t en o ugh B esi des th e r esulti n g gro wi n g
.

sto r ag e pr o bl em th er e w as th e f a ct th at th e D o m esti c M ark eti n g D ep art

,

m en t s pr o fi ts w er e fall i n g fast Wh er e th ey h ad b een m illi o n in

’
.

1 2
9 4 ,th e n ex t y ear th ey w er e o n ly m i ll i o n
54
T h e m ark ete r s agr ee d .

with T eagl e o n th e n eed for an en ti r e ch an ge in o ur m eth o ds o f arri vi n g

“

”
a t t an k w agon an d serv i c e Stati o n pr i c es an d fo r r ev am p i n g r ad i c al ly a
,

di stributio n an d sto r age sy stem sti ll b ased o n h o r se an d wago n s r ath er

55
th an o n t ru ck s an d o n th e sal e o f k er o sen e r ath er th an g aso li n e
,
A ll .

r ea li zed th at th ey m u st co n cen tr ate m o r e en ergeti cally an d sy stem ati cally

o n th e r etai l sal es o f gaso li n e Y et as T eagl e to ld C l ark
.
,
th ey h ad to ,

m eet con ti n u o u sly fo r th r ee w eek s in an effo rt to r eco n cil e th e vi ews o f

“

all an d to d eci d e o n an u n an i m o u s co ur se o f pr o c edur e to b e eff ecti v e at

”
o n ce . A gr eem en t w as fi n ally r each ed an d o n A ugu st 7 th e B o ard ,

appr o v ed o f a ch an g ed pr i ce stru ct ur e o f pr o po sal s to d ev el o p m o r e

,

effic i en t d i str i bu ti n g m eth o d s an d o f th e exp an si o n o f th e c o m p an y s

’

m ark eti n g f aci li ti es .

Th e Pr ogra m
“
25
1
9
Th e i n ab i li ty o f th e exi sti n g o rgan i z ati o n to m eet th e ch an gin g m ark et
co n vi n ced T eagle o f th e n eed fo r m aj o r structur al ch an ges He wai ted .

o n ly f o r th e r etur n o f k ey d i r ec to r s b efo r e m ak i n g pl an s Wr i ti n g C l ark .

o n July 1 T eagl e c o m m en ted

3 ,

I won t ’
w o rry yo u w ith
recital o f all th e trou b les w e ar e u p again st
a

h ere b u t th ere are certainl y plen ty o f th em Wh at w e are do in g is ru nn in g

, .

too m u ch C ru d e an d sellin t o o littl e fi n ish ed r o du cts We h ave b een m o re

g p .

o r less m ar k in tim w ith th it t i w it i r etu r n s o f Messrs B edf o rd

g e e s u a o n a a n
g
a n d Mo ff ett w h o I am l ad t o say w ill b e b ack h er e th e fi r st o f th e w eek I
g ,
.

feel co nfi den t th at as a resu lt o f th eir r etu r n an d th e discussion w hi ch w ill

th en en su e as to o ur
p r es e n t S i tu a ti o n a n d fu tu re p o licy th at b ef ore th e ,

en d o f th e w eek a defi n ite d ecisio n can b e r each ed S O w e can start in d o in

g
THE I N I TI A L REO R G A NIZ A T IO N — 1 9 25 — 1
9 2 6 18
9
th ese th in gs w h ich are n ecessa ry to ca rry on our b u sin ess alo n g sou n d
li n es .
56

D uri n g A ugu st, th e B o ard di d r ea ch sev er al i m p o r tan t d eci si on s A fter .

r esh ap i n g Jer sey s m ark eti n g p o li ci es, it m o ved to th e study o f th e r equ i re

’

m en ts fo r a m o r e eff ecti v e coo rdi n ati o n o f pr o duc t H ow T h i s pr o bl em .

o f pl an n i n g an d c o o rd i n ati o n , in t ur n , led th e sen i o r ex ecu ti v es to co n

si d er expl i ci tly , app ar en tly fo r th e fi r st ti m e in m an y y ear s th e pr o bl em s ,

an d n eed s o f pl an n i n g l o n g ter m allo cati o n o f fi n an c i al r eso ur ces

- To .

m eet th ese n eed s, th e B o ard agr eed to cr eate a sep ar ate C o o rdi n ati on
Co mm i ttee an d D ep artm en t an d to fo r m a n ew F i n an c e e r B udget
Co mm i ttee an d D ep ar tmen t Nex t T eagl e an d h is asso ci ates d eci d ed o n a
.

co m plete o verh aul i n g o f th e Do mesti c M ark eti n g D ep ar tmen t Furth er, .

th ey r eal i z ed th at th ese o rg an i z ati o n al ch an ges as w ell as th e n ew

o p er ati n g c o n d i ti o n s c alled for S i mi l ar al ter ati o n s in m an u f act ur i n g, an d

th ey n o w deci d ed to i n tegr ate th e Lo ui si an a Co m p an y s acti vities mo r e ’

clo s ely with th o se o f th e p aren t co mp an y .

Th ese d eci si on s w er e th r esh ed o u t at lu n ch eo n s an d in th e B o ard R o o m

duri n g A ugu st 1 925 S uch deci si o n s o n structure wer e n o t th e r es ult o f
, .

c arefully detai led studi es as at G en er al M o to rs an d du Po n t T h er e is .

n o evi d en ce th at br o ad r ep o r ts w er e m ad e for th e B o ard o r by B o ard

m em b er s o n J er sey s m an agem en t structur e o r ev en o n th at o f a si n gle

’

dep artm en t No fu n d am en tal qu esti o n s app ear to h av e b een r ai sed

57
.

ab o u t o rg an i z ati o n , n o r w er e an
y set o f o rg an i z ati o n al o bj ec ti v es o u tl i n ed .

A s yet n o o n e pr o p o sed to ch an g e r ad i c ally th e co mp an y s o v er-all st ru e

’

t ur e o r its t r ad i ti on al c o mm i tm en t to th e ad m i n i str ati o n o f o p er ati o n s by

co m m i ttees T h e di scu ssi on w as co n cer n ed m o r e wi th m eeti n g th e i mm e

.

di ate pr o blem s o f co o rdi n ati o n of pro duct flo w an d m ark eti n g th an with

deali n g sp eci fi cally wi th th o se o f o ver-all o rgan i zati o n al structure .

Th e Co o rdin atio n D ep artmen t a n d Co mmittee

Th e an n o u n c em en t o n S ep temb er 3 , 1 925 of th e fo rm ati o n o f , a coo r din at
in g u n i t i n i ti ated th e n ew pro gr am Desp i te S adler s earli er m i sgi vi n gs
.
58 ’

th e B o ard set up a D ep ar tm en t as w ell as a C o m m i ttee T h e C o o rd i n a

, .

ti o n Co m mi ttee i n clud ed sen i o r ex ecu ti ves T eagl e B edf o rd S a dl er C l ark, , , , ,

an d Bl ack O rv i ll e H ard en w h o as th e S ecr etary o f th e M an u fac tur i n g

.
,

C o m m i ttee h ad b een h an dl i n g co o rd i n ati o n o f pr o duc t flo w too k ch arge ,

o f th e n ew C o o rd i n ati o n D ep ar tm en t an d soo n h ad it pl ay i n g a v i t al

ro l e in J er sey s o p er atio n s No t o n ly di d H arden m aster effici en tly t h e

’
.

co m pl ex ta sk o f gu i d i n g pro du ct fl o w b u t in do i n g so h e m ade th e
,

dep artm en t i n v aluabl e fo r th e purp o se o f o ver—all pl an n i n g an d appr ai sal .

H arden fully des crib ed th e fun cti o n s o f th e n ew gen eral o ffice dep art
men t in a len gth y m em o ran du m wri tten to Cl ark in O cto b er 1 927 He , .
1 90 S T A N DA R D O I L CO M P A N Y (N E w J
'

ER SE Y)

p lan n in g an d ca rryi ng mm th e a ctivi ti m o f the b u sin ess f ro m th e st an d ,

”
po int o f th e ben efit to th e in t er est as a wh o l e rath er th an f r o m th e ,

vi ew o f an y o n e d ep artm en t subs i dia ry o r afi l ia te Th is Har den ex

?"
,
9

peered to acco m p lish n o t by o rders b ut o nl y by pro v i din g essen tial ,

inf o rm ati o n He sa w hi s uni t exp li ci t ly as a se rvi ce o r st aff d epa rt men t

.

wi th o ut lin e au th o ri ty : it co uld o nl y r eco mm en d But as it pr o mi sed

for urin g a m o r e r ap i d t u rn o v er
ass o f i n v en to r y ,
an d a st ea di er f ull er
, ,

an d m o r e pr o fi tab l e u se o f fa cil i ti es th e y w er e usuall y o n ly t oo h a py t o

, p
f o ll o w th e r eco mm en dati o ns .

In Ha r den s w o rds :
’

be a dop ted so far as th e a cti viti es o f th e p r oduci n g ,

r r
t ansp o t a ti o n an d

w i th t h e su b sidia ry co m p an i es t o see th a t th es e p o lici es are ca rr ie d o u t . This

ca ti o n ; p r od u cti on , p u r ch ases an d m o v em en ts
fi ni sh ed p rod uc ts o f certai n

n a h th as
p [g aso lin e
] r efi n m o il, gas, an ,d f u el o ils ) ; coo r din a ti o n of

refi ni n g m an u f act urin o er ati o ns f ro m th e st an d oin t o f Cru des ru n an d

g p p
r od u ct s r equi r ed S t oc k s o n h an d, etc , an d th e all oca ti on o f b usin ess am o n
p , g
th e v ari ous su b sidiar y co m p an i es .

in v o lv ed in ca rryin g o u t th s i b asi c act i vit y in a h u ge in dustrial en te rpri se

h ow th e w o rk i n gs o f an esse n t a i lly o per ati o na l an d tact i cal act i vi ty can

i th e r fi ca rry in g o u t en tr epr en eurial an d st rat eg e
'

ass st seni o o cers in

In c u r de oi l o per ati o n s ,
for ex a m pl e , Har d en expe ct ed his D epa rt m en t

to r i es an d to coo per ate w i th all th e co m p an i es wi th a v i ew o f r egu latin g

, ,

such in v en to ri es Ia o r der to be ce rt ain th at su p pli es be curr en tly av ai l

’

ab le w h en an d as r eq uir ed by o u r r efi n er i es an d on th e o th er h an d t h a t , ,

”
th e su ppli es w i ll n o t be ex c es si v e th e De p art men t n o t o n ly r eco mm en ded
,

th e all o cati o n o f cru d e to be pr o du ced by i ts am lia tes b ut al so S upe rv ise d

p ur ch asin g th e cru d e su p pli es n eed ed f o r an y J er sey r efin eri es h er e o r
abr oa d A ll su ch p ur ch ases w er e cl ea r ed th r o ug h th e De pa rtm en t w hi ch
.
,

al so n eg o ti a t ed m o st o f th e cru d e buyin g co n tr acts .

T h e task o f pr o po sin g cru d e ru n nin g pr o gr am s at th e difi er en t r efi n

- e

eri es w as p art i cular ly co m pl ex f o r :

Th is n ecess a ri ly r eq u i r es a st u dy o f th e grades o f Cru de av ail ab le and th e ,

des ir ab ili ty f o r r d i th e r od u ct s r eq u ir ed f o r th e T ra de ; th e r el ativ e

p o uc n g p
THE INITIAL REO RG A N I Z A T I O N — 1
9 2 5
- 1
9 2 6 1
9 1

profi ts o f o n e C ru de again st an o th er ; al so an in telli gen t distrib u tion O f th e

vari ous grades o f C ru de as am on g th e Refin eries h avin g difi eren t m ark et
r equir em en ts k eep in g in min d th e r elative advan tages o f o n e r efin ing
,

po in t as com p ar ed w ith an oth er fo r a given gr ade o f C ru de; th e pr op er

co rrelation o f th e v ar io us m an u f actu r ing p lan ts so th at th ey m ay b e eco n o m i

ca ll y O er a ted b y t ak in g clo se adv an t age o f o ur m an u factu rin g f acili ties

p
an d av ail ab le st o r age cap acity ; pr o du cin g pr o d u cts a t p o in ts w h er e th e

m in im u m to tal f reigh t ch arges to th e fin al d estin atio n w o u l d pr ev ail .

L i ke the upplyi n g o f th e crude th e pr o gr ammi n g o f r efi n ery ru n s t e

s ,

quir ed m uch accurate i nf o rm ati o n It f u rth er d em an d ed th at m ar i n e an d .

p ip e-li n e tr an spo rt ati o n b e avai l abl e Co m p ar abl e c o m pl ex sch edu li n g .

w as n eces sary to k eep th e sh i p s an d p ip e li n es o p er ati n g as cl o se t o f ul l

cap acity as p o ssibl e an d at th e sam e ti m e to pr ev en t o v erl oadi n g o f
sto r age f aci li ti es a t sh i pp i n g an d p i p e-li n e t er m i n al s .

Th e all o c ati o n o f r efi n ed pro ducts am o n g th e v ar i o u s d i str i bu ti o n

p o i n ts w as al so i n tri cate A s H ard en n o ted .

Th e aim , h er e do th is in th e w ay th at w o ul d r esu lt in th e gr eat

again , is to

est pro fi ts t o th e r at est in t er es ts — try in o n th e o n e h an d, t o mi n imi ze

g e g,

fr ei gh t ch arges an d o n th e o th er, t o h arm o ni z e th e situ ation o f th e diff er en t

in dividu al su p p ly p o in ts T h is pr o b lem is o n e o f co n siderab le m agn itu d e,
.

w h en th e vo lu m e o f ou r b u sin ess is co n sider ed .

T ak in g e xp o rt Nap h th as [ gaso lin e ] f o r ,

x
e a m ple, w e h av e cert ain to tal
r q rm
e ui e en ts — co m p il ed an d est a b lish ed b y th e D ep artm en t, f r om in
f o rm atio n f u rn ish ed b y th e sales p eo p le — th at m u s t b e f u lfi ll ed, an d w e

h av e p o ssib le su p p lies avail ab l e at ato n R o u e,

g ayto w n [ T ex as ], N B
ew B
Yo rk , T alar a [ P eru ], C alif o rn ia, etc T h e F o r eign S ales D ep artmen t loo k s .

to th e Co o rdin atio n D e art m en t for ad v ice as t o th e p o rt o f loadin f or

p g
each steam er Wo r k in th i w w v id t l r xt t e r efin er
g s . a y e can a o o a a ge e en o n
”
o r te rmin al o f b ein g pro du ct w hi le an o th er sh ip p in g p oin t is
“
lo n g on a

It is o b v io u s
”
sh o rt th at th is p r oc edu r e k eep s t o a m in imu m o u tsid e p u r
“
.

ch ases b
y en ab li u s to shi p b us in ess t o w h atev er o in t at w h ich w e h av e
, n
g p
su p lies an d th u s b u ly w h h i r w h l i h r
p , y o n en t e n t e est a s a o e s s o t .

T hi s so t o r f
pl an n i n g r equ i r ed a gr eat d eal o f stati sti c al i n fo rm ati o n .

In 1 92 1 H ard en h ad m ade C l ark n o ted in th e f o r w ardi n g l etter, th e ,

fi r st attem pt t o set up a r ec o rd o f to t al sto ck s C rud e o il an d pr o du cts , ,

o f th e N ew J er sey Co m p an y to g eth er w i th th e L o u i si an a an d H u m bl e

A s h ead o f th e Co o rdi n ati on D ep art m en t H ard en gr eatly

”
Co m p ani es 60
.
,

enl arg e d th ese st ati sti c s B esi d es g ath er i n g d at a o n m an y asp ec ts o f crud e

.

pr o duct i o n r efi ni n g an d tr an sp o r tati o n H ard en d ev elo p ed th e Pr o duct

, , ,
“

” ”
O ut loo k an d Lo o k A h ead sh eets T h e fi r st sh o w ed th e sh o r t—t erm an d
“
.

th e seco n d th e l o n g ter m t o tal an ti ci p ated bu si n es s f o r each m aj o r pr o du ct

-

agai n st expect ed suppli es T h is o v er -all p i ctur e r egul arly r ev i sed w o uld

.
, ,
1
92 S TA N DA R D OI L CO MP A N Y (N E W y r n s n v )

w h eth er cr u de an d r efin ed h o ul d be
s div er te d fr om on e pla ce to an oth e r .

to fin d ou t w h er e an d w h y th e estim at es w er e o fi It is
. su rp ri sin g that
n or

Har den qu ickl y di sco v er ed tha t th e lack of a ccur at e m ar k et dat a

th e m o st defect in th e stat ist ical

i
se r o us co n tr o l s h e w as dev el o pi n
g .

Be si d e gui di n g th e fl ow of pr o duce , Har den s Depart m en t soon b e

’

i l p rofit an d l os s p er barrel based o n pri ce pai d f or crude

er es, th e actu a ,

an d simil ar statisti cs Th ese data w er e n ot o nl y ess en ti al t o th e plan n i n g

“
.

”
of Cru de ru nni n g pr o grams o f th e difi er en t p lan t s b u t al s o pro v i de d a ,

A ll est im a tes f or r efin fi y co ns t ruct on i w er e sen t t o i t f or co mm en t In th is

.

a w h ol e, r ath er t h an m er ely co n s i deri ng th e r et urn to th e pa rti cular

”
co mp an y m ak in g th e exp en di ture , an d l
a so to av o id an y n m dle as

Th e Coordin ati on De par tm en t im m ediamly b ecame a v ita l ly im portan t

J er sey s gen eral o mt e par tly b w use it cam e to m eet th e real
in
'

u ni t ,

n eeds an d l y be cau se of its man age r s dri v e an d ab il i ty T h

’
t e cons eq u en t
p ar .

efi ecri v e coo rdi n a ti on o f th e flo w o f tr o l eum f ro m w ell t o m ark et

p e

uni t an d hi gh er o u tp u t p er w o rk er Th e Co ordina ti on D ep a rt m en t .
, by
pr ov i di n g th e inf o rm at i on th at p ermi tt ed a m o re efi ecti v e lin kin g o f
so o n

f u rni sh in g th e da ta so n ecessar y f or p lann in g f or th e co m an p y a a

w h ol e .

Th e de l
ve o ba si c f u n cti o n di d n o t o f co u rse co m e au to
pm en t o f th e , ,

m a ticall y In f o rw ar di n g Har d en s r epo rt t o T eagl e Clar k em p h asiz ed

’
.
,

t h at : Th e fau l t I h av e t o fin d w i th this m emo ra n d um is th at h e

“

[ H ar den
] h as en t ir ely l eft o u t t h e me n i m p o rt an t el eme n t an d th a t is his ,
THE INITIAL RE O R G A N I Z A TI O N — 1
9 2 5
— 1
9 2 6 1
93
ow n p art in th e fo rm ati o n an d co n du ct o f th e D ep artm en t . He th en
co n ti n ued
Th e w o r k o f th e C oo rdin atio n C o mm ittee is ru n n in g alo n g so sm oo th ly,
o n e m i h t b e led t o b eliev e th at it co u ld b e con du cted b y an y on e o f av er
g
age in telli en ce an d k n o w ledge o f t h e C o mp an y s b usin ess m m ediate
’

g I .

k n o w ledge o f all details o f th e C o mp an y s b u sin ess, as r epr esen ted b y soeu r

’

in g its su pp lies o f cru de o il, tr an sp o rtatio n o f it, r efi nin g an d distrib u tio n

o fpro du cts th erefr om an d th e tact an d diplo m acy in deal in g w ith th e
,

ex ecu tive h ead s o f th e v ario u s o er atin u n it s are qu alifi cati o n s f o r su ccess

p g
f u l m an agem en t o f th e C o o rdin ati o n C o mm ittee T h e k n ow ledge o f th e .

details o f th e Co mp an y s b usin ess can n ot b e acqu ired in a f ew m on th s

’ ’

tim e an d O rville s v ersatil ity w i th it is t h e resu l t o f h is year s o f wo rk f o r

’

th e Co mp an y
62
.

Th e B u dget D ep artmen t an d Co mmittee

Th e cr eati o n o f th e Co o rd i n ati on D ep ar tm en t, des cri b ed ab o v e m ade as ,

p o ssi bl e a far m o r e eff ecti ve m o b i li zati o n o f J er sey r eso urc es j u st by

pro vi di n g an offi ce wh o se pri mary task w as to r educe co st s an d assur e an
even er an d s teady u se o f o p er ati n g pl an t an d per s on n el Th e f o r m ati o n o f .

th e Budg et Co mm i ttee an d th e Budg et D ep ar tmen t (th e s econ d step in th e

9 5
1 2 pr o gr am ) h ad si m i l ar o bj ec ti v es T h e ai m o.f t his s eco n d n ew

st aff o fi ce w as to m ak e m o r e effic i en t u se o f J er sey S tan d ard s c ap i tal

’

r eso ur ces an d li k e th e Co o rdi n ati o n D ep artmen t to pr o vi de d ata essen

, ,

ti al to m o r e system ati c an d r ati o n al fo rw ard pl an n i n g an d o th er o v er-all

en t r epr en eur i al acti v i ti es .

Up to th is tim e th e allo cati o n an d co n tr o l o f fu n d s fo r b o th o p erati n g

,

an d cap i t al exp en s es h ad b een h ap h az ard an d u n s y stem ati c T h e r egul ar .

appr o pr i ati o n r equ es t s w er e d efi n ed v agu ely an d w ith v ery li ttl e S upp o r t

in g d ata M o st d ep artm en ts an d sub si d i ar i es ask ed fo r f u n d s o n ly w h en

.

a d efi n i te an d i mm ed i ate n eed ar o se In r evi ew i n g r equ est s an d esti m ates

.
,

th e M an uf actu r i n g Co mm i ttee an d th e B o ard h ad co m p ar ati v ely f ew

d ata o n wh i ch to b ase d eci si o n s ahd m o st o f wh at th ey di d h av e c am e

,

f ro m th e i n ter ested d ep ar tm en ts an d di vi si o n s A s a r esul t th e B o ard h ad .

,

a v ery i n co m pl ete p i c tur e o f th e c o m p an y s p ast pr esen t an d f u tur e

’

, ,

fin an ci al co mm itmen ts No r w er e th e D ir ecto r s abl e to use fi n an ci al r es ults

.

as a cl ear cr i ter i o n o f m an ageri al p erf o r m an c e as di d S l o an Bro wn an d , , ,

th e du Po n ts T eagle h ad sh o wn l i ttl e c o n c er n f o r fi n d i n g o u t wh i ch
.

o p er ati n g u n i ts w er e m ak i n g an eff ecti v e r etur n o n i n v estm en t B efo r e .

th e cr eati o n o f th e C o o rdi n ati on Co mmi t tee i n t erd ep ar tm en t al pr i ci n g, ,

f o r ex am pl e ten d ed to b e h an dl ed by n ego ti ati o n b etw een th e o rgan i z a

,

t i o n s i n vo lv ed an d w as u su ally w o rk ed o u t o n th e b asi s o f i mm ed i ate

n eed s o f th o se pr o duci n g r efi n i n g o r m ark etin g un i ts

63
.
, ,
1
94 S T A N DA R D O I L C O M P A N Y (N E W J
'

ERSE Y)
Im pr o v em en ts in fi n an ci al co n tr o l s an d pro cedur es b egan imm edi ately
aft er th e B oard m eeti n g s o f A ugu st 1 92 O n S ep tem b er h
5 4 1 9 5
,2 t e .
, ,

day after th e an n o u n c em en t o f th e fo rm ati o n of th e Co o rdi n ati o n Co m

m itt ee th e T r easur er ask ed in a ci rcul ar lett er t o all d ep art men t h ead s
,

th at wh en appli cati o n for appr o pri ati o n an d o th er exp en di tures are

“

pr esen ted to th e B o ard they sh o uld b e attach ed to a statem en t gi vi n g a

,

m o n th ly esti m ate o f th e per i o d in wh i ch th e m o n ey w ill b e a ct u al ly

” 64
di sbur sed Th i s h ad b eco m e n ec essary if th e T r easur er s D ep art men t
’
.

”
w as t o accur ately f o r ecast th e d em an d s th at m ay b e m ad e up o n it
“
.

Next th e n ew T r easur er S eth B H u n t b egan t o d ev elo p budg et ary

, , .
,

pr o cedur es He ask ed all d ep artmen ts an d sub si di ari es t o pr esen t an

.

an n u al budget o f exp ect ed exp en d i t ur es f o r th e c o m i n g y ear whi ch

sh o uld sh o w in a s few i tem s as p o ssi bl e all cash d i sbur sem en ts w h eth er

“

” 65
ch argeable to capi tal acco u n t o r o p er atin g expen ses T h e budget h e .
,

urged sh o uld b e k ep t at th e l o w est po ssible am o un t co n si sten t with

,
“

goo d bu si n ess an d n o i tem o f cap i tal exp en ditur e sh o uld b e i n cluded

,

”
unl ess sati sfact o ry ear n i n g p o wer can b e sh o w n A ll budgets w er e t o .

i n clu de estim ated gr o ss an d n et i n co m e as w ell as m ai n ten an ce o p er at ,

in g an d c ap i tal exp en d i tu r es an d w er e t o b e sub mi tted o n th e sam e t yp e

, ,

o f f o r m an d f o rw ard ed t o th e o ffi ce o f Wesl ey Z an e

, .

Th en in J an u ary 1 92 6 a B u dget Co mm i tt ee an d a Budget D ep ar tm en t

, ,

wer e fo rm ally establi sh ed wi th Z an e as S ecr etary of th e fi r st an d M an ager

66
o f th e seco n d D u ri n g th e tw o pr ev i o u s y ear s Z an e h ad b een a w o rki n g
.
,

m em b er o f th e Effi ci en cy Co m mi ttee a gr o u p app o i n ted by th e B o ard in

,

J an u ary 1 923 to study w ay s an d m ean s o f r eo rgan i zi n g ro u ti n e o ffi ce

, ,

m an agem en t in o rd er to i m pr o v e effici en cy av o i d d u pli cati o n a n d cu t , ,

67
c o sts A ft er Z an e h ad r etur n ed fr o m a n i n e m o n th s study o f th e Eu ro
.
’

pean o ffi ces an d h ad h elp ed th e Co mm ittee m ak e its r epo r t T eagle i m m e ,

diately p u t h im in ch arge o f c o m p i li n g an d sy stem ati zi n g th e J er sey

68
budgets .

Zan e s r o le w as a servi ce o r staff o n e His co m p i l ati o n o f u n i fo rm

’ 69
.

d ata an d its pr esen tati o n to th e B o ard in co n ci se fo rm gave th e sen i o r

ex ecu ti v es f o r th e fi r st ti m e a cl ear o v er-all p i ctur e o f th e Co m p an y s
’

, ,

fi n an ci al c o m mi tm en ts an d th e r eso ur ces to c o v er th em O n ce a d ep art .

m en t s budget h ad b een appr o v ed Z an e s o ffic e k ep t a ch eck o n h o w th e

’ ’

fu n d s w er e b ei n g exp en d ed an d i ssu ed to th e B o ard m o n th ly fi gu r es th at

,

sh o w ed h o w act u al exp en di tur es fo r ea ch d ep a rtm en t an d sub si di ary in

th e co m p an y c o m p ar ed w i th th e budget esti m at es D ur i n g th e y ear th e .

,

D ep ar tm en t ch eck ed r equ ests fo r m o n ey to c o v er u n exp ected c o n ti n

n cies an d fo ll o w ed th em up t o see h o w th e f u n d s w er e b ei n g sp en t
g e .

S oo n too th e D ep artm en t w as aski n g fo r a car eful r evi si o n o f th e an n u al

, ,

budget in Ju n e o f each year .

T HE I NITIAL REO RGA NI ZA TIO N — 1 9 2 5
— 1
9 2 6 1
95
Wh i le cr eatio n of Z an e s Dep ar tm en t gave th e Dir ecto rs a cl ear er
th e
’

o ver-all p i c tur e o f th ei r fi n an c i al sit u ati on th e d ata w er e sti ll crud e in ,

com p ari so n to th o se devel o p ed at G en er al Mo to r s aft er 1 92 1 an d at

du Po n t by Wo rld War I A t S tan d ard th er e w as i n i ti ally lit tl e effo r t t o
.
,

fo r ecast o ver-all c o m p an y fi n an c i al n eed s in th e ligh t o f pr ob abl e bu si n es s

co n di tio n s or to pro vi de o utsi de ch eck s on an y esti m tes of th e o p er ati n g
,
a

u n i ts A t fi r s t appro pri ati o n s r eques ts fai led to sh o w th e n eed o f th e

.
,

exp en ditur e in th e u i t s o v r all pr o gr am to say n o thi n g o f th e n eed in

n e —
’

J er sey s gen er al bro ad pl an s S o o n h o w ever each r equ est came to b e

’
.
, ,

a cco m p an i ed by a go o d d eal o f supp o r ti n g i n fo rm ati on w h i ch i n di cat ed ,

am o n g o th er th i n g s wh eth er an d w h y each r equ es t w as essen ti al o r n o t

so n ec essary o r mi gh t ev en b e u t o ff V ery s o o n to o H ard en s Co o rd i n a

’

p .
, ,

ti o n D ep ar tm en t w as pro vi di n g d etai l ed d ata on curr en t o p er ati n g co sts

an d o n pr o p o sed m aj o r c ap i tal exp en d i tur es S uch i n fo r m ati o n pr o v i d ed .

an ex cell en t ch eck o n th e r ep o r ts an d budg ets o f th e o p er ati n g d ep ar t

m en ts an d afi liates in m uch th e sam e w ay s tatisti c s an d r ep o r ts fr om

th e gen er al staff d i d at G en er al Mo to r s an d du Pon t A l so th e Co o rdi n a .
,

ti o n Dep artm en t s lo n g-term esti m ates fi n ally b ec am e d etai led en o ugh to

’

b e u sed in pl an n i n g bro ad p oli cy for th e co m p an y as a wh o l e .

T h e cr eati o n o f th e Co o r di n ati o n an d th e Budget D ep artm en ts at 26

Br o adway w as th en a m aj o r step fo rw ard in i m pr o vi n g co mm u n i c ati o n s
, ,

b etween th e B o ard th e o p er ati n g dep ar tm en ts sub si di ar i es an d th e

, , ,

affi li ates an d so m ad e p o ssi bl e a m o r e effec ti v e m o b i li z ati o n o f th e J er s ey

,

Co m p an y s t o tal r eso urc es T h e fo r m ati o n o f H arden s o ffic e ass ur ed th e

’ ’
.

co llecti o n co m p i latio n an d di ssemi n ati on of a steady fl o w o f r eli abl e

, ,

d ata wh i ch co uld b e u sed fo r evalu ati n g o p er ati n g p erfo rm an ce as w ell

,

as fo r c oo rd i n ati n g th e r ate an d d i r ec ti o n o f pr o duct fl o w T h e add i ti on al .

i nfo rm ation co mp i l ed r egul arly an d s y stem ati cally by Z an e s ofiice g ave ’

th e J er sey D i r ecto r s i n v alu abl e d ata fo r pl an n i n g th e f u t ur e c o ur ses o f

ac ti o n fo r th e d i ff er en t o p er ati n g o rg an i z ati on s an d fo r th e c o m p an y as

a w h o l e Fr o m th i s ti m e o n
. th e J er sey Co m p an y w o ul d h av e a m uch
,

clear er p i ctur e o f wh er e it h ad b een wh er e it curr en tly sto o d an d wh i th er

, ,

it w as go i n g
A f ter 1 925 th e m aj o r w o rk o f th e tw o n ew cen tr al o ffic e d ep ar tmen ts
,

w as l arg ely th at o f d ev el o p i n g m o r e accur ate an d s op histi c ated d ata

an d fi n an ci al an d i n fo rm ati o n al pr o c edur es an d c o n tr o l s H arden r eal .

iz ed as h ad earl i er sen i o r ex ecu ti ves at du Fo n t an d G en er al M o to r s th at

, ,

th e gr eatest n eed w as f o r b etter i n fo r m ati o n o n m ark et pr o sp ec ts T h e .

ch an gi n g m ark et after all determ i n ed th e vo lum e o f each fu n cti o n s

, ,
’

ac ti v i ty an d th e r ate o f flo w th r o ugh th e w h o l e o rg an i zati o n In M arch .

,

1 92
9
, H ard en sub mi tted a p erc ep ti v e r ep o r t th at str essed th e cr i ti c al n eed

fo r m ark et an alysi s i n clud i n g accur ate fo r ec asti n g an d a br eakdo wn o f

,
1
9 6 S T A N DA R D C O M P A N Y (N E W J E R S E Y )
O I L

dem an d . It is beco min g ev ery day m o r e appar en t Har den po inted o ut ,

”
,
“
that wecan n ot thin k in terms of raw m ateri als co n vert ed into m erch an
dise so ld an d dist ribu ted to p o ssibl e custom er s wh o se tast e buyin g h ab its , ,
7° ”
l o cati ons an d ab ili ty to purch ase are m o r e o r l ess un kno wn
,
T h e m o re .

pr o fi tabl e u se of J er sey f acili ti es r equi r ed co—o rdin ated an d sci en tifi c st udy
“

n o t o n ly o f o ur pr es en t m ark ets b u t al so o ur f ut ur e m a
, r k ets ; o ur pr esen t

po sitio n tod a y in each m ark et ; o ur m ark etin g po si ti o n as a wh o l e in th e

”
in dustry an d wh at it will pr ob ably b e n ext y ear th e y ea r aft er etc A t , , .

th i s tim e H ard en an d o th er s r eco mm en d ed th e cr eati o n o f o ffices t o

,

an alyze sa l es an d m ark et co n di ti o n s A s H ard en s r epo rt em ph as i zes

’
.
,

deci si ons abo u t coo rdi n ati o n o f pr oduct fl o w an d th e allo cati on o f f un ds

fo r cap i tal exp en di tur es w er e be co mi n g b ased at J er sey j u st as th ey h ad ,

been ear li er at du Fo n t an d at G en er al M o to r s on an ti cip ated co n di ti ons

r ath er th an on p ast pe rf o rm an ce .

R eor gan iz in g Mar k etin g D ep artm en t

th e

In cr ea tin g th e Co o rdin ati on an d Budg etin g o rgan i zati o n s T eagle an d ,

h is Bo ard w er e b u il din g n ew an d f o rm al lin es o f comm uni cati on fro m

gen er al h ea dquarter s to all p art s of th e J er sey d omai n an d w er e devel o p ,

in g th e n eces sar y data t o fl o w th r o ugh th ese so th at th e o per atin g u n i ts ,

n ew an d o l d co uld in tegr ate th ei r r eso ur ces m or e pr o du cti v ely T h e

,
.

pr o gr am al so call ed f o r ch an ge w i th in th e st ruct ur e o f th e f u n ct i o n al
1 92
5
dep art m en ts H er e t h e fi r st st ep w as th e r eo rgan i zati on of th e M ark etin g
.

Dep art m en t Th e lin es o f au th o ri t y as w ell as th ose of comm un i ca tio n

.

between h ea dquarter s an d th e fi eld h ad to be r esh ape d if thi s o lder un i t

w as to m eet m o r e qui ckly an d i m agi n ati v ely th e n ew n eeds an d ch al
l en ges .

In r ef o rmin g th e structur e o f th e do m esti c m ark eti n g o rgani zati o n ,

T eagl e s fir st ch an g es w er e in t op p er so n n el T h e curr en t D i r ect o r in

’
.

ch arge o f D o m esti c S ales w as r epl aced by th e y o un g an d aggr ess i ve

J am es A M off ett Jr w h o h ad co m e to 2 6 Br o adway fr o m th e Lo ui si an a
.
, .
,

Co m p an y an d w h o h ad b eco m e D i r ecto r in ch arg e o f F o r ei gn M ark et

in g a f ew m on th s earli er at A sch e s d ea th 71
A n xi o us to in t egr ate L o ui si
’
.
,

an a s sal es a cti v i ti es w i th th o se of th e p ar en t com p an y t h e Bo ard ap o in ted

’

p ,

on e o f L o ui si an a s sen i o r m ar k etin g ex ecu ti v es t o a n ew G en er al

’ “

p o st ,
”
A ss i stan t in ch arg e of M ark etin g A cti vi ti es T eagl e n ext sel ect ed t h e n ew
.

D o m esti c S al es Co mm i ttee wh i ch u n l ik e th e o ld in clud ed se n i o r

, ,

ex ecu ti v es in J er sey s d o m esti c m ark etin g o rgan iz a ti o n — th e A ss is t an t

’

G en er al M an ag er f o r Do m esti c S al es at 26 Br o adw ay an d th e R esi den t ,

M an ager s at th e tw o bran ch O ffi c es N ew ar k an d B al tim or e A fo u rth

,
.

m embe r A C l ark e Be dfo rd h ad b een f o r so m e tim e M o ff ett s assi stan t

’
. .
, ,

T eagl e th en ask ed th ese f o ur to sugg est h o w th e S al es Dep artm en t m i gh t

THE INITIAL RE ORGA N I ZA TIO N — I
g s
z 1 97

be reo rgan i zed in o rder to m eet m o r e eff ecti v ely th e ch allen ges o f th e
gaso li n e age .

A t a m eeti n g o n No vem b er 25 1 925 w i th th e m emb er s o f th e n ew, ,

Do mesti c S ales Co m mi ttee th e Presi den t m ad e cl ear th at h e w an ted th e

,

Lo ui si an a an d Jer sey m ark eti n g o rgan i z ati o n s to b e co m b i n ed i n t o a si n gl e

dep artm en t wi th h eadqu ar ter s r esp o n si bl e fo r fewer o p er ati n g detai l s
72
a n d if p o ssi bl e w i th few er ad m i n i str ati v e p er so n n el
, , T h e Co mm i ttee .
,

in its r epo rt o f D ecem b er 4 fi r st r eco m m en d ed th e co n so l i d ati o n o f s o m e

,

o f th e br an c h o ffi ce a c ti v i ti es l i k e acco u n ti n g S eco n d th e Dep ar tm en t .

,

sh o uld t ak e o v er th e sal es o f th o se f u el o il o il n d m i sc ell an eo u s

gas a , ,

asp h al t pr o ducts th at so ld in r el ati v ely s m all l o ts th r o ugh br an ch O ffic es

b u t wh i ch w er e sti ll u n d er th e d i r ecti o n o f Mr S h effield m an ager o f

“
.
,

th e Fu el O il D ep ar tm en t T h e l atter wo uld c o n ti n u e to h a n dle o n ly

.

l arge bulk c o n t racts m ade di rectly wi th sh i pp i n g co m p an i es ro ad co n trac ,

to r s an d si m i l ar cu sto m er s N ex t th e N ew Y o rk h eadqu ar ter s w o uld

, .
,

i n clud e b esi d e th e fo ur m emb ers o f th e n ew Co m m ittee as si stan t m an

, ,

ager s in c h arg e o f m ark eti n g w h at h ad b ec o m e th e tw o m aj o r sets

o f pr o duc ts — refi n ed o il an d g aso l i n e an d lubr i c at i n g o i l s T h er e w o uld

,
.

al so b e an assi st an t m an ag er to h an dl e serv i c e st ati o n s an d an o th er t o

sup erv i se th e m ai n ten an c e an d r ep ai r o f th e c o m p an y s au to m o ti v e equ i p

’

m en t n o w repl ac i n g w ago n s fo r g aso l i n e d i str i bu ti o n A pp ar en tly th ese

, .

ex ecu ti v es w er e t o h ave d i r ec t c o n tact w i th th ei r c o u n terp ar ts in t h e

bran ch o ffices at Newark an d B alti m o r e wh i ch w er e sti ll to b e h eaded ,

by Bran ch M an ager s .

Wh i le accepti n g th e gen er al o utli n e T eagle felt th at th e reco mm en da ,

”
ti o n s d i d n o t go f ar en o ugh It w o uld seem v ery n ecess ary h e wr o te
“
.
,

th e n ew m ark eti n g Co mm i ttee th at yo u g en tl em en sh o uld d efi n e th e

“

ex act r el ati o n sh i p w h i ch
y o u w o uld r ec o m m en d sh o uld ex i st b etw een

o u an d th e Br an ch M an ag er s in th e F i eld ; al so y o ur r ec o mm en d ati o n s
y
as to h o w th e w o rk sh o uld b e h an dl ed an d d i v i d ed am o n g f ur
y o u o gen
” 73
tlem en . A l ack o f such pr ec i sen ess co uld l ead to d i fficulti es T eagle ,

str essed in a l etter to Mo ffett A uth o rit y a n d r esp o n si b i l i ty sh o uld b e

.

d efi n itely p i n n ed do wn
Y ou w ill n o tein my letter to th ese fou r gen tlem en I r ai se specifi cally
th at
th e q uestio n as to th eir r elation sh ip to th e m ain statio n m an ager s My .

th o u gh t is th at th e m an a er s sh o u ld b e in ch ar e o f an d r esp o n sible fo r th e
g g
en ti e r b u sin ess in th is fi eld , in clu din g equ ip m en t, co n stru ction , service sta
tio n s, as w ell a s sales, accou n tin , etc I am o pp o sed to a d ivi sion O f a u th o r ity
g .

if th ese lo cal m an agers are to b e h eld respon sib le fo r th e en tire o rgan izatio n
an d o p eratio n s in an r t i l r fi l d d it seem to m e a m istak e to h av e
y p a c u a e , a n s

sp ecial m en fo r sp ecial j o b s as th e eff ect o f th is w ou ld b e, in th e fi rst p lace,

,

in creased o peratin g cost, an d in th e secon d place w ou l d m ak e th e lo cal

1
9 8 S TANDARD O I L C O M P A N Y (N E W J E R S E Y )
m an ager feel th at h e h as n o n respo sib ility for th ese pecial j b s a d if any
s o n

th in g goes w ro n g in conn ectio n th erew ith h e can p ass th e b lam e o n to th e

s ecial m an w h o h as b een h an dlin

74
p g it .

Wh at T eagle w an ted w as to h ave th e

li n es o f auth o ri ty b etween th e fi eld
an d h eadqu ar ter s d efi n ed o n a li n e-an d—staff b asi s .

T h ese vi ew s h o w ever T eagle di d n o t p ass o n to th e m ark eter s He

, , .

let th em c o m e up w i th th ei r o w n o rg an i z ati o n al sch eme O n D ecem b er 2 1 .

,

th ey sub mi tted a seco n d an d m u ch m o r e d etai l ed r ep o rt Th e fo ur each .

,

o f wh o m w o uld tak e th e ti tl e o f G en er al S al es M an ag er r ec o mm en d ed : ,

a . Th at th e G en eral S ales Man agers, actin g as a Co mmitt ee, sh all b e h el d

B
resp on sib le b y th e o ard o f Directors fo r th e gen eral m an agemen t an d
o p eration o f o u r d o m estic m ar k etin b u sin ess
g .

b Th ey
. sh all b e h eld
respo n sib le fo r gen eral sellin g policies an d sh all ,

recomm en d to th e B o ard su ch ch an ges as m ay be n ecessary fr om tim e to

tim e in th e gen eral price stru ctu re o f all pr o ducts excep t th at th ey sh all ,

h a v e au th o rity w ith o u t r eferen ce to th e B oard to m eet lo cal comp etitive

, ,

price co n ditio n s w h ich deman d imm ediate action in o rder to protect our
,

b usin ess an d w h ich do n o t r eq u ir e gen eral m ark et ch an ge

, .

c . T h ey al so sh all b e h eld r esp on sib le fo r th e exp en ditu re o f m o n ey in th e

do m estic fi eld o p er atin g u n der a b u dget system approved b y th e Bo ard
,

o f D ir ecto rs an d app o rti o n i n g th ese exp en ditu res b etween t h e v ari o us

,

divisio n s as m ay seem advisab le fro m time to tim e au th o rity b ein g ,

g r an ted t o th i s C o m m it tee t o appr o v e estim at es W ith ou t r ef er en ce t o th e

Bo ard except in th e cases o f exceptio n al exp en ditu res Th is Co mm ittee

, .

w ill exp ect to ren der r egu lar r ep o rts at stated p erio ds as to m o n ey ex
p en ded so th at th e B o ard w ill at all tim es b e p o sted
,
75
.

In th i s w ay, th en , fo ll o w i n g th e o ld J er sey S tan d ard cu sto m , th e Com

mi ttee wo uld b e r esp o n si bl e fo r m ak i n g p o li cy u n der th e gen er al super
vi sio n o f th e B o ard .ur n wo uld h o ld th e Bran ch
“
Th i s C o m m i ttee in t

an d D i v i si on M an ag er r es o n si bl e for th e bu si n ess in h is en ti r e fi eld

p ,

i n cludi n g c arryi n g o u t o f sal es p o li ci es as m ay b e l ai d do wn by th e Co m

m itt ee fr o m ti m e to ti m e th e m ai n ten an ce o f pri c es th e co sts o f m ark et
, ,
”
in g sel ecti o n an d o p er ati o n o f servi ce stati o n s an d acco u n ti n g
,
Bu t ,
.

th e r ep o r t d i d n o t m ak e cl ear th e r el ati o n s b etw een th e Br a n ch M an ager s

in th e fi eld an d th e pr o duct m an ag er s at h eadq u arter s T o h an dl e th e .

ad m i n i str ati v e du ti es an d at th e sam e ti m e to co o rd i n ate th e w o rk o f th e

, ,

Bran ch an d pro duct m an ager s th e r epo rt as H o w ard h ad don e earli er , ,

fo r th e M an u facturi n g D ep ar tm en t suggested th at tw o m em b er s o f th e ,

Co mmi ttee b e in th e fi eld an d th e o th er tw o in th e h o m e o ffi ce at an y

gi ven ti me In o th er wo rd s fo llo wi n g T eagle s vi ew th e dep ar tm en t w as
.
,
’

to b e ad mi n i ster ed a s at du Po n t w i th th e li n e o f au th o r i ty f r o m h ead
, ,

qu arters to th e fi eld v ia th e bran ch m an ager T h e pri m ary di ff eren c e w as .

T HE INI TIA L REORGA N I Z A TI ON — 1
9 25 —1
9 26 1 99

th at a co mmittee r ather th an a si n gle i n di vi du al at h eadqu arter s w as to

b e r esp o n si bl e for d ep ar tmen tal p erfo rm an ce Do m esti c s al es li k e man u .
,
”
factu rin g wer e to b e m an aged by a Roo m T h e mark eter s co n cluded
“
.
,

th ei r r ep o r t by sayi n g th at th ey pr eferr ed n o t to say in adv an ce wh at th e

sp eci fi c du ti es o f each o f th e fo ur w o uld b e an d al s o th at th ey fel t th at

th ey co uld b egi n wi th th e pr esen t Do mesti c S ales Dep ar tmen t o rgan i za

“

ti o n m ak i n g addi tio n s to th e p er so n n el as m ay b e n ecessary fr o m tim e to

,
”
ti me .

Excep t fo r th es e l ast tw o p o i n ts T eagl e w as qu ite s ati sfi ed T h e l ast

, .

s en ten ce p ar ti cularly di sturb ed h im It ten d s h e wro te to th e Ch ai rm an

.
,

o f th e B o ard fr o m h is h u n ti n g pl an tati on in G eo rgi a :

to c eate th er impressio n th at th ese gen tlemen h ad in m in d b u ildin g u p an

exten siv e dep artm en t in New Yo rk T h is I th in k is a gr eat m i stak e All th at
.
, , .

th e C o mm ittee w an ts to do is to d irect th e b u sin ess leav i n g all th e d etails ,

an d th e actu al carryin o u t o f th e w o rk to th e m en in th e fi eld I f it is

g .

agreeab le to th e B o ard to delegate to th ese S ales Man agers th e add itio n al

au th o ri ty th ey are ask in g f o r th en th ey o n t h eir p ar t sh o u ld in m y o p in

, , , ,

io n delegate resp o n si b ility to th e lo cal m an agers in th e Field If th ey do

, .

th is th ere w ill b e n o n ecessity wh atev er f o r th em to en large in an y w ay

th e presen t S ales Dep ar tm en t in New Yo rk 76

.

The B o ard in appr o vi n g o f th e mark eter s r eco m men dati on s h o wever ’

, ,

di d n ot r equ i re th e fo ur execu ti ves to defi n e th ei r o w n du ti es mo re

”
s p ecifi c ally .

T eagl e s r eacti o n to th is r ep o r t suggests th at wh en pressed h e co uld

’

, ,

set fo r t h f ai rly expl i c i t i d eas o n o rg an i z ati o n He saw th e n eed o f d efi n i n g

.

resp o n si b i li ty an d auth o ri ty an d th e v alue o f del egati n g o p er ati n g resp o n

,

sib ilit
y H e adv
. o c ate d a cl ea r l i n e o f au th o r i ty b etw een h eadqu ar t er s an d
fi eld A n d h e w as t ro ubled by th e fai lure to d efi n e t h e a ctu al du ti es o f
.

th e d i ffer en t m en w i th i n th e n ew S ales Co mm ittee i tself Y et app ar en tly .

it di d n o t o ccur to h im to rej ect th e co mm i ttee fo rm o f adm i n i ster i n g

such o p er ati n g acti v i ti es o r to cl ar i fy t h e l i n es o f au th o r it y w ith i n th e

h eadqu ar ters office T h e r el ati o n sh i p b etween th e co m mi ttee m emb er s

.

w as j u st as u n clear as b etw een th ese ex ecu ti v es an d M o ff ett an d h is n ew

as si stan t Wh o r ea lly d i d h ave r esp o n si b i l i ty fo r d o m esti c sal es at J er sey
.

S tan d ard in 1 926 ? T eagl e w o u ldzso o n h ave to an s wer th is qu esti o n o f th e

lo c ati o n of res p o n sib i lity an d au th o r ity n ot o n ly in mark eti n g bu t al s o
,

in m an ufactur i n g .

Reorgan izzn g Man ufactu rin g D ep artmen t

’

th e

The reo rgan i zatio n o f th e M an ufacturi n g Dep artm en t l i k e th at o f th e ,

Mark eti n g D ep ar tm en t c alled fo r a r efash i o n i n g o f th e l i n es o f au th o rity

,

an d c o mm u n i c ati on an d fo r ch an g es in p er s o n n el Ho w ever th e sit u ati o n .

,
zoo S TANDARD O IL C O M P A N Y (N E W j ER SEY
)
w as m o r e co mpl exr th an in m ark etin g an d so th e sto ry o f th e
th e e ,

ch an ges in th e m an uf act ur in g o rg ani zati o n pr o vi des a r ev ealin g ex am pl e

o f th e di ffic ul ti es in vo lv ed in al ter in g l o n g—est abli sh ed struct ur e Th e .

st o ry is all th e m o r e i ll ustr ati v e b ecaus e bo th th e d ep artm en t in v o lved

an d th e sen i o r ex ecu ti v es in th e cen tr al o ffi ce f ai l ed t o study expli ci tly

th e o rg ani z ati on al n eeds o f th e d ep ar tm en t an d its st ruct ur al r elati o n shi p

wi th o th er o per ati n g un i ts .

Th e si tu ati o n in m an u f a ct uri n g w as m o r e com plex be ca use in th e ,

fi r st pl ac e th e cri si s in 1 925 w as l ess o bvi o us h er e th an in m ark etin g

, ,

an d ch an g e seem ed l ess im per ati v e T h e gr eat exp an si o n o f th e g aso lin e

.

bu sin ess n ev erth el ess w as cr eatin g pr ess ur es in th e r efi n in g as w ell as

, ,

i n th e sel lin g d ep ar tmen ts Co m p l ain ts f r om cu stom er s b o th l arge an d

.
,

small ab o u t v ari ati o n s in th e qu al i t y an d perf o rm an ce o f S tan dard s

’

g aso lin e em p h asi zed th e n eed to achi ev e a un ifo rmly r efin ed pr o duct
fr o m th e m an y diff er en t crud es Com plain ts by str essin g th e co n tin u in g
.
,

n ecessi ty o f im pr o vi n g exi stin g pr od uct s an d pr ocess es al s o br o ugh t o ut ,

th e im po rt an ce o f a cl o ser li ai son be tw een th e De v elo p m en t Man uf ac ,

t ur in g an d M ark etin g Dep artm en ts

, .

In th e se co n d pl ace T eagl e an d th e Bo ard w er e l ess lik ely to cha n g e

,

to p per so n n el in th e M an uf a ct ur i n g th an in th e M ark etin g D ep artm en t ,

be cause th e seni o r r efi n in g ex ecu ti ves h ad l on g h eld po si ti o n s of respo n

sib ili t Th t r ch ed an d po w erful M an uf a ct ur in g Co mm i ttee co ul d
y . e en en

n o t be summ ar i ly di smi ssed o r r esh ape d W i th o u t ei th er d epri v i n g th e

co m p an y of abl e m en o r ca usin g a br eakdo wn in m o r al e T hi s w as .

p arti cularly true becaus e in th i s o ldest of th e J er sey dep art men ts len gth
, ,

o f serv i ce w as o f gr eater impo rt an c e f or pr esti g e an d pr o m o ti o n th an

in th e r es t o f t h e Co m p an y .

Th e si tuati o n in th e D ep ar tmen t w as f urth er co n f used by a co n tin ui n g

co nfli ct o f atti tud es an d p er so n ali ti es T h i s h ad be gun in 1 9 1 9 wh en.

T eagl e br o ugh t Cl ark an d hi s l i eu ten an ts to h ead th e B ayw ay pl an t an d

to impr o v e an d d ev el o p b etter pr o ducts an d pr o cesses Th e o ld er r efi n er s .

— l i k e Bl ack H aup t an d W C K oehl er w h o h ad t B yw ay in to

, , . .
p u a

o per ati o n in 1 0 w r e n o t o nl y sk ep ti cal o f th e n ew sci en tifi c w ay s b u t

9 7 e

th ey al so r esen t ed th e pl acin g o f o u tsi d er s to sen i o r po si ti o n s C l ark an d .

hi s asso ci ates o n th eir si d e f ail ed to hi d e th eir imp ati en ce at wh at seem ed

78
to th em o u tm o d ed m en u sin g o u tmo d ed m eth o d s By k eep i n g the .

m aj o r p o sts in th e M an u fa ct ur in g De p ar tmen t di vi ded be tw een th e tw o

r o up s as h e did in 1 2 1 w h en bo th C l ark an d Bl ack w er e pr o m o ted to
g , 9
th e Bo ard as D ir ect o r s in ch arg e o f Man uf act urin g T eagl e o n ly ass ur ed ,

th e co n tin ua n c e o f th e co n fli c t O n t h e M an uf a ct uri n g Co mmi ttee

.
,

Koehl er an d H aup t w er e th e h ard co r e o f th e o ld r efi n eri es an d Ho ward

th e sp o k es m an fo r th e n ew Th e o ld est an d m o st sen i o r m em b er s (G eo rge
.
THE INITIAL RE O RG A N I Z A TI O N — 1
9 2 5
— 1
9 2 6 20 1

W McKn igh t
.
, th e Co mmi ttee s Ch ai rm an
r 1 92 1 an d C E G r aff
’
a tef , . .
,

V i ce-Ch ai rm an an d M an ager o f B ayw ay ) u su ally fav o r ed th e o ld B ayw ay

gro up Whi l e th e yo u n ger m em b er s wer e m o r e s ym p ath eti c to i deas o f
,

C l ark an d H o w ard
79
.

F o r b o th th ese r easo n s — th e c o nfli c t o f p er so n a lit i es an d t h e l ack o f

po werful pr essur es fo r ch an ge T eagle m et wi th th e C o mm i ttee sev er al

—

t im es in D ec em b er 1 925 r ath er th an pr o p o si n g m aj o r ch an ges h i m self

, ,
.

A t th ese m eeti n g s h e ask ed th e Co mm i ttee to suggest w ay s an d m ean s

o f assur i n g m o r e u n if o r m q ua li ty o f cu tti n g co sts an d o f stan d ard i z i n g
, ,

pro duct an d pro cesses He al so w an ted i m pr o ved an d m o r e s y stem ati c

.

meth o d s an d a cl ear er d efi n i ti on o f th e o rg an i z ati o n o f th e Co mmi ttee

80
an d its r el ati o n s to th e B o ard F i n ally as in th e c ase o f m ark eti n g h e
.
, ,

h o pe d to br i n g th e Lo u i si an a Com p an y s acti vi ti es u n der cl o s er adm in is

’

trativ e c o n tr o l T eagl e agr eed th at th e C o mm i ttee sh o uld b egi n its w o rk

.

by h avi n g th e tw o sen i o r executi ves McKnigh t an d G r aff v i si t S tan d ard , ,

o f In d i an a S tan d ard o f C al if o r ni a an d U n i o n O il h am e th r ee co m
, ( t e s ,

p an i cs Ho ward h ad studi ed tw o y ear s b efo r e) to ex am i n e th e w ay th ey

h an dl ed th e pr o bl em s an d o rgan i zed th ei r m an uf ac t ur i n g ac ti v iti es .

A cco rd i n g to h is pr ac ti c e T eagl e l ef t th e tw o men to dr aft th ei r

,

o w n d etai l ed pl an s C l ark h o w ev er th o ugh t it b est to pr es en t hi s o w n

.
, ,

vi ews I h av e b een gi vi n g con si der abl e th o ugh t to o ur M an uf actur i n g

.
“

Co mm i tt ee pr o bl em s Cl ar k wr o te to McK n igh t in S an Fr an ci sco an d

“

, ,

h ave a h alf b ak ed i d ea I w o uld li k e to gi v e yo u thi s o u tli n e to b e

‘ ’
-
.
,

co n si der ed by yo ur self an d Mr G r aff at yo ur l ei sur e o n th e tri p .

81
.
”

Th e pl an w as essen ti ally th e o n e h e an d H o w ard h ad pr o p o sed in Jan

u ary 1 924 fo r a m o r e cen tr ali z ed d ep ar tmen tali z ed o rgan i z ati on in place
, , ,

o f th e exi sti n g fed er a ti o n o f r efi n er i es Bu t a s t i t h er C l ark n o r T eagl e

y e n e .

n o r th e m an u f act ur er s th em selv es pr o p o sed alt er i n g th e b asi c c o mm i ttee

fo rm o f adm i n i st rati o n .

T h e r eco mm en d ati o n s o f McKni gh t an d G r aff appr o v ed by th e M an u ,

factu rin g Co mm i ttee o n J an u ary 29 1 926 di d call fo r m o r e o f an all o c a , ,

82
ti on o f th e Co mm i ttee s w o rk al o n g fu n cti on al l i n es Th e D ep ar tmen t
’
.

w as to h av e fi v e f u n ct i o n al o ffic es T h e pr es en t D ev el o p m en t an d En gi .

n eer i n g D ep art m en t s w er e to b e s pec ifi cal ly un d er th e M an uf act ur i n g D e

ar tmen t Th e o th er th r ee d eal t w i th i n sp ec ti o n an d co m pl ai n t s qu ali ty

p .
,

co n tr o l an d acco u n ti n g an d co st an alysis T h e stan dardi zati o n o f pr o cess

, .

an d equi p m en t w as to b e h an dl ed by a S tan d ardi zati o n C o mm i ttee .

Exc ep t in th e c ase o f En gi n eer i n g th e r el ati o n b etw een th ese h eadqu arter s

,

o ffic es an d th e r efi n er i es in th e fi eld w as n o t m ad e cl ear T h e En gi n eer i n g .

”
D ep art men t w as to h av e di r ect admi n is tr ati v e co n tro l o v er th e M ech an
“

i cal Dep artm en ts in th e r efi n er i es T h e adm i n i str atio n o f th e r efi n eri es .

w as to b e c en tr ali zed w ith Koeh l er in ch arge o f th e tw o gr eat r efin er i es

,
202 S TANDARD O IL C O M P A N Y (N E W j ER SEY
)
of B ayw ay an d B ayo nn e an d T h o m as R P ar k er all th e f o r ei gn o n es . .

Th e o th er d o m esti c r efi n er i es, i n cludi n g th e B ato n R o uge pl an t w er e t o ,

co n t in u e to h ave th ei r G en er al M an ager s o n th e Commi tt ee, wi th o ffices

at 2 6 B r o adw ay T h e fi n al pr o p o sal th en . ca ll ed f o r th e co n ti n u ati o n o f a, ,
”
co mmi tt ee o r r oo m -m an aged o rgani za ti o n b u t wi th m o r e cl early d efi n ed
“

83
a ux ili ary o r servi ce u n i ts .

Th e B o ard accep ted m o st o f t h ese r eco mm en d ati o ns d esp i te str o n g

o bj ec ti o n s o f tw o o f th e O ld er r efin er s K o eh l er an d H au p t Ho wever
84
, .
,

b ecau se o f th e latter pro test th e duti es o f th e E n gi n eeri n g D ep artmen t ,

r em ai n ed un ch an ged an d r efin eri es in th e N ew Y o rk ar ea k ept sep arate

,

m an ag er s Th en in th e f o ll o w i n g au tu mn T eagl e agr eed o n a S i n gl e

.
, ,

m an ag em en t fo r all th r ee N ew Y o rk r efi n er i es b u t n o t u n d er a sin gle ,

m an ager Th e M an ufact ur i n g C o mm i ttee h ad r eco mm en ded Fr an k

.

W A br am s fo r th e p o st T eagle th ou gh t th e w o rk sh o uld b e di vi ded

.
85
.

b etween thi s y o u n ger m o r e im agi n ati v e ex ecu ti v e an d th e m o r e exp eri

,

en ced K o eh l er Th i s T eagl e wr o te G raff wo ul d l eav e Mr A br am s “

. .
, ,

fr ee to d ev o te hi s tim e an d atten ti on to co—o r di n ati o n o f o p er ati o n s an d

th e all o cat i o n o f C rud e b etw een th e th r ee pl an t s as w ell a s q u esti o n s o f ,

m eth o d an d pr o c ess w h il e Mr K o eh l er wo u ld c o o rdi n ate an d adj us t

, .

l ab o r acti vi ti es o f th e th r ee pl an ts in q u esti o n 86
T h i s Sh arp di vi si o n o f .
”

r esp o n sib ili ty an d au th o ri ty o nl y i n ten sifi ed th e co n fli cts an d an tago n i sm s

W i thi n th e M an u fact ur i n g D ep art men t .

T h e w o rki n g o u t o f t h e pr o gr am th at T eagl e an d t h e B o ard d eci d ed o n

in A ugu st 1 925 stim ul ated o th er i mp o r ta n t o rg an i zati o n al ch an ges in
, ,

th e fo ll o wi n g y ear M o st si g n ifi can t w as th e co n so l i d ati o n in O ct o be r

.
,

1 2 6 o f th e tw o pr o d u ci n g d ep art men t s i n to a si n gle o n e u n d er S adl er s

’

9 ,

”
co mm an d O n Co rwi n s r etir em en t f rom C arter earli er in th e y ear R M
.
’

, . .

Yo u n g th e h ead o f its Western D i vi si o n b ecam e Pr esi den t Rem ai n i n g in

, , .

T u l sa h e r ep o rt ed to 2 6 Br o adw ay th r o ugh Ri ch ard so n Pr att fo rm erly

, ,

Co rwi n s assi stan t an d n o w o n e o f S adler s th r ee sen i o r gen er al assi st

’ ’

88
Th e w o rk o f S a dl er s o th er tw o sub o rdi n ates w h o su perv i sed
’
an t s .

fo r ei gn pr o duct i o n i n cr eased r ap i dl y b ecau se in S ep tem b er th e p er so n n el ,

o f th e Par i s o ffi c e h ad b een sh ar ply r ed u ced an d th e d i r ecti o n o f pr o duc

ti o n in Eur o p e t r an sf err ed b ack to N ew Y o rk A t th e sam e t i m e Lo ui .

,

si an a s pr o d u ci n g a ct i v i ti es app ear t o h av e c o m e m o r e u n d er th e super

’

vi si o n o f 2 6 B ro adway .

S adl er n o w effecti v ely a dm i n i ster ed all o f J er sey s pr o du ci n g acti vi ti es

’

ex cep t th o se o f H u m bl e an d Im p er i al I n sp i te o f h is abl e m en in t h e fi eld .

,

d ep artmen tal h ead q u art er s in N ew Y o rk b ec am e d eeply i n vo lved in

o p er ati o n al acti vi ti es an d t ac ti cal d ecisi o n s He h i m self k ep t co n t act w i th .

pro d u cti o n in al l p ar ts o f th e wo rld arr an ged m eeti n gs b etween p ro ,

du cers to exch an ge i n f o r m ati o n an d advi c e o n p o l i ci es a n d pr o cedur es set ,

THE INITIAL RE O RG A N I Z A TI O N — 1
9 2 5
- 1
9 2 6 203

up co n feren ces b etween th e pro ducer s an d th e B oard to co n si der bro ad

pro ductio n pro blem s an d h elp ed co llect co mp i le an d an alyze th e n eces
, , ,
89
sary stati sti c al d ata . A s a r esul t S adler w as h avi n g l ess an d less ti m e
,

av ai l able to c arry o u t h is r o le o f a D i r ec to r in th e pl an n i n g appr ai si n g , ,

an d co o rd i n ati n g th e ac ti v i ti es o f th e c o m p an y as a w h o le .

In ter esti n gly en o ugh j u st as th e ad m i n i str ati o n o f pro ducti o n w as b e

,

co m i n g m o re cen tral i zed th at o f fo r ei gn m ark eti n g an d fo r eign refi n i n g

,

w as b ec o m i n g m o r e d ec en tr al i zed T h e p o s tw ar exp an si o n o f t h e bu si n ess

.

o f J er sey s sub si d i ar i es in p a r ti cul ar t h e gr o w i n g g aso l i n e d em an d w as

’

, ,

fo rc i n g th e Eur o p ean affil i ates to p ay cl o ser atten ti o n to sal es m eth o d s

an d p o l i c i es H arp er s Exp o r t T r a d e D ep ar tm en t w as h av i n g d i ffi cul ty in
’
.

getti n g agreem en t o n s uch po li ci es as u n ifo rm t r ade n ames pri ces to b e ,

p ai d th e Man ufacturi n g Dep artm en t fo r its gaso li n e an d au to m o b i le

lubr i c an ts th e pro cur em en t o f equi pm en t fo r servi ce statio n s an d so
, ,

fo r th T h e r ap i d c h an ges in dem an d w er e c o mpl i c ati n g th e d i stri bu ti o n

.

o f r efi n ed pro duc ts to th e E ur o p ea n affil i at es as w ell as th e all o c ati on o f

Euro p ean a n d o th er crud es to th e sm all co n ti n en tal r efi n eri es .

T o pro vi d e m o r e effecti ve c h an n el s o f co m m u n i cati o n b etw een 26

Bro adway an d th e Euro p ean co m p an i es an d am o n g th e s ub si d i ari es th em
selv es as w ell as to r educ e th e ad m i n i str ati v e l o ad o n th e Exp o r t T r ad e
,

D ep ar tm en t T eagl e w i th th e s en i o r ex ecu ti v es in th e D ep ar tm en t an d
,

th e h ead s o f th e sub si d i ar i es agr eed in th e su m m er o f 1 24 to set up th e

9
Eur o p ean C o mm i ttee T h i s Co m m i ttee co n si sti n g o f th e ch i efs o f th e m a
.
,

jo r s ub si d i ar i es a n d r epr esen t ati v es o f th e E xp o r t T r a d e D ep ar tm en t w as ,

to d ec i d e g en er al p o li c i es an d to stan d ard i ze pr o c edur es

90
T h e Co m m i t .

tee so o n h ad a p er m an en t staff w i th h eadqu ar ter s in Par is T h i s staff .

ac ted as a cl ear i n g h o u se fo r i n fo r m ati o n an d ch eck ed o n h o w th e C o m

,

mittee s p o li ci es wer e b ei n g c arr i ed o u t A lth o ugh th e Par i s o ffice assi sted

’
.

in gu i d i n g pro duc t fl o w w i th i n Eur o p e it r em ai n ed pr i m ar i ly co n cer n ed

,

wi th th e adm i n i str ati o n o f m ark eti n g u n ti l 1 927 .

A t th e sam e ti me fo ll o w i n g th e suggesti o n o f C l ark an d S adl er T eagl e

, ,

tr an sferred th e ad m i n i strati o n o f th e several sm all refi n er i es o f th e Euro

p ean affili ates fro m th e fo r ei gn m ark eti n g d ep ar tm en t to th e Man u fac
t ur i n g C o mm i ttee
91
. In th e su mm er o f 1 925 C l ark an d H o w ard tr a veled
,

th r o ug h Eur o p e i n sp ecti n g th e r efi n er i es to see h o w th ey m i gh t b e im

pro v ed to meet th e gr o wi n g call fo r gaso li n e C l ark w as i m pres sed at

92
.

”
o n c e by a v ery str i k i n g n eed fo r b etter sup erv i si o n o f r efi n i n g m eth
“

o ds an d pr o p er pr o duc t i n sp ec ti o n if effi ci en t pr o ducti o n o f h i g h qu al i ty -

gaso li n e w as to b e ach i ev ed By th e en d o f th e tri p h e w as r eco m men di n g

.
,

to T eagle an d Mo ff ett th e est abl i sh m en t o f a sep ar ate d ep ar tm en t to h elp

s up ervi se an d coo rd i n ate m an u facturi n g in Euro p e T h ese suggesti o n s .

,

seco n d ed by th e pr o p o sal s o f McK n i h t a n d G r aff fo r c h an g es in th e

g
204 STANDARD O I L C O M P A N Y (N E W J E R S E Y )
M an ufact ur in g Co mmi ttee fi na lly led in th e summer o f 1 926 to th e ap
,

po intmen t o f Th om as R Park er as th e Co mmi ttee mem ber in ch arge

.

o f E ur o p ean r efi n er i es Par k er s ai l ed alm o st imm edi ately f o r En gl an d

.
,

Wh er e h e b eg an to set up a Eur o pean m an ufact ur in g o rgani zati o n 93

Th i s .

r egi o n al decen tr ali zati o n o f admini str ati ve deci sion m aki n g in fo r ei gn
m ark etin g an d m an uf a ct ur in g w as m o r e pr op h eti c o f th e c o mi n g o rg an i
zatio n al ch an g es at J er sey th an w as th e c en tr al i za ti o n o f co n tr o l i n th e

pr o ducing en d o f th e busin es s .

By th e en d o f 1 926 m uch h ad b een acco m pli sh ed o n all thr ee l evels o f

,

a dm i n i str ati o n A t th e gen er al o ffi c e l ev el th e cr eati o n o f th e n ew Coo rdi

.

n ati o n an d Budg et D ep art m en ts m ad e po ssi bl e th e m o r e effe cti v e ad

mi n i str ati o n o f th e en terpr i se as a wh o l e By pr o vi din g th e n ecessary d ata .

an d ch an n el s o f co mmu n i cati o n th ese tw o u n i t s impr o v ed th e co o r din a

,

ti o n o f th e fl o w o f pr o duct thr o ugh th e v ast in du str i al em p i r e an d p er

mi tt ed th e B oard to ca rry o n mo r e r eali sti c appr ai sal an d pl an ni n g o f th e

a ct i v i ti es o f th e p art s an d o f th e wh o l e A t th e c en tr al o ffice l ev el t h e .
,

D ir ecto r s at 26 Br o adway h ad in cr eas ed th eir a dmi ni str ati v e co n t ro l o v er

th e s in gl e f un cti on dep artmen ts Th e n ew Coo rdi n ati o n an d Budg et D e
-
.

p ar t m en ts as si st ed h er e t oo as ,di d t h e r
, ef o r mi n g o f t h e l i n es o f co m
m un i cati on an d au th o r i ty in th e pro ducin g an d th e fo r ei gn an d th e h om e
m ar k etin g dep art mm ts b etw een th e D ir ect o r in ch arg e an d d ep art men tal
h ea dqu art er s Parti cul ar ly impo r tan t w as th e i n co rpo r ati o n o f Lo n i
.

si an a s act i vi ti es
’
in to th e J er s ey Co m p an y s m ark etin g m an uf actur ’

in g an d pr o duci n g o rg an i za ti on s Thi s in tegr ati o n w en t a step f urth er

, .

wh en D an i el R Well er Lo ui si an a s Pr esi den t w as app o i n ted a D i r ecto r

.
,
’

in th e J er sey Co m p an y in F ebru ary 1 926 an d m o v ed hi s o ffic e fr o m , ,

B aton Ro uge to 2 6 Br o adw ay 94

F in ally o n th e dep art men tal h ea d
.
,

qu ar ter s level th e tw o dep artmen ts m o st n eedi n g r eo rg an i zati on M an u

,

f acturin g an d D om esti c M ark eti n g — h ad each b egu n to cl ar ify t h e lin es

o f au th o r i ty an d c omm u ni ca ti o n w i th i n d ep art m en tal h ea d q u art er s an d

b etw een h eadqu art er s an d th e fi eld A third th e Exp o rt T r ade D ep art .

,

m en t h ad str en gth en ed its o rg ani z ati o n by setti n g up n ew lin es o f co m

,

m u ni ca ti on an d n ew l o ci fo r d eci si o n m ak i n g .

Y et m an y pr o bl em s sti ll r em ai n ed In f a ct so m e o f th e so lu ti o n s o f th e
.

pr evi o u s y ear w er e a ctu ally cr eati n g n ew diffi cu l ti es T h e i n cr ease o f a d .

mi n i str ati v e co n tr o l o v er th e fu n cti o n al d ep artm en ts w as en l ar gi n g th e

admi ni str ati v e l o ad o f th e D i r ect o r s in ch arg e o f th es e ac ti vi ti es S adl er .
,

B l ack C lark Mo ff ett an d even T eagle fo u n d th em selves so i n vo lved in

, , ,

o per ati o n al acti v i ti es th at th ey h ad l ess an d l ess tim e to u se th e i nf o r m a

ti o n pr o v i d ed by H ard en s an d Z an e s d ep ar tm en ts fo r o v er all appr ai sal

’ ’
-

an d pl an n i n g N o r w er e th e ch an g es in th e d ep ar tm en t al o rg an i za ti o n
.

bri n gi n g th e expected i mpro vem en t B eca u se n o r eally si g nifi ca n t al ter a

.
CREA TI O N O F M UL TIDI V I S I O NA L STR UCT URE 205

tio n h ad b een m ade in J er sey s b asi c structure an d b ecau se o f th e co n

’

ti n ned co mm i tm en t o f h er ex ecu ti v es to c o m m itt ee m an agem en t o f d ep art

m en tal aff ai r s adm i n i str ati v e d eci si o n m ak i n g w as sti ll co n c en t r ated t o o

,

o n o p er ati o n al ac ti v i ti es an d tac ti cal d eci si o n s an d to o li tt l e o n en trep re ,

n eu rial an d str ategi c o n es .

T HE CREA TI O N O F T HE MU LTIDIVI S I O N A L ,
D ECENTRA L I Z ED S TRU CTU RE

T eagl e h i m self r eal i zed th at m o r e n eeded to b e do n e b u t di d n o t yet

c o n si der th e p o ssi b i l ity o f dr asti c ch an ges O n ly u n der th e pressur e o f a .

se co n d cr i si s th i s ti m e r esul ti n g f r o m th e o v erpr o duc ti o n o f crud e d i d h e

, ,

g o b ey o n d t h e pl an s o u tl i n ed in 1 2
9 5 By th i s se c o n d r eo rg an i z at i o n
.
,

J er s ey s Pr esi den t t ran sfo rm ed h is com p an y s structur e i n to wh at w as to

’ ’

”
b eco m e t h e m o der n m ul ti d i vi sio n al decen tr ali zed typ e w i th a g en er al
,
“

o ffi c e o f g en er al ex ecuti v es an d s taff s p ec i ali sts an d au to n o m o u s s elf — co n

tain ed o p er ati n g d i v isi o n s T h e ge n era l o ffic er s o n th e B o ard w er e to b e

.

r eli eved of o p er ati n g r esp o n si b i l iti es T h e Co o rdin atio n an d Budget D e

.

rtm en t to geth er w ith p ar t s o f o th er exi sti n g aux i l i ary o fii ces b ecam e

p a

th e n ew gen er a l st aff T h e f u n cti o n al d ep ar tm en ts w er e co m b i n ed u n d er

.

th e adm i n i str ati o n o f r eg i o n ally d efi n ed u n i ts F i n ally all th e d ep ar tm en t s .

,

th em selv es c am e to b e adm i n i ster ed th r o ugh a s tructur e th at cl early de

fi n ed r esp o n si b i li ty an d au th o r it y Y et b ec au s e th e c om p an y s r eo rg an i z er s
’
.

co n ti n u ed to pl an in an i nf o rm al ad h oe w ay an d al so b ecau s e o f th e gr eat
,

depr essi o n in 1 929 th e structure o utli n ed in 1 927 w as n o t fully wo rk ed

,

o ut u n ti l af ter Wo rld War II .

Co n tin u in g D ifiieu lties

‘

In l etter to S adl er in O ctob er 26, J er sey s Pr esi d en t r evi ewed th e

’
a , 1
9
pro gr ess m ade in th e pr evi o u s y ear :
Th e o rigin al pro gram , as yo u k n o w , pro vided for th e settin g u p o f th ree
m ain co mmittees, i e , Co -o rdin ati on , Fi n an ce an d S ales Up to d ate w e
. . .

h ave o n ly h ad tim e to really get th e fir st on e o f th ese thr ee co mm itt ees

f un ctio n in g pro p erly Th e Fin an ce Co m m ittee, b ased o n th i s y ear s expe ri
’
.

en ce w ith th e B u d et, I am qu ite su re w ill f r o m th e en d o f th is year b e

g
co m e alm o st as activ e as th e C o -o rdin ati o n C o mmittee an d w ith th es e tw o
,

co mm itteés fu n ctio n in pr p r ly w w ill th h v th t im sar t

g o e e en a e e e n eces y o

tak e u p an d p erfect th e o r aniz ati f th S l C mm i tt ee

9 5
g on o e a es o .

F u rth erm o re T eagl e fullyppr eci ated th at m o r e adj u stmen ts wer e c all ed
a

fo r in th e m an uf act ur i n g as well as in th e m ark eti n g o rg an i zati o n .

Nearly all of J er sey s to p ex ecu ti ves w er e at o n ce pl eased by th e W o rk o f

’

th e Co o rd i n ati o n Co mm i ttee an d D ep artm en t T h e v ery w i d e v i ew

“
.

”
o b tai n ed by th e Co o rd i n ati o n Commit tee n o ted C E G r aff A cti n g , . .
,
2 06 STANDARD O I L C O M P A N Y (N E W j ER SEY )
Ch ai r m an o M an uf act ur in g Co mmi tt ee pl aces us in a m uch better
f th e ,

i t i o n to d eci d e m att er s co rr ect ly th an w as po ss i bl e pr evi o usly wh en

p o s
”
th ese q u esti o n s w er e su b m i tt ed t o th e M an uf act uri n g Co mmi tt ee
96 “
A .

”
cl ea r er kn o w l edge o f f u t ur e o pe r ati o n s pr o vi d ed by th e n ew uni ts T ea gl e ,

h app i ly r epo rt ed w as br in gi n g a un if o r m i ty in o pe r ati o n s an d a cl ear

,

appr eci ati o n o f j u st W h at ca p i tal exp en di t ur es ar e ab so lu tely n eces sary an d

97 ”
th o se whi ch can b e d ef err ed f o r co n si d er ati o n later S u ch d ata h ad .

h elp ed too in th e m o r e ef fecti v e all o ca ti o n an d u se o f p er so n n el A s t im e

, , .

p assed th e v al u abl e co n tributi o n s o f th e Budget Co mm itt ee an d Dep art

,

m en t al so b ecam e i n cr ea si n gly appr eci ated Bu t if th e n ew st aff o ffices at .

2 6 B r o a dw ay w er e o p er ati n g efi ectiv el th ld r f un ct i o n al d ep art men ts

y e o e , ,

p art i cul arly M an ufact ur in g an d D om esti c Mark etin g were n ot Th e , .

di vi si o n an d diff usen ess o f r es po n sib ili ty an d gr o up d eci si o n m ak in g

k ep t execu ti ve acti on slo w an d in d eci si v e an d th e D ir ecto r s in ch arge ,

o f th e f un cti o n w er e ca ll ed o n t o m ak e m an y o p er ati o n al an d ta ct i cal d eci

Si o n s .

Th e n ew mpl e, h ad di scussed m an y w ays to

S al es Co m m i tt ee, f o r e a x
m eet J er sey s co n tin u in g d eclin e in th e d o m es ti c g aso lin e m ark et b u t h ad
’

dif ficul t y in agr eein g o n spe cifi c po li ci es M o ffett stressed th e n ee d fo r .

m o r e eff ect i v e a dv er ti sin g S h effiel d u rged im pr o v em en ts in J er sey s serv

’
.

”
ice stati o n s Th ese sh o uld b e th e l att er a dv o ca ted, truly serv i ce rath er
“
.
,

S h efli eld f u rt h er po in ted o u t th e impo rt an ce

98
th an j ust gaso li n e st ati o n s .

”
o f d eal er edu ca ti o n b o th a s t o serv i ce an d sal esm an shi p at o u r stati o n s,
“

an d th e n eed f o r a m an u al o f i n structi o n in th e m ain ten an c e o f serv i ce

“

”
i
stat o n s, pri n cipl es an d sal es argum en ts O th er s f av o r ed a pl an t o
l
sa es .

f o rm a sep ar ate sub si di ary to m an age th e gr o w in g n um b er o f J er sey an d

Lo ui si an a serv i ce stati o n s 99
A n d y et li tt l e a ct i on h ad been tak en
. .

D esp i te its r ecen t ch an ges th e M an uf act ur in g Co mm i tt ee co n t in u ed t o

,

b e m o r e di vi d ed th an th e m ar k eter s Th e o ld an d n ew sch oo l s o f r efin er s

.

w er e alm o st imm edi ately in vo lv ed in a h ea ted co n tr o v er sy o v er Ko eh ler s

’

n er th e R es i den t
1 00
pl an s to cu t o v erh ea d co sts at B ayw ay J R C arr i g . . .
,

M an ager w h o h ad co m e to th e J er sey Co m p an y w i th Cl ar k def en ded th e ,

exi sti n g f o r m o f o rg an i za ti o n at B ayw ay wh i ch h a d b een set up in 1 922 ,

by an exp ert pr acti ti on er o f Fr eder i ck W T ayl o r s bran d o f sci en tifi c .

’

m an agem en t S i gn ifi ca n tly th e m aj o r i ssu e w as o v er Ko ehl er s pl an to

’

.
,

eli mi n ate a s sup er fl u o u s th e o ffic e th at w a s u sed to pr o p erly pl an seb ed

“
,

ul e an d co—o rd i n ate our w o rk Ko eh l er th e v eteran m an ag er beli eved

.
”
, ,

th at per so n al sup ervi si o n o f th e m en in th e r efin eri es w as all th e admi ni s

tr atio n th at w as n eed ed T o th e y o un g er C arrin ger th e pl a n n i n g o ffice

.
, ,

o n th e o th er h an d w a s a m o st essen ti al un i t in th e r efin ery A br am s w h o

,
.
,

w i th K o eh l er w as r es po n si bl e f o r th e N ew Y o rk r efi n er i es suppo rt ed ,

C arrin ger as tactq y as h e co uld T h e i ssu e w en t to th e B oard w h er e

. ,
CREA TI O N O F M U L T I DI V I S I O N A L STR UCTURE 207

C l ark gly b ack ed Carrin ger an d Bl ack supp o r ted Ko eh l er Wh i l e

st o n r ,

T eagle as b efo r e seem ed to feel ea ch si d e w as p ar tly r i gh t

, ,
.

T h e p ar ti al r eo rg an i z ati o n o f th e M an uf actur i n g D ep ar tm en t n o t o n ly
h ad fai led t o en d its i n tr am ur al co n t r o v er si es b u t in Fr an k H o w ard s
’

, ,

o pi n i o n it h ad d o n e l i ttl e to b etter th e l i ai so n b etw een m an uf actur i n g

, ,

1 01
develo p m en t an d m ark eti n g , Co n ti n u i n g l o sses in r efi n i n g o p er ati o n s
.

em p h asi z ed th e n eed to so lv e b o th th es e pr o bl em s By 1 927 th e Man u fac .

,

t ur i n g D ep ar tm en t w as G r aff r ep o r ted , li vi n g in a sea of red fi gures th at

,
“

1 02 ”
th r eaten ed to sw am p th e b o at T eagl e s i mm ed i ate r esp o n se to t h is
’
.

w as to cu t co sts an d r educe p er so n n el He en d o r sed b o th K o eh l er s m eat

’
.

ax e appr o ach an d th e suggesti o n s o f C l ark Ho w ard an d H arden for , ,

m o r e so p h i sti c ated co st an aly ses esp eci ally th o se c o n cer n i n g o v erh ea d ex

,

p en ses 1 03
Nei th er acti o n h ad an i mm edi ate eff ect fo r at th e en d o f 1 927
.
,

do m esti c r efi n i n g o p er ati o n s sh o wed a staggeri n g n et lo ss o f m il

1 04
lio n .

T h e co n ti n ui n g co n tr o v er si es an d th e c o n stan t i n v o lv em en t o f B o ard
m em b er s in d ep ar tm en tal acti v i ti es T eagl e i n cr easi n gly r eal i zed w er e
, ,

h am p eri n g th e B o ard in d eterm i n i n g lo n g term pl an s an d in c arry i n g -

th e cr i ti cal n ego ti ati o n s n ec essary to i mpl em en t such pl an s He fo u n d th i s .

p ar ti cul arly tru e in h is effo rt s to o b tai n o il-pr o duci n g lan d s in Po l an d an d

th e N ea r East Bu t it b ec am e m o st app ar en t in th e n eg o ti ati o n s o v er R u s
.

si an pr o p er ti es an d suppli es o f R u ssi an crud e A s early as No v em b er .

,

T agl e w as wr i ti n g to H ei n r i ch Riedem an n h ead o f J er s ey s f o r m er

’

9 4
1 2 , e ,

sub si d i ary :

A s I look b ack v er w h at w e h ave don e du r in g th e past six o r eigh t m on th s

o ,

I am r ath er im pr essed w ith th e f act th at a m atter so imp o rtan t as th is Ru s

sia n p u r ch a se situ ation sh o u ld h av e b een h an dled b y u s w ith ou t r eally

giv in g th e su b j ect th e co n sider ati o n w h ich its im p o r tan ce j u stifi ed [ J A ] . . .

Mo w in ck el [ ch ief o f th e Italian su b sidiary ] pro b ab ly m o re th an an yo n e

,

el se deser v es th e cr edit f o r r eally b ri n in f o r cib ly to o u r att en tio n in j u st

, g g
w h at directio n o u r presen t p o licy w o u ld s eem to b e leadin g It is cer tain ly .

to b e r egr etted th at w e h av e so m an y th i n s to do an d o u r b u sin ess day

g
is so fu lly o ccu p ied th at so m eh o w o r o th er w e seem t o m ak e m istak es w h ich
co u ld h a v e b een av o ided if w e h a d sp en t th e tim e n ecessary t o th in k th e

m atter th r ou gh to a lo gical co n clu sion 1 05

.

In th e fo llo wi n g
y ear Riedem an n m ad e th e sam e p o i n t em p h asi zi n g
, ,

th e n eed o f fo cu si n g o n br o ad st r ategy He wr o te J er sey s P r esi d en t

’
.
,

so m eti m es I h av e w o n d er e d w h eth er it is p o ssi bl e th at so m e o f u s l o se

“

si gh t o f th i s f ac t by p ay i n g to o m uch atten ti o n an d sacr i fi c i n g to o m uch

” 1 06
ti m e to th e tech n i cal an d r o u ti n e si d e o f o u r bu si n ess A few w eek s .

l ater T eagle th en i n vo lved in th e detai l s o f m an ufactur i n g an d m ark et

, ,

in g pro bl em s as w ell as th o se o f n ego ti ati o n s w i th fo r ei gn n ati o n s an d

208 S TA NDARD O I L C O M P A N Y (N E W J ER SE Y)

th at o n e g ets f ed
up ; th is is ex a ctly th e w ay I f eel abo ut th e R ussian
‘ ’

si tua ti on I h av e spen t m o r e tim e an d th o ugh t durin g th e last tw o y ea rs

.

o n it th an o n an y o th er o n e m att er an d so f ar as I can see n o w w i th o ut ,

th e co m pl ete co llap se o f th ese g

n e o ti at on s eni ded a ny h o pes o f a cco m

Th e 1 9 27 Cha n ges
Th e lack o f tim e f or plann in g an d g
n e o ti at n i g h i gh l ev el -
st at e r gy as

w er e ll n o t en o ugh in th em sel v es imm edi at el y t o f o rce m o r e maj o r

sti

o r an i za ti o n al ch an g es at J er sey T ea l e n ee d ed th e stim u lus o f an o h

g g .

v i o us cri si s an d on e cam e in th e sp rin g o f 1 2

, 9 7 B y th e en d o f th e .

1 08
r en t of
cr ude o il By A pril 1 92 7 T eagl e hi s asso ci ates an d m o st o il
.
, , , ,

m en w er e an ti ci pa tin g a dr o p in pri ce b elo w th e co st o f th e pr od u cti o n o f

cr ude A s th is o v erpr o du cti o n pr om i sed t o b e l on g er in du r atio n th an
.

an y i n h is m em o ry T ea i e t o g eth er w i th Cl ark an d o th er s f o r esa w a

g ,

co m pa r abl e dr op in th e p ri ce of r efi n ed pr o du cts S uch a r edu cii o n th ey .

,

w as nol o n ger ex pan di n g as it h a d b ef o r e 1 92 5 .

N o t o nl y did th e v ast fl ow of cru d e thr ea ten d ecr easin g pri ces b ut al so

a t em po r ary i n cr ease i n co sts C lark an d T ea gl e em ph asiz e d th a t th e o pe n
.

in g of t h e Sem i n o l e an d P an h an dl e fi elds r equ i r ed larg e ca p i tal expen d

itur es f or p i pe lin es an d pr o du cti on equip m en t 1 09
Furth erm o r e th e n ew .
,

cru de h ea vy in su lp h u r d em an ded ch an ges in th e r efi n in g equ ipm en t

, .
0 o

w h i ch pr o cessed i t D uri n g 1 926 an d 1 927 th e Dev elo p m en t De p art m en t

.
,

co n cen t r at ed o n d evel op in g n ew w ays an d equ ip m en t to h an dl e th ese A s .

a r es ul t J er sey s pr o fi t r eco rd f o r 1 92 7 w as t h e l o w est sin ce 1 9 1 2 Ea rn i n gs

’
.
,

f ell fr om $ 1 1 7 7 mill i on i n 1 926 to $4 0 4 m illi o n i n 1 92 7 N o t o nl y di d th e

. .

r efi n in g acti vi ti es sh o w h eav y l o sses b u t d o m est i c pr o duct i o n r epo rt ed ,

11 0
a small n et l oss .

T ea gl e an d h is asso cia tes en vi sa ge d tw o po ssibl e co u r ses of a cti o n t o

m eet thi s cha ll en g e O n e w as t o co n tr o l cru d e o il pr od u cti o n ei th er
.

th r o ugh go v er n m en t r egu lati o n o r by a v o l un tar y m o r a to ri um wi th th e ,

la tter pr ef err ed Th e seco n d w as to exp l o r e all po ssibl e w ay s o f cuttin g

111
.

co st s r edu cin g p er so nn el an d impr o vin g efi cien cy i n o per ati o ns an d

, ,

m an a g em en t Th us th e massi v e o v er pr od u cti o n o f crude o il co m b in ed

. ,

w i th th e alr ea dy ex i stin g pr obl em s fi nally ca us ed T ea gl e t o d eci d e o n a ,

CRE A TI O N O F M U L T I DI V I S I O N A L STR U CTURE 209

r eo rgan i zati on th at wen t be yon d m er ely p at chi n g up exi stin g dep art
m en ts an d m eth ods A ssist ed by S adl er e w o rk ed o u t th e o v er all stru c
. h —
, ,

t ur al ch an g es durin g th e sprin g o f A s b ef o r e n o f o rm al stud i es ,

or r e o rt s w er e m ad e A t l east n o ev i d en ce o f th em pr es en tly exi sts in th e

p .

Jer sey fil es .

Th e 1 927 ch an g es r efl ect bo th J er sey s a dmini str ati v e n eeds an d T eagl e s

’ ’

in cr easin g awar en es s o f th em Th e m o r e car ef ul an d pr eci se d efi ni ti on of

.

r es po n sib ili ty an d auth o ri ty wi thi n th e d ep artmen ts refl ected th e l att er 5 ’

gr o wi n g skep ti ci sm of the v alu e of co mmi tt ee a dm ini r ti o st a n o f day

—t o

day o per atin g a cti vi ti es Th e pl acin g o f th e f un ct i o n al d ep artm en ts

.

W i th in a sep ar ate au ton om o us o pe r at in g di vi si o n an d th e cr eati o n o f a

,

g en eral o v er-all admini strati v e O ffice in di cated hi s co n cer n f o r th e in creas

in g cen trali zati o n of d eci sio n m akin g in 26 Br o a dw ay .

By t h e mi d-tw en ti es T eagl e h ad be com e t r o ubl ed by th e gr o w in g si ze

,

o f co m mi tt ees wh i ch h e f el t w er e a lr ea dy too sl o w in co mi n g t o d eci si o n s

, ,

o r takin g a ct i o n In lat e 1 2 h e h ad r ej ect ed C l ark s r ec omm en d ati o n t o

’
.
9 5 ,

p u t H o w ard o n th e n ew M ark et i n g Co m m i tt ee as M a n u fa ct u ri n g s re
p r e ,
’

sen ta tiv e In t h e f o ll o w in g O ct o be r h e h ad t ur n ed do w n a sim i l ar su

.
, g
ges ti o n by S adl er to h av e a m ark et er o n th e Co o rdin ati on Co mm i tt ee S uch .

co m m i ttees T eagl e h ad m ain tain ed sh o uld o nl y i n clud e m en f r om o n e

, ,

f u n ct i on R epr esen ta ti v es of oth er s mi gh t b e br o ugh t in to th e di scu s si o n

.
,

b u t sh o uld h av e n o say in t h e fi nal d eci si o n A s h e to ld S adl er : .

I h av e h o rr o r o f t oo lar ge commi ttees as th ey n ev er accom p lis h m u ch

a

b u t sp en d en dl es s tim e in tal k in g A co mm itt ee o f thr ee acco m p lish es m u ch

.

m o r e th an a commi tt ee o f fi v e, an d to add t o o r b rin g in to commi ttee dis c

eus sio n s an y m o r e in dividuals th an is ab solu tely n ecessary to o b tai n t h e

n ecessa ry inf o rm atio n t o in t elli en t discu ssio ns w ill , I k n o w , o nl y t en d to

g
slo w u th e w o rk a ct ually accom plish e d, th u s r edu cin t h ff tiv n ess o f
p g e e ec e

J er sey s exp eri en ce in th e y ear s j ust b efo r e 1 92 7 h elped co nfir m T eagl e s

’ ’

pr ej udi ces Th e n ew dep art men ts — Pr o duction S h i pp in g an d D ev elo p

.
, ,

m en t W hi ch w er e h ea d ed by in di vi dual s r an w i th m u ch l ess str ain an d ,

a v er a ged b ett er pr o fi ts t h an di d th e o ld er comm i ttee m an aged r efin in g -

an d d o m esti c ; m ark etin g o rg ani z ati o ns

114
In f o r ei gn m ark eti n g th e Ex
.
,

po rt T r a de D ep ar tmen t r ath er t h an Co mmi ttee h ad h an dl ed m o st of th e

a dmi n i st r ati ve a cti v i t i es sin ce 1 1 2 T h e n ew C oo rdi n ati on Co mm i ttee w as
9 .

m eetin g l ess an d l es s oft en sim ply be ca us e H ard en w as a dm in i ster i n g th at

dep artm en t s o per ati on s so eff ecti v ely
’ 11 5
M o r eo v er i n f ew o th er O il co m
.
,

i v i J r y s fil i s w r h d p r m l dmi i str a
’

p an es o r e en n e se o w n a f a te e e t e e a t en ta a n

ti v e d ecisi o n s m ad e in t h e f un ct i o n al d ep art m en ts by gr o up v o te .

T ea gl e it sh o uld be str esse d w as n o t o pp o sed to gr o up co n sult ati on

, ,
.
21 0 S TANDARD O IL C O M P A N Y (N E W J ERSE Y)
A deci si o n m ak er n eeded all th e advi ce an d i n fo rm ati o n h e co uld get .

Wh at T eagle di sli ked w as gro up resp o n sib i li ty fo r admi n i strati ve acti o n .

”
A n i n di vi du al execu ti ve n o t a ro o m sh o uld b e an sw er able for dep ar t
“

, ,

men tal deci si o n s ; an d th e li n e o f auth o r i ty b etween th e di ff er en t o ffices

at h eadqu ar ter s an d th ose in th e fi eld n eed ed to b e pr ec i sely d efi n ed T h e .

h i sto ry o f th e M an uf actur i n g an d M ark etin g D ep art men ts clearly d em o n

strated th at gr o up r esp o n si b i li ty m ean t S l o w i n d eci si v e acti o n ,
b ased o n ,

co mpr o mi se an d n ego ti ati o n Wh i le such gr o up actio n m igh t b e p ermi s

.

si bl e in w o rk i n g o u t co m pli c ated l o n g term p o li ci es it w as h ardly feasi bl e

-
,

fo r day to day o p er ati o n s M o r eo v er u n less au th o r i ty w as d el eg ated

- -
.
,

cl early f r o m h eadqu ar ter s to th e fi eld m o st d eci si o n s soo n c am e to b e

,

m ade at th e d ep ar tmen t o ffices .

T h e o th er asp ect o f th e 1 927 r eo rgan i z ati o n th e cr eati o n o f m ul ti ,

dep artm en tal u n i ts r eflects emph ati cally T eagle s con cern fo r co n cen tr a
,
’

ti o n o f d eci si o n m ak i n g at 26 Br o adw ay In t h e spr i n g o f 1 927 h e t e .

,

p ea te d l y em p h asi z ed th e n e e d t o cu t d o w n o n o v er h ea d c o sts p ap er w o rk , ,

116
an d p er so n n el at h ea dqu ar ter s A ctu ally h e h ad l o n g b een tr o ubled by
.
,

b o th th e cen tr al i zation of day to -day adm i n i str ati o n an d th e i n crease o f

-

bureaucr ati c r o uti n e in New Yo rk Ever si n ce I cam e to New Y o rk

.
“

”
o v er sev en teen y ear s a o h h d wr i tt Bl ck n d C l ark in M arc h
g e, a e n a a ,

I felt th at th er e w as a lo ss in effi ci en cy an d an i n cr ease in exp en se

“
1 922 ,

th r o ugh an eff o r t to cen tr al i ze to o m uch o f o u r d etai l ed w o rk at 26

1 17 ”
Bro adway . T h i s w as p arti cul arly tru e h e b el i ev ed in acc o u n ti n g an d
, ,

m ark eti n g Redu cti o n o f p ap er wo rk an d o ffic e r o uti n e w as th e pr i m ary

.

”
r easo n w h y T eagle cr eated th e tw o c arb o n r em o v al co m m ittees — th e

S tati sti c al Co mmi ttee an d th e Effici en cy Co m mi ttee — in 1 922 an d 1 923 .

A l so as h e to ld th e m ark eter s l ate in 1 926 d etai l ed ex ecu ti o n o f adm in is

, ,

t rativ e d eci si o n s an d th e c arry i n g o u t o f th e act u al day-to d ay ec o n o m i c

a cti v i ti es sh o uld b e l eft to ex ecu ti v es in th e fi eld If m i n o r o p er ati o n al

.

qu esti o n s k ept co mi n g to 26 Bro adway fo r deci si o n th en th e sen io r o ffi ,

cials w o uld i n evi tably b eco m e i n v o lv ed in d etai l m i n u ti ae an d so w o uld

h av e li ttl e ti m e fo r m o r e i m p o r tan t m atter s .

T h e an sw er to T eagl e s pro bl em o f p i n p o i n ti n g an d cl ar i fy i n g auth o r

’

ity an d r esp o n si b i l i ty in th e f u n cti o n al d ep ar tm en ts an d at th e sam e ti m e , ,

o f d ecen tr al i z i n g ad m i n i st r ati v e d eci si o n m ak i n g m ay h av e co m e f r o m a

sugg esti o n m a d e by Fr an k H o w a rd in F ebr u ary T h e l atter w as

9 7
1 2 ,
.

an xi o u s to exp an d J er sey s r esear ch an d d ev el o p m en t acti v i ti es yet l i k e

’

, ,

T eagl e h e f el t th i s sh o uld b e d o n e by th e o p er ati n g u n i ts n o t at 26 B r o ad

, ,

w ay T h i s exp an si o n m i gh t b e c arr i ed o u t m o r e effici en tly if th e d i ff er en ce

.

b etween th e fun c ti o n s o f th e o v er-all h o ldi n g (o r p ar en t) co m p an y an d

th o se o f th e o p er a ti n g u n i ts w er e cl ar i fi ed In pr esen ti n g th e D ev el o p m en t
.

D ep ar tm en t s an n u al r ep o r t to T eagl e in F ebr u ary H o ward expl ai n ed :

’

,
CREA TIO N O F M U L T I DI V I S I O N A L STR UCTURE
My ow n view o f th e prop er po licy fo r an expans ion o f research an d develop
men t w o rk in th e J ersey i n terest w h ich to m y m in d is ab so lu tely n ecessary
, ,

is th at th e n ext step o f th e pro cess is to b u ild u p a tech n ical stafi in su b

sidiary an d affiliated o p er a tin g co mp an ies It is m y S in cer e con v ictio n t h at.

th e b est in terests o f J er sey are served b y clearly r eco gn izin g th e distin ctio n

b etw een J ersey as an o p era tin g C o mp an y an d J ersey as a h oldi n g co mp an y .

S o far as m y lim ited k n o w ledge o f th e b u sin ess goes th er e is a failu r e to o h

, ,

serve th is distin ctio n in m an y lin es o f th e C o m p an y s b u sin ess w h ich is n o t

’

to o h elp fu l an d I w o u ld lik e to r ep o r t is p erp etu atin g w h at I th in k is an

, ,

erro r in th e fi eld o f r esearch an d dev elop m en t

118
.

His D ep ar tmen t s In sp ec ti o n L ab o r ato ry

’
d Paten t Di visi o n were
an

o p er ated H o ward p o i n ted o u t

, ,
fo r th e b en efi t o f th e J er sey i n ter est s at
”
l arge 8 0 to o w as so m e o f th e
.
, , wo rk o f th e Research L ab o r ato ry an d th e
Exp er i men tal D i vi si o n T h er efo r e th es e fu n c ti o n s co uld b est b e h an dl ed
.

by th e gen eral o r p aren t o ffice O ther acti viti es o f th e l ast tw o D i vi sio n s

.
,

h o w ev er were str i ctly o p er ati n g f u n cti on s an d co uld b e b etter c arr i ed

,

o u t by th e o p er ati n g u n i ts u si n g th ei r o w n t ech n i c al staffs .

So f ar as I can see [ H o w a rd
ded ] th ere is n o o b stacle to p u ttin g
co n clu ,

th is p lan in to eff ect du ri n g th e co m in g year in a m o difi ed f o rm at least ,

.

T h e b est develop m en t o f th e p lan w o u ld req u i re m aj o r o rgan iz ation ch an ges

w h ich w o u ld o f co u rse h ave to b e co n sidered o n th eir o w n m erits an d
, ,

cou ld n o t b e m ade to acco mm o date th em selv es to th e r eq u ir em en ts o f t h is

relatively sm all b ran ch o f th e Co mpan y s w o rk ’

.

Th e v alue o f di sti n gu i sh i n g b etween o p er ati n g an d h o ldi n g co m p an y

ac ti v iti es m a
y h av e i n cr ea sed b e c a u se o f t h e N e w Y o rk t ax l aw s A c .

co rdi n g to Ho w ard Ch ester O S w ai n th e co m p an y s G en er al Co u n sel

, .
,
’

po i n ted o ut to th e B o ard th at u n ti l th e di sti n cti o n w as m ad e mo r e cl early ,

th e J er sey Com p an y m i gh t b e u n abl e to qu al i f y fo r th e f av o r abl e t ax

tr eatm en t o f a h o ld i n g c o m p an y u n d er N ew Y o rk law
1 19
.

In an y cas e o n c e T eagl e h ad d eci d ed o n a m aj o r r eo rg an i z ati o n h e

, ,

fo llo w ed th ro ugh w i th th i s suggesti o n B o th leg al an d ad m i n i str ati v e dis

.

tin ctio n s b etw een J er sey s o p er ati n g an d p ar en t o rg an i z ati on ac ti v i ti es

’

were cl ari fi ed in a seri es o f o rgan i zati o n al ch an ges b etween May an d

S ep temb er 1 927 T h e J er sey C o m p an y d i vo rced i tself f ro m o p er ati o n s an d
, .
,

so S tan d a rd O il C o m p an y
( N ew J er sey
) n o w b ec am e l eg a lly o n ly a h o ld

in g co mp an y A dm i n i str ati vely its f u n cti o n s b ec am e sp eci fi c ally to co

.
,

o rd i n at e appr ai se an d pl an th e ac ti v i ti es o f a n u mb er o f m ul ti fu n c ti o n
, ,

di vi si on s an d to appr ai se an d pl an th e wo rk o f th e en terpr i se as a wh o le .

Th e p aren t o rg an i z ati o n l eg ally a h o ldi n g co m p an y an d adm i n ist r ati v ely

,

a gen er al o ffice w as t o c o n si st o f r epr esen tati v es o f th e m aj o r o p er ati n g

,

di vi si on s as well as gen er al p o li cy—m aki n g officer s an d staff sp eci ali sts .

T h r ee f u n c ti o n al ad mi n i str ati v e u ni ts th e M an ufac tur i n g an d D o m esti c

,
212 STANDARD O I L C O M P A N Y (N E W j ERSEY
)
M ark eti n g Dep ar tmen t s an d C art er O il cam e to b e admi n istered by a ,

cen tr al o ffice th at w as l egally set up u n der th e n am e of th e S tan dard O il

Co m p an y o f New J er sey i n co rp o r ated in Del aw ar e, th e Del aw ar e Co m

p an y as it c ame to b e called
,
1 20
Th e exi sti n g M anuf ac tur i n g D o m esti c
.
,

S al es an d Exp o r t T r ad e Co m m i ttees w er e ab o li sh ed Th e n ew dep art

, .

m en ts wer e each h eaded by a si n gle ex ecu ti v e McKn igh t h ad ch arge o f .

th e M an ufac tur i n g D ep art m en t ; S h effield th e M ark eti n g ; an d R i ch ard ,

so n P r att th e Pr o duc i n g Each r ep o r ted to Ch arl es G Bl ack th e P r esi d en t

, . .
,

o f th e n ew D el aw ar e Co mp an y Each w as h eld f ully r esp o n si ble for th e.

p erfo rm an ce o f h is dep art men t .

Th e o rg an i z ati o n o f th e M an ufacturi n g Dep artmen t n o w cam e to

resembl e in m an y way s th e o n e pro p o sed by H o ward th r ee year s earlier .

G raff b ec am e McKn igh t s assi stan t A br am s co n tr o l o ver th e r efi n er i es

’ ’
.

w as ti gh ten ed an d th e R esi d en t M an ager s r ep o rt ed d i r ectly to h im Th e

, .

r em ai n i n g dep artmen t o fli ces b ecam e fu n cti o n al staff u n i ts h an dli n g

pro cess qu ality an d co st co n tro l p erson n el an d develo p men t an d so
, , , ,

fo r th .

In D el aw ar e s M ark eti n g Dep artmen t m emb er s o f th e fo rm er m ark et

’
,

in g Co mmi tt ee n o w to o k ch arge o f m aj o r pro duct d i v i si o n s such as G en

er al S ales
(g a so li n e) L ubr i c ati n g O
, il Fu el O il an d A sp h al t T h ese pr o d , , .

u et d ep art m en ts an d th e br an ch o ffic es in th e fi eld r ep o rted to S h effield

an d h is li n e assi stan ts as d i d th e o n e m aj o r auxi li ary u ni t th e r ap i dly ,

gr o wi n g adverti si n g dep artm en t L ate in 1 927 s p eci alti es such as N ujo l .

, , ,

Fli t Mi sto l an d o th er p etro leum b y pr o ducts th at co uld n o t b e so ld eff ec

, ,
-

ti vely th r o ugh th e D ep ar tm en t s sal es o rg an i z ati on w er e c o m b i n ed i n to a

’
,

sep ar ate s ub si d i ary — S tan co In co rp o r at ed — wh o se Pr esi den t b ec ame a

,
1 21
Di recto r in th e p aren t co mp an y .

C art er b ec am e a sub si d i ary o f th e D el aw are Co mp an y Y o u n g rem ai n ed .

in T ul sa as Car ter s Pr esi d en t P r att as h ead o f th e n ew affili ate s Pro duc

’ ’
.
,

in g D ep artm en t co n ti n u ed m uch as b efo re as th e ex ecuti ve r esp o n si bl e

,

fo r o p er ati o n al co n tact b etween th e p i p e li n es C ar ter an d th e m an u , ,

factu rin g o rgan i z ati o n Bu t n o w i n stead of r ep o rti n g to S adler an d th e

.
,

P ro duci n g D ep artm en t Y o u n g an d Pr att r ep o rt ed to Bl ack Pr esi d en t o f

, ,

th e D el awa r e Co m p an y .

Th e sen i o r l i n e an d s taff ex ecu ti ves in th e M an u factur i n g an d M ark et

in g Dep ar tmen ts o f th e D el aw ar e Co m p an y co n ti n u ed to m eet in co mm it
tees to exch an ge i nf o rm atio n an d o ccasio n al ly to pl an p o li cy an d p ro ce
”
dures But there were n o mo re roo m s with gro up r esp o n sib i li ti es Th ese
.
“
.

sam e d ep a rtm en t h ead s to geth er w i th Pr att an d Y o u n g fo r m ed th e D el a

ware s B oard o f Di recto r s an d to geth er came to fo rm ul ate an d deci de

’

o n m o r e gen er al p o l i c i es an d pr o gr am s fo r th e n ew affi li ate w ith i n

th e f r am ewo rk set by th e gen er al o ffic e I n th i s ad m i n i str ati v e wo rk th ey .

CREA TIO N O F M U L T I DI V I S I O N A L STR UCTURE 213

were ai ded by th e staff dep ar tmen ts th at h ad th ei r n ucleu s in th e o ld

Jersey staff u n i ts i n cludi n g D evelo pm en t En gi n eeri n g Per so n n el Pu r
, , , ,

ch asi n g an d T r affi c
, .

Th u s th e D el aware C o m pan y b ec ame in th eo ry at leas t an au to n , ,

o m o u s m ul ti f u n c ti o n o p er ati n g s ub si d i ary si m i l ar in o rg an i z ati on t o Im

per i al an d H u mble T h e Lo u i si an a Co mp an y at th e s ame ti me re

.
, ,

t urn ed to its o ri gi n al an d qu ite co m p ar able structure D an i el R Weller . .

n o w r et ur n ed to B aton R o uge to b ec o m e ag ai n th at affiliate s ch i ef

’

1 22
execu ti v e o ffic er w h i l e r em ai n i n g a J er s ey D i r ec to r L o u i si an a s m ar
’
.

k eti n g refi n i n g an d pro duci n g acti vi ties on ce agai n r ep o rted to B ato n

, ,

Ro uge an d n o t to 26 Br o adway .

T h e fo rei gn s ub si d i ari es excep t for Im p er i al w ere r egro up ed for ad

, ,

m i n i str ati ve purp o ses u n d er tw o o ffi cer s o n e fo r Euro p e an d o ne fo r ,

L ati n A m er i ca T h e Euro p ean Co m m i ttee w as pro v i d ed w i th its o w n

.

pro duc i n g an d en l arged m ark eti n g an d m an uf acturi n g adm i n i str ati ve

dep ar tmen ts T h ese fu n ctio n al o ffi ces were resp o n sible for sup ervi si n g th e
.

ex ecu ti o n o f p o l i ci es d eci d ed by th e C o mm i ttee an d al so as si sted in co

1 23
o rd i n ati n g pr o duc t fl o w w i th i n Eur o p e an d it s en v i r o n s T h e n eed for .

s ep arate sub si d i ari es in each co u n t ry an d th e m i n o rity sto ck h o ld er i n ter

,

ests in th es e m an y c o n c er n s m ad e it d i fficul t to fo r m a si n gl e E uro p ean

,

s ub si d i ary wi th a si n gle head S o th e Co mmittee wi th sup erv i so ry de

.
,

rtm en ts r em ai n ed th e m o st pr ac ti c al an s w er O n th e o th er h an d th e
p a , .
,

respon si bi l i ty fo r L ati n A meri c an o p er atio n s o u tsi de o f th o s e m an aged by

Im p er i al s sub si d i ary In ter n ati o n al w as c en tr ali zed t i gh tly u n der J o s ep h
’

, ,

H S en io r T h at executi ve lo n g Presi den t of th e West In di an O il Co m

. .
,

p an y m ai n tai n ed o ffi ces at 26 Bro adway an d in h is o rgan i zati o n h ad re

,

fi n i n g an d m ark eti n g secti o n s T h e sm all n atur al gas affil i ates an d th e

.

l arger p ip e li n e an d sh i pp i n g u n its wer e l ittl e ch an ged r em ai n i n g rela

-
,

tiv ely i n d ep en d en t T h e o ld M ar i n e D ep ar tm en t fo r ex am ple m er ely

.
, ,
1 24
al ter ed its n am e to th e S tan d ard S h i pp i n g C o m p an y .

T h e cr eati o n o f th e au to n o mo u s o p er ati n g d i v i si o n s w as a fai rly

s trai gh tfo rw ard task T h e fash i o n i n g o f th e gen eral o ffi ce to adm i n i ster
.

w as h ard er Mo st d i fficul t w er e th e d ec i si o n s as to w h i ch o f th e staff activ i

.

ti es pr o p erly bel o n ged to th e g en er al o ffi c e an d wh i c h to th e o p er ati n g

di vi sio n s In en gi n eeri n g an d develo p men t T eagl e an d th e B o ard fo l

.
,

lo wed H o w ard s earl i er r eco mm en datio n s clo sely New research an d

’
.

develo pmen t l ab o r ato ri es were set up in Lo ui si an a an d in th e n ew D el a

ware Co mp an y S o too w ere en larged en gi n eeri n g faci l i ti es T h e dev elo p
.
, , .

men t an d en gi n eer i n g acti v iti es co n cern i n g J er sey s i n terest s as a w h o l e ’

were pl aced u n der th e ex i sti n g S tan d ard Develo pmen t Co m p an y — a

sub si d i ary set up in 1 2 1 to h o ld p aten ts
, 9 w h o s e n am e w as n o w c h an g ed

to th e S tan d ard O il D ev elo p m en t C o m p an y

1 25
A s its P r esi den t C l ark .
,
214 S TA N DA R D O I L C O M P A N Y (N E W I ERSEY )
rem ai n ed in eff ect th e Di r ecto r wi th sup ervi si o n o ver b o th En gin eeri n g
, ,

an d D ev el o p m en t wh i l e Ho ward b ec ame th e o p er ati n g h ead D uri n g

, .

S ep temb er an d O c to b er th ese tw o m en w o rk ed o u t th e d etai l s o f th e

,
1 26
n ew sub si d i ary s o rg an i zati o n
’
.

T h i s gen er al staff a cti v i ty w as to serve a lon g th e fo llo w i n g l i n es as m ay

b e r equ i r ed o r r equ ested by an y o p er ati n g u n i t o f th e New Jer sey C o r
ratio n : ch em i c al an d p h y si c al r esearch en g i n eer i n g testi n g i n sp ecti o n
p o , , ,

an d gen er al tech n i c al w o rk p aten t an d tr ad em ark w o rk an d li ti gati o n s

,
1 27
T h e staff o ffic er s w er e al so to assi st in th e stan d ard i z ati on an d
co o rdin atio n o f m an u facturi n g an d tech n i c al pro cedures an d p o l icies
th r o ugh o u t th e J er sey h o ld i n g s A s o n e ex ecu ti v e n o ted :
.

Un der th e n ew fo rm o f organ iz atio n , th ere w ill b e th e en deavo r to co -o rdi

n ate th e r efi n in activ ities th r u th e Stan dard O il D ev elo m en t C o m an y
g p p .

T h is rdin atio n w ill go vern o n ly stan dardization so far as is p o ssib le o f

co -o ,

eq u ip m en t an d r o cess an d th e r esearch an d dev elo m en t activ ities o f th e

p , p
diff eren t op eratin g u n its 1 28
.

To h elp ass ure system ati c co mm u n i c ati o n b etween th e staff an d li n e o r

n iz atio n s th e o p er ati n g ex ecu ti v es m o st c o n c er n ed w i th tech n i c al ac
g a ,

tiv ities b ec am e m em b er s o f th e D ev el o p m en t C o m p an y s B o ard T h i s

’
.

li ai so n w as furth er en co ur aged th ro ugh th e co n ti n u an ce o f th e S tan dardi

z atio n Co m m i ttee set up in 1 26 by th e fo r m ati o n o f a T ech n i c al C o m
9 ,

m ittee for co o rdi n ati n g r esearch an d d evelo p m en t an d by th e app o i nt ,

m en t o f a th i rd c o m m i ttee wh i ch wo rk i n g wi th th e D evelo p m en t C o m
,

L i br r i f c i l i d h fl f c h i c l i f r m i A fi n al
’

p ya n s a an a, tate t e o w o te n a n o at o n .

resp o n si bi l ity o f th ese staff o ffic es w as th e pro vision o f advi ce an d in fo r

m atio n to th e g en er al ex ecu ti ves o n th e B o ard wh i ch co uld b e u sed fo r
appr ai si n g d i v i si o n al a cti vi ti es as w ell as fo r l o n g r an ge pl an n i n g - .

T h e sam e pr o bl em o f d eci d i n g wh at b el o n ged to th e gen er al o ffi ce an d

wh at to th e o p erati n g di vi si o n s h ad to b e wo rk ed o u t fo r o th er o ffices th en
at 2 6 Br oadw ay Hi ck s an d an i n dustri al rel ati o n s o ffi ce rem ai n ed wi th
.

th e p ar en t co m p a n y A s A ssi stan t to th e Pr esi d en t H i ck s an d h is ai d es

.
,

gave advi ce o n bro ad l ab o r p o li ci es an d o th er acti vi ti es deali n g wi th em

l o ee r el ati o n s an d ac ted as l i ai so n m en o n th ese m atter s b etw een th e
p y
p aren t an d th e o p er ati n g u n i ts 1 29
T h i s u n i t i n cl u d ed d ep ar tm en ts fo r
.

ca rry i n g o u t th e v ar i o u s sto ck acqu i si ti o n pl an s an d i n sur an ce pro gr am s .

A s C h ai rm an o f th e A n n u i ti es an d B en efi ts C o mm i ttee H i ck s al so sup er ,

vi sed an d co o rdi n ated th e p en si o n pl an s an d o th er emplo yee w elfare

p o li ci es o f di ff eren t di vi sio n s Mo st o f th e o ld Perso n n el an d T rai n in g
.

D ep ar tm en t n o w b ecam e p ar t o f th e Del aw are C o m p an y an d si m i l ar o r ,

an iz atio n s w er e en l arg ed in o th er affil i ates o r sub si d i ar i es R el ati o n s w i th

g .
CREA TI O N O F M U L T I DI V I S I O NA L STR UCTURE 215

th e pr ess t rade
,
ci ati o n s go vern m en t an d m i li tary o rg an i zatio n s co n
asso , ,

tin ued to b e h an dl ed by an o th er A ssi stan t to th e P r esi d en t as th ey h ad ,

b een si n c e O th er u n i ts d eal i n g w i th publ i c an d em pl o y ee r el atio n s

rem ain ed wi th th e p aren t i n cludi n g Th e La mp th e S afety D ep ar tm en t
, , ,

13 1
an d p ar t o f th e M ed i c al D ep ar tm en t S o to o d i d th e L eg al D ep ar tm en t
.
, ,

?3 2
a n d th e S ecr etary s o ffi ce
’

B esi de th ese servi ce dep ar tm en ts th e n ew p aren t co m p an y i n cluded o f

,

fi ces essen ti al fo r c o m m u n i cati o n wi th an d ad m i n i str ati o n o v er th e o p er at

in g affili ates T h ese w er e o f co ur se th e r ec en tly fo r m ed Co o rd i n ati o n an d
.
, ,

Budget D ep artm en ts as w ell as th e o lder T r easur er s an d C o mp tro ll er s

,
’ ’

o ffic es — th e u n i ts th at w er e b eg i n n i n g am o n g o th er th i n gs to h elp de , ,

v elo p fi n an c i al an d s tati sti c al c o n t r o l s T h e m an u fac t ur i n g d ep ar tmen t s .

o f th e i n tegr ated affil i ates coo rd i n ated pr o duct fl o w w i th i n t h e i n d i vi du al

di vi si o n s wh i le H arden s u n i t at th e gen er al o ffi ce h elp ed to gu i de it b e

,
’

tween th e affiliates F or wh i le each adm i n i str ati ve u n it co n tro lled th e

.
,

b asi c fu n cti o n al ac ti vi ti es o f pro duci n g r efi n i n g an d m ark eti n g n o u n i t , , ,

w as fully b al an ced H u m bl e r em ai n ed l argely a pro ducer o f crud e D el a

.
,

ware w as pri m ari ly a r efi n i n g co m p an y wh il e Imp er i al an d th e Euro p ean ,

an d L ati n A m er i c an c o m p an i es sti ll c o n c en tr ated m o st ly o n m ark eti n g .

A l s o S adl er s P ro ducti o n an d H arp er s Exp o rt T r ad e D ep ar tm en ts

’ ’

stay ed o n as p ar t o f th e p ar en t staff No w m uch sm all er th an th ey h ad .

b een b efo re th ei r task w as to h elp co o rdi n ate an d to advi se an d pro vi de

,

ch an n el s o f co m m u n i c ati o n b etween th e fu n ctio n al ac ti vi ti es in th e dif

feren t m u ltidep artm en t d i vi si o n s L ater a si m i l ar staff d ep ar tm en t w as
.
,

?3 3
set up to c o o rd i n ate fo r ei g n r efi n i n g acti vi ti es T h ese st aff o ffices in
th e n ew p ar en t co m p an y w er e t h en to assi st an d a dv i se th e o p er ati n g
, ,

di vi io
s n s — Del aw ar e (i n clud i n g C ar ter ) Lo u i si an a H u mble Im p er i al , , , ,

th e Euro p ean an d L ati n A m er i c an gr o up th e n atu r al gas affi l i ates an d , ,

G i lb ert 8: B ark er in c arry i n g o u t th ei r r esp o n si b i li ti es an d al so in ai d i n g

th e g en er al ex ecu ti v es o n th e B o ard in o v er —all sup erv i si o n an d pl a n n i n g .

T h e cr eati o n o f a gen er al o ffic e al so al ter ed th e m ak e u p o f th e B o ard it -

sel f as w ell as th at o f th e S taff T h e B o ard w as en l arg ed to i n clud e th e

.

r epr esen tati ves o f m aj o r o per ati n g di vi sio n s n ew an d o ld G H arr is o n , . .

S m i th o f Imp er i al Wi ll i am F F ar i sh th e P r esi d en t o f H u m ble H ei n ri ch

, .
, ,

Reidem an n an d Jo h n A Mo w in ck el C h ai rm an an d V i ce-C h ai rm an o f
d
.
,

th e E ur o p ean C o mm i ttee S en i o r c o o rd i n ato r o f L ati n A m er i c an activ i

, ,

ti es an d Fr ed er i ck H B ed fo rd o f S tan co th e n ew m ark eti n g sub si d i ary

, .
,

for s p eci al ty pro ducts all b ec am e B o ard m em b er s

,
?3 4
Weller co n ti n ued
to sp eak fo r L o u i si an a w h i le Bl a ck as Pr esi d en t o f th e D el aw ar e C o m
,

p an y an d C l ark as Presi den t o f b o th th e S h i pp i n g an d D evelo pm en t

Co m p an i es repr esen ted th ei r u n i ts at B o ard m eeti n g s In ci d en tally by .
,
21 6 S T A NDA R D O I L CO MPANY ( NE W j ER SEY )
th s a oca t o n o f
i ll i duti es T eagl e fi n ally so lved th e pr o blem o f th e o ver
,

lapp in g j uri sdi cti o n s an d th e co n tin uin g co nfli ct between Bl ack an d

Cl ark .

Th ese ch an ges w er e to pr o vi d e an o th er imp o rtan t ch ann el o f co m

m u ni catio n an d au th o r i ty b etween th e p ar en t an d th e O per ati n g co m
an ies H o w ev er m o st o f th e n ew D i r ecto r s r epr esen t in g m aj o r af fili ates
p .
,

co n ti n u ed to w o rk at an d li v e n ear th ei r l o ca l h ead q u art er s an d t o c o m e

t o N ew Yo rk o nl y a f ew ti m es a y ear Th u s th e o ffi cer s W h o h ad run

- .

th e co m p an y b ef o r e 1 927 — T eagl e H un t C l ark S adl er Mo fi ett an d , , , , ,

C h es ter O S w ai n th e se i r Leg al O ffi c er

n o — co n tin u ed to m ak e th e si
.
, g
n ifi can t st r at egi c an d en t er ren euri al d eci si o n s m u ch as th ey h ad d o n e
p
bef o r e Bu t n ow r eli ev ed o f day-to—day o p er atin g d eci si o ns th ey h ad m o r e
.
, ,

tim e f o r o v er all po li cy pl an nin g an d appr ai sal

- ?3 5

B y th e en d o f 1 927 T eagl e an d h is asso ci ates h ad O utlin ed an o ver-all

,

m an agem en t st ruct ur e th at w as b eco m in g simi l ar to earli er cr eatio n s at du

Po n t an d at G en er al M o to r s T h e chan ges h ad c o m e as a r esul t o f tw o
.

sep ar at e m o v es th e fi r st in A ugust d t h seco n d in May

, 9 5
1 2 an e , 9 7
1 2 , , .

T o g eth er th es e g av e J er sey au to n om o us m ul tif un ct i on o per atin g di vi si o n s ,

wi th m an ager s w h o w er e r espo n sible for p erf o rm an ce an d with a gen er al

o ffi ce o f g en er al ex ecu ti v es an d staff spe ci al i sts W h i ch pl an n ed appr ai sed , , ,

an d c o o rdi n ated th e a cti vi ti es o f th e v ar i o us un i ts an d o f th e en terpr i se

a s a wh o l e R eo rg ani zati on at J er sey h o w ev er h ad co m e in qui te a dif

.
, ,

f eren t m an n er th an h ad th o se at du Pon t an d G en er al Mo to r s It w as n o t .

th e r esul t o f a ca r efull y th o ugh t— o u t pl an m eeti n g o v er-all o rg an i za ti o n ,

n eed s b u t r ath er o f ad h o e an sw er s ar i sin g fr o m f un cti o n al pr o bl ems an d

, ,

n eed s cr ea ted by J er sey s bus in es s st r at e i es J u st be ca use th e o rgan i za ti o n

’

g .

h ad be en sh ap ed in su ch an ad h oe i n f o r m al m an n er m an y y ear s h ad t o , ,

p ass b efo r e th e du ti es o f th e o p eratin g o ffic ers st aff sp eci ali sts an d gen er al , ,

ex ecu t i v es an d th e r elati on s b et ween th em w er e f ully w o rk ed o u t

, , .

Wo k i
r n
g O ut th e New S tr u etu r e
Th e blu epr i n t J er sey s o ver-all man agem en t struct ur e at th e en d
f or
’

of 1 2 w as th en an in f o rm al pl an in th e m i n d s o f m en r ath er th an wri t
9 7 ,

t en d o w n in m an u al s d i r e cti v es or c h art s O n e r easo n f or th e t i m e in

, , .

vo lv ed in w o rki n g ou t th e st ruct ur e w as th at diff er en t m en in evi tably

r ea d su ch a n i nf o rm al blu epr in t diff er en tl y S ti ll m o r e Si gn ifi can t w as .

th e f act th at th e sam e ex ecu ti v es co n ti n u ed t o w o rk in th e s am e o ffi ces o n

m u ch th e sam e typ e o f m att er s as th ey h ad b ef o r e 1 927 Men li k e T eagl e .

,

Hu n t S adler an d Cl ark co ul d h ar dl y b e exp ect ed n ot to beco m e in vo lved

, ,

13 6
in th e affai r s o f th e n ew D el aw ar e Co m p an y .

Th e ev o lu ti o n o f th e n ew struct ur e n eed n o t be d escr i b ed h er e ; it w ill be

A ll th at is n ec essary n o w is to i n di cate h o w th e
?3 7
to ld in d et ai l el sew h er e
CREA TIO N O F M U L T I DI V I S I O NA L S TR UCTURE 21 7

bluepri n t o f 1
9 7
2 co mp an y s mo r e fo rm al carefully ra
rel ates to th e
’

tion ali zed struc ture o f th e 1 95 0 s Wh i le th er e w er e co n s t an t mi n o r sh ift s

’
.

in o rgan i zati o n an d per s o n n el o n ly tw o s er i es o f m aj o r ch an ges n eed

,

b e m en ti o n ed T h e fi r st c am e in 1 933 T h e co n ti n u i n g co n tr acti on o f th e
. .

m ark et p arti cul arly dur i n g th e great depr es si on plu s th e p er si sti n g o v er

, ,

pro ducti on o f crude wh i ch so h ar assed th e p etro leum i n du s tr y aft er 1 927 ,

created press ures th at h elp ed fo rce th e fi r st ser i es o f ch an ges T h e seco n d .

set co m pleted in th e y ear s dur i n g an d af ter Wo rld War II w as a r esp on se

, ,

to th e r ap i d exp an si o n o f J er sey s bu si n ess in th e w ar y ear s an d p o stw ar

’

bo om .

13 8
T h e 1 933 ch anges h ad f o u r m ai n as p ects F i rst c am e th e wh o l esal e .

r eti rem en t o f top m an agem en t p er so n n el T h e tur n o v er w as alm o st as .

s weep i n g as that i n sti tu ted by Pi err e du Po n t in h is co m p an y in 1 9 1 9 .

Next th e m ak e-u p o f th e B o ard w as ch an ged to i n clude o nl y p o li cy—m ak

,

in g gen er al ex ecu ti v es T h i rd th e acti v iti es of th e Del aw ar e an d L o u i si an a

.
,

Co mp an i es w er e r esh uffl ed so th at th e co m p an i es c ame tem p o r ar i ly t o

co n cen trate o n th e adm i n i str ati o n o f a si n gle fu n c ti o n F i n ally th e Del a .
,

w ar e an d J er sey Co m p an i es w er e ph y si c ally sep ar ated by m o vi n g th e

p ar en t co mp an y o u t o f 26 Bro adway up to w n to 30 Ro ckefell er Pl az a .

Th e o n s l augh t o f th e d epr es si o n led to a d em an d fo r ti gh ter co n tr o l

an d a r educ ti o n o f ad mi ni st r ati v e p er son n el A s a r esul t th e a dm i n i str a .
,

ti o n o f all domesti c sal es i n clud i n g tho se of Lo u i si an a an d Del awar e as

,

well as th e n ew S tan dard O il of Pen n s ylvan i a an d th e recen tly purch as ed ,

Co l o n i al B eaco n an d exclud i n g o n ly t h o se o f H um bl e w er e n o w cen

“

, ,
” 13 9
trali z ed at 26 Br o adw ay h en n sylv an i a Co m p an y h ad b een o r
(T e P .

g a n ize d an d th e C o l o n i a l B e ac o n h ad b ee n purc h as e d in o rd er t o exp an d

Jer s ey s m ark eti n g r es o urces an d o u tl ets in th e No r th east ) A cco rdi n g to
’
.

Th e Lamp a n ew m ark eti n g dep ar tm en t h ad b een i n i ti ated by R o b er t

,

G S tew ar t r ecen tly app o i n ted Di r ecto r at th e J er sey Co m p an y in ch arg e

.
,

o f D o m esti c S al es T h i s n ew u n i t h a d its sen i o r ex ecu ti v e r esp o n si bl e to

.

S tew ar t fo r th e sup ervi si o n o f day—to —day o p er ati o n s ; al so it s r etai l w h o l e ,

s ale tan k car ti re an d acces so ry s ec tio n s ; an d its s taff o ffi c es i n cludi n g

, , ,

an en l arg ed A dv er ti si n g D ep ar tmen t an d th e tw o staff o ffices r eco m

m en ded earli er by H arden — a S al es R esear ch D ep artm en t an d a S al es

Pro mo tio n an d T r ai n i n g D ep ar tm en t U n d er th e pr esi d en cy o f Fr an k
g
.

A br am s th e D el aw ar e Co m pa n y co n ti n u ed to ad m i n i ster all acti v i ti es

,

relati n g to r efi n i n g wh i l e C arter c am e to o p er ate qu ite i n d ep en den tly as

,

a pr o duc i n g c o m p an y In eff ect th en J er sey s d o m esti c p etr o l eu m bu si

’
.
, ,

n ess o u t si d e o f H u m bl e h ad b eco m e d efi n ed f o r ad m i n i st r ati v e purp o ses

, ,

alon g f u n c ti o n al li n es w ith th e C ar ter Co m p an y h an dl i n g pr o duc ti o n

, ,

th e D elaw ar e an d Lo u isi an a Co m p an i es r efi n i n g o u i si an a m an aged

(L ,

pro ductio n in its o w n vi ci n i ty ) an d th e n ew sal es dep artm en t m arketi n g

, , .
21 8 S T A N DA R D O IL CO MPA N Y (N E W J ER SE Y)
H o wever , th e m an ager s o f u
f n cti th ese
o n al u n i t s w er e t o h a v e m o r e

au th o r i ty an d r es po n si b i l i ty th an h ad th e ex ecu ti v es in th e o ld d ep art

m en ts an d co mm i ttees T o h elp m ak e m o r e c er tai n t h at th e g en er al O f

.

fi cers in th e p ar en t co m p an y wo uld c o n ti n u e to co n cen tr ate o n o ver -all

en t r epr en eur i al acti vi ti es w hi l e th e m en in ch arge o f th e n ew fu n cti o n al

dep artm en ts an d th e o th er r em ai n i n g m ul tif u n cti o n afliliates fo cu sed o n

o p er ati o n al o n es, th e r eo rg an i z er s in 1 933 ch an g ed th e B o ard s p er so n n el,
’

r ed efi n ed its duti es an d m o v ed th e gen er al offi ces o u t o f 2 6 B ro adway t o

,

th e n ew 3 0 Ro ck ef ell er Pl aza A ser i es o f r esi g n ati o n s r educ ed th e B o ard

.

f ro m ni n eteen to th ir teen m em b er s an d m o st o f th ese th i rt een w er e n ew

,

appo in t men ts
?4 0
Excep t for G H arr i so n S m i th o f Im p er i al, n o D i r ecto r
.

af t er 1 9 3 3 w as an o ffic er in , o r a r epr esen t ati v e o f an o p er ati n g co m p an y , .

T h e J er sey ex ecuti v es li k e th o se at G en er al M o to r s an d du Po n t, fi n all y

,

d eci ded th at po li cy m ak er s o ugh t n o t to sp eak fr o m i n ter ested o r com

mitt ed p o si ti o n s In o th er w o rd s th ey S h o uld n o t h av e o p er ati n g resp o n
.
,

sib ili ti es an d l o y al ti es A t th i s sam e ti me F ar i sh fo rm erly H um bl e s Pr esi

’
.
, ,

den t, b ecam e th e Ch airm an of th e B o ard an d a n ew T r easur er w as ap

po in ted .

T h e b i g B o ar d n o w co n si st ed o f f ull —tim e ex ecu ti v es w h o d evo ted th ei r

ti m e wh o ll y to o v er -all co o rdi n ati o n appr ai sal an d po li cy pl an n i n g A n

, , .

Ex ecu ti ve Co mm i tt ee o f fi v e d i r ect o r s — T eagl e S w ai n F ar i sh Payn e , , , ,

an d S adl er wi th a p erm an en t S ecr etary m et d ai ly as its pr edecesso r h ad

,

S i n ce In tim e each o f th e fi v e h ad an al ter n ate to att en d Wh en

,

h e hi m self co uld n o t b e pr esen t In di v i d ually m o st D i r ecto r s c am e to h ave

.
,
”
wh at w as k n o wn as co n tact r espo n sib ili ty Each co n tact Di r ecto r w as
“
.

assi g n ed a n um b er o f o p er ati n g sub si di ar i es to o v er see an d a dvi se A n d .

,

lik e th e G r o up Ex ecuti v es at G en er al M o to r s an d th e m em b er s o f th e
Ex ecu ti ve Co mmi tt ee at du Pon t th ese g en er al o fficer s h ad o nl y an ad
,

v i so ry r el ati on sh ip w i th th e h eads o f th e o p erati n g u n i ts Co ll ecti vely .

,

ei th er as t h e Ex ecu ti v e C o mm i ttee o r th e B o ard th ey f o r m ul ated an d ,

deci ded br o ad p o li cy fo r th e J er sey i n ter ests .

Th ese a dmi n i str ati v e ac ti v i ti es i n clud ed th e all o cati o n o f J er sey s re

’

so urces to m eet an ti ci p ated d em an d s an d n eed s a n d th e appr ai sal o f th e

effec ti v en ess o f th e em pl o y m en t o f exi sti n g r eso urc es S i n c e th e m ark et .

h ad b eco m e m o r e stabl e th an it h ad b een in th e early 1 920 s J er sey execu

’

tiv es w er e l ess c o n c er n ed w i th str ategi c pl an n i n g in t h e sen se o f d ev el o p ,

in g n ew m ark ets n ew r efi n er i es an d n ew Shi pp i n g an d crud e pr o duci n g

, ,

f aci li ti es ?4 2
F or tu n e d escri b ed th e Co mm i ttee s du ti es w ell :
’

Bu t th em ain b u sin ess o f th is ex ecu tiv e comm ittee migh t b e div ided in to
tw o m ain ch an n els In th e fir st p lace it k eep s p r etty close w atch o n th e fl o w
.

o f o il acr o ss th e imm en se S tan d ard m a Th C o r o r atio n w o rk s o n a

p e p .

”
fi v e-y ear loo k -ah ead p lan b ased o n estim ates o f m ar k et dem an ds, w h ich
“
CREA TIO N O F M U L T I DI V I S I O N A L STR UCTURE
in g ir
v
tu ne an id ea o f n ecessary refi n ery o u tp u t a n d cr u de pro du ctio n Fo r .

i n stan ce, th e to tal flo w o f gaso lin e fo r 1 93 8 w as ab o u t b arrels to

all m ark ets ; th e pro j ected flo w f o r 1 94 3 is b arrels Th is pro j ect .

is o f cou rse in co n stan t state o f revi sio n an d such revi sio n is carried o u t b y
,

variou s co o rdin ato rs an d th e h eads o f operatin g co mp an ies Th e sec .

o n d an d m u ch m o re im p o r tan t f u n ctio n o f t h e co mm ittee is to k eep a clo se

ch eck o n co sts o f th e su b sidiaries an d th eir b u dgets

?4 3

The p adewo rk f
s l g t rm co o rdi n atio n an d plan n i n g co n
or such on -e

?4 4
tin u ed to b e do n e by th e C oo rd i n ati o n D ep ar tm en t T h at D ep artm en t
wo rked clo sely with o ffi ces in th e p aren t co m p an y with Pro duc ti o n w ith ,

Fo rei gn M ark etin g an d wi th Fo rei gn Refi n i n g O n e si gn ifi can t ch an ge

, .

w as th e r ev i v al o f th e Coo rd i n ati o n Co mmi ttee u n d er th e Ch ai rm an sh i p

o f S adl er C o n si sti n g o f tw o o th er B o ard m em b er s H ard en an d S tew ar t
.
, ,

an d th r ee gen er al s taff ex ecu ti v es i n clud i n g H arp er an d H o w ard

, th e ,

Co mm i ttee b ec am e mo re ac ti ve n o t o n ly in coo rd i n ati n g an d appr aisi n g

,

o p er ati o n al ac ti vi ti es bu t in assi sti n g th e B o ard an d Ex ecu ti v e C o m mittee

,

in lo n g-term pl an n i n g A bl e m em b er sh i p a r el i an c e o n accu i ate d at a

.
,
'

pro vi ded by th e C o o rd i n atio n Dep ar tmen t an d a co n cen tr atio n o n ,

str ategi c pr o bl em s h elp ed m ak e th i s sm all adviso ry c o m m i ttee th e pr i m e

i n iti ato r o f n ew pro j ec ts an d n ew co ur ses o f actio n at Jer sey S tan d ard .

If th e Co o rd i n ati o n Co m m itt ee o r i n d i v i du al Di recto r s pr op o s ed a n ew

co ur se o f ac tio n th e fi n al en trepren euri al d eci si o n o n th e p o li cy c am e with
,

th e act o f all o c ati n g f u n d s to c arry o u t th e pl an s pr i m ar i ly th r o ugh a d ,

j u stin g an d fi n ally appro vi n g budgets By sy stem ati c ally appr ai si n g th e

.

p erfo r m an ce n eed s an d pl an s o f th e m an y o p er ati n g u n i ts an d by

, , ,

co rrel ati n g an d co o rdi n ati n g th em i n to a bro ad gen eral s ch em e fo r th e

co m p an y as a wh o l e th e po li cy m ak er s at J er sey w ere abl e to ch ar t th e
,

co urse o f th ei r v ast en terpri se far m o r e r atio n ally an d effici en tly th an th ey

h ad b een in th e year s b efo r e th e fo rm al i zi n g o f budget pr o c edur es in
1
9 5
2 .

A fter
933 budg 1e ts w e,
r e dr aw n up by w h at w as c all ed th e gr o up sy s

tem T a h.t sy stem l i k e h

t e I n te
, r -di vi si o n al Co mm ittees at G en er al Mo to r s ,

pro vi ded a w ay fo r bri n gi n g gen eral s taff an d o p er ati n g execu ti ves to

geth er regularly an d yet avo i di n g o p er ati o n al b i as in to p deci si o n m ak i n g .

Budgets fro m each u n i t fo r example were th o ro ugh ly d i ssected by a

, ,

gro up of speci al i sts Wh i l e th e execu ti v es fro m th e fo rei gn r efi n i n g fo r

.
,

eign m ark eti n g a n d pr o duc i n g u n it s o f th e gen er a l o ffi c e to o k p ar t th e

, ,

k ey m en o n th ese gro up s wer e o p er ati n g execu ti v es F ortu n e d escri b es th e .

pro cess as it w as c arri ed o u t in 1 940 in th is w ay

Bu dgets m ade u p in th e fi rst in stan ce b y th e su b sidiaries T h ey are th en
are .

”
to rn to p ieces b y d iff eren t gro u p s, depen din g o n th e n atu re o f th e ap pro
“

riatio n in v o lved T h u s th e b u d et o f th e S tan dard O il C o o f Lo u i sian a w ill

p .
g .
220 S T A N DA R D O I L CO MPA N Y (N E W J ER SE Y)
u su ally in vo lve a decisio n abo u t exp an din g o r mo dern izmg p lan t Th e .

r p o k s at it w ill in clu de mo st o f J er sey s to p U S r efi n ers

’
h l
“

g ou t at o . . .

Wh ere a sp ecial p ro blem is in volved Lloyd Sm ith may b e p u lled u p from ,

A ru b a o r L eo McC lo sk ey m ay co m e do w n fro m Imp eri al O il in C an ada .

Sim ilarly w h en b u dgets fo r p ro du cin g u n its are in v o lved a p ro du cin g ,

sit in j u dgem en t T h u s th e b u dget o f S tan d ard s C arter O il

”
“

g r o up w il l .
’

C o w h ich p ro du ces largely in O k lah o m a an d Illi n o i s w ill b e scru tin iz ed

.
, ,

in New Yo rk b y a n u m b er o f men in clu d in g G en e Ho lm an Pr esiden t o f ,

L ago Petro leu m w h ich o p er ates in V en ezu ela In a similar w ay Lago s

’
.
,

b u dget w ill b e in sp ected b y Leo n ard Mcco llu m fro m C arter an d o th er

pro du cers It is o n ly after a b u dget h as p assed th e app rov al o f th e gro u p
.

th at it go es u p to th e execu tiv e co mm ittee an d to th e J er sey Bo ard fo r

”
fi n al r eview T h e p o in t o f th is grou p system is to b rin g to b ear o n every
“
.

problem all o f th e talen t th at th e co rpo ratio n can comman d dfaw n fro m ,

vario u s p arts o f th e w o rld 14 5

.

If th e c h n g es br o ugh t a m o re c ar eful d efi n i ti o n o f th e mak -

933 1a p e u

an d du ti es o f th e B o ard th e n ex t ser i es o f m aj o r c h an ges th o s e th at c ame

, ,

duri n g an d after Wo rld War II r esulted r ather in fo rm ali zi n g th e wo rk ,

o f th e p ar en t co m p an y s staff an d in r esh ap i n g th e d o m esti c o p er ati n g

’

?4 6
u n i ts T h e l atter o n ce agai n b ec am e m ultifu n c ti o n r egi o n ally defi n ed ,

di vi si o n s T h e great exp an si on o f th e p etro leu m bu si n ess in th ese y ear s

.

u n do ub tedly m ade th e regio n al o ri en tatio n mo re practi cal .

In an y c ase th e Lo u i si an a Co mp an y w as m erged w i th th e D elaw ar e

,

Co m p an y wh o se Pr esi d en t so o n b ec am e f ully r esp o n si bl e for m ark eti n g

,

as w ell as r efi n i n g A fter o b tai n i n g c o n tro l o v er sal es after cl early defi n

.
,

in g its r el ati o n s w i th th e p aren t co m p an y an d after acqu i ri n g a n ew ,

n am e Esso S tan d ard to em p h asi z e its i n d ep en d en c e th e Del aw ar e Co m

, , ,

p an y u n derwen t a m aj o r i n ter n al o rgan i zatio n al o v erh aul ?4 7

By th e en d
o f th e w ar C ar ter h ad al so d ev elo p ed r efi n i n g an d m ark eti n g o rg an i z a
,

ti o n s an d h ad b eco m e an au to n o m o u s i n tegr ated u n i t li k e ESSO an d th e ,

o ld er affil i ates l i k e Im p er i al an d H u m bl e
14 8
O th er ch an ges th o ugh l ess .
,

si g n i fi c an t too k pl ace in m an y o p er ati n g affi l i ates p ar ti cul arly in th o s e

, ,

abro ad w h en J er sey t en d ed to c o n c en tr ate th e exp an si o n o f pr o duc i n g

, ,

m ark eti n g an d ev en r efi n i n g faci li ti es

, .

In th e p ar en t co m p an y s staff r el ati vely few n ew o ffic es w ere cr eat ed

’

in th e w ar an d early p o stw ar y ear s T h e mo re i m p o r tan t structur al ch an ges .

th er e d ealt wi th th e d ev elo p m en t o f m o re fo rm al an d s y stem ati c co m

mu n icatio n b etween th e di ff eren t staff u n it s Here the mo st si g n i fi can t .

ev en ts w er e th e r eo rg an i z ati o n o f th e C oo rd i n ati o n C o m mi ttee an d th e

fo rmati o n o f a n ew A dvi so ry C o m mi ttee o n H u m an Rel ati o n s ?4 9

The
fi n an c i al l egal an d h o u s ekeep i n g s ec ti o n s mo st o f w h o s e acti viti es h ad
, , ,

b een wi th th e p aren t co mp an y si n ce 1 927 were l itt le aff ected by thes e ,

tw o s ets o f c h an g es .
CREA TIO N O F M U L T I DI V I S I O N A L STR UCTURE
Th e reo rgan i zatio n of th e Co o rd i n ati o n Co m mittee ess en ti ally r ede
fi n ed th e r el ati o n s h i p s withi n th e gro wi n g staff dep art men ts in th e gen
er al o flice th at d eal t w ith th e m aj o r f u n c ti o n al ac ti v i ti es By th i s ti m e th e .
,

fo r ei g n m ark eti n g an d r efi n i n g o ffices (staff o ffi ces fo r l i ai so n w i th an d

co o rdi n ati o n o f fo rei gn mark eti n g an d refi n i n g ) h ad exten ded thei r
?5 0
s ervi ces to th e do m esti c u n i ts as h ad th e staff pro ducti o n o ffice
, An
early step in t h is ev o lu ti o n c ame in 1 43 w i th th e app o i n tmen t o f Fr an k
9
M S urface th e head o f th e S ales Research o ffice as co o rdi n ato r of s ales
.
, ,
?5 1
r esearch fo r bo th fo reign an d do mesti c sub si di ar ies D ep artm en t s fo r
p i p e-lin e an d sh i pp i n g co o rdi n ati on w er e al so added T h e Co o rdi n ati o n .

Dep artmen t wh o se pr i m ary co n cer n co n ti n u ed to b e adv i ce o n th e co

,

o rd i n ati o n o f pr o duc t fl o w co n ti n ued as a sep ar ate o rgan i z atio n ; an d

,

b ecau se of th e co m plex wo rld co n ditio n s a sep ar ate Econ o m i c s Dep ar t ,

m en t h ad b een set up by
A fter th e w ar th e Co o rd i n atio n Co mmittee c ame to b e made up of th e
,

head s o f th es e fu n ctio n al s taff d ep ar tm en ts plu s tw o J er s ey D i recto r s as ,

Ch ai rm an an d V i ce Ch ai rm an an d r epr esen tati ves o f affil i ates in th e New

-
,

Yo rk area T h e Co m mi ttee co n ti n ued to b e as it h ad b een si n ce 1 925 an

.
, ,
”
adv i so ry gr o up o n ly A l th o ugh it mak es n o d ecisi o n s F o rtu n e p o i n ted
“
.
,

o ut , it diss ec ts m o st pro blem s an d pr o p o si tio n s b efo r e th ey co me to th e

“

” 153
B oard fo r decisi o n A l tho ugh th e co m p an y h ad b egu n to exp an d its
.

petro chemi cal li n es the pr im ary co n cer n o f th ese pro bl em s an d pro po si

,

ti o n s was s ti ll th e fut ure s upply an d deman d o f its b asi c gas o l i n e lub ricat ,

in g an d fuel o il li n es an d th e b est w ay s o f d evelo p i n g th e r es o urc es to

,

meet esti mated n eed s T h e Co mm i ttee an d th e fu n cti o n al co o rd i n ati n g

.

dep artmen ts al s o too k o v er th e task o f revi ewi n g th e budgets o f th e affi li

at es wh i ch h ad b een c arr i ed o u t in pr ew ar y ear s by gro up s o f o p er ati n g

m en .

Usi n g th e Co o rd i n ati o n Co mm itteedep ar tm en ts as mo del s th e

an d its ,

o rg an i z ati o n bu i ld er s at J er sey in 1 8 gr o up ed th e r em ai n i n g s taff de

94 , ,

rtmen ts — t h o se d eal i n g w i th p eo pl e m pl y ck h ld r g v r
p a (e o ees s to o e s o e n , ,

men t o ffi ci al s an d th e gen er al publi c ) r ath er th an w i th eco n o m i c f u n c

,

tio n s aro u n d th e A dvi so ry Co mmi ttee o n H um an Rel ati o n s

— ?5 4
Mo s t o f
th ese u n its h ad lo n g b een w i th th e c o m p an y bu t th ei r acti v i ti es h ad ,

b een exp an ded duri n g th e w ar an d p o stwar p er io d Wo rk i n g i n d i vi du ally .

o r th ro ugh th e n ew C o mm i ttee th e ex ecu ti v es o f th ese o ffi c es co n ti n u ed to

,

a dv i se t h e B o ard o ften r ec o m men d i n g p o l i c i es an d pr o p o s al s star ted o n

,

th ei r o w n i n i ti ati v e .

S o me Fin al Co n sideratio n s

By pro mi se o f th e ch an ges c arri ed o u t b etween 1 925 an d 1 927

1 94 8 , t he
w as f u lfi lled T r i al an d erro r o ften qu ite p ai n ful led to a cl ar i fi c ati o n o f
.
, ,
222 S T A N DA R D O IL CO M PA N Y (N E W j ER SEY )

i
t on .By th e en d of 1 927 th e de par tmen tal structur e h ad been resh ape d
, ,

us u al ly o n a lin e an d-stafi ba si s so th at th e r elati onshi p b etween the field

-
,

un i ts an d th e h ea dquar ters as w el l as th e r esp on sib ili ti es fo r t h e v ari ou s

duti es at h ea dquart er s w er e cl ear ly d efi n ed Th i s cl arifi ca ti on m ade p os
sibl e th e d el ega ti on o m u ch a dmini st rati v e wo rk t o th e fi el d A f ter 1 927
f
i .
,

ex ecu ti v es at d epa rt m en tal h ea dquart ers h a d n o r easo n to b e as o v er

w h elm ed w i th r o uti n e w o rk as ha d be en th e m em bers o f th e Ma n uf ac

A r th e h er
ot en d o f th e c l a dmin i st r ati v e
du ti es of th e gen er al
s a e, t h e

om oe w er e r ed efi n ed so th a t th e ex ecu ti v es r es o nsi bl e f o r dir ect in g t h e

p
en terpr ise as a wh o l e h a d m o r e tim e to con cen trate on br oa d str ategi c an d

en t r ep ren eurial a cti v i ti es Th e n ew ly cr eated C o o rdi nati on an d Bu dget

.

D ep artm en ts pr o v i d ed th em w i th f ar m o r e sati sf acto ry data th an h ad pr e

p a r t m en ts al so h el pe d

Th e perati o n al admin i str ati on

o o f th e f un cti o n al d ep ar tm en ts w as
t urn ed o v er as it h ad been at du
, Po n t, to u
a ton o m ou s, se lfc on t ai n ed

si an a Co m pa ni es a dmi nist er ed J erse y s busin ess w i th in s pecifi c geo gr aph i c

,
’

r egi ons S i n ce th e du ti es of t h e ex ecuti v es in th e cen tral o fi ces o f th ese

.

in g sm oo th ly an d efi ci en tly r ath er th an l o n g —term plann in g , coo rdina t io n ,

an d allocati o n o f a vai l ab l e r eso ur ces

cen t er e d in a sin gl e ofi cer .

O n e o f th e m o st stri k in g f a cts abo ut th e a d h oc str uctur al cha ges at

n
J er sey w as th at alm ost co m pl etel y un p lan n ed t h e r eor gani zers i n th e
.
,

o il co m pa n y m a d e t h e sa m e t pe o f all oca tion o f gr o up an d in di vi dual

y
r espo n si b ili ty as h a d th os e at G en er al Mo to rs an d du Pon t O pe ratio n al .

a dm i ni str ati v e a ct iv i ti es t h at r equ ir ed f air ly qu i ck acti on be came th e

r espo n sib ili ty o f a si n gl e in di vi dual an d th e m o r e co m pl ex lo n g-r an ge
, ,

en t r epr en eu ri al o n es w er e th o se o f a gr o up T h e di vi si o n o r d epa rtm en t

.

h ea d co nsul t ed hi s lin e assist an ts or st afi o fi cers b ef o r e tak in g a cti o n But .

h e al on e w as r esp o n sib le f or t h e perf o rma n ce o f th e uni t O n th e o ther .

h an d th e Ex ecu ti v e o r Co o rdin at i o n Co mm i tt ee at J er sey th e Ex ecu ti v e

, ,

Co mmi tt ee at du P on t an d a t G en eral Mo t o r s m a d e th eir d ecisi o ns as a

gr o u p w i th ea ch co m pa ny in cr eas in gly a ccep tin g gr o up r esp o ns ib ilit y
,

a t th e t o l e v el Wi h i h i r d ci si o n m ak i n g un i ts th e m emb ers
-
p t n
. t e sen o e ,

w er e co nsi d er ed t o be o f equa l r ank A lso in al l thr ee co m p a ni es th e

.
, ,

r elati o n o f th e in di vi dua l g en er al o fi cers to th e Ope ratin g ex ecu ti v es w as

an ad vi so ry n o t a lin e o n e .
CREA TIO N O F M U L T I DI V I S I O N A L STR UCTURE 2 23

A ft er br
tw o o ugh t f urth er m o d i fi c ati o n s in th e r eo rg an i zed
f ac t s
9 7
1 2 ,

struct ur e T h e fi r st w as th e l ack o f pr eci si o n in th e i ni ti al d efi n iti o n o f th e

.

n ew o rg an i z ati o n T h e seco n d w as th e co mi n g o f th e d epr essi on T h e

. .

fir st aff ected th e o rg an i z ati o n o f th e g en er al o ffi ce th e s eco n d th at o f th e ,

o p er ati n g d i v i si o n s .

T h e i n iti al i m p o rt an t S tructur al r efi n em en ts to o k pl ac e in th e d evel o p

m en t o f m o r e accur ate an d pr eci se i nf o rm ati o n to fl o w th r o ugh th e n ew
ch an n els o f co mm u n i cati on an d auth o ri ty Th en th e m aj o r adj u stm en t .

in 1 933 by f ur th er cl ar if yi n g th e r o le o f th e g en er al o ffi ce co m pl etely
, ,

fr eed th e s en i o r ex ecuti v es f r o m o p er ati n g acti v i ti es With th e r edefi ni ti o n .

o f th e du ti es o f th e B o ard w i th th e app o i n tm en t o f a n ew set o f sen i o r

,

ex ecu ti v es w i th th e p h y si c al s ep ar ati o n o f th e gen er al o ffice f r o m th e

,

cen tr al o ffi ce o f th e D el awar e C o mp an y th e sen i o r ex ecuti v es at J er sey,

cam e to h av e a p sych o lo gi cal co mm itm en t to an o v er-all o r en trep re

n eu rial r ath er th an to a d ep artm en ta l o r o p er ati n g p o i n t o f v i ew A ft er .

19 3 th e s truct ur al redefi n itio n s in th e gen er al o ffi c e d eal t pr i m ar i ly

3 ,

wi th th e duti es an d r esp on si b i li ti es o f th e gen er al staff .

Th e c o n tr ac ti o n o f bu si n ess c au s ed by th e depr essi o n led to a t em p o r ary

ab an d o n m en t o f th e r eg i o n ally d efi n ed m ul tif u n cti o n d i v i si o n s f o r ad
,

mi n ist eri n g do m esti c bu si n ess T h e th r ee m aj o r do m esti c o p er ati n g s ub

.

sidaries — D el aw ar e Lo u isi an a an d C art er — b ec am e f u n c ti o n al r ath er

, ,

th an regio n al u nits wi th th e gen er al o m , ce staff ag ai n s up erv isi n g th e co

o rd i n ati o n o f pr o duct fl o w Bu t in c o n tr ast to th e y ear s b ef o r e 1 2 t h

.
, 9 7 e ,

gen eral ex ecuti ves stayed clear o f o p er ati n g detai l s Th en w ith th e w ar .

an d p ost w ar b o o m an d th e r ap i d gr o wt h o f th e m ark et J er sey r etur n ed to ,

th e m ult ifu n cti o n r eg i o n al d i v i si o n s B ecau se th e D el aw ar e Co m p an y by

.

t h is ti m e r ec ei v ed m o s t o f its crud e s uppli es f r o m o v er seas it d i d n o t t ak e ,

o ver t h e c o n tr o l o f pr o duc i n g ac ti v iti es bu t di d h an dl e its o w n pr o cur e

m en t mark eti n g an d r efi n i n g A t th e sam e ti m e C art er b egan to r efi n e

, , .
,

an d m ark et as w ell as to pr o duc e .

In 1 95 9 as th e d em an d fo r r efi n ed pr o ducts l evel ed o ff o n c e m o r e J er s ey
, ,

ag ai n b egan to r eo rg an i ze h er o p er ati n g a cti v i ti es T h e n eed to cu t c o sts .

,

th e gr o w i n g h o m o gen ei t y o f t h e do m esti c m ark et an d th e d esi r e to ,

m o ve i n to ar eas wh er e th e J er sey Co m p an y h ad b een fo rb i dden t o u se

a S tan d ard O il tr ad e n am e si n c e th e di sso lu ti o n o f 1 1 1 all h elp ed i n duc e
9 ,

th e B o ard to co mb i n e Esso (th e o ld D el aw ar e Co m p an y n d C ar ter

) a

wi th H um ble as th e fi r st step in a br o ad pl an for co n so li d ati o n o f

“

pro duci n g r efi n i n g m ark eti n g an d m ar i n e acti viti es in th e Un ited S tates

, ,

in o rd er to ach i eve n ati o n w i d e o per ati on u n der a u n ifi ed m an ag e

” 155
men t . Po s si bly in ti m e J er sey w i ll do as S o co n y an d S h ell h av e
alr eady d o n e : f o r m a c o mp ar abl e struc tur e fo r its fo r ei g n bu si n ess w h i ch ,

parti cul arly with th e ri se o f th e n ew pro duci n g areas is far m o re co m ,

224 S T A N DA R D O I L CO M PA N Y (N E W j ERSEY
)
plex th an in 1 927 an d duri n g th e 1 g3o s In an y cas e th e fo rm atio n o f ’
.
,

suc h en l arged ,
m ulti f u n c ti o n r egio n al u n i ts in n o w ay al ter s th e b asi c
struc tur e fi r st o u tl i n ed in 1 2 f o r th e r eo rgan i z ati o n o f th at y ear f ash
9 7 ,

io n ed fo r th e fi r st ti m e a structur e th at fo r mally defi n ed th e rel ati o n sh i p

b etween th ree b asi c adm i n i strati ve u n its th e fu n ctio n al dep artm en t th e ,

regio n ally d efi n ed m ulti fu n ctio n al affili ate an d th e gen er al o ffi ce wh i ch ,

co o rdi n ated apprai sed an d set p o l i cy fo r th e auto n o mo u s di vi sio n s in

, ,

t h e i n ter est o f th e en terpr i se a s a wh o l e .

A t Jer sey S tan d ard th en stru ctur e fo ll o w ed str ategy Bu t th ere th e

, .

resp o n se w as slo wer m o re ten tati ve an d l ess s ure th an at du Po n t an d

, ,

G en eral Mo to r s In so m e w ay s th i s d i ff er en ce w as o w i n g to th e fact th at
.
,

its pr o bl em s w er e m o r e d iffi cult In 1 925 J er s ey w as at th e same ti me a cen

.
,

tralized f u n cti o n ally d ep ar tm en tali zed c o n so li d ati o n as du Po n t h ad b een

, ,

in 1 920 an d a lo o sely h eld o v erdecen tralized fed erati o n li k e G en er al

,

Mo to r s b efo re it s reo rgan i zati o n Wh ere th e pro blem at du Po n t w as th e

.

fo rm ati o n o f th e o p er ati n g d i vi si o n s an d fo r G en er al Mo to r s th at o f bu i ld
in g th e gen er a l o ffic e fo r Jer sey it w as b o th as w ell as r esh ap i n g th e
, ,

o rgan i z ati o n o f so m e o f th e f u n c ti o n al d ep ar tm en ts M o r eo v er i n m ak i n g .
,

its st ruc tur al ch an ges Jer sey w as m o r e en cu m b ered w i th i n h er i ted t rad i

,

ti o n th an G en er al M o to r s a n d th an k s to Pi err e du Po n t th an th e exp lo
, ,

siv es c o m p an y T h i s i n h er i tan c e i n clud ed a co mmitm en t to co mmittee

.

m an agem en t an d a l ack o f co n c er n fo r o rgan i zatio n al pro blem s .

Y et T eagl e an d h is ass o ci ates d i d w ai t a lo n g t i m e b efo r e ch all en gi n g

th ese tr ad i ti o n s a n d adj u sti n g s truc tur e to str ategy T h e d el ay c er tai n ly .

r eflects th e p er s o n ality t rai n i n g and dai ly wo rk o f th e J er sey ex ecuti v es

, ,
.

Wi th th e exception o f S adler an d Ho ward an d p ossibly o f Clark th ese , ,

m en r ar ely th o ugh t in term s o f o rgan i z ati o n T h er e w as li ttle in th ei r .

t r ai n i n g o r t r ad i ti on s t o d ev elo p an aw ar en ess o f th ese pro bl em s Th ey .

fo cu sed th ei r day to day i n ter ests m o r e o n th e i mm edi ate an d n o t on

- -

th e l o n g r an ge pr o bl em s T h ey pr eferr ed a c ti o n to an aly si s T h ey d eem ed

-
. .

u n n ecessary th e system ati c study o f th e exp er i en ce o f o ther fi rm s o r in ,

fact ev en o f th ei r o w n A s a r esul t J ersey s o rg an i z atio n al structure gr ew

’

, .
,

in an essen ti ally u n pl an n ed aa h oe w ay O n th e o th er h an d few if an y

’
, .
, , ,

o th er co m p an i es in th e O il i n du stry th o ugh t m o r e r ati o n ally ab o u t o rgan i

z atio n th an J er sey N o t o n ly w as th e J er sey C o m p an y th e fi r st m aj o r o il

.

fi rm to h ave fash i o n ed th e mo d er n m ulti d i visi o n al st ruc ture b u t it w as ,

al so o n e o f th e v ery fi r st A m er i c an en terpr i ses o f an y s o r t to do so .

 S E A R S R O E BUC K A ND C O M
,

PANY — DE CENTRALIZATI ON ,

P L A N N E D A N D UN P L A N N E D

CHA NG I NG STR A TE GY A ND S TRU CTURI

r ebuck d Co m p an y, on e o f th e n atio n s l argest an d

’
In 1
9 9
2 ,
S ea s, R o an

m o st pr o fi tabl e m ark eti n g co mp an i es, w as m eeti n g m an agem en t pro b

l em s sim i l ar to th o s e wh i ch du Po n t, G en eral Mo to r s , an d J er s ey S tan dard
h ad alr eady con fro n ted an d fo r m uch th e s am e r eas on s In 1 925 S ear s .
,

h ad star ted o n a n ew str ategy Up to th at ti m e it h ad s o ld o n ly th ro ugh

.
,

m ai l—o rder c atalo gu es T h en a d ecli n i n g m ark et an d th e r esulti n g th r eat

.

o f exc ess c ap ac i ty tur n ed it t o r etai l i n g t h ro ugh its o w n s to r es T h is fo r m .

o f exp an si o n r equ i r ed th e d ev el o p m en t o f n ew r es o urc es an d th e reo rien

tatio n o f ex i sti n g o n es T h e i n i ti al attem p t to c arry o u t th e n ew str at egy

.

wi th th e o lder, l o n g—establi sh ed structur e r ais ed i n n u m erabl e di fficulti es .

A s at Jer s ey an d th e o th er c o m p an i es th e add it i on o f li n es o f bu si
,

n ess at S ear s d em an d ed a r eadj u stm en t in th e r esp o n si b i l i ti es o f th e to p

ex ecu ti v es, a r ed efi n i ti o n o f th e l i n es o f au th o r i ty an d c o m m u n i c ati o n ,

an d th e d evelo p m en t o f n ew t yp es o f i n f o rm ati o n to flo w th r o ugh th es e

li n es .

S ear ss pro blems wer e sim pl er in m an y ways th an th o se o f J er sey S t an d

’

ard Its gr o w th c am e f r o m exp an d i n g its o w n r eso urces an d by bu i ld i n g

.

o r buy i n g its o w n sto r es an d n o t f ro m th e purc h asi n g an d c on tr o ll i n g

,

o f alr eady l arg e en terpr i ses as h ad b een l arg ely th e c ase at J er sey G en er al
, ,

Mo to r s an d even du Po n t Its acti vi ti es were n o t spread all o ver th e wo rld

, .

an d w er e co n fi n ed essen ti ally to o n e b asi c a c ti v i ty m ark eti n g Y et at , .

S ear s as at J er sey th e st ructur e n eces sary to m eet th e adm i n i str ati ve

, ,

n eed s o f a n ew str ategy w as s l o w in r each i n g its fi n al f o rm .

T h e r eason s fo r th e d el ay h o w ev er w er e qu i te d i ff er en t T h e execu ti v es
, , .

at S ear s li k e th o se at G en er al M o to rs an d du Po n t h ad a r ati o n al
, , ,

sy s temati c appr o ach to th e pr o bl em o f m an ag em en t T h ey stud i ed o rg an .

iz atio n fo r o rg an i z ati o n s s ak e as th o s e at J er sey d i d n o t T h ey pl an n ed

’
.

an o ver-all struc tur e to i n tegr ate an d m o b i l i ze all t h e r es o urc es o f th e

225
226 SE A R S ,
R OE BUCK A N D CO M P A N Y
co m pan y Bu t wh er eas th e sl o w structural a dj u stm en t at J er sey r es ul ted
.

f r om la ck o f an ex p li ci t pla n at S ears it cam e f r om th e ad o p ti o n of wh at

,

w as at fi r st an in co rr ect p l an wi th w r o n g o bj ecti v es Th e i n i ti al struct u ral .

plan pr o v ed in eff ecti ve b eca use its f r am er s di d n o t cl early defin e th e

ch an n els o f au th o ri ty an d comm uni cati o n an d di d n o t th in k thr ou gh
f ully th e a dmi ni st r ati v e r o le o f th e f u n cti on al d epar tm en ts th e n ew ,

m ul tif un cti on di v i si on s an d th e g en er al o fi ce Much o f th i s fail ur e in

, .
,

t urn cam e b eca us e th e o bj ecti v e w as t o r ed u ce costs r ath er th an t o m ai n

,

tain an d In cr ease th e v o lum e of th ei r busi n ess .

I n itial S tr a tegy an d S tr uc t u r e
An d er stan din g of th e pr o bl ems f acin g S ear s R oeb u ck i n 1 929
un ,

th e y ear it emb ar k ed o n th e m aj o r r eo rg ani z ati o n o f its a dmini str ati v e

str uct ur e — r eq uir es an an al y sis of b o th th e fas hi o nin g o f its earli er st rue

tur e an d th e d ev el o p m en t o f its n ew st r ategy Th e r eal st o ry o f th e .

?
pr esen t day co m p an y b egin s in 1 895 Befo r e thi s Ri ch ard S ear s h a d
—
,

so ld o n ly w atch es an d j ew elry by m ai l o rd er In t h at y ear Jul i u s R osen .

,

w al d an d h i s br o th er i n IaW A ar o n E N us b a um j o i n ed th e co m pan y
- o

, .
, ,

pr o vi din g th e cap i tal an d ex ecuti v e ab i lity t h at Se ar s n eed ed to m ak e

th e m o st o f th e o p p o rt u ni t y o ff er ed by m ai l -o rd er se llin g t o A m eri ca n

f a rm s an d vi ll ag es In th e f o ll o win g d ecad e th e com p an y s b u si n ess gr ew

’
.
,

en orm ous ly S ear s m ark et w as alm o st w h o lly in rural A m eri ca wh er e

.
,

th e p rim ar y r etail o u tl et r em a i n ed th e cr os sr oa ds gen er al st o r e wi th its

limi t ed sto ck of r el at i v ely hi gh —pri ced m erch an di se In hi s semi ann ual .

catal o gu e S ear s o ff er ed th e A m eri can f arm er a w i de v ari et y o f goo ds

,

an d b ecause h e purch ase d in lar ge qu an t iti es an d o f ten d i r ectly f rom

,

th e m an uf a ctu r er o fi er ed th em at a p ri c e l o w er th an di d th e l o cal m er
,

ch an ts an d sto r ek eep er s S ear s w as n o t t h e fi r st t o see th e ssi b ili t i es o f

.
p o

ma i l—o rd er selli n g Lo n g bef o r e h e began t o pe ddl e w at ch es M o n tgo m ery

.
,

Ward Co h ad co m e to d omi n ate th e busin ess Y et thr o ugh hi s ab ili ty

. .
,

to sto ck an d pr o m o te goo d s w an ted i n th e A m er i can co un tr y si d e S ears ,

w as abl e to surp ass hi s lar g est com peti to r in n et sal es j u st fi v e y ear s af ter
R o sen w al d h ad j o i n ed w i th hi m .

S ear s 5 p h en o m en al su ccess i n sellin g t o th e A m eri can f a rm er f o r ced

’

h i s C hi cago m ail -o rd er en terpri se to enl ar ge its f a ci li ti es an d per so nn el

r ap i dl y an d at th e sam e tim e to sy st em ati z e its buyi n g di strib u tin g
, , , ,

selli n g an d fi n an ci al a cti vi ti es S ear s a bri lli an t m erch an di ser

, .
,
b ui lt hi s ,

bu sin ess em p i r e by co n cen tr atin g o n sal es pr om o ti on In stim ul atin g th e .

d em an d fo r o ff erin g s in hi s catal o gu e h e w o rk ed v ery clo sely w i th Loui s

,

E A sh er M an ager in ch arg e o f th e A dv erti sin g an d Catal o gu e D epa rt

.
,

m en t w h o be cam e th e co m pa n y s G en er al M an a ger f r o m 1 9 06 to
’

,
C HA N G I NG STRA TEG Y A ND STR UCTURE 227

Th e fi lli n g of th e o rder s th at he an d A s h er so ef e f cti v ely gen erated w as

left to Ro sen wald .

Ro s en w ald w as m o r e i n ter ested in system in a dmi n i str ati v e str u ctur e —

— th an in sal es str ategy O f th e d ep ar t men ts h e h elp ed f ash i on th e buy

.
,

in g or M erch an di se D ep artmen t h ead ed by J Fl et ch er S k i n n er w as th e , .

,

mo st im p o rtan t Un der S k i n n er s g en er al di r ecti on c am e a l arge n u m b er

’
.

o f buy er s each h an dli n g a m aj o r l i n e an d each h av i n g a gr eat d eal o f

,

i n dep en den ce in s el ecti n g an d pr o curi n g at th e l o w est p o ssibl e pr i ces , ,

th e g oo d s th at w er e th en adv er ti sed in th e c atal o gu e .

Wh ere th e Merch an di se Dep ar tmen t pro cur ed th e goo d s an d th e ,

A dv ert i si n g an d Catalo gu e D ep ar tm en ts so ld th em th e O p er ati n g D e ,

art men t w as exp ec ted to t th em fr o m th e pr o duc er o r w h o l esal er t o

p g e

th e cu sto m er T h e n eed s whi ch ar o se f r o m th e h an dli n g o f th e ev er

.

i n cr easi n g n um b er o f o rd er s p o uri n g i n to Ch i cago — so m etim es at th e

rate o f a h u n dr ed th o u san d a day — at fir st br o ugh t th e com p an y to
exp an d i n g it s p h y si cal r eso urc es an d in 1 0 it b g an th e c o n str uc ti on o f
9 5 e ,

a h ug e f o rt y -a cr e pl an t o n H o m an A v en u e in West C h i c ago a pl an t th at ,

sti ll h o u ses its l argest m ai l-o rd er pl an t an d its gen er al o ffices N ext cam e .

a sy stem ati zi n g o f pr o c edur es In 1 06 an d 1 0 t h O p er ati n g D ep ar t

9 9 7 e .
,

m en t s h ead O tto C D o er i n g assi sted by an abl e staff w o rk ed o u t a

’

, .
, ,
”
preci se detail ed an d v ery effi ci en t s ch edul e system wi th i n th e m ai l
, ,
“

3
o rd er pl an t T h ey d evelo ped n ew s p eci al m ach i n ery to pr o c ess th e o rd er s
.

an d mad e m o r e c ar ef ul an d r ati on al u se o f th e o p er ati n g p er so n n el T o .

c arry o u t its r esp o n sib ili ty fo r h an dli n g o f i n b o u n d an d o u t b o u n d

“
-

o rd er s an d m erch an d i se t h e D ep ar tm en t w as g i v en sup erv i si o n an d

,

co n tr o l o v er th e flo w o f go o d s from th e pr o duc er to th e con sum er i n clud ,

4
in g tran sp o rt ati o n an d sto r ag e T o assi st in carry i n g o u t th ese resp o n .

sib ilities D o er i n g bu i l t up a f ai rly ex ten si v e S upply D ep ar tm en t an d a

,

l arge o n e for T r affic .

T h e equ i p m en t an d p er so n n el r equi r ed to h an dl e th e ev er -i n cr easi n g

vo lume o f bu si n ess call ed in t ur n fo r m o r e wo rki n g c ap i tal T h e fi n an ci al
, , .

n eed s c o uld n o l o n ger b e m et by a few i n d i v i du al s o r f ami li es S o in .

,

1 906 R o s en w ald w en t to a b o yh o o d f r i en d H arry G o ldm an o f G o ld m an , , ,

S ach s 8 : Co m p an y of New Y o rk Ci ty A t G o ld m an s sugg esti on th e

’
.
,

S ear s fi n anci al struct ur e w as t e-f o rm ed an d s to ck w as o ff er ed to th e

publi c th r o ugh G o ldm an S ach s an d al so th r o ugh L eh m an Br o th er s
, ,
.

Th e co m p an y b ec am e c ap i ta li z ed at $4 0 m i l li o n S ear s an d R o sen w ald ,

con ti n ui n g to con tr o l th e l argest sh ar e o f th e n ew s to ck A B o ard o f .

Di recto r s w as fo rm ed i n cludi n g S ear s R o sen w ald an d A lb er t L o eb

, , ,
.

Lo ch — o r i g i n a lly th e fi rm s l awy er — b ec am e o n e o f its th r ee sen i o r

’

ex ecuti v es fir st a s S ecr etary

, th en after 1 90 8 as T r easur er T h e o th er
, .

Di r ecto r s w er e r epr esen tati ves o f th e i n v estmen t h o u ses an d tw o o f th e

22 8 SEA RS , ROE BUCK A ND CO MPA N Y
5
co mp an y s fin an ci al Ofi cers Th is excur si on i n to publi c fin an cin g led
’
.

al so to th e gro w th o f th e T r easur er s an d S ecr et ary s Dep ar tmen ts

’ ’
.

Exp an si on en co ur aged ver ti c al in tegr atio n Wh en pr o duct s co uld n ot .

b e purch ased at a sui table pr i ce th e c o mp an y o ften bo ugh t an i n terest in

,

a f ac to ry th at m ad e th ese goo d s By 1 906 S ear s R oebuck h ad a fi n an ci al

.
, ,

i n vestmen t in at l east n i n e facto ri es by 1 90 8 mo r e th an twen ty an d by

, ,

1 9 1 8 o v er th i rt y T h ese n o t o n ly m ad e dur abl e go o ds

. l ike far m imp le ,

m en ts an d sewi n g m ach i n es b u t al so tur n ed o u t S h aped woo d f ur n i tur e

, , ,

cl o thi n g an d sh oes Sh o r tages dur i n g World War I in cr eased th e n eed

, .

f o r co n tr o l o v er so urc es in o rder to h av e an assur ed supply A f ter th e .

depr ession o f 1 92 1 dr am ati cally en ded th ese sh o r tages an d m ade suppli es

r eadi ly avail able th e n um b er of f actor i es wh o lly o r p ar ti ally con tr o lled
,

d eclin ed .

S ear s s p o li cy to w ar ds f acto ry o wn er sh i p ch an ged li ttl e o v er th e y ear s

’
.

A s B o r i s Emm et an d Jo h n E Jeu ck h av e p o i n ted o u t in th ei r excell en t

.

h i sto ry o f th e co mp an y :

In its p art icip ation in f actory ow n e s r hip , h ew

th e com an p y i
co n t n u e d to

closely t o th e l in e laid d o w n b Ri h a rd S e r t f a t o ry o w n ershi p en ter

y c a s : o c

o n ly w h en co mpelled to an d also to r estr ict its in ter es t to t l

5 p
0 e r cen o r es s

w h er ever f easib le T h e fir m w as eager to do as little o f its ow n m an u fac

.

”
u rin g a s r eas on ab ly p ossib le It so u h t in stead t o f h d r “

g .
get its oo t in t e oo

in o rder to in su r e a su pp ly su fi cien t f o r its o w n n eeds an d to con tro l

qu ali ty (ap p aren tly a secon dary consideration for m an y years) b u t preferred
th at th e f acto ry sell som e o f its o u tp u t to o th er co n cern s in o rder to insu r e

th at it w o u l d op er ate o n a co mp etitiv e, eco n o mi cal b asis Th is w as n o t, .

h o w ever, alw ays p o ssib le 6

.

Th e b asi c r easo n th en fo r v er ti cal in tegration at S ear s w as as it h ad been ,

fo r D ur an t an d at J er sey S tan d ar d essen ti ally d efen si ve — th at is to

, ,

h av e av ai l abl e an adequ ate supply o f sto ck at a r easo n abl e pr i ce .

S h o r tly after th e p an i c o f 1 907 S ear s r esi gn ed T h e br i ef b u t s h ar p

, .

bu si n ess depressi o n co mi n g sh o rtly after th e comp an y h ad b een r efin an ced

,

an d its admi n i str ati v e struc tur es o rg an i zed al o n g th e li n es o f a gr eat

m o der n en terpr i se h ad slo w ed o rder s f o r th e fi r st tim e si n ce 1 895 To

,
.

m eet th e d ecli n e o f bu si n ess Ro sen wald urged a p o li cy o f r etr en ch m en t

, ,

wh i l e S ea r s vi go ro u sly d em an ded i n cr eased sal es pro m o ti on T ro ubl ed .

by th is co n tr o ver sy suff eri n g i n cr ea si n gly fr o m p oo r h ealth an d a b it

, ,

b ewi lder ed by th e si ze an d co m pl exi ty o f th e o rgan i z ation h is exp an si ve

i d eas h ad en co uraged S ear s d eci d ed in No vemb er 1 908 to r etir e from
, , ,

acti v e b u si n ess li fe A f ew m o n th s l ater h is seco n d in co mm an d A sh er

.
, , ,

al so l eft th e co m p an y Wi th h is d ep a r tur e th e A dv er ti si n g an d C atal o gu e

.
,

D ep a rt m en ts wer e p erm an en tly pl aced u n der S k i n n er s M erch an di si n g

’

D ep ar tm en t .
C HA N G I NG S TRA TEG Y A ND STR UCTURE 229

S ear s, Ro ebu ck, un der Juli u s Ro s en w ald th e n ew Pr esi d en t co n ti n u ed

, ,

to gr o w r ap i dly p ar ti cul arly dur i n g th e pr o s p er o u s w ar y ear s Fr o m 1 90 8

,
.

u n til 1 92 1 each year saw l arger vo lume an d pro fi ts S k i n n er c am e to h ave

,
.

un der h im m o re an d mo r e buyi n g dep artm en ts an d th e si ze o f th es e ,

dep ar tmen ts gr ew r ap i dly as o rder s trebl ed an d qu adrupl ed duri n g th o se

year s Do erin g s O p er ati n g Dep artm en t k ep t ap ace of its ever i n cr easi n g
.
’
-

dem an ds Wh i le S k i n n er an d Do er i n g admi n i ster ed th e co m p an y s day

.
’

to —day o p er ati o n s A lb ert Lo eb th e c o mp an y s T r eas ur er c am e to m ak e

’

, , ,

n early all th e en tr epr en eur i al d ec i si o n s Fr o m l ate 1 9 1 6 u n ti l 1 920 R o sen

.

Wald h ad b ecome alm o st completely i n vo lved in ch aritable an d w ar work ,

an d th e b an k er s G o ldm an an d L eh m an app ear to h av e gi v en th e th riv

, ,

in g com p an y l i ttl e d i r ec t atten ti on .

Th e mo st si gn i fi c an t d evel o p m en t in th es e y ear s w as th e geo gr ap h i c al

exp an si o n t o o th er p ar ts o f th e c o u n t ry T h is gr o w th o f pl an t an d p er
.

so n n el bro ugh t S ear s s fir st i m p o r t an t st ructur al r eo rg an i z at i o n Th e

’
.

fi r st br an ch m ai l -o rd er h o u s e w as est ablish ed in 1 906 in D all as T ex as , ,

an d th e sec o n d o p en ed in S eattle in 1 9 1 0 w h i l e a th i rd pl aced u n d er th e

, ,

s up ervi si o n of Jul i u s son Les si n g J Ro sen wald w as set up in Ph iladel

’

, .
,

ph i a in 1 920 T h e o p en i n g o f th e Ph i l adelp h i a sto r e led fo r th e fi r st ti m e

.
, ,

to an ev alu ati o n o f th e r el ati o n s b etw een th e br an ch h o u ses an d th e m ai n

Ch i c ago pl an t T h e D all as an d S eattl e br an ch es h ad r em ai n ed qu it e

.

au to n o m o u s T h i s au t o n o m y h o w ev er w as n o t sp ec i fi cally pl an n ed
.
, , In .

th e w o rd s o f Em met an d Jeu ck :

Di stan ce alo n e ten ded to all o w th em [ th e b ran ch es ] a f r eer r ein th an

o r igin ally in ten ded, becau se d ep ar tmen t h ead s an d o th er ex ecu tives in th e
”
p aren t-h o us e Simply co u ld n o t w o rry ab ou t b ran ch es so far aw ay T h ere .

w as n o system u n der w h ich th e h ead o f, say, th e clo th in g dep artm en t in

Ch i cago received an y credit fo r th e p erfo rm an ce o f th e cloth i n g dep artm en ts
in Dal las o r S eattle So m e efi orts were m ade to syn ch ro n i ze procu r em en t,
.

b u t n o step s w ere taken to m ak e th e syn ch r on i z atio n r eally eff ectiv e 7

.

Th e lo o s e, i nf o r m al, d ecen tr ali zed struct ur e h ad br o ugh t so m e co n fu si o n ,

in effi ci en ci es, an d u n n ecessary comp etiti o n in pr o cur em en t o f go o d s .

S upplier s w er e oft en u n abl e to d i sti n gu i sh b etw een th e o rd er s fr o m

th e di ff er en t h o u ses L ack o f c o rr el ati on b etw een c at al o gu es led to err o r s
.

in d es cri p ti o n an d in th e pri ci n g o f merch an dis e .

Th e n eed fo r eff ec ti ve coo rdi n ati o n an d sup ervi si o n o f th e br an ch es

led to a cl ar i fi c ati on an d ti gh ten i n g o f th e li n es o f comm u n i cati on an d
au th o r i ty b et w een th e h eadqu ar ter s o f th e f u n c ti o n al d ep ar tmen ts at

Ch i c ago an d co mp a r abl e acti viti es in th e fi eld Ro sen w ald at fi r st th o ugh t.

th at th e Ph i l ad elp h i a pl an t co uld b e m an aged m uch li k e th e o th er t w o .

Bu t th e n ew G en er al M erch an di s e M an ag er, w h o h ad s ucc eed ed to th e

23 0 SEA R S , R OE B UCK A ND C O M P A N Y
po st on S kinn er s d ea th in 1 9 1 7 str o n gly di sa gr eed He s ub mit ted a
’

, .

d etai l ed r epo rt po in tin g o u t th e curr en t a dmin istrati ve probl ems and

”
pr o po sin g as a r em edy th e in stitu ti on o f a cen tr al co n tro l sy st em
, ,
“
.

Un d er thi s system wh i ch Rosen wald an d th e o th er seni o r ex ecuti ves

,

a ccep ted th e M erch an di se Depa rt m en t at Chi ca go w as t o h av e f ull

,

au th o r i ty an d r es po n sib i l i ty f o r th e lin es o f m er ch an di se in th e br an ch es

as w ell as th e Ch i ca go h o u s e Th e m erch an dise m ana g er in ch arge o f ea ch

.

m aj o r lin e o f goo ds w as to co n tr o l th e d ev el o p m en t o f su ppli es th e ,

buyi n g an d g en er al m erch an di sin g an d pr om otio n al po li ci es His w o uld

, .

b e th e fi n al say as to qu ali ty pri ce th e so ur ce o f supply an d catal o gue , , ,

m at eri al Th e Ch i cago ca tal o gu e edi t o r n ow be cam e r espo n sible f or all

.

catal ogues an d De er in g s O peratin g Depa rtm en t r ecei v ed f ull con tro l

,
’

o v er th e br an ch h o us es o pe r at i n g pr oced ur es an d m et h o ds His S upply

’
.

D ep art m en ts pur ch ased th e equip m en t an d st o ck n eeded to o pe rate th e

h o us es an d hi s T r affic D ep artm en t t o h elp gui d e th e fl ow o f g oo d s T h e .

Co m p tr o ll er s D ep artm en t w as h eld r esp o n sib l e f or all a cco un ti n g an d

’

o th er fi n an ci al pr o cedur es i n th e br an ch h o uses T h e au th o ri ty of th e .

br an ch Man ag er on e ex ecu ti v e l ater poi n ted o ut appli ed o n ly to th e

, ,
“

r esp on sib ili ty f or main t enan ce o f in v en to ri es an d av ai lab ili ty o f goo ds

8 ”
f or cust om er o rd er s By this fi r st d efin i ti on of th e r elati o n s bet ween
.

th e c en t r al o fi ce an d th e br an ch mai l - o rd er h o u ses s uperv isio n an d ,

co n tr o l o v er th e a cti viti es o f th e co mp an y s b asi c f un cti on s purch asin g

— ’

sell in g di st ribu ti o n an d fi n an ce
,
—
, b ecam e hi gh ly cen tr alize d in Chi ca go .

Th e y ear af t er th e di fl er en t d ep artm en tal h eadqu art er s h ad gain ed

a dmi ni str ati v e con tr o l o v er th eir fi eld a ct i vi ti es th e com p an y s cen tr al
’

o fli ce t oo k st ep s t o acqu i r e so m ewh at co m p ar abl e co n tr o l o f th e w o rk o f

th e l arges t m o st a cti v e an d m o st co m pl ex of its f u n ct i o nal un i ts th e

, , ,

M er ch an di se D ep artm en t A s th e comp an y s busin ess exp an ded af ter

.
’

1 90 8 th e h ea ds o f th e man y buy in g d ep art m en ts becam e al mo st by

, ,

n ecessi ty i n cr ea sin gly in d epen d en t S k in n er an d h i s successo r h a d li ttl e

, .

tim e t o o v er see th e m yri ad t r an s act i on s th at th e buy ers car r i ed o n Th e .

l ogi c o f th e si tuati on led Ro sen wal d an d Lo eb t o l oo k on S ear s Roebuck ,

”
a f ed er ati on o f m erch an ts F o r all i n ten ts an d purp oses ea ch buy i n g
“
as .
,

dep artm en t b ecam e a fr ee agen t as l o n g as it sh o w ed a pro fi t Th e ,

.

M er ch an di se D ep art men t m a de li ttl e eff o rt to co ordin ate appr ai se an d , ,

plan for its m an y subdep art men ts O n e ex ecuti v e expr essed b o th th e real .

si tua ti o n an d th e w a i n w h i ch i t h d b e co m d efi n e d w h en h e wr o te
y a e

in 1
9 18 :

A n o th er f ea tu r e is th e confi den ce we place in th e lea ders o f o ur dep a rt

m en ts . Ea chdep artm en t man ager is gi v en a large m ea sur e o f resp o n o

si b ili ty in dev el opin g his dep artm en t w ork acc ordi ng to h is ab ility . Th e
C HA NG I NG STRA TEG Y A N D STR UCTURE 23 1

b u sin ess is h is b u sin ess He is n o t h edged w ith lim itation s, su ch as du ll th e

.

i n i ti ati ve Th e resu lt is th at th ese m en h av e r esp o n ded w ith th eir b est

. .

We h ave app lied th e prin ciples o f dem o cracy to a comm ercial en ter
prise .
9

A b o ut th e o n ly si gn i fi c an t r estr ai n t o n th e buy er s w as th e testi n g l ab o r a

to r i es T h i s si n gl e i m p o r tan t staff o rg an i z ati o n at S ear s, fo r m ed in 1 9 1 2 ,
.

t ri ed h e m erch an d i se d ep ar tm en ts to m eet m i n i m u m stan d ard s

to get t

an d to see th at th e c atal o gu e cl ai m s w er e v er i fi ed by a c tu al p er fo r m an c e .

T h e d epr essi o n o f 1 92 1 d em o n str ated at S ear s m uch as it d i d at G en er al ,

Mo to r s, th e d an ger s o f th e l ack o f o ver-all admi n i str ati v e sup ervi si on .

In b o th c o m p ani es m ark et
co ll ap se cr eated v ery ser i o u s i n v en to ry
, th e

exces ses A n ti ci p atin g a c o n ti n u ed b o o m af ter th e w ar S ear s s buy er s

’
.
,

li ke th e co mp ar ably i n dep en d en t D i v i si o n M an ag er s at G en er al M o to r s
co n ti n ued to purch as e heavi ly In ven to ri es wh i ch at th e en d o f 1 9 1 9 w er e
.
,

valued at r o se to by th e fo llo wi n g Ju n e T h en in
?0

th e s umm er an d f all c am e th e s h arp d ecl i n e o f bu si n ess an d th e r ap i d

falli n g o ff o f pr i c es By th e en d o f th e y ear S ear s s i n v en to ry w as v alu ed

’
.
,

at T h e co n ti n u ed r ecessi o n in 1 92 1 m ad e th e si tu ati o n ev en
mo e e o
r s r i u s a d
n pl c
a e d th e m a i l -o rd er fi rm in as pr ec ar i o u s a fi n an ci al

po siti on as G en er al Mo to r s h ad b een a few m o n th s b efo r e O n ly Juli u s .

Ro sen w ald s pledge o f o u t o f h is o w n p er so n al f o r tu n e

’

p re

ven ted th e b an k er s fro m tak i n g o ver th e com p an y .

Ro s en w ald an d L o ch r esp o n d ed to th e d epr essi o n by cu tti n g co sts

wh er ever p o s sibl e an d i n creasi n g th e co n tr o l o ver th e am o u n t o f go o d s
th e buy er s pur ch ased T h ey app o i n ted a n ew G en er al M erc h an di si n g
.

Man ager Max A dl er w h o too k ch arge o f th e pr o gr am o f r etren ch m en t

, , .

O n e ac ti vi ty to f all b efo r e A dl er s eco n o m y ax e w as th e testi n g l ab o r ato r i es

’

wh i ch wer e dro pp ed in 1 922 A l th o ugh th is r em o v ed o n e r estr ai n t o n

.

S ear s s buyer s A dl er s o ffi c e i n cr eased its co n tr o l o ver th ei r i n v en to ry an d

’ ’

fi n an ci al p o l i ci es an d pro c edur es T h e actu al h i sto r i c al d ev el o p m en t o f

.

th e n ew i n v en to ry c o n tr o l s an d budg etar y tech n i qu es is n o t cl ear f r o m

exi sti n g pr i n ted m ater i al s an d Emm et an d Jeu ck say al m o st n o th i n g o n

,

thi s p o i n t .

In th ese y ear s h o w ever th e Co mp tro ll er s du ti es en l arged i n cr easi n gly

’

, ,

so th at w ell b efor e th e en d o f th e d ec ad e th at ex ecu ti v e r an k ed as th e

sen i o r fi n an c i al o ffi cer at S ear s Wi th i n th e Merch an di se D ep artmen t

.
,

th e G en er al M erch an d i se C o m p tr o ll er s o ffice b ec am e o n e o f t h e m o st
’

imp o r tan t adm i n i str ati ve u n its Rep o r ti n g di rectly to th e V i ce Pr esi d en t

.
-

in ch arge o f M erch an di se th e G en er al M erch an d i se Co m p tr o ll er h ad

, ,
”
by 1 929 b eco m e r esp o n sibl e fo r all m ai l o rder an d r etai l i n ven to ri es
,
“ 11
.

Wo rk i n g clo sely with o th er sen io r execu ti ves at h ead q u ar ter s h e prep ar ed ,

23 2 SEA RS , ROE BUCK A ND CO M P A N Y
est im ates o f sales an d in ven to ri es Budgets b ased o n th ese m ark et estimates
.
, ,

w er e dr awn up by th e buyi n g d ep art m en ts an d r equi r ed th e appro val

o f b o th th e seni o r M er ch an di se o ffi cer an d hi s Co m p tr o ll er T h e G en er al .

M er ch an di se Co mp tr o ll er w as al so r esp o n sible f o r th e w atch in g of “

surpluses an d th e di sco n ti n u i n g o f m er ch an di se T h u s th i s o ffi ce ca me
.

t o pr o vi d e ch an n el s o f a dm i ni str ati v e superv i si on an d co n tr o l an d at th e

sam e tim e d ev el o p ed d ata to fl o w t hr o ugh th ese ch an n el s In th ese sa me .

y ear s th e O p er ati n g D ep ar tm en t cam e to b e h eld acco un tabl e fo r dr aw

,

in g up estim ates an d budgets o n o p er ati n g an d cap i t al expen di t ur es .

If th e d eb acl e o f 1 92 1 w as n o t a di r ect cau se f o r th e d ev el o p m en t o f

stati sti ca l an d fi n an ci al c o n tr o ls , c ert ain ly th e l esso n s it t augh t pl ayed a
m aj o r p art in sh ap in g th em In th e 1 920 s estim at es by buy er s an d th e
’
.
,

cen tr al o ffice seem to h av e b een ed u ca ted gu esses b ased o n p ast exper i en c e .

It w as o nl y in th e 1 g3 o s th at S ear s b eg an em pl o y i n g t r ain ed econ omi sts

’

to m ak e car ef ul an d m o r e so p h i sti ca ted an aly ses o f f u t ur e d em an d an d

eco n om i c an d fin an ci al c o n di ti o n s N ev er th el es s thi s c o n tr o l o v er in v en
.
,

t o r i es m ea n t th at th e M e r c h an di s e D ep ar tm en t — its C o m p tr o ll er w o rk
in g w i th th e buy er s — h ad tak en o v er th e f un ct i o n o f coo rdin ati n g th e
fl o w o f pr o duc t fr o m pr o duc er to ul ti m at e co n sum er f o r th e m an y lin es
h an dl ed an d th at th e r ate o f fl ow h ad co m e t o b e b as ed o n estim at ed
m ar k et d em an d .

By 1 924 th en S ear s h ad wo rk ed o u t a c en tr ali zed fun cti on ally dep art

, ,

m en tali d ze s t ruc t ur e f or i t s m ai l —o rd er bu sin ess T h e a dm i ni str ati on o f

.

th e purch asin g o f th e m er ch an di se o f its sal es pr o m o ti o n

, an d o f its ,

di stri bu ti o n w as cen tr ali zed at Ch i ca go as w as th e co n tro l o v er all

,

fi n an ci al t r an sacti o n s an d pr o cedur es as w ell as th e sup erv i si o n o f th e

facto r i es th at S ear s o wn ed an d o p er ated Wi th i n th e M er ch an di se D ep art
.

m en t th e au to n o m y o f th e buy er s w as li m i ted by th e am o un t o f goo d s

,

th ey co uld purch as e an d th e m o n ey th ey mi gh t sp en d T h ey sti ll h ad littl e .

o v er si gh t as t o j u st wh at th ey c o uld buy T h e C atal o gu e an d A dv erti sin g

.

D ep art m en ts c o n ti n u ed to sup erv i se th eir r especti v e acti vi ti es in th e

differ en t m ai l -o rd er h o u ses T h e O p er ati n g D ep art m en t r em ai n ed ac
.

co u n t abl e f o r th e a ctu al fl o w o f pr o duct f r o m th e pr o d u cer to th e co n

sum er ; w h i l e th e fi n an ci al d ep ar tmen ts b esi de b ei n g r espo n sibl e for

,

acc o u n ti n g
, cr edi t an d o th er fi n an ci al tran sacti on s w er e b egin n i n g to
, ,

d ev el o p th e fi n an ci al an d stati sti ca l i n fo rm ati o n n ecessary to assur e effec

12
ti v e co mm u n i ca ti o n an d c o n tr o l w i th i n th e o rg an i z ati o n Th e sen i o r .

ex ecu ti v es m u st al so h av e f o u n d th ese l att er d ata ex tr em ely u seful fo r

appr ai si n g th e p erf o r m an ce o f th e buy i n g an d o p er ati n g d ep ar t men ts an d

in m ak i n g po li cy fo r th e c o m p an y as a w h o l e Ro sen w ald an d th en L oeb

.
,

in co n sul tati on wi th th e h ead s o f th e fu n c ti o n al d ep artm en ts carri ed ,

o u t o v er all appr ai sal an d set br oad po li ci es an d pr o cedur es

-
.
C HA N G I N G S TR A TE G Y A ND STR UCTURE

Th e N ew S trategy
In 1 925 , i n i ti ated a str ategy th at qu i ckly p u t an exc essi v e str ai n
S ear s
o n th e ex i sti n g struct ur e T h e en t r an c e i n to d i r ec t r et ai li n g
. th e m o s t ,

si gn ifi c an t si n gl e step in S ear s s h i sto ry w as th e w o rk o f a gro up o f n ew

’

to p m an ag er s A fter th e h ard ti m es o f 1 92 1 R o sen w ald b eg an l o o k i n g

.
,

fo r a successo r to tak e b o th h is pl ace an d Lo eb s He h i m self h ad l o st clo se

’
.

to uch w ith t h e bu si n ess dur i n g th e w ar y ear s wh i l e L o eb su ff er e d f r o m ,

ser i o u s h ear t tr o ubl e aft er 1 92 2 R o s en w ald a cqu i r ed a h i gh r esp ect fo r

.

th e adm i n i str ati v e ab i l i ti es o f r ai lr o ad m en an d fi n ally ask ed C h arl es M .

Ki ttle Executi v e V i ce-Pr esi d en t o f th e Il li n o is C en tr al R ai lro ad to b e

, ,

th e n ew P r esi d en t at S ear s A t t h e sam e ti m e h e app o i n ted R o b er t E

.
, .

Woo d a V i ce—Pr esi dent .

Wo o d cam e d i r ectly from M o n tgo m ery Ward w h ere h e h ad t ak en ,

th e p o st o f G en er al M erch an d i se M an ag er after l ea vi n g th e A r m y in

1 9 1 8 D ur i n g th e w ar th i s r el ati v ely y o u n g ar m y o ffic er h ad bu il t up an

.
,

i m pr essi ve r eco rd as th e d i r ecto r o f purch asi n g an d sto ri n g all arm y

suppli es excep t o rd n an c e an d ai rcr aft Wo o d h ad r each ed th i s s en i o r .

p o si ti o n aft er a r ap i d r i se fr o m th e r an k o f m aj o r to th at o f acti n g
qu ar term aster gen er al h an dli n g o n th e w ay v ari o u s supply purch asi n g
, , ,

an d t r an sp o r tati on du ti es A gr adu ate o f West P o i n t in 1 900

. h e h ad ,

h ad ten y ear s du ty in Pan am a b efo r e th e w ar h elp i n g to bu i ld th e c an al

’

, .

By 1 9 1 3 h e w as a c aptai n an d ch i ef qu arterm aster an d th e go o d r i gh t

,
“

G eo rg e W G o eth al s L eav i n g t h e can al in

”
a rm o f th e c an al s b u i ld er
’
.
, .

h e w o rk ed f o r a ti m e in a m i n o r ex ecu ti v e b h d P
1 91
5 , jo a t t e u o n t

C o m p an y an d th en at G en er al A sp h al t T h e en tr an c e o f th e Un i ted .

S tates i n to th e w ar br o u gh t h im b ack to th e A r m y w h er e h e w as so o n ,

serv i n g ag ai n u n d er G o eth al s th e A r m y s D i r ec to r o f P urc h ases S uppli es

’

, , ,

a n d T r an sp o r t ati o n War s ervi ce in turn led to th e p o si ti o n at Mo n t

.
, ,

go m ery Ward fo r R o b er t J T h o rn e l o n g o n e o f th e leadi n g execu ti ves

, .
,

in th at m ai l—o rd er h o u se h ad b een G o eth al s sen i o r c i v i l i an as si st an t

’

, .

A t M o n tgo m ery Ward Wo o d b eg an t o advo c ate a n ew bu si n es s str a

,

tegy M o r e th an an y o th er m ai l -o rd er ex ecu ti v e o f th e ti m e h e w as aw ar e
.
,

o f th e i m p ac t o f i n cr easi n g urb an i z ati o n a n d o f th e c o mi n g o f th e au to

m o b i l e o n th e n ati o n al an d p ar ti cul arly th e m ai l-o rd er m ark et Th i s

, , .

a w ar en ess app ar en tly c am e f r o m an o dd p assi o n fo r r ead i n g th e S tatistical

A b stract of th e Un ited S tates d ev elo p ed dur i n g h is o ff h o ur s in Pan am a

, .

S uch stati sti c s em p h asi zed Wo o d to ld h is co ll eagu es at Wa rd s th at th e

’

, ,

Un ited S tates w as rap i dly b eco m i n g an urb an n ati o n S i n ce th e m ai l —o rder .

buyer s li ved in th e rur al ar eas Ward m u st a dj u st i tself to th es e ch an ges

,
.

Mo reo ver th e m ass pro du ced au to m o b i le w as m ak i n g it p o ssi ble fo r th e

,
-

farm er to get to to wn m o r e easi ly an d to buy f ro m a m uch br o ad er

23 4 SEA R S , R O E BUCK A ND C O M PA N Y
asso t r men t o f goo d s th an w as a a
cr o s sro ads gen er al st o re v i l abl e at t he .

Woo d po in t ed o u t in O ct obe r 1 92 1 t o Th eo d o r e Merseles Ward s Pr esi ,

’

d en t th at ch ain sto r es lik e J C P en n ey w er e al r eady begin ni n g to explo it

, . .

t h i s sm all t o w n m ark et -
13
Wi th its exi stin g bran ch h o us es as di stri butin g
.

po in ts its hi ghl y d ev el o pe d pur ch asin g o rgani zati on an d its l o n g—estab

, ,

lish ed r ep u tati on M on tgo m ery Ward c o ul d easily co m pete w i th Woo d

, ,

i n si sted th e ch ai n sto r es in an y m ark et

, .

Merseles p ai d li tt l e att en ti o n to Woo d s pro po sal s Earli er in th at ’

.

depr essi on yea r M o n tgo m ery Ward h ad set up o utl et sto res in its m ail
,
“ ”

o rd er pl an t s a s a w a
y t o r e du ce i n v en t o r y T h en i t o pe n ed tw o suc h .
,

st o r es o u tsi d e o f th e m ail -o rd er pl an ts Th e co m pl et e f ai lur e o f th ese .

sto r es m a
y h av e tu r n ed M e r sel es a g ai n st W oo d s pr o p o sa l s In an y c a s e
’
.
,

Wo o d an d Merseles co n tin u ed in co nfli ct o ver exp an si on an d o th er

li ci es S o in 1 2 G n er al Woo d l eft M o n tgo m ery Ward
p o .
9 4 e , , .

R o sen w ald in ter est ed by Wo o d s i d eas o n r etai l a ct i vi ti es ask ed hi m t o

’

j o in S ear s He wo uld n o t tak e an y o th er ex ecuti v e s pl ac e b u t wo u ld

.
’

co m e as V i c e Pr esi den t in ch ar ge of F act o r i es an d R etai l S to r es Th e

-
.

f act o r i es h i th ert o un d er th e M erch an di se D ep artm en t w o ul d h av e th ei r

, ,

o w n sep ar at e d ep art m en t al o rg ani zati o n N ow S ear s h ad a r etai l o fi ce .

a l so ,if n o r etai l sto r es .

Woo d b egan at o n ce to pl an S ears s m o ve in to th e n ew t ype of m arket ’

in g A g ai n h e m et w i th st r o n g o ppo si ti o n fr o m th e o ld er m ai l-o rder

.

ex ecu ti v es w h o w er e m o r e in ter est ed in exp an din g th ei r establis h ed busi

,

n ess In th e mi d t w en ti es in f act S ea r s o p en ed six m o r e m ai l-o rd er h o uses

.
-
, , .

A s h e h ad d o n e at Ward Wo o d str essed th e si gni fi can ce th at th e gr o win g ,

ci t y po pul ati o n an d th e m ass pr o duc ed au to m o b il e w o ul d h av e f o r th ei r -

m ar k et Th e p o st w ar agr i cu l tur al d epr es si o n m ad e hi s argu men ts sti ll

.

m o r e c o n v i n cin g S i n ce 1 92 0 f ar m in co m es h ad dr o p p ed fr o m o ver
.
,

?"
$ 1 7 b il l i o n t o b illi o n If th e n ew sto r es w er e c on cen tr ated in l arge
ci ti es b e f u rt h er ar gu ed th ey w o uld n o t cu t i n to th e exi sti n g m ai l-o rd er
, ,

bu si n ess N ev ert h el ess in getti n g th e r et ail pr o gr am u n d er w ay th e

.
, ,

str o n g suppo rt o f Ki ttl e an d Jul i u s R o sen w ald w er e un d o ub t edl y m o r e

im p o rt an t t o th e G en er al th an h is d em o n str at ed ar gum en ts abo ut th e

po ten ti al d ecli n e o f th e m ail -o rd er busi n es s an d th e th r eat o f un u sed
r eso ur ces .

T h en in J an u ar y 1 92 8 m uch to h is o w n surpr i se Woo d f o u n d h im self

, , ,

r u n ni n g th e co m p an y w i th hi s o w n h an d p i ck ed sub o rdi n ates Ki ttl e di ed - .

sudd en ly o n J an u ary 2 Wh en R o sen wal d app o in ted Woo d Pr esi den t

.

ni n e d ay s l at er D o er i n g an d A dl er imm edi at ely r eti r ed

,
Ea ch o f th em .

h ad exp ected to b e gi v en th e po si ti o n Wood an d Ro sen w ald th en pl aced .

th e exp eri en ced D o n ald M N el so n a sea so n ed m erch an di se r w h o star ted .

,

in 1 9 1 2 as a ch emi st in th e t es ti n g l ab o r ato ri es in A dl er s jo b as h ea d
’

,
C HA NG I N G S TRA TEG Y A N D S TR UCTURE 23 5

o f th e Merch an dise Dep artmen t an d bro ugh t in Th eo do re V Ho us er .

,

w h o h ad w o rk ed w i th Wo o d at Mo n tgo m ery Ward to b e Nel so n s

’

L essi n g R o sen w ald to o k D o erin g s pl ace as th e h ead o f O p er a

15
assi stan t
’
.

ti o n s T h e yo u n ger Ro s en w ald c o n ti n u ed to sp en d m o st o f h is tim e in

.

Ph i ladelp h i a wh er e h e h ad b een M an ager o f th e br an ch

,
m ai l o rd er
-

h o u s e si n c e its o p en i n g in 1 920 His as si stan t T h o m as J Car n ey a ct u all y

.
,
.
,

h an dled m o st o f th e O p er ati n g D ep artm en t s admi n i str ati o n fo r L essi n g

’

Ro sen w ald w i th Wo o d n o w b ecam e co n cer n ed w i th l o g term en tr e

, ,
n —

ren eurial m atter s In th e fi n an c i al d ep ar tm en t s Em i l J P o ll o ck b ec am e

p .
, .

th e Co m p tr o ll er an d sen i o r fi n an ci al o fficer wh i l e R o sen w ald b eg an a ,

search fo r a n ew T r easur er N o o n e to o k Woo d s f o rm er p o st as V i c e

’
.

Pr esi d en t in ch arge o f F act o r i es an d R etai l S to r es T h e Pr esi d en t s o ffi c e

’
.

wen t o n s up ervi si n g facto ri es wh i l e Wo o d as b efo r e con cen tr ated o n

, , ,

h is c am p ai g n o f o p en i n g r etai l sto r es .

Un der th i s n ew m an agem en t team th e cr eati o n o f a n atio n wi de r etai l ,

ch ai n m o v ed ah ead r ap i dly 1 928 w as th e year o f gr eatest exp an sio n

. .

In 1 925 8 sto r es h ad b een o p en ed 4 l o c ated in m ai l o rd er pl an ts ; in 1 926

, ,
—
,
”
o nl y o n e add i ti o n w as S tar ted an d 1 6 in 1 2 l l w er e l arge A
“

9 7 A 1 6 .

sto r es By th e en d o f 1 2 8 h o w ev er S ear s h ad 1 2 r etai l sto r es in o p er a

.
9 , 9 ,

ti o n Nearly all th o s e o p en ed in th at l ast y ear w er e sm all er B st o r es

.
” ?6 “

In 1 929 th e n u mb er h ad gr o w n to 324 an d ag ai n m o s t o f th e exp an si o n

, ,
” ”
c am e with th e B an d sti ll s m aller C sto r es T h is r ap i d gr o wth h ad
“ “
.

b een p aced by a simi l ar exp an si o n at Ward Merseles fi n ally co n vi n c ed .

,

o f th e v alu e o f d i r ect r et ai l s elli n g w a s d eter m i n ed t o k eep ah ea d o f S ear s

, .

In 1 927 Ward h ad 37 st o r es ; in 1 92 8 246 ; an d in 1 929 as m an y as 25 a

, ,

week wer e o p en i n g .

Whi le o bvio u sly affected by Ward s exp an si o n S ear s s acqu isiti o n of ’

,
’

r etail sto r es an d p er so n n el fo llo wed a fai rly sp eci fi c str ategy b ased o n
Wo o d s ass ump ti o n ab o ut th e ch an gi n g n ature of th e m ark et In th o s e
’
.

early y ear s Woo d r ec all s th e c o m p an y

”
m ad e ev ery mi stak e in th e b o o k
“

, ,

17
I n i ts r et ai l s elli n g an d ad m i n i st r ati on Y et in th e G en er al s o p i n i o n
’
.
, ,

th e co m p an y s c on ti n u i n g s ucc ess in r etai li n g can b e cr ed i ted to th e

’

o r i i n al pl an s
g Bu si n ess is l.i k e w ar in o n e r esp ec t — if it s gr an d str ategy

is c o rr ect
”
Wo o d o n ce wro te an y n um b er of tac ti cal err o r s can b e
, ,
“

” 18
m ade an d yet th e en terpr i se pro v es succ essful
~
.

T h e G en er al s b asi c s tr ategy (w as to c o n c en tr at e o n th e urb an m ark et

’

by u si n g th r ee typ es o f s to r es Pl aci n g h is o utlets in ci ti es wi th a p Op u

.

l ati o n o f at l east sh o uld k eep th e n ew r etai l s to r es f r o m c o m p eti n g

clo sely wi th hi s m ai l o rder h o u ses By h avi n g l arge m edi um an d sm al l

- 19
.
, ,

sto r es h e h o p ed to m eet th e co m p eti ti o n o f t h e t w o pr i m ary t yp es o f

,

vo lum e m ark eter s in th e ci ty th e o lder dep a rt men t sto r es an d th e n ewer

urb an ch ai n s li k e Wo o lwo r th s G r an t s o r Kr esge s ’

,
’

,
’
.
 S EA R S , R OE BUCK A ND CO M P A N Y

locati on an d typ es f lin es fi ered Thr ee essen t al i d that ti me

“
o o . an at

Wo o d wr ot e in Fir l oc ati on Se w n d th e ch ar act er of th e

1 9 48 .
“
st — .
—

sto res T hi rd — ma ss urc h i g d i t gr ti f th d bl d

.
p as n an n e a o n o e ur a e go o s
”
li n es Th e fi rs t con cep t w as based exp li cit ly o n th e impa ct of th e auto
,
“

m ob il e on th e r etai l b u sin ess R etailin g h ad b een con cen tratm in th e

”
.

fu nn ell ed Th en, i n . Wo o d s ’
w o rds

m a de h opp i ng mobil e I n th e gr eat cities Se ars l ocated it s st ores w ell ou t

s .

si de t h e m ain sh o i n di t i t o n ch ea l d ll t i l h i h w ays,
pp g s r c , p an ,
u su a y on ar er a g
w i th am p le p ar k i ng sp ac e In th e be ginn in g th ese l ocations w er e a source
.

o
f
great a mus em en t an d w o n derm en t to th e dep artmen t st or e r
w o ld .

As to th e secon h e ch ar a cter o f th e sto r es, dep ar tm ent an d

d con ce t , t p
ch ain sto r es w ere l ar gely w om en s stores, f eaturin g soft l in es ; an d so ’

“
S ear s, f ro m th e b egi n n in g ga v e i ts sto r e ap p eal to th e ma n — t e fami ly
, h

an d, m o st i mp or tan t o f all, th e dur abl e go o ds cr eated by th e comi n g o f

trical ap p lian ces .

Fin all y Wo o d , as h e w r o te i n 1
94 8 , saw th e o pportu n i ty o f l ow erin g
”
un i t co sts o f th ese n ew m er du r ab l es b i g ti ck et s h ey h ad
"
con su or ,
as t

be cam e k n o w n in th e S ear s p ar l an ce :

Th e vo u f Se ars an d W ar d ga v e op p o rt uni ty r or mass b u yi ng , the

l me o

lin k in g u p o mas s p rod u c tion an d m ass distribu t ion Th is p r o duc ed ev en

f

g rea ter v al u es t o th e cons u m er an d i n cr eased v o lu m e Se a rs,

w hil e r em ai n
i ng p rim ar ily a m erch a n t, f el t o b li ged o n acco un t o f i ts v ol u me to h av e

Besi d e pr o vi di n g a r en ew ed in ter est in f acto ry o wn er ship th e em p h asis ,

”
o n cons um er dur abl m led to m u ch m o r e sp ecifi cat i o n buyin g o r w hat
“

”
cam e to b e call ed b asi c b uyi n g Th e m erch an disin g d epa rtm en ts began
“
.

t o d esi gn th eir o w n p r o d u cts t o det erm i n e t h e h en l oc a ti on f or p ro duc

,

t i on in r elat i on t o t h e m ar k et an d su li s an d th en t o go t o a m an u fa c
pp e ,

tur er i n th e gi v en ar ea w i th th ese sp ec ifi cati o ns an d n ego tia te a co n t rac t .

S p ecifi cati ons as w ell as pri ce b ecam e th e cri t eri a f o r purch asi n g I n thi s
, ,
.

w ay Sears in cr eased its con t ro l o v er th e f un cti o n o f coo rdin ati n g the

C HA NG I NG STRA TE G Y A N D STR UCTURE 23 7

Ho w of pro duct to i n clude every step fr o m th e i ni ti al d esi gn o f th e pro duc t

to its s ale t o th e ul ti m ate co n s um er .

Th e s tr ategi c pl an s as Wo o d d efi n ed th em in 1 94 8 h ad pr o b ably b een

les s clear an d pr ecis e in th e mid twen ti es Neverth eles s th ere s eem s - .
,

li ttl e qu esti o n th at th es e th r ee fu n damen tal co n cep ts pro vi ded th e b asi s

fo r pl an n i n g th e exp an sio n o f th e r et ai l sto r es b et w een F ebru ary 1 925 ,

an d May , Po li c i es fo r c arry i n g o ut th es e o bj ecti v es w er e o ft en mo r e

di ffi cul t to determi n e th an w as th e defi n i ti on o f th e gr an d str ategy it self .

”
T h e l o c ati o n o f A sto r es in o u tlyi n g areas w as qu i te r i go r o u s ly adh er ed
“

” ”
to b u t th e lo cati o n o f
,
B an d C s to r es w as a far di fferen t m atter
“ “
.

T h e n umb er an d v ar i ety o f li n es pro v ed a si mi l arly con ti n ui n g an d v exi n g

pro blem an d fi n ally th e devel o p men t o f sp ecifi c ati o n s an d th e fin di n g o f
,

s uitabl e an d wi lli n g m an u fact ur er s t urn ed o u t to b e n o sim pl e t as k .

”
In m o v i n g i n to d i rec t r etai li n g th e m ed i um -si zed B sto r es r ai sed th e
“

mo st diffi culti es “21

In th e l arger m etr o p oli t an ar eas l o cati o n h ad to b e
.
,
”
ch o sen c arefully in r el ati on to th e existi n g o r pl an n ed A sto r es an d to , ,
“

”
o u t si d e c o m p etiti o n In th e sm al l er ci ti es wh er e m o st sto r es o f th e B
“
.
,

typ e were th e li n e b etween d o wn to wn an d o u tlyi n g ar eas w as an y thi n g

,

bu t cl early drawn No r di d th ei r o u tlyi n g areas off er th e s am e adv an tages

.

as th o se o f th e l arger c i ti es Mo n tgo m ery Ward s deci si o n to lo cate in

.
’

th e s m all er c i ti es i n cr eas ed th es e pr o blem s fur th er ; al th o ugh Wo o d h ad

i ni ti ally pl an n ed to lo cate o n ly in th e l arger urb an areas h e h ad to fo llo w ,

Ward i n to th e smaller to wn s if o n ly to pro tect S ear s s m ai l—o rder

,
’

mark et .
22

”
Th e t yp e o f l i n es th at sh o uld b e c arr i ed in th e B sto r es pr o v ed
“

par ti cul arly difii cu lt to d etermi n e If a prim ary str ategy of co n cen tr ati n g
.

o n h ard goo d s w as to b e fo ll o w ed w h at sh o uld b e th e cr i ter i a fo r s el ect

,
”
in g o th er li n es ? T h e l arge A s to r es h ad en o ugh r oo m to h an dle a
“

”
v ar i ety of s o ft li n es as w ell as h ard T h e s m allest sto res th e C co uld .
,
“

,
”
carry h ard li n es such as ti res an d auto acc esso r i es Bu t th e B u n i ts .
“

n eed ed at l eas t: s o m eth i n g b esi d e h ard li n es if th ey w er e to u se th ei r sp ac e

”
an d to attr ac t cu sto m er s Ju st w h at k i n d o f a sto r e a B sho uld b e wh at “
.
,

it s h o uld c arry an d where it sh o uld b e l o cated r emain ed co n ti n ui n g

,

qu esti o n s for th e p o li cy m ak er s at S ear s for m o r e th an a decade Th e .

”
B s to res th erefo re cr eated c on st an t press ure fo r structural as well as
“

, ,

str at e i c adj u stmen t in th ese y ear s

g .

S tru ctu ral S trains Created by tize New S trategy

E ven af ter th e s to r es h ad b een l o c ated an d li n es go o d s i niti al ly o f
deci ded up o n a clearly defi n ed b asi c s tr ategy o f exp an si o n i n to this n ew
,

typ e o f r etai li n g f ai led to ass ur e eff ec ti v e an d pr o fi t abl e o p er ati o n s Ju st .

as at J er s ey S tan d ard G en er al Mo to r s an d du Po n t exp an si on at S ear s

, , ,
23 8 SEA R S , R O E BUCK A ND COM PA NY
d em an ded th e cr eati o n o f a struct ur e to admi n i ster th e n ew f aci liti es .

S ti ll m o r e im p o rt an tl y it call ed fo r a r eo ri en tati on o f existin g r eso urces ,

j ust as in th e o th er co m p an i es Unl ess o ld er pl an t pro cedur es an d p er

.
, ,

so n n el w er e i n t egr ated cl o sely w i th th e n ew ly acqu i r ed r eso urces an d

un l ess th ey w er e r ea dj usted to m eet efi ectiv ely th e n eed s o f th e n ew

st r ategy gr o wth i n to th e n ew lin es o f busin es s co ul d br in g o nl y in creas
,

i ng pr o bl em s str ain s an d in effi ci en ci es Th es e a dmini str ati v e d ifficul ti es

, , .

i mm edi ately ap p ear ed in th r ee cri tical ar eas — th e sel ecti on an d t r ain in g

o f pe r so nn el th e ch o i c e an d q uali t o f pr o ducts carri ed an d th e fl o w o f
, y ,

go o ds fr o m th e m ail -o rder pl an ts to th e r etail sto r es .

Y et Woo d an d hi s asso ci at es at fir st an ti ci p ated n o m aj o r o rg an i za

tion al ch an g e Th e n ew sto r es w er e to be a dmi n i ster ed th r o ugh th e
.

exi stin g m ai l— o rd er str uct ur e Th e M an ager o f ea ch of th e t en mai l-o rd er

.

h o u ses too k o v er th e admi ni str ati on o f th e r eta i l sto r es th at w er e t o be

suppli ed f r o m hi s pl an t Each w as gi v en a R egi o n al R etail M an ag er t o
.

h an dl e th e day-t o-day sup erv i si o n Th e o nl y o th er o rg an i zati on al m odifi

.

c ati o n br o ugh t by th e n ew str ategy w as th e fo rm ati on of a sm al l r etail

staff uni t in th e cen t r al o m
23
ce at Chi cag o .

Th ese mi n o r structur al adj us tm en ts soo n pr o v ed in suffici en t t o m eet

th e m an y n ew a dmi n i str ati v e pr obl em s O f th ese difii cul ties n o n e appear ed
.
,

m o r e ser i o u s th an th at o f p er so n n el P ri o r to 1 925 th e catal o gu e h ad

.
,

so ld S ear s s v ast arr ay o f pr o duct s P eo pl e a s w ell as cat al o gu e descri

’
.
p ,

ti o n s w o uld n o w h av e to m ak e th e sal es D i r ect c o n f r o n tati o n w i th th e

, .

co n sum er m ean t devel op in g a br an d n ew w ay of m erch an di sin g f or S ear s .

S to r e m an ager s th ei r assi stan ts an d o th er sto r e p er so n n el h ad t o b e

, ,

r ecrui ted ei th er f r om th e m ail —o rd er pl an ts o r fr o m o utsi de? If th e n ew

4

m an ager s cam e fr o m wi th i n th ey h ad li ttl e o r n o tr ai ni n g in selli n g to

,

cu sto m er s dir ectly o v er th e co un ter If th ey w er e m en expe ri en ced in

.

m an agi n g sm all or l arge r et ail sto r es th ey h ad n o u n der stan di n g o f th e

,

co m p an y s m ail-o rd er acti vi ti es an d o per ati on s n or an y appr eci ati o n o f

’

w h y th ey h ad to fit th ei r w o rk i n to th at o f th e o ld er o pe r atin g o rg ani za

ti o n By 1 9 29 th e pr o bl em o f p er so n n el h ad b e co m e so acu te th at Woo d
.
,

t o y ed w i th th e i d ea o f m ergi n g wi th I C P en n ey Co m p an y as o n e w ay . .

to o b tai n th e n ec essary tr ai n ed m an ager s .

B y th at tim e to o Woo d reali zed th at th e old o rgani zati o n al structur e

, ,

w as i nh i b i ti n g th e d ev el o p m en t o f r ev en u e-pr odu cin g asso rt m en ts for .

th e sto r es an d co m pli ca ti n g th e fl o w o f goo d s t o th em Th e m ail -o rd er .

h o us es h ad to supply th e n ew r etai l sto r es if S ear s w as to m ak e f ull use

o f its exi sti n g buy i n g an d d i str i bu ti n g f aci li ti es an d pe r so n n el S u ch .

reso ur ces Wo o d h ad p o in ted o u t to Merseles in 1 92 1 m ade it po ssibl e fo r

, ,

th e m ai l -o rd er co m p an i es t o co n si d er co mpe ti n g succ essful ly wi th existi n g

vo lu m e r etai l er s Y et th e m ail -o rd er buy er s w er e co mpletely un tr ained in

.
CHANG ING S TRA T E G Y A N D S TR UCTURE 23 9

purch asi n g for th e n ew urb an m ark et Nor w as th e O p er ati n g D ep ar t .

men t m uch b etter equ ipp ed to di str ibute th e buy er s go o d s to th e n ew

’

sto res.T h e m ai l -o rd er p er so n n el fo r ex am pl e wer e n o t u sed to m ak i n g

, ,

adj u stm en ts f o r l o c al an d seas o n al d i ff er en c es T h ey sh i pp ed ski s an d .

o th er co ld w eath er sp o r ts equ ip m en t to s o u th er n sto r es wh i l e sto r e

-
,

m an ager s in M ai n e an d M i n n eso ta fo u n d th em selv es burd en ed w i th b ath

in g su i ts an d o th er tr o p i cal sp o r tsw ear in th e w i n ter m o n th s T h e buy i n g .

o rg an i z ati o n cl early h ad to b e r efo r m ed if th e sto r es w er e to carry t h e

m o st sal abl e go o d s an d th e O p er ati n g D ep ar tm en t r eo rg an i z ed if th er e

,
”
w as to b e an effici en t servi c e o f s upply fr o m th e m ai l-o rd er d i str i bu ti on
“

s y stem to th e r etai l o u tl ets .

Wo o d s r etai l strategy i n ten sified th e pressur es o n its p er son n el an d

’

facili ti es in o th er w ay s T h e m ai l o rd er h o u s es h ad b een enl argi n g th ei r

.
-

li n es con stan tly By 1 925 S ear s so ld al m o st everyth i n g b u t th e m aj o r

.
, ,

pr o p o r ti o n o f its sales c am e in clo th i n g an d drygo o d s A s l ate as 1 94 1 .

,

such s oft lin es s ti ll a cc o u n t ed f o r r c en t o f S ear s s m ai l o rd er bu si n es s

’
6
5 p e .

Bu t fo r th e n ew r etai l sto r es Wo o d s str ategy r equ i r ed a co n cen tr ati o n o n

,
’

”
h ard li n es an d b i g ti ck ets A n d c o m p eti n g as th ey di d w i th th e estab
“
.

lish ed d ep ar tm en t sto r es an d urb an ch ai n s r ath er th an wi th sm all c o u n try

cro s sro ads sto r es th ese s to r es n eed ed to o ff er a b etter styl e o f goo d s o f
,

m o r e u n ifo rm qu al i ty th an d i d th e m ai l-o rd er c atal o gu e B uy i n g fo r .

r etai l differ s so m uch f r o m th at for th e m ai l-o rd er m ark et th at Wo o d

fo r a m o m en t c o n si d er ed th e p o ssi b i li ty o f h av i n g tw o pur ch asi n g o rg an
izatio n s He o rder ed a study o f T E ato n 8 : Co m p an y o f C an ad a a l arg e
. .
,

m ark eti n g firm th at u sed tw o such u n i ts 25

H o w ev er h e an d h is asso ci ates .
,

qui ckly agr eed th at s uch a step wo uld n ull if y th e b asi c r easo n s fo r S ear s s ’

m o ve i n to di r ec t r etai li n g .

In stead Woo d en co ur ag ed h is n ew m an ag er s to r eo rg an i z e th e struc tur e

o f th e exi sti n g M erch an d i se D ep ar tm en t N el so n a n d H o u ser star ted by .

r ev i vi n g th e testi n g an d i n sp ecti o n l ab o r ato r i es an d at th e sam e tim e by ,

co n so li d ati n g an d co m b i n i n g th e m an y lin es T h ey fu lly appr eci ated th at .

,

b esi de adj u sti n g th e buy i n g dep artm en ts to th e n ew n eed s o f o v er—th e

co u n ter sal es th ey an d th ei r buyer s m u st m eet ch an ged co n di ti o n s in th e
,

rur al m ai l-o rder m ark et wh i ch h ad r esul ted fro m th e co m i n g o f th e

au to m o b i l e an d th e pr o l o n g ed agr i cul t ur al d epr essi o n T h e al ter ed m ark et .

w as th er efo r e fo rc i n g a m uch ti gh ter a d m i ni st r ati v e c o n tr o l o v er th e

”
buyer s T h e o ld c o n cep t o f S ear s as a feder ati o n o f m erch an ts h ad
.

b eco m e o b so l ete in th e f ace o f n ew n eed s an d ch all en ges .

T r o ubl ed by th e i n cr easi n gly c o m pl ex ad m i n i st rati v e pr o bl em s cr eated

by th e m o v e i n to d i r ect r etai li n g Wo o d d eci ded in May 1 929 to d efer
, , , ,

f ur th er exp an si o n T h e r easo n w as n o t b eca u se Wo o d s str ategy app ear ed

26 ’
.

in an y w ay to b e u n succ essf ul In j u st tw o y ear s al m o st 275 sto r es o u t

.
,
24 0 S EA RS , R OE BUCK A ND CO M P A N Y
of a t o ta
o f goo h a d be en l
o pe n ed O f th e s e, n ear ly t h r ee-f ur
o th s w er e o f .

”
th e B type Th e r etail st or es in th o se pr o spero us tim es w er e sh o wing
“
.

a g oo d pr o fi t In 1 929 o nl y f o ur y ea r s af t er Woo d em bark ed on h is n ew

.
,

str ate gy ,
c un t ed f or j ust un der 4 0 p er cen t o f th e co m
th e y al r ea dy ac o

p y
an s t
’
o ta l sa l es
27
Wi th a pr o fi t of m i ll
. i o n an d a
p er ce n t

rate of r et ur n on in v est m en t th at y ea r w as o n e of th e bes t in Sea rs s ,

’

hi st o ry M o r eo v er M on tg om ery Ward sh o w ed n o si gn o f st opp in g it s

.
,

exp an si o n ; it w as t o h a v e 5 00 st o r es by th e en d o f Bu t Wo od l i k e ,

S l o an at G en er al M o to rs H o w ar d an d S adl er at J er sey S tan dard an d , ,

sev er al ex ecu ti v es at du P o n t saw th e n eed f o r a ct i o n bef o r e a cr isi s h ad ,

a ct uall y arisen S in ce h e un l i k e th e m o r e f o r e-
. si gh ted ex ecu ti v es in oth er
,

co m pan i es w as th e ch i ef ex ecut i v e offi cer h e w as abl e to act pr o m pt ly

, , .

He abrup tly po stpo n ed f ur th er ex p an si on until th e o per ati ons o f th e

exis tin g st o r es co ul d be impr o v ed an d un til th e n ew l in e of busi n ess

co uld be m o r e eff ecti v ely in tegr ated wi th th e co m p an y s o lder a ct i vi ti es ’

.

Th e fir st st ep Wood t oo k t o impr o v e h is r etail o rg ani za ti on w as t o

in vi t e a mark et in g ex pert A lvi n Do dd t o co m e t o S ear s t o inst il so m e
“

, ,

28 ”
‘
r etail kn o w h o w in to th e o rgan i za ti on
- Do dd w as w ell tr ain ed f or
’
.

thi s ta s k He h ad h a d a l o n g ca r eer in i n du str i al edu ca ti o n an d m ar k etin g

.
,

in cludin g po siti o n s l i k e tha t of Ch ai rm an of th e War Se rvi ce Co mm i tt ee

o f th e R eta i l R esea rch A sso cia ti o n D i r ect o r o f th e R etai l R esea rch A sso ,

ci ati o n an d Man ag er o f th e D i stri bu ti on D ep ar tm en t at th e Un i t ed S tates

,

Ch amb er o f Co mm erce In 1 929 h e w as l ect uri n g at N o rt h w est ern .

, ,

Un i ver si ty o f Chi ca go an d S tanf o rd o n T r a d e an d In dustrial P r oblems

,
“ ”

an d w as th e D i r ect o r G en er al o f th e Wh o l esal e D ry G oo d s In sti tut e?

”

A t th e sam e tim e t oo Woo d pe r sua ded G en er al W I West er v el t a West

, , . .
,

P o in t cl ass mat e t o tak e ch arg e of th e labo r ato ri es He w as t o gi v e co n

, .
e

cen trated att en ti o n t o t es ti n g an d im pr o vi n g th e m erch an dise th at S ear s

30
o ff er ed .

Bef o r e ei th er of th es e tw o n ew ex ecu ti v es ha d tim e t o do m o r e th an

r evi ew th ei r pr obl em s Wood d eci ded on a stil l br oa der appr oa ch Sea r s 5
,
.
’

difficul ti es w er e n o t to be answ er ed by co pyin g Ea to n s o r by m ergin g ’

wi th Penn ey s N o r w er e th ey to be so lv ed by such p i ec em eal r eo rgani za

’
.

ti o ns an d ch an g es as H o use r an d West erv el t w er e ma k in g i n th e Mer

ch an dise D ep art m en t an d as D o dd w as be gi nn i n t o plan i n th e r etai l

g ,

o rg an i z a ti o n Th ey r equi r ed an an al y si s an d po ss i b le o v erh a ul in g o f Sea r s 5

’

w h o le m an a g em en t stru ct ur e Woo d r eal ize d in a w ay th at Wal ter T ea gl e .

,

a t J er sey n ev er di d th at th e diffi cul ti es w er e m o r e th a n th o se o f m ark et

,

in g o pe r ati o n s o r buyi n g Th e b asi c pr o bl em w as o rg an iza ti o n F o r t h is

, , . .

r easo n S ea r s s Pr esi d en t late in A ugust 1 92 9 ask ed G eo rge E Fraze r

,
’

, ,
.
,

th e sen i o r p ar tn er o f th e C h i ca go fir m o f Fr aze r an d T o rbe t ce rtifi ed ,

A B ORTIVE DE CE N TR A L I ZA TION 24 1

publi c a cco u n tan ts to tak e ch arge of a th o r o ugh r ev am p in g o f Sear s s

,
’

man agem en t st ruct ure .

Th e G en er al as k ed Fr aze r to ch air a Co mmi ttee o f R eo rg ani zati o n

whi ch aft er car ef ul study wo uld r ecomm en d a n ew o rgani zati on al stru c
, ,

31
t ur e t o as si st th e co m p an y in r eali zi n g th r ee sp ec ifi c o bj ecti v es F ir st th e .
,

M erch an di se D ep art men t m u st b e r eadj us ted in o rd er to h an dl e th e n ew

n eeds o f th e ch an gi n g m ai l-o rd er bu sin ess an d t h e n ew ur b an r etail
”
m ark ets S eco n d th e j o bb in g en d o f th e busi n ess m us t b e r eo rg an i ze d
“ ‘ ’
.
, ,

th at is t h e c oo rdi n ati o n o f th e fl o w o f suppli es f r o m th e m ai l —o rd er h o u ses

,

to th e r eta i l sto r es m u st b e i m pr o v ed F i n ally an d m o st im p o rt an t o f all.

, ,

th e st ruct ur e m u st pr o vi d e an effect i v e a dm in i st r ati on o f th e pl an t an d

per so n n el o f S ear s 3 n ew r etail sto res ’

.

A s oxr m a

Th e Fra zer Co mmi ttee s R epo rt r em ain s a l an dm ark in th e hi story

’

o f S ear s R oebuck an d Co m p an y Its r eco mm en d ati o n s led t o som e

, .

r estruct ur in g o f th e m aj o r fu n cti o n al d ep art men ts at Chi ca go p arti cul arly ,

th e M erch an di se D ep art m en t an d t o th e cr eati on o f fi v e n ew t err i t o r i al

,

di vi si on s fo r th e adm i ni st r ati o n o f th e m ai l—o rder h o u ses an d r et ai l sto r es

in th e fi eld F i n all y th e Co mmi ttee pl aced th e o ld f un cti on al an d th e n ew
.
,

terri t o r i al o rg an i za ti o n i n to a l arg er o v er -all st ruct ur e H o w ev er f or tw o

, .
,

reaso n s th e n ew d esi gn pr o ved in eff ect i v e F ir st th e li n es o f co mm un ica .

,

ti o n an d a u th o r i ty w er e n o t d efin ed cl ear ly en o ugh to pr ev en t c o n fli ct

o v er th e adm ini str ati on o f th e f un cti o n al a cti v i ti es w i th in th e T err i t o ri es .

Se con d th e terr i to r i al o rg an i zati o n di d n ot h av e t h e n ec essary p er so n n el

,

o r in f o r m ati o n t o ca rry o u t it s essen ti al t ask s Th e di str u st o f G en er al

- .

Woo d an d G eo rge Fr azer fo r lar ge-scal e bur eaucr ati c o rg ani zati on w as ,

l argely r es po n sibl e f o r b o th th ese d efect s .

F or th e deca d e aft er th e Fr azer Co mmi tt ee h ad sub m i tt ed its reco m

m en dation s Wo o d co n tin u ed to sear ch f o r a sati sf act o ry st ructur e by
,

wh i ch to m an age th e m erch an di si n g em p i r e h e h ad enl arged so gr eatly

between 1 925 an d 1 929 Th e in cr easin g co n fli ct b etw een th e T err ito ri es an d
.

Ch i cag o o v er th e admi n i str ati on of th e n ew sto r es an d o ld er m ai l-o rd er

h o u ses as w ell as th e co n tr acti on o f bus in ess ca u sed by th e d epr essi o n
, ,

led him to abo li sh th e T err i to r i es 111 1 932 an d to r etur n t o a f un cti o n ally

dep artmen t ali zed struct ure wi th admi ni str ati v e d eci si o n m ak in g cen tral
ized 1n Chi cago Th en in 1 940 in fl u en ced by th e u n pl an n ed gr o w th o f
.
, ,

lo cal admi n i strati v e u ni ts an d al so by th e r en ew ed an d en ergeti c exp an

si o n o f S ear s s bu si n es s th e G en er al an d h i s a sso ci ates b egan to
’
u t i n to
, p
ef fect a struct ur al d esi g n b ased o n th e Fr azer Co mm i tt ee s o r i gi n al r epo rt
’
.
24 2 SEA R S , R O E BUCK A ND CO M P A N Y
Thi s im e th e t err i to r i al un i ts becam e full -fl edged m ultif un cti on auto n
t ,

o m o us di v i si o n s w i th th e m an ager s r espo n si bl e f or o v er-all o per atin g

perfo rm an ce an d th e Ch i cago h eadqu arter s a gen er al o fi ce wi th staff

, ,

spe c i ali sts an d g en er al ex ecu ti v es .

Th e F raz er Co mmittee
Wo o d app o in ted xp eri en ced execu ti ves to th e Co mmi tt ee o n R e
five e

o rg ani za ti o n T h ey w er e t al en ted r epr esen t ati v e an d r el ati v ely y o un g

.
, , .

Ho us er spo k e fo r m erch an di sin g ; Car n ey w as th e actin g h ea d of O per a

ti o n s ; P o ll o ck th e Co m p tr o ll er w as th e fi n an ci al an d c o n tr o l spe cial i st ;
, ,

wh i l e A lvin D o dd w as th e r etai l exp ert A n o th er m emb er J am es M .

, .

B ark er w as th e pr o sp ecti ve T r easur er A gr adu ate an d o n e tim e pr ofesso r

, .
-

o f c i v i l en g i n eer in g at th e M assach usetts In sti t u te o f T ech n o lo gy B ark er ,

w as w o rki n g for th e F i r st Nati o n al B an k o f B o sto n in Bu en o s A i r es w h en

L es sin g R o sen w al d ask ed h im t o co m e to S ea r s A ft er th e b an k er h ad .

a ccep ted th e p ost o f T r easur er R o sen w ald sugg ested th at h e sp en d so m e

,

m o n th s l ear n in g th e busin ess by s up erv is in g th e Phil ad elp h i a m ail-o rder

32
h o us e Th e Co mm itt ee i n clud ed th en th r ee m en w i th man y y ear s in
.
, ,

th e m ai l —o rder bu si n ess an d thr ee — B ark er D o dd an d Fr a zer — w i th , ,

br o ad o utsi d e exp er i en ce H o user th e yo un gest w as thir ty sev en an d

.
, ,
-

D od d th e o ldest w as fo r ty six
, ,
-
.

Ch ai r m an Fr azer at fo rt y w as o n e o f th e fir st exp er t s o n l arge-scal e

, ,

a dm in i str ati v e o rg an i za ti o n in th e Un i ted S tates

33
A li b er al art s gr ad uate .

fro m th e Uni v er si ty o f Io wa h e h ad go n e to Wi sco n si n in 1 9 1 0 as an

,

in structo r in acco un tin g T h er e wh i l e takin g a dvan c ed d egr ees in law

.
,

an d a cco u n ti n g h e h ad b eco m e en th u si asti ca lly in v o lv ed w i th S en ato r

,

L a F o ll ett e s br an d of Pr o gr es si vi sm A s Chi ef A cco un tan t o f Wi sco n sin s

’ ’
.

Bo ar d o f Pub li c A ff ai r s Fr az er h ad set up o n e o f th e ea rli est s tate budgets

,

in th e co u n try Th en at tw en ty-thr ee h e w en t to th e Uni v erstiy o f Illi

.
, ,

n o i s as Pr o f esso r o f A cco u n ti n g an d U ni v er sity Co m p tr o ll er In 1 9 1 5 .

,

aft er h av i n g r eo rg an i zed th e u ni v er si ty s fi n an ci al sy stem h e en ter ed th e

’

b u si n ess wo rld as G en er al A u di to r at Mon tgom ery Ward T w o year s .

l ater h e w as d evi si n g a fi n an ci al o rg an i zati o n fo r th e state o f Ill in o i s

, .

Wi th th e co mi n g of th e w ar h e w en t to Washin gto n at th e s uggesti o n

,

of R .
I T h o.r n e th e W ar d ex ecu
, ti v e w h o w as a ssi sti n g G o et h al s t o ,

fo rm ul ate acco un ti n g an d o th er pr o cedur es for th e Q u ar ter m aster Co rp s .

T h er e h e w as soo n w o rki n g cl o sely wi th G en er al Woo d Th en after .

,

cr eati n g a n ew F i n an ci al D ep art men t f o r th e A r m y an d r en ego ti atin g

co n tr acts fo r th e S h ipp in g B o ar d in 1 92 1 Fr a zer b ecam e ch i ef co n sul tan t ,

fo r th e r eo rgan i za ti o n o f O hi o s a dm i n i str ati v e as w ell as fi n an ci al sy stems

’
.

S imi l ar c o n sul ti n g j o b s f o llo w ed m an y m o r e in bu sin ess th an in go v er n

,

m en t Ev en so aft er c o m pl eti n g th e study at S ear s Fr azer wr o te Wood

.
, ,
A BORTIVE DE C E N T R A L I ZA TION 243

th at af te r tw en ty year s o f w o rk o f thi s kin d th e suggesti on s co n tain ed ,

” 34
in thi s r epo rt are th e m ost im p o rtan t I h av e been ask ed to m ak e .

In thi s sam e l etter wri tt en in early J an u ary 1 93 0 Fr az er stated : Pr ac

“

, , ,

ti cal ly ev ery day s in c e S ep tem b er I h av e been in co mm un i cati on w i th o n e

”
o r m o r e m emb er s o f th at Co mm i tt ee A ct u ally m o st of th e w o rk fell
.
,

to Ho u ser Do dd an d Po ll o ck wh o se offi ces w er e in Ch i cago

, , ,
35
.

Ho u ser co n tin uin g th e w o rk h e h ad start ed with Nel so n studi ed an d

, ,

r epo rt ed o n ways t o co n cen tr ate an d r egr o up th e admin i str ati o n o f th e

di fl eren t lin es o f m erch an di se Th e Co m mi ttee h ad h o ped to co n so li d at e
.

all m erch an di se i n to t w elv e b asi c d ep art m en ts H o w ev er t h e bes t H o user .

,
”
co ul d do an d sti ll h av e wh at I beli eve t o be pr a cti cal si zed uni ts w as
“

36
tw en ty o n e
- Th ese h e cl assifi ed un d er th r ee m aj o r h eadin gs th at h ad
.

be en sugges ted by Dodd : w earin g app ar el ; h om e f urnis hin g s an d acces

so ri es ; an d h eavy m ech an i ca l f arm an d buildi n g con stru c ti on equ i p m en t
, , .

Ho user n ext wo rk ed o u t o rg an i zati o n ch art s f or th e d ep artmen ts b ased

on th ese n ew gr o up in g s an d th en o u tl i n ed pr o c edur es wi th r espect t o “

” 37
th e m o st im p o rt an t r o u tin es .

While H o u ser w as r efashi o n in g th e buy in g o rg an i za ti o n Do dd w as ,

co n t in uin g to pl an th e n ew m ark etin g o n e Ev ery o n e agr eed th at th e .

m an agem en t o f th e r etail sto r es fr o m th e m ail-o rd er h o use s h ad pr o v en

co m pletely un sati sfacto ry A fter st udyin g th e stru ct ur e of I C P en n ey
. . .

an d o th er ch ain s D o dd an d th e Co m mi tt ee fi n ally d ec i d ed on a di st ri ct
,

38
o rgan i zati o n A ll r etai l st o r es w er e pl ac ed in o n e of th irty -thr ee geo
.

gr aph i cal di st r i ct s ea ch h ead ed by a D i stri ct M an ag er wi th a s m all st aff

, .

Th e di stri cts in t ur n w er e p u t un d er f o ur terri t o r i al o fli ces ea ch o f

, ,

whi ch w as to b e h eaded by a V i ce-Pr esi d en t o r A s si stan t V i ce-Pr esi d en t .

A f t er th e g en er al s tru ct ur e h ad b een acc ep ted Do dd w o rk in g cl o s ely , ,

wi th Frazer o utlin ed th e du ti es o f th e terri to ri al an d di stri ct omcers

,

an d d efi n ed th e bo un d ar i es o f th e di stri ct s Th e di stri ct o ffi c es v ar i ed in .

” ”
si ze T h e sm al l est th e D en v er di stri ct in clud ed o n e A an d tw o B “ “
.
, ,
” ”
sto r es whi l e th e l arg er o n es in clud ed tw o t o f o ur A s an d up t o 1 5 B s
“ “

, .

Dod d s an d H o us er s r eco mm en d ati o n s w er e car ef ully r evi ewed by fi n an

’ ’

ci al V i ce P r esi d en t Po ll o ck w h o co n c en t r ated on im pr o v in g acco un t in g

-
,

pro cedur es an d stati sti cal in f o rm ati on for th e r etail s to r es N ext th e .

reco mm en da ti o n s w er e con si der ed by th e Co mm i tt ee as a wh o l e an d

th en f o rw ard ed to Woo d an d L essin g Ro sen w al d 39
.

l Co m m zttee s Pr op osals
’
’
e

Th e co mmi tt ee s fin al pr op o sal s pr o vi d ed S ear s wi th tw o o rgan i za

’

ti o n s a n ew t erri to r i al o n e in addi ti on to t h e older f un cti o n al o n e (see

,

Ch art T h e t erri to ri al o rgan i zati on w as essen ti ally th e on e D o dd h ad

 SEA RS , RO E BUCK A ND CO M PA N Y

C HA R T 8

S ears S tru ctu re as Defi n ed in Frazer Rep o rt, J ry

an u a 6, 1 93 0

G enera l M e rch an d i s e M a na g e r

G e n e ra lM erch a n d i s e p ll
Co m tro er
M il
a
-
O rd er S a l M
es a na ge r

C l
a ta o g ue P roduct ion M ana ger

Reta il S a l es Ma na ger

p S p
G rou u erv is o r

D p m B
e a rt ent uye rs

G p C mp l l
ro u o tro er

Grou pM lO ai M
-
rd er S a le s a na g er

G roup l M
Reta i S a les a n a ge r

M erc h an d is e Su p e rintend ent

Su p e rin tend e nt of O p e ra tio ns

Cre d its M erc h a ndis e

Cont ro l Dep ts

‘
T h ere w il l b e T errito rial O fficers lo cated at Ph iladelp hia , Memp h is, C h icago , an d th e

Pacifi c Coast : i e , fo u r regio n s in p lace o f th e p resen t ten

. . .

1 A G e n eral Ma n ag er f o r each M a il -O rder Hou se .

A District Man ager for each Retail District as esta lish ed b .

A BORTIVE DE C E N T R A L I ZA TIO N 24 5

r eco mmen ded Excep t fo r th e M erch an di se D ep ar tmen t th e existi n g

.
,

f u n ctio n al struc tur e w as o n ly s l i gh tly mo di fi ed C ar n ey th e n ew V i ce .

,

Presi d en t in ch arg e of O p er ati n g w as gi ven an assis tan t fo r th e r etai l

,

as w ell as o n e for t h e m ai l -o rd er bu si n ess Each w as to s up erv i se p er so n n el

.

an d d ev el o p stan d ard m eth o d s an d pro c edur es in th e o p er ati o n s o f th e

tw o typ es o f bu si n ess T h e ch i ef o f th e O p er ati n g Dep ar tm en t al so co n

.

ti n n ed to h av e sup erv isi o n o f th e S upply an d T r affi c D ep ar t m en t s an d

40
w as gi ven j ur is d i cti o n o ver a n ew o fficer th e P ro p er ty M an ager , Th e .

V i c e-P resi d en t an d Co mp t ro ller n o w b ec ame r es p o n si ble fo r all fi n an ci al

t r an s ac ti o n s an d p er s o n n el He n o t o n ly s up erv is ed th e acco u n ti n g an d
.

aud iti n g w o rk an d th e c o m p i l ati o n o f statis ti c al d ata b u t h e al so h ad th e ,

C redit Man ager an d th e S ecr etary an d T reasur er r ep o r ti n g to h im A

. .

th i rd s en io r o fficer th e executi ve in ch arge o f facto ri es co n ti n ued fo r

, ,

th e m o m en t as an A ssis tan t to th e Pr esi d en t

K
.

Th e Co mmittee pro p o s ed m o r e f u n d amen tal ch an ges for th e Merch an

di se Dep artmen t Th e staff o f th e V i ce-Presi den t in ch arge n ot on ly
.

i n cluded a G en eral M erch an dis e M an ager an d th e G en er al Merch an di se

Co m p t ro ll er bu t al so a S al es M an ag er fo r m ai l o rd er an d an o th er fo r
,
-

r etai l T h e pri m ary task of th es e tw o n ew o ffi cer s w as pl an n i n g sales

.

pro mo tio n for b o th Ho u s er an d D o dd fully r eali zed th e cri ti c al i mp o r

,

tan c e o f t ry i n g c o n st an tly to exp an d s al es T h e M ai l-O rd er S al es M an ager

.

wo rk ed clo s ely wi th th e C at alo gue Pro ducti o n M an ager wh i l e th e Retai l ,

S al es Man ager w as to h an dle th e pr ep ar ati o n an d d is tri bu tio n o f r etai l

“

adver tisi n g wi n d o w d i spl ay s an d st an d ard m an u al o f sal es i n st ruc ti o n s

, ,
” 41
to r etai l sales p er so n nel .

T h u s th e d ep ar tmen t buyer s lo st co n t ro l o v er s al es pro mo ti o n as th ey

h ad earli er o ver i n ven to ry Furth er mo re th ey wer e n o w co n so l i d ated
.
,

i n to ad mi n i str ati ve dep artmen ts o r G ro up s T h e fi n al d eci sio n o n th e .

”
n u m b er an d m ak e u f h l i s f g d s c m m d iti c rr i d by “

p o t -
e n e o o o o r o o es a e

each G r o up w as l eft to Wo o d an d Nel s o n w h o app ear to h av e fo ll o w ed ,

clo sely Ho u ser s r eco mmen d atio n s to th e Fr azer Co m m ittee Each h ad

’
.

its G r o up S up ervi so r w h o w as r esp o n si ble fo r th e sel ecti o n pur ch ase

, , ,

an d sal e o f m erc h an d i se in its c o m m o d i ty gr o up an d w h o w as assi sted

by a G ro up C o m p tro ller an d M ai l-O rder an d Retai l S al es M an ager s T h e .

Co m p tr o ller, b esi d e ch eck i n g o n i n v en to ry w as to h an dle all m atter s

“

,
”
o f o ffice m an agem en t an d r o u ti n e in o rd er to f ree th e d ep ar tm en t
“

” ”
buyer s T h e S ales M an ager s were to b e th e mean s o f co n tact b etween
.
“

th e u n it an d th e sto r es or plan t s an d w er e to c o n c en tr a te o n s al es p ro

mo ti o n T h e G ro up Co mp tro ller an d S al es M an ager s r ep o r ted d i r ectly to

.

th ei r c o u n terp ar ts at h eadq u ar ter s an d n o t as in th e m an u fac tur i n g

, ,

dep artmen ts at du Po n t o r th e G en er al Mo to r s sub si di ari es to th e h eads ’

o f th ei r u n it s th at is th e G ro up S up erviso r s O n ly th e buyer s w ere

, , .
24 6 SE A R S , R O E BUCK A ND CO M P A N Y
dir ectly r espo n sibl e to th e G r o up S up erviso r Th ese m en o n ce am o n g .
,

th e m o st po w erf ul execu ti v es at S ear s n o w w er e o nl y buy er s an d th e ,

si tuatio n r em ai n s m uch th e sam e to d ay .

Th e f un ct io n al d ep artm en ts at Chi cago w er e to h av e dir ect co mm uni ca

ti on wi th t e ex ecu ti v
h es in th e ten m ai l o rd er h o uses an d th e th r ee
-

h un dr ed r etail sto r es A t th e sam e tim e th e sto r es an d th e m ail-o rd er

.
,

h o uses w er e p art o f a r egi o n al o r terri to ri al o rgani zati o n A sto r e m an ager .

r epo rt ed to o n e o f th ir ty th r ee D i str i ct M an ager s w h o lik e th e ten Mail

-
,

O rd er H o us e M an ager s cam e un der th e j u ri sdi cti o n of o n e o f f o ur T er

,

ritorial Ofli cers l o cated at ei th er Ph il ad elp h i a M em phi s Chi cago o r , , ,

O akl an d T h e Co mm i tt ee h o pe d to in tegr ate th e terr i to ri al di vi si o n s an d

.

f u n cti on al dep ar tmen ts in to a l arger o v er all stru ctur e by d efi ni n g car e -

f ully th e duti es o f each an d by in di ca tin g ex pli ci tly th e fl o w o f au th o ri ty

an d c o mm un i ca ti on b etw een each T h er e w o ul d b e th e Fr azer R epo rt
.
,

po in ted o u t tw o l in es of au th o r i ty an d co mmu ni cati o n th e ex ecuti v e

,
—

li n e fr om th e Pr esi den t to th e r etail sto r e m an ager s o r m ail-o rder de

ar tm en t h ead s vi a th e D i st r i ct an d M ail -O rd er M an ag er s an d th e T err i
p
tori al Offi cer s an d th e f un cti on al lin e f r o m th e Pr esi d en t t o t h e f un ct i o n al
,

m en in th e sto r es an d m ai l —o rd er h o us es v ia th e f un cti o n al d ep ar t men ts

in Chi cago Th e tw o prin ci p al du ti es of th e R egi o n al [ T erri to ri al ] O E
“
.

th e r epo rt ex pl ai n ed lie i n r eco mm en d ati o n s o n m att er s o f p er

“
cer , ,

so n n el an d in coo r di n ati on o f m er ch an di s e supply b etw een th e m ai l o rd er

”
h o us es an d th e r etai l sto r es T h e f un cti o n al ex ecu ti v es at Chi cago w er e o n
.
,

th e o th er h an d to r em ai n r esp o n si bl e f o r th e carryin g o u t o f t h ei r r esp ec

,

t i v e du ti es in th e sto r es Th ey w er e to h av e di r e ct co n ta ct w i th the m an a
.

ger s of th e r etail sto r es an d m ail -o rder h o us es In th e w o rds o f t h e r epo rt .

Th e plan of o rganiz ation p r o v ides f or im m ediate an d co n stan t dir ect

co mm u n i ca tio n b etw een th e h eads o f ea c h fu n ction in th e b us in ess an d th e
f u n ctio nal o ffi cer s an d em p loy ees o f th e b usin ess w h erev er located th r ou gh
ou t th e coun tr y F o r ill u stratio n , w e m ay say th at th e V ice-P r esiden t in
.

C h arge o f O p eratin g is au th o riz ed an d dir ected to giv e hi s o rder s an d

adv ices dir ectly to all o er atin g em p loy ees o f th e b usin ess, as f o r ex am p le, t h e
p
o p e r a tin
g su
p erin ten de n t o f th e K ans as Ci ty M ail -O rd er H o u se an d ea ch

retail sto r e m an ager It i s exp ected th at each emp loyee o f th e b usin ess w ill
.

r eceiv e an d o bey in stru cti on s comm u n icated to hi m on th e fu n ctio n al lin e

o f au th o rit d w ill b t i ly f t r t t h i rio r o ffi cer in hi s
y an e en re r ee o e
p o r o s su
p e

fu n ctio n al lin e .

Th e territo rial o rgani z atio n in clu din g th e gen eral m an ager s o f th e Mail
,

O r der Ho u ses an d th e D istrict R etail Man ager, is lik ew ise au th o rized an d

dir ected to giv e o r ders an d in stru cti o n s dir ectly to th e m em b ers o f th eir
r esp ectiv e un its Th e o rders an d instru ctio n s o f th e G en eral Man ager of th e
.

Lo s A n geles Ma iLO rder Ho u se h av e fu ll fo rce an d au th o rity to all em

l
p y
o ees l oc ated at t h e Lo s A n geles Mafl O r der H ou se .
A BORTIVE DE C E N T R A L I ZATION 24 7

T o h elp r estri ct th e T err i to r i al O ffic er s o n th e ex ecu ti v e l i n e o f au th o r

”
ity to th ei r pr i m ary task o f p er so n n el an d servi ce (c o o rd i n ati o n ) o f su p
ply, th e Co m m ittee pro p o sed to k eep regio n al staff s to a m i n imu m T h e .

m ax i m u m staff p erm i tted th e T err i to ri al O ffic er w as m ad e up o f th r ee

fu n cti o n al i n sp ecto r s — a t r av el i n g aud i to r , a m erch an d i se i n s p ec to r, a n d

an i n sp ec to r o f o p er ati o n s — an d th ese w er e to b e tak en f r o m th e m ai l

o rd er an d sto r e p er so n n el in h is d i str i c t A t l east o n e pr o s p ec ti v e T err i to r i al

.

O ffic er fel t th at th i s n u m b er w as h ardly en o ugh He saw th e n eed fo r .

42
fo ur adv er ti si n g an d a m i n i m u m o f o n e p er so n n el m an o n h is staff .

Bu t Fr azer i n si sted o n a very sm all staff m ad e up o f ex i sti n g p er s o n n el .

A s he wr o te L essi n g Ro s en w ald :

H u m an n atu e r is su c h th at each Region al O ffi cer m ay seek to b u ild u p a

large r
o n ate st af f
f h is o w n at a o con sid erab le exp en se to th e C o mp an y an d

w ith th e resu lt th at th e Regio n al O fficer an d h is staff w ill b e du p licatin g

th e w o rk th at sh o u ld b e do n e b y th e D istr ict Retail Man ager s an d b y th e
G en er al Man agers o f th e Mail O rder Ho u ses - .
43

T h e D i str i ct M an ager s an d th e h ead s o f th e m ai l—o rder h o u ses w h o

c ame u n der th e territo ri al o fficer s were al so s h o wn v ery s m all staff s Th e .

Mai l-O rder Man ager s were to b e assi sted by an A udi to r a Merch an dis e ,

S up eri n ten d en t an d a S up er i n ten d en t o f O p er ati o n s T h e Di str i ct Man

, .

ag er d esp i te his cr i ti c al r o l e w as assi g n ed o n ly an A ud i to r an d a S ales

, ,

M an ager .

S i g n i fi can tly D o dd th e m ark eti n g sp ec i al i st an d Fr a zer th e exp er t o n

, , ,

o rgan i z ati o n v i ew ed th e n eed s fo r th e si z e o f th e r egi o n al staff d i ff er en tly

, .

A n d th ese v i ew s r eflected th ei r i n terpretatio n o f th e fu n cti o n s o f th e m an

ager T o Fr azer th e D i str i c t M an ager s w er e to do l i ttl e m o r e th an appr ai se
.
,

an d an alyz e th e p er fo r m an c e o f th e sto r es an d t h e m ai l —o rd er h o u ses in

h is d i str i c t an d to m ak e c h an ges o f p er so n n el o n th e b asi s o f th ese

” 44
an aly s es T o D o dd th e D ist r i c t M an ager h as a du al r esp o n si b i l i ty
“
.
, .

No t o n ly w as h e to see by co n stan t p er so n al vi si ts an d an aly ses o f O p er at

,

in g stati sti c s th at sto r es in h is d i str i c t are b ei n g pr o fitably o p er ated

“

, ,

b u t h e w as seco n dly to see th at th e m aj o r m erch an d i se an d sal es pr o m o

“

ti o n p o l i ci es o f th e c o m p an y are b ei n g c arr i ed o u t His S al es M an ager .

w as to h ave, in D o dd s wo rd s sal es pr o m o ti o n in th e bro ad est sen se

’ “

, , ,

[ ]
as h i s pr i n c i p a l f u n c ti o n He is a sal es.pr o m o t er n o t i n th e sen se

o f m er ely ch eck i n g o n c er tai n d etai l s o f sto r e o p er ati o n — b u t t h r o ugh

actu al w o rk in th e sto r es w i th sp eci fi c m erc h an d i se an d o p er at i n g d i v i

si o n s . Fr azer s vi ew w o n ou t fo r th e task s assi gn ed th e D i stri c t S ales

’

M an ager s an d A udi to r s w ere to b e o n ly additi o n al p art tim e j o b s fo r an -

ex ecu ti v e alr eady w o rk i n g in o n e o f th e sto r es In i n si sti n g th at th e .

m anager s h ave a m i n i m u m o f staff Fr azer w as c arryi n g o u t h is o w n ,

24 8 SEA R S , R O E BUCK A N D CO M P A N Y
co n vi cti o n s l so f o llo w in g G en er al Woo d s expli ci t ins tructi o n s
an d
’
a .

Th e essen ti al w eakn ess in th e Co mmi ttee s r eco mm en da tion s w as th at

’

th e f ou r T err i to r i al O fficer s an d th e th i rt y-th r ee D i stri ct M an ager s w er e

all gi v en w i d e r es po n si b i l i ti es E v en t h o ugh th ey h ad al mo st n o st afl s an d
.

ev en th o ugh th e Chi ca go o flice w as a cco un tabl e f o r th e f un ct i o n al acti v i

ti es in th e sto r es an d m ai l—o rd er h o us es , th eir duti es wer e m o r e th an -

m er ely sup erv i si n g p er so nn el an d co o rdi n atin g pr o duct fl o w Ea ch T erri .

t o rial O fficer w o ul d b eco m e spe cifi ca lly r esp o n sibl e to th e Pr esi den t an d
“

th e S en i o r V i c e-P r esi d en t f or th e act i vi ti es o f th e Co m p an y in th e terr i to ry ,

i n cludin g assets pr o fi ts exp en ses in v en to r i es sales per so nn el, an d goo d

, , , , ,
” 46
wi ll o f th e Co m p an y Mo r eo v er G en er al M an ager s o f th e m ail-o rder
.
,

h o u ses an d th e r etai l di str i cts w er e to r epo rt dir ect ly to th e T erri t o ri al

”
O fficer wh en an d as r equ ested by th at o cer, ev en th o ugh th er e w as
“
m
al so t o b e di r ect c o mm uni cat i o n b etw een th e sto r e an d pl an t m an ag er s

an d th e f u n cti o n al o ffic er s in Chi ca go .

Th e Co m m i ttee h op ed to av o i d co n fli ctin g au th o r i ty an d r espo n sib ili ti es

by h av in g th e impo rt an t co mm u ni ca ti o n s b etw een C h i ca go an d t h e
di stri cts b etw een sto r es an d pl an ts go al so to th e T erri to ri al O ffice fo r
,

i n f o rm ati on Th at executi v e co ul d th en at hi s di scr eti o n v eto o r susp en d

.
, ,

a n o rd er, gi v i n g hi s r easo n s t o Wo o d R o sen w al d, an d th e h ea d o f th e,

f u n cti o n al dep artm en t in vo lved 47

Th e Fr a zer R epo rt spell ed o u t th i s
.

r elati o n shi p in th e fo ll o w in g w ay
In rder th at b oth th e f u n ction al o rgani zatio n an d th e territo rial o rgani za
o

ti o n m ay o p er ate to th e f ullest effi cien cy it is r equ ir ed th at in stru ctio n s gi v en

,

b y th e fu n cti o n al o fficer to hi s f un ction al su b o rdin ates in a territo rial u ni t

sh all b e
g i v en dir ectl y an d at th e s am e tim e th at a co y o f su ch inst ru c
p
tion s sh al l b e giv en to th e t errito ri al o fficer in ch ar ge o f th e u ni t aff ected .

F o r ill us tratio n th e V ice P r esiden t an d Co m p tr oll er w ill co mm u n ica te hi s

,
-
,

instru ctio n s dir ectly t o th e Cr edit D ep artm en t at th e S eattle House an d

w ill al so sen d a cop y o f in stru ctio ns t o th e G en er al Man ager o f th e Sea ttle
Ho u se an d to th e territori al ex ecu tiv e at O ak lan d .

Th e T errito rial O ffi cers are on th e execu tiv e lin e o f au th o rity r ep o rt in g ,

directly t o th e S eni o r V ice Pr esiden t S u ch o fficer s ar e au th o riz ed an d in

- .

s tru cted to sto p o r ch an e an y o r al l o rder s aff ecti n g th eir terr it o ries if in

g ,

th eir j u dgm en t th e b es t in ter es ts o f th e C o m p an y are serv ed F o r ex am p le

,
.
,

th e Mail O rd er S al es Man ager m ay co mm u n i cate an o rd er dir ec tly t o th e

Merch an dise S u p erin ten derft at th e D all as Ho u se Th e Regio n al A ss istan t .

V ice P r es iden t m ay eith er v et o o r ch an ge it as m ay th e G en er al Man ager o f

-
,

th e D all as H o u s e Wh il e su ch cases w ill b e excep tion al each su ch cas e w ill

.
,

b e im p o rtan t .

H ere sur ely w er e th e seeds o f di sco rd .

H avi n g o utli n ed th e d u ti es o f th e fu n cti o n al fi r o f ce s at Ch i ca go an d

th e n ew r egi o n al un i ts in th e fi eld, th e Co mm i tt ee th en set up a gen er al
A BORTIVE DE CE N TR A L I ZA TIO N 249

o ver-all p o li cy—fo rm ulati n g an d co o rdi n ati n g office T h e m an ager s o f th e .

m aj o r f u n cti on al dep ar tmen ts — M erch an di se O p er ati on s an d F i n an ce , ,

— an d th e h ead s o f th e f o ur n ew T err i to r i es w er e to b ec o m e V i c e P r esi -

den ts L essi n g Ro sen wald as th e n ew S en i o r V i ce-Pr esi den t b ec am e a

.
, ,

gen er al ex ecu ti ve in n am e as well as in fact He an d th e o th er V i ce-Pr esi .

den ts an d th e execu ti ve in ch arge of f acto r i es w er e to m eet m o n th ly as

th e O flicers B o ard to assi st th e Pr esi d en t o n th e d ev el o p m en t o f C o m
“

p an y p o li cy an d in th e co —o rdi n ati o n o f th e f u n ctio n al ac ti vi ti es o f th e

”
C o m p an y A s h ad l on g b een stan d ard pr o cedur e in l arge A m er i can
.

bu si n ess en terpri ses th e seni o r ex ecuti v es wer e r esp o n sibl e i n di vi du ally

,

fo r th e adm i n i str ati o n o f th e b asi c o p er ati n g u n i ts an d co ll ecti v ely f o r th e

en terpr i se as a wh o l e T o m ak e sur e th at th e m em b er s w o uld d ev o te so m e
.

o f th ei r ti m e to a v ar i et y o f sp ec i fi c pr o bl em s a n u m b er o f s ubc o m m i ttees ,

were set up to m eet an d r ep o rt to Ro sen w ald at l east qu ar terly Each .

subco mmi tt ee w as ch ai r ed by th e h ead o f th e d ep ar tm en t m o st i n v o lv ed

a n d i n clud ed ex ecu ti v es n o t o n th e B oard Th er e w er e c o mm ittees fo r .

facto r i es adver ti si n g cr edit p o li cy m erch an d i se budgets o p er ati n g esti

, , , ,

m ates r et ail p er so n n el an d pr o c edur es an d r egi o n al o rgan i z ati o n T h ei r

, , .

t ask li k e th at o f th e O ffi c er s B o ard w as o n ly adv i so ry T h ey w er e t o

, , .

fo rm ul ate r ecomm en d ati o n s for d eci si o n s by th e Pr esi d en t an d to ch eck

o n p o li ci es alr eady d ec i d ed up o n .

Carryin g O u t th e Co m m ittee s Prop osals

’

Wo o d an d ccep ted th e Fr az er C o mm i ttee s reco m

L es si n g R o sen w ald a
’

m en datio n s wi th o n ly mi n o r m o di fi c ati o n s Th e m o s t i m p o rt an t o n e .

a cc ep ted w as R o sen w ald s pr o p o sal to set up an A ssis tan t to th e P r esi d en t

’

w h o w o uld h an dl e publi c r el ati o n s an d r ecrui tmen t o f p er so n n el an d

to an alyz e r ep o r ts an d r eco mm en d ati o n s th at c am e to th e P r esi
“
al so

Th r o ugh cr eati n g such a s taff office Ro sen w ald wr o te Wo o d

” 48
den t .
, ,
”
h e h o p ed th e co mp an y co uld sav e Mr D o dd to th e o rg an i z ati on an d
“
.
,

m ak e th e m o st eff ec ti v e u se o f h is splen di d exp er i en ce an d ab i li ty Th e

”
“
.

Fr azer Co mmi ttee app ar en tl y at Wo o d s suggesti o n h ad tak en Wester

,
’

v elt s T ech n i c al D ep ar tm en t o u t o f th e M erch an d i se D ep a rtm en t so th at

’

it b ec ame th e o n ly o th er cen tr al staff o flice at S ear sf "9

Wo o d an d R o sen wald n ext ch o se th e executi ves to fill th e offices o f

th e o rg an i z ati o n th e Co mmi ttee h ad f as h i on ed Ro sen w ald m a d e th e .

i niti al r eco mm en d ati o n s A s h e wr o te Wo o d : T h ese are n o t to b e co n

.
“

sidered fi n al by an m s d i s m c I w uld f t
y , ean an n o e ases , o g o so ar as o

say th at th ey are n o t d esi r abl e I h av e go n e o n th e fo ll o w i n g b asis : T h at

.

ea ch s qu ar e m u st b e fil l ed by a n am e ev en if w e m ak e a ch an g e l ater
”
.
,

F o r th e lo w er ech el o n s Ro s en w ald s ugg ested so m e n am es b u t str ess ed

, ,

th at d ep ar tmen t h ead s an d th e r egi o n al ex ecuti v es m u st h av e th e fi n al say .

25 0 SEA R S , R O E BUCK A ND CO M P A N Y
O nl y abo ut m en di d th e n ew S en i o r V i c e-Pr esi den t f eel stro n gly
tw o .

O n e w as D o dd an d th e o th er w as G i lb er t E H um p h r ey wh o m h e
, .
,

wan ted to tak e o v er th e p o st o f A ssi stan t to th e Pr esi den t fo r F a cto ri es

b ecau se th at dep ar tmen t n eed s imm edi ate atten ti o n an d sup ervi sion
an d f urth er m o r e, b ec au se th er e is a tr em en do u s fi eld f o r th i s p ar ti cul ar
,
”
a cti vi ty at th i s pr esen t ti m e
, .

In fi lli n g in th e squ ar es R o sen w ald an d Wo o d ten d ed to r ely o n

,

Fr azer s r ecomm en d ati o n s o n p er so n n el wh en ever th ey wer e un cer tai n

’
.

B o th h ad gr av e do ub ts ab o ut th e p ossi b i li ty o f o b tai ni n g executi ves able

en o ugh to h an dl e th e cr i ti ca l p o st o f T err i to r i al Offic er B eca u se o f th ei r .

h esi tan cy o n ly o n e m an B ark er w as m ad e a V i c e-Pr esi den t Th e o th er

, , , .

th r ee C h arl es B Ro b er ts C A Wo o ds an d Hi r am W Ki n g sl ey t oo k
, .
, . .
, .
,

th e ti tl e o f T err i to r i al O fli cer r ath er th an o f V i c e-P r esi d en t o r A ssi stan t

V i ce—Pr esi d en t as th e Commi ttee h ad r eco mm en d ed F o r th i s r eason

, .
,

th e r egi o n al o rg an i zati on h ad li ttl e r epr esen tati o n o n th e O fficer s B o ard,

wh i ch w as m ade up o f V i ce-Pr esi den ts T h u s th e fu n cti o n al o fficer s came .

to pl ay a l arg er r o l e in po li cy m ak i n g th an di d th e terr i to r i al ex ecu ti ves .

A ft er th e sen i o r o ffi c er s h ad b een n o tifi ed o f th eir n ew j o b s th e j u n i o r ,

o ffic er s w er e appo i n ted an d fi n al ly all con c er n ed w er e c ar efully br i efed

, ,

o n th e r easo n s fo r th e ch an g e an d th e n atur e o f ea ch i n di v i du al s n ew
’

50
o b A l l th i s w a s c arr i ed o u t qui te sm oo th ly u n d er C ar n ey s sup ervi si o n
’

j . .

T h e fi n al m eeti n g o f th e Fr az er Co mmi ttee w as o n J an u ary 6 1 930 an d , ,

by F ebru ary 1 7 th e n ew structur e w as in ful l o p er ati o n

, .

A lm o st at o n c e qu esti o n s b egan to b e r ai sed con cer n i n g th e r el atio n s

b etw een th e fu n cti o n al an d r egi o n al o rgan i zati o n s L ate in J an u ary Fr azer .

w as wr i ti n g G en er al Woo d expl ai n i n g so m e o f th e co nf u si o n s th at h ad
ar i sen o n th i s p o i n t an d em p h asi zi n g th e n eed to lim i t th e r o l e o f th e

r egi o n al o fficer s O n e Di stri ct M an ager fo r ex am ple, h ad i ss u ed in stru c

.
,

ti o n s th at all r equ i si ti o n s f o r m er ch an d i se m u st b e i n i ti ally wr i tten in h is

o ffic e F r az er i n si sted th at such a step w as

” 51
ab so lu tely wr o n g It v io
“
. .

l ated Wo o d s o r i gi n al i n structi o n s to h im an d h e added,

’

You r l
p anrganizati on is a goo d on e b u t you r exp ectation s u n der it w ill
o f o ,

b e defeated if y o u p erm it territo rial o ffi cers to m ak e th em selv es in to n eck s

o f th e b o ttl e ; o r if o u p ermi t D istr ict Man a ers to b u il d u p ex ten siv e o ver
y g
h ead ; o r if yo u p erm it a diff u sion o f f un ctio n al resp o n sib ility b etw een fu n c
tio n al o fi cers in C h icago an d t err ito r ial o fficers in th e fi eld .

T h e m an agem en t o r r d th e m o st difficulti es
f th e sm al ler
“
B ”
sto es c eate

in carryi n g o u t th e n ew pl an o f o rgan i z ati o n T h ei r co n ti n u i n g adm in is .

trati v e n eed s br o u g h t a co n stan t pr essur e f o r en largi n g th e T err i to r i al

an d D i st r i ct O ffices B sto res r em ai n ed th e h ardest to sto ck th e h ardest

.
“

to m an an d th e o n es n eed i n g th e m o st atten ti o n in d i spl ay a dv er ti si n g

, , ,
A BORTIVE DE C E N T R A L I ZA TIO N 25 1

h f -li n e d ep art m n t
an d o h et r sal es pr o m o ti o n a c ti v i ti es Th . e A t e ull , e

sto r es ca rry i n g al m o st ev eryt h i n g in th e c atal o gu e th o ugh em p h asi z i n g

h ard li n es h ad a cl ear pl ace in Wo o d s str ategy o f urb an r etail i n g S o

’
.
,

di d th e C sto r es wi th th ei r c o n cen tr ati o n o n au to m o b i l e accesso r i es

“

an d o th er h ard li n es t o th e almo st to t al ex clu si on o f so ft o n es Bu t th e .

”
“
B sto r es w er e as Em m et an d Jeu ck p h r ased it a m erch an di se n o
, ,
“ ‘

m an s l an d T h ei r w ei rd asso rt m en ts i n cluded sm att er i n gs of m an y

’ ’
.

” 52
th i n g s an d f ul l o ff eri n gs o f few li n es Y et as f ar m co mm o di ty pr i c es
.
,
”
plumm eted an d th e m ai l-o rder h o u se sal es dr o pp ed th e B sto r es wer e ,
“

b ecomi n g an i n cr easi n gly vi tal so urce o f r ev en u e f o r S ear s In 1 930 wh en .

m ai l-o rd er s al es decl i n ed by m i ll i o n sal es in th e r etai l sto r es r o se

,

m i lli on o v er th e pr evi o u s y ear T h ese t r en ds w er e d es ti n ed to con

.

ti n n e .

By mi d s ummer 1 930 H u mp h r ey w h o h ad n o t y et r eturn ed fro m

, ,

Lo s A n gel es to tak e ch arge o f th e F act o r i es D ep ar tm en t w as i n si sti n g ,

”
th at th e Di str i ct M an ager s o ffic e m u st b e en l arg ed if th e B sto r es w er e
’ “

go i n g to carry th e ri gh t sel ecti on o f go o ds an d sell th em eff ecti v ely .

Un der th e o rgan i zati on f ash i o n ed by th e Fr az er Co mmi ttee H ump h r ey ,

po i n ted o u t
All m er ch an di se is in th e h an d s h e [ f u n ction al ] P ar en t dep art men ts an d
of t

th e Heads-o f-S to ck in th e r etail sto r es T h e P ar en t d ep art m en ts select, b u y

.

an d est ab lish th e lin es to b e so ld b y th e R etail S to r es, b u t h av e n o m eth o d

o f su p erv isio n o v er th ese li n es, th is b ein g th e f u n cti o n o f th e H ead-o f-Sto ck .

In th e p erf o rm an ce o f h is fu n ctio n s, th e Head-o f—S to ck is pr actically in

dep en den t, b ein g su b j ect o n ly to th e gen eral sup erv ision of th e Sto re
Man ager an d r eceivin g n o su p erv isio n o r assistan ce from an yo n e w h o is
prim ar ily f am iliar w ith h is lin e o f m erch an dise Th e resu lts ob tain ed in any
.

lin e w ill dep en d o n th e in dividu al j u dgm en t disp lay ed b y th e Heads-o f

S tock in h an dlin g th at lin e, h is an al y sis o f sal es p ossib il ities o f item s, h is
en er gy in k ee in h is st o ck s, h is j u d m en t an d an aly sis o f price lin es t o b e
p g g
carried , h is sh rew dn ess in sen sin g p o p u l ar d em an d an d in estim atin
g p os

sib ilities o f n ew item s o fl ered h im , h is j u d m en t in fi ttin h i m r h d ise

g g s e c a n

to lo cal co n ditio n s, h is ab ility t o secu r e sales th r ou gh pr o p er adv er tisin

g
an d disp lay , an d h is ab il ity to secu r e th e m axim u m t u rn o v er w ith o u t

s acrifi ce o f serv ice, t o m eet h is cu st o m er an d hi s in en u ity in t ak in m r

g g e asu es

to co rr ect p ast m ist ak es an d to m eet adv erse an d u nl o ck ed-fo r co n ditio n s .

Th e p r o b lem is n o t to fi n d th ree h u n dr ed efli cien t m an ager s f or o u r

sto res, b u t to fi n d th r ee h u n dr ed efficien t h ardw ar e m en , th r ee h u n dr ed

efficien t sp o rt in g goo d s m en th r ee h u n dr ed effi cien t p ain t m en , etc w h o

, .

can erf o rm th e in tr ica te du ties o f r et ail m erch an d isin u n d er a str an e

p g g
system in w h ich im o rt an t elem en ts o f o rd in ary co mm ercial r d r
p p o c e u e are

lack in g an d do it w ith ou t o th er gu id an ce t h an th rou gh co rresp o n den ce

w ith a b u yer in C h icago , w h o , w h il e h e is an exp er t in h is lin e, is th in k in g
252 SEA RS , R OE B UCK A ND CO MPA N Y
in term s o f sel ectin g, b u yin g an d pricin g , an d n ot o f t he pro b lems of reta il

To p lace so m uch of th e r es pon sib ili ty f or sales v o lum e an d pro fi ts

on t h e v ari o us H ea ds-o f-S tock in th e r etail st o r es w as H ump hr ey str es sed , ,
”
“
decen tr aliza ti o n to th e full est exten t It pr ev en t ed S ear s f r om takin g .

a dv an tag e o f th e m an agerial econ o m i es o f scal e It w as n o t all o win g th e

‘

com p an y t o
”
secur e un if orm r esul ts th r o ugh establish ed po li ci es ; t o
“

em pl o y cap abl e m en in k ey po si ti on s th us per mi ttin g t h e use o f m edi ocr e

“

,
”
m en i n l esser p o si ti o ns ; to d ev el o p n ew i deas n ew po li ci es n ew
“

, ,

m eth ods [ that ] ma y b e pr o duc ed th r o ugh th e in terch an ge o f i deas o f a

n u m ber of m en be tter th an wh en l imi ted to th e i n di vi dua l an d so to ,

m ak e it po ss ibl e f or mi st ak es in m erch an di sin g to b e co rr ected by t h e

“

”
tr an sf er of g oods b etw een st o r es .

T h e r em edy pr o p ose d by H umph r ey w as to expa n d th e D i stri ct Man

ager s a dmi ni st rat i v e stafl T h e M ana g er sh o uld h av e a st aff of m erch an
“
.

di se m en each in ch ar ge of r elated lin es w h o se du ty it wo ul d b e to

, ,

sup er vi s e an d ass ist th e H eads—o f-S t o ck of th e sto res i n th at di stri ct t o ,

k eep th e buyin g o rgani zati on inf o rm ed as to co n di ti o ns i n th e fi eld

an d t o see t h a t p o li ci es an d p l an s of th e P ar en t o rg an i z ati o n ar e car ef
”
t
carri ed o ut i n d etail in th e fi eld Af ter di sc ussi n g t h e ma tt er wi th th e
.

o th er T erri to ria l O fficer s w h o suppo rt ed H u mp h r ey s vi ew s Woo d o n

’

, ,

A ugus t 8 auth o rize d th e f o rm ati on of a m erch an di si n g st aff in th e

,

54
Di st ri ct Ofi ces .

F r a zer R e vi ew : th e N ew S tru ctu r e

A f ew w eeks lat er Woo d d eci d ed c d l oo k at th e n ew
to ta ke a se on
”
struct u r e N o t o nl y w er e t h e pr obl ems of t h e B st o r es be co mi n g m o r e “
.

rpl exi n g a s th e ec o n o m i c d epr essi on d eepe n ed b ut si gns o f co n fli ct

p e ,

be tween f u n cti o nal an d r egi o n al officer s w er e in cr easi n g A t a m eetin g .

o f th e Ofi cers B o ar d o n S tem e 3
ep b r 0 1
93 0 — al s o a tt en d ed by Fra zer
, ,

Ho user an d D od d — th ere w as g en er al agr eem en t that th e un derlyin g

,

pr obl em in r etailin g w o rk w as th e n eed f or be tter pe r so nn el at all l ev els

”
o f m ana g em en t ? T h ese ex ecut i v es f urth er agr eed to h a v e Fr aze r r evi ew

th e stru ct ur e b e h a d h elp ed t o cr ea te .

Fr azer s seco n d r ep o rt fi ni sh ed a m on th later in di cated h o w actua l

’

, ,

o er atin g co n di ti o n s w er e b egi n n in g to m o d if y th e Comm i ttee s ca r ef ull y

’

p
dr aw n p lan M o st obvi o us w as th e gr o w th o f th e T erri to ri al an d D istri ct
.

Oflices Fr azer ag ai n w arn ed Woo d ag ain st perm i tt in g th e T erri t o ri al

.

O ffi ces fr o m be co mi n g th e n eck o f th e b o ttl e th r o ugh w hi ch all in stru c

“

ti o n s o f ev ery ki n d an d sh ap e h a d to p ass an d fr o m w hi ch all co rr ecti v e

m eas u r es w er e tak en Th e T erri to ri al O ffi cer un d er n o circu mst an ces

”
sh o ul d un d ertak e f u n cti o n al w o rk
56
T h e co n sul tan t w as a lso t ro u bl ed
.
A BO RTI VE DE C E N T R A L I Z A T I O N 25 3

by th e gro wi n g ten den cy fo r th e A sto res to b e admi n i ster ed di r ec tly

by th e T err i to ri al Offi cer r ath er th an by th e Di stri ct M an ager T h e d an ger .

h er e Fr a zer b eli eved w as th at s uch adm i n ist r ati o n wo uld k eep th e B

“ ”
, ,
”
sto res fro m mak i n g f ull u se o f th e faci li ti es o f th e A sto r es an d th ere “

fo r e wo uld l ead to a dupl i c ati on o f faci li ti es in th e D i str i c t M an ager s

’

o ffic e He urged b o th th e
” ”
A an d B S to r e M an ager s to m ak e m o r e
“ “
.

eff ec ti v e an d co n t1n u o u s u se o f th e m erc h an d i si n g exp er i en c e an d f ac i liti es

in th e m ai l—o rd er ho u s es th at w er e pr o v i d i n g th em w it h s uppli es .

Frazer wo uld appro ve o f th e cr eati o n o f th e n ew m erch an disi n g

adm i n i str ati v e s taff s in th e D i str i c t O ffic es w h i ch H u m p h r ey h ad fi r st
,

s uggested o n ly after a c areful budgetary study h ad b een co m pl eted Th e

,
.

app o i n tm en t o f fi ve to t en merc a d is e up erv i o r s to t i r y th r ee d i str i ct

h n s s h t -

o ffi c es h e p o i n ted o u t co uld i n cr eas e o v er h ead exp en sesh y o v er a mi ll i o n

, ,
”
do llar s a y ear T h ere sh o uld n o t b e th e sli gh tes t fear o f do i n g th i s if
.
,
”
th e en l arg ed o ffice s uppl emen ted th e exi sti n g r eso urc es in th e A sto r es
“

an d m ai l -o rd er h o u ses Bu t if s uch D i st r i c t O ffic e s taff s w o rk ed i n d e

.

en n f m
p de tly o th e erc an dise c n t ro l di vi i o s in t e m ai l o rder h o u ses
h o s n h -

”
an d th e s to ck cl erk s in th e A sto r es S ear s w o uld in f act b e c arry i n g
“

th ree sep ar ate s ets o f o verh ead Co uld th e co m p an y affo rd th at typ e o f

.

exp en se Fr azer ask ed ?

,

F or th e m o m en t at least th e S ear s ex ecu ti v es w er e m o r e i m pr ess ed by

,

th e n eed to i m pr o v e adv er tisi n g d i spl ay s to r e d esi g n an d o th er s al es

, , ,

pr o mo tio n acti viti es th an by th e d an ger of i n cr easi n g o ver h ead co s ts .

Th e dis tr i c t staffs w er e r etai n ed an d b o th d i str i c t an d s to r e m an ager s

,

were n o w m ade even mo r e expl i ci tly r esp o n sibl e fo r m ai n tai n i n g a

sati sf ac to ry vo lum e o f s ales an d for m ak i n g c er t ai n th at each sto r e
”
c arried o ut its pro p er sales pr omo ti o n al wo rk an d th at th e sto res
“

coo p er ated wi th th e Merch an di se Dep ar tm en t in Ch i cago o n pl an s to

57
exp an d sal es .

F o r m o r e th an a y ear th e struct ur e f ash i o n ed l ate in 1 929 an d sli gh tly

,

mo di fi ed in th e fo llo wi n g au t um n co n ti n u ed w i th o u t a ch an g e F o r o n e .

th i n g th e pr o bl em o f s upplyi n g th e r etai l sto r es o n e o f th e th r ee r easo n s

, ,

fo r setti n g up th e Fr azer Co mm ittee h ad b een sati sf acto r i ly an sw er ed

,
58
.

”
T h e cr eatio n o f p oo l sto ck s o r war eh o u ses clo se to r etai l sto r es an d th e
“

im pro ved co n tro l an d sup ervi si o n in Ch i cago an d in th e T erri to ri es w er e

assur i n g a sm o o th fl o w o f suppl i es to th e v ar i o u s sto r es T h e c o n tr ac ti on .

o f th e m ark et an d th e sm all n u m b er o f n ew sto r es b ei n g o p en ed h ad m ad e

th i s pr o bl em easi er to so lv e .

Co n tin u in g Co n flict an d R esu ltin g Prop osals

By th e en d o f 1 93 1 h o wever th e dr i vi n g o n s laugh t o f th e depressi on
, ,

agai n i n cr eased th e c on c er n o v er gr o w i n g ad mi n i str ati v e c o s t s A t th e .

254 S EA R S , R OE BUCK A N D CO M P A N Y

di visi o n f
r espo nsib ili ty an d auth o ri ty bet ween th e f un cti o nal dep a rt
o

m en ts an d th e T erri to ri es A s pr o fi ts be ca m e h a rd er to o bt ain th e r egio nal

.
,

ex ecut i v es r es po ns ibl e f or such pr o fi ts be g an to in t er f er e m o r e d i r ectl y

with th e m an a gem en t o f th e r etail st o r es an d ma il -o rder h o uses Th e .

st o r e ma n ager s in tur n l oo k ed to th e l ocal m en r ath er th an to Chi ca go

”
f o r ass ist an ce o n man y o f th ei r pr o bl em s A gai n th e B st o r es wer e th e
“
.
,

sea t o f m o st o f th e difi cu l ti es .

T o Woo d S ea r s s difi cul ti es w er e esse n tially th ose o f pe rso nn el Im

’

, .

pr o v e th e ca libe r an d th e t rai ni n g of th e m a na gers an d execu ti ves an d ,

th e m a j o r pr o bl ems w o uld be o v erco m e In th e f all o f 1 93 1 h e o rder ed a .

,
”
car ef ul in ven to ry o f pe r so n n el as a st ep t ow ard m eeti n g th e problems of
“

sel ecti on t raini n g advan cem en t co m pen sati o n apprai sal an d discip lin
, , , , ,

in g o f ex ecuti v e an d st o r e per so nn el 59
A t t h e sam e tim e f o ll o win g a .
,

sugg esti o n Fr aze r h a d m a d e in his r ev i ew o f th e y ea r bef o r e h e set up ,

a R etai l P er so n n el D ep artm en t un d er Ir a R A n dr ew s f o rm erly o n e of .

,

Do dd s ass ist an ts By th is tim e Do d d h imse lf h a d l eft Se ar s to be co m e a

’
.

vi ce pr esi d en t of a large gr ocer y ch ain th e Kr o ger G ro cer y an d Bak in g

-
,

Co m p an y A n dr ew s w as t o h an dl e all po li cy an d plan n in g m att ers co n

“
.

” ”
n ect ed w i th r eta il per so nn el
0
In m eetin g th ese pr obl em s h is o fli ce w as
.
,

al so to act as a cl ea ri n g h o u se f o r d esir ab le appl i can ts em pl o y ee appea l s

“

, ,

r equ ests f or m en n o t l ocally av ai labl e et c an d fo r info rm ati o n o n , ,

per so nn el pr a cti ces an d pr ocedur es bet ween th e v ari o us fi eld offices an d

Ch i ca go Its r ela ti ons t o th e t err i to rial o rg ani za ti on s w er e n o t qui te cl ea r
. .

Th e r epo rt an n o un cin g its f o rma ti on m er ely st at ed : Co n ta ct wi th th e

“

sto r es wil l be m ai n tain ed th r o u h th e T erri to rial O fficer s ea ch o f wh om

g ,
”
will ha v e a spe cifi ca lly assi gn ed assi st an t f o r su ch wo rk But w h o ha d .

th e fi n al sa y th e T err i to rial o th e C i g
, r h ca o o ffi c e ?

N ex t in mi d—De cem be r Woo d wr o te a m em o r an dum to th e T erri to rial

, ,

Om cer s urgi n
g t h em t o co n c en tr ate o n th ei r pri ma ry r es po ns i b ili t y t ha t ,

o f per so n n el T h is m em o r an dum is w o rt h qu o tin g at so m e l en gt h f o r in

.

it Wood mak es cl ea r so m e o f th e b asi c i d eas abo ut man ag em en t th at lay

beh in d th e Fr az er r epo rt an d th e lat er o rganiza tio n al ch an ges at Sear s :
In o u tl ni ngi my co n cep tio n o f resp o ns ib ilities an d duties o f th e T er ritorial
Ofi cer , r eall y ou tli n ing m y co n cep tion o f m y ow n
I a m j o b , beca use, in

you r r espectiv e ter rito ries y o u st an d in my p lace Th er e is v ery little th at

,
.

th e p rin cip al ex ecu ti v e o f a wi del y sca tt er ed far-fl un g o rgan iza tio n lik e ,

Sear s Roe b uck can do perso n all y T his ap p li es to m e an d lik ewise to y ou

, . .

A s Pr es iden t o f th e Co m p an y abo u t th e m os t I can h op e to do is t o sel ect

, ,

r
p p o e rl
y r ew ar d an d r
p p o er l y w
,
ee d o u t th e o fi cers an d k ey m en o f t h e

Co m p an y bes ides co n tin uin g al o n g th e lin es o f certain f un dam en tal po lici es .

T o sum u p m y pri ncip al j o b is th a t o f a pe rso nn el o m

,

,
cer to a lim it ed cl ass
A BORTIVE DE C E N TR A L I ZA TIO N 255

of m en , th e estab lish m en t an d m ain ten an ce o f pr op er p o licy an d a clo se

w atch o ver th e r esu lts o f p o licy to th e C o m p an y .

Th is again applies to yo u In y ou r r esp ectiv e territo r ies y o u r fi rst an d m o st

.

imp o rt an t du ty is th e p ro p er selectio n , prop er r ew ard an d pr op er elim in atio n

of person n el in yo u r rrito ry
'

te .

Th en Wo o d added a si gn i fic an t co mm en t .

S tan din g in m y p lace, y o u are also th er e to see th at th e f u n dam en tal

p o licies o f th e C om p an y are p ro p erly carried o u t, an d to w atch th e p o licies
an d th e resu lts o f all diff eren t u n its in you r territory .

Wh en I say th at y o u are th er e to see th at th e f u n dam en tal p olicies are

carried o u t I m ean th e p o licies d eterm in ed b y th e fu n ctio n al o m
,
cers o f t h e

C o m p an y Mr Nel son in Mer ch an disin g Mr C arn ey i n O p er atin g a n d

,
.
, .
/

Mr Po llock in A cco u n tin g If yo u f eel th at th ese p olicies are w ro n g in

. .

th em selv es o r th at th e p o licies as estab lish ed b y th ese fu n ctio n al o ffi ces are

n o t b ein r
g p p o erly carried o u t it i s y o u r d u ty to call th e m atter t o th e
,

a tten tio n o f th e o ffi cer s if th e p o licy is w r o n g t o see if it can n o t b e ch an ged

, , ,

o r if th e p o licy is co rr ect b u t ex ecu tion is b a d th r o u gh m isco n cep tio n o r

o th er cau ses to see th at th ey ar e in f o rm ed o n t h e su b j ect .

T h e great est d an ger o f an y ex ecu tive — th e d an ger is gr eater th e m o r e

activ e ab le an d aggr essive an execu tiv e is
,
— is to su rr o u n d h im self w ith a
staff a n d t o b u ild u p a d u p licat e o rgan iz ati o n P er son ally I try to av o id thi s .
,

b y h avin g o nl y an O fiice A ssistan t an d a p er so n al secretary T h e p o licies o f .

th e b u sin ess I delegate to th e fu n ction al o ffi cer s an d th e terr ito rial o fli cers .

A gain I w an t to im pr ess yo u w ith th e vital s electio n o f p erso n n el O u r .

w h ol e fu tu re dep en ds o n th e p ro p er selectio n p r op er r ew ard an d pr op er ,

elim in atio n o f p er son n el Y o u can n o t p er so n ally r em edy m atter s in an y u n it

.

u n der yo u r co n t r o l Y o u h av en t h m u t y o u can r em edy m atter s

’
.
g o t t e ti e B .

b y gettin g th e righ t m en in th e righ t place an d I h ave n o t seen a sin gle

in stan ce in an y T errito ry Mail O rder Ho u se D istr ict or S to r e w h ere th e
, , ,

selection o f r igh t m en did n o t alm o st im m ed iately b r in r esu lts P u t y o u r

g .

p erso nn el w o rk fi rst b ecau se it is th e m o st imp o rtan t 61

.

Wo o d by pl aci n g
, h is f ai th in
p er so n al ab i li ty fai led to see th e valu e ,

o f sy stem ati c o rg an i z ati o n an d th er efo r e to appr eci ate th e f atal fl aw in

S ear s s exi sti n g structur e T h e T err i to r i al O fli cers h ad m o r e r esp o n si b i liti es

’
.

th an j u st th at f o r p er so n n el ; th ey w er e to c arry o u t th e p o l i c i es set by

Ch i cago T o_ co o rd i n ate an d ex ecu te th o se p o l i c i es w as esp eci ally difli cu lt

.

si n ce th ey h a d n o sa i th ei r d eter m i n ati o n T h d i ffic l ti i cr d

y n e u es n ea se .

wh en th e p o li ci es wer e set by ex ecuti v es con cer n ed wi th o n e acti vity an d

n o t w i th th e i n tegr ati o n o f sev er al T h e t err i to r i al u n i t s w er e sp eci fi c all y
.

r esp o n sibl e fo r th e pr o fi t an d m ark et p erfo rm an ce an d fo r a wi de v ari ety

o f acti vi ti es w i th i n th ei r d o m ai n s M o r eo v er if th e T err i to ri al O ffi c er s
.
,

were to sel ect pro mo te an d dr op p er so n n el th ey al so h ad to c arry o u t

, , ,

th e b asi c adm i n i str ati v e f u n cti o n o f appr ai si n g o p er ati n g p er f o r m an c e In .

25 6 SEA R S , R OE BUCK A ND COMPA NY
ot h er w o rd s, Wo o d w as aski n g th e T erri to ri al O ffi cer s to a dm in i ster
a m ul tifun cti o n o rg an i zati on wh i l e l ea v in g auth o ri t y o ver th o se f un cti o n s

in o th er b an ds .

C ar n ey saw th e pr o bl em m o r e cl early T o th e V i ce-P r esi d en t in ch arge

.

o f O p er ati o n s, th e pr o bl em s w er e m o r e th an th o s e o f p er so n n el ; th ey

r esul ted fr o m a l arger o rgani zati o n al cri si s In fact, th e fai lur e to meet
.

eff ecti v ely p er so nn el n eeds came in goo d p art f r o m a f ai lur e o f th e exi stin g

stru ct ur e to m ak e cl ea r th e r esp o n si b i li ty an d au th o r i ty o f th e f u n ct i o n al

an d t err i to r i al o ffi ces T h e c en tr al difii cu lty, C ar n ey m ai n tain ed, w as th at

.

th e T err i to r i al O ffic er s w er e t ak i n g o n du ti es th at b el o n g ed pr o p erly t o

th e f u n cti o n al d ep art men t s T hi s m ean t th at T err i to r i al O fi cers h ad

.

t oo li ttl e t i m e fo r p er so n n el w o rk an d th at th ey an d th e W h o l e S ear s

field o rgani z ati o n wer e fai li n g to t ak e adv an tage o f th e f un c ti on al experts

in C h i cago O n th e v ery day Wo o d w as di ctati n g hi s m em o r an dum to
.

th e T err i to r i al O ffic er s, C ar n ey w as dr aw i n g up a simi l ar o n e for Wo o d ,

an alyz i n g th e r easo n s o f an d sugg esti n g so lu ti o n s t o th e pr esen t diffi cu l

62
i
t es .

C arn ey b eg an th i s rep o rt by p o i n tin g o u t th e co n ti n uin g pr ess ur e o n

th e T err i to r i al O ffi c er s t o t ak e o v er th e a dmi n i str ati o n o f th e s ever al

diff er en t f u n cti o n al acti vi ti es in th ei r ar eas :

While dou b tedly each T errito rial O fficer ap p reciated thi s [ th e su p erv i
un

sio n an d d ev elo m en t o f p er so n n el as th e lar er r es on sib ilit y actu ally

p ] g p ,

w h at cam e to p ass as I see it — w as a r ef er en ce t o th e T errito r ial O fi cer

o f m att er s p ert ain in to o er atin acco u n tin m er ch an di sin g an d l as t b u t

g p g g , , ,

n o t l eas t sal es pr o m o tio n

,
It h as b een ou r practice t o exp ect a T errito rial
.

O fficer to b e in a p osition to co rr ect m er ch an dising Op er atin g an d ev en , ,

acco un tin g as w ell as sales pr o m o tion w ea k n es ses th at exist in a p articu l ar

,

district or sto res If a p o orer class o f credits is b eing accep ted in th e Sto res
.
,

th e r esp o n sib il ity f o r co rr ectin g th is n ew situ atio n h as b een p u t to th e

T err ito r ial O fi cer ; if a n ew b u yin g co n trol sy stem is to b e in stall ed th e ,

r esp on sib ility for m ak in g it efi ectiv e w ith in th e Sto res is giv en to th e assist
an ts o n h is staff If a S to r e Man ager o r D istrict Man ager w an ts au th o r ity to
.

dep ar t f r o m estab lish ed m eth o d s o f sales p r o m o tio n ou tside sellin g tim e

, ,

p aym en ts o r w h at n ot th e r equ est f or th e n ew rul ing is p u t u p to th e T er

, ,

r ito rial O flicer .

As I see w h at is h ap h o u gh w e h av e sever al h u n dred m erch an

p eni n g : al t

disin g, o p eratin g, an d acco un tin g exp er ts av ail ab le in th e Paren t O rgan iza

tio n w ith th is k n o w ledge an d exp erien ce, w e h av e ten d ed m o r e an d m o r e

t o clea r all su ch pr o b lem s to th e T err ito rial O ffi ce, exp ectin g th e T err ito r ial

O fi cer a n d h is staff t o act as a u th o rities an d actu ally cen so r th e decision s o f

th es e exp er ts C ert ain ly, in m an y instan ces, criticism s m a de b y territo r ial
.

execu tiv es h av e b een w ell-f o u n ded, an d it h as b een ap p aren t th at fi eld ex

rien ce h as o ft en b een o f m o r e r ti l v al u e th an th e o p in io n o f th e
p e
p ac ca
A BORTIVE DE C E N T R A L I ZA TIO N 25 7

e xpe rts in th e P ar en t o ffi ces T his w as p ar ticul arly tru e du rin g th e fi r st

.

year o f op eration Th e very f act th at in certain in st an ces th e qu ality o f th e

.

ex ecu tiv e m aterial av ail ab le on th e T err it o r ial st aff w a s su ch as t o p ermi t

criticism bein m d f ech n ical exp ert s n stru ctions en d ed m o r e an d

’

g a e o t i t ,

m o r e to ca us e a con cen tration of su ch r espo nsib il i ty in th e T errit o rial O f

fi ce an d th er e w as a grea t er in clin ati on o n th e p art o f th e T errit o rial staff
,

t o co mm en t o n an d cr iticiz e th e act io n s o f th e F u n cti o n al E x ecu ti v es an d

th eir assistan ts o i so f ar a s t o au th o r i ze th e ex t en sion o f or m o difi cati on

g
, n
g ,

o f ins tru cti on s th e l atter issu ed o ftti m es w ith ou t r ef errin b a ck t o th e ex

, , g
ecu tiv e w h o i ssu ed an d w as p er so n ally r esp o n sib l e f or su ch in stru cti o n s .

B eca use o f this d efin i te ten d en cy t o lo ad th e T err ito r i al O ffi cer d o wn

”
wi th r espo n sib i li ty n o t at fi r st co n tem pl ated C arn ey con tin u ed p er sonn el , ,

trai n in g an d d ev el o p m en t h av e n ot r ec ei ved th e att en ti o n th at it w as

“

”
pl an n ed th ey sh o uld .

C ar n ey fel t th at S ear s w o uld b e m uch f ur t h er al o n g if th e Fr az er

Co mmi tt ee h ad o r i gin ally m ad e th e T err i to r i al Offi c er r espo n sibl e o n ly
fo r pe r son n el an d fo r th e coo rdin ati o n o f pr o duct fl o w an d h ad gi v en
th em n o au th o r it y to co u n ter m an d o rd er s o f th e f un c ti o n al d ep artm en t s .

Certai nl y a cl ear er d efi n iti on o f r espo n si b ili ty an d au th o ri ty sh o uld n ow

be m ade Th e T err i to r i al O ffi c er s Car n ey i n si sted m u st n o t c o n cer n
.
, ,

th em selv es w i th in terpr eti n g o per ati n g ac co un ti n g m erch an di si n g an d, , ,

sal es pr o m o ti o n p o li ci es O n ly wh en co n fli ct o ccur s wh en a br eakd o w n

“
.
,

is app ar en t to th e T erri to ri al Ofi cer wi ll h e get in o n th e pr o bl em at all

, ,

an d in such i n stan c es h e w i ll t ak e th e r espo n si b i l ity f o r seein g th at hi s

”
D i stri ct M an ager g ets th e b est r esul ts By th e s am e to k en t h e fu n cti on al
.
,

o ffi c er s w er e to k eep th ei r b an ds 0 6 p er so n n el pr o bl em s E ach T err i to ri al

“
.

O ffi cer sh o uld be t o ld th at h e is expe cted an d r equi r ed t o h an dl e all m at

ter s p ert ai n i n g to p esonn el an d t h at h e w ill r i se an d f all in th e o rg an i za
,
‘

ti o n a cco rd i n g t o th e succ es s h e m eet s in th i s r esp ect T o C ar n ey th e .

,

T err i to r i al O ffices sh o uld be li ttl e u n i ts o f an o t h er f un cti o n al d ep art m en t ,

th e o n e fo r per so n n el A s h e f o r esaw o nl y co n stan t co n fli ct b etw een th e

.

dep art men tal o ffices in C hi ca go an d th e T erri to r i al Offi ces if b o th co n

tin u ed to ca rry o n th e a dmi n i str ati on o f th e sev er al f u n c ti o n s h e w as in ,

f ac t es sen ti ally adv o cati n g a r eturn t o a cen tr ali ze d f un ct i o n all y d ep art ,

m en talized stru ctu re .

A f ter dis cus sin g th e tw o m em o r an da w i th Ca r n ey, Woo d s en t b o th

‘

his r ep o rt an d Ca r n ey s to R o sen w ald an d t o th e f o ur T erri to ri al O f

’

ficers 63
He ask ed th e l atter to fo rw ard th ei r co mm en t s to hi m pri o r t o a
.

T erri to ri al O fi cers m eeti n g to b e h eld early in J an u ary 1 932 o n th e m at

’

, ,

ter o f o rg ani z ati o n T h e r espo n se of t h e T err i to r i al Offi c er s sh o uld h ardly

.

h av e been a surpr i se T h ey f el t th at, in li n e wi th th e Fr a zer Co mm i tt ee s

’
.

r eco mm en dati on s , th e y h ad b een gi v en th e r espo n sib ili ty an d a uth o ri ty to

 25 8 SEA RS , RO E BUCK A ND COMPA NY
h an dl e bro ad admi n i str ati ve m atter s th at i n cluded m o re th an p er so n n el .

T h ey f ur th er b el i ev ed th at such bro ad po wer s w er e ab so lu tely n ec ess ary

if S ear s w as to m eet eff ecti vely th e ch an gi n g co n di ti o n s an d ch all en ges in
th e fi eld .

B ark er th e V i ce-Pr esi den t in ch arge o f th e Eastern Terr ito ry w as th e

, ,

mo st expli ci t He r em i n ded Wo o d th at th e Fr azer Rep o r t sp eci fi c ally

.

”
stated th at T err i to r i al O ffic er s w er e o n th e ex ecu ti v e l i n e o f au th o r i ty

f ro m th e Pr esi den t an d S en i o r V i ce-Pr esi den t th at th ey co uld co u n ter ,

man d o rder s fr o m th e f u n cti o n al d ep artm en ts in C h i c ago th at th e D i stri ct ,

Man ager an d th e S to re m an agers rep o r ted to th e T err i to ri al O ffi cer an d ,

fi n ally th at t h e T erri to r i al O ffi ce h ad fu ll r esp o n si b i li ty fo r all th e

acti vi ti es o f th e c o m p an y in th e r egi o n i n clud i n g assets pr o fi ts exp en ses
“

, , ,
” 64
i n ven to ry sal es p erso n n el an d go o dwi ll as well as wareh o u si n g F u r
, , , , .

th erm o re th e Fr az er R ep o r t d i d n o t gi v e th e d i r ect r esp o n si b i l i ty fo r

,

pro fi ts an d sal es to th e fu n cti o n al o fficer s B ark er f ai led to m en tio n h o w .

,

ev er th at Fr az er i n si sted th at th e r egi o n al o ffi c er s sh o uld n o t co n cer n

,

th em selv es w i th fu n cti o n al du ti es an d th at th ey sh o uld avo i d as B ark er ,

h i m self h ad b een d o i n g bu i ldi n g up l o cal staff s , .

F o wl er B McCo n n ell w h o h ad tak en o ver th e S o uth er n T err ito ry fro m

.
,

Wo o d s presen ted a som ewh at weak er stan d for terri to ri al auto n o m y I n

, .

“
defi n i n g fi eld au th o ri ti es an d resp o n si b ili ti es as b etw een th e Fu n cti o n al
” ”
a n d T err i to ri al O ffi cer s h e saw tw o i n terpr etati o n s a l i ter al o n e an d
“

, ,

65 ”
a
“
li b er al o n e T h e l i ter al o n e w h er e th e T erri to ri al O fficer c o n c er n ed
.
,

h i m self wi th p er so n n el o n ly wo uld b e a p o o r so l u ti o n Per so n n el re

“
.
,

sp o n si b i l i ty w i th o u t r esp o n si b i l i ty fo r w h at p er so n n el d o es w i ll si m ply
, ,
”
lead to co n fli ct an d n egati ve acco m pli sh m en t T h i s w as all th e t r u er .

si n ce th e d ev elo p m en t o f p er so n n el w as ti ed so i n ti m ately to th e a dm in is

tra tio n o f day-to da p r ti -n s a n d to c o u n sel i n g t h e m an ag er s a n d ap

y o e a o

prai si n g th ei r p erfo r m an ce B ark er h ad em ph asi zed th i s sam e p o i n t

. .

T h e m o r e li b er al i n terpr etati o n w h er eby resp o n si b i l i ty fo r n et pro fi t

,

an d c u sto m er go o d w i ll sti ll r em ai n ed w i th th e T err i to r i al O fficer h ad ,

m uch m o r e m eri t in McC o n n ell s o p i n i o n He th en attem p ted to d efi n e

“ ” ’

, .

a sp eci fi c d i v i si o n o f r esp o n si b i l i ti es b etw een th e T err i to ri es an d C h i cago .

He w o uld gi ve th e f u n cti o n al o ffi cers m u ch m o re au th o ri ty th an B ark er

d eem ed advi sabl e T h i s i n cluded co n tro l o v er sales pro m o tio n as well as
.

th e sel ecti o n o f m er ch an d i se a n d t h e d eter m i n ati o n o f o p er ati n g a n d

66
acco u n ti n g pr o cedur es Bu t h e m ai n tai n ed at th e v ery l east th e T err i
.
, ,

to rial O ffi c er m u st b e r esp o n si bl e fo r appr ai sal sup erv i si o n a n d p er , ,

f o rm an ce o f th e S to r es p ar ti cul arly th e sm all er o n es He S h o uld also re

, .

tai n co n tro l o f th e l i n es c arr i ed in B an d C S to r es b ecau se h e is cl o ser to

‘ ’ ‘ ’

th e fi r i n g l i n e an d sh o uld b e r esp o n si bl e f o r i n sp ec ti n g an d fo l lo w i n g
,

up th e ex ecu tio n o f acco u n ti n g an d o p er ati n g o rder s an d pro cedures .

A BO RTIVE DE C E N TR A L I Z A T I O N 25 9

Furth ermo re an alyzi n g Sto re r esults an d ac ti n g o n these res ults s h o uld

,
”
remai n th e duty o f th e T err i to r i al O fficer S o meo n e b esi de a fu n ctio n al .

sp eci ali st w as n eed ed to appr ais e th e o ver-all well-r o u n d ed p erfo r m an ce

“

”
o f th e sto r e .

G en eral Woo d agreed w i th B ark er th at th e T err i to ri al O ffi cer w as o n

th e l i n e o f ex ecu ti v e co m m an d an d al so h e appr o v ed o f Mc co n n ell s l i b
’ “

”
er al i n terpretatio n Y et as o th er executi ves p o i n ted o u t cl early n ei th er
67
.
, ,

o f th ese p o si ti o n s w as in l i n e w i th o n e b asi c aim o f th e o r i g i n al Fr azer

68
Rep o r t . B o th i n creased th e S i ze o f th e terri to ri al s taff s an d exp anded
o v er h ead c o sts an d r ais ed th e sp ecter o f dupl i c ati o n o f eff o r t .

Th e m eeti n g o f th e T err i to r i al an d f u n ctio n al o ffi cer s in Chi c ago o n

J an u ary 1 5 an d 1 6 1 932 bro ugh t o u t tw o s ym p to m s o f th e un derlyi n g
, ,

pro blem F i r st all agreed th at at pr esen t a great amou n t o f damm ed-up

.
,
“

cri ti ci sm o f th e Paren t exists in th e Fi eld an d o f th e F i eld in th e Paren t , ,

with th e resul t th at th e sto r e an d d i stri c t o fficer s gen er ally t urn ed to th e

69
Terr i to ri al O flicer r ath er th an to Ch i c ago for advi ce an d assis tan ce .

S eco n d th er e h ad been gen u i n e co n fu si o n as to wh at w as an o rd er an d

,

wh at merely a s uggestio n To o o ften o rder s fro m Ch i cago were dis

.

r egarded as b ei n g m er e reco mm en dati o n s .

T h e r esults o f th e tw o -day co n fer en ce wer e ess en ti ally a v i cto ry fo r

Car n ey s p o si ti o n A l th o ugh th e Terr ito r i al O flicers r em ai n ed o n th e ex
’
.

ex ecu ti ve l i n e o f au th o r it y an d w er e r es p o n si bl e for pr o fi t th ey w o uld ,

on ly h av e a sa
y i n an d in f ac
,
t w o uld b e on ly i n fo r m ed o f f u n c ti o n al ac ,

tiv ities wh en an ac t u al co n fli c t b etw een a man ag er in th e fi eld an d th e

Ch i c ago o ffi ce o ccurred Even th en th e T err i to r i al O ffi cer co uld do n o

.

m o r e th an su sp en d th e o rd er u n ti l th e n ex t meeti n g o f th e O flicers B o ard .

B esi des th is ch an ge in b asi c du ties th e to p executi ves agreed o n s o me ,

m ech an i cal devi ces t h at aff ected o n ly th e s ym p to m s o f th e co n fli ct b e

tween th e fi eld an d p aren t o ffi ces New pro cedur es were i n sti tu ted to .

en sur e th at i n st ructi o n s w er e n o t mi stak en for m er e sugg es ti o n s Dep ar t .

men t h ead s were urged to develo p mo re p er s on al con tacts with m an ager s

in th e fi eld an d th e sto re an d Distr i ct M an ager s w ere to b e br o ugh t
,
70
regul arly to Ch i c ago .

Th ese ch an ges were m er e p all i ati ves T h e d i visio n o f r es p o n si b i lity an d

.

au th o r i ty etw een th e T err i to r i es an d Ch i c ago co n ti n ued an d so d i d th e

b ,

co n tro versi es Th e al tern ati ves were b eco m i n g cl earer T h e T erri to r i al

. .

O ffice mu st b eco me as B ark er m ai n tai n ed mo r e au to n o mo u s o r as C ar

, , ,

n ey pr o p o s ed b eco m e little mo re th an sectio n s o f a cen tr al per so n n el

,

dep artm en t O r el se th ey sho uld b e elimi n ated al to gether Woo d s aver

. .
’

si o n to l arge st aff s an d th e pr essi n g n eed to r educ e c o s ts as th e d epr essi o n

deep en ed m ade th e ch o i ce cl ear .

2 60 SE A R S , R OE BUCK A ND COMPA NY

Tire Territo ri a l Orga n ization S cr app ed

In May, 1 932, th e G en er al ab o lish ed th e T erri to ri es Mail—O rder Man
.
71

ager s n o w r epo rt ed dir ect ly to C ar n ey whi l e th e r etai l Distri cts cam e

,

un der th e j uri sdi cti on o th e V i ce Pr esi d en t in ch ar ge o f Retail A dmin is

f —

trati on at Ch i cago B ark er too k o v er t h is n ew po st wi th McCo n n ell as his

.

A ssistan t Woo d th us p ut th e t w o st ro n g est an d m o st o u tsp o k en T erri

.

t o t ial Offi cer s in ch arg e of t h e n ew cen tr alized r eta i l o rgan i zatio n Be .

si de th e co n t r o l o f r etai l p er so nn el th e n ew o ffi ce as sugg est ed by McC o n~

, ,

n ell in h is m em o r an du m h a d r es p ons i b ili ty o f analyzi n g an d appr ais in g

,

st o r e r esul ts an d takin g ex ecu ti v e a ct i on o n th em Th e f un cti o n al o fi cers .

,

h o w ev er con tin ued to h av e di r ect comm un i cati on wi th th e sto r e an d

,

D istri ct M an ag er s on all m atters con cern in g th eir o w n a cti vities .

Har d times un do ub tedl y played a S i gni fi can t r o l e in brin gi n g abo ut the

cen tr ali zati on o f super visi on an d th e con tr o l o f th e r etai l sto r es an d m ail
o rder plan t s in C h i ca g A s ai l o rder sales dr opp ed (f al lin g fr o m $266 9
o . m -

mil li on in 1 929 to mi lli o n in 1 93 0 an d t o mil li o n in

th e Merch an dise Depa rt m en t h ad ti gh t en ed i ts con tr o l o v er t h e Catal o gue

Dep artm en t an d th e buy er s Wh en sal es fi na ll y f ell 0 5 i n th e r etail Sto res

72
.

( fi r st r i sin g f r om m il l i o n in 1
9 9
2 t o m i ll i o n in 1
93 1 an d th e n

dr o ppin g i n 1 932 to m ill i o n ) th er e w er e Si mil ar r easons f o r cen

,

traliz atio n If t h e m ar k et h ad b een exp an din g r ath er th an co n tr a ctin g th e

.
,

co nfl i ct in g i ssu es b etw een th e T err i t o ri al Ofli cer s an d th e f un cti o n al o f

fi cers mi gh t h av e b een l ess a cu te an d po ssi bly th er e w o ul d h a v e be en less

co n cern f or in cr easin g r egi o n al staf fs an d o v er h ea d co sts A s it w as th e .
,

d epr essi o n o nl y in tens ifi ed al r ea dy exi stin g pr oblems Ev en wi th co n .

”
t in u ed pr o sper i ty th e B sto r es w o ul d h av e r ai se d di ffi cul ti es to aggr a v ate
,

th e o rgan izati o n al tens i ons bet w een th e T erri to ri es an d Chi cago .

T h e essen ti al r easo n f o r th e ch an ge i n 1 932 w as th e r ealiz ati on by Woo d

an d h is co llea gu es th a t S ear s co ul d n o l o n ger o per ate un d er a struct ur e

th at w as p ar tly fu n cti o n al an d pa rtly r egi o n al a r ealiz a ti on th at w oul d

,

un do ub tedl y h av e co m e ev en if th er e h ad b een n o d epr essi on Th e co nfli ct .

b etw een C hi cago an d th e r egi o ns gr ew in in ten si ty as th e T erri to r ial

Officer s b eg an to tak e o v er th e a dmin i str ati o n o f th e f u n cti o n s B us in ess .

n eeds r ath er th an dri ves of h um an n atur e stim ulated the exp an sio n .

A s bo th Car n ey an d McCo n n ell n o ted th e T erri to ri al Offi cer s w er e clo ser

,

t o th e fi rin g lin es T h ey co u l d m eet m ark et ch an g es by adj ustin g sto ck

.
,

asso rt m en ts sal es pr o m o ti o n an d o th e r acti v i ti es m u ch m o r e q ui ckly th an

, ,

co ul d th e f u n cti o n al ex ecu ti v es in C hi cag o S o th e loc al m an ag er s loo k ed

.

to th e T err i to ri a l O m oe r a th er t h a n t o th e m o r e di stan t cen tr al o m oe fo r

a d v i ce a n d a ssistan ce T h e T erri to ri al O ffi cer s too w er e th e o n es res o n

.
, , p
si b le f o r th e rf r m f th t r d m i l — rd r h u in th eir re
p e o an ce o e s o es an a o e o ses
EVO L UTI O NA RY DE C E N TR A L I ZATION 26 1

sp ectiv e di stri ct s A S th ey i n cr eased th ei r admi n i str ati v e lo ad th e si ze an d

.
,

wo rk o f th eir o flice exp an ded acco rdi n gly an d th e co n tact w ith exp er ts ,

in Ch i c ago s f u n cti o n al d ep art men ts l essen ed T h u s m ark et n eed s an d

’
.

adm i ni st r ati v e r esp o n si b i li ti es ev en m o r e th an ex ecu ti v e p er so n ali ti es

tr an sf o rm ed th e T err it o r i es i n to de facto m ul tif u n cti o n d i v i si o n s th at
,

com peted wi th th e f u n cti o n al d ep artm en ts o f th e c en tr al o fi ce fo r th e

a dmi n i str ati o n o f S ear s s n ati o n w i d e m ark eti n g em p i r e
’
.

If tim es h ad b een m o r e pr o sp er o u s Wo o d mi gh t h av e en d ed th e co n
,

flict by con c en tr ati n g a dmi ni str ati v e co n tr o l o f th e fu n ct i o n al acti v iti es

in th e T err i to r i es r ath er th an in C h i cago Y et th er e w as n o i n d i c ati o n th at
.

an y on e w ith th e po ssi bl e exc ep ti on o f B ark er th e str o n g est o f th e T er

, ,

rito rial O ffic er s ser i o u sly c o n si d er ed th i s alter n ati v e Ifi tim e h o w ev er

b

, .
, ,

this w as th e typ e o f o rgan i z ati o n al structur e S ear s wo uld ado p t .

EV OLU TI O N ARY DECEN TRAL I Z A TI ON

S ear s w as u n abl e to r em ai n l o n g h alf terr ito r i al an d h alf f un ctio n al .

T h i s w as th e l ess o n l ear n ed fr o m th e co m p an y s fi r st attempt to fash i on

’

an a dmi ni str ati v e o rg an i z ati o n f o r th e m an ag em en t o f it s r et ai l -Sto r e

n etwo rk A fter th e spr i n g o f 1 G en er al Wo o d t r i ed o u t o th er al ter n a

.
93 2 ,

tiv es F i r st h e c en tr ali z ed th e s up erv i si on o f th e r etai l sto r es in th e R etai l

.
,

A dmin is tr ati v e O ffice in Ch i cago Next early in 1 935 h e att em p ted to

.
, ,

decen trali ze the m an agem en t o f th e sto r es c o m pl etely by ab o li sh i n g b o th

th e l o cal Di str i cts an d th e R et ai l A dmi ni str ati v e O fli ce T h e r etai l sto r es .

a n d m ail — o rd er h o u ses w er e n o w to r ep o rt d i r ectly to th e P r esi d en t T h en .

,

alm o st in sp i te o f h im n ew l o cal a dm i n i str ati v e o rga n i z ati o n s th e G r o up

, ,

an d th e Zo n e gr ew up to tak e th e pl ace o f th e o ld D i str i ct s By 1

, 94 0 .
,

Woo d w as o n ce again r eady to try a territo ri al o rg ani zati o n t o h an dl e

th e sto r es an d th e n ew l o c al u ni ts an d t o gi v e th e T err i to r i al O ffi c er
,

r esp o n sib ility fo r all f un cti on s (except th e actu al buyi n g ) as w ell as fo r

pr ofi t In o th er wo rd s h e w as wi lli n g to tur n th e terr ito ri al un its i n to
.
,

m ul tif u n cti o n di vi si on s an d to tr an sfo r m th e C hi c ago h eadqu art er s i n to

a gen er al o ffic e T h u s w h en th e c o m p an y s m an ag em en t struc tur e w as
’
.

c o m pleted in th e y ear s i mm edi ately after Wo rld War II th e m aj o r t ask ,

b ecame o n e o f defi ni n g th e ro l e of th e n ew gen er al or p ar en t ofli ce .

Th e Cen traliz ed R etail Orga n iz ation

Wh en B ark er too k o n h is n ew p o siti on as V i ce-Pr esi den t in ch arge of
R etai l A dmi n i str ati on an d P er sonn el in May, 1 932, h e b ecame r esp o n si bl e
fo r t h e sup erv i si o n o f 3 75 r etai l sto r es m an aged th r o ugh m uch th e sam e
di stri cts as h ad b een set up by th e Fr azer r ep o rt He h ad to cr eate a h ead .

qu art er s o tfi ce wh o s e t ask w as his wo rd s f o ld : fi r s t ad mi n is tr ati o n ,

“

, in , tw o ,
262 SEA R S , R O E BUCK A ND COM PA NY

” 73
efl o rt o f th e Co m pan y who l e o n th e r etai l probl em
as a Th e fi r st .

tas k besi d e plan n i n g an d settin g pr o ced ur es f or th e st o r es an d appr aisi n g

,

th ei r per f o rm an ce w as t o try t o m eet th e co n tin u in g n ee d t o r ecru i t tr ai n

, , ,

an d pr o m o te co m pet en t per so n n el Th e seco n d ca ll ed fo r bu i ldi n g cl o se r .

r elatio ns bet w een th e f un ct io nal dep artm en ts an d th e cen tr al r etail o r

ni z a ti o n sin ce ea ch f un ct i o n al o m r t i d di r ct c n ta ct wi th an d
g a , cer e a n e e o

r espo n si b ili ty f o r hi s type o f a cti vi ti es in th e st o r es T h e h o ped for coo per a .

-

ti o n B ark er w as cert ain co u ld co m e o n ly thr o ug h dai ly co mm u ni ca ti o n

, ,

wi th t h e seni o r ex ecu ti v es in th e m erch an di s in g o pe r atin g an d fi n a n ci al , ,

uni ts B ark er ha d alw ays f elt th at th e w ea kn ess o f th e ini ti al t err i to ria l

.

o rg an i za ti o n h a d been th at ex cep t f or h i m se lf th e T erri t o ri al O fli cers h a d

, ,

n o t been V i ce P r es i den ts an d so w er e un abl e t o get im po rt an t diff er en ces

“
-

bet w een th em an d th e Chi ca go V i ce Pr esi den ts discu sse d o n th e ba sis o f -

g i v e an d ta k e
4
H .
”
e n ow w o rk ed cl o se ly wi th th e o th er V i ce-P r es i d en ts
‘
,

in di vi dually o n Specia l matt er s co llect i vely as ch airm an of a r et ai l co m ,

T o h elp impr o v e th e ca lib e r o f Sea r s s r et ai l man ager s B ark er enl arged ’

th e sco pe o f th e P er so nn el De partm en t tha t Woo d ha d est abli sh ed a f ew

m o n ths ear li er T o t ak e o v er th at d epar tm en t h e br o ugh t w i th hi m f r o m

.
,

Ph il ad elp h ia F E Burr o w s w h om h e h ad pla c ed as th e pe rso nn el o m

. .
, cer

o f th e Eas t er n T err i to ry agai n st th e wish es o f Ch i ca go

,
75
N ex t Bark er .
,

r evi se d th e wo rk alr ea dy beg un in sy st em atizin g pe r so n n el pr ocedur es .

By th e foll o win g S ep tembe r for exam pl e Burr o w s h ad di stribut ed a , ,

co m pl et el y n ew ed i ti o n o f a m an ual o f pr oce dur es f o r r et ai l st o r e m an

ag er s B ar k er al so set up pe rso nn el o fi ces i n th e A sto r es an d th e Dis

“
.

tri ct Man ag ers o fli ces Th en to im pr o v e co mm uni ca ti o n bet w ee n th e fi eld

’
.
,

an d Chi ca g o h e h eld oc cas i o na l co n f er en c es in th a t ci t y wi th th e n ew

,

pe r so nn el m an a ger s o per atin g supe rin ten den t s an d o th er fi eld ex ecuti v es

, ,
.

In per so n n el t r ain in g as w ell as i n th e ex ecu ti v e supe rvi si o n an d ap

,

raisal o f th e st o r es B ark er r eli ed m o r e o n h i m self an d h i s imm edi at e su b

p ,

o rdi nates than o h th e prin ted o u tput o f h is C h i ca g o o m M an u als an d ‘

ce .

sal es tr aini n g c o ur ses ar e v alua bl e an d vi tal h e o n ce w r o te Woo d b ut

“

, ,

o nl y eff ecti v e w h en th e h i gh t ensi o n curr en t fr o m th e P ar en t o rg an i za ti o n

dynam o s is tran sf o rm ed to th e lo w er a n d sui table vo ltage by th e tran s

”
f o rm er — t h e M anag er — i n ea ch st o r e 76
T h e co n n ect i o n be t w ee n h ea d .

quart er s an d th e fi eld sh o uld be th r o ugh th e cen tr al o ffice ex ecu ti v es

th em selv es f o r th e str en gt h o f an y l ar g e o rgan iz a ti o n B ark er bel i ev ed
, , ,

w as to a gr ea t ext en t d epe n d en t u po n th e m an a g er s fi r st h an d acq ua in t

“ ’
-

”
an ce w i th co n di ti o ns o n th e fi rin g l in e .

B ar k er tr ain ed an d appr ai sed simul tan eo usly He r ealized m o r e cl ea rly .

th an h ad Woo d tha t g oo d m an ag er s n eed g oo d too ls Th e basi c a d .

 EVOL UTIONA RY DE C E N T R A L I ZA TI ON 263

min istr ati ve to o l s th at h e u sed d

r i d h is s ub o rdi n ates to u se w er e
an t a ne

spo t ch eck s an d acc o u n ti n g an d st atisti c al d ata F o r sp o t ch ecki n g B ark er .

,

b eli ev ed in develo p i n g a co mpl ete an d detai l ed k n o wl edge o f a few

k ey i tem s in each an d ev ery dep ar tm en t S uch k n o wl edg e g ave to a sto r e
.

m an ager s sub o rdi n ates (th e m en w h o sup ervi sed th ose w h o di d th e

’

a c tu al s ellin g to th e cu sto m er s) an appr ec i ati o n o f th e f act th at hi s Man

“

ag er k n o ws th e i tem s ch eck ed He g en er ally i m agi n es th at th e M an ager s

’
.

r an ge of k n o wledge of i n di v i du al i tem s is m o r e exten si ve th an it p erh ap s

”
ac tu ally is .

In h is fi n al r ep o r t as h ead o f th e r et ail o rgani z ati on B ark er i n di cated ,

h o w h e u s ed stati sti c al i nf o rm ati o n f o r b o th sup erv i si o n an d tr ai n i n g

As a Co m p an y, w e h ave w o rk ed ou t an d h ave in eff ect a co mpr eh en siv e

an d satisfacto ry r etail acco u n tin g system T h e fi gu res pr esen ted to th e in
.

dividu al S tore Man ager w ill giv e h im a p ictu re o f alm ost an y p h ase o f th e
b h at h e m ay w an t Mo st Man ager s h av e n o t an adeq u ate co m p r eh en si o n
j o t .

o f w h at th ey can get fro m th e r ep o rts su pp li ed to th em Th e m eth o d w h ich .

I gen eral ly u se in lo o k in g at th e S to res in v o lv ed , fi rst o f al l, a r eview o f

si n i fi can t r ep o r ts in th e Man ager s o ffi ce n cid en tally I gen er al ly h av e
’

g I .

u sed h is r ep o rt s b ecause, in th at w ay, I f ou n d o u t w h eth er h e h ad th em

av ailab le an d k n ew w h at th ey w er e A cou p le o f h o u r s in th e o flice o n th e

.

repo rts en ab le th e diagn o sis o f th e S to r e s case, u sually w ith clarity an d

’

defi ni ten ess T h e time sp en t in spo t-ch eckin g actu al co n diti on s in th e S to re

.

af ter th at w a s eflicien tly dir ected th r o u gh th is in f o rm ati on an d it o ft en

seem ed al m ost un cann y t o th e Man ager th at th e ins p ection o f a ctu al co n di

tio n s in th e S to r e co n fi r m s th e diagn o sis fr o m fi gu r es so accu r ately A d efi n ite .

att em p t sh o u ld b e m ade b y th e C o m p an y t o teach in div idu al Man ager s th e

sco p e an d u til ity o f th es e r ep o rts

77
.

Her e B ark er r s i g th e vital imp o r tan ce o f stati sti cal data fo r em

w as st e s n

ci en t admi n i str ati o n at ev ery level o f o p er ati o n s Wi th Po llo ck th e Co mp .

,

tr o ll er B ark er co n ti n u ed to impr o v e th es e s tati sti c al to o l s an d i n f o r m a

,

tio n al c on tr o l s an d to i n struct th e aud i to r s an d o th er o flicials to Sh o w th e

s to r e m an ager s h o w to an alyze th em pr op erly In this w o rk b o th m en .

,

r ecei ved Wo o d s str on g supp o rt for alth o ugh th e G en er al w as pri m ar ily

’

co n cern ed with o b tai ni n g co m p eten t m an ager s h e r eal i zed th at th e sup er ,

vi sio n o f th ei r wo rk r equi r ed so m e so r t o f th o r o ugh Stati sti cal co n tr o l s He .

later p o i n ted o u t th at

As a b u sin ess b eco m es larger an d h as b ran ch es all o ver th e co un try, it

b eco m es imp o ssib le for th e execu tiv e to f ollo w it an d to con tr o l it excep t
b y fi gu res T h ese fi gu r es h av e to b e carefu lly an d rap idly co mp il ed, avai lab le
.

imm edi ately, an d x

th e e ecu ti e v mu st b e ab le to in terpr et th em prop erly
read b eh in d th e fi gu res .
78
2 64 SEA R S , R O E B UCK A ND COM PA NY
S eco n d on l y in im po rtan ce r
i g an d appraisin g o f m an ager i al
to th e t ain n

per so nn el w as th e plan ni n g o f wh at th e r etail sto r es sh o uld sell Th e .

”
m aj o r pr obl em in th e sprin g o f 1 932 r ema in ed th e B sto r es an d it w as
“

in t ry in g t o m eet th ei r di fli cul ties th at B ark er an d hi s ass i stan ts w o rk ed

m o st cl o sely wi th th e f u n cti on al d ep artm en ts O n e o f th e fi r st steps w as .

”
th e cl assif yi n g of th e B st o r es a cco rdi n g t o th e l in es ca rr i ed T h e sma ll
“
.

”
B 2 w as to co n cen tr ate on h ard lin es p arti cularly h ardwar e an d large
“

,
”
appli an c es Th e stil l sma ll er B—3 w o ul d l i k e th e C f o cus o n au to
“ “

, ,
.

m ob i l e supp li es an d a ccesso ri es In fa ct it sh o ul d soo n r epl ace th e C

“
.
, ,

B ark er beli eved as it h ad m or e com plete b asi c asso rtmen ts in th eir lin es
,
“

”
in pl ace o f th e C S to r e s smatt er i n g Th e B-I r em ai n ed th e o nl y o n e
‘ ’ ’ “
.

o f th ese sto r es t o carry so f t g o o d s Because of th e pr o bl em o f fi n di n g sati s

.

fa cto ry lin es f or th e sm al l sp a ce av ai l abl e in th e B-1 un i ts Bark er w as

“ ”
,
”
w illi n g to elimi n ate th em an d to l eav e soft l in es o nl y in A sto r es Bu t 79 “
.

an y su ch a cti on h e wr o te s h o u ld aw ai t th e r esul ts o f d etail ed st udi es

, ,

th en u n d er w ay o n sof t l i n es as in d eed s h o uld an y d eci si o n s o n th e

,

st r ategy o f s to r e exp ans i o n .

T o impr o v e S ear s s off eri n g s B ar k er i n sti tu ted o th er r ef o rm s His o ffice

’

,
.

w ork ed o u t a seri es of asso rtmen ts so th at a m an ag er in orderin g wo uld ,

h av e at l eas t a mi nim um lin e of wh at a custo m er m i gh t n o r m a lly expect

f o r a gi v en typ e of g oo d s By aski n g th e m an ag er s t o purch ase by specifi ed
.

”
asso rt m en t s B ar k er h o p ed to cu t o ut th e sm att erin g s an d o dd l o ts th a t
“

so ld sl o wly an d i n duc ed cust om er di ssa tisf a ct i o n T h e R etai l V i ce-P r esi .

”
den t al so f urth er r efi n ed an d elab o rated u n i t co n tr o l an d o th er st ati st i cal
“

pr o cedur es to en sur e th e m ain ten an ce an d co n tro l o f in v en to ri es so th at

m erch an dise w o uld b e in sto ck i n th e ri gh t am o un ts at th e ri gh t tim es .

He o rd er ed studi es m ad e o f di stri ct pri ces an d sugg ested zo n e pri ces “

f o r ea ch i tem in th e asso rt m en t so th at th e l ess m erch an t mi n d ed -

m an ag er s mi gh t h av e at l east h ope f o r a r easo n abl e gr o ss pr o fi t if th ey

fo llo w ed th e zo n e pri ces an d th e m o r e int elli gen t m an ag er s h ad a gui de
,

so ”
th at ai d ed th em in pri cin g co m peti ti v ely .

B y clo se sup ervi si o n an d di sciplin e in all aspects of th e busin ess by a ,

w eedi n g o u t o f l ess cap abl e m an ag er s by st ea dy t r ain in g o f th e m o r e ,

co m peten t o n es by th e pl an n in g an d dev el op m en t o f n ew m ark eti n g

,

pr o ced u r es an d p o li ci es an d by ach i evin g cl o ser coo rdin ati o n b etw een

,

th e f un ct i o nal d ep art m en ts an d r etai l a dmi ni str ati v e per so nn el B ark er ,

h ad cr eated by th e en d o f 1 934 a coh es i v e an d cap able r etai l o rg an i za

ti o n Wi th t h e pr o bl ems o f r n n el an d l in es o n th e w ay t o so lu ti o n
.
p e so ,

th e m o st pr essi n g co n tin u in g n eed a cco rd i n g t o B ark er h ad beco m e th e

, ,

im pr o v em en t o f th e adv ertis in g an d sal es tech ni qu es so essen ti al to th e

m ain tainin g an d exp an din g o f sal es v o lum e Th e cr ea ti o n o f th e S to r e .

Pl an n in g an d D i spl ay Dep art men t w i thi n th e M erch an di se D epa rt m en t

EVO L UTIONA RY DE C E N T R A L I ZATION 265

in 1 932 w as p
a ste di recti on bu t m uch m o r e
in th at , w as ded
n ee if b etter
81
sa e l s pro mo tio n w as to b e as sur ed .

D ecen traliz atio n o f tii e R etail O rga n iz atio n

B ark er s success h elp ed Wo o d to deci d e th at th e ti m e h ad com e to tur n
’

m o st o f th e sto r e m an agem en t o v er to th ei r i n di v i du al m an ager s N o w .

th at th es e m en h ad l ear n ed th ei r task s Wo o d saw few go o d r easo n s fo r ,

m ai n tai n i n g an y so r t o f an el ab o r ate adm i ni s tr ati ve Structur e S ear s .

n eed ed li ttl e m o r e th an h i m self c o m p eten t buy er s an d sto r e m an ag er s

, , .

L at e in 1 93 4 h e pr o p o sed th e ab o liti o n o f th e r etai l d is tr i ct s an d th e V i ce

82
Pr esi d en cy fo r Retai l A dm i n is tr ati o n in Ch i c ago B ark er w as pro m o ted .

to b e th e sen i o r fi n an ci al o flicer an d w ith h is d ep art ur e % u ld co m e th e

,

eli mi n ati on o f th e o ffi c e r esp o n si bl e fo r pl an n i n g appr ai si n g an d co o rdi , ,

n ati n g th e acti v iti es o f th e r etai l sto r es T h e o dd r etai l-sto r e m an ager s

oo-
4 .

an d th e h ead s o f th e m ai l— o rd er h o u ses w o uld r ep o r t d i r ectly to th e G en

er al T h e f u n c ti o n al d ep ar tmen ts in Ch i c ago w o uld r etai n th ei r ch eck

.

o n th e sto r es by m ean s o f t r av eli n g aud it o r s an d o th er l i ai son m en .

Wo o d s execu ti ves o pp o sed th is extr eme decen tr ali zati o n u n an i

’

83
m o u sly . T h e ti me h ad n o t co m e th ey fel t to p er mi t the sto r e m an ager s
, ,

so m uch f r eedo m T h e pr o p o sed sli m s tructur e w o uld n o t p er mi t S ear s to

.

mo b i li ze its to tal r es o urc es effecti v ely B ark er fo r o n e w as c ertai n th at .

, ,

th e appr ai sal an d an aly si s o f o v er-all p erfo r m an c e w o uld b e exc eed i n gly

diflicult T h e merch an di si n g an d o p er ati n g m en f r o m Ch i c ago w o uld b e

.

abl e to ch eck o n ly o n th ei r o w n sp ec i al ti es T h e tr av eli n g aud i to r m i gh t .

bri n g to li ght u n sati sfacto ry co n diti o n s b u t s u ch m en h av e gen erally n o ,

“

” 84
a d equ ate b ackgr o u n d in m erch an d is e o r o p er ati n g exp er i en c e H ere .

lay B ark er th o ugh t o n e o f th e d an ger s o f eli mi n ati n g th e Retai l A d

, ,

mi n i st r ati on Offic e wh i ch w i th o u t au th o r it y o v er m erch an di si n g o p er at

, ,

in g or acco u n ti n g excep t as d er i v ed fr o m th e go o dwi ll an d coo p er ati o n

, ,

o f th ese f u n cti o n al a c ti v iti es yet h ad th e o pp o r t u n i ty t o r ev i ew all p h ases

,
”
an d th u s i nfl u en c e b o th Par en t an d F i eld .

Mo reo v er th is full decen tr al i z ati on wo uld in th e o p i n i on o f B ark er an d

, ,

th e o th er ex ecu ti v es r educ e S ear s s ab ili ty to m ak e th e m o st o f its tr ai n ed

’

a dmi n i str ati v e p er so n n el
,
” ”
T h e sm aller B an d C sto r es p ar ti cul arly
“ “
.

n eed ed gu i d an c e in sal es pr o m o ti on an d adv er ti si n g an d r equ i r ed a f ai rly ,

co n s t an t ap r ais al an d an aly si s o f th ei r o p er ati n g p er f o r m an c e

p F o r ef .

fi cien cy B ark er i n si sted th ese sto r es m u st b e o rg an i zed in gr o up s with

“

, ,

cen t r ali z ed a dm i n i str ati v e m an agem en t an d a f ew lo w -pr i c ed m en in

”
ch arge o f each i n di vi du al sto r e .

Wo o d s co n ti n ui n g appr eh en si ven ess ab o ut bureaucrati c gro wth as well

’

as h is l asti n g b eli ef th at i n d i v i du al co m p eten c e w as en o ugh u n d o ub tedly

pro m pted h is pro p o s al fo r a ch an ge fro m a h igh ly cen tr ali zed to an ex

266 SEA R S , R OE B UCK A ND CO MPANY

ordin ates th at ma n y m an ager s w er e n o t y et r ea dy f o r auto n om y an d

th a t S ea r s mi gh t l o se so m e o f th e a dv an ta g es o f larg e s cal e o pe r ati ons -
.

Y et as h e mai n tain ed at abo ut this ti me :

,

r ath er ms If w e d evise t oo elab o r at e a syst em o f ch eck s an d

th an on sy ste .

b alan ces it w ill o nl y b e a m att er o f tim e bef o r e th e se lf -r elian ce an d i ni ti a~

,

ti v e o f o u r m a n a gers wi ll be d estr o y ed an d ou r o rganiza tion w ill be gra d

u all y co n v ert ed in t o a h u e b ur ea u cra cy

85
g .

In s p i te co n vi cti o n s Woo d h eeded th e co unsel o f his m an

o f hi s ow n ,

ager s an d so f ai l ed t o carry d ecen t r al iz a ti o n as f ar as h e h im self w o uld

ha v e lik ed He di d elim in at e th e ofi ce o f R etail A dmi n ist rati o n as w ell as

.

th e D ist ri ct s I n th eo ry all r etai l st o r e m an a g er s w er e t o r epo rt dir ectl y

.
,

t o th e P r es i d en t I n pr a ct i ce so m e a dmi nist r ati v e w o rk co n tin u ed t o be

.
,

car ri ed o n i n t h e fi eld an d at Ch i ca go McCo nn ell appo in ted ea rly in 1 935 .

,

as th e A ss i st an t t o th e Pr es i d en t o n r etail pe r so nn el be cam e r es po ns ibl e ,

f or fi ll in g all o pe ni n g s in th e r etai l o rgan i za ti o n cl ear in g o nl y m aj o r ap ,

”6
i n tm en ts w i th G en er al “ f ood s O th th r h d m g r c uld
p o n e o e an n o an a e o ,

be dis ch arg ed un til hi s cas e h ad been r evi ew ed by a spe cial co mm i tt ee an d

by Woo d hi mself pe r so n al ly N or co ul d a m an w h o w as doin g sa tisfac
87
.

t o ry w o rk be m o v ed fr o m o n e st o r e t o an o th er wi th o ut hi s o w n co n sen t .

McCo nn ell h ad o th er t ask s t oo f or h e w as soo n gi v en ch arge of m ai l

88
, ,

o rd er an d cen t r al ofii ce pe r so n n el an d b eca m e th e co m p an y s secr etary

’
.

So wh il e h e un do ub t edl y k ep t an inf o rm al ch eck o n th e per fo rman ce

,

o f th e in di vi dual st o r es h e ha d co m p ar ati v ely li ttl e tim e t o an alyze t h e

,

r esul ts o r to tak e or sugg est a cti on on th e b as is of th e ana lysis .

T h i s las t t ask w as l ef t t o th e m an ager o f n ew l oca l r egi o n ally defi n ed , ,

uni ts F o r th e fa ct w as that even th ou gh th e D istri cts ha d b een abo lish ed

.
, ,

o th er l o cal a dmi n ist r ati v e o rg an i zati o n s d ev el ope d Un d er Bark er sev er al .

,
“
B sto r es in th e sam e ar ea w er e o ft en gr o up ed t ogeth er t o gi v e u n i
”

f o rm i ty to S ear s s pri ces g oo ds an d pr oc edur es in a sin gl e m etr o po li tan

’

, ,

r egi o n S u ch gr o up in gs f urth erm o r e pe rmi tt ed th e st o r es t o poo l th eir

.
, ,

m er ch an di si n g tal en t T h es e G r ou p s soo n cam e t o h av e th eir o w n m an

.

”
ag er s an d stafl s A f t er 1 3 m y A st o r es w er e a dd ed t o G r o ups o f
9 5 an .
,
“
B 5 A l so wi th th e abo lis h m en t o f th e Di stri cts in 1 935 th o se B an d
” ’
.
, ,
“ ”

C sto r es n o t y et in G r ou p s w er e pl aced in o n e o f fi v e Zo n es ea ch h ea ded ,

by an ex ecu ti v e w h o h ad b een a D i stri ct lVfan ager T h ese r etai l o m cer s .

“

w er e n o w B ar k er w r o t e in S ep tem be r 1 935 i n a po siti o n w h er e th ey , ,

“

co uld a ct in ci d en t all y as di stri ct m an a g er f or th e r el at i v ely f ew w ea k

st o r es i n th eir zo n es prima ri ly ex ercis in g o nl y an a dvi so ry r el ati o n t o th e

,

39 ”
str o n g st o r es w h i ch w er e th us l eft f r ee f r o m d etail supe rv i si o n .
EVO L UTIO NA RY DE C E N TR A L I ZATION 267

Th e Zo n e M an ager s were ca refully i n tegr ated i n to the exi sti n g fu n c

tio n al o rg an i z ati o n Ev en th o ugh th ey r esi ded in th e fi eld th ey w er e to
.
,

a s r epr esen tati v es o f th e f u n c ti o n al o flicers an d fo r m w i th t h e sen i o r

“
act
'

a ss i sta t
n s h
to t e f u n c ti o n al v i c e—presi den ts a comm ittee wh i ch m eets at
Ch i c ago r egul arly d i scu sses r etai l pro blem s an d pr es en ts t o th e r etai l
, ,
”
po li cy c omm i ttee r eco m m en d ati o n s o n b asi c m atter s A fter 1 935 B arker .

co n ti n u ed to serve as Ch ai rm an o f th i s R etai l Po li cy Co mmi ttee wh i ch ,

i n cluded m uch th e sam e p er s on n el an d duties as h ad th e earli er R etai l

”
C o mm i ttee T h e r esp o n si b i li ti es o f A gr o up m an ager s to th e f u n cti o n al
.

o ffi c er s in Ch i c ag o w er e pr o b ably m uch th e s am e al th o ugh cl ear ev i d en c e ,

is n o t av ai l abl e o n th i s p o i n t .

Th e G r o w t h o f L ocal Regio n al A dmin istrative Un its

In th e year s i m m edi ately fo ll o wi n g 1 935 th e th r ee typ es o f r egi o n al ad
m i n i str ati ve u n i ts th e G r o up an d Zo n e o ffi ces an d even th e adm i n i str a
, ,

ti ve staff s of th e i n dep en d en t A sto r es n o t pl aced in G ro up s exp an ded

“

in m u ch th e same w ay an d fo r m uch th e sam e r eason as h ad th e D i str i ct

an d T err i to r i al O ffi c es after 1 2 T h i s gr o w th c am e pr i m ar i ly by th e
9 9 .

add i ti o n o f ex ecu ti v es p ar ti cul arly s p ec i al i sts in m erch an d i si n g w h o con

, ,

cen trated th ei r f ull ti m e an d en ergy o n th e m ai n ten an c e an d exp an si o n

o f sal es v o lu m e by k eep i n g c o n stan tly in to uch w ith c h an gi n g l o c al de

m an d s an d tastes by appr ai si n g th e p er fo rm an c e o f th e sto r es in th ei r

,

o w n p ar ti cul ar pr o duc t l i n es an d by d ev elo p i n g a dv er ti si n g an d d i spl ay s

,

in th ese sam e sp ec i al ti es T h e c om p an y s d ec i si o n to co n ti n u e an d in
’
.
,
” ”
f ac t to exp an d its soft l i n es in th e B as w ell as A sto r es i n cr eased
“ “

th e n eed fo r cl o se c o n tac t w i th th e m ark et an d fo r b etter sal es pr o m o ti o n

tech n i qu es T h er efo r e th at d ec i si on m ay h av e h asten ed th e add iti o n o f

.

th ese m erch an d i si n g ex ecu ti v es to b o th th e l o c al staff s an d th e Ch i c ago

M erch an di se Dep ar tmen t In an y c ase th e r egio n al adm i n i str ati ve o f

90
.
,

fi ces gr ew fo r th e v ery r easo n th at D o dd an d H u m p h r ey h ad gi v en fo r

en l argi n g r eg i o n al d i str i c ts w h en th e r etai l s tru ctur e w as fi r st set up O n ly .

with execu ti ves w h o studi ed m ark et co n di ti o n s an d sal es pro m o ti on in

o rd er to adv i se S to r e m an ag er s an d C h i c ago buy i n g o fli cer s c o uld S ear s

carry o u t effici en tly its prim ary eco n o mi c r o le o f u si n g its v ast an d wi de

spr ea d r eso urc es to l o w er u n i t c o sts an d pr i c es by d i str i bu ti o n o f go o d s at

a h i gh v o lu m e an d w i th a r ap i d t ur n o v er .

”
T h e A S to r e fo r ex am pl e o p er ati n g i n d ep en d en tly o f a G r o up c am e
“

, , ,

to h av e sp ec i al i sts o r M er ch an d i se M an ag er s as th ey wer e c all ed f o r h ard , ,

”
l i n es so ft li n es b i g ti ck ets an d h o m e fu r n i sh i n g s S u ch a sto r e so o n h ad
, ,
“

, .

91
its o w n A dv er ti si n g an d S al es M an ager an d a D i spl ay M an ag er Th e .

n um b er o f m an ag er s o f G r o up s o f
” ”
A an d B sto r e staff s gr ew to b e
“ “

”
l arger th an th o se o f a si n gle A th e m aj o r d iff er en ce in si ze co m i n g in
“

,
268 SEA R S RO EBU CK A ND CO MPANY
'

th e n um b er o f m erch an di si n g dep ar tmen ts T h e G ro up Man ager h ad h is .

Per so n n el O p er ati n g C r ed i t an d Po o l S to ck M an ager s an d G ro up A ud i

, , ,

to r He al so h ad a D i spl ay M an ager His k ey assi stan t h o wever w as

. .
, ,

r eco gn i zed to b e th e Merch an d i se an d S ales Pro mo tio n Man ager to wh o m

th e v a r i o u s M erch an d i se M an ager s r ep o r ted an d w h o w as as si sted by an ,

A dverti si n g M an ager T h ese Merch an d is e M an ager s w h o h elp ed to k eep

.
,

b o th sto r e m an ager s an d Ch i cago buyer s in clo se co n tact wi th ch an gi n g

regi on al dem an ds were staff execu ti ves l ik e th e G ro up Man agers s o th er
, ,
’

assi st an ts T h ey c o uld a dv i se b u t n o t o rd er O f th e G r o up M an ager s staff

’
.
.
,

o n ly th e A dv er ti si n g M an ager w as d i r ec tly r esp on si bl e for h is ac ti v iti es at

all th e sto r es .

T h e Zo n e o rg an i z ati o n th at grew up fo r th e sm all er sto res af ter 1 935 w as

qui te co mp ar able with th at o f th e G ro up Th e Zo n e Man ager an d h is .

A ssi stan t u su ally h ad a staff o f fo ur m en S ales Pro m o ti o n A dver tisi n g , ,

D i spl ay an d In ven to ry M an ager s an d a n um b er o f Merch an di se F i eld “

Men staff sp eci ali sts in th e m ark eti n g o f p ar ti cular li n es w h o h ad duti es

,
”

S i m i l ar to th e M erch an d is e M an ager s o f th e G r o up s T h ey adv i sed th e .

Di vi si o n M an ager s w h o h an dl ed th ei r sp eci al li n es in th e v ar i o u s B
“

”
an d C S to r es
“
B
“
.

By 1 939 th e retai l sto r es h ad co me to b e m an aged th ro ugh m uch th e

,

sam e so r t o f o rg an i z ati o n as th ey h ad b een u n d er B ark er T h e n ew .

str u ctur e w as m o r e fl exi bl e th an th e earl i er o n e in th at i n stead o f o n e typ e ,

f
o br a c n h ad m i n i str ati v e o ffi ce — th e D istri c t — th ere were n o w th ree th e ,
”
Zo n e th e G ro up an d th e i n dep en den t A r ep o rti n g di rectly to Ch i cago
, ,
“
.

A s th e n u mb er o f r etai l s to r es gr ew f rom 428 at th e en d o f 1 935 to 5 20 at

,

th e en d o f 1 939 an d as pr o s p er i ty r et ur n ed an d th e v o lu m e o f bu si n es s
,

i n creased th e n eed for eff ec ti ve sup ervi sio n o f the sto res an d for th e n ew
,

regi o n al u n i ts b ecam e i n creasi n gly clear A S a result th e o ffice o f Retai l .

,

A d m i n i str ati o n w as fo rm ally r ev i ved in 1 939 w i th McCo n n ell as th e V i c e ,

Pr esi d en t in ch arge McCo n n ell n o w b ec am e m o r e th an j u st a p er s on n el

.

o ffic er A s B ark er h ad h ad b efo r e 1 h n o w h ad th e r esp o n si b i l i ty fo r

.
935 e ,

appr ai si n g an alyz i n g an d tak i n g acti o n o n th e p er fo r m an c e o f th e sto r e

, ,

m an ag er s as well as o f th e ex ecu ti ves in ch arge o f th e G ro up s an d Zo n es

,
.

Th e Retu rn to th e Territo rial O rga n iz atio n

G en er al Wo o d
u n do ub tedly co n cern ed wi th th e gro wth o f th e
w as
i n term ed i ate o rg an i zati o n b etween Ch i cago an d th e sto r e m an ager s Po s .

sibl th r s h e d i d l i ttl e ab o u t it w as h is d eci si o n in th e su mm er o f

y e e a o n

I 93
7 t o r e ti r e f r o m acti v e co mm an d H o w ev er u n d er pressur e f r o m
.
,

Ro sen w ald h e agr eed as h e to ld h is execu ti ves to rem ai n as Ch ai rm an o f

“

, ,

th e B o ard w i th r esp o n si b i li ti es fo r p o li ci es th e upp er p er so n n el o f th e

, ,
EVO L UTIO NA RY DE C E N TR A L I ZA TIO N 269

C o m p an y, but with o u t res po n si b i lity as to th e acti ve o perati o n s o f th e

” 92
Co mp an y an d w ith m y ti me at my o w n d i sp o s al .

T h e ch an ge in co mm an d c ame early in Lessi n g Ro s en w ald ,

wh o si n ce h is fath er s d eath in 1 932 h ad b een Ch ai rm an o f th e B o ard

’

reti red an d XVoo d to o k h is place C arn ey w as pro mo ted to th e pr esi den cy

, .
,

an d H o u s er b ecam e th e n ew V i c e-Pr esi d en t in c h arge o f M erch an d i se .

A t th e s ame ti me Woo d an d C ar ey s el ected a ew

n n V i c Pr esi den t in
e-

ch arge of O p erati o n s an d a n ew Com p tro ller

, .

A s s o o n as th e s en i o r man ager s w er e app o i n ted Woo d expr es sed h is ,

co n cern o ver th e gro wth of m i ddl e m an agemen t In h is A n n u al R epo r t .

d ated March 1 939 h e rem i n ded th e sen i o r executi ve as w

/

,
ell as th e s to ck

h o lder s th at this Com p an y h as fo r sever al y ears p ast ado p ted a p o l i cy

“

o f d ec en t r al i z ati o n an d h as g i v en its M ai l O rd er Man ager s an d S to r e

” 94
M an ager s a f ull m eas ur e o f au th o rity A few d ay s l ater at a con fer en ce
.

h eld in Ch i cago to i n t ro duce th e st o r e man ager s to th e n ew o ffi cer s th e ,

G en er al w as even mo re expl i cit :

Y ou are all familiar policy o f decen tralization We h ave deliber

w i th our .

ately tri ed to treat yo u as f ree i n dep en d en t merch an ts an d m en We ll t ry

’
.
,

to give yo u th e w i dest p o ssib le au th o ri ty an d sco p e We h ave tr ied to f ree .

y o u f rom a h o ard o f b ureau crats fu n ction aries in specto rs w h o migh t n ag

, , ,

an d h ar ass
you W e h a
.v e en d ea v o r ed in a ch ai n sto r e sy stem t o h av e a co

o p er ative d emocracy I th in k th e sy stem h as su cceeded b eyo n d ou r b est h op es

. .

Bu t I wan t to remi n d you o f o n e th i n g — an d th at is if su ch a system is ,

to rem ai n p erm an en tly su ccessfu l th ere m u st b e self imp o sed discip lin e Y o u
,
- .

as Man ager s m ust discip li n e y ou r selv es o th erwi se d i sci plin e h as to b e a

, p
l i ed fro m ab o ve In po liti cal an d so cial life th e d em oc raci es o f th e w o rld
p .

are in retreat to d ay an d th ei r pri n cip al w eak n ess is th ei r lack o f discip li n e If .

th ey can t get so m e self im p o sed discip li n e th ey will p eri sh

’
- 9 55
.
,

Y et w as dis ci pli n e en o ugh ? Wi th co m pl ete decen t r ali z atio n th e co m ,

p an y co uld n o t t ak e full advan tage o f its si ze T h e mai n ten an ce an d .

exp an si o n o f s al es v o lu me an d th e r esul ti n g l o w er i n g o f co st an d pr i ce

were th e ess en ti al eco n o mi c j u stifi cati o n s fo r S ears s exi sten ce Exper i en ce ’

.

h ad clearly sh o wn th at i n crease in vo lu me r equ i r ed co n stan t u se o f

m ark eti n g tal en t an d execu ti v e d i r ecti o n to pl an mo re eff ecti v e d is pl ay s ,

adver ti si n g u se o f sto r e s p ac e sto r e pl an n i n g an d d esi g n an d ch o i c es

, , ,

o f a s so r t men ts as w ell as to m ai n tai n cl o s e t o uch w i th th e day-to -day

,

ch an ges in th e dem an d fo r S ear s s m an y m an y di ff eren t pro ducts Devi ces

’

,
.

were n eeded to k eep a con ti n ui n g ch eck an d an aly si s o n sto re p erfo rm an ce

an d m an ager i al p er s o n n el It w as n o t en o ugh to k n o w th at a st o r e w as
.

do i n g po o rly ; th e executi ves m u st k n o w w h y T h ese apprai sal s co uld .

n o t b e m ad e pr o p erly by th e f u n c ti o n al d ep art men ts in C h i c ago as ,

2 70 SEA RS , RO E BUCK A ND C O MPANY

Mc co n n ell an d B ark er h ad po i n ted o ut earli er Efl ectiv e explo itatio n o f .

m an ager i al as w ell as o f th e p h ysi cal eco n o m i es o f scale call ed fo r so m e

, ,

type o f supervi so ry o r admin i str ati v e structur e .

Bu t w as c en tr ali z ati o n o f S up ervi si o n an d co n tr o l in C hi cago th e o n ly

al ter n ati v e to th e d ec en tr al i z ati o n th at G en er al Wo o d h ad h o ped t o

ac h i ev e in 1 935 ? Certai n ly a th i rd c o ur se w as o pen a r etur n to th e ,

terr i to r i al o rg ani z ati on A n d yet Wo o d an d h is ex ecu ti v es c o uld h ardly

.

h av e fo rgo tt en th e c o n fli cts an d co n tr o v er si es r esul tin g fr o m th e earli er

att em p t t o set up such large r egi o n al admi ni str ati ve u ni ts Po ssibly .

th ese sam e pr o bl em s w er e dev elo p in g agai n as th e l o cal u n i t s grew in

si ze A cl ear al ter n ati v e th en to o v erdecen trali zatio n o r o v erc en tr al i zati o n

.

wo uld b e th e cr eati o n o f T erri to ri al O flices wh i ch u n lik e th o se of 1 930 , ,

wo uld h av e th e au th o ri ty to adm i n i ster th e fu n cti o n al acti vi ti es as well

96
as th e r espo n si b i li ty f o r pr o fi t an d p erfo r m an c e .

N o t surpri si n gly th en Wo o d an d C ar n ey d eci ded to h ave an o th er try

, ,

at a t err i to r i al o rg an i z ati o n Sh o rt ly aft er th e ch an ges in t o c o mm an d

p
h ad b een co m pl eted No t o n ly h ad Wo o d s effo rt s to pr even t cen tr ali za
’
.

ti o n o f d eci si on m aki n g at Chi cago fail ed b u t th e r eturn o f goo d tim es ,

an d th e exp an di n g v o lu m e o f bu si n ess h ad i n cr eased th e n u m be r o f

deci si o n s Ch i cago h ad to m ak e In th e fi v e year s b etw een 1 935 an d 1 940

.
,

sal es alm o st d o ubl ed f r o m , mi lli o n to mi lli o n an d carr i ed

S ear s f ar b ey o n d th e pr ed epr essi o n p eak o f mi lli o n in 1 929 Mo r e .

o v er th e i n cr ease w as l argely in r etail sal es wh i ch by 1 940 w er e j u st

, ,

u n der 70 p er cen t o f th e to tal A n d if th e m ai l—o rder bu si n ess l en t i tself

97
.

to a f u n c ti o n al o rg an i z ati o n th e r etai l sto r e as th e Fr a zer C o mmi ttee

, ,

h ad r eali zed in 1 929 w as m o st easi ly m an aged by a terr i to r i al o n e

,
.

T h i s ti m e Wo o d an d h is sen i o r ex ecu ti v es agr eed to m o ve m o r e

,

slo w ly T h ey w o uld sta rt by setti n g up a T err i to r i al O ffi c e o n th e West

.

Co ast wh er e th e li n es o f co mm u ni ca ti o n an d supply w er e geo gr ap h i ca lly

,

th e l o n gest
98
If th i s n ew o rgan i zati o n pro ved successf ul o th er s w o uld
.
,

fo ll o w By early 1 94 1 A r th ur S B arro w s o n e o f th e co m p an y s m o st
’
.
, .
,

co m p eten t m er ch an di si n g ex ecu ti ves h ad tak en ch arge o f th e n ew ,

”
P ac i fi c Co ast T erri to ry A ll m an ager s o f G ro up Zo n e i n d ep en d en t A
“
.
, ,

sto r es an d m ai l -o rd er pl an ts in h is ar ea w er e to r ep o r t to h im He h ad
, .

full r espo n si b i l i ty fo r th e f u n c ti o n al acti vi ti es o f th e co m p an y as well

as a d m i n i str ati o n o f sto r e p er so n n el U n li k e th e fo r m er T err i to r i al O ffi
.

cer s h e h ad a staff o f o ffi cer s r espo n si bl e fo r th e p erfo r m an c e o f th e

,

vari o u s fu n cti o n al acti vi ti es His m erch an di se w as o rdered th ro ugh C h i

.

c ago fo r th e Mer ch an di se D ep artm en t r em ai n ed th e o n ly so urce o f

,

supply f o r all S ear s S to r es A cl o se li ai so n c o n ti n u ed b etw een th e sal es

.

pro m o ti o n exp erts at C h i cago an d th e Merch an di se S u peri n ten den t s an d

fi eld m en in th e o ffic es o f th e G r o up th e Zo n e an d th e i n d ep en d en t , ,
EVO L UTIO NA RY DE C E N TR A L I ZA TIO N 27 1

A r A si de fro m th is vi tal co n tact B arro w s lo o k ed to Ch i cago o n ly

sto es .
,

fo r p o l i cy gu i d an ce an d fo r a budget u n d er wh i ch h e h ad to o p er ate .

T h e Paci fi c C o ast exp er i m en t pr o v ed gr ati fyi n g b eyo n d o u r h o p es

“

as G en er al Woo d l ater p o i n ted o u t

99
But b efo r e th e n ext T erri to ri es
.

co uld b e set up Wo rld War II i n terven ed T h e po stwar plan s an d exp an

, .

si o n
, h o w ever were m app ed o u t o n th e as su m p tio n th at th e o rgan i z a
,

tio n al f r am ew o rk w o uld b e th e m ul ti f un c ti o n T err i to ry w ith its G r o up s ,

”
Zo n es d i r ectly r ep o r ti n g A s to r es an d m ai l-o rder pl an ts (see Ch ar t 9B)
,
“

In 1 945 B arr o w s w h o h ad b eco m e P resi d en t o n C ar n ey s d eath in 1 942

’

, ,

b egan to wo rk o ut th e sp eci fi c o rgan i z ati o n o f tw o m o re Territo ries o n e ,

fo r th e S o u th an d an o th er for th e Eas t .

In o u tli n i n g th e n ew o rg an i z atio n t w o typ es o f pr o blem s pr es en ted

,

th em selves T h e easi est o n e to s o lv e w as th e setti n g up o f th e b o u n d ar i es

.

fo r th e T err i to ri es an d al so fo r th ei r subu n i ts Wo o d sti ll co n cer n ed o v er .

,

th e d an g er o f to o m an y l arge lo c al st aff s w an ted th e Zo n e to r em ai n ,

1 00
l arge wi th at l east fo rty o r fif ty sto r es
, T h e m o r e d i ffi cul t task w as
.

th e r ed efi n i ti o n o f du ti es o f th e g en er al o r p ar en t o ffi c e at C h i c ag o .

If the T err i to r i al O fficer s w er e to h ave f ull au to n o m y w h at sh o uld ,

b e th e ro le o f th e fu n ctio n al d ep artm en ts at C h i c ago ? T h e o ffice th at

s up ervi sed th e facto ri es w o uld b e l i ttl e affected Wh i le th e M er ch an di se .

D ep ar tmen t w o uld co n ti n u e to s upply th e go o d s th e ex ac t r el atio n b e ,

tween its large sales pro m otio n offi ces an d th e execu ti v es h an dli n g this
cri ti cal fu n ct io n in th e T err i to ri es w as sti ll u n clear A n d wh at o f th e .

p o werful an d ven er able O p eratin g D ep ar tmen t an d th e n ewer o fl ice of ‘

Per so n n el an d Retai l A d mi n i st r ati o n ? A s to th e fo rm er th e an s w er ,

Its h ead b ec am e th e V i ce-Pr esi d en t o f th e

1 01
i n iti ally w as to ab o li sh it .

Easter n T err i to ry Its T r affi c Pr o p erty an d Co m m u n i c ati o n s D ep art

.
, ,

m en ts wer e n o w to r ep o r t d i r ec tly to th e Pr esi den t T h e r el ati o n s o f th ese .

th r ee u n i ts to th e n ew T err ito r i al O ffic es an d th e sto r e an d m ai l-o rd er

m an ag er s in ar eas in th e c en tral p ar t of th e n ati on wh er e n o terr i to r i al ,

o rgan i z ati o n
y et ex i sted w er e ,
by n o m e a n s cl ea r S o m e o f t h e a cc o u nt .

in g acti v i ti es o f th e o ld O p er ati n g D ep artm en t w en t to th e T r easur er s

’

o ffi c e T h e S uppl i es an d E qu i p m en t P urch asi n g D ep ar tm en t w as t ur n ed

.

o v er to H o u ser s m erch an d i si n g o rg an i z ati o n T h e r em ai n i n g ac ti v i ti es

’
.

were pl aced u n der McCo n n ell s Per s o n n el an d Ret ai l A dm i n istr ati o n

’

o ffi c es T h e du ti es o f th ese o ffi c er s w er e al so i n d efi n i te McC o nn ell sti ll

. .

a d m i n i ster ed th e l o c al u n i ts n o t et in T err i to r i es b u t w h at w as th e
y ,

rel atio n o f Retai l A dm i n i str atio n to th e th ree T erri to r i es ?

T w o w eek s after th e n ew T err i to r i al O ffi ces an d th e alter ed Ch i cago
o ffic e set up w en t i n to o p er ati o n o n F ebru ary 1 1 946 B arr o w s r esi g n ed , , ,

an d F o wl er B McCo n n ell b ecame S ears s Pr esi den t McCo n n ell an d

.
’
.

Wo o d n o w deci ded th at b efo r e co mpleti n g th ei r terri to ri al structure

, ,
272 SEA R S , RO E B UCK A ND CO MPA NY

th ey wo uld utsi de co n sulti n g fi rm to Study th e co mp an y s o rgan

get an o
’

iz atio n to an alyz e th e ch an ges alr eady mad e an d to suggest an swer s

, ,

to th e n ew qu esti o n s r ai sed Po ssi bly so m e u n exp ec ted pr o bl em s h ad

.

ar i sen in c arry i n g o u t th e n ew terr i to r i al o rgan i z ati o n U n d o ub tedly too .

, ,

th e sen i o r ex ecu ti v es wi sh ed a ch eck o n th ei r o rg an i z ati o n al i deas an d

co n cep ts .

T h e con sul tan ts co m pleted th ei r r ep o r t in S ep tem b er 1 947 It w as a , .

lo n g gen er al an d v agu e do cumen t with n o n e o f th e preci sio n an d

, ,

sp eci fi cs o f th e earli er Fr azer Rep o r t T h e co n sultan ts h ad app aren tly .

lear n ed li ttle ab o u t th e co mp an y s p ast o rgan i zati o n al h i sto ry an d wer e

’

to tally u n aw ar e o f th e earli er t err i to r i al o rgan i z ati o n an d th e co n fli cts it

h ad gen erat ed b etween Ch i c ago an d th e fi eld T h e r ep o r t th er efo re is .

, ,

m o r e i n ter esti n g as a study in gen er al th i n k i n g ab o u t o ver-all m an agemen t

structure in th e y ear s i mm ed i ately fo llo w i n g Wo rld War II th an as an

an aly si s o f th e sp eci fi c o r an iz ati o n al pr o bl em s o f S ear s Ro ebuck

g , .

Its pri m ary valu e to S ear s s ex ecu ti ves w as u n d o ub tedly its suggesti o n s
’

in d efi n i n g th e ro l e o f th e gen er al o ffi ce T h e co n sultan ts s ai d very l i ttle.

ab o u t th e o rgan i z ati o n o r f u n c ti o n s o f th e l o c al u n i ts th e i n d ep en d en t ,
”
th e G r o up o r th e Zo n e T h ey fel t th at th e ex i sti n g terr ito r i al
“
A , , .

o rg an i z ati o n w as exc ell en t an d th at th e pl an to co m pl ete it by s etti n g up

tw o m o r e T err i to r i es in th e Mi dwest an d S o u th w est sh o uld c er tai n ly b e

c arr i ed o u t A lth o ugh M i dwes ter n T errito ry s offices wo uld b e in

.
’

Ch i c ago it sh o uld h ave its o w n co mpletely s ep ar ate o rgan i z ati o n Th e

, .

T err i to ri al O ffi cers m u st o p er ate in th e atm o sp h er e o f a ch i ef execu

“

”
ti ve , an d sh o ul d h av e f ull r esp o n si b i li ty fo r th e establ i sh m en t o f n ew

sto r
1 02
es (l o c ati o n si ze an d d esi g n )
, , p er so n n el an d o p er atio n s
,
Th e
,
.

co n sultan ts h o wever di d n ot say s p ecifi cally wh at th ey co n si dered th e

,

o fficers r esp on si b i l i ty Sh o uld b e w i th r eg ard to pr o fi t goo d w i ll assets

’

, , ,

an d o v er-all p erfo rm an c e n or w h at ti tl e th ey sh o uld h o ld

,
n o r ex actly ,

wh at sh o uld b e th ei r rel ation to th e p aren t o ffi ce .

In m an y w ay s th e n ew gen er al o ffice w o uld b e co mp ar able to th at o f

o th er l arge d ec en tr al i zed co m p an i es T h e staff sec ti o n s wo uld pr o v i d e
.

sp ec i al serv i c es o n an adv i so ry b asi s an d w o uld assi st th e g en er al o fficer s

appr ai se p er fo r m an c e ll c u
a o ate f n s an d d
,
f o r m ul at e l o
,
n g—r an ge p o li cy .

B ecau se o f th e n atu re o f its bu si n ess th e gen er al o ffice sh o uld con ti n u e to

,

ad m i n i ster th e m an uf act urin g u n i ts an d th r o ugh th e M erch an d i se De ,

n ti n u i n g to h an dle th e
1 °3
artm en t th e b u y i n g ac ti v i ti es A i d f r m c
p , s e o . o

buyi n g fu n ctio n th e M erch an di se D ep ar tm en t s rel atio n s with th e T erri

,
’

to r i es w er e to b e so l ely adv i so ry It c o uld suggest pr i c es S to ck pl an s an d

.
, ,

sales pr o m o ti o n tech n i ques b u t s h o uld h ave n o au th o r i ty to u t th em

p
i n to eff ect .

T h e O p er ati n g Dep ar tmen t o ugh t to b e r evi v ed as an advi so ry staff

 C HA RT 9B

TERRITORY STAFF

" "
GROUPS REPORT DIRECT A S TORES

office . Un der x cu ti ve o f adequ ate vi sio n an d i m agi n atio n th e

an e e ,

co n sultan ts rep o r t co n ti n ued it co uld carry o n research an d develo p

’

co st-cutti n g stan d ard s pro cedures an d faci liti es co mmo n to all u n i ts o f

, ,
“

” ”
th e Co m p an y It co uld al so sti m ul ate a r esearch p o i n t o f v i ew in th e
“
.

T err i to ri es h elp d i ssemi n ate i deas an d i n fo rm ati o n wo rk cl o sely w i th

, ,

th e buyi n g d ep ar tm en ts o n o p er ati n g pro bl em s i n h er en t in th ei r l i n es

o f m erc h an d i se an d m ai n tai n a gr o up o f serv i c e an d co n su l ti n g sp eci ali sts

, .

T h e gen er al o ffic e wo uld h av e S i m i l ar advi so ry co o rd i n ati n g sp eci al i sts

,

fo r p er so n n el an d publi c r el atio n s T h e T r easurer s an d th e Co m p tro ll er s

’ ’
.

o ffic es w er e to pr o v i d e m uch o f th e sam e typ e o f assi stan c e an d exp er tn ess

o n tax i n s ur an c e acco u n ti n g an d o th er fi n an c i al m atter s

, , , .

Furth ermo re th e fi n an ci al ex ecu ti ves sh o uld play a k ey r o l e in th e

,

o ver -all appr ai si n g i n spec ti o n an d p o li cy plan n i n g at C h i cago T h ey

, , .

sh o uld c o n ti n u e as th ey h ad b een d o i n g to c o ll ec t an d co m p i l e acc o u n t

, ,
O rgan izatio n o f Sear s Midw estern T errito ry

TERRITORY S TAFF

MAIL — 0RDER ORGANIZATION

" "
a STORE ORGANIZATION

in g an d o th er stati sti c s th at wo uld sh o w th e day-to -day p erfo rman ce o f

all S ear s s o p er ati n g u n it s T h es e o ffices sh o uld r ev i ew all o p er ati n g
’
.

budgets fo r bo th ru n n i n g an d cap ital expen dit ures as well as fo rec asted

, ,

s ales an d s ales plan s o f all u n its b efo re fo rward i n g th em to th e s en i o r

o ffi c er s fo r acti o n .

Th es e l atter o fficer s th at is th e Presi d en t an d Ch ai rm an o f th e B o ard

, ,

wo rk i n g wit h th e fi n an ci al an d Merch an di si n g V i ce-Presi den ts an d th e

h ead s o f th e Staff u n i ts were to pl an an d deci de o n bro ad p o l i cy T h ei r s .

wo uld b e th e i m p arti al o ver-all v i ew u n en cum bered by an y p ar ti cular

“

”
d i vi si o n a l lo yalty o r b i as In sp i te o f th ese reco mm en datio n s th e r ep o r t
.
,

el sewh er e sugg ested th e so m ew h at c o n tr ad i c to ry pr o p o siti o n th at t h e

1 04
T erri to ri al O ffi cer s Sh o uld t ak e p art in p o l i cy m ak i n g .

!
T h e essen ti al message o f th e co n s ultan ts r epo r t w as th at th e o rg an i z a
’

tio n al po l i cy an d p h i lo s o p h i es o f th e S ear s s ex ecu ti v es were c o rr ec t

’
.
2 76 SEA R S , R OE B UCK A ND CO M P A N Y
A lth o ugh ugg esti on s w er e ma de as to th e r o l e of th e gen er al ofli ce
so me s ,

th e r epo rt g av e r el ati v ely l itt l e h elp o n th e S pe cifi c impl em en tat i o n of

th ese p o li ci es It is r eass urin g to h av e thi s co n fi r m ati on o f o ur th in k i n g

“
.

by o u tsi d e experts B ark er wr ot e Wood al th o ugh it is difli cul t to see

,
”
,
“

” 1 05
h o w th ey co uld ar ri v e so un dly at an y o th er co n clusi on T h e n ext .

St ep ,th e w o rk i n g o u t o f d etai l s m ust b e d on e f r o m with in b e co n, ,

tin u ed My o w n suggest i on on thi s n ext ph ase wo uld b e th at a perm a

.
“ ‘

,
’

n en t co mmi tt ee o n o rg an i z ati on sh o ul d be ap p o in ted [ w h i ch ] ,

wo ul d h av e as its r espo n sib ili ty th e wo rki n g o u t of an admi ni st rati ve

plan in its pr acti cal detail s an d th e r eco mm en d ati o n s of pr op osa ls t o
,
”
u f r ad o p ti o n T h is co mmi tt ee w o ul d h av e th e fi r sth an d kn o wl edge
y o o .

an d exp eri en ce th at th e con sul t an t s l ack ed an d by b ei n g p erman en t it , ,

“
wo ul d con st antly w atch th e f un cti o ni n g of th e o rg an izati on pla n an d
w o uld co n sti tu te an agen cy wh er e pr o posal s f or m o difi cati o n s o rigi n atin g
”
an ywh er e i n th e Com p an y co ul d b e car eq y co n si d er ed .

Early i n Ian u ar y 1 94 8 Woo d ap p o in ted a S tan di n g Co mmi ttee on

, ,

O rg an i zati on It in clud ed th e. V i ce Pr esi den ts o f th e exi stin g T erri to ri es

-

wi th th e Co mp tr o ll er as Ch ai rm an an d th e Di r ect o r o f Perso nn el as
S ecr etar y
1 06
By th e en d of M arch th e Co mmi tt ee m ade its r epo rt to
.
,

McCo n n ell an d Woo d O n ce agai n it w as sh o wn th at whil e o u tli n in g th e

.

fi n al t erri to r i al bo un da ri es pr o v ed so m ewh at of a pr o bl em th e r eal tas k ,

w as o u tl ini n g cl early an d expli ci tly th e du ti es o f th e g en er al o ffice ,

p arti cul arly th e st aff spe ci ali sts in r el atio n to th o se of th e T erri to ri al

,

Th e F in al S tru ct u r e
O n A pri l 2 6, 1
94 8, t h e l ast tw o T erri to ri es, th e
Mi dwestern an d S o uth
w estern b egan o p er ati ons Th ei r V i ce-Pr esi den ts lik e th o se in th e o th er
, .
,

terr i to ri es r epo rt ed di r ec tly to th e P r esi d en t an d ea ch h ad

, com pl ete ,
“

” 1 07
ch arge of o p er ati on s in hi s o w n ar ea Thi s in clud ed per sonn el .
,

exp en ses in ven to ry main ten an ce O p er atin g b an kin g an d l o cal sal es

, , , , ,

A t th e s am e tim e th e Op er ati o n s o fli ce
1 08
pr om o ti on (see Ch art 9E) .
,

w as r evi v ed in t h e g en er al o ffice o n an advi so ry b asi s an d th e o ld er ,

R etai l A dmi ni str ati on ofli ce w as di scon t in u ed So m e o f th e latter s fu n c

’
.

ti o n s su ch as r eal es tate w er e gi v en to th e T err i to ri es O th er s lik e p er so n

, , .
,

n el an d p u bli c r elati o n s w er e di vi d ed be tw een th e T err i t o ri es an d th e

,

p ar en t o ffice Th e s ecti on s r em ain in g in Ch i cago be cam e adv iso ry uni ts

.

co n cer n ed wi th o v er-all pr obl ems an d pr o cedur es .

T h e p ar en t o flice n o w in clud ed be si d e M er ch an di si n g F act o ry Man , ,

a em en t an d th e fi n an ci al o ffi ces f ur sta fl d p r t m ts — O r ati o n s

g , o e a en
p e , ,

1 09
Per so n n el P ubli c Rel ati ons an d Chi ef Co un sel (see Ch art 9A )
, ,
Th e .

n ew O p er ati o n s o fli ce ha d di v isi o n s to d ev el o p an d impr o v e r etai l an d

EVO L UTIONARY DE C E N TR A L I ZA TIO N 277

m ail-o rder pro cedur es an d in cluded an O p er ati on s R esearch D ep artm en t .

A l so it w as gi v en ch arge o f th e o ld er G en er al Traflic D ep ar tmen t w h i ch ,

w as r espo n si ble for th e co m p an y — o w n ed o v er—th e-r o ad truck i n g li n es “

as w ell as r ai l f r ei gh t fo rw ard i n g ac ti v iti es an d f o r th e Co mm u n i c ati on s ,

D ep ar tm en t o p er ati n g o n e o f th e n ati o n s b i ggest pr i v ate i n ter n al co m

’

m u nication s n etwo rk s T h e gen er al staff s Per so n n el O flice n o w co n cer n ed

’
.

i tself with d ev elo p i n g co mp an y-wi de pr o cedur es in em plo yee r ecru itm en t

an d tr ai n i n g ex ecu ti v e d ev el o p m en t co m p en sati o n
,
lab o r r el ati o n s an d
, , ,

o th er p er s o n n el m att er s
110
T h e sp eci fi c du ti es o f th e o th er s taff o ffic es
.

n eed n o t b e d et ai led h er e b u t are c o m p ar abl e to o n es cr eat ed at G en er al

,

Mo to rs du Pon t an d S tan d ard O il in th e 1 920 s

, ,
’
.

A s in th ese s am e co m p an i es th e Co m p tr o ll er s O ffi ce at S ear s r etai n ed

’

a d ir ect l i n e o f au th o r i ty v ia th e T err i to r i a l Co m p t r o ll er to th e m ai l— o rd er

pl an t s an d r etai l sto r es Wh en th e co mp an y s Comp tr oll er w as ask ed in

.
’

t o d efi n e th e r el ati on s o f th e T err i to r i es to th e p ar en t h e wr o te th at
1 94
7 ,

th e T err i to r i al C o m p tr o ll er wo uld b e u n der th e co n tr o l o f th e ch i ef

“

ex ecu ti v e o f th e terr i to ry as to o p er ati on bu t u n d er th e s up erv i si o n o f t h e ,

co rp o r ati o n s Co m p tro ller as far as acco u n ti n g p o li cy an d pr acti ces are

’

” 1 11
co n cern ed .In m atter s d eali n g w ith th e l att er th e terr i to r i al ex ecu ti v e ,

wo uld t ake a h an d o n ly wh en th er e w as a co n tr o ver sy b etween th e l o c al

comp tr o ller an d Ch i cago T h en as w as tru e in th e earli er terr i to ri al
.
,

setup h e c o uld c o u n ter m an d th e f u n c ti o n al O ffi c er s o rd er s If n ec essary

’

, .
,

th e pr o blem m i gh t go to th e Pr esi d en t fo r a dj ud i c ati o n ac t u ally a v ery ,

r ar e ev en t A di r ect l i n e is Ho u ser p o i n ted o u t a n ecess ary s afety

.
, ,
“

m easur e in a co m p an y do i n g a bu si n ess in lo cati o n s wi th a m er

ch an disin i v t ry f $ d i n stallm en t acco u n ts o n th e
g n en o o
5 oo oo o oo o an , ,

b o o k s t otalli n g wh er e u n ifo rm acco u n ti n g pr ac ti ces are essen

”
“ 2
ti al
.

Th e s taff ex ecu ti v es at S ear s as in th e o th er dec en tr ali zed co mp an i es

, ,

co uld o n ly advi se n o t o rd er b u t th ey w ere al so gi v en an i m p or tan t

,

appr ai si n g o r aud i ti n g resp o n si b i li ty T h ey h ad wh at c ame to b e call ed

“
.

” 113
th e r i gh t o f ch all en ge Ex ecu ti ves fr o m h eadqu art er s w er e p er mi tted
“
.

an d exp ected to c h all en g e li n e o ffi c er s in th e fi eld a s to th e r esul t s th e

l atter h ad ach i eved an d th e m an n er in wh i ch th e res ul ts h ad b een acco m

p lish ed .

B esi de audi ti n g an d adv i si n g th e s taff w o rk ed clo s ely wi th th e Pr esi

,

den t an d Ch ai rm an o f th e B o ard an d th e M erch an di si n g an d fi n an ci al

V i c e Pr esi d en ts to pl an a br o ad p o l i cy an d to all o c ate th e f u n d s p er s o n n el
-
, , ,

an d fa ci liti es n ec es sary to c arry o u t such pl an s T h r o ugh t h e c o n tr o l o f .

r eso ur ces th e gen er al o ffi ce deci ded wh er e th e co mp an y Sh o uld exp an d

, ,

mai n tai n o r co n tr act its ac ti vi ti es S en i o r staff an d g en er al o ffi c er s at

, .

h eadqu ar ter s al so wo rk ed to geth er in appr ai si n g th e acti vi ti es o f th e

27 8 SEA RS , R O E BUCK A ND CO M P A N Y
o p er ati n g un i ts an d o f th e co mp an y as a wh o l e F o rm al devi ces lik e th e .
,

Po li cy G r o up s at G en eral M oto r s w er e u nn eces sary at S ear s wh er e

, ,

th e gen er al Offi ce w as m uch s m al l er Ev en an O ffic er s Bo ard to as sur e

.

r egul ar m eetin gs o f th e gen er al an d staff o ffi cer s in th e p ar en t o rgan i za

ti o n pr o v ed u n n ec essary Th e O ffic er s B o ard in sti tu ted by th e Fr azer Co m
.

”
m i rtee whi ch h ad b eco m e an i nf o r m al Ex ecu ti ve Co mm i tt ee by th e
“

mid 1 93 0 s w as dr o pp ed wi th th e cr eati on o f th e T err i to r i es 1 14

’
-
.

S in c e 1 94 8 th e p o li cy in i ti ato r s at Ch i cago h av e di scu ssed th eir pl an s

wi th th e r egi o n al o p er atin g o fi cers at th e tim e o f B oard m eetin gs Be .

tw een m eeti n g s th ey k eep in co n stan t to uch w i th th e terr i to r i al u ni ts

, .

T o av o i d wh at B ark er o n ce ca lled th e t en d en cy th at th ei r d ec i si o n s
“

as to p o li cy w ill b e m ad e in a r em o te an d r at ifi ed atmosp h er e f ar f r o m
”
th e r eali ti es o f th e f r on t-l i n e c o n tac t w i th th e pub li c th e gen er al o fli ce ,

ex ecu ti v es r ely as do th o se at G en er al M o to r s
, du Po n t an d J er sey , ,

115
S tan d ard o n r egul ar in specti on to ur s in th e fi eld S ear s s ex ecu ti v es also
’

, .

stay in to uch th r o ugh in tert err i to r i al c o mm i ttees set up t o en co ur age

exch an g e o f i n f o r m ati o n an d i d eas an d carr i ed o n un d er g en er al o ffi c e

sup erv isi o n Bu t m ost im p o rt an t o f all in inf o rmi n g Chi c ago o f terr i
.
,

t o rial ac ti v iti es an d p erf o r m an ce is th e steady fl o w o f S tati sti cs an d

,

r ep o rt s th at p o ur in to th e p ar en t o ffice D eci si o n s in cludi n g th e fo rm ul a

.
,

ti o n o f t h e budg et are r ev i ew ed b u t v ery r ar ely r ev is ed o r al ter ed by th e

,

116
B oard of D ir ecto r s .

T h e structur al r eo rg an i zati on at S ear s in th e 1 93 o s an d 1 g4o s r equi r ed

’ ’

l ess co n cen tr ated effo rt on th e d ev elo p m en t of stati sti ca l an d fi n an ci al

co n tr o l s th an o n th e defini ti o n o f th e li n es o f co mm un i cati o n an d au
th o rity T h e 1 92 1 d epr essi o n h ad i ni ti ally stim ul ated th e d ev el o p m en t
.

o f i n v en to ry c o n tr o l s an d o f estim ates o f sal es f o r th e c o m in g spri n g

an d f all buy i n g season s A t th e sam e ti m e th e O p er ati n g D ep art men t
.
,

d evel op ed fo r ecasts an d budgets o f o p erati n g an d cap i tal exp en di tur es

n eed ed f or th e n ex t tw o buy i n g seaso n s Wi th th e m o v e i n to r etai li n g
.

d em an di n g n ew typ es o f stati sti cal i nf o rm ati o n an d fi n an ci al co n tr o l s ,

B ark er an d Po llo ck h ad wo rk ed o ut in th e early th i r ti es i n v en to ry

, ,

co n tro l s an d budgets fo r th e r etai l sto r es T h ese effo rts wer e co n c en tr ated

.

pr im ari ly o n o b tai n i n g co n tr o l o v er curr en t i n v en to r y an d curr en t p er

fo rm an ce Bu t th e sto r es th e r egi o n al o rg an i z ati o n s an d th e f u n cti o n al
.
, ,

d ep ar tm en ts all di d d ev elo p esti m ates fo r th e r etai l sto res exp ected n eed s ’

in b o th g oo d s an d m o n ey fo r at l east tw o buy i n g seaso n s .

Un til th e mid th i rti es th e Ch i cago o ffice m ade li ttle effo r t to pro vi de

-
,

a ch eck o n th e sal es an d exp en d i tur e esti m ates o f its sto r es a n d buy i n g

d ep ar tm en ts F or o n e th i n g th e M erch an d i se D ep ar tm en t h ad tw o
.
,

so urc es o f d ata as th e esti m a tes f r o m th e sto r es a n d m ai l —o rd er h o u ses

,

w er e car efully co m p ared wi th th o se m ad e by th e buyer s fo r each o f th e

EVO L UTIONARY DE C E N TR A L I ZA TIO N 279

differen t li n es In 1 935 h o wever th e Mer ch an di se D ep ar tm en t set up

.
, ,

an E con o m i c R esearch C fli ce to c oo rd i n ate a n d pr o v i d e an o u t si d e r ev i ew

117
o f th e d ata pr es en ted by t h e o p er ati n g u n i t s T h e n ew o ffic e al so m ad e
.

m o r e detai led esti m ates o f econ o m i c co n di ti o n s an d an alyzed sal es p o ten

ri al s an d p erfo rm an c es S uch d ata w er e as u sef ul to th e g en er al o ffic e
.

as to th e o p er ati n g u n i ts T h ey h elp ed t h e t o p ex ecu ti v es pl an c ap i tal

.

exp en d i tur es an d th e all o c ati o n o f f u n d s b et w een di ff er en t u n i ts an d

li n es as w ell as to defi n e an d deci de o n o th er fi n an ci al p o li ci es T h e

, .

co m p an y s fi n an ci al dep artm en ts b egan at ab o u t th i s tim e, to dev elo p

’

fi n an ci al fo r ec asts to assi st in budgeti n g an d in c o m p ar ab lepl an n i n g 118

.

Fr o m th e 1 920 s o n th en th e S ear s s execu ti v es wer e m aki n g th ei r pl an s

’

, ,
’

o n th e b asi s o f an ti c i p ate d as w ell as p ast p er fo r m an c e an d by th e 1 3o s

“
’

9 , ,

suc h d ata w er e b ec o m i n g m o r e accur ate an d m o r e so p h isti c ated .

By th e s umm er o f 1 948 S ear s h ad ach i eved an o rgan i z ati o n quite

,

si m i l ar to th o se d esi g n ed earli er at G en er al M o to r s du Pon t an d J er sey , ,

S tan d ard Th i s st ruct ur e wh i ch h as r em ai n ed r el ati vely u n ch an ged h ad

.
, ,

th e s am e au to n o m o u s s elf-c o n tai n ed o p er ati n g d i vi si o n s an d th e s am e

,

119
gen er al o ffice o f fu n cti o n al staff s p eci ali sts an d s en i o r gen er al o flicers .

T h e pr o c ess h ad b een s lo w er at S ear s b ec au se o f ex ter n al ci rcu m s tan c es

an d th e c o n v i c ti o n s o f its to
p ex ecu ti v es Bu t f o r th e d epr es si o n an d
.

G en er al Wo o d s d i stru st o f bur eaucr ati c pr o cedur es a si m i l ar s truct ur e

’

m i gh t h av e b een wo rk ed o u t in th e early 1 g3o s Th e co n fli cts b et w een

’
.

th e r egi o n al o ffi c er s an d th e f u n cti on al d ep artm en ts in Ch i c ago c o uld

p o ssi bly h ave b een so lved in 1 932 h ad Wo o d b een wi lli n g to tran sfo rm
th e t err i to r i al u n i ts i n to f ul l-fl edged mu ltidep art men tal d i v isi o n s and so

create a m u ltidivisio n decen tr ali zed struct ur e S uch an auto n om o u s di vi .

si o n m i gh t h av e ev o lved in an c if t r n g ex ecu ti v es li k e B ark er

y a se S o ,

w h o too k o n au th o r it y an d cr eated th ei r o w n s taff s h ad b een p erm i tted ,

to go th ei r o w n w ay H o w ev er th e d epr essi o n -cr eated n eed to cu t co sts

.
,

h elp ed fo rce a d ec ision an d gi v en Woo d s s tr o n g c o n v i cti on s as to th e

’

d an ger s o f i n cr eas ed staff s th is deci si o n w as th e eli mi n atio n of th e terr i

,

to rial o rg an i z ati o n an d th e r eten ti o n o f th e c en tr ali z ed f u n c ti o n al o n e .

A ctu ally if G en er al Wo o d co uld h av e h ad h is o w n w ay th er e w o uld

, ,

h ave b een on ly th e small est o f i n term ed i ate a dmi n istr ati v e o rgan i z ati o n s
b etween Ch i cago an d th e r etai l sto res an d m ai l—o rder h o u ses Y et as th e
~
.

ev en ts after 1
934 d em o n st r ated th e c o n ti n u ,
i n g exp an si o n in th e n u m b er
o f sto r es an d p ar ti cul arly th e co n stan t pr ess ur e to i n cr ease s al es vo lu m e

m ad e such a c o ur se i m pr acti c al S ear s si m ply co uld n o t t ak e adv an tage

.

o f its si z e an d its h i g h -v o lu m e lo w -c o s t o p er ati o n s u n l ess it h ad m o r e

,

eff ecti ve a d m i n i str ati o n o f th e i n d i v i du al st o r es p ar ti cul arly th e sm all er ,

o n es T h e n eed fo r eff ec ti v e appr ais al an d at th e s am e t im e th e n eed

.
, ,

fo r a clo se an d co n stan t co n t act with th e ev er-ch an gi n g m ark et led ,

28 0 SEA RS , R OE B U CK A ND CO MPA N Y

in th e fi eld, Sea rs s i r cut i v e o fi cer d eci ded to ret urn to a t er ritorial

’
sen o ex e

t yp e o f o rganizati on . Th i s tim e h e p ro vi ded th e T erri to ri al Ofi cer wi th

f o r pr ofit s an d perf o rma n ce Woo d t h en a dj ust ed th e duti es o f th e pa rent

.

o fli ce so that i t servi ce d apprai se d, coo rdi n ated, an d m a d e po l i cy f o r th e

,

t erri t o r ial di vi si o ns an d f or th e co m pan y as a wh o l e .

A t Sear s th en , st rategi c exp an si o n br o ugh t st ru ct ura l chan ge Ra pi d .

gr owth of th e act i vi ti es of th e ini tial Chi ca go mail —o rder plan t led t o th e

quar t ers an d th e fi eld Co n ti n u ed

. gr owth al so cr eat e d a gr eat er n ee d fo r

m en ts S h o rtl y
. af t e r th e cen t a ze r li d st ruct ur e n ecessa ry t o as u e r f ull us e

expan din g i n a n ew di r ecti on i n o rd er t o ob tain a sha r e of th e ra pi dly

gr owi n g urb an an d suburb an mark et T h e m o v e in to di r ect r etaili n g after
.

l ed t o th e crea ti on o f a n ew st ru ct ur e co n si stin g o f Di stri ct an d

wi th th e o lder struct ur e wh i ch , h ad be en created f or th e m ail -o rder

n ecessa ry t o a dmi nist er t h e un it s fi el d —in th e

th e G ro ups , Zo n es lar ge ,

”
A st o es an d ma l o
r i rd r h u an d wh os e a cti vi ti es w er e i n t ur n
“
- e o se s —
, , ,

a dmi nist er ed in th e i n ter est o f th e en t er pri se as a w h o l e f r o m t h e n ew

n er a l o ffice at Chi ca go
g e .

Th e expe r i en ce of S ea rs a m ass m er ch an diser difi ers from th at o f

, ,

th e o th er th r ee co m pa n i es st udi ed h er e — all basi cal ly m an u fa ct ur ers

in th at co n tin u ed gr o w t h ra th er th an v erti cal i ntegr ati o n cr ea ted th e

n eed f o r cen t r al o fi ce a dmi n i st r at i o n o f t h e f u n cti o n al d ep ar tm en ts On .

th e o th er h an d th e Chi ca go h ea dquart er s di d tak e o v er t h e pr im ar y

,

o pe ra t in g f un cti o n o f coo rdi n a tin g th e fl o w o f pr o d u ct f r o m th e p r e

m an ufacturi n g sta ge t o th e ul tim ate co ns u m er I t acqui r ed th is r o l e l ess .

fr o m its co n tr o l o v er m an uf a cturi n g (al th o u gh S ear s di d purch ase stoc k

it di d fr o m th e caref ul specifi ca ti o ns it set in mak i n g h i gh -v o lum e o rder s

EVOL UTIO NA RY DE C E N T R A L I ZA TIO N 28 1

from its s uppli er s No rm ally, S ear s , r ath er th an th e m an ufact ur er, d eter

.

mi n ed th e qualit y of m ateri al s an d p ar ts th at wen t i n to th e pro duct, as

well as h o w much w as to b e pro duced an d at wh at time In S ear s, as at .

G en er al Mo to r s th e sh arp an d sudden d epr essi o n o f 1 920 m ad e cl ear th e

,

n eed for cl o s er c en t r al o ffi c e c o o rdi n ati o n o f pr o duct H o w to ch an g i n g

m ar k et d eman d s T h en , m uch as in th e c ase o f du Po n t wh en S ear s

.
,

mo ved i n to a n ew li n e o f bu si n ess th e co o rd i n ati o n o f fl o w w i th th e

,

mark et agai n ten ded to br eak do wn T his f ai lur e w as a pr im ary reason

.

fo r i n iti ati n g th e structur al ch an ges th at, in time, led to the fo rm ati o n

o f s ev er al m ultif u n cti o n d i v i si o n s .

T h e difi eren ces in S ear s s fi n al struct ur e an d th o s e of th e oth er s al s o

’

reflec t th e diff er en ces b et ween a mass m erch an dis er an d a large i n du s tr i al

m an uf act ur er A t S ear s , th e co n tro l o f so me acti v iti es, th e m an uf act ur i n g
.

u n its an d th e buyi n g, rem ai n ed cen tr al i zed T h e sto r es an d mai l—o rder

.

ho u ses in th e Terri to ri es h ad a Wi d e r an ge o f goo d s to ch o o se fro m , bu t

th ey h ad to b e o r i gi n ally purch ased by th e S ear s s buy i n g d ep ar tmen ts
’
.

Ho wever, terri to ri al executi ves h ad co mplete r esp o n si b i li ty fo r h o w th e

s elli n g s ales prom o tio n , an d distr i bu ti o n were do n e A ls o S ear s develo p ed
, .

a po li cy o f s upply i n g th e sto r es , w h er e p o ssi bl e, fr o m l o cal s o urc es .

O n e o th er differ en ce b etw een th e co mpleted struc tur e at S ear s an d

th at in th e three o ther com p an i es w as th e sm all er n um b er o f gen er al
ex ecu ti v es in t h e p ar en t o ffice Th e to p adm i n i str ati v e team at S ear s
.

i n cluded th e Presi den t, a f ull—tim e Ch ai r man o f th e B o ard, th e v i ce

presi den ts r es po n sibl e for m erch an di sin g, fi n an ce, an d m an uf actur i n g,
an d th e s eni o r execu ti v es in th e gen er al st aff d ep ar tmen ts T h e h ead s o f .

th e fu n c ti o n al u n i t s w h o w o rk ed cl o sely w i th th e g en er al o ffi c er s an d

th e s en i o r stafi ex ecu ti v es h ad a l arge d ep art men t al o rg an i z ati o n to h an dle

o per ati o n al ac ti v iti es T h ey h ad n o di r ec t co n tact w i th th e fi eld u mt s

. .

T h ey wer e, th er efo re, in a m uch b ett er p o siti on to m ai n t ai n th e br oa d

str ategi c o u tlo o k of gen er al execu ti ves th an th ey h ad b een b efo r e th e
creation of th e mul ti di visio n al struct ur e Th e r easo n S ear s s bu si n ess
.
’

requ ir es fewer gen eral o fi cers is th at it is less co m pl ex th an th at o f

du Po n t, G en er al M o to r s an d J er s ey Just b eca u s e its m ultif u n cti o n di v i
, .

sio n s carry o n the s am e acti viti es an d, ex cep t fo r th e n ew L ati n A meri c an

di v ision , in m uch th e s am e m ark et, its s en i o r o fi cers h ave to m ak e
_

rel ati vely fewer an d less co m plex str ategi c o r en trepr en eur i al d eci sio n s .

A l so th e fact th at G en er al Wo o d fo r so m an y year s m ade m o st o f th e

b asi c en tr epren eur i al decisio n s himself m ay h ave en co ur aged h is su c
cesso rs to k eep th e fi n al sa i th i r h d s
y n e an .

If Sear s, Ro ebuck is th en co n si d er ed as a r epr esen tati ve of a s ub sp eci es

of th e l arge A m er i can i n du str i al en t erpr is e — its m ass -m erch an d isi n g

var i atio n o r mo difi catio n — th en its exp er ien ce fully s upp o r ts th e gen er al
28 2 SEA R S , R OE B UCK A ND CO M P A N Y
pr o pos i ti o ns o utlin ed i n th e in tr od ucti o n E v en mo r e cl ea rly th an the
.

Oth er th r ee ca se stu di es its st o ry d em o n st r ates th e vi t al n ee d fo r admin i s

,
”
t rativ e per so n n el f o r m ana gemen t in d ep th i n t h e large in dust r ial
“

, ,

d efi n es cl ea r un cr osse d lin es o f auth o ri ty an d co mm uni ca ti o n

, .

G en er al Woo d w as sur ely ri gh t wh en h e str esse d th e impo rtan ce o f

ha vi n g th e ri gh t m an at th e ri gh t pla ce Y et po ssib ly beca use o f hi s o w n
.
,

en o rm o us co m pet en ce h e seem ed t o f o rget th a t goo d

difi cu lt to fin d p arti cul ar ly w h en a gr ea t en terprise li k e his n eede d

,

li ter all y h un dr eds of tr ain ed an d ex per i en ced ex ecut i v es Mo reo v er as

.
,

h e hi msel f cl ea rly appr ecia ted th e ri gh t m an w as una bl e to m ak e f ull

,
”
use o f h is tal en ts u nl ess h e h a d a st ea dy fl o w o f a ccur ate fi gur es o n
“

wh i ch to ba se his acti on an d un less h e w as c ertai n tha t his d ecisi o ns

w er e bein g ca rr i ed o ut Th er e is n o qu est i o n w h atev er tha t co m pe ten t
.

large en terpri se Th e l esso n G en er al Woo d l ea r n ed w as tha t effecti v e

.

a dmini s tr ato rs ca nn o t b v th em se l v es alw ay s as s ur e effect i v e a dmi nist ra~

ti O IL
 ORG ANIZATI ONAL INNOV A
TION —
A C O MP A R A T I V E
ANALY S I S

T HE a dmi n i str ati v e h i sto ry o f S ea r s R oebuck l ik e th at o f J ersey

, ,

S tan d ard G en er al M oto r s an d du Pon t d es cr i be s th e bu ildin g o f n ew

, , ,

adm i ni strati v e O ffi c es an d th e r ef ash i o n i n g o f exi stin g o n es to m eet th e

n eed s cr eat ed by th e gr o wth o f th e en t erpr is e By fo rci n g th e r eo ri en t ati o n

.

o f exi sti n g r eso ur c es an d th e accum ul ati o n o f m o r e an d o ft en qui t e

diff eren t typ es o f p er s on n el an d f ac i li ti es gro wt h br o ugh t n ew pr o blem s

,

an d n ew d em an d s at ev ery ad mi n is tr ati v e l ev el S uch n eed s r equir ed th e

.

pl ann i n g an d r epl an n i n g o f th e d esi gn used to admin i ster th e r eso urc es ,

o ld an d n ew av ai l abl e to th e en terpr i se Y et r ar ely di d th e bui ld i n g o f

, .
,

th e n ec essary structur e c o m e imm edi ately Its co n structi o n call ed fo r

.

t im e th o ugh t an d en ergy T h e tr ai n i n g tem p er am en t an d d ai ly ac ti viti es

, , .
, ,

o f th e ex ecu ti v es r es p o n si bl e f o r th e c o m p an y s b asi c d ec i si o n s v i tally

’

a ff ect ed th e atten ti o n i v t an d th e so lu ti o n s pr o po s ed f o r th es e n eed s

g en o .

In thi s w ay ex ecu ti v e exp er i en c e an d p er s o n ali ty h elp ed d eter mi n e th e

co ur se an d r ate o f structur al ad ap tati o n an d i n n o v ati on .

In summ ar i zi n g an d an alyzi n g th e a dm i n i str ati v e exp er i en c es o f th ese

fo ur gr eat i n du str i al en terpr i ses it seem s b est fir s t to r evi ew th e cr ea ti o n
,

o f th e di ffer en t typ es o f o ffic es . Wh at w er e th e b asi c n eed s at each

admi n is tr ati v e l ev el ? Ex ac tly h o w di d th e n eed s d ev el o p an d w h at so rt o f

s truct ur e c am e to m eet th em m o st eff ecti v ely ? A co m p arati v e an aly si s

o f o rg an i z ati o n al i n n o v ati o n can th en b e f o ll o w ed by a l o o k at th e

o rg an i zati o n al i n n o v ato r s Wh o saw th e n eeds an d w h o di d n o t ? A n d

.

w h y ? Wh o pu sh ed fo r r eo rgan i zati o n an d wh y ? O n c e th ese qu esti o n s

,

h av e b een co n si d er ed th en th e exp er i en c e o f th e f o ur co m p an i es m u s t agai n

,

b e co mp ar ed m o r e sp ec ifi c ally w i th th ose o f m an y o th er larg e in du stri al

en terpr i ses Whi ch o th er co m p an i es cam e t o h av e co m p ar abl e n eed s an d
.

wh i ch di d n o t ? A n d w h y ? O f th o s e th at di d whi ch cam e t o th e s am e
,

gen er al s o lu ti o n an d wh i ch di d n ot ? A n d w h y ? Ho w di d th e per son ali ty

an d exp er i en c e o f th ei r ex ecu ti v es affect th e p ac e o f o rg an i z ati o n al ch an ge ?

28 3
2 84 OR G A NI ZA TIONAL I NN OVA TI ON

i
t o ns . O n th e h er h an d in
ot , bui ldin g fi eld un i ts departm en tal
, h eadqu ar

bus in ess pr a ct i ce . Y et, whi l e th e co ns tr ucti on o f ea ch o f th ese th r ee t ypes

Th e du P o n t s an d th e o rgani za tio n buil ders o f G e n eral Mot o rs sub si d

Se ar s, R oe bu ck, w h o con si d er ed th e ex eri en ce o f

p go v ernm en tal as w ell

r eo rgani za ti on di d n o t co n sci o usly bo rro w th ei r forms f r om oth er s or ev en

f r om th eir o w n past exp eri en ce .

Th ese f o ur cas e st udi es say v er y li ttl e abo ut th e buil din g o f th e stru cture

purch asin g uni t lab o r at o ry an d th e lik e Th e ini ti al expan si on a t S ears

, , .
,

at t h e R e au n o Ch emi cal Co m p an y a t H yatt Bui ck an d oth er G en er al

p , , ,

i i Th e o r gan i zati o n of such uni t s w as usu all y lef t t o th e plan t o r

act vi t es .

d epa rtm en t m ana ger rath er th an t o th e o rgan i zati on b u ilders f or th e

en terpr ise as a wh o l e I n set tin g up a st ru ct ur e f o r a plan t o r di stri ct
.

om oe th e ex ecuti v es h a d pl en ty of inf o rm ati on to n f o r it w as o n

, go o ,

thi s l o w est a dmi ni st r ati v e l ev el th a t Fr ed er i ck W T ayl o r Fra n k G ilbr eth .

, ,

Har ry H op f an d o th er advo cat es an d practiti o n ers of sci en tifi c m anage

,
“

m en t co n cen tr ated t h ei r en er gi es A s late as Wo rld War II m ost o f

” 2
.
,

th e li ter at ur e o n a dm in i st r a ti o n st il l dea lt wi th th e m an age me n t o f t h e

in di vi dual fi eld un i t r ath er th an th e lar ger en terprise F o r th ese r easo ns .

,

th en th is r ev i ew f o cu ses o n th e buil din g o f th e a dmin i str ati v e pos t s at

,

th e th r ee hi gh er l ev el s th e d epa r t m en tal h eadqu a rters th e cen tral

, ,

an d th e en er al o fi ce
g .
T H E A DA P TIVE RESP O N SE 2 85

Bu ildin g tize F u n ctio n al D ep art m en ts

Th e cr eati on o f d ep ar tmen tal h ea dqu art er s f o r th e adm n
i istr ati o n o f
th e fi eld u ni ts b ecam e n ec es sary wh en a co mp an y h ad a n um b er o f pl an t s

o r o ffi ces s ca tt er ed th r o ugh o u t th e co u n try Th i s gr o wth in t urn r esul ted

.
, ,

fr om a str ategy o f ex p an si o n o r of c o mb i nati o n an d co n s oli dati o n devi sed

to m eet m o r e effect i v ely an i n cr easin gly w i d e d em an d b o th exi sti n g an d ,

p o ten ti al fo r th e com p an y s pro duc ts Fo r S ear s th e bu ildi n g Of th e n ew

,
’
.
,

br an ch m ail-o rder h o us es led in 1 920 to th e fi r st fo rm al defini ti o n of t h e

r elati o n s between h eadqu arter s an d th e fi eld u n it s o f th e fu n ctio n al
dep artmen ts T h e au to m o b il e co mp an i es th at cam e to m ak e up G en er al
.

M t r s an d als o th e du Fo t fi n an ced R ep au n o Ch emi ca l Co m p an y ex

o o n -

d d b th by l argi n g th e m an uf ac turi n g f aci l iti es an d by buildi n g

p an e o en

up th eir o wn s ales o rgani zati on s Th e r es ul tin g r ap i d gr o wth br o ugh t a

.

fo rmali zin g o f th e r elati on s b etw een h eadqu arter s an d fi eld B oth J er s ey .

an d du Po n t h ad w i d ely s ca tt er ed m an uf ac tur i n g m ark eti n g an d pur , ,

ch asin g uni ts ar th e ti me o f th eir r eb i rth o r r ecr eati o n D u Po n t af ter .

,

com b inin g an d co n so li d ati n g its h o ldi n gs co n cen tr ated o n c ar efully

,

defi n in g th e struct ur e of its dep art men ts as well as o f it s cen tr al o ffice .

Jer se y on th e o th er h an d m ade n o com p ar able r eo rgani z ati o n o f its

, ,

ex isti n g d ep art men ts u n ti l thi r teen y ear s aft er a n ew c o m p an y h ad r is en

fr o m th e dis memb erm en t o f th e o ld H o w ev er w h er e th e o il co m p an y

.
,

exp an d ed in to n ew eco n o mi c fun c ti o n s such as th e pr o duc in g o f crude

,

o il o r m ar ine t r an s po rt ati o n ,its ex ecu ti ves qui ckly cr eated d ep ar tmen ts

to a dmi n i ster th em .

Wh en th e du Pon ts re-fo rmed th e desi gn by whi ch th ey m ob ili zed th eir

r es o u rces they wer e v ery m uch awar e o f th e m o st adv an ced admi ni str a
,

ti ve pr acti ces in A mer i can in du s try F oll o wi n g an d impr o vin g o n th e

.

ex ampl e set by H enr y C Fr i ck in st eel an d C h ar l es A Co fiin in el ec

’
. .

tricity th ey cr eated af t er 1 90 3 w h at mi gh t b e c on si d er ed an alm o st i d eal

“

,
”
t ype of f un cti o n ally d ep artmen tal i zed cen tr al i zed structur e A fter 1 9 1 0
, .
,

th e au to mo b il e an d p ar ts co mp an i es th at b ecam e s ub si di ar i es o f G en er al

Moto r s wo rk ed o u t s tructur es quite co m p ar able with th o s e at du Po n t .

Th e ex ecu ti ves o f S ear s app ar en tly r eli ed l ess o n o utsi de pr acti c es in th e

r eo rgan i zation o f 1 920 th an di d th e auto m o b i le an d explo si ves c om p ani es
in settin g up th ei r i n iti al s truct ur es b u t th e r esulti n g o rgani z ati on w as
, ,

i v h d iff r c s i r s s cti v iti s q i c m p r bl A J r s y

’

g en t e e en e n S ea a e u te o, a a e t e e on .
,

th e o th er h an d wh er e th e ex ecu ti v es p ai d littl e atten ti o n to admi n i str ati v e

,

matter s an d accep ted un criti cally tr aditi o n al w ay s of m an ag em en t stru e ,

tural r eo rgan i zati o n cam e o nl y aft er m uch str ess an d str ai n Ev en th ere .
,

ho wever th e struct ur e of th e f un cti o nal d ep ar tmen ts an d th e cen tr al

,
286 ORG A NI ZA TIONA L I NNOVA TI O N

office cam e in im e
t to be qui te simi lar to th at o f th e r
o th e th ee com
r

In fashi o ni n g th e dep artm en tal h ea dquarter s th e prim ary tas ks at all

,

fo ur co m pan i es w er e th e defi ni ti o n o f th e lin es o f auth o ri ty an d co mm u

mi cati o n betw een h ea dquart er s an d th e fi eld un i ts an d th e allo cati on of
du ti es am o n g th e diff er en t execu ti v es at h ea dqu arter s T h e o rgani zati on .

desi gn ers h ad to determi n e h ow deci sions w ere t o b e m ade an d h o w

r esp o n sib i li ty w as to b e fix ed In dep artm en t buildin g th e dev el opm ent
.
,

o f St ati sti cs an d o th er i nf o rm ati on t o fl o w th r o u gh th e lin es o f

cati on pro v ed l ess of a ch all en ge th an it did in th e settin g up of th e

adm i n is tr ati v e Offices at th e n ext tw o hi gh er l ev el s Be ca use th e ex ecu ti v es
.

at h ea dqu art er s an d th o se i n th e fi eld w er e ca rry i n g o ut th e sam e typ e

o f f u n cti o n al acti vi ti es un if orm acco un tin g an d r epo rtin g sy st ems w ere

,

qui te eas ily dev elo ped an d bo th sets o f ex ecu ti v es co ul d r ea dil y i nterpr et
,

an d u se th ese da ta d ev el o ped as th ey w er e in th e areas o f t h ei r o w n

pr o fessi o n al sp ecial ti es Co m p ar able info rm atio n w as far m or e difficult

.

t o o b tai n an d in terpr et f o r un i ts carryi n g o n differ en t f un cti o ns o r h an

dlin g difi eren t li n es o f b u s in ess .

In mak in g cl ear th e lin es o f au th o ri ty an d comm un i ca ti on betw een

h ea dqua rt er s an d th e fi eld t h e m aj o r pr o blem w as th e d efi ni ti on o f t h e
,

r el ati o n b etween ex ecu ti v es at h eadqua rter s an d th o se in th e fi eld un i ts

w h o h an dl ed th e sam e typ e o f acti viti es S h o ul d th e dir ect o r o f an
.

a ux ili ary o r servi ce d ep art men t such as per so nn el

, workin g wi thin a ,

p lan t o r br an ch o ffice r epo rt dir ect ly to th e per so nn el m an ager at h ea d

q uarter s o r sh o uld h e r each hi m thr o ugh th e plan t m an ager ? Th is so rt of
pro bl em co uld ari se o nl y wh en th e a cti vi ti es of b oth h ea dquarters an d
fi eld b ecam e com pl ex en o ugh to r equir e a n u mb er o f spe ci ali sts It h ardly .

ex i sted wh er e th e h ea dqua rter s uni t w as sm all wi th l i ttl e o r n o aux ili ary

or serv i ce a c ti vi ti es or wh er e th e fi eld u n i t w as sti ll m an aged by t w o or

th r ee ex ecu ti v es wh o se w o rk w as n o t s ub d i vi d ed a cco rdi n g to speci al ti es .

Bu t wh er e as w as n o rm ally th e case sp eci alize d o r au xili ary acti vi ti es

, ,

di d exi st at bo th h ea dquarter s an d fi eld th e r elati o n sh i p n early alway s

,

am
c e be w rk ed o u t o n a lin e an d staff b asi Th e lin e
to o - - s -an
. d -staff m eth o d

o f d ep art men tal o rg an i za ti on w as m o st cl early d efi n ed i n th e m an uf ac

tu rin g d ep artm en ts at du F o n t an d th e G en er al M o to r s sub si di ar i es .

H er e th e stru ctur es us ed clo sely p ar alleled th o se devi sed a gen er ati on

earli er o n th e P en n sylv ani a R ai lr oad Th e li n e o f au th o ri ty w en t fr o m
.

th e ex ecu ti v e i n ch arg e o f th e d ep artm en t th r o ugh hi s imm edi ate assist

an ts to th e plan t supe rin ten d en ts an d th en o n do w n t o th e fo r em en o r

su erv i so r s
p . T h e pl an t sup er i n t en d en t an d th e d ep ar t m en t h ea d w er e

h eld f u ll y r es po n si b le f or th e perf o rm an c e of th eir r espe cti v e uni ts T h ey .

h ad th e au th o ri ty to gi v e o rd er s an d to m o v e an d u se pe r so nn el f un ds , ,
THE A DA P T I V E RE SP O N SE 28 7

an d qui pm en t Th e executi ves in ch arge o f th e m o re s p eci al i zed fu n c

e .

ti o n s — i n sp ecti o n p er s o n n el pl an t l ayo ut purch asi n g pro ces ses co st

, , , , ,

an aly si s an d so fo r th
,
— co mm u n i c ated wi th th ei r s ub o rdi n ates th r o ugh
th e li n e o ffi c er s at h eadqu ar ter s an d at th e pl an t T h es e m en w er e resp o n .

si ble fo r d ev el o p i n g s tan d ard s an d pr o c edur es bu t o n ly th e l i n e o fficer s ,

co uld i ssu e o rd er s .

In o th er d ep ar tm en ts it w as so m eti m es m o r e d i ffi cul t to mak e th e

,

li n e an d stafi d i stin c tio n as clear cu t In s al es th e g en er al p aftern h eld

- - ‘
.
,

at du Fo n t an d th e au to m o b i l e c o m p an i es exc ep t th at a dv er ti si n g t en d ed ,

to b e c en tr al i z ed at h eadqu ar ter s T h at is th e adv er ti si n g m an ager h ad

.
,

th e fi n al say o n all m atter s c o n c er n i n g h is a c ti v i ty Th e sal es d ep ar t .

m en ts at du Fo n t an d J er sey h ad ex ecu ti v es at h eadqu ar ter s an d in th e

fi eld fo r each m aj o r pr o duct o f its b asi c l i n e Bu t in du Fo n t an d in ti m e .
,

in J er sey th e l i n es o f co mm u n i cati o n an d au th o r i ty w en t f rom h eadq u ar

,

ter s th ro ugh th e br an ch o r di st ri ct o ffice m an ager T h e purch asi n g d ep ar t .

m en t o f du Fo n t an d app ar en tly th o se o f J er sey an d th e G en er al M ot o r s

sub si d i ar i es h ad m uch th e s am e typ e o f o rg an i z ati o n as th e s al es d ep ar t

men ts A t S ear s wh ere purch asi n g w as th e co m p an y s l argest acti v i ty

’
.
, ,

n early all th e r esp o n si b i l it y a n d au th o r it y fo r buy i n g w as d el eg at ed ,

u n ti l th e 1 929 ch an ges to th e h ead s of th e buyi n g u n its A t esti n g an d

, .

stan d ard s o ffi c e w as th e o n ly l arge st afi u n it at h eadqu art er s

'

T h e o th er f u n c ti o n al d ep ar tm en t s s uch as r es earch en gi n eer i n g an d

, , ,

p er s o n n el wh i ch b ec am e in time desi gn ated as c en tral ofli ce aux i l i ary o r

,

serv i ce d ep ar tmen t s al so d ev el o ped a li n e-an d-stafi st ruc tur e A t du Po n t

, .
,

well b efo re 1 92 1 th e r esearch (Ch em i c al ) dep artmen t h ad its l i n e u n i ts

, ,

di vi si o n s in ch arge of l ab o r ato ri es h an dli n g res earch for th e m aj o r pr o d

u cts an d its s taff s ecti o n s w hi c h pr o v i d ed i n fo r m ati o n an d set st an d ard s
, , .

Ho w ard s D evelo p men t D ep ar tmen t at J er s ey Stan dard h ad m uch th e

’

sam e s truct ur e S o t o o d i d th e En gi n eer i n g Dep ar tm en ts at du Po n t

.
,

Jersey an d th e G en er al Mo to r s s ub si di ari es In ci den tally th e du Pon t

, .
,

E n gi n eeri n g Dep ar tm en t b efo r e 1 920 h ad a s taff u n it th at co n cen t r ated

wh o lly o n s tudyi n g o rgan i zati on pl an n i n g s y s tem s an d m eth o ds o f , ,

m an agemen t for u se in th e d esi gn i n g an d co n structi o n o f co m p an y o fiices

an d pl an ts .

In th e fi n an ci al d ep artm en ts of th e fo ur co m p an i es th er e w as l ess n eed

fo r m ak i n g a l i n e-an d-st aff d i sti n cti o n T h es e d ep artm en t s c arr i ed o n .

th ree b asi c ac ti v i ti es F i r s t th ey h an dl ed th e m ass o f r o u ti n e fi n an c i al

.
,

t r an sac ti o n s w i th i n all th e d ep ar t m en t s T h is i n cluded p aym en t o f .

sal ar i es an d w ages th e appr o v al an d p ay m en t o f v o uch er s f r ei gh t b i ll s

, , ,

an d o th er acco u n ts p ay abl e an d th e h an d li n g o f a cc o u n t s r ec ei v abl e

, .

S econ d th ey c arr i ed o u t th e exter n al fi n an ci al tr an s acti o n s o f th e co m

,

p an y as a wh o le B esi de tak i n g c are o f th e r o uti n e wo rk o f securi ty i ssu es

.
,
288 O R G A N I ZA TI ONA L I N N OVA T I O N

m ck transf ers p y
am en t o f divi den ds and mt er esg an d so fo rth fl h ey

ordin a tin g an d appr aisin g t h e w o rk o f oth er de pa rt ments an d the en ter

,

pr ise as a w h o l e .

Bef o re th e 1 92 0 5 o nl y th e du Pon t Co m pa n y dev elo p ed thi s thi rd ro le

,

fo r th ei r fi na n cial Ofi ms By th e tim e of Wo rld War I th e T reas urer s

’
.
,

m on ths f o recast s
’
o f pr ob a bl e fi nan cia l co n diti ons an d r evi sed th em each
m on th Th e De pa rt m en t l prov i ded cos t data on all th e co m pa n y s ’
. a so

t h e 1 9 215 5 th e fi nan cial dep ar tm en ts at t he h er th r ee

ot co m p an i e
s h elpe d

part o f th e cen t ra l an d v en
e of th e gen eral o m oe o rgan izati ons .

On e r ea son f or th e f air ly g en eral a do pnon o f th e l in e an d-sta fi

-
typ e

Hask ell r epo rt at du P on t in 1

9 9
1 an d Wal t er T eagl e s
’
co mm en ts t o th e

th e plan t o r b ran ch o fi ce th e loml m an ag er co uld not r easonably b e h el d

,

r es po n sible f or th e uni t s perf o rm an ce I n th at ca se a gr eat m an y m atters

’
.

alin e an d st af i disti n cti on di d r esu l t in cen traliza ti on o f decisi o n

- v
m a k in g .

By t h e I gao r eo r gani za ti on at S ear s th e de par t men tal ex ecuti v es , at h ea d

m ail —o rd er pla n ts A s a r esu lt Chi ca go cam e to mak e n early all t h e

.
,

adm in is tr ati v e d eci si ons S o too aft er 1 9 29 th e ex ecut i v es o f th e au xili ar y

.
, ,

o fi oes at t h e M erch an di se Depa rtm en t s h ea d ua rt ers h ad di r ect co n ta ct

’

q
w i th th eir co un terpar ts in th e o fi ces o f th e difi er en t M erchan disi n g

fi n all y set t ed l th e m ul tidivin o n a l uct ur e it also carri ed th e

'

on str , o ut

lin e an ds t afi con ce p t m o r e
-
th e an d th e
ex pli ci tly i n bo t h T erri to ri es
at
buyin g o rgan iz a tion .

T h e J ers ey expe ri en ce w as ev en m o re st ri ki n g fo r h er e th e accept ed ,

f o rm o f d epart m en tal o rga n i z ati o n w as th e co mm i tt ee o r gr o u p structu re .

Wh il e th e n ew d epa rtm en ts Pr o ducti o n an d Mari ne T ranspo rta ti on di d

, ,

dev el op lin e an d-staf f o rgan i za ti o ns th e Man uf acturi n g De pa rtm en t t e

-
,

ta in ed an d th e Do m est i c Sa l es w en t o v er t o th e in h eri t ed st ru ctur e Ev en .

th o u g h th e co m mi tt ee f o rm di ed o ut in th e Exp o rt T r ade De par tm en t

becau se co m p et en t ex ecut i v es i gn o r ed it by cr eatin g inf o rmall y clear ~ cut

THE A DA P T I V E RE SP O NSE 2 89

lin es o f co mm u n i cation an d auth o rity th e M an ufact ur i n g Co mmittee ,

r em ai n ed th e pro to typ e A n d it w as as h as b een str essed an extr em e

.
, ,

ex ample o f gr o up m an ag em en t o f d ep art men t al affai r s T h e pl an t m an .

ager s at J er sey d i d n o t h av e th ei r o ffi ces in th e fi eld b u t at 26 Br o adw ay .

Fro m h eadqu arter s th ey admi n i ster ed th ei r o w n r efi n er i es i n d i vi du ally

,

an d man aged co ll ecti v ely th e J er sey m an u f actur i n g a c ti v i ti es as a w h o l e .

Th e i n ev i table r esult as H o ward s 1 924 r ep o rt SO v iv idly dem o n strates

/
’

, ,

w as a co m pl ete c en tr ali zati on o f all ad mi n i str ati v e acti viti es at h ea d

qu arter s Th e slo w an d p ai nf ul sh if t fro m a co mm i ttee m an aged dep art
.
-

t
m en to o e n a d m i n i s ter ed th r o ug h a l i n e-an d-st aff o rg an i z ati o n w ith

i n di vi du al res po n si b i li ty at b oth dep ar tmen t an d pl an t l ev el s w as o n e o f

th e m o st si gn i fi c an t asp ects o f th e J er sey r eo rg an i z ati o n b etw een 1 925

an d 1 927 O n ly a n ew an d cl ear er cu t structur e m ad e p o ssi bl e th e d el eg a

.

ti o n o f au tho r ity an d r es p o n sib i lity fo r o p erati o n al d eci si o n s fr om 26

Bro adway to th e fi eld .

Th er e is a di ff er en ce it sh o uld b e r em em b er ed b etw een gr o up m an

, ,

agem en t an d c o n sul ti v e m an ag em en t A t du P o n t th e G en er al M o to r s
.
,

s ub si di ar i es an d S ear s a sin gl e i n d i vi du al an d n o t a co mmi ttee w as

, ,

r espo n sible fo r th e p erfo rm an ce o f a dep ar tm en t an d th e acti o n s t ak en

wi th i n it In m aki n g adm i ni str ati ve deci si on s th e dep ar tm en tal di r ecto r
.
, ,

m an ager o r v i c e-pr esi den t m et w ith th e o th er ex ecu ti v es at th e d ep ar t

,

m en tal h eadqu art er s r egul arly an d o ft en in qui te fo r m al com mi ttees o r

“
B o ard m eeti n gs He Oft en co n sulted pl an t sup er i n ten den ts o r br an ch
.

m an ager s fr o m th e fi eld B esi d e r egul ar sessi o n s w i th h is sen i o r ex ecuti v es

.
,

h e O ft en call ed m o r e i n clu si v e d ep ar tm en tal m eeti n g s t o exch an ge in

fo rm ati o n an d to ta lk o v er exi sti n g pr o bl em s an d n ew d ev elo p m en ts .

Th e r egul ar m eeti n gs o f sen ior ex ecu ti v es an d th e l arger d ep ar tm en t al

’

gath er i n g s pr o vi ded excell en t ch ann els o f comm u n i cati o n Bu t th e co m .

mi rtee at du Po n t at th e au to m o b il e c o m p an i es an d S ear s w as n o t
, ,

resp o n sible for actio n an d p erfo rm an ce Th e fi n al deci si o n an d r esp o n .

sib ility r ested w ith th e d ep ar tm en t h ead an d n o t o f a Ro om A S th e

“
.

H ask ell r epo rt at du Po n t str essed th e pri n ci ple o f i n di vi du al resp on

,
“

sib ility an d au th o r i ty for o p er ati o n al acti vi ti es h ad b een f u n d am en tal

to th e c o m p an y s su cc es s H er e du Po n t w as fo ll o w i n g th e a cc ep ted pr ae
’
.

t i ce
. A s o n e early wr i ter o n i n du s tr i al o rgan i z ati o n em p h asi z ed in
1 1 : Co mm i ttees are alw ay s o f an a d v is or
4 ”
9 3
“

y c h ar a c t er In ti m e J er sey.s ,
’

dep art men tal co mm i ttees al so b ec am e a dvi so ry .

O f co ur s e a ch an ge in stru ctur e d i d n o t n ecessar i ly m ean th at th e m o r e

,

ro uti n e day to d ay deci sio n s wo uld b e t ak en o v er by th e fi eld an d th at

-
,

th e d ep art men tal ex ecu ti v es c o uld th en c on c en tr ate m o r e o n o v er-all

co o rdi n ati o n appr ai sal an d pl an n i n g Th e p o i n t at wh i ch th e deci si o n s

, , .

were act u ally m ade dep en ded a great deal o n th e p er s o n ality an d tr ai n i n g

290 OR G A N I Z A T I O NA L I N N O V A T I O N

o f bo th th e ex ecu ti v es at h ea d q uart er s an d th e fi eld o ffi ce r s S till it seems .

,

saf e to co n clud e th at wi t h o u t a lin e-an d-st aff struct ur e d eci si o n m aki n g

t en d ed t o be co n cen tr at ed at h ea dqua rt er s n o m att er wh at w er e th e

perso n ali ti es of th e ex ecu ti v es in v o lv ed In an y ca se, th e experi en ce o f .

th e f o ur co m p an i es S tudi ed h er e mak es cl ea r th at exp an si o n ei th er by ,

buildin g o r o b tain in g co n tr o l of geo gr ap hi cally di sper sed uni ts cal l ed f o r a ,

clea r—cu t d efi ni ti o n o f th e l i n es o f a uth o ri t y an d co m m u ni ca ti on bet w een

th e d ep ar tm en t al h ea dquart er s an d its fi eld un i ts If th e r espo nsibl e ex ecu .

t i y es p ai d too li ttl e att en t i o n t o clari f yin g th es e r elat i on shi p s co n fuse d an d ,

in efi ci en t a dmi ni st r ati o n r es ul ted .

B u il din g 2126 Cen tr al Ofi ce

Wh er ev er th e d ep art m en tal h ea dquar ter s admi nister ed uni ts in th e fi eld ,

th e y in t ur n ,rpri se gr ew cam e t o be a dmi ni st er ed by a cen tr al

as th e en t e ,

o ffice Th e ex ecu ti v es in th e cen t r al o fii ce h ad a diff er en t set o f pr obl ems

.

an d a dif fer en t r an g e o f acti vi t i es th an th o se at d ep artm en tal h ea dquarter s .

Th e f o rm er h ad t o supe rvi se an d al lo cat e r eso ur ces t o sev er al busi n ess

f u n cti o ns n o t m er ely o n e In pl an n in g appr ai sin g an d coo rdi n atin g th e
, .
, ,

use o f th e en t erpri se s ex i stin g r eso ur ces an d in d et ermi n in g th ei r f ut ure

’

all oca ti on an d exp ans i o n th ese ex ecuti v es h ad t o be aw ar e o f th e im pa ct

o f ch an gi n g t ech n i q u es d em an ds fi n an ci al n eeds an d l eg al r equ i r em en t s

, ,

in m an ufa ct uri n g m ar k etin g t r an s po rt ati o n an d in th e pr o cur em en t

, , ,

an d o f ten pr o duct i o n o f raw semifin i sh ed m at er i al s o r p art s an d a cces

,

so t i es .

In th e m an uf actur i n g co m p an i es v ert i ca l i n t egr ati o n th e st r ategi c

, ,

pro gen i to r o f th e cen tr al omce r esulted i ni ti ally f r o m a comb inati on of

,

m ark etin g w i th m an uf a ct ur in g In th e 1 880 s th e o ri gin al S ta n da rd Oil

’
.
,

Co m p an y h ad begu n t o m o v e in to its o w n m ark et in g w ell bef o r e it

st a rt ed t o co n tr o l its o w n suppli es o f cru d e o il A f t er th e di sso l u ti o n in .

1 1 2 m ar k et i n g r em ain ed its se c o n d larg est a ct i vi ty aft er r efin i n g F o r

9 ,
.

th o se a u to m o b il e co m p ani es th at be ca m e p art o f G en er al M o t o r s t h e ,

b u il din g o f a m ar k etin g o rgani za ti o n w a s as es sen tial f o r th e fi r st gr ea t

gr o w th as w as th e en lar g em en t of th ei r as semb ly p lan ts T h e du Po n t .

Co m p an y in its m assi v e r eo rgan i za ti o n o f 1 902 an d 1 90 3 f o ll o w ed th e

ex ampl e o f t h e m o st e n erg eti c o f its pr ed eces so r s th e R ep a un o C h emi cal ,

Co m p an y an d cr ea ted its o w n sal es an d di str i b u ti n g o rgan i za ti on Th en

,
.

it n o lo n g er n eed ed t o r ely o n w h o l esal er s o r o th er o u ts i d e mi ddl em en .

S ea r s as a h i gh v o lum e r eta il er c o ul d n o t o f co ur se in t egr ate f o rw ard

-
, , ,

b u t it di d h elp fi n an ce m an uf act uri n g co m p an i es o r pur ch ase th ei r st oc k

in o rd er t o a ssu r e i tself o f a d eq uate suppli es .

F o r th e o th er th r ee co m p a n i es in tegr ati o n b ack w ard so o n f o ll o wed

,

t h e m arri ag e o f m an ufa ctu r in g an d m ar k etin g A s in t h e case o f S ears .

,
THE ADAP TIVE RESP O NSE 29 1

it w as s
e sen t a i l ly d efen si ve Th at is b ackward i n tegrati o n r esult ed fr o m
.
,

a d es ir e to h ave an ass ur ed st o ck o f s uppli es at a r ea s o n abl e pr i ce o n h an d

an d avai l abl e wh en ev er th e m an uf act ur i n g pl an t s n eed ed th em A t G en .

er al Mo to r s this s tr ategy led to th e purch ase o f p ar ts an d acc ess o r i es fi r m s ,

but n ot to th e co n tro l of steel alumi n um ti r e o r gl ass wo rk s A f ter 1 9 1 2

, , , .
,

a c o m p ar abl e s tr ategy br o ugh t th e n ew S tan d ard O il Com p an y (N ew

J er s ey ) i n to th e pro ducti on of crude o il an d m ar i n e tr an sp o rt ati o n A ft er .

its r eb i r th th e du Po n t Co mp an y purch ased n i tr at e so urc es in Ch il e T h en

,
.

with wartim e exp an sio n it dev elo p ed its o w n ch emi cals an d oth er s up
,

pli es Wh en d i ver sifi c ati o n fo llo w ed it fo u n d i n tegr ati o n al so n ecess ary

.
,
.

”
Th u s da Po n t purch as ed a l arge pl an t to m an uf actur e th e gr ay goo d s
“

b ase for its F abr ik o i d pro ducti o n an d at th e sam e ti m e m o ved fo rw ard

,

i t th
n o e m n h
ak i g o f fi n is ed pyr o xyli n
(C ellul o i d -t yp e
) pr o duc ts as a m o r e

certai n way to ass u re o u tlet s for its sh eets an d o th er sem ifi ni sh ed pyro xylin
materi al s F i n ally aft er co mpl eti n g th e m aj o r m o v e i n to ch em i cals it
.
, ,

purch as ed tw o l arge co m p an i es m ak in g b asi c ch emi cal pr o ducts in 1 928 ,

th e G r asselli C h em i c al Co an d in 1 30 th e R o ess l er 8c Hasslach er

9 .
,

C h emi c al Co .

O n ce r es o ur ces h ad b een acc um ul ated to p ermi t th e expl o i tati o n o f

th e n ati o n al m ark et th r o ugh its o w n d i str i bu ti n g an d sal es o u tl et s an d

to ass ur e i ts elf o f a f ai rly sur e s upply o f m ater i al s each o f th e fou r com ,

p an i cs studi ed h ere dev elo p ed o v er tim e a cen tral s tructur e to p erm it th e

, ,

eff ecti v e admi n is tr ati o n an d pr esum ably th e m o r e pr o fi tabl e em pl o ym en t

o f th o s e r es o urc es Wh eth er pl an n ed o r n o t th e n ew c en tr al o ffi c e ev en
.
,

tual ly d evel o p ed th r ee t yp es o f du ti es O n e cr i ti c al r o l e b ec am e th e co
.

o rd i n ati on an d i n t egr ati o n o f th e o u tpu t o f th e sev er al f u n c ti o n al d ep art

men ts to ch an gi n g mark et d em an d s n eed s an d tastes T hi s i n cluded th e

, , .

coo rdi n ati o n of pro duct fl o w fr om o n e f u n ct i o n al dep ar tmen t to an o th er ,

an ac ti v i ty w h o s e d ev el o p m en t is str i k i n gly i llu str ated in th e J er s ey

S tan d ard c as e It al so r equi r ed th e mai n ten an ce o f co o p er ati o n b etw een

.

th e m an uf ac t ur i n g s ales an d d ev elo p m en t o r en gi n eer i n g d ep ar tm en ts

, ,

r egardi n g th e impro v em en t o r r edesi gn of pro ducts S eco n d exp an si o n .

,

an d v erti c al i n tegr ati o n en co ur ag ed th e gr o w th o f auxi li ary o r s erv i c e

dep ar tmen ts in th e cen tr al office wh i ch co ul d r eli ev e th e adm i n i str ati v e

lo ad on the f u n cti o n al dep artm en ts by tak i n g o ver m o r e s p eci al i zed
acti v iti es
. F i n ally b esi des co o rdi n ati n g ac ti vi ti es wi th th e m ark et an d
,

pro vi di n g s p eci ali zed s ervi ces th e c en tral o ffice of co ur s e allo c ated th e
, , ,

fut ur e u se as well as appr ai sed th e pr esen t p erfo rm an c e o f th e r eso urc es

o f th e en t erpr is e .

T h e cen tr al office ac ti vi ti es th at ti ed th e w o rk o f th e fu n cti o n al d ep ar t

men ts to t h e ch an gi n g m ark et u su ally cam e ab o u t o n ly after a slo wi n g
o f m ark et d em an d T h en in th ese f o ur co m p an i es th e cl ear n eed to
.
, ,
292 ORG A N I ZA TIO NA L I NNOVA TI O N

coo rdi nate th e l ev el o f d ep art m en tal wo rk an d th e r ate o f product fl ow

th r o ugh th e dep art men t s t o m ark et r equir em en ts led t o th e ba sin g o f

n ear ly all o pe r ati o n al d ecisi o n s o n estimates an d f o r ecast s o f an ti ci pa ted

co n di ti o n s r ath er th an o n p ast o r ev en curr en t perf o rman ce Th e m o r e .

a ccur at ely d em an d co ul d b e f o r ecast th e m o r e ev enly th e H

, ow co ul d be

ch an n el ed Bef o r e 1 920 h o w ev er n on e of th ese co mp an i es excep t da Po n t

.
, ,

h a d begu n t o co rr elate pr o duct i on an d purch as in g sch edul es sy stema ti call y

w i th an ti ci p ated mar k et d em an ds an d un til 1 92 1 du P on t w as stil l feel in g
,

its w ay By t h e en d o f th e Wo rld War I its maj o r d ep art ments — S al es

.
, ,

f o r eca sts f sal es f or th ei r pr o duct i on an d v o lum e sch ed ul es A s l o n g

o .

as th e com p an y h an dl ed o nl y o n e l i n e, expl o si v es , th e d epa rtm en tal

ex ecu ti v es ha d l i ttl e t r o ubl e in co rr ela ti n g th ese difi eren t estimates O n ce .

th e thr ee d ep art m en ts h ad t o est ima te f or n ew i n du st ri es in wh i ch th ey

h ad l itt l e exp eri en ce, f or wh i ch da ta h ad n ev er been eff ecti v ely co ll ected,

an d wh ose ch a r a ct eri sti cs w e re v er y diff er en t fr o m th o se o f exp l osi v es,

th en co rr el ati on o f d ep art m en tal in f o rm a ti o n b ecam e ex tr em ely difficul t .

A t G e n er al M ot or s littl e atten ti o n h ad been p ai d to th e coo rdi n ati on o f

,

pr o du ct How un til th e sh arp po st war depr essi on t em po rarily pun ctur ed

th e s wif tly gr o win g au to m ob il e m ark et In th e sam e y ea r, S ear s al so
.

l ear n ed th e v al u e o f o v er a ll in v en t ory co n tr o l A t J er sey, it w as th e rap i d

.

l ev elin g o ff o f dem an d f or g aso lin e in th e s u mm er o f 1 925 th at demo n

str ated th e n eed t o impr o v e t ech ni qu es t o in tegr ate pr od uct flo w A t J er se y .

an d al so at G en er al M oto r s, th e r ealiz ati on o f t h ese n eed s w as a si gn i fi can t

stim ulus f or th e maj o r o rgan i za ti on al ch an ges tha t r e-fo rm ed th e cen tral

o ffice stru ctu r e as w el l as set up a g en er al o fii ce .

Th er e w as an o th er situa ti o n th at cal l ed f or ca r ef ul estim ates o f m ark et

d em an d Th e c en tr al o ffice p arti cul a rly r equir ed un ifo rm , a ccur ate, and
.

m ean in gful da ta o n co sts i n all th e d ep artm en ts if it was t o car ry

o u t eff ect i v ely o v er -all plannin g an d appr ai sal Whil e w o rk in g o ut
.

t echni qu es f o r all oca tin g o v er h ea d co st s an d d eterm in in g v ariabl e ex

s h c m p y s cu i v s r c gn i z ed th at v ari abl e co st s, an d
’

p en es
, t e o an e x e t es oon e o

th er ef o r e un i t co st s w er e cl o sely r el ated t o v o lum e A n y r el iabl e oost

,
.

an aly si s pri cin g

, o r es tim ati n g o f pr o fi ts h ad t o b e b ase d o n a ccur at e
,

f o r eca sts o f d em an d Th e supplyin g o f su ch da ta w as vi ta l t o th e effi ci en t

.

a dmini str ati on o f th es e la rg , v ert i ca lly in tegr ated in dust r i al en t erpri ses
e .

Th ese f o ur co m p ani es in i ti ally p ai d m o r e att en ti o n t o brin gi n g t o g eth er

th e diff er en t d ep artm en ts — i n o rd er to impr o v e pr o duct s t o al ter th ei r,

d esig n o r to dev elo p n ew o n es in th e fa ce o f ch an gin g m ark et tast es

,

an d n eeds — th an th ey di d to coo r di n a tin g pr o duct H ow A t du Po n t

.
,

th e maj o r r espo nsi b il i ty f o r th is tas k bel o n g ed at fi r st t o th e T ech ni ca l

Di vi si o n of th e S al es De partm en t A t J er se y H o war d s D ev el op m en t De
’
.
,
THE A DA P T I V E RE SP O N SE 293

p artmen t b egan t ake o ver this ro le in th e 1 920 s A t G en eral Mo to r s little

to
’
.
,

was do n e to coo rd i n ate desi g n man u factur i n g an d mark eti n g u n ti l th e

, ,

1 92 1 reo rgan i z ati o n m ad e suc h co o rd i n ati o n o n e o f th e i m p o r tan t duti es

o f th e i n terd i v i si o n al co m mi ttees F i n ally at S ear s th is typ e o f co o rd i n a

.
, ,

ti o n i n iti ally o n e o f th e m o s t si gn ifi c an t fu n ctio n s th at th e buyer s p er

,

fo rmed b egan after 1 929 to b e tak en o ver i n cr easi n gly by i h e s taff o f

,

th e Merch an di se D ep ar tm en t an d th en fo r th e r etai l sto r es by th e d i st r i ct

, , ,

o r r egi on al ad mi n i str ati v e o ffices In all fo ur co m p an i es th e n eed to

.
,

rel ate all acti viti es to m ark et chan ges bro ugh t i n creasi n gly i n ten si ve
studi es o f pres en t an d an ti ci p ated d em an d fo r existi n g an d p otenti al
pro ducts .

Fi n ally th e execu ti ves at all fo ur co m p an i es c ame to reali ze s o me

, ,

mo r e s lo wly th an o th er s th at s y s tem ati c p o li cy fo rm ul ati o n an d all o c a

,

tio n o f reso urces c alled fo r carefully d efi n ed budgeti n g an d cap ital appro

riation s pr o cedures T h is pl an n i n g al s o r equ i r ed i n fo r m ati o n on f u t ur e
p .

fi n an ci al an d gen er al econ o mi c co n d iti o n s as w ell as o n an ti ci p at ed

mark et dem an d S uch d at a co llect ed by th e du Po n t T reasur er s D ep art
’
.
,

m en t by Wo rld War I c am e to b e co m p i led by th e fi n an c i al secti o n s of

,

b o th th e d i vi sio n al an d gen er al offices at G en er al Moto r s after th e 1 92 1

reo rg an i z ati o n at J er s ey by th e Budget an d Co o rd i n ati on D ep ar tm en t s
,

af ter 1 925 an d at S ear s dur i n g th e 1 20 s by th e sto r es an d by buy er s in th e

’

, 9
Merch an d is e Dep ar tmen t an d th en after 1 935 by a staff u n it in th e
,

Merch an di se Dep artmen t Th u s in all fo ur of th es e com p an i es an d

.
, ,

cert ai n ly al so in a gr eat m an y o th er A meri c an i n du stri al en terpr i ses ,

t acti cal an d str ategi c d ecisio n s an d o p er atio n al an d en trepren euri al

ac ti v i ti es c am e t o b e b ased on d at a d eal i n g w i th an ti c i p ated m ark et an d

eco n o m i c co n d i ti o n s as w ell as th o se co n cer n ed w i th p ast an d curr en t

p erfo rm an ce Th e develo pm en t o f i n cr easi n gly accur ate an d pr eci se

.

i nfo rm ati o n fo r th e u se o f th e s en i o r executi ves in pl an n i n g co o rdi n ati n g , ,

an d appr ai si n g th e ac ti v i ti es o f an en terpr i se as a w h o l e w as a m aj o r

ach i ev em en t o f th e A m er i can o rg an i z ati o n bu i ld er s .

Even b efo r e th es e l arge m ul ti fu n cti on en terpr i ses b egan to bu i ld o ffices

an d tech n i qu es for co o rd i n ati n g th e u se o f t h ei r pl an t fac i l i ti es an d , ,

p er s o n n el to th e ch an gi n g m ark et th ey started to fo rm auxi li ary o r

,

s ervi ce dep artm en ts to tak e o ver sp eci al i zed acti vi ties In th e m an ufac .

t ur i n g co m p an i es m an y o f th e n ew c en t r al staff o ffi ces h ad th ei r b egi n

,

n in s in th e m an u fact ur i n g d ep ar tm en t S ear s R o ebuck o n th e o th er

g .
, ,

h an d h ad n o sep arate cen tral o ffice auxi l i ary u n its u n ti l 1 929 wh en

, ,

L essi n g Ro sen w ald set up an o ffic e co mb i n i n g publ i c r el ati o n s p er so n n el , ,

an d t h e an aly si s o f d ep ar tmen t al r ep o r t s an d pr o p o sal s an d G en er al ,

Wo o d too k Westerv elt s testi n g s tan d ard s an d research dep artmen t o u t

’

, ,

o f th e Merch an d is e D ep ar tmen t .
294 ORG A NI ZA TIONA L I N NO VA TI O N

A t du Fon t an d J er sey an d xto so m e e t en t a

pp ar en tly at Bui ck C adi ll ac , ,

an d th e o th er G en er al M o to r s sub si di ar i es th e r es earch en gi n eer in g

, , ,

p er sonn el dep art men t s an d th e dep artmen t purch asi n g suppli es an d

,

equi p m en t (b u t n o t b asi c m ater i al s w er e all at fi r st admi ni str ati vely

)
clo se to m an uf actur i n g Th ei r wo rk soo n b ecam e v alu abl e fo r th e o th er
.

dep artmen ts P urch asi n g co uld buy fo r di stri ct offices as well as fo r pl an ts

. .

En gi n eer i n g co uld d esi gn w ar eh o u ses an d l ab o rato r i es as w ell as f act o r i es .

L ab o r r el ati o n s pr o gr am s w elf ar e pl an s m ed i cal assi stan c e an d o th er

, , ,

acti v i ti es o f th e p er son n el o ffic e c o uld b e c arr i ed o u t f o r w ag e ear n er s in

all d ep ar tm en t s T h e gr o wth o f th es e n ew er auxi l i ary d ep artm en t s r ai sed

.

th e qu esti o n o f th ei r r el ati on to th e m a o r f u n cti o n al o n es O n e ear ly

j .

an sw er at b o th du Pon t an d J er sey w as to r et ur n th e cen tr al o ffice s erv i c e

dep artmen ts to th e co n tro l of th e m an ufactur i n g dep artmen t Th is is .

wh at th e Hask ell Commi tt ee pr o po sed at du Po u r in 1 9 1 9 an d th e M an u

facturin g Co mm i ttee at J er sey in 1 926 In b o th ca s es h o wev er th e u n i ts
.
, ,

r em ai n ed in th e cen tr al office an d th ei r r el ati on to th e o th er m aj o r

,

dep artm en ts b ec ame expli citly defin ed as a staff o r advi so ry o n e Th eir .

ex ecu ti v es c o uld r eco m m en d advi se an d suggest bu t th e actu al execu ti o n

, , ,

o f th ei r i d eas w as t o b e carr i ed o u t o n o rd er s fr o m th e h ead s o f th e

fu n c ti o n al d ep ar tmen ts or th ei r li n e assi stan ts Un less th e li n es o f au th o r ity

.

an d c o mm u n i cati on w er e d efi n ed in th i s w ay th e n ew c en t r al o ffi ce un i ts ,

co uld easi ly tak e o v er much o f th e wo rk o f th e o p er ati n g dep artmen ts an d

so i n cr ease t h e c o n cen tr ati o n o f r esp o n si b i l i ty an d d eci si o n m ak i n g in

th e cen tr al o ffi c e S o m e au xi li ary d ep ar tm en ts o f co ur s e h ad li n e du ti es
.
, ,

o f th ei r o w n .R esearch d ev el o p ed n ew pr o ducts or b etter pr o cesses ; em

in eerin c n structed n ew f aci li ti es o r im pr o v ed exi sti n g equi p m en t ;
g g o

wh i le p er so n n el wo rk ed o u t pr o m o ti o n p o li ci es tech ni qu es fo r evalu ati n g ,

p erfo rm an ce a n d so fo rth But wh en th es e u n i ts were wo rki n g with on e

,
.

o f th e m aj o r f u n c ti o n al li n e d ep ar tmen ts th ey d i d so at its r equ est or at

,

l east wi th its appro v al .

E ven m o r e cri ti c al fo r th e pr esen t h eal th o f th e en terpr i se an d its f utur e

gro wth th an th e creati on o f cen tr al staff o ffices w as th e cl ar i fi cati o n o f
th e du ti es o f th e sen i o r ex ecu ti v es Th ey h ad to b e en c o ur aged to con
.

cen trate o n en trepr en euri al r ath er th an o p er ati on al acti vites A t du Po n t .

,

t h e d i sti n c ti o n b etw een th ese tw o typ es o f ad mi n i str ati v e acti v i ti es cam e

after th e 1 02 1 0 — r rg an i za ti o n T h en th e r eb o r n expl o si v es co m p an y
9 9 3 eo .

m ad e th e d i sti n c ti o n o ri gi n ally i n tro duc ed by th e Pen n sylvan i a R ai lr o ad

, ,

by wh i ch th e vi c e-presi den t in ch arge o f a d ep artm en t sh o uld co n cen tr ate

o n br o ad , l o n g-term pl an n i n g appr ai sal an d co o rdi n ati o n wh i le th e
, , ,

d ep artmen t s di r ecto r sh o uld h an dl e th e m o re r egul ar an d ro u ti n e activ

’

i ti es n ecessary to k eep it ru n n i n g sm oo th ly T h e vi ce—pr esi d en t h o wever .

, ,

w as h eld r espo nsi bl e fo r th e fi n al r esul ts Pi erre du Po n t m ad e it cry stal

.
T HE A DA P T I V E R E SP O N SE 295

clear th at h is Execu ti ve Co mmi ttee sh o uld n o t b eco m e di r ec tly i n vo lv ed

in d ep artm en tal d ecisi o n m ak i n g Its m em b er s c o uld a dvi se d ep ar tm en t
.

h ead s as l on g as th e adv i c e w as co n st ructi v e T h e Co mmi ttee all o c ated

,
.

fu n d s an d p er so nn el an d c o uld r em o v e d ep ar tmen t h eads b u t it w as n o t ,

to tak e an a c ti v e p ar t in th e admi n i str ati v e duti es o f th e d ep ar tm en t al

h eadqu art er s Y et Pi err e s w ar n i n g o ften w en t u n h eeded an d th e Ex ecu

’
.

ti v e C o mm i ttee d i d b eco m e i n v o lv ed in o p er ati n g du ti es al th o ugh n o t ,

in an y w ay to th e ex ten t th at J er s ey S tan d ard s Ex ecu ti v e Co mmi ttee d i d

’
.

A t J er sey a co m p ar abl e struc tur e d ev el o p ed o n ly o v er ti m e A l th o ugh

,
.

th e J er sey B o ard i n clud ed in 1 9 1 2 a n um b er o f ex ecu ti v es w i th br o ad

exper i en c e in th e succeed i n g y ear s n ear ly all its n ew m em b er s c am e f r o m

,

th e f un cti o n al d ep artm en ts Each b ec am e i n d i v i du ally a D i r ecto r sp ecifi c

.

a lly in c h arg e o f th e ad mi n i str ati o n o f th e d ep ar tm en t h an dli n g h is

spec i al t y Co ll ec ti v ely as th e B o ard th ey d eterm i n ed o v er-all p o li cy an d

.
, ,

appr ai sed th e a cti v iti es o f th e c o m p an y as a w h o l e T h ei r task s th u s .

b ecame si mi l ar to th o se o f V i ce—Pr esi d en ts at du Po n t H o wev er T eagl e .

,

an d h is c o ll eagu es n ev er cl early d i ff er en ti at ed b et w een en tr epr en eu r i al an d

o p er ati o n al a c ti v iti es In th e ad mi n i st r ati o n o f pr o ducti o n

. fo r ex am ple , ,

S adl er w as as m uch i n v o lv ed in day-to —day adm i n i str ati o n as h e w as in

lo n g-t er m pl an n i n g In M an ufact uri n g th er e w er e tw o D i r ecto r s in
.
,

ch arge an d as each w o rk ed th ro ugh th e M an uf acturi n g Co mm i ttee th e

, ,

duti es of th e s ev er al sen i o r ex ecu ti ves an d th e l i n es o f auth or i ty b etw een

th e D i r ecto r at e an d th e d ep artm en t w er e an y th i n g b u t cl ear In D o m esti c .

M ark eti n g m u ch th e sam e si tu ati o n dev elo p ed O n ly in F o r ei gn M ark et

, .

in g w as th e di sti n cti on b et w een th e d ep ar tmen t h ead s an d th e D i r ecto r

in ch arge clearly dr aw n an d th e li n es b etw een th e c en tr al o ffi c e t h e ,

dep art men t h eadqu art er s an d th e fi eld u n i ts c ar efu lly d efi n ed

, .

A t S ear s th e p atter n w as cl o ser to du Po n t Bu t si n c e th er e w er e f ew er

, .

dep artm en ts an d u n til th e m o v e i n to r etai li n g few er str ategi c d eci si o n s

, , ,

th e r el ati o n sh i p b et w een th e v ar i o u s s en i o r o ffic er s r em ai n ed on a m o r e

i nfo rm al b asi s wi th Ro s en w ald th en Lo eb an d fi n ally Wo o d m ak i n g

, , ,

th e m aj o r d ec i si o n s in con sul tati o n w i th th e d ep ar tm en t h ea d s Wal ter .

Chr y s l er at Bu i ck an d th e h ead s o f th e o th er au to m o b il e sub si d i ar i es at

G en er al Mo to r s m ad e th ei r d ec i si o n s in m uch th e sam e w ay as L o eb
an d Wo o d after i n f o rm al c o n t act w i th th ei r sub o rd i n at es In th ese n ew
, .

an d r ap i dly exp an di n g au to m o ti v e en terpr i ses th e Pr esi d en t o r G en er al

,

Man ager ten ded to b ecom e i n vo lv ed in d etai l ed o p er ati n g duti es .

T h i s ten d en cy w as in f ac t a b asi c w eak n ess o f th e c en tr al o ffic e

, ,

structur e d ev elo p ed in th es e s ev er al en terpr i ses Ex ecuti ves r esp o n sibl e fo r .

o ver -all pl an n i n g co o rdin atio n an d appr ai sal b ecam e in cr easin gly em

, ,

mesh ed in o p er ati o n al acti viti es T h ey h ad n ei th er th e ti m e th e i n f o rm a

.
,

ti o n n o r th e i n cli n ation n ecessary to sti ck to en tr epren eur i al an d str ategi c

,
29 6 O RG A N I Z A T I O N A L I N N O VA T I O N

deci si on m ak in g Th e detai l s Of th e d ep art men tal acti viti es for whi ch

.

they w ere respo n sible h ad pr i o r i ty o ver wh at Oft en seem ed v agu e lo n g

term pl ann in g an d appr ai sal M o r eo v er ea ch w as a sp eci ali st r ath er th an
.
,

a g en er al i st N o r m ally h is wh o l e bu si n es s ca r eer h ad b een in o n e fu n c

.
,

tio n al fi eld T h u s h e h ad pr o fessi on al pr i de as w ell as in sti tu ti o n al resp o n

.

sib ility in kn o w i n g j u st h o w h is sp ec i al ty w as b ei n g carr i ed o n th r o ugh

o u t th e c o m p an y He mi gh t b eco m e i n vo lved in su ch ques ti o n s as to

.

wh at diff er en t types Of r efini n g m achi n ery w er e to b e sen t to Br itai n o r

h o w to set up a br an ch Offic e in Pi ttsbur gh Wo r se yet j us t b eca us e .
,

ea ch such s en i o r o fiicer v i ew ed th e co m p an y s pr o bl em s fr om th e po in t
’

o f v i ew o f a sin gl e f un cti o n h e t en d ed to r eflect in appr ai sin g pl an n in g

, , , ,

an d c oo rdi n at in g th e a c ti v iti es O f th e en terpr i se as a w h o l e th e o u tl oo k ,

o f o n e of th e p art s .

S in c e th es e m ul tif un cti o n en terpr i ses w er e m an aged by m en trai n ed to

h an dl e sin gl e f un c ti on uni ts th e fi n al d etermi n ati on o f po li cy ten d ed to
-
,

b e a r esu l t o f n ego ti ati o n s b etw een in ter es ted p arti es r ath er t h an O f an ,

un der stan di n g o r an awar en ess o f o r ev en co n si der ati on Of th e bes t

in terests Of th e co rp o r ati o n as a wh o le Th i s w as p art i cul arly true wh en
.

th e d eci si on s in v o lv ed m aj o r all o cati o n Of f u n d s an d O th er r es o urces .

S uch p oli cy m aki n g by n ego ti ati n g seems to h av e an Obvi o u s p ar all el in

th e m ak i n g O f mili tary an d di pl o m ati c d ec i si o n s in Wash in gton sin ce

Wo rld War II .

M an agem en t by dep art men t h eads al so h am p er ed so un d apprai sal an d

th e t aki n g O f ex ecu ti v e acti o n b ased on th at appr ai sal Fl etch er Br o wn .

m ade th i s p o i n t fo rcibly wh en h e d escr i b ed th e weak n ess o f th e du Po n t

Ex ecu ti v e Co mmi ttee in 1 92 1 :

Th e C o mm ittee m em ber at t Dep artmen t is m o reo ver

h e h ea d Of an y on e

in no ositi o n to in v es ti at e o r criticiz e th e w o rk O f an o th er D ep ar tmen t

p g .

It h as n ev er b een f oun d r acti cab le f o r th i s C o mm itt ee to d iscu ss an d con tro l

p
r
th e co n du ct O f aff ai s o f an y o n e D ep a rtm en t F u rt h erm o r e it is u n r ea son
.

ab le to exp ect th a t a m aj o rity O f th e m em b er s w il l b e able to su b j ect th eir

o w n D e artm en ts to su ch self—ex am in atio n an d criticism so th at th e C o m

p
y w h l w ill r t ffi i tl y T h O us D e artm en ts O f th e
p an a s a o e o
p e a e e c en e v arI p .

C o m p an y lack an adequ ate directin g an d co o rdin atin g f o rce at th e presen t

tim e, w ith o u t w h ich su ccess is imp o ssib l e .

T o m ak e m atter s wo rse O bj ecti ve d ata o n dep ar tmen tal perfo rm an ce

,

pro ved h ard to d evi se if o n ly b ec au se pro fi t an d lo ss in o n e acti vity

,

d ep en ded so m uch o n th e wo rk acco mpli sh ed in an o th er Mo r eo ver th e .

,

i nfo rm ati on o n wh i ch b o th appr ai sal an d pl an n i n g h ad to b e b ased

cam e l arg ely f ro m th e d ep ar tm en ts i n v o lv ed A dmi n i str ati v e d eci si o n s .
T HE A DA P T I V E R E SP O N S E 297

f
O ten e ov lved fro m th e gi ve an d tak e O f b i ased in di vi du al s u si n g b i ased
d ata A t du Po n t th e T r eas ur er s Departmen t b egan to prov i de well b efo r e
.
,
’

Wo rld War I s o mewh at Obj ecti ve an d b al an ced i n fo rm atio n wh i ch

,

co uld act as a ch eck o n dep artmen tal d at a A t S ear s G en er al Mo to r s .

, ,

an d Jer sey th e ex ecu ti v es b eg an dur i n g th e 1 920 s to get si m i l arly i

’

pro ved data fro m th ei r fi n an ci al dep artm en ts T h o se at J er sey di d SO .

o n ly after th e fo r m ati o n o f th e Budg et an d Co o rd i n ati o n C o mm itt ees in

1 925 .

The l ack O f time O f i n fo rm ati o n an d O f p sych o lo gi cal co mm itmefft to

, ,

an o v er-all en t r epr en eur i al v i ewp o i n t w er e n o t n ec essar i ly ser i o u s h an d i

c ap s if th e co mp an y s b asi c acti v iti es r em ai n ed stable th at is if its so urc es

’
, ,

O f raw m ater i al s an d s upp li es its m an u fac t ur i n g t ech n o l o gy its m ark et s

, , ,

an d th e n at ur e O f its pr o duc ts an d pr o duc t l i n es st ay ed r el ati v ely u n

ch an ged Bu t wh en f ur ther exp an sio n i n to n ew f u n ct io n s i n to n ew geo

.
,

graph i cal areas o r i n to n ew pro duct l i n es greatly i n creased all typ es Of

,

ad m i n i str ati v e d ec i si o n s t h en th e ex ecu ti v es in t h e c en tr al O ffice b ec am e

,

o v erw o rk ed an d th ei r a d m i n i str ati v e p erfo r m an c e l ess effic i en t T h ese in .

cr easi n g pres sures in tur n created th e n eed for th e bu i ld i n g o r ado p ti o n Of

, ,

th e m ul ti d i v i si o n al st ructur e w i th it s g en er al o ffic e an d au t on o m o u s o p er at

in g d i v isi o n s .

P r i o r to th e r9ao s th e cl o sest appro x i m ati o n to th is n ew typ e o f s tru e

’

tur e o ccurr ed in th e l arge h o ld i n g c o m p an y t h at r em ai n ed ad mi n i st r a

tively w h o lly o r p ar ti ally a f ed er ati o n T h e sm all to p ex ecu ti v e o fiices in

.
,

such en terpr is es h ad n o t yet h o w ev er devi sed th e faci li ti es devel o p ed

, , ,

th e i n fo rm ati o n o r cl early d efi n ed t h e ch an n el s o f c o mm u n i c ati o n a n d

,

au th o r i ty n ec essary fo r effec ti v e l arge—sc al e ad m i n i str ati o n G en er al MO .

to r s u n der Wi l li am C D ur an t v i vi dly i llu str ates th e adm i n i str ati ve weak

.

n es ses O f an en t erpr i se th at w h i l e l eg ally c o n so l i d at ed r em ai n ed ad m i n

, ,

istratively a d ecen t r ali zed fed er atio n .

D ur an t s O ffice m ad e li ttl e effo rt to explo it th e m an ag er i al eco n o m i es

’

O f sc al e by p as si n g ar o u n d i n fo r m ati o n i d eas an d a dv i c e It d ev el o p ed , , .

wi th i n th e o rgan i z atio n n o m ean s o f co o rd i n ati n g pro duct flo w w ith

m ark et d em an d o r o f assi sti n g th e sub si d i ar i es in c arryi n g o u t t h is f u n c
tio n mo re eff ecti vely by th em selves D ur an t f ai led to wo rk up w ays o f .

appr ai si n g a curat ely th e p er fo r m an c e o f h is d i ff er en t o p er ati n g u n i ts

c
o r ev en o f th e en terpr i se as a w h o l e He g av e l i ttle c ar ef ul an d rati o n al
.

atten ti o n to th e a llo cati o n O f f u n d s fo r c ap i tal or da to da p r ti ng - -

y y o e a

exp en ses In h is Ex ecu ti v e C o mm i ttee th e i n t er ested p ar ti es — th e d i v

.
,

si o n m an ag er s — n ego ti ated fo r f u n d s by pu tti n g th e n eed s O f th ei r sep a

rate di v i sio n s ah ead O f th o se o f G en er al Mo to r s as a wh o le .

D ur an t an d th e m em b er s O f h is Ex ecu ti v e Co m m i ttee were n ev er r eally

 O R G A N I ZA TIONA L I N N O VA T I O N

r d by this la ck o f a r ati onal o r sy st em ati c appr o a ch to poli cy

co n ce n e

f o rm ul ati o n o r t o th e efi ectiv e m ob iliz a ti o n Of th e exist in g r eso ur ces Of

t h e gr ea t en ter prise Th e cr eat o r Of G en er al M ot o r s p ut h is en tir e fai th
.

in th e gr ea t po t en tial d em an d f o r th e m edi um p ri ced aut om ob i l e G i v en -

.

en o ugh d eal er s p lan ts an d par ts an d a ccessor y fi ri ns h e w as con fi den t

, , ,

th at h e co ul d sell all th e car s h e m i gh t ass emb l e S uch a san gui n e vi ew .

m ad e co st acco u n tin g f o r ecasti n g sc h e dul in g in v en to ry co n tro l an d

, , , ,

bu dg etin g ap p ear as un n ecess ary r efin em en ts in th e bo omi n g aut om ob i le

busin ess Of th e day His wh o l e con cer n w as to accumul ate th e r eso ur ces
.

n ecessa ry t o m eet th e cu rr en t d em an d .

S to rr ow an d his b an k in g associ ates be tw een I 9 I I an d 1 9 1 5 m ad e an , ,

ab o rt iv e at em p t t o cr eat e a gen er al O fi ce t o a dmi ni st er t h ei r y o un g b ut

t
,

alr ea dy h ug e aut om ob i l e em p i r e Th ey w er e f ar m o r e con cern ed th an

, .

Du r an t w i th th e pr ofi tabl e u se of exi stin g r eso ur ces th an wi th th e a ddi

ti on o f n ew on es Th ei r efi o rts to bu i ld offi ces f o r pr o vi di n g u nif o rm
.
,

cen tr ali zed purch as in g an d ev en t ech n o l o i cal a dv i ce w as as amb it i o us

g
an d as w ell p lan n ed as in an u ch co m p y f th at da B u t th ey di d n ot
y s an O y .

n or d ev el o p w ay s o dv an t ag e of th e econ omi es Of size

f k in g
ta an y a .

N o r di d S torr o w s com p an y appear t o h av e h ad effecti v e co mm un i ca ti on

’

w i th an d a dmin i s tr ati v e co n tr o l o v er th e su b si dia ri es Th e o per atin g un its .

co n tin u ed t o m ak e th ei r pr o duct s an d to spen d f u n ds wi th li ttl e o v er

si gh t f r om h ea dqua rt er s N or w as J er sey S tan dar d ab l e t o d evise bef o r e

.
,

m uc h b etter lin es o f a u th o r i t y an d co mm un i cati on b et w een its

9 5
1 2 ,

p ar en t o ffi ce an d its au to n om o u s in tegr ated affil iates li k e Lo ui sian a ,

Im peri al H umb l e G ilb ert 81 B ark er an d th e n at ur al gas co m p ani es

, , , .

B ecau se o f this i n ab ili ty of f eder at ed en terpris es to a chi ev e efi ecti v e

adm i ni str ati o n m an y fi rms th at be g an as such comb in ati o ns qui ckly
,

co n so li dat ed th ei r acti vi ti es i n to f un cti o n ally d ep artm en tali z ed cen tr alize d ,

O pe r atin g stru ct u r es C ert ainl y o n e m aj o r cause f or th e r eo rg an i z ati on o f

.

th e du P o n t Co m p an y in 1 902 an d 1 903 w as th e a dmi ni st r ati v e in efi ectiv e

n ess o f a co m p ar abl e co m b i n ati on O nl y th r o ugh cen tr ali z e d co n tr o l di d

.

th e effi ci en t u se o f t o t al r eso ur ces Of t h e en t erprise appear p os si bl e .

Bo th th e cen tr al i z ed co nso li da ted an d t h e o v er decen tr al ize d f ed er ated

o rg an i z at i ons h ad i n h er en t w eakn esses f o r th e admi nis tr a ti o n O f gr ea t

in du st ri al en terp ri ses Wh er e th e top m an ager s in th e f o rm er f o un d th em

.

sel v es in v o l v ed t oo m u ch in o p er atin g a cti v i ti es th o se i n th e la tter w er e ,

too li tt l e aw ar e o f w h at th ei r sub si di ari es w er e d o in g Th us in bo th t yp es .

,

t h e seni o r o fi cer s w er e h an di capped i n carr y i n g o u t th eir b asi c f un cti o n s

O f coo rdin ati o n appr ai sal

, an d p o li cy m akin g A s th eir busi n esses gr ew
,
.

m o r e co m pl ex an d di v er sifi ed a f ew o f th ese ex ecu ti v es b ecam e aw are O f

,

th ese d ef ects .
T HE CREA TIVE I N NO VA T I O N

T HE CREA TIVE INNO VA TI O N

Th e bui ldi n g o f th e i n iti al struct ures w as sign i fi can t in its elf In th e fo ur .

cases descr i b ed h er e an ex ami n ati o n Of th e adap ti ve r esp o n se to n ew

,

a dm i n i st r ati ve n eed s al so pr o v i d es es sen ti al b ackgro u n d f o r an a n aly sis

o f th e f s i on i g O f a n ew s truc tur
a h n e — O f th e truly cr eati v e r esp o n se .

Th e i n h er en t weak n ess in th e cen tr al i zed f u n cti o n ally d ep ar tm en tal i zed

,

o p er ati n g c o m p an y an d in th e l oo s ely h eld d ec en tr al i z ed h o ld i n g co m

,

p an y b ec am e cri ti c al o n ly wh en th e adm i n i str ati ve l o ad o n th e sen i o r

ex ecu ti v e O ffic er s i n cr eased to suc h an ex ten t th at th ey w er e u n abl e t o

h an dl e th ei r en trepren euri al res p o n si b i l iti es effi c i en tly T h is si tu ati o n ar o se

.

wh en th e o p er ati on s of th e en terpr i se b ecam e to o co mplex an d th e pro b

lem s o f co o rdi n atio n appr ai sal an d p o l i cy fo rm ul ati o n too i n tr i cate fo r
, ,

a sm all n u m b er o f to ffic er s to h an dl e b o th l o g ru n en t r epr en eur i al

-
p o n , ,

an d sh o r t-ru n , o p er ati o n al ad m i n is tr ati v e a c ti v i ti es T o m eet th ese n ew

.

n eed s th e i n n o v ato r s bu i l t th e m ul ti d i v i si o n al st ructur e w i th a g en er al

,

O ffi c e wh o s e ex ecu ti v es w o uld co n c en tr at e o n en t r epr en eur i al a c ti v i ti es an d

with auto n o mo u s fai rly s elf—co n tai n ed op erati n g di visio n s wh o se m an

,

ager s wo uld h an dl e o p er ati o n al o n es .

Com pl ex ity in it self it sho uld b e em ph asi z ed d i d n o t ass ur e i n n o v ati on

, ,

o r ch an ge ; s om e r es p o n si bl e ad mi n ist r ato r h ad to b eco m e aw ar e O f th e

n ew co n d iti on s Fur th er m o r e aw ar en ess h ad to b e tran s l ated i n to a pl an

.
,

fo r meeti n g th e n ew c o n d ition s an d th en th e pl an h ad to b e accep ted by

,

mo st Of t h e sen I o r ex ecu ti ves S i n ce such a pr o gr am d ealt w i th th e r ela

.

ti o n s b et w een p er s o n s r ath er th an w ith tec h n o l o g i ca l o r m ech an i c al d ev el

o men ts th e wo rk i n g o u t O f th e pl an w as m o r e c o mpli c ated th an m er ely

p ,

bri n gi n g a n ew pro duct or pro cess i n to effecti ve u se .

A n aly sis o f this b asi c struct ur al i n n o v ati o n r equ i r es ex am i n ati o n fi r st , ,

o f th e con d iti o n s c al li n g fo r c h an g e an d s ec o n d O f th e pr o c ess O f i n n o v a

, ,

tio n Wh at created th e co n d itio n s Of complexity in th e fo ur co mp an ies ?

.

Wh y were th ese fo ur amo n g th e very fi r st l arge co rp o r atio n s in A meri ca

to fi n d th ei r ex isti n g m an agem en ts i n adequ ate to c arry o u t t h e task s o f

o ver-all c o o rd i n ati on appr ais al an d p o l i cy fo r m ul ati o n ? A n d th en w h y

, , ,

an d h o w d i d i n d i v i du al s w ithi n th ese co m p an i es b ec o m e aw ar e O f th ese

n eed s h o w W
, as thi s aw ar en ess t r an s fo rm ed i n to ac ti o n an d h o w w er e th e
,

pl an s an d po li ci es mo di fi ed o n ce in action ?

Th e Co n ditio n: f
or I n n o vatio n
S i ze, meas ur ed by vo lume of o u tput cap i tal i n vested an d m en em
, ,

plo yed w as clearly o n ly o n e as p ect Of th e n ew co m plexi ty G r o wth by

, .

di versifi cati o n i n to n ew li n es Of bu si n ess an d co n ti n ued ver ti c al i n tegra

3 00 ORGA N I ZA TI ONA L I NN OVA TI O N

h uge ex a n p si on of th e du Pon t Com p an y in Wo rld War I cr eat ed few

o rgani z ati o nal st rai n s or pr obl ems In f act th e Ha s k ell Co mmi ttee in
.
,

recomm en din g po st war o rgan i zati onal ch an ges at du Pon t d eci ded th at
th e exi st in g st ru ct ur e h a d emi n en tly pr o v en its v al u e T h e o nl y i mpr o v e .

m en ts n eed ed w er e a m o r e car eful d efin i ti on of th e du ti es an d stru ctu r e o f

th e f u n cti o n al dep armaen ts a m o r e expl i ci t pla cin g o f auth o ri t y an d t e
,

sp on sib ili ty fo r f un cti on al a ct i vi ti es o n a si n gl e in di vi du al an d a gr eat er ,

ass ur an ce th at th e E x ecu ti v e C omm i ttee w o uld co n fi n e i t self t o th e

“

”
g en eral supervi si o n o f t h e Comp an y s afi air s an d t o qu esti on s o f br oa d
’

poli cy .

Th e in ad equaci es of th e f un cti o n ally d ep artm en tal ize d st ru ct ur e at du

Po n t b ecam e appar en t o nl y as th e b asi c po li cy of pr o du ct di v er sifi cati on
w en t in to f ull-scal e o per ati on Th e n eed to p u t to use po st war ex cess
.

capa ci ty t urn ed th e com pan y to m akin g an d selli n g sev eral lin es of

w er e un ab l e to gi v e th e pr o per att en ti on t o th e coo r din ati on of pro duct

flo w an d pr o du ct d esi gn wi th m ark et d em a n d an d t aste t o th e apprai sal ,

o f cu rr en t o p er ati n g rf m r to pl an f or f ut u r e al l ocati on o f re
p e o r an ce o ,

so ur ces i n th e n ew b u sin esses as w ell as th e o l d A s th e ex ecu ti v es in .

ch arge of th e fi n al r eo rgan i zati on r emin ded th e Bo ar d of D ir ecto rs in

S ep tem b er 1 921 : Th e Ex ecu ti v e Commi tt ee is co n st i t uted chi efly o f
“

h eads of D ep artm en ts an d h as f o un d it di fi cul t t o coo rdin ate th e v ari o us

,
”
f un cti on s an d t o fix pr o perly th e du e r espon sibili ty f or r esul ts 5
A s lo n g .

as t h e co m pan y r em ai n ed in a sin gl e li n e o f b u si n ess t h at of ex pl osi v es , ,

it co uld be eff ecti v ely o rganiz ed al o n g f un cti o n al lin es wi th t rai n ed

“

”
speciali sts i n ev ery D ep art m en t o f th e C o m pan y Bu t n o w o ur busi n ess
“
.

is so di v er sifi ed an d o ur experi en ce in th e n ew in du stri es so sh o rt th at an

o v erwh elmi n g n um b er o f pr o bl em s ar e clam o r in g f or so lut i on E ach pr ob .

lem r equir es i ndi vi dual att en ti on an d sep ar at e tr eat m en t an d can n o t b e

solv ed in th e sam e w ay Expan si on in a sin gl e l in e of b u si n ess o nl y
.
’

in cr eased th e scal e or sco pe o f exist in g r o u tin e an d pr o cedur es Div ersifi .

ca ti on in to n ew lin es o f pr o du cts wi th n ew m ar k et s an d so ur ces of sup

pli es br o ugh t a wh o l e n ew r an g e of ta cti cal an d st r ategi c decis i o ns .

S ear s s ex p er i en ce w as m o st lik e du P on t s A t S ear s th e r ap i d ex p an

’ ’
.
,

si on o f th e m ail-o rd er busin ess in th e 1 920 s in cr ea sed th e n u mber o f ’

br an ch p lan ts f r om thr ee to ten b ut ca u sed li ttl e o r n o o rgani zati o n al

str ai n O n th e o th er h an d th e m o v e i n to a n ew lin e o f busin ess o v er th e
.
, ,
'

cou n ter r et ai li n g cr eated a h o st o f n ew pr o bl ems o f co o rdin ati on super

, ,

visi on an d pl an ni n g whi ch th e exi st in g o rgani zati on fo un d almost im p os

,

si bl e t o h an dl e .

J er sey s m an ag em en t dimcul ties r esul ted fr o m th e d ev el op m en t o f n ew

’
T HE CREA TIVE I N N O V A TI O N 3 0 1

pro ducts cr eated by th e comi n g of th e au to mob i le an d fr om th e con ti n u

in g v erti c al i n tegr ati on in all p art s Of th e w o rld r ath er th an fr o m pr o duct
d i ver sifi c ati o n In th e year s after Wo rld War I th e n ati on s l argest p et ro
.
,
’

leum comp an y w as O p en i n g n ew o il fi eld s in Euro p e Lati n A m eri ca , ,

an d A si a s etti n g up a w o rld w i d e s h i pp i n g sy s tem to ca rry its crud e an d

,
-

r efin ed p etro leum co n st ructi n g r efi n eri es h ere an d abr o ad an d th en ex

, ,

p an di n g its m ark eti n g in fo r ei gn co u n tr i es an d th e Un ited States If J er s ey .

h ad co n cen tr ated as di d m o st o f h er A m eri can c om p etito r s o n pro duc

, ,

ti o n tr an sp o r tati o n r efi n i n g an d m ark eti n g w i th i n th e Un i ted S t at es

, , , ,

its B o ard wo uld h ave h ad f ar l ess co m pli c ated pr o bl em s o f co o rd i n ati o n ,

appr ais al an d pl an n i n g T h er e w o uld h av e b een l ess pr ess ur e o n T eagl e

,
.

an d h is ass o c i at es to set Up th e g en er al o ffi c e Co o rd i n ati o n an d Budget

D ep artm en ts an d th en to d efi n e cl early th e sep ar at e admi n is tr ati v e du ti es

o f th e p ar en t an d o f th e m ulti fu n c ti o n o p er ati n g d i v isi o n s .

In th e c as e of G en er al M o to r s th e o bv i o u s co m p ari so n is w i th F o rd
, .

By co n cen tr ati n g o n o n e m o del wh i ch c ame to b e bu i lt l argely in o n e

plan t Hen ry Fo rd exp an ded en o rm o u sly in si ze wi th o ut cr eati n g m an y
,

cen tral o ffi ce m an agem en t pro blem s Bu t by th e sam e to k en F o rd fo u n d

.

it ex tremely di fficult to d ev elo p o th er pro ducts such as ai rpl an es o r t rac ,

to r s or o ther c ar s li k e th e Li n co l n o r even n ew m o d el s o f h is si n gle

, , ,

pro duct H is wh o le o rgan i z ati o n w as fash i o n ed ri gi dly aro u n d th e

.

Mo del T .

G en er al M o to r s o n th e o th er h an d w as as d i ver si fi ed as F o rd w as
, ,

u n ifi ed Wh ere Fo rd h ad b u t o n e m o del G en er al Mo to r s c am e to h ave

.
,

a m aj o r li n e in each pr i c e cl ass an d a n um b er o f m o d el s fo r ea ch li n e .

Mo r eo ver it m ade an d m ark eted fo r th e n ati o n al m ark et m an y mo r e

,

p arts an d accesso ri es th an di d Fo rd B ec au se o f Dur an t s desi re to h o ld h is

.
’

dealer s duri n g Wo rld War I G en er al Mo to rs b ecam e o n e of th e l argest

,

man ufacturers o f r efri ger ato r s K etteri n g h ad bro ugh t w ith h im Delco
.

Li gh t m ak er s o f i so l ated li gh ti n g s y stem s an d an i n ter est in th e D ay to n

, ,

Wri gh t A i rpl an e Co mp an y wh en h e j o i n ed th e co rpo rati o n S uch a .

d i versity o f ac ti viti es pro ved alm o st i mp o ssi ble to m an age eff ecti vely
th ro ugh th e o v erdecen tralized h o ldi n g co mp an y an d m ade i mpracti c al ,

th e fo r m ati o n o f a c en t r al i z ed f un c ti o n ally d ep ar tmen t ali z ed s truc tur e

, .

Th e pro bl em s o f m an uf act ur i n g sal es fi n an c i n g en gi n eer i n g an d pur

, , , ,

ch asi n g wer e al mo st as vari ed an d as tech n i c ally co mpl i c ated as th o se in

th e r ec en tl y di v er sifi ed du Po n t Co m p an y S l oan s t r an sfo rm ati o n o f
’
.

D ur an t s ti n y to p Offic e i n to a co o rdi n ati n g appr aisi n g an d p o l i cy—m ak i n g

’

, ,

gen er al O ffice m ade p o s si bl e th e r ati o n al an d pro fi table m an agem en t O f

s uch an en terpris e By th e s am e t o k en s uch a structure p erm itted
‘

.
,

G en er al Mo to r s to d i v er si fy w ith a m i n i m u m of str ai n i n to o th er pro duc t

li n es b ased o n th e i n tern al-co mbu sti o n en gi n e wh en th e dem an d fo r
3 02 OR GA N I ZA TI ONA L I NN OVA T I O N

a utom ob il es l evel ed of f an d began to declin e i n th e lat e ’

1 920 s an d w ly
’
1 93 0 s .

a m on g th e earli est i n th e Un i ted S tates to co nsi de r structur al reo rganiza

t i o n Du P o n t w as th e fi r st lar ge ch emi cal com pa n y to di v ersi f y its pro d
.

u cts o n a m aj o r scal e G en er al M ot o rs w as far an d aw ay th e most d i versi

.

fi ed aut om ob i l e co m pa n y of its day In th e 1 920 s, J er sey s o pe rati o n s were

’ ’
.

geo gr aphi cal ly m o r e wi dely sca tter ed th an th o se of any o th er A meri can

m ob i l es an d ev en pet ro l eum co n sti t ut ed a m o r e co m plex job in itself t h an

,

di d m an ufacturin g an d m ark eti n g i n such m aj o r in dustri es as steel co p ,

p er m ,ea t pa ck i n g t o ba cco an d w h,is ky S ear s al t h o u,

g h cl ose ly f o ll o w e d .
,

by Mon tgom ery Ward p i o n eer ed in co mb ini n g o v er-th e—co u nter sales
,

w er e th er ef o r e a m on g th e ea rli est to fa ce th e co mplex m ana gem en t pro b

Wo rld War II eco n om i c boo m .

o f b usi n ms an d by co n tin u ed xpan si on

e o f l i
tech n o og c
a ll y com plex

to s r . In th e case o f du P o n t, Sear s, an d t o so m e exten t J er se y S tan da rd ,

th e a ddin g o f n ew busin ess acti vi ti es r esu lted fr om th e n fl t o assu re

co n ti n ui n g pr o fi ta bl e use o f ex is t i n g p lan t equip m en t an d perso nn el
, , .

In th e ca se o f du P o n t th e th r ea ten ed ,
po st war ex cess cap aci ty t urn ed th e

th e m an uf a ct urin g an d m a rk etin g
pr o du ct li n e ba se d o n a ni tro
O f a

cell u l o se t ech n o l o A t S r s t h d eclin e o f f arm in co m e an d w i th it th e

gy ea e .
,

ma i l-o rd er co m p an y s m aj o r m ark et in du ced G en er al Woo d to a search

’

f o r n ew em pl o ym en t f or hi s buyi n g an d di str ib u ti n g f acili ti es an d t rain ed

an d m ark etin g k er osen e to gaso lin e cr ea t ed as man y a dmi n ist rati ve pro b
l em s as di d its exp a nsi o n into tr anspo rtati on an d crude o il pro ducti o n .

Y et at J er sey also th e m aj o r r eo r gani za ti o n w as a r es po n se t o t h e ra pi d

a cc um ula ti o n o f r eso urces n ecessar t m t t h swi f t ly gr o w i n g dem a n d
y o ee e

f o r l ubri ca n ts an d f u el o il as w ell as f o r g aso li n e A t G en eral M o to rs th e .

,

a dmin istr ati v e pr ob l em s w er e th o se o f m ana gi n g m o r e effecti v ely t he

v ast a ccum ulati on o f r eso u r ces Du r an t h a d bro ugh t t o geth er in hi s efi o rts

t o m ee t th e h u g e d em an d f or th e m edi um p ri ced car an d n o t wi th th e o

ex ce ti o n o f a bri ef pe ri o d dur in g Wo rld War I o f t ran sf errin g exist in g

p ,

r eso u rces t o n ew lin es .

F o r th e se ni o r ex ecu ti v es at du Po n t Sea rs an d J erse y expa n si o n in to , , ,

T HE CREATIVE I N N O VA T I O N 3 3
0

n ew in du stri es n ew li n es o f b u si n es s an d n ew geo gr ap h i cal ar eas

, ,

broaden ed th e r an ge as w ell as th e compl exi ty o f tacti cal an d str ategi c

d eci sio n s S imi l arly th e r ap i d gro wth u n ti l 1 920 o f G en er al M o to r s
.
,
’

sev er al li n es o f au to m o b i l es tru ck s p ar ts an d a cc ess o r i es

, ,
el ec tr i cal m a ,

ch i n ery an d r efr i ger ato r s co n ti n u ally i n cr eased th e admi n i str ati v e l oad o n
,

it s ex ecuti v es Th ese sen i o r ofii cers n o w h ad to appr ai se p erf o rm an c e an d

.

m ak e b asi c d eci si o n s ab o u t s tart i n g m ai n tai n i n g exp an di n g o r c o n tr act

, , ,

in g th e a cti v i ti es o f a n um b er of i n tegr ated m ul t if un c ti o n d i v i si o n s w i th

, ,

each di v i si on h an dl i n g v ery di ff er en t li n es o f g oo d s o r o p er a ti n g in qu i te

diff er en t ar eas T h e h o r i zo n s of th ese o ffic er s w er e n o lo n g er th o s e o f a

.

sin gl e in du stry bu t r ath er o f n ati on al an d i n ter n ati o n al ec o n o m i es T h ey .

truly h ad to b e gen er ali sts n o t fu n cti o n al sp eci ali sts ; an d th ey n eed ed

,

h
all t e tim e an d i n f o ma o
r ti n th e y c o uld get f o r o v er -all sup erv i si o n an d

pl an n i n g .

Th e Pr ocess o f I n n ovation
Wh i le th e n eed s an d pr es sur es for structur al i n n o v ati o n w er e m uch th e

s am e in all fo ur c o mp an i es th e actu al w o rk in g o u t of th e ch an ge pr o v ed
,

qui te diff er en t in each case In tr an sfo r m i n g th e an sw er s to adm i n i str a

.

ti ve n eed s i n to o rgan i z ati o n al fo rm s th e di ff er i n g p er so n aliti es an d

,

tr ai ni n g o f th e s eni o r ex ecu ti v es in each c o m p an y an d th e u n i qu e b i sto r i

cally determin ed situ ati on w ithi n each pl ay ed th ei r cr i ti c al p a rt s N ever .

th eless th er e w er e som e si g n i fi c an t sim i l ar iti es am o n g th em in th e pr o c ess

,

o f i nn o v ati on .

A t da Po n t G en er al Mo to r s an d J er s ey S tan d ard th e i n i ti al aw ar en ess

, , ,

o f t h e struct ur al in ad equ ac i es c au sed by th e n ew c o m pl exi ty c am e f r o m

ex ecu ti v es cl o se to to
p m an a g em en t b u t w h o w er e n o t th em selv es in a
,

po siti o n to m ak e o rgani z ati o n al ch an ges In all th r ee th e pr esi den t gav e

.
,

n o en co ur agem en t t o th e pr o po ser s o f ch an g e Ir e ne e du Po n t str o n gly .

r esisted th e r eco mm en d ati on s fo r a n ew structur e wh i l e D ur an t an d ,

T eagle r em ai n ed u n c o n cer n ed ab o u t th e i n ad equ aci es o f th ei r ex i sti n g

o rg an i z ati o n s an d th e sugg esti on s f or th ei r struc tur a l impr o v em en t In .

all thr ee c o m p an i es it t o o k a si z abl e cr i sis to br i n g a c ti o n Y et all th r ee

, .

pr esi den t s h ad r ecei ved pr op osal s f or r eo rgan i z ati o n b efo r e th at cr i si s

m ad e th ei r u sefuln ess app ar en t O n ly at S ear s di d th e to p p o li cy m ak er
.
,

G en er al Woo d see th e o rg ani z ati on al n eed s as th ey ar o se an d act qu i ckly

,

to m eet th em .

Th ese c om p ar i son s r ai se tw o qu esti o n s : Ho w di d th e i n di vi du al s w h o

fi rst pr o p o sed r eo rg ani za ti on b eco m e aw ar e o f th e stru ctur al w eak n esses
b efo r e o th er execu ti v es ? Wh y di d th e presi den ts in each o f th e th r ee cases
f ai l to tak e im m edi ate acti on ? T h e i n n o v ato r s app ear t o h av e b een t h e
3 4
0 O R GA N I ZATIONA L I N N O VA T I O N

x cu ti ves cl o ses t to th e pro blem w h o wer e gi v en or too k tim e aw ay fr om

e e

o per a tin g du ti es in o rd er to co n cen tr at e on th i s si gnifi can t en trepren eur ia l

pr obl em A t du P o n t th e pl an of r eo rgani za ti on germin ated in a com

.
,

mittee of yo un g ex ecu ti v es w h o h eld r es po n si bl e po st s in ea ch of th e

ma j o r f u n ct i on al d ep ar t m en ts T h ey became co n sci o u s o f th e ina deq ua
.

ci es in th ei r o w n un i ts an d p arti cul arly of th e diffi cul ti es of in terdep ar t

m en tal coo rdi n ati o n T h us al th o ugh th at speci al comm i tt ee w as f o rm ed
.
,

to study th e m ark etin g pr o bl em s it so o n be cam e con v in ced th a t o rg ani za

,

ti o n al difficul ties t r an sc en d ed an d w er e in d eed th e u n d erlyin g cau se f o r

th e m ark etin g difficu l ti es Th e co mmi tt ee th en too k th e tim e t o st udy

.

th o r o ugh ly w ay s an d m ean s t o impr o v e t h e o rgan i zati on in o rd er to m eet

th e pr o bl em .

O n th e o th er h an d it seem s si gn ifi can t th at th e H ask ell Co mm i ttee set

, ,

up specifi cally to study o rg ani zati o n at a t im e wh en it di d n o t appear

cri ti cal saw n o n eed to r esh ap e th e exi stin g struct ur e T h e ch all en ge o f a
, .

r eal an d imm edi ate n eed as w ell as an un der st an din g of th e n atur e of th e

b asi c difiiculties w as n ecess ary for th e i niti al in n o vati o n at du P o n t .

A t G en er al M o to r s aft er Wo rld War I o rg an i zati o n w as a cl ea r er an d

,

m o r e pr essin g pr o bl em Y et excep t f o r S l o an n o ex ecu ti v e p ai d r eal ar

.
, ,

ten ti o n to o rg ani z ati o n al n ee ds D ur an t w a s t oo bus y in bu i ldi n g h is

.

em p i r e ; th e ex ecu ti v es o f th e au to m o b i l e an d p art s sub si di a ri es w er e t oo

en r o ss ed in m ai n tain in g an d exp an d in g pr o d u cti o n Th e fi n a n ci er s w er e

g .

too o ccup i ed i n th ei r primar y busin ess — th e du F o n ts in m eetin g t h ei r

o w n w ar an d o stw ar ch all en g es an d S to rro w wi th th o se o f bei n g t h e

p ,

sen i o r p artn er o f o n e o f th e n ati on s l arg es t an d be st kn o wn in v est m en t

’
-

b an k in g h o uses S l oa n w as as clo se to th e pr o bl emas an y G en er al M o to rs

.

ex ecu ti v e He w as curr en tly m anagi n g a n u mber o f o per atin g un i ts an d

.

att em p tin g t o coo rdin at e th e a cti vi ti es o f th ese u ni ts n o t o nl y w i th each ,

o th er b u t wi th th e m aj o r car ass em bl in g an d m ar k etin g di v isi o ns

,
Be .

cau se of h is con cern o v er th e si tuatio n h e t oo k th e tim e app ar en tly o n

, ,

hi s o w n ini ti ati ve to mak e a com pr eh ens i v e study o f h ow to an sw er th ese

,

cri ti cal n eeds .

Th o se ex ecu ti v es at J er sey w h o w er e ini ti ally aw ar e o f o rg an i zati o nal

difficul ti es w er e al so m eetin g sp ecifi c pr o blem s C lark an d H o ward fo un d .

th e struct ur e o f th e Man uf a ct urin g C o mm i tt ee co n stan tl y h am per in g

th ei r day to~d ay w o rk Th er ef o r e H o w ard wi th C l ar k s bl essi n g t oo k

’
- .
, , ,

th e tim e i n th e f all o f 1 2 t o study car ef u lly th e o rg an i zati o n o f m an u

9 3
f acturin g u ni ts in t hr ee o th er pe tr o l eum co m p an i es L ater in 1 92 7 wh en .
, ,

Ho w ar d pr o po sed makin g a di stin cti o n be tw een a h o ldi n g co m p an y

an d o per atin g a cti vi ti es h e w as l arg ely in t er est ed in m eetin g th e n eeds o f
,

h is R esearch an d De v el op m en t D ep artmen t Bu t be cause n ei th er H o w ar d .

n or an y on e el se at J er sey w as gi v en or too k th e tim e t o m ak e a co m pl ete

T HE CREA TIVE I N N O VA TI O N 3 5
0

st udy of Jer sey s o ver-all o rg an i z ati o n al n eed s n o d etai led desi gn for th e
’

co mp an y s s truc ture as a wh o l e w as wo rk ed o u t
’
.

S adler in p o i n ti n g ou t th e n eed for b etter coo rdi n ati o n of pro duct H

,
ow ,

h ad a br o ader v i ew A n d yet to h im th e pro bl em w as mer ely o n e of

.
,

cr eati n g a co mm i ttee o r dep ar tm en t to as sur e th e m o r e eff ec ti ve h an dli n g

o f th e coo rd i n ati n g f u n cti o n He fai l ed at th at tim e to co n cen tr ate as
.
,

H arden wo uld do l ater o n s eek i n g o ut th e b est w ay s to m eet th e n eed s

,

fo r o v er-all coo rd i n ati o n J er s ey di ffer ed f r o m du Po n t G en er al M o to r s

.
, ,

an d S ear s in th at v ery few o f its ex ecu ti v es appr ec i at ed th e n eed t o st udy

i n ten si v ely th e pro blem s o f o rg an i zati on q ua organ iz atio n Furth erm o r e .

,

th ey were alm o st alway s to o i n vo lved in t acti cal acti viti es to co n cen tr ate on
str ategi c o n es .

A t S ear s G en er al Wo o d th e cr eato r o f th e n ew str ategy s o o n b ec am e

, , ,

aw ar e o f th e m assi ve pr o bl em s cr eat ed by th e mo v e i n to o ver—th e-co un ter

s ales ; b ut u n li k e S lo an h e di d n o t h ave th e ti me to m ak e a pro p er study

, ,

o f th e pr o bl em A s P r esi d en t th er e w er e to o m an y o th er thi n g s d eman d

.
,

in g h is atten ti o n an d acti on B ec au s e th e co m mi ttee th at h e set up to

.

i n vesti gate th e pro bl em s i n clud ed o u tsi d er s as w ell as i n si d er s th e o rgan i ,

z atio n bu i ld er s at S ear s h ad a br o ad er r an g e o f gen er al exp er i en c e th an

th ose in th e o th er c o m p an i es Bu t th ey w er e n o t n ec essar i ly ad equ ately

.

equ i pp ed to fi n d so lu ti o n s to S ear s s sp eci fi c n eed s Ev en to th e i n si d er s

’
.
,

th e pr o blem s o f o rg an i z i n g an d m an agi n g r etai l sto r es w er e qu ite n ew .

Th e eff ecti v en ess o f th e r es ul ts w as in di r ect r ati o w ith th e exp er i en ce o f

th e i n n o v ato r s In r eo rg ani z i n g th e M erch an dis e D ep ar tm en t w h er e m en
.
,

lik e Ho u ser an d Do dd were very m uch at ho m e th e Co mmi ttee s reco m ,

’

m en datio n s cr eated a l asti n g s et up Th e s tructur e f ash i o n ed fo r th e.

r etai l o p eratio n s pr o v ed m uch les s sati sfacto ry T h ere th e o u tsi de o rgan i .

zatio n exp ert Fr az er d o mi n ated th e pl an n i n g an d h is pr i m ary c o n c er n

, , ,

w as to cu t co sts n o t to s ell merch an d is e

, .

T h u s th e m an n er in wh i ch th e r eali za ti o n c am e o f o rg an i z ati o n al in
ad equ ac i es aff ec ted th e n at ur e o f th e r esul ti n g pr o p o s al s T h is in t ur n .
, ,

h elp ed to determ i n e th e len gth of ti m e i n vo lv ed in br i n g i n g th e pl an to

fruitio n A t G en er al Mo to r s an d du Po n t th e i n iti ato r s o f th e ch an ge
.
,

created a fai rly expli ci t detai led o v er-all pl an o f reo rgan i z ati o n A t Jer s ey
, .
,

th ey d evelo p ed o n ly p i ecem eal pl an s to tak e c are o f i mm edi ate pro bl em s .

A t S ear s th e pl an fo r th e r etai l o rgan i z ati o n d esi g n ed by an o utsi d er

,

pro ved in eff ecti ve an d i n adequ ate F o r th ese r easo n s th e tim e b etw een
.
,

th e i n iti ati on o f th e r eo rg an i z ed st ruc t ur e an d its fi n al f ru iti o n w as r el a

ti vely sh o rt at du Fo n t an d G en er al Mo to r s an d co m p arati v ely lo n g at

S ear s an d J er sey S tan d ard .

O n ly at da Po n t w as th er e an y expli ci t r esis tan c e to th e reco mm en da

ti o n s o f th e i n n o v ato r s T h er e th e Pr esi d en t Ir en ee twi ce tur n ed do wn
.
,
’

,
3 5 0
f
O R G A N I ZA TI ONA L I NN O VA TI O N

th e o cs al
p p
r I I e did this p art ly f r om
-
a con vi ction or the val u e of the

I n h is stan d l rén ee had th e sn pp or t o f h is b roth ers an d o n e or t w o o f

den t in ch arge o f Pu r cha sin g B u t m ost . o

f
t h e top so
“

- i.- '
I

l
ts t
i a nt .
"

j
=
t hfi

th e r eo rgani zat i on amo n gl y . In co n t rast, at J ersey an d G en er al Moto r s

Po ssib ly j u st f Iren ee ch an g es
' '
b ecau se resistan ce, t h e i ni tial
’
o s st ro n
g at

amen din g o an y or th e fo u r reo rgan iz a ti ons h ere st u di ed I n th e i nt erim

f
.

pe ri o d b etw ee n Ir enee s rej ectio n of th e p rop o sal in th e au tum n of 1 920

’

u
pon .

Th e dela y a sol led t o a sign i fi ca nt rn o di fi cauon of t he o ri gi na l r eor gani

his co ll ea gu e s tha t t h e gen eral ori ce fi f un cti o ns ld

cou n ot be carri ed o ut by

to th e b usi ness o f th e C om pa n y as a w h ol e . Be in g conn ecte d w i th no

o ut b ias or
p re u
j di ce . Th is arr an ge ment w o ul d also p er mi t a di vi si on

Th u s t hr o u gh i
ra t o na l , care u f l ini tia l p lan n in g an d a te f r a b rief but

b e o r een r
or
o an d o
r ar on e o f th e fi rs t an d mo s t l ea —
c r cut ex a mp l es o f
m o de rn m ul ti di vi si o n al st ru ct ur e
th e ,

Th e fi nal defi nit io n o f a w m p ar ab le st ru c tur e too k lo n ger at G eneral

Mo to rs fo r S lo an Br ow n an d Pr att h a d m o r e creati v e w o rk to do The y
, , ,
.
THE CREA TIVE I N N O VA TI O N
3 7
0

a dvi so ry staff h ad to b e m an n ed an d tr ain ed G en eral o ffi cer s h ad to b e

.

recru ited an d th ei r du ti es d efi n ed Th e pro blem o f wo rk i n g o u t th e r el a

.

ti on s b etw een th e gen eral o ffice an d th e d i vi si o n s w as p ar ti cul arly d i fficult ,

si n ce th e l atter h ad always b een self-co n tai n ed u n its o p er ati n g with almo st

co mplete i n dep en d en ce Mo reo ver very few o f th em w er e u si n g co m
.
,

p arable d ata in c alcul ati n g th ei r o p er ati n g co sts an d few r el ated eith er

,

co s ts or i n ven to r i es to accurate appr ais al s o f m ark et dem an d .

O n e o f th e m o s t im p o r tan t task s f aci n g S lo an an d Bro wn in 1 92 1 w as

th e cr eati o n o f an i n f o r m ati o n al sy stem to pr o v i d e b o th t h e d i v i si o n h ead s

an d th e g en er al ex ecu ti v es w ith an i n tell i gi bl e p i c tur e o f pr es en t p erfo rm

an c e an d an ti c i p ated c o n d i ti o n s By 1 924 th ey h ad d ev el o p ed th ese essen ti al

.
,

d ata an d so m ade p o s si bl e th e ad mi n is tr ati on o f th e o p er ati n g di visi o n s

wi th o u t i nh ib iti n g or i n terfer i n g with th e au th o ri ty an d r esp on sib i l i ty o f
th e g en er al m an ag er s By th is sam e d ate th e s en i o r ex ecu ti v es at G en
.
,

er al Mo to r s h ad b eco m e c o n v i n c ed as h ad th o se at du Po n t earl i er o f
, ,

th e n eed t o h av e t h e to p ex ecu ti v es b e truly g en er al o ffi c er s T h ey w er e .

reli eved o f o p er ati n g r esp on sib i l iti es an d each w as to h av e on ly adviso ry

,

co n tact with th e d i vi si o n m an ager s as S lo an h ad r eco mm en ded in h is

,

o r i gi n al pl an F i n ally th r o ugh th e d ev i c e o f th e In ter -Di v i si o n al C o mm it

.
,
o

tees fo r m ed b etw een 1 922 an d 1 924 S l o an m ark ed o u t an o th er f o r m al

,

m eth o d or ch an n el o f c o m m u n i c ati o n an d auth o r i ty th r o ugh wh i ch th e

gen er al execu ti ves staff sp eci al i sts an d o p er ati n g m an ager s k ep t in co n
, ,

s tan t co n tact with o n e an o th er By 1 925 th e G en er al M o to r s s truct ur e

.
,

w as as clearly o ut li n ed as th at o f du Po n t .

A t J er s ey thi s cr ea ti v e i n n o v ati o n w as sl o w er in co m i n g It w as w o rk ed
, .

o u t in a m uch m o r e h ap h az ard w ay an d m an y y ear s w er e to p ass b efo r e

,

it r each ed as expli c i tly d efin ed a fo rm as in th e o th er tw o c o m p an i es Ju st .

b ecau se its execu ti v es i gn o r ed fo r so lon g th e pro blem s of o rgan i zati o n ,

th ei r task w as ev en gr eater th an th at o f th e o rg an i z ati o n bu i ld er s at du

Fo n t an d G en er al Mo to r s S tru ctur al ch an ges b oth th e sh ap i n g an d t e

.
,

sh ap i n g o f th e l i n es o f au th o r i ty an d c o m m u n i c ati o n an d th e d ev el o p

m en t o f essen ti al d ata h ad to b e i n i ti ated an d c arr i ed o u t o n th r ee l ev el s

,

o f ad mi n i str ati o n B etw een 1 2 nd 1 2 T gl n d h is ass o c i ates o u t

.
9 5 a 9 7 ea e a ,

li n ed th e b asi c structur e fo r th e o ffices at all th ree l ev el s — d ep artm en t al

h ea dqu ar ter s th e c en tr al o ffi ce an d th e gen er al o m
, ,
ce A ft er 1 2
9 7 .th e ,

r el ati o n s b et ween th ese o ffi ces wer e r eadj u sted an d at th e sam e tim e m o re , ,

an d m o r e a ccur ate o p er ati n g an d pl an n i n g i nf o r m ati o n w as d ev el o p ed .

Th e m o st si gn i fi c an t o f th e l ater ch an ges c ame in 1 933 wh en th e ac ti v i ti es

o f th e g en er al o ffi c e an d th e o p er ati n g affil i ates w er e m o r e expl i ci tly se
p
arated by r el i ev i n g all gen er al o fiicers o f o p er ati n g r esp o n si b i l i ti es by re ,

mo vi n g p h y si cally th ei r pl ace o f w o rk to an o th er l o c ati o n an d by bri n g ,

in g in sever al n ew sen i o r ex ecu ti ves Th ese ex ecu ti ves l i k e th o se at du

.
,
3 08 ORG ANIZ ATIONAL INNOVATION
Fo n t an d G en er al M o to rs cam e to h av e as in di vi duals o nl y an advis ry
,
o
r el ati o n shi p wi th th e o per atin g ex ecuti v es A ft er w artim e expan si o n .

br o ugh t a r eturn of th e m ul tif un cti o n o per atin g affil i ates th e st ructur e at ,

J er sey b ecam e com p ar abl e to th at at du F o n t an d G en er al M o tor s

A t S ear s th e aw ar en ess o f o rg an i zati on pr o bl em
.

,
s cam e m o r e qui ckly
t h an in th e o th er thr ee com pan i es b u t th e d ev el o p m en t o f th e n ecessa ry
,

stru ct ur e too k l on ger t o achi ev e H er e th e di fii cul ty w as n ot as at J er sey

.
, ,

o f h av i n g n o o v er -all plan b u t r ath er o f ad o p tin g th e wr on g plan G e n

, .

er al Woo d a hi ghl y r a ti on al a dm ini st rat o r wi th gr eat r es pect f or data

, ,

r ar ely permi tt ed tacti cal deci si ons to int er f er e with st r ategi c on es Wh en .

h e r eali zed th at th e m o v e in to di r ect r etai lin g r equir ed a n ew st ruct ur e ,

b e qui ckly call ed t o g eth er a com pet en t co mm i tt ee to pl an it Th e r esul t .

in g str uct ur e fai l ed h o w ev er because th e l i n es o f au th o ri ty an d comm uni

, ,

cati on w er e co nfli ct in g an d un cl ear .

T h e struct ur e a lso pr o v ed in ad equ ate be cause it call ed f or t oo few

a dm ini st r ato r s A cl o se an d i n ti m ate r el ati o n wi th m il i ta ry an d p oli ti cal
.

o rg an i zati o n m a h v co n vi n ced Woo d an d Fr az er th a t g o od adm i ni st ra

y a e

ti on m ean t l i t tl e m o r e th an pu tti n g th e ri gh t ma n in th e ri gh t pla ce It .

c ertai nly in still ed in bo th m en a dr ea d of bur eaucr a cy th at ex pan ded by

cr eati n g w o rk f o r i ts elf an d n o t by carryin g o u t an pr o duct i v n o mi c
y e eco

r o l e Co n cern ed wi th thi s v ery r eal if n egati v e dan g er o f any admini str a

.
, ,

ti v e o rg an i za ti on th ey o v erl oo k ed th e p o si ti v e v alu e t o a larg e busi n ess

,

u ni t o f h avi n g m an ag er s w h o co n cen tr ated on th e coo rdin ati o n planni n g , ,

an d appr aisal of th ei r en terpri se s m an y an d wi d es pr ea d r eso ur ces As

’
.

on e S ear s ex ecut i v e qui ckly r emi n d ed th em an ad equ ate a dmini st rati v e ,

o rg aniz ati o n w as ab so lu tely essen ti al if Sea r s w as to ca rry o u t its b asi c

eco n o mi c f u n cti o n of hi gh -v o lum e lo w —co st m erch an disin g Wi th o ut

, .

o ffices to su erv i se t h e st o r e m an ag er s
p C o l o n e l G i lbe r t E H u
, m p h r ey .

wr o te Woo d in J u n e 1 93 0 S ears n ee ded m o r e th an j u st th r ee h un dred

, ,

h i ghl y com pe ten t st o r e m an a ger s It al so r equir ed an abl e an d t r ain ed

.

m an f or each lin e — h ardw ar e a ut om o b il e accesso ri es h o u seh o ld ap

, ,

p li an ces s o rtin g g o o d s p ai n ts an d so f o rth

, p , ,
— in ea ch o f t h e th r ee h un

dr ed st o r es Un d er such to tal d ecen tr aliz ati o n H um p h r ey in sist ed th e

.
, ,

co m p an y w as u n abl e to coo rdi nate an d i n t egr ate its v as t buy i n g an d di s

tri bu ti n g f a ci liti es wi th m ark et d em an d in o rd er to tak e f ull adv an tage o f

tr ai n ed an d co m pe ten t
p er so nn el p ar ti cul a rly i ts m
,
erch an di sin g sp e

ciali sts V al uabl e i d eas an d m eth ods al r ea dy in u se in so m e sto r es w o uld

.

perm ea te v ery sl o w ly th r o ugh th e r est o f th e o rg an i za ti o n Th e ab ili ti es .

o f th e m o st co m pe ten t m en w o ul d be c o n fi n ed to a sin gl e un i t N o r .

wo ul d th er e d ev elo p n ew i d eas n ew p o li ci es n ew m eth o ds [th at ] may

“

, ,
”
be pr odu ced th r o ugh th e in ter ch an g e o f i d eas o f a n umb er o f m en .

A f ter try in g a v ari ety o f so lut i o n s Wood be cam e co n vin ced by ,

of
T HE CREA TIVE I N N O VA TI O N 3 9
0

th e v alue of th e multi di v isi o n al s truct ur e Th e n ew terr i to r i al o rg ani za

.

ti o n w as, in man y ways, simi l ar to th e o n e th e Fr azer Commi ttee h ad

pro po s ed in 1 929 bu t th e sen i o r ex ecut i ves h ad f ull au thor ity an d resp o n
,

sib ili ty f o r carry in g o u t th e sev er al f un ct i on al a c ti v i ti es in th ei r r egi o n ally

defi n ed di vi si o n s O nl y th e co mi n g of w ar del ay ed th e cr eati o n o f fi v e

.

s uch T er ri to ri al D i vi si ons an d a p ar en t ofi ce w ith stafi s pe ci ali sts an d

gen er al ex ecuti ves Th e fin al s tructur e v ari ed fr om th at of each of th e
.

o th er thr ee co m p an i es, l argely be caus e S ear s co n cen tr ated o n th e m ark et

in g of m an y l in es r ath er th an o n m an uf act ur in g, m ark etin g, an d pr o cur

in g o r pr o duc i n g raw o r semifi ni sh ed m ater i al s an d o th er s uppli es in a
f ew m aj o r l in es o f pr o ducts .

Thi s br i ef r evi ew o f th e pr o cess of o rg an i zati on al in n o v ati o n in th ese

fo ur gr eat in du stri al em p ir es sugges ts h o w th e atti t ud es an d a cti v i ti es o f
th e difi eren t ex ecu ti v es afi ected st ructu r al ch an g e Th e c o m in g o f th e de
.

pr es sio n an d of Wo rld War II m o s t c ert ai nl y s low ed th e co m pl eti on o f

th e n ew struct ur e at J er s ey an d S ear s Bu t ev en w ith co n tin u i n g pr o sp er
.

ity, th e l ack o f a pl an in th e fir st comp an y an d th e adop ti o n o f t h e wro n g

pl an in th e seco n d wo uld un do ub tedly h av e c au sed m uch th e s am e del ay .

Th e exper i en c e o f all fo ur firm s m ak es v ery cl ear h ow co n cen tr ati on o n

o per ati o n al acti v iti es in terf er ed w i th an d i n h i b i t ed l o n g-term pl ann in g, in

clu din g th e desi gn in g of a n ew s tructu r e to m eet th e a dmi ni str ati v e n eeds

o f a n ew str ategy O nl y w h en th e ex ecu ti v es w ith dr ew fr o m day—to—day
.

tas k s di d th ey pr o duc e u s eful o rgani zati on al pl an s or pr o po s al s In th e .

cas e o f pl an n in g th e m ul ti di visi o n al s truct ur e th e cr eati ve in n o v ati on

th e in di v i du al in n o v ato r s n eed ed t o h av e an in tim ate c o n tac t w i th th e

pr oblem, an d th ey h ad to tak e th e tim e to s tudy it T h e qu esti o n still .

remain s wh y som e ex ecu ti v es clo s e to th ese n eeds gav e th e n ec es sary

time whil e o th er s di d n o t Cl early d iff er en ces 111 tr ai n i n g, temp er am en t,
.

an d bu s in ess expe ri en ce pl ay ed th ei r p art .

Tfi e S ign ifican ce of th e I n n ovation

B ef o r e ex ami ni n g th e imp a ct of th ese diff er en ces in ex ecu ti ve per s on al
ity on o rgan i zati o n al ch an ge a fi n al w o rd is n eeded ab o u t th e structur e
,

wh i ch all fo ur comp ani es cam e to ado p t Th e b asi c r eas o n fo r its s uccess

.

w as sim ply th at it cl early r em o v ed th e ex ecu ti v es r es p o n si bl e fo r th e

destin y o f th e en tir e en terpri se fr om th e mo r e r o utin e op er ati o n al act iv i
ti es an d so gave th em th e tim e in fo rm ati o n an d ev en p sych o logi cal
, ,

commi tmen t for l on g-term pl an ni n g an d appr ais al Co n v er sely it pl aced

.
,

th e r es po n si b i li ty an d th e n ec essary au th o r i ty f o r th e o p er ati o n al admi n is

tratio n in th e h an ds o f th e g en er al m an ag er s o f th e m ul tif un c ti o n di v i

sio n s A t G en er al Mo to r s A lf r ed S lo an an d Do n aldso n Br o wn descr i bed

.
,

this allo cation of d ecisio n m akin g as on e bet ween p oli cy an d admini s tr a

“
3 I O O R G A N I ZATIONA L I N N OVA T I O N

ti on In 1 937 S lo an succ in ctly r eph r ased in th e

.
, fo llo win g w ay wh at
Br o wn h ad pro n o un ced publi cly t en y ear s earli er :
By m in i str atio n is m ean t th e daily con du ct o f th e Co rp o r atio n s af
ad
’

f air s By f o rm ul atio n o f p o li cies is m ean t b o th th e estab lishm en t o f th e

“ ”
.

b r o ad p rin cip les b y w hi ch admin istr ation is to b e gu ided an d th e determin a

tio n o f th e f un d am en tal co n cep ts o f th e b u sin ess Th e prim e o b j ectives o f .

th e b usin ess ; th e scop e o f its o p er atio n , b o th as to p r odu cts an d m ar k ets, th e

desir ab ility of exp an sion , h o riz o n tall y or vertically o r bo th ; th e provisio n o f

th e essen tial cap ital f or its op eratio n s ; an d th e qu estion o f dist rib u tion o f

its p ro fi ts a s b etw een th e am o u n t p aid in dividen ds an d th e am o u n t r etai n ed

”
in th e b usin ess — all ar e prob lem s in vo lvin g f o rm u l atio n of po li cies an d
“

illustrate th e prin ciple inv o lv ed 6

.

Th u s th e n ew struct ur e l eft th e br o ad str ategi c deci si on s as to th e all o

cati on o f exi stin g reso urces an d th e acqui siti on of n ew o n es in th e h an ds
o f a to
p t eam o f g en er ali sts R eli ev ed o f o p er atin g du ti es an d tact i cal de
.

cisio n s, a gen er al execu ti ve w as l es s l ik ely to r eflect th e p o siti o n of j us t o n e

p art of th e wh o le even th o ugh old ti es an d atti tudes wer e o ften h ard to
,

br eak Mo r eo v er th e top team w as n o w l ess th e cap ti v e of its o per atin g

.
,

o rg an i zati on s th an it h ad b een sin c e it n o l o n ger h ad t o b ase its d eci si o n s

,

o n in f o r m ati on pr o v i d ed by th e fu n cti o n al d ep artm en ts No t o n ly di d th e .

fi n an ci al o fi ces pr o v i de m o r e an d b ett er d ata b u t th e g en er al o ffi ce ad ,

vi so ry stafi imm edi ately to o k o n th e maj o r task of supply in g inf o rm ati o n

o f all kin d s In thi s w a it pr v i d d in d p d n t ch eck o n d i vi si o nal
.
y o e an e en e

r equests pr op o sal s an d estim ates It al so h elp ed th e gen er al o ffi ce to study

, , .

n ew ar eas f o r d ev el o p m en t o r exp an si o n in w h i ch th e o p er atin g ex ecu

tiv es w o uld h av e co m p ar ati v ely l i tt l e i n ter est o r kn o wl edge In ad diti on .

,

th e fi n an ci al o ffic es an d th e a dv i so ry stafi g av e th e g en er al o fiicers an

addi ti o n al fl o w o f d etail ed i n f o r m ati o n on p ast an d pr esen t p erfo r m an ce

o f th e o p er ati n g un i ts an d o f th e c o m p an y as a wh o l e Wi th tim e an d .

inf o rm ati o n th u s av ail abl e t h e top team w as equi pp ed to h an dl e th e

,

n ew r an g e o f pr o bl em s cr eated wh en th e m ul tif un ct i o n c om p an y b ecam e

m ulti-in du stry o r m u lticon tin en t in sco p e .

A t th e s am e time th e n ew stru ctur e eas ed th e pro blems of co o rdi n ati o n

,

an d appr ai sal Co o rd in ati n g pr o d u ct H

. o w an d d etermi n i n g co sts in r el a

ti o n to v o lum e as w ell as ad ap tin g pr o duc t d esi gn o r m ak e-u p to ch an g

in g d em an d s w er e all l eft to th e m ul tifu n ct i o n di vi si on s each o per atin g ,

in its o w n cl early d efi n ed mark et T h ei r estim ates of d em an d whi ch set

.
,

th e r ate o f fl o w th r o ugh t h ei r f un cti o n al d ep art men ts an d d eterm in ed

er-u n i t co sts w er e c h eck ed an d suppl em en ted by stafi spe ci al i sts in t h e

p ,

gen eral o ffice A s m eth o ds o f fo r ecasti n g im pro v ed th i s co o rdi n ati on an d

.
,

co st d eter m i n ati o n b e cam e i n cr easi n gly r o u ti n e A l so th ro ugh pr o v i di n g a

.
,

gr eat deal o f in fo rm ati on th e gen er al s taff h elped to assur e co n tact be

,
 HE I N N O VA T I O N
T CREA TI V E S I I

tween th e fu n cti on al dep ar tmen ts regardi n g ch an gi n g m ark et t astes an d

n eed s O th er typ es o f co o rd i n ati o n o f ac ti v i ti es in th e di ff er en t o p er ati n g
.

u nits c ame th ro ugh stan d ardi zi n g pro cedur es in p er so n n el r egul atio n s ,

adver ti si n g publ i c r el ati o n s an d th e l i k e A n d h er e o f c o ur se th e stafi

, , .
, ,

played an i mp o rtan t ro le .

A ppr ai sal o f m ul ti fu n c ti on d i vi si on s pr o v ed to b e m o r e pr eci se th an

th at o f si n gl e-f u n cti o n d ep ar tm en ts D i v i si o n m an ager s d i d n o t d ep en d
.

clo sely o n o th er u n i ts for th e sale o f th ei r pro ducts an d th ei r suppli es o f

materi al s A s teady flo w o f d etai l ed rep o r ts o n all asp ects o f a g i ven d i v i
.

si o n s fi n an ci al p erfo rman c e an d its sh ar e o f th e m ark et pr o vi d ed b o th its

’

man ager an d th e gen eral o fficer s with a u s eful an d co n ti n u i n g ch eck o n

o p er ati n g r es ult s an d ac h i ev em en ts Co m p ar is o n s w er e m ad e w i th th e
.

res ult s o f sim i lar u n its withi n th e en terpr i se such as th e var i o u s auto m o
,

b i le di vi si o n s o f G en er al Mo to r s o r th e Territo ri es at S ear s o r with p ast ,

perfo rm an ce fo r sim i lar s easo n s o r with th e di vision al o r gen er al o ffice

esti m ates an d fo r ec asts fo r th e sam e p er i o d A t all fo ur co m p an i es v i si ts
.
,

b etween th e gen eral office an d th e o p er ati n g u n its s upplemen ted th e

steady flo w o f r ep o r ts .

In th i s w ay th e n ew s tr uct ur e l eft th e d i v i si o n al executi ves to ru n th e

,

bu si n ess wh i le th e gen eral o fli cers set th e go als an d po li ci es an d pro vi ded

,

o ver—all appr ais al T h e d i v isi on m an ager s r esp o n si bl e for th e f u n c ti o nal

.
,

ac ti v i ti es o f th ei r u n it s m ad e d ec i si o n s ab o u t pr i c es ch arged o n sp ec i fi c
,

pro ducts ab o u t design an d qu al ity o f th e ex i sti n g pro ducts an d th e de

,

v elo p m en t o f n ew o n es ab o u t mo r e i m m ed i ate m ark ets an d m ark eti n g

, ,

ab o u t pr o b abl e s o urc es o f supply ab o u t tech n o l o g i c a l i m pr o v em en ts a n d

, ,

fi n ally ab o u t th e flo w of pr o duct f ro m suppli er to co n su m er But th es e .

deci sio n s wer e to b e m ade wi th i n th e framewo rk set by th e broad p o l i cy

gui des an d fi n an ci al budgets th r o ugh wh i ch th e gen er al ex ecu ti ves deter
m i n ed th e pr es en t an d fu t ure allo cati o n o f th e r es o urc es o f th e en terpr i se
as a w h o l e an d w ith i n th e c ar ef ully d efi n ed i n t err el ati o n sh i p s b et w een

th e o p er ati n g u n it s an d th e g en er al o ffic e as i n d i c at ed by th e c o m p an y s
’

st ruc t ur e .

S uch an all o tm en t o f d i ff eren t duti es to th e o u tlyi n g p ar ts an d to th e

cen ter bro ugh t di ff eren t m eth o d s o f deci sio n mak i n g A t th e o p erati n g .

level deci sion s came ultim ately t o b e m ade by o n e r esp o n si bl e i n di vi du al

, .

He m i gh t t urn to co mmi ttees fro m h is o w n staff o r to o p er ati n g m an ager s

fo r advi c e an d i n fo rm atio n b u t th e fi n al deci sio n s rem ai n ed h is A t th e
, .

en tr epr en eur i al l ev el gr o up acti o n an d ev en gr o up d ec i si o n b ec am e th e

,

mo re u s u al pr o cedur e Her e th e pro bl em s co n si der ed w ere mo r e c o m pl ex

.

an d l ess r o u ti n e l o n g-term r ath er th an sh o r t m o r e c o n c er n ed w i th diffi

, ,

cu lties to b e s urmo u n ted an d l ess w ith s p ec i fi c an d i m m ed i at e d em an d s

an d r equ i rem en ts to b e m et In h an dl i n g en t r epren euri al ac ti v iti es th at

.
3 1 2 O RG A N I ZA TIONA L I N N O VA T I O N

call ed fo r th o ugh t gr o up d eci sio n s cam e to b e th e pra cti ce In carryi n g

, .

o u t O pe r ati o n al o n es w h er e qui ck er a cti o n w as d em an d ed in di vi dual deci ,

si on m a kin g pr ed o mi n a ted .

Besi de al lo catin g decision m akin g m o re efi ectiv ely an d assurin g m or e

pr eci se comm un i cati on an d co n tr o l th e n ew structu r e pr o v ed to h ave ao,

o th er a dv an tage o v er th e f un ct i o n ally d ep ar tmen tal i zed o rgan i z ati on It .

pr o vi ded a place to tr ai n an d t est gen er al execu ti v es Un der th e earli er .

st ruct ur e n o o n e b u t a pr esi d en t o r ch airm an o f th e bo ard ev er h ad a

,

co n t in uin g o v er all vi ew o f th e com p an y s afi airs Th e d ep artm en tal vi ce

’
-
, .

pr esi d en ts as m emb e r s of an Ex ecu ti v e Com mi tt ee or o th er sen i o r cen tral

,

O fii ce gr o up mi gh t h a ve som e experi en ce in o ver-all coo rdi n ati on ap

, ,

r aisal an d po l i cy m akin g b u t ev en h er e th ey t en d ed t o b e pr i m aril y co n

p , ,

cer n ed wi th t h eir o w n par ti cul a r fu n cti o n al acti vit y Now all th e di vi .

si on m a n ag er s h ad t o be g en er al i st s r ath er th an s pe ci al is ts an d th us t h ey ,

gain ed exp eri en ce i n run nin g a com pl ex bus in ess It sh o ul d be st ressed .

,

h o wev er th at th e v al u e o f th e st ruct ur e in pr ep arin g test in g an d pro v

, , ,

i n g g en er al o ffi cer s w as onl y a b y pr o duct o f th e ch an ge ; it h ad n o t p recip i

-

ta t ed it Th e r eo rgani zer s at du F o n t an d at J er sey S tan dar d sugg est ed

.

th e v alu e of th e n ew stru ct ur e in d ev el o p in g ex ecuti v e t al en t b ut o nl y as

an aft erth o ugh t o n ce th e d eci si o n t o r eo rg ani z e h a d b een full y a ccep ted

, .

It w as n o t m en ti o n ed by t h e o rgan i zati o n al i nn o v ato r s at G en er al Mo tors

n or at S ea r s R oe buck , .

I n seekin g an d fi n din g ans w er s to th ei r f un d am en tal pr obl em o f ass ur

i n g th e n ecessar y tim e inf o rm a ti on an d p sych o l o gi cal co mm i tm en t to th e
, ,

m en w h o m ad e t h e cri ti cal deci si o n s th e o rgani zati on b uil der s in th ese ,

f o ur co m p an i es pr o vi d ed usef ul clu es t o th e sch o lar s anx i o us t o di sco v er

ex a ctly w h o m ak es so m e o f th e m o st im po rtan t d ecisi ons in th e pri v ate

S in ce m an y b as i c i n dustri es i n A mer
7
sect o r o f th e A m eri can e co n o m y .

ica h av e been d o mi n ated by a h an df ul o f fir m s th e i d en tifi cati o n of th e ,

k ey d eci si o n m ak er s in th ese larg e en t erpri ses is p ar t i cul arly r el ev an t fo r

an un d er st an din g an d ev al u ati o n o f th e r o l e o f th e in di vi du al an d o f

d eci si o n s by in di vi dual s in A m eri can in du stri al gr o w th an d ch an ge Th e .

m en w h o m ak e th e cri ti cal d eci si o n s in an y eco n o m y can be d efin ed as

th o se w h o h av e t h e a ct u al o r r eal r ath er th an m er ely th e l eg al po w er to
, ,

all oca te th e r eso ur ces a v ai l abl e to th em an d w h o in fa ct d etermin e t h e , ,

b asi c go al s an d p o li ci es for th eir en terpri ses C lea rly th e gen er al ex ecu ti v e .

is su ch a m an .

I n th e l arg e co rpo r ati on th e sto ckh o ld er s th e l egal o w n er s l o n g ago , ,

ab di ca ted th i s fu n cti o n T h ey h ad n ei th er th e tim e i nf o rm ati on

. n o r (as , ,

l o n g as th e en terpri se w as p ay i n g di vi d en ds ) th e in ter est t o m ak e th e

b as i c p o licy d eci si o n s Wh at li ttl e th ey di d kn o w abo u t th eir co m p an y
.

w as to ld th em by th e ma n ag er s w h o spe n t all th ei r w o rkin g tim e adm in is

,
THE CREA TIVE INN OVA TI ON 3 3 1

teri n g its aff ai r s Unl ess th ey were al so full-ti me c ar eer ex ecuti ves o f th e
. ,

co n cer n th e m emb er s of th e b o ard o f d i recto rs h ad o n ly a littl e m o r e

,

k n o wl edge an d u n derstan di n g o f th e wo rk i n g s o f th ei r co mp an y th an th e
sto ck h o ld er s T o b e sur e th ey m et m o r e o ft en an d in subco mm i ttees esp e
.
, ,

cially th e fi n an c e co mm i ttee an d c o uld o b tai n m o r e i n fo r m ati o n an d t ak e

,

mo r e ti me to s tudy th e co n di ti o n o f th e en terpr is e Y et th ey to o h ad .
, ,

ne ith e r th e ti me n o s r o urc es o f i n fo r m at i o n i n d ep en d en t o f t h e f ull -ti m e

execu ti v es T h ey too w er e o ccup i ed w i th th ei r o w n bu si n ess a cti v i ti es

.
, ,
.

O f co ur s e w h en ev er co mp an y s d i v i d en d s sto pp ed an d r ecei v er sh i p
’

lo o med th e b o ard an d th e l arge sto ckh o lder s c am e ali ve O n ly th en di d

,
.

th ei r ulti m ate au th o r i ty b ased o n th e l eg al san c ti o n s o f pr i v ate pr o p er ty

, ,

come in to play But ev en th en th ey h ad l ittle ch o i ce excep t to h i re a n ew

.
,

set o f ad mi n i st r ato r s T h u s th e m em b er s o f th e b o ard u n l es s th ey w er e

.
,

f ull-ti m e ex ecu ti ves of th e co n cer n wer e as m uch c ap ti ves o f th e p ro fes

,

si o u al en t r epr en eur s as w er e th e s to ck h o ld er s A s th e d i r ecto r s o f A m er .

i ca s l argest n i n eteen th cen t ury bu si n ss co rp o r ati n th e Pen n sylv an i a

’
- e o —

R ai lroad — n o ted as early as 1 874 : T h e pr esen t fo rm o f o rgan i z ati o n

“

p ar t-ti m e di r ec to r s an d f u ll -ti m e o ffic er s m k es pr ac ti c al ci p h er s o f th e

[ ] a

Di r ecto r s an d this is f r o m n o d eli b er ate i n ten ti o n bu t f r o m t h e very

, ,
” 8
n ec essiti es o f th e c ase O n ce a l arge bu si n ess h ad r each ed a si ze th at
.

requi red th e s ervi ces o f several full-ti m e admi n i str ato r s th e b o ard an d ,

th e sto ck h o ld er s h ad o n ly a n eg ati v e o r v eto p o w er o n th e go v er n m en t

o f t h ei r en terpr i se an d o n th e allo c ati o n o f its r eso urc es T h ey co uld .

say n o , but th ey h ad n eith er th e i n fo rm ati on n o r th e awar en ess o f th e

co mp an y s situati o n to pro p ose r eali sti c alter n ati ve co ur ses o f acti o n
’
.

Bu t if th e sto ckh o lder s an d th e b oard b ec am e c ap ti ves o f th e full-ti me

admi n is tr ato r s w ere n o t th e pr o fessi on al en tr epr en eur s th em selves cap
,

tiv es o f thei r s ub o rd i n ates ? Wer e n o t th e i n fo rm ati o n an d al ter n ati v es

av ai l abl e t o th e to p m en d eter m i n ed p o ssibly qui te u n co n sci o u sly by

, ,

j u n i o r executi ves do wn th e li n e ? Mu st n o t th en th e en terpri se o r th e

o rgan i z ati o n as a w h o l e b e c o n si d er ed r esp o n si bl e fo r th e b asi c ec o n o m i c

deci sio n s ? If th is is so th en n o i n di vi du al or team o f i n di vi du al s can b e

,

i den ti fi ed as th e k ey dCCl Sl O I l mak er s in th e pri v ate s ecto r o f th e A meri can

‘

9
ec o n o m y .

T h e ad m i n i str ati ve exp er i en c e o f th e fo ur co mp an i es s tud i ed h er e

ch allen ges th i s last vi ew T h e m en r esp o n si ble for th e allo cati o n an d u se
.

o f f u n d s for th e t r an sfer o f p er s o n n el
, an d fo r th e c o n tr o l an d u se o f
,

equi p m en t can b e i d en ti fi ed at each ad mi n i str ati v e l ev el T h e d ep ar tm en t .

head s in th e cen tr al o ffi ce wh o m ade th e b asi c d ecisi o n s in a l arge en ter

,

pr i se u n ti l th e creatio n o f a gen er al o fii ce in r ecen t years m ay h ave re ,

ceiv ed th ei r i n fo rm ati o n an d th e sel ecti o n o f a l ter n at i v e acti o n s f r o m th ei r

sub o rdi n ates in th e d ep ar tm en t s Bu t u n li k e th e sto ck h o ld er s an d b oard

.
3 4
1 ORG A N I ZA TIONA L I N N OVA TI ON

m emb er s, th ey h ad m o r e o ppo rt uni ty an d m o r e t ech ni cal com pet en ce t o

ev al u ate th e inf o rm ati o n an d t h e pr op o sal s .

M o r eo v er th e b asi c decisi ons us u ally con cer n ed m o r e th an on e dep art

,

m en t T h er ef o r e th e in f o rma ti o n an d r ecomm en dati o n s f r om o n e d epa rt

.

m en t h ea d co uld b e ch all en ged by o th er s If th e pr esi d en t h ad th e fin al

.

deci si on h e n eed n o t be th e cap ti ve o f an y on e gr o up Th er e w as l ess

, .

dan ger th at th e ex ecu ti v e commi tt ee w o u ld be com e a rubber stam p th an ,

th er e w as th at its d eci si o n s an d th e r es ul tin g all o cati o n of r eso ur ces

wo uld be b ase d on a r elati vely n o n r ati o n al n ego ti ated com pr omi se b e

'

t w een d ep art men ts N ev erth el ess, th e da ta on whi ch th e ex ecu ti v e co n}

.

mi tt ee i n a cen tr ali zed f u n cti o n ally dep artmen tal i zed stru ct ur e a ct ed di d
,

com e fr o m b i ased so ur ces A n d tw o or thr ee b i ase d pr o po sals certain ly

.

di d n o t au tom ati ca lly pr o duce a so un d un b i as ed o n e A l so as th e du Fo n t .

,

an d J er sey st o ri es em p h as i ze, su ch slan t ed i n f o r m ati o n m a d e o bj ecti v e

appr aisal o f d ep ar tm en tal perf o rm an ce difficul t In th e cen tr ali z ed, f un c

.

tio n all y d epa rt m en tal i zed st ruct ur e, th er ef o r e, th e i den tifi ca ti o n o f th e

act ual o r r eal d ecis i o n m ak er s is oft en di ffi cu l t .

T h e cr eati o n of th e n ew struct ur e wi th its gen er al office an d its several

m ul tif u n ctio n di vi si o ns di d m ak e i den tifi cati on eas i er Th e ex ecu ti v es in .

th e g en er al o fii ce, f r eed f r om all b u t th e en tr epr en eur i al r espo ns i b ili ti es,

h ad f ull tim e to spe n d o n plann in g an d appr ai sal Fr om th e staff th ey .

r ecei ved in depen den t inf o rm ati on as a ch eck on data f rom t h e di vi sions
an d an al tern ate so ur ce f o r d ev el o p in g po li cy pr o po sa l s an d r ecomm en

dati on s Th e r epo rts f r om th e di visi on s ten ded to gi v e o bj ecti ve, imper

.

so n al data on r et urn o n in v est men t an d on m ark et perf o rm an ce Th e .

gen eral ex ecu ti v es th en w er e r el ati vely i n depe n den t of th ei r su bo rdinates .

A n d sin ce th ey sti ll pr o vi d ed th e b o ar d an d th e st o ck h o lder s an d, of

,

co ur se, any go vernm en t o r r egul a to ry agen cy wi th wha tev er detail ed

data ab o u t th e com p an y th ese gr o up s mi gh t w an t th eir a cti ons wer e ,

co n tr o ll ed o nl y n egati vely by th eir l egal sup eri o r s Th e gen eral ex ecu ti ve

.

o f th e lar ge co rp o r ati o n is th en as cruci al an d i den ti fiabl e a fi gur e in

mi d-tw en ti eth cen tury eco n om y as A dam S mith s cap i tal ist w as in th e
’

l ate ei gh teen th cen tury an d l ean B ap ti ste S ay s en tr epr en eur in th e

,
’

early ni n e teen th .

OR GAN IZ A TI ON AL IN NOV A TORS

Un l ess uctur e fo llo ws strategy in efiicien cy r esul ts T h is certainl y

str ,
.

ap ear s to b e th e l esso n t o b e l ear n ed fr o m th e ex per i en ce o f o ur f o u r

p
co mp ani es V o lum e exp ansi on geo gr ap hi cal di sper si o n v erti cal in tegra
.
, ,

ti o n, pr od uct di v er sifi cati o n an d co n tin u ed gr ow th by an y of th ese

,

b asi c str ategi es lai d an in cr eas i ngly h ea vy l o ad of en tr epr en euri al d eci si o n

ORGA NI ZA TIO NA L INNOVA TORS 3 5
1

mak i n g on s en io r execu ti ves If th ey fai led to re fo rm th e l i n es o f

th e .

au th o rity an d c o mm u n i c ati o n an d to d ev elo p i n fo rm ati o n n ec ess ary

fo r admi n is tr atio n th e execu ti ves th ro ugh o u t th e o rgan i zati on were

,

drawn deeper an d deep er i n to o p er ati o n al acti viti es an d often were

wo rk i n g at cro s s purp o s es to an d in co n fli ct with o n e an o th er .

Y et st ructure o ften fai led to fo ll o w s trategy In each o f th e fo ur co m

, .

p an ics th ere w as a ti m e lag b etween th e appearan ce o f the adm i n istrati ve

,

n eed s an d th ei r s atis fac ti o n A pr i m ary reaso n fo r d el ay w as th e very

.

fac t th at r es p o n si ble execu ti ves h ad b eco me to o en mesh ed in o p er ati o n al

acti v iti es Nev er th el ess s o me o f t h em d i d b ec o m e c o n sc i o u s o f th e n ew
.
,

an d gr o w i n g ad mi n ist r ati v e n eed s an d d i d t ak e th e ti m e aw ay f r om

o p er ati on al w o rk to st udy th e pr o bl em s f ac i n g th e en terpr i se o r app o i n ted

o th er s to do so Wh at th en . cau s ed th ese execu ti v es to b e mo re aware

, ,

o f ad mi n i st r ati v e n eed s an d pr o bl em s an d so t ur n ed th em to o rg an i z a

tio n al i n n o v ati on ?

A n Organ izatio n Bu ilder s Peiso n ality a n d Train in g

’

T h e fo ur c as es s uggest th at th e em p i r e bu i ld er r arely b ec am e an o rgan

iz atio n bu i lder Co leman du Po n t, Wi ll i am C D uran t, an d Ri ch ard Sear s
. .

p ai d very l ittle atten tio n to o rgan i zatio n al struct ure O f th e th ree, Co le.

m an w as mo s t aware o f th e n eed fo r st ruct ur e, yet even h e left its creatio n

an d th en th e m an agem en t o f th e en terpr is e to h is y o u n ger c o u si n T h ese .

th r ee m en w er e ex tro v er t s D ur an t an d S ear s w er e b o th br i llian t s al es m en ,

.

an d f b o th Co l em an du Fo n t an d B i lly D uran t, th ei r ass o ci ates often

o

s ai d th at th ey co uld ch arm th e b i rd s ri gh t o u t o f th e t rees .

Walter T eagle an d Ro b ert Woo d were in m an y w ay s li ke th o s e earlier

i n du stri al em p i re bui ld er s B o th en l arged th ei r co m p an i es do mai n s
.
’

greatly Perh ap s if T eagle h ad b een in o n e of th e man y n ewer o il fi rm s

.

r ath er th an in th e mo st v en er able of th em all, h e migh t h ave fo u n d a

s ti ll bro ader sco pe fo r h is talen ts He to o w as an o utstan d i n g s alesman ,
.

an ex ecu ti v e w h o l o o k ed o n th e w h o le w o rld as h is fi eld o f b att l e, an d

a m an w h o m o t h er s gl a dly fo llo w ed Bu t u n l i k e th e mak er s o f n ew bu si

.

n ess d o m ai n s, T eagl e b ec am e en tan gl ed in O p er ati n g d etai l s He h ad as .

little time fo r plan n i n g an d carryi n g o ut J er sey s strategy o f exp an sio n ,

’

an act i vi ty th at h e th o ro ugh ly en j o y ed as h e h ad fo r d esi g n i n g h er

,

o p er ati n g stru ctur e, a m atter th at i n terested h im h ardly at all .

G en er al Wo o d , a m an o f great p er s on al w ar mth an d ch arm, c am e

cl o sest to b ei n g b o th an emp i re an d an o rgan i zati o n bu i lder His s uccess .

s pran g fro m h is ab i li ty to avo i d tacti cal matter s an d to co n cen tr ate on

r gi c o n es Mo r e th an an y o th er ex ecuti ve s tudi ed h er e h e kept
st ate .
,

h i m sel f al er t to b o th i n ter n al n eed s an d ex ter n al o p po rtu n i ti es Po ssi bly .

it w as sim ply b ecau s e o f th i s s up erl ati ve co m peten c e th at Woo d w as

3 1 6 O RG A N I ZATIONA L I N NO VA TIO N

u n able to appr eci ate th e n eed to develo p man agemen t in depth an d

to d efi n e th e cl ear — cu t li n es o f auth o r i ty an d c o mm u n i cati o n th at w er e so

n ec essary if m en o f so mewh at l es ser t al en ts w er e to adm in i ster eff ecti vely .

T h e ex ecu ti ves w h o f o rm ul ated th e pl an s fo r go v ernin g th e emp ir es

wh i ch Co lem an du Po n t D uran t an d S ear s created an d th ose th at T eagle
, ,

an d Wo o d exp an d ed w er e a difi eren t so r t A t l ea st th ey left a difi eren t .

im pr es si on on th ei r co n temp o r ar i es Pi err e du Pon t H arry H as kell .

, ,

D on ald son Br o wn A lf r ed S l o an Fr an k Ho w ard Edgar Cl ar k J am es

, , , ,

B ark er an d T h eo do re Ho u ser were m o re r eserved th an th e empire

,

bui lder s stu died h er e an d h ad a mo r e studio u s appro ach to busin ess

,

pro blem s Th ei r r an ge o f acqu ai n tan ces w as n arro wer an d th ey were les s

.
,

i n vo lv ed in ext r acurr i cul ar ac ti viti es .

T h ese ex ecu ti v es cl osely r esem bl ed th e pr o fes si o n al admi ni s tr ato r s o f

to d ay Wi th th e excep ti on o f Pi err e du Po n t th ey di d n o t co n tr o l o r
.
,

ev en o w n l arge bl o ck s o f sto ck in th e c o mp an y th at th ey m an aged A gai n .

ex cep t for Pi err e h is br o th er s; a n d br o th er s—in -law t hey h ad n o family

'

, ,

ti es wi th th e l arg e sto ckh o lder s A t th e sam e tim e th eir c o m p an i es b ecam e

.
,

th eir c ar eer s th ei r ca lli n g s an d th ei r li v es T h ey di d n o t ev en h ave an y

, , .

o u t si d e bu si n es s i n t er ests .

No r h ad an y o f th e o rg an i zati o n bui lder s h ad v ery m uch exp eri en ce

in o th er co m p an i es o r i n du s tr i es b efo re j o i n i n g th e co mp an y h e cam e to
a dmi ni ster Y et n early all o f th em h ad m o r e o u tsi d e exp er i en ce th an th eir
.

s ucc esso r s o r th e pr o fes si o n al ex ecu ti v es o f to d ay Pi err e du Po n t h ad .

sp en t th r ee y ear s in st eel an d el ec tr i c r ai lw ay s an d m an y o f h is a sso ci ates ,

h ad h ad th ei r start in th e steel electri cal o r r ai lw ay busi n esses O n th e

, ,
.

o th er h an d th e ex ecu ti v es w h o en gi n eer ed th e du Po n t r eo rgan i zati o n s

,

in 1 9 1 9 an d 1 92 1 h ad sp en t n early all th ei r bu si n ess car eer s in th e exp lo

siv es i n du stry an d in th e du Pon t Co m p an y i ts elf A t G en er al Mo to r s .
,

th e o rgan i z ati on bu i ld er s h ad gr o w n up wi th th e au to m o b i l e bu si n ess

o r h ad c o m e f r o m th e du Pon t Co m p an y A t J er sey H o w ard c am e to th e .

,

o il c o m p an y aft er pr acti ci n g p aten t l aw an d C l ark w as r ecru i ted f ro m ,

S tan d ard O il o f In d i an a A t S ears mo r e o u tsi d e talen t w as in vo lved in

.
,

th e o rg an i z ati o n al ch an ges th an at an y o f th e o th er co m p an i es B ark er .

,

Ho u ser Do dd an d o f co urse Frazer all h ad h ad fai rly bro ad busi n es s

, , , , ,

c areers O n e o th er w ay in wh i ch th ese m en di ffered fro m th e m o der n

.

pro fessi on al m an ager s w as {t h e sh o rter l en gt h of ti m e th ey sp en t in

climbi n g th e admi nis trati ve l adder wi th i n th ei r en terpri ses .

T h e f act th at th e o rg an i zati o n al ch an ges in th e fo ur co m p an i es studi ed

h er e w er e m ad e by pro fessi o n al admi n i str ato r s r ath er th an by o u tsi de
o w n er s m ad e th o se ch an g es m o r e d iffi cul t to ca rry o u t H i sto r i cally l arge .
,

co rpo rate or bureaucrati c h i er arch i es rarely t e—fo rm th em selves Th e rela .

ti v e ease an d sp eed wi th wh i ch th e s truct ur al c h an g es cam e at du Po n t

O R G A N I Z A TI O NA L IN NO V A TO R S 3 7
1

an d G ener al Mo to r s as co m p ar ed with J er sey an d S ear s str ess ed th er efo r e

th e v alu e o f an alyzi n g th e di ff er en t appr o ach es by wh i ch th e sam e br eed

o f pro fes si o n al m an ager s h an dl ed th e s am e b asi c pr o bl em s of m an agem en t .

Som e co rrel ati o n s eem s to exis t b etw een th e educ ati o n an d t r ai n i n g o f

th e ex ecu ti v es an d th ei r appr o ach to o rg an i z ati o n al n eed s M o st o f th e .

m en w h o sh o wed th e gr eates t i n terest in sy stem ati zi n g an d expli cit ly

defi ni n g o rgani zati o n al r el ati on sh i p s h ad h ad en gi n eer i n g t rai n i n g Pi err e .

du Po n t, A l fr ed S lo an , Fr an k McG rego r o f du Po n t, an d J am es B ark er

o f S ear s w er e all M I T gr adu ates B arker h ad even served o n th e
. . . .

en gi n eer i n g f acul ty o f th e In sti tu te G en er al Wo o d h ad h ad en g i n eer i n g

.

trai n i n g at West Po i n t Don ald so n Bro wn l i k e S lo an w as a t rai n ed

.
, ,

el ec tr i c al en gi n eer w i th a d egr ee fr o m V i rg i n i a Po ly t ech n i c In sti t u t e

an d gr a du ate wo rk at C o r n ell Fl et ch er Br o w n b eg an as a s c i en ti st r ath er

.

th an as an en gi n eer He h ad st ud ied ch em is try at H arv ard an d b efo re

.
,

com i n g to du Po n t h ad sp en t s ever al y ear s at th e Naval T o rp edo S tatio n

,

in Newp o r t Rh o d e Isl an d exp er i m en ti n g w ith a s m o k el ess p o wd er H arry

, ,
.

Haskell h ad studi ed mi n i n g en gi n eeri n g at Co lumb i a A mon g th e o th er .

du Po n t o rgan i z ati o n bu i ld er s H ami l ton B ark sd ale J o h n L Pr att an d

, , .
,

A n gu s Ech o l s w ere all ci v i l en gi n eer s f r o m th e U n i v er si ty o f V i rg i n i a

10
.

Willi am C Spru an ce h ad gradu ated fro m Pr i n ceto n as an electri cal

.

en g i n eer A t S ear s H o u ser w ith a d egr ee in el ectr i c al en g i n eer i n g fr o m

.
, ,

Io w a h ad so mewh at th e sam e educ ati o n al b ackgro u n d as Wo o d an d

,

B arker T h e tw o men at Jer sey w h o th o ugh t mo st alo n g o rgan i zatio n al

.

li n es h ad b o th b een t rai n ed as en gi n eer s Ho ward at G eo rge Wash i n gto n ,

Uni ver sity an d S adler at th e Naval A cademy .

Th e si gn i fi c an ce o f thi s co rrel ati on b etw een educ ati o n an d o rg an i z a

tio n al aw ar en ess is u n c er tai n Po s si bly th e r i go r r equ i r ed in w o rk i n g o u t
.

s ci en tifi c an d en gi n eeri n g pro blem s led th ese m en to appro ach m an age

men t n eed s in s o mewh at th e same w ay A l so in th ese y ear s en gi n eer s .
, ,

were b egi n n i n g to co n si der th e u se o f m en in wo rk i n g th e machi n es an d

n o t j u s t th e m ech an i c s o f th e m ach i n es th em selv es S o it m a b e th at th es e
y .

m en lear n ed at th ei r en gi n eer i n g s ch o o l s so m ethi n g o f th e v alue o f sys

tem atic i n du str i al o rg an i z ati on .

In an y case th e co n n ec ti on b etw een th e en gi n eer i n g pr o fession an d

,

th e r ati o n ali z i n g an d sy stem ati zi n g o f i n du s tr i al ad mi n i str ati on in t h e

Un i ted S tates h as b een clo se Frederi ck W T aylo r s sci en tifi c m an age

. .
’

men t tech n i qu es w ere th e b est-k n o w n ex ampl e o f th e i n tro ducti o n o f

en gi n eer i n g i d eas i n to m an ag em en t Wh i le T ayl o r d eal t pr i m ar i ly w i th
.

sh o p o rg an i z ati o n s an d h ad l i ttl e co n c er n w i th th e l arg er struc tur e h e ,

an d h is d is c i pl es c er tai n ly s h o w ed m uch th e sam e appr o ach an d o u tl o o k

as m an y o f th e o rg an i z ati o n al i n n o v ato r s st ud i ed h er e Wh at w as n ew .

ab o u t th e s c i en ti fi c m an agem en t m o v em en t wr i tes H ugh G A i k

J t e
,
n : . .
3 1 8 O RG A NI Z A TI O NA L I NNO VA TI O N

w as th e delib erate exten sio n o f ratio n al ism to th e an alysis

self-conscio us an d
of in dustr ial w o rk It is n o co in ciden ce th at T aylo r an d mo st o f h is immedi
.

ate d iscip les w ere en gin eers for it w a s b y w ay o f en gin eerin g th at sci en tifi c
,

an alysis h ad m ade its m o st p o w erfu l an d con tin u in im t i d tr ial

g p ac u
p o n n us

pro du ctio n T h ey accep ted w ith o u t qu estio n th e en gin eerin g ap p ro ach th at

.

h ad al ready pro ved itself in th e design o f ph ysical o bj ects an d th ey ex ,

ten ded it to th e an alysis an d con tr o l o f th e activities o f p eop le

11
.

En gi n eer swer e al so amo n g the very fir st to publi sh an alys es o f o rgan

izatio n al struc tur e for en terpr i ses l arger th an a facto ry In 1 9 1 1 Ch arles .
,

B G o i n g a tr ai n ed en gi n eer an d m an agi n g edito r o f Th e En gin eerin g

.
,

Magazin e publi sh ed h is Prin ciples of I n dustrial E n gin eerin g in New

,

Yo rk Ci ty A n o th er p i o n eer in o rgan i zati o n al an alysi s w as Dexter S

. .

Ki mb all pr o fesso r o f mach i n e desi gn an d co n structi o n at Co rn ell wh ose

, ,

Prin ciples of I n du strial Organ iz atio n w as publis h ed tw o y ear s l ater Th ese .

b o o k s an d oth er s by pro fes sio n al en gi n eer s suggest th e si gn ifi can t ro l e

en gi n eer i n g s c h o o l s an d j o ur n al s pl ay ed in th e early effo r ts t o r ati on ali ze

m an agem en t o rgan i za ti o n Wh i le su ch wr iter s w er e f ully aw are o f

.

Tayl o r s wo rk th ey di d n o t b o rr o w o r deri ve m an y o f th ei r i d eas

’

di rec tly fr o m h im or h is di sci ples an y mo re th an di d H en ry F o rd s ’

en gi n eer s w h en th ey fash i o n ed th e assembly li n e o r pl an n ed th e H i gh l an d

Park pl an t 12
Wh at T aylo r th e Fo rd en gi n eer s th e en gi n eeri n g j o ur
.
, ,

n alists an d pr o f ess o r s an d th e o rg an i z ati o n bu i ld er s h er e s tudi ed h ad in

,

co mm o n w er e n o t s p eci fi c i d eas t ech n i qu es o r m eth o d s b u t r ath er th e, , ,

s ame rati o n al self—c o n sci o u s appro ach to th e man agem en t of men

, .

Un do ub tedly mo r e im p o rtan t th an co llege tr ai n i n g in develo p i n g the

r ati o n al an alyti cal vi ew of th e problem s of bu sin ess an d i n du stri al admi n
,

istratio n w er e th e atti tud es exi sti n g with i n th e en terpr i se i tself Fro m th e .

ti me o f its re-fo rm ati o n in 1 902 o n th e du Po n t Co m p an y h eld an ,

en gi n eer i n g appr oach to m an agem en t an d bu si n ess pr o bl em s Th ese .

rati on al an d system ati c ways wer e cl early evi den ced at th e mon th ly meet
i n gs o f B ark sdale s S m o k eless Po wder O p erati n g D ep artmen t wh ere
’
,

p ap er s were r ead th at an alyzed m an uf acturi n g m eth o d s c arefully by

co m p ar ati v e stati sti c s o r di scu ss ed th e creati n g o f stan dards o r explai n ed
, ,

devi ati o n s fro m th e stan d ard s By 1 9 1 1 B ark sd al e s staff already i n cluded

.
,
’

13
a L ab o r Effi c i en cy D ep ar tm en t T h i s same p ai n stak i n g appr oach w as
.

u sed in bu ildi n g th e S ales Dep artmen t o r in i n vestigati n g n ew fi elds fo r

th e c o m p an y to en ter in its d i v er si fi c ati o n pro gr am after 1 908 Wo rk i n g .

in th is so r t o f atm o sp h er e d evel o p ed in m en l i k e Walter C arp en ter an d

Fr ederi ck Pi ck ard w h o were n o t en gi n eeri n g-trai n ed th e sam e rati o n al
, , ,

s y stem ati c appro ach O n th e o th er h an d Co lem an an d A lfred du Pon t

.
,

w h o alth o ugh M I T gr adu ates h ad n o t b een tr ai n ed in th e n ew da Po n t

, . . .
,
O RG A N I ZA TI O NA L I NNO VA TO Rs 3 9
1

Co mp an y, di d h av e th is co ld, an alyti c al, o ft en i m p er s o n al w ay o f

n ot

goi n g ab o ut th e comp an y s bu si n es s ’
.

G en er al M o to r s d i d n o t d evelo p a si mi l ar i n s ti tu ti o n al eth o s u n ti l after

Duran t h ad dep arted an d S lo an , Pi erre du Po n t, an d Do n ald so n Bro w n
h ad mo e in
v d By h
t e
. m id - w en ti es
t , th e appr
o ach at G en er al M o to r s h ad

b eco me m uch l i k e th at o f du Po n t A n d h er e agai n , men w i th o u t en

.

gin eerin g t rai n i n g develo p ed an en gi n eeri n g appro ach A t S ear s an d .

p arti cul arly at J er sey th e systemati c atti tude w as n ever so o bvi o u s ; th ese
,

co mp an ies h ad fewer en gi n eer s in th e to p r an k s But even after Jer s ey .

b egan to recru it men fro m M I T an d o th er en gi n eer i n g s ch o o l s th e

. . .
,

mo re i n fo rmal p er so n al appro ach con ti n u ed

,
.

A pp aren t ly a co rpo r ate p er so n al i ty r esults fro m th e i n ter acti o n o f th e

n at ure o f th e bu si n ess an d th e educ ati o n an d p er so n al i ti es o f th e s en i o r

ex ecu ti v es U n d o ub tedly th er e w as m o r e sci en c e an d en gi n eer i n g i n v o lved

.

in th e early y ear s o f th e ch em i c al an d even th e au tom o b i le i n du str i es t h an

in th o se o f th e p etro leu m o r vo lu me m erch an d i si n g t r ad es C er tai n ly du .

Po n t h i r ed m an y mo r e tr ai n ed en gi n eer s an d u sed th em mo re in to p
man agemen t th an di d an y o f th e o th er th ree co m p an i es stud i ed Wh at .

ever th e r eas o n th e d i ffer en c es in th e eth o s o r th e p er s o n al i ty o f eac h o f

,

th ese co m p an i es sti ll p er si st as ev en a s h o r t v i sit to each c o m p an y do es

,

em p h asi z e N ev er th el ess th e r ati o n al an aly ti c al o u tl o o k o f th e du Po n t

.
, ,

Co mp an y h as b eco me in recen t y ear s th e mo r e accep ted w ay in A mer i

, ,

can bu si n ess .

O u r o rgan i zati o n al i n n o v ato r s t en d ed to h av e an o th er co mm o n ch ar

acteristic b esi d e th ei r en g i n eer i n g b ackgr o u n d o r atti tud es T h ey w er e .

rel ati vely yo u n g an d h ad n o t b een lo n g in th e p o si ti o n s t h ey h eld at th e

ti m e th at th ey b ecam e i n ter es ted in o rg an i z ati o n al ch an ge T h e m en .

w h o m ad e th e i n i ti al s tructur al i n n o v ati o n s in 1 902 an d 1 903 at du Po n t

were in th ei r th i rties an d early fo rties T h is w as tru e excep t fo r Fletch er
.
,

Bro wn o f th e m en w h o p u t th ro ugh th e structural r eo rgan i zati o n in

,

th e sam e c o m p an y sev en teen an d ei gh teen y ear s l ater S l o an w as fo r ty .

fo ur wh en b e devi sed h is o rgan i z ati o n study an d h is tw o k ey as si stan ts ,

in pu tti n g th e pl an i n to actio n D o n ald so n Bro w n an d Jo h n Lee P r att

, ,

were a goo d bit yo u n ger T h e Fr a zer Co mm ittee at S ear s i n cluded m en

.

in th ei r l ate t h i r ti es an d m id-fo r ti es A t J er s ey th e B o ard w as o ld er an d

.
, ,

it seem s si gn i fi c an t th at th e ch an ges th er e co uld n o t r eally b e c arr i ed o u t

u n ti l th e o ld m an agem en t w as r eti red an d r epl aced by an al m o st co m
p le te ly n ew se t o f g en er a l o fi
f cer s Mo reo v er at S ear s du Po n t an d
.
, , ,

G en er al M o to rs th e o rg an i z ati o n al ch an ges all c am e sh o rtly after a

,

sw eep i n g c h an ge in to
p m a n a g em en t .

Th e exp eri en ce o f th ese i n n o vati n g fi rm s suggests th en th at o rg an , ,

320 ORG A N I ZATIONA L I N N O V A TI O N

iz atio n al ch an ges w ere mo st eff ecti vely un dertak en by m en w h o h ad n o t

y e t i d en t i fi ed th em selv es w i th o n e c er tain p atter n o r r o l e o f a cti on A .

redefi ni ti o n o f r el ati on shi p s wi thin th e co rp or ate so ci ety — even th o se

th at d efi n e po w er o v er th e d ai ly w o rk an d f ut ur e d estin i es o f m o st o f

th e m em b er s o f th at in sti tu ti o n — w er e r el ati v ely easy to f o rm ul ate T h e .

ac ti o n s an d a cti vi ti es o f specifi c in di vi du als pr o v ed h ard er t o al ter N ew .

st ruc tur es an d n ew st r ategi es too were b est buil t an d carri ed o u t by

, ,

yo un ger ex ecuti ves w h o h ad o nl y r ec en tly en ter ed to p man agem en t

, ,

b u t w h o h ad h ad exp er i en ce in th ei r co m p an y s g en er al bu si n ess an d
’

wh ose car eer s h ad n o t been wh olly co nfi n ed to wo rk wi th th at o n e fir m .

Co n v er sely o n e o f th e primary r eas o n s s truct ur e w as slo w to fo llo w

,

str at egy w as th at th e exi stin g m an ag em en t w as un abl e to ch an ge its

way s Thi s w as n o t app ar en tly b ecau se th ey fel t th at t h eir pr esen t po si

.

ti o n s o f po w er w er e b ein g ch all en g ed O n ly f o r a f ew ex ecu ti v es such as

.

th e o ld r efi n er s at J er sey d o es thi s app ear to h ave been th e ca se O f

, .

co ur se such atti t ud es are n o t l i k ely to b e r ev eal ed in co m p an y r eco rds .

Y et th e p sych o l ogi c al h azards of adj u stin g to n ew w ay s n ew tem po s , ,

an d n ew du ti es seem to h av e been a m o r e si gni fi can t bl o ck to st ruct ur al

ch an ge th an a co n cern fo r dimin i sh ed po wer an d pr estige .

S o u rces o f I n for m atio n

In r eo rderin g th e structur e of th ei r in sti tu ti o n s wh at di d th e yo un g
,

seni o r pr o f essi o n al admi ni str ato r s wi th th ei r en gin eer in g appr o ach br i n g

to t h e pr o bl em s o f o rg ani zati o n besi d e th ei r o w n abun d an t en er gy an d

imm edi ate exper i en c e ? A t J er sey an d G en er al Mo to r s th e an sw er seems ,

”
to h av e b een — v ery li ttl e S l oan s O rgani zati on S tudy w as an an s w er
’ “
.

to pr essin g pr obl em s b ased o n h is o w n exp er i en ce at H y att an d Un i ted

Mo to r s Th ere is n othin g in th e av ail able evi den ce to suggest th at h e

.

b orro wed fr om o utsi de .

J er s ey ac t ually di d h ave so m e dir ect exper i en ce with th e sci en tifi c

”
m an agem en t m o v em en t In 1 922 T eagl e an d th e B o ard h ir ed F A
.
,
. .

Parkh ur st o n e o f th e acti v e pr acti ti o n er s o f T ayl o r s m eth o d s t o in tr o

’

, ,

du ce th e system in cludi n g tim e an d m o ti o n studi es bo n u ses an d so

“

, , ,

14
f o r th at th e B ayw ay R efi n ery
, A ft er tw o y ear s T eagl e d eci d ed to dr o p
.
,

Parkh ur st l arg ely becau se o f th e r esi stan ce o f th e wo rk er s S o m e o f

,
.

P ark h ur st s pl an s w er e r etai n ed at th e gr eat r efi n ery b u t th e w o rk in

’

sci en tifi c m an ag em en t d o n e th er e appear s t o h av e h ad ab so lu tely n o

imp act o n th e structur al ch an ges th at began at J er sey in 1 925 Sin ce .

T eagl e di d n o t co n si d er J er sey s difficul ti es to b e o rgan i za ti o n al n ei th er

’
,

h e n o r fo r th at m atter hi s m o r e o rg an i zati o n —m i n d ed ex ecu ti ves lik e

, ,

C l ar k o r H o w ard saw an y co n n ecti o n betw een r eo rg an i zin g a pl an t an d

r esh ap i n g th e struc tur e o f th e en tir e corpo r ati o n .
O RG A N I ZA TI O NA L I N NO VA TO RS
32 1

F or th e me
r easo n s T eagl e an d h is asso ci ates app ear to h av e m ade
sa ,

f h i i g l i r ur rg i z i By h mi d
’
t t t t t t -
n o u se o e e x s n e a e on o a n a o n e
9
1 20 s a .
,

great deal w as bei n g wri tten o n th e pr oblem s o f structur e in such per i o di

cals as Man agemen t an d A dmin istratio n an d in th e pro ceedi n g s o f th e
A m er i can M an agem en t A sso ci atio n as w ell as in en gi n eer i n g j o ur n al s ,

an d b oo k s Wh i l e th er e w as v ery l i ttl e sp ec ifi cally on th e d ec en t r ali z ed

.

typ e o f stru ct ur e un ti l th e publi cati o n o f th e arti cl es by G en er al Mo tor s

ex ecuti v es in th e spr i n g o f 1 924 an d n o t r eally u n ti l aft er D o n al ds o n

Bro wn s arti cle o n D ecen tr ali zed O p er ati o n s an d R esp o n sib iliti es with
’ “

”
C oo rdi n ated Co n tr o l in 1 2
9 7 m uc h i n f o rm ati on di d exist o n th e o rg an
,

izatio n o f i n di vi du al f u n cti o n al d ep artm en ts

15
Wh at evi den ce sti ll exi sts .
,

all i n di cat es t h at T eagl e an d h is asso c i at es c o n si d er ed mo st o f J er s ey s

’

pro bl em s to b e u n i qu e an d on es wi th wh i ch o u tsi d er s c o uld pr o vi de

li ttl e h elp .

A t du Po n t an d S ear s th er e w as m uch m o r e aw ar en es s of o u tsi de

,
—

exp eri en c e ex am pl es an d i d eas Th e m en i n v o lv ed in th e r e cr eati o n o f

, , .

th e du Pon t Co m p an y in 1 903 h ad h ad br o ad exp er i en c e in th e s teel ,

el ect r i cal an d mi n i n g as w ell as expl o si v es i n du str i es Thi s w as u n d o ub t

, , ,
.

edly o n e r easo n w h y th e in iti al struc t ur e at du Pon t is such a goo d

ex ampl e o f th e o rgani zati o n al f o r m o f th at p er i o d an d o f an ad ap ti v e

res po n s e to n ew n eed s an d ch all en ges Th e H ask ell Co mmi ttee in its .

,

reo rgan i zati o n pl an of 1 9 1 9 m ade a car ef ul st udy o f th e pr acti ces o f o th er

,

comp anies Its r ep o rt al so sh o w ed a k n o wl edge o f th e t erm s an d i deas

.

then cur ren t in th e li ter atur e on o rgan i zati o n al th eo ry an d practi ce as ,

sp ell ed o u t by s uch wr i ter s as G o i n g K imb all H ugo D i em er Lew i s H , , , .

Han ey Edward D Jo n es A W S h aw an d R u ssell Robb But b oth

, .
, . .
16
, .

th eo ry an d practi ce o n ly h elp ed to co n vi n ce th e H ask ell Co mm itt ee of

th e gr eat v alu e o f th ei r exi sti n g o rg an i zati on al s truct ur e .

Th e l ater s ubcomm itt ee s r ep o rt o n Tonn ag e v er s u s M erch an di si n g

’ “

”
S al es, wh i ch presen ted th e fir st s ugges ti on for a r adi cally n ew type of
struc t ur e in du Po n t m ad e n o expli ci t stat em en t o f o rg ani za ti o n al pri n
,
”
cip les Li k e S l o an s O rgani zati on S tudy at G en er al M ot o r s it con
’ “
.
,

cen trated o n t h e imm edi at e m att er s at h an d T h e Co mmi ttee m em b er s .

di d m ak e a wi de study of th e exp er i en ce o f oth er fir m s b ut fo u n d thi s ,

o f li ttl e v al u e si n ce th e o th er c o m p an i es th at w er e c en tr ali z ed w er e n o t

so di v er sifi ed as w as du P o n t T h ey di d fi n d suppo rt fo r th ei r c o n t en ti on
.

th at th e b asi c weak n ess at du Pon t w as a l ack o f r espo n sib i lity for profi t ,

al th o ugh th ey l ear n ed litt l e t o aid th em in setti n g up a n ew struc tur e to

co rrect thi s f ault .

Th e o rg ani zati o n bui ld er s at S ear s dr ew fr o m an admi n i str ati ve exp e

rien ce th at w as br oad er th an th at t app ed by th o se in th e o th er thr ee

co mp an i es In fa ct n o t o n ly di d h alf th e m em b er s o f th e Fr a zer Comm it

.
,
322 O RG A N I ZATIONAL I N NOVA TI O N

tee h ave mo s t o f th ei r bu si n ess exp er i en ce o ut si de o f S ear s bu t al so o utsi de

th e m ass-m ark eti n g i n du str i es A n d th is w as u n d o ub tedly on e ca u se for
.

c
th e o n n ti u i n g pr o bl em s Fr a z er w a s. o n e o f t h e b est-k n o wn experts o n
o rg an i z ati o n o f h is day His effo r ts h ad h elp ed in r esh ap i n g publ i c b o d i es
.

— u n i ver si ti es an d state an d m u n i ci p al go ver n m en ts S ears w as th e m ost .

imp o rtan t en terpr i se, h e to ld Woo d, th at h e h ad ever i n vesti gated Y et, .

wh i le h is r ep o rt w as con ci se, cl ear, an d sp eci fi c, develo p i n g in m an y way s

an a d m i r abl e set o f r eco mm en d ati o n s, it d i d p u t cu tti n g co sts ah ead o f
~
p erfectin g S ear s s pri m ary aim , th e vo lum e sale o f m erch an dise H ere
’
.

wh ere th e r el ati o n s wer e clear, th e exp eri en ces o f publi c an d m i li tary

o rg ani z ati o n s pr o v ed o f li ttl e sp ec i fi c r el ev an c e to th e pr o bl em s o f b i g

bu si n ess .

A ct u ally th e m an agem en t o f a pr i vate bu si n ess en terpr i se an d th at o f

a publi c ci vi l o r m i li tary o rg an i z ati o n are f u n d am en tally d i ffer en t Th ey .

are o f c o ur se all bur eaucr a c i es in Max Web er s sen se o f th e w o rd

’

, ,

h i er arch i es m an n ed by pr o fessio n al o ffi cer s — an d so h av e f eatures co m

m o n to th at so ci al fo rm Bu t th e bu si n ess en terpri se h as di ff er en t o bj ect i v es

.

an d fu n cti o n s an d f ar m o r e cl ear-cu t cr i ter i a fo r f ai lur e an d su cc ess T h e .

pri m ary o bj ecti ve o f an en terpri se is to sh o w a return o n i n vestmen t by

th e pr o duc i
t on a n l
d sa e o f g o o d s an d se rv i c e s T h e c.o n ti n u i n g p ro fi t-an d

lo ss reco rd o f a fir m pro vi des a fai rly preci se an d o bj ecti ve criterio n o f

its p erfo rm an ce an d th at o f its o p er ati n g d i v i si o n s an d d ep ar tm en ts .

E xc e p t in t i m e o f w ar suc h i m p
,
er so n a l cl ear,
-cu t stan d ard s fo r th e

p erfo rm an ce o f m an ager s o f a m ili tary co rp s o r a go v ern m en t bureau

are h a rd to fi n d Perf o rm an ce in th ese en terpri ses an d wi th it pro m o
.
,

ti o n an d ch an g es in p er so n n el m u st b e j udged by m o r e subj ec ti v e stan d

,

ard s M o r eo v er
. si n ce th ese publ i c u n i ts do n o t u su ally g en er ate th e
,

c ap ital to fi n an ce th ei r ex i sti n g an d future acti vi ti es th e legi sl ature p ro ,

vi des th e fu n d s an d app o i n ts th e to p per so n n el Th ei r m an ager s depen d

.

far mo r e o n th e l egi sl at ure th an th e ex ecuti ves o f an i n du stri al en terpri se

dep en d o n th e b o ard o f di recto rs wh i ch th eo reti c ally h as th e s ame
,

so rt of con tro l Th e greatest con cern o f l egi sl ato rs an d th ei r adviso r s h as

.

n o r m ally b een t o k eep c o sts as lo w as s i bl as Fr a zer s at ti tud e su g

’

p o s e ,

gests T h ey ten d to c are n o t so m uch for wh at th e u n it s staff can do b ut

.
’

r ath er h o w littl e it can do an d sti ll m eet mi n im u m r equ i rem en ts .

If Fr azer s exp er i en ce in go v er n m en t reo rgan i zati o n pro vi d ed l i ttle o f

’

v alu e in r esh api n g S ear s s stru cture h e m igh t h ave l ear n ed so meth i n g
’

fro m th e w o rk o f S lo an Br adl ey an d Br o w n T h ese m en h ad all wri tten

, ,
.

ar ti cl es fo r l ead i n g m an agem en t j o ur n al s an d h ad d eli v er ed p ap er s b efo r e

th e A m er i can M an agem en t A sso ci atio n o n th ei r w o rk at G en er al Mo to r s .

Fr azer co uld h ardly h ave avo i ded k n o wi n g ab o ut th em If h e di d r ead o r .

li sten to th em it is sig n i fi c an t th at h e saw n o co n n ecti on wh atsoever

,
ORGA NI Z A TI O NA L I NNOVA TORS 3 3
2

b etween h is pro blem s an d th o se s o lved earlier at G en er al Mo to r s an d

du Po n t S om e ei gh teen y ear s later wh en S ear s agai n called in an o rgan
.
,

I z atro n con s ul tan t th e r ev er se w as tru e T h e co n s ul tan ts in 1 947 k ep t

, .

m ak i n g to o m an y gen er al co m p ar i so n s wi th th e d ec en tr ali zed mo d el as

wo rked o u t at G en eral Mo to r s an d du Po n t with o ut tak i n g su fficien tly
i n to acco u n t th e d ifferen ces b etween S ear s s n eed s an d tho s e o f th e m ul ti
’

i n du stry auto mo b i le an d ch em i cal co m p an i es

‘
.

A co mp ar ati ve an aly sis o f th e fo ur en terpr ises th at fi r st cr eated th e

mu ltidiv isio n structur e h elp s to d o cu men t th e gen er al pro p o siti o n s ou t
'

li n ed in th e i n tro duc ti o n Th e co n ditio n s for ch an ge wh i ch led to the

.

a do p ti o n o f th e m ul ti d i v i si on al struc t ur e c am e o n ly after an en terp ri se

h ad exp an ded its acti v iti es i n to n ew l i n es o f bu si n ess o r co n t i n u ed its

gro wt o n a n atio n al o r mo re u ually w rld wi de s c ale Th e n ew struc
h s o - .

t ur e m et th e ad m i n i st r ati v e n eed s th er eby cr eated pr i m ar i ly b ec au s e it

gav e to th e sen io r execu ti ves w h o wer e respo n si ble for th e en terpr is e s ’

h eal th an d gro wth mo r e ti me an d i n fo rm atio n an d a p sych o lo g i cal co m

mitmen t to con cen trate eff ecti vely o n th e gro wi n g n u mb er of st r ategi c
d eci sio n s res ulti n g fro m th e exp an sio n A n d seco n d b ecau se it p erm itted
.
,

th e executi ves w h o w er e ch arged w ith k eep i n g th ei r o rgan i z ati o n ru n

n i n g s m o o th ly to c o n c en t r at e on th ei r f u n cti o n al activ ties an d o n co o rdi

n ati n g th e flo w of goo d s th r o ugh th ese d ep ar tmen ts to th e c h an g i n g mar

k et dem an d for a si n gle maj o r pro duc t l i ne o r r egi on .

Del ay s in i n iti ati n g o r co mpleti n g th e n ew st ruct ur e us u ally r es ulted

fro m th e fail ure o f th e s en io r execu ti ves to appr ec i at e th e admi n ist r ati ve
n eed s created by exp an si on i n to n ew m ark ets T h is f ai lur e r eflec ted th e .

t r ai n i n g an d tem p er am en t o f th e i n d i v i du al s i n vo lv ed S o m eti m es t h ey .

were u n aw are th at th e pro blems mi gh t b e adm i n i str ati ve rath er th an

j u st marketi n g fi n an ce m an ufacturi n g or o ther pri m ari ly eco n om i c
, , ,

pro blems A t o th er ti mes th ey b ecame too en meshed in day—to -day o p erat

.

in g ac ti vi ti es to r eal i ze th at n ew n eed s h ad ar is en or to gi ve pro p er atten

tio n to th e bu ildi n g o f a structure to meet th ese n eeds O ften it w as .
,

th e r ap i d i n cr ease in th e n u m b er o f adm i n ist r ati v e decisi o n s r es ulti n g

fro m th e s trategy o f exp an si o n th at c au s ed th e to p execu ti v es to b og d o wn

in tacti c al d etai l T h is co mp arati ve an aly sis al s o st r esses th e fact th at men
.

lo n g accu sto med to h an dli n g admi n i str ati ve m atter s in o n e w ay h ad

difficulty in devisin g n ew adm i n is trati ve st ructur es O n th e o th er h an d .
,

en gi n eer i n g t r ai n i n g a r ati o n al an aly ti c al appr o ach to pr o bl em s o f man

, ,

agem en t co mp ar ati v e y o u th
, an d a r el ati vely s h o r t i n cu mb en cy in an y
,

o n e po siti o n all h elp ed bu si n ess ex ecu ti v es to appr ec i ate th e n ew n eed s

,

an d to b eco me o rg an i z ati o n al i n no v ato r s .

 THE SPREAD O F THE MU L T I
D I V I S I O N A L S T R UC T UR E

T HE com p ar ati ve an alysi s o f o rgan i zati o n al i n n o vati o n in fo ur

pio n eer s in m o dern man agemen t h as m ade p o ssible a r el ati vely objec
ti ve evalu ati o n of th e perfo rm an ce of executi ves carryi n g o ut so me o f
th e m o st d ifficul t an d m o st im p o r tan t o f m o d er n a dmi n istr ati ve t as k s .

It s ugges ted h o w an d w h y s o me f ulfi ll ed thei r en trepr en euri al duties

m o r e effec ti vely th an o th er s In pro v i di n g a mo re pr eci se ev alu ati o n
.

of ad m i n i str ati o n an d ad mi n i str ato r s in th es e fo ur co m p an i es th e ,

an aly sis al so s uppl i ed i n fo rm ati o n o n th e ch an gi n g m eth o d s o f m an

agem en t an d c on tro l in th e l arg e A mer i c an c o rp o r ati o n , i n cludi n g s uch

develo pmen ts as th e gro w th o f th e lin e an d—staff co n cep t th e exp an si on
-
,

o f st aff f u n c ti on s, th e a dv an c es in i n fo rm ati o n al an d stati sti c al t ech

n i qu es an d m o s t i m p o r tan t o f all th e bu i ld i n g o f t h e d i ff er en t o ffic es

, , ,

at th e d i ff er en t l ev el s o f i n du str i al ad mi n istr ati o n

.

Th e comp ari son o f th e admi n i str ati v e exp er i en ces o f fo ur h uge co m

n ies b ased o n th ei r i n ter n al r eco rd s tell s mo r e ab o u t br o ad ch an ges
p a

in th e struc tur e of A mer i c an i n du str i al en terpr i ses th an it do es ab o u t

ch an ges in th ei r str ategy T h e fo ur clearly b o rro wed from Oth er s in
.

bui ldi n g th ei r early structures an d o th ers b o rro wed fro m th em wh en

,

th ey set up th e n ew m ul ti di v i si o n al fo r m Bu t d i d o th er s co m e to th e
.

n ew structur e fo r th e same r eas o n s as d i d du Pon t , G en er al M o to r s

,

Jer s ey S tan dard an d S ear s ? Did structural ch an ges fo ll o w strategi c

,

o n es ? D id o th er fi rms d evel o p n ew s tr ateg i es to assur e m o r e effi c i en t

an d pr o fi tabl e u se o f th ei r r eso urc es ? If so w h d i d th y f l th n eed

, y e ee e

to t ur n thei r r eso urc es to n ew u ses ? F i n ally w er e ex ecu ti ve t r ai n i n g an d

,

p erso n ali ty si gn i fi can t to th e ti mi n g an d meth o ds o f b o th strategi c an d

st ruc tur al adj u stm en t ? T h ese qu esti o n s ab o u t ch an gi n g str ategy an d its

i m p act o n adm i n i str ati ve structure can b e an swer ed o n ly by comp ari n g

”
th e exp er i en c e o f th e fo ur i n n o v ato r s in th e m o der n decen trali zed
fo rm wi th th at o f m an y o th er gr eat i n du str i al co rp o rati o n s .

T h i s c o m p ar i so n can pr o b ably b e c arr i ed o u t m o st effici en tly by

o b serv i n g th e spr ead o f th e n ew struc tur e th ro ugh A mer i c an i n du stry ;

3 4
2
SPREA D O F T HE M UL TI DI VI S I O NA L S TR U CTURE 3 5
2

h t is by learn i n g wh i ch co mp an i es ado p ted an d wh i ch fai l ed to tak e

t a ,

o n th e n ew struct ur e an d w h y th ey h av e acc ep ted o r r ej ected it S uch

, .

a br o ad c o m p ar i so n can h elp cl ar if y th e r el ati on o f struct ur e t o str ategy

a n d o f str ategy to th e c h an gi n g n at ur e o f th e A m er i can ec o n o m y ,

an d so can pr o v i d e clu es to th e r easo n s for th e gr o w th o f th e i n du stri al

en terpr i se in th e U n i ted S tates an d for th e w ay s in w h i ch it h as b een

man aged It can h elp pr o v i de expl an ati o n s fo r th e p atter n s o f in stitu

.

tio n al gr o w th an d admi n i str ati on wh i c h w er e so br i efl y o u tl i n ed in

Ch apter I .

Th is i n v esti gati o n i n to th e spr ead o f th e m ul ti d i v i si o n al struc tur e

has reli ed o n th e admi n is tr ati ve exp eri en ce o f th e seven ty l arg est co m
i li t d i T bl B si d th s v n ty o m e o th er i m p o rt an t
p an es s e n a e 2 e es
. e e se e s ,

fi rm s o n wh i ch i n fo r m ati o n w as i mm edi ately av ai l abl e w er e al so con

sidered . T o g eth er th ey fo rm a s am pl e o f l arge i n du stri al en terpr i ses
whi ch seem s to b e bro ad as w ell as n eutr al T h e sel ecti o n o f an o th er
.

set o f f ro m to 1 00 l arge c o m p an i es s h o uld n o t gr eatly al t er th e b asi c

7 0

p attern s i n di cated by th e comp an i es studi ed h ere fo r thi s l atter gro up in

,

clu des th e l ea di n g en terpr is es in m an y o f th e m o s t im p o rt an t A m er i can

in du str i es Even if 1 5 0 o r 200 com p an i es co uld b e ex ami n ed th e r es ults

.
,

wo ul d b e much th e s am e A l so as a bri ef r evi ew o f th e 5 00 l argest

.
,

i n du stri al s l i sted in F or tu n e i n d i cated if th e sel ecti o n o f th e 70 l argest

,

h ad b een for 1 95 9 i n stead o f for 1 94 8 th e m aj o r d i ff er en c e wo uld h av e

,

b een th e i n clu sio n of m o r e fi rm s th at h ad d i ver sifi ed an d d ecen trali zed .

Th e r evi ew o f th e adm i n i str ati v e h i sto ry o f th ese m an y l arg e i n du s

tr i al s can to uch o n th e sto ry o f th e i n d i vi du al co m p an i es in o n ly th e
bri efest w ay Mo r e d etai led study an d an alysi s o f th ei r exp er i en ce
.

wi ll certai n ly m o dify but sh o uld n ot b asi c ally alter th e u n derly i n g

, ,

pattern sh o wn h er e as to th e w ays in wh i ch gr eat A m eri c an i n du str i al

co rpo rati o n s h ave gro wn an d are m an aged .

A co m p ar ati ve an al y si s o f th e ad o p ti o n o f o r f ai lur e to ado p t th e n ew

m ul ti di vi si o n al fo rm can b est b e m ad e by gr o up i n g th e en terpr i ses
by i n du str i es an d by k eep i n g th e defi n i ti on o f th e m ulti di vi si o n al
struc t ur e a f ai rly l oo se o n e A n en t erpr i se can b e sai d to h av e ad o p t ed
.

th e n ew fo rm if it came to h av e a g en er al o ffi c e w i th ex ecu ti v es wh o s e

pri mary task s wer e gen er al r ath er th an f u n cti o n al an d if it al s o h ad

at l east tw o m aj o r m u ltide art men tal r el ati v ely au to n o m o u s d i v i si o n s
p ,
.

In s o me c as es th e s truct ur e o f an en t erpr i se w as in 1 960 sti ll in n eed

,

o f cl ear d efin iti o n Wh ere this w as th e case th e di recti o n in wh i ch

.
,

th e struct ur e h ad b een m o v i n g b ecame cr iti ca l fo r u n d erstan di n g

th e m ean i n g o f th e en t erpr i se s admi ni str ati v e h isto ry T h u s tw o

’
.

co mp ani es co uld h ave develo p ed wh at app ear s to b e m uch th e sam e

ty pe o f mix ed or b astar d fo rm bu t if o n e h ad b een cl early m o vi n g
,
3 2 6 SP REA D O F T HE M U L T I DI V I S I O N A L STR U CT URE
to ward a m ore decen tr alized , m ul ti di vi si o n al st ructur e an d th e ot h er

si gn ifi can ce o f th e tw o wo uld cl ear ly differ A gain th e mix ed f o rm .

,

mi gh t h av e be com e a p erm an en t o n e It is p o ssible t h o ugh stil l rare .

, ,

f or a co m pan y t o d evi se a cl ear —cu t rati o n ally defi n ed stru ctur e by ,

whi ch th e gen er al o ffi ce supervi ses bo th th e sin gl e-fu n cti o n an d m ul ti

Th e r easo ngr o up in g th ese en terprises by in dust ri es is th at th ose

f or
w i thi n th e sam e in dust ry n o rm ally h ad to fa ce simi lar ext er nal si tuati on s
an d so co ul d b e exp ect ed t o h ave m et com p ar abl e admi ni str at i v e pr o b

l ems an d n eeds A s T ab l e 2 in di cates th e seven ty co m pani es can be

.
,

co n veni en tl y gr o uped in to nin e in dustrial catego ri es an d for th e ,

p u rpo ses of th is ch ap ter th ese n in e catego ri es f all in to thr ee larger

,

gr o ups In so m e in dus tri es s uch as st eel an d n on ferr o us materia ls

.
, ,

very f ew fi rms ado p ted an y v ari ati on of th e n ew f orm In oth er s lik e .

,

th o se th at pr o cess a gri cul tur al pr od uct s rub b er an d petro l eum so m e , , ,

fi rms a ccep ted th e m ul ti di visi o nal st ructur e an d o th er s di d n ot Wh i l e .

in a th ird gr o up co nsi stin g of th e el ect ri cal (in cludin g el ectro n i cs )

, ,

p o w er m a chi n ery
( i n cludin g aut o m o b i l es ) an d ch em i cal i n dustri es , ,

n early all t h e l ea din g en t erpr i ses h av e tur n ed t o it A n examin ati o n .

o f th e fi r st gr o up r ev eal s th e eco n o mi c co n di ti o ns th at m a d e f o r li ttle

str ategi c an d struct ur al ch an g e an d so en co ur ag ed r elati v e i nst i t ut i o n al

st ab ili ty and admi ni st r ati ve simpli ci ty Th e study of th e secon d set o f .

in dustri es sh o ws w h y admi ni str ati ve n eeds may v ar y be t ween en terprises

wi th in a sin gl e in du st ry F in ally an an al y si s of th e ch an ges in th e
.
,

th i rd gr o up h elp s br oa d en the i n t erpr et ati o ns d ev elo ped i n t h e f o ur

case st udi es bo th as t o th e n atur e o f th e in dustri al co m pl ex i t y whi ch

br o ugh t o rgani zati on al ch an ge an d t o a l esse r exten t th e in t ernal , ,

fa cto r s wh i ch in hi b i ted th e adj u stm en t t o th e n ew n eeds .

INDU STR IES N or A CCEPTI NG THE NEW S TRU CT URE

As s ug d abo v e am o n g th e m o r e th an sev en ty co m p ani es studi ed
g este , ,

th o se th at w er e n o t a dmi n ist eri n g th ei r r eso ur ces th r o ugh th e n ew

m ul ti di visi o n al str u ctur e by 1 960 w er e co n cen tr at ed in th e m etal s an d

m ateri al s in dust ri es Of th ese th e co p p er an d ni ck el co m p ani es h a d
.
,

pa i d th e l eas t atten ti o n to struct ure A n d wh at th o u gh t h ad be en gi v en

.

to o rg aniz a ti o n by ex ecu fi v es in su ch i n tegr ated en terp ri ses h ad t u rn e d

to ti gh teni n g t h ei r f un cti o n all y d ep artm en tali zed struct ur es T h e st eel .

co m p an i es o n th e o th er h an d h ad d evo ted m o r e th o ugh t to th e lin es

, ,

o f a u th o ri ty an d co mm un i cati o n an d in alm o st ev ery case t his co n cer n

,

ha d br o ugh t in cr eas i n g cen tr al i za ti on F or th e m ak er s o f o th er m a .

 I ND U STR I ES NOT A CCEP TING NE W S TR UCTURE 3 7
2

terials, tr en d h ad b een th e o th er w ay Th e l eadi n g alum i n um

th e .

comp an y alth o ugh

, u n der pr ess ures for decen tr ali z ati o n r etai n ed its ,

o ld f u n c ti on ally d ep ar tmen t a li z ed fo rm whi ch h as b eco m e ext r emely ,

el ab o r ate an d c o mpl ex O f th e m etal s an d m ater i al s fir m s li sted all

.
,

th ree — A m eri c an C an In ter n ati o n al Pap er an d Pi tts burgh Pl ate G lass

, ,

— h ad accep t ed th e n ew d ec en tr ali z ed m ulti di v i si on al fo r m by 1 60

, 9 .

Th e st ructur al fo r m t ak en by th ese en terpr is es h as b een cl o sely

r el ated to th e n at ure o f th ei r m ark ets A S th e typ es o f cu stom er s he .

c ame m o re n um ero u s th e S tructur e t en ded t o b eco m e mo re i n tri cate

,

an d m o r e s y stem ati z ed T h e copp er an d ni ck el co m p an i es h av e co n

.

cen trated o n m aki n g semi fi n ish ed sh eet s r o d s wi r e an d extru si o n s , , ,

for a r el ati vely few l arge cu sto m er s T h e steel m an uf act ur er s h av e .

s o ld a gr eater var i ety o f sh eet sh ap es an d fo rm s to a much l arger , ,

n u m b er o f buy er s Th ey h ave m an uf actur ed m an y st an d ardi z ed pr o d

.

u cts ah ead o f s p ec ifi c o rd er s A l so t h ey c arry sp ec i al li n es fo r p ar ti cul ar

, .

mark ets li k e th e p etro leum i n du stry T h e A lumi n um C o mp an y o f .

A m er i ca sell s to a sti ll w i d er v ar i ety o f i n du stri es th an th e steel fir m s ,

an d h as ev en r each ed th e m ass c o n s um er m ark et th r o ugh its k it ch en

w are li n e Th e o th er th r ee en terpris es in thi s gr o up h av e h ad to s atisfy

.

a sti ll l arg er an d m o r e dis p ar ate set o f cu st om er s In m o s t c as es s uch .

m ark eti n g di ff er en ces app ear to h av e h ad a gr eater effect on th e stru c

t ur e o f th es e en terpr is es th an h ave eith er d iffer en ces in th ei r i n du str i al
tech n o lo gy o r th e p er so n aliti es o f th ei r execu ti ves .

Copp er an d Nickel
In co pper ni ck el an d zi n c i n du stri es th e s ame comp ani es h ave
th e , , ,

h an dled si n ce th e early y ear s of th e cen tu ry th e gr eat er p ar t o f th e

in du stry s o u tpu t in m uch th e s ame w ay O f th e n o nf err o u s metal s
’
.

i n du str i es o n ly alumi n um h as d ev elo p ed n ew en terpr is es Co pp er s

, .
’

”
A mer i c an S m el ti n g 8: Refi n i n g A n aco n d a K en n eco tt
“
B i g F ur o —
, ,

Co pp er an d Ph elp s D o dge — stil l pr o duce th e gr eatest s h are o f th e

,

n ati on s co pp er an d z i n c ; w h i l e In ter n ati o n al Ni ck el f o r m ed in 1 02

’

9 , ,

h as a pr ac ti cal m o n op o ly o f th e f ree wo rld s n i ck el s upply 1

A gai n
’
.

exc ep ti n g alumi n um th e l ea d er s in th e n o nf err o u s m etal s i n du str i es

,

have co n centrated o n mi n i n g s m elti n g an d r efini n g b asi c m et al s D u r

, , .

in g th e 1 920 s an d 1 g3o s h o w ev er all bu t In t er n ati o n al Ni ck el purch as ed

’ ’

, ,

co n tr o l o f fabri cati n g s ub si di ar i es m ak i n g s h eets ro ds wi re an d t ub es

,
?
, , ,

By 1 95 0 th ese S ub si di ari es m an uf act ur ed an esti m ated 65 p er c en t o f th e

”
n ati o n s r efi n ed co pp er A s th e
’
B i g Fo ur pro duced clo s e to 90 p er cen t
.
“

o f thi s cop er th ey al so s o ld to o u t si d e f abr i cato r s

p , .

O f th es e i n tegr ated fi rm s tw o K enn eco tt an d In ter n ati on al Ni ck el

, , ,

have a l arger i n v es tmen t in mi ni n g th an in pro ces sin g A ll h ave sm all .

328 SPREA D O F T HE MU L T I D I V I S I O N A L STR UCTURE
sa es l o rg an izati o n s to m ark et
bli ster an d r efi n ed co pper to
o re an d
mi d dlem en o r to a r elati vely f ew l ar ge u ser s in cludin g th ei r o w n
f abri catin g sub si di ari es S in c e o rder s f or th ese un diff er en ti ated i tems
.

co m e in by tel ep h o n e an d tel egr aph m uch of th e wo rk o f th e sal es ,

d ep art men t can be h an dled by a f ew m en T h e fab ri catin g sub sidi ari es .

pr o ducin g r elati v ely f ew types o f w ir es cables r o ds an d so fo rth fo r , , , ,

in dustri al cus tom er s h av e so m ewh at l arger s al es d ep artmen ts S in ce .

th e r efinin g an d sm el tin g cap aci ty o f t h e co pper co m p ani es exc ep t f o r ,

Kenn eco tt h as b een gr ea ter th an co uld b e suppli ed by co pper o re fr o m

,

th ei r o w n mi n es th ey sell li ttl e o re an d purch ase a siz a bl e am o un t o f

,

it f r om o u tsi d er s Y et th e purch as in g o rg an i zati o n h as n eeded t o be

.

o nl y a li t tl e l ar g er th an th e sal es o ffi ce A l s o b eca u se sm elti n g h as been

.
,

carri ed o n cl o se to th e min es th e vo lum e of goo ds tr an spo rt ed h as n o t

,

been l arge en o ugh to warr an t th e co n stru ct io n o f th eir o w n tr an s po r

tatio n f a cili ti es .

B eca use th e co pp er co m p an i es are mi n in g an d pr o cessin g en terprises

pr o ducin g a r elati v ely f ew t ypes o f pr od uct s for a w ell-defi n ed m ark et ,

th ey h ave been un d er l ess pr essur e to co n cer n th em selves with o rgan

iza ti on al m atter s Th eir o nl y admi ni str ati ve ch all en g es h av e been in
.

th e impr o v em en t o f th e adm ini str ati v e co n tr o l o f th e d ep artm en tal

h ea dquart er s an d th e cen tr al o fi ce F o r sta n dardi ze d un d iff er en ti ated

.
,

pr oduct s th e sch edul in g o f pr o ducti o n h as r em ai n ed r el ati v ely simple

, .

Be ca use th ese fi rms h ave h ad f ewer tr an spo rt ation an d St o rage n eeds ,

th ey h av e n o t f el t im p e ll ed to coo rdi nate pr o duct fl o w as di d th e o il

or st eel co m p an i es S o m o r e th an m ost o f th e en terpr i ses stu di ed h er e

.
, ,

th ey h av e r eli ed o n day-t o-d ay fl uct ua ti o ns in pr i c es r ath er th an o n

f o r eca st s an d m ark et an aly s es to d etermi n e wh en an d in wh at quan

titi es to ob tai n raw m ateri als an d pr od uce th eir goo ds .

A t bo th A n aco n da an d Ph elp s Do dge th e cen tr al office admi n i s tra ,

ti on of f un cti on al a cti vi ti es h as been h an dl ed inf o rm ally S in ce Wo rld .

War I th e o ver-all po li cy m ak in g at A n aco n d a w as carri ed o u t in

,

w eekly m eetin gs o f th e h eads o f th e f un cti o n al sub si di ar i es Co r n eli us .

F Kell ey as Pr esi d en t an d Ch air m an o f th e Bo ard do min ated th e

.
, ,

co mp an y s affai r s fr om 1 9 1 8 un til 1 955 an d h e g ave li ttl e th o ugh t to

’

buil din g at th e cen tral o fi ce s uch staff d ep artm en ts as en gin eerin g ,

r esearch labo r o r public felation s to bett er th e co o rdin ati o n betw een

, , ,

t h e fu n cti on al un i ts or to im pr o v e a cco un tin g an d o th er fi n an ci al an d

a dmini str ati v e data Nor h a v e th e m an ager s at Ph elp s Do dg e att em pted

.

to bu i ld a si zabl e c en tr al o ffice for th e admini str ati o n o f th ei r f un c

tio n al a cti viti es .

A t A m eri can S m el tin g an d R efi ni n g an d at K enn eco tt Co pper stru c ,

”
ture h as r ecei v ed m o r e att en ti o n O f th e B i g Fo ur A meri can S melt “
.
,
I ND USTR I E S NOT A C CEP TI N G NE W STR UCTURE 3 9
2

in g an d Refi n i n g h as h ad the smallest i n vestm en t in m i n i n g but ,

pro ces ses m o re zi n c l ead an d o th er m etal s b esi de co pp er th an do its

, ,

ma o j r c o m p eti to r s I t s c en. t r a l o ffi c e h as l o n g i n clud ed a v i c e-pr esi d en

t

in c h arg e o f ea ch o f th e m a j o r f u n c ti o n s — m i n i n g sm el ti n g an d refi n ,

in g sa es
,
l purc,
h a s i n g r e s ea rc h , a n d fi n an c e — as w ell as a sm all l eg al
,

an d m etallurgi c al st aff T h e co m p an y h o w ev er h as m ad e l i ttl e eff o r t

.
, ,

to ex ten d th e co n tr o l o f th e c en t r al o ffi ce to i n clude th e ad m i n i str ati o n

o f its f abri c atin g s ub si d i ar i es wh i ch it is s ai d , tak e a r el ati v ely sm all ,

sh ar e o f its o u tpu t H o w ev er in th e 1 930 s it en t er ed th e pr o c es si n g o f

’
.
, ,

a v ar i ety o f n o n ferr o u s m etal s f r o m s cr ap B ec au se b oth th e purch asi n g

.

an d m ark eti n g o f th ese m ater i al s w er e qu it e d iff er en t f ro m its pr im ary

o p er ati o n s th e c o m p an y c am e to fo r m a s ep ar ate au to n o m o u s u n it
,

ca ll ed F eder ated Metal s H o w ever th i s ven tur e h as n o t pr o ved v ery

.
,

succ essf ul in p ar t b ecau se its ac ti viti es d i ffer f r o m th e r est o f th e

,

l arger o rgan i zati o n S o s en i o r execu ti ves h ave s eri o u sly co n si der ed ab an

.
,

don i n g th is bu si n ess wh i ch th ey feel h as n ot eff ec ti v ely u s ed its m aj o r

, , ,

r es o urces in m en m o n ey an d m ateri al s n o r fi tted i n to th e c en t r ali zed

, ,

S tI UCt UI C
' '

Th e Ken n eco tt sto ry h as b een on e o f i n cr easi n g c en tr ali zed adm i n istr a

ti ve co n tro l Un ti l th e r eti r em en t in 1 933 of S tep h en B i rch — th e m an
.

w h o h ad w i th th e b ack i n g o f th e G ugg en h ei m s bu i lt this gr eat co pp er

, ,

mi n i n g emp i re Ken n ecott w as m an aged as i n fo rm ally as A n aco n d a an d

Ph elp s Do dge h ave b een for so lo n g B i rch s succes so r E T S tan n ard
’
.
, . .
,

i n s tituted m o r e fo rm al admi nistr ati ve co n tr o l o ver m i n i n g sm elti n g an d , ,

r efi n i n g an d o ver th e s ales an d fabri c ati n g u n its by dep artrn en talizin g

th ei r acti v i ti es S t an n ard al so bu i lt up th e c en tr al purc h asi n g an d t r affic
.

dep artmen t A fter h is death in 1 949 h is success o r Ch arl es Co x exp an ded

.
, , ,

th e ac ti v iti es o f th e cen tr al o ffic e by a dd i n g en g i n eer i n g pub li c r el ati o n s , ,

an d l ab o r r el ati on s staff d ep artm en t s an d by en l arg i n g th e r es earc h o r

g a n iz ation W ith i n t
.h e m i n i n g an d f abr i c ati n g o rg an i z ati o n s h e I n st r ,

tu ted mo r e o f a li n e-an d st aff s truct ur e in o rd er to d el eg ate m o r e au th o r

-

ity an d r esp o n sib i lity to th e fi eld ac ti viti es He al so c o n cen tr ated on th e .

devel o p m en t o f b etter co st an d p erfo rm an ce i n fo rm ati o n in all o f th e

o pe r ati n g d ep ar tmen t s A s sist ed by th e h ead s o f th e mi n i n g pr o c essi n g
.
, ,

an d f abr i c a i n g u n it s Co x w ith tw o ex ecu ti v e assrstan ts appr ais ed th e

t , , ,

ac ti v iti es an d m ad e p o li cy for th e c o m p an y as a w h o l e .

B ecau se o f th e si mpli ci ty o f o p er ati o n an d th e l ack of maj o r tech n o lo gi

cal an d m ark et ch an g es ad m i ni s tr ati v e d eci si on s in th e c o pp er an d n i ck el
,

en terpr i ses h av e b ec o m e al m o st en ti r ely o p er ati o n al o n es O v er tim e th e .

,

deci si on s deali n g with th e admi n istrati o n o f th e di fferen t f un cti on al ac

tiv ities an d th e co o rdi n ati o n o f th e flo w th r o ugh th e fu n c ti o n s w ith th e

mark et dem an d h ave b eco m e qu ite r o uti n i z ed E ven r elati vely mi n o r .

33 0 SP REA D O F THE M U L T I DI V I S I O N A L STR UCTURE
r
st ate gi c decisio n s s u ch as th e bui ldi n g o f n ew pl an ts an d purch asi n g o f
,

n ew m i n i n g pr o p erti es co m e o n ly o cc asio n ally In fact admi n i strati ve

, .
,

ne ed s h av e n o t b een p o w er f ul en o ug h to i m p e l th e l o n g —establ i sh ed

veter an m an agemen ts at A n acon d a an d Ph elp s Do dge to develo p mo re

sy stem ati c an d r ati o n al c o n tro l s o v er th ei r f u n c ti o n al acti vi ti es H o w ever .
,

A n aco n d a r ecen tly m ad e a cr i ti c ally i m po r tan t str ategi c d eci si o n to m o ve

i n to th e alum i n um bu si n ess S uch a step sh o uld certai n ly create a n eed for
.

ad mi n i str ati v e r eo rg an i z ati o n at th at c o pp er co m p an y if th e exp er i en c e o f

th e A lu m i n u m C o m p an y o f A m er i c a is an y cr i ter i o n .

A d m i n i str ati ve exp er i en ce in th e n i ck el i n du stry h as p ar all el ed th at o f

co pp er Ni ck el di ffer s fro m co pper in th at its m arket is sm all er an d m o re
.

sp eci al i zed an d o r es c o m e l argely f r o m o n e area in c en tr al C an ad a A l so

, .

th e n i ck el i n du stry h as b een do m i n ated by m o n o p o ly r ath er th an o li

ol n d th e l ead i n g en terpr i se I ter n ati o n al Ni ck el h l n g h ad

g p y
o a , n , a s o ,

a p o l i cy o f n o t pr o du ci n g r o ll ed o r fabr i cated go o d s Its o n ly r o ll i n g m i ll .

in A m eri c a w as set up in 1 920 to pro duce ro lled b ar s an d Sh eets o f a n ewly

i n ven ted m etal Mo n el Ni ck el h as b een u sed pri m ari ly to mak e steel
, .

allo y s o r to fo r m S uch n ew m etal s as Mo n el B efo re Wo rld War I th ese .

all o y s an d m etal s w er e u sed l arg ely in w ar s h i p s gu n s an d o th er arm a , ,

‘

m en ts A fter th e w ar th e au to m o b i le ch emi c al an d electri c al i n du str i es

.
, ,

b ecam e th e m aj o r m ark et A t all tim es th e n i ckel m i ners an d refi n ers h ave

.

so ld th ei r pro ducts to rel ati vely few cu sto mer s fo r furth er pro cessi n g .

T h e In ter n atio n al Ni ck el Co m p an y wh i ch b ecame th e In ter n ati o n al

,

Ni ck el Co m p an y o f C an ad a Ltd in 1 9 1 6 b egan as a co m b i n atio n in

, .
,

1 902 A l th o ugh its sen i o r execu ti ves h ad w o rk ed o u t an em bry o n i c f u n c

.

tio n al struc ture by Wo rld War I th ey d i d n o t g i v e s er i o u s atten ti o n to

,

o rgan i zati o n u n t i l th e t w ar d epr essi o n br o ug h t a sh arp d ecl i n e in th e

p o s

dem an d fo r n i ck el T h en a n ew set o f admi n i strato r s h eaded by Ro b ert

.
,

C S tan ley a gr adu ate o f S teven s In sti tu te o f Tech n o lo gy an d th e Co lu m

.
,

b ia S ch oo l o f M i n es c o n c en tr ated o n cu tti n g co sts i m pr o v i n g o ld a n d

, ,

develo pi n g n ew pro ducts an d in bui ldi n g a mo re system ati c o rgan i z a

,

tio n al struc tur e T h e r es ulti n g c en tr ali zed f u n c ti o n ally d ep ar tm en tali zed

.
,

o rg an i z ati o n i n clud ed a n ew research an d develo p m en t dep ar tm en t

th at h ad a tech n i c al serv i ce u n it S i m i l ar to th e o n e at du Fon t a n d an

en l arg ed sal es d ep ar tm en t th at exp an d ed its adver ti si n g ac ti vi ti es an d

its m ark eti n g areas A t th e same ti m e th e m i n i n g d ep artm en t set up a

.

secti o n d ev o ted to sy stem ati c explo r ati o n fo r o r es In 1 2 8 In ter n ati o n al

9 .

Ni ck el s m erger wi th th e M o n d Ni ck el C o m p an y L td g ave th e n ew
’

, .
,

co m b i n atio n a V i r tu al mo n o p o ly o f th e i ndustry A d m i n i str ati ve co n so li d a

.

ti o n o f th ese tw o en terpri ses c am e sl o wly wi th th e fi r st step s b ei n g t ak en

,

in 1 936 an d w i th fur th er c en tr ali z ati o n in th e 1 g5 o s

’
.
I ND U STR I E S NOT A CCEP TING NE W STR UCTURE 33 I

In steel pro ductio n tech n i ques as well as mark eti n g requ i remen ts de
,

m an ded ti gh t adm i n i st rati ve co n t ro l Un li k e co pp er an d n i ck el pro duc .

ti o n steelm ak i n g h as lo n g b een a clo sely i n tegr ated acti vity wi th th e t e

,

fi n i n g o f o r es th e co n ver si o n o f i ro n to steel an d th e fabr i c ati on o f steel

, ,

i n to sem ifi n ish ed pro ducts all b ei n g do n e at th e same pl an t T h e b i g i n te .

grated steel wo rk s pro duce a vastly greater amo u n t o f a l arger v ari ety o f
pro ducts fo r m o re typ es o f i n du st ri es an d bu si n ess es th an do th e co pp er
sm el ter s r efi n er i es an d f abr i c ati n g mi ll s No t on ly h av e th e steel co m
, , .

p an i cs fash i o n ed r ai ls structures pl ates Sh eets St ri p tin pl ate b ar r o ds

, , , , , , , ,

n ai l s w i r e p i p es an d tub es to t h e s p ec i fi c ati o n s o f i n d i v i du al cu sto m er s

, , ,

fo r d ec ad es b u t th ey h av e al so tur n ed o u t m o s t o f th ese pro duc ts in stan d

,

ardized fo rm an d in l arge v o lu m ah ead o f o rd er s uc h w ar eh o u se

“

e S .

”
sto ck s h av e go n e to th r ee sets o f cu s to m er s In du s tr i al t r an sp o rt atio n .
, ,

an d c o m m erci al co n cer n s h av e t ak en th e l arg est s h ar e d i r ec t ly S o me .

s to ck s (p arti cul arly n ai l s fen ci n g p i p e an d el ect r i c al co n du i t) wen t to

, , ,

wh o lesal er s an d o th er l arge m i ddlem en w h i le th e rest wen t to meet th e ,

mo r e s p ec i al n eed s o f th e o il i n du st ry F i n ally th e steel co m p an i es s o ld

3
.
,

ch em i c al s an d by pro ducts o f th ei r c o k e o p er atio n s to o th er pro du cer s fo r

-

furth er pr o cessi n g T h u s th e m uch gr eater v o lum e o f go o d s an d a m uch

.

l arger n u mb er o f cu sto m er s as well as th e h i gh ly i n tegrated pro ductio n

, ,

h ave m ad e th e sch eduli n g of o p er ati o n s an d th e co o rdi n ati o n o f th e fu n c

tio n al act1v1t1es f ar m o r e co m pl i c ated in st eel th an in c o pp er en terpr i ses .

A l so th e pr o duc ti o n o f stan d ard fabri c ated i tem s o n a vo lu me b asi s

,

ah ead o f o rd er s h as cr eated m o r e o f a n eed to fo r ec ast an d an alyz e t h e

fu ture m ark et in o rd er to i n tegr ate th e ac ti viti es o f th e v ari o u s p ar ts o f th e

en terpr is e to th at m ark et .

A s a r es ul t o f th es e n ecessi ti es m o st l arge steel en terpr i ses h av e l o n g

,

b een admi n i stered th ro ugh cen tral i zed fun ctio n ally dep ar tm en tal i zed ,

struc t ur es O f th e i n du stry s B i g Eigh t fi ve B eth leh em Republi c

’ “
.
, , ,

Jo n es 8 : L augh l i n In l an d an d Y o u n gsto wn — h ave h ad fo r m an y year s

, ,

such a fo r m B o th B eth l eh em an d R epubl i c st ar ted as c o m b i n ati o n s early

.

in th e c en tury B efo r e l o n g th ey co n so l i d ated th ei r co n sti tu en t fi rm s i n to

.

a si n gle m u ltide artm en t al struc tur e an d as th ey exp an d ed in l ater y ear s

, p ,

th ro ug h purch as es th ey al s o pl aced th e n ewly acqu i r ed u n i ts w i th i n th e

,

sam e b asi c c en tr ali ze d o rgan i z ati o n A r m c o N ati on al S teel an d U n i ted .

, ,

S tates S teel h ave b een l ess c en tr al i z ed an d h ave h ad S truct ur es n earer th e

multi d i vi si o n al fo rm Y et even in th ese co m p an i es th e t ren d h as b een
.

to ward c n tr al i z ati o n r ath er th an d ec en tr al i z ati o n ev en th o ugh th ei r

e ,

s ales assets an d vo lum e o f o utput h ave gr o wn r ap i dly

, , .
332 SP REA D O F T HE M UL T I DI V I S I O N A L STR U CT URE
Jo n es s: La ugh lin wh ose o rganiza ti o n w as S implifi ed aft er a ca ref ul
,

stu dy in 1 95 1 pr o vi des an excell en t example of th e type of cen tr alized

, ,

f u n cti o n al ly dep artm en tali z ed stru ctur e wi th its cl ear lin e-an d-st aff dis
“

gan iza ti on s o f Bethl eh em, R epub l i c, In l an d,

Y oun g st o wn S h eet 8: an d

T ub e di fi er fr om th at o f J on es La ughl in o nl y in detail an d th e v aria ,

ti o n s f r o m th e sta n dard m u lti dep artm en tal m od el co m e larg ely fr o m

difi er en ces in m ar k etin g th e difi er en t t yp es of pr o ducts J on es 8: Laugh

4
.

lin h as a m aj o r d ep ar tm en t h ea d ed by a g en er al m an ager f or o re an d
, ,

qu arri es an d i n it an o ffi ce f or ex pl or ati on A n oth er gen er al m an ager .

supe rvi ses co al o per ati o n s an d a thi r d t r affic an d tr an s po rt ati o n Th e V i ce

, .

Pr esi d en t an d A ssi stan t V i ce-P r esi d en t o f t h e Pr o duct i on D epa rtm en t

h av e adm in is tr ati v e co n tr o l o v er th ese g en er al m an ag er s as w ell as o v er
th e co m p an y s th r ee gr eat s teelw o rk s an d t w o st aff d ep art men ts — co n
’

structi o n an d m ai n t en an ce an d plan t pr o tect i o n , .

Th e S al es D ep ar tm en t has an ev en m or e compl ex structur e Th er e are .

distri ct o ffices in th e fi eld H ea dqu art er s is subdi vi d ed wi th secti on s f or

.

differ en t pr o duct s an d al so in cludes tw o st afi uni ts co mm erci al r esearch ,

an d th e sal es serv i ce o ffi ce
5
Th e l att er perf o rm s m uch th e sam e f u ncti on
.

as di d th e T ech n i cal Di visi o n in th e o ld du P o n t Co m an y s S al es D e

’

p
‘

rt m en t Th e offi ce in th e S al es D ep artm en t s h ea dquart er s th at is r e

’

p a .

spo n sibl e f o r s upplyin g th e oil in dus try wi th p i pe t ub i n g dr i ll r o d s an d , , ,

simi lar equi p m en t h as m o r e au to n om y th an t h e o th er pr o duct un i t s in

th e sam e d ep ar tm en t f or i n o rd er t o h av e a f ull lin e o f equip m en t f o r o il

, ,

pr o du cer s it m ark ets goo ds m ade o utsi de of th e co m p an y as w el l as

,

in si d e Its sal esm en h o w ev er w ork ou t of th e comp an y s bran ch o ffices

.
, ,
’
.

Th e w ar eh o usin g or r etailin g un i t th at m ar k ets st an dard i tems on th e ,

o th er h an d h as its o w n di stri bu tin g o rg ani za t i o n wi th its o w n distr i ct

,

o ffi ces an d w ar eh ou ses Th e fi n al f un cti on al a cti vi t y fi n an c e is di vi d ed

.
, ,

be tw een the T r easur er s Dep artm en t an d a S tafi u n i t th e A cco un tin g

’

Dep artm en t .

T o h elp admi n i ster th ese f un ct i on al d ep art men ts to coo r din ate t h ei r ,

po li ci es an d to pr o vi de th em wi th speci al assist an ce th e cen tr al o ffice at

, ,

J on es 8: L aughl in h as d ev el ope d a l arge n umbe r o f S taff u ni ts in cludi n g

en gi n eeri n g r esear ch in dus tri al r el ati on s acco un tin g an d g en er al serv
, , , ,

i ces Th e l ast h as a se cti on for o rg an i zati o n pl an n in g A s is tru e in m ost

. .

cen tr alize d fi rm s th e h ea ds o f th e d ep ar tm en ts an d th e P r es i den t h av e

,

b eco m e th e un i t r espo n sibl e for o ver -all a dmini strati o n T h i s cen tral o ffi ce .

gr o u p h as b as ed its deci si o n s o n in fo rm ati o n comi n g fr o m th e st aff de

art m en ts an d th e fi n an ci al o ffices as w ell as fr o m th e li n e d ep art m en ts
p
th em selv es .

Besi d e th e m aj o r f un cti o n al d ep artm en ts th er e ar e f o ur sma ll er au to n ,

I ND U S TR I E S NOT A CCEP TING NE W STR UCTURE 333
o m ou s di vi si o n s wh o s e m an ager s h an dle m an uf act ur i n g as w ell as s ales .

Th r ee o f th em m ak e s p eci al pr o duc ts , w ire r op e, electricw eld t ub e, an d

con tai n er s , an d r epo rt to a V i c e— Pr esi den t in ch arge of S peci al P r o ducts .

A fo urth au to n om o u s u n it w ith its ow n V i ce-Pr esi den t is th e S tai n l ess an d

S tri p D i vi sio n , whi ch w as purch as ed by th e com p an y in 1 948 Th e exi st .

en ce o f th es e m ul tifu n c ti on d i v isi on s mi gh t i n di cate th at J o n es Laugh

lin wo uld, in time, turn to a fu lly decen tr ali zed, m ulti di v i si o n al S tru e
t ur e Y et, th e av ai l able evi d en ce s uggest s th at such a step is u n l ik ely A
. .

l arge Sh ar e o f J o n es 8: Laugh li n s busi n ess is stil l fr om job order s m ade to

’

cu sto mer s p arti cul ar s p eci fi cation s c alli n g fo r i n tri cate cen trali zed sch ed
’

uli n g an d allo cati o n of th e o rder s to th e mi ll s Mo r eo ver, b ec au s e th e o re

.

supply co m es pr i mar il y f ro m th e L ak e S up er i o r r egi o n , it is cu t o ff dur i n g

th e w i n t er m o n ths an d car ef ul s ch eduli n g o f raw m at er i al s is r equi r ed .

Th e m an ager s I t alk ed with at Jo n es 8: L augh li n th o ugh t th e acti viti es

o f th e S tai n l ess an d S tr i p Di vi si o n w o uld s oo n b e in co rp o r at ed in to th o s e

o f t he o th er d ep artmen t s , an d th ey exp ec t th at th e s m all er u ni ts s elli n g to

sep ar ate m ark ets w i ll al s o b e i n t egr at ed i n to th e l arg er Struc t ur e Th ei r .

V i ew o f th e pr o p er o rg an i z ati o n fo r th ei r co m p an y t o d ay is striki n gly

simi lar to th at of H arry H ask ell fo r th e du Po n t Com p an y in 1 9 1 9 .

T h e tr en d to ward s c en tr ali z ati on , wh i ch S ti ll seem s to b e go i n g o n at

J o n es 8: L augh li n , is i n di cated mo r e cl early by th e exp er i en ce of Nati o n al
S teel an d th e gr eatest Steel pr o duc er of th em all, th e Un i ted S tates S teel
Co rp o r ation Th e histo ry o f th e S teel Co rp o r ati on fo r th e p ast S ixty
.

year s h as b een o n e of steadi ly i n creasi n g cen tr ali z atio n Dur i n g th e fir st

“
.

deca des of its existen ce, Uni ted States S teel in cluded man y v ery auto n
o mo u s, o p er ati n g d i v isi o n s th at w er e loo s ely admi n ist er ed fr o m a s m all

fi n an ci al o ffice at 7 1 Bro adway in New Y o rk City Th e h o ldi n g co m p an y s

’
.

m aj o r ach i evem en t dur in g its early y ear s w as to o b t ai n u n ifo rm acco u n t

in g i n fo rm ati on f ro m its sub si diar i es In th e seco n d d ec ad e o f its hi sto ry ,
.

th e p ar en t co m p an y s ac ti v iti es w er e en l arg ed A V i c e-Pr esi den t in ch arge

’
.

o f P urch asi n g w a s appo i n ted, an d al s o o n e fo r en gi n eer i n g Th e t as k o f .

th e fir st o f th es e o fii cers w as to s upply o r es f ro m fo r ei gn s o urc es an d th en

to co o rdi n at e th ei r u se w ith th e o u tpu t o f th e O li v er Mi n i n g C o m p an y,

th e S teel Co rpo r ati o n s o re-pro duc i n g s ub si di ary This o ffice b eg an to

’
.

estim ate th e o re n eces sary to m eet th e o p er ati n g s ub si di ar i es pr o ducti o n

’

pl an s bu t app ar en tl y m ade n o attemp t to r el ate th es e to estimated l o n g

,

term m ark et d em an d Th e c oo rd i n ati o n o f pr o duct H

. o w r em ai n ed in th e

h an d s o f th e i n di vi du al s ub si di ar i es th at h ad littl e co n tac t with o n e an

o th er Th e pr i mary o b f o r th e V i c e-Pr esi d en t in ch arg e o f En gi n eer i n g
.
j
cam e to b e th e revi ewi n g of appro pri ati o n s an d th e pr o vision o f mo re
sy stem ati c i n fo r m ati o n f o r th e curr en t an d f u tu r e allo c ati o n o f th e co m
’

p y
an s r eso urces Fi n ally
.
, h ird
a t p aren t—o ffice execu ti ve w as a pp o i n ted to
33 4 SPREA D O F T HE M U L T I DI V I S I O N A L S TR U CT UR E
mai n tain co nt act w i th m aj o r cu stomer s N everth el wg even th o ugr the .

ofi ces at B r oa dw a w m wh t l d t h di d t h
yr y er e so e a en ar
ge ey n o ye t a v e ,

set up at G en er al Mot o rs an d Jersey Sta ndar d i n th e rgzo s Unit ed S tates

’

organ izati on of the S teel Co rpo r ati on en gi neer ed by Myro n C T aylo r .

aft er h e becam e h ea d of th e co r o rat i on f o ll owi n g G ar y s dmt h in 1 2

’

p 9 7 .

Thi s reo rgan i zat i o n star ted i n a t ent at i v e w ay in 1 9a 9 an d n ot co mp lete d

,

u n til I w th r u h g in g as t h e cha n ges of 1 m an d 1 0 w

93 7 as as
, o o
g o 9 9 3 e e

operating subs i diar i es w ere ra di mllyl a t er e d re fo rm ed New plan ts

an d .

and o m ce s w ere buil t , o th ers comb i n ed , an d still o th ers w er e aban do n ed .

large gen eral sta fi v er

y si m il ar to th e on e S loa n ha d cr w ed ear li er at

o n as a dvi sory st a E fl ee s . A Pro ducti on Plan n i n g De part me nt w as b

est a

th e co rpo ra ti on paci ty f or m ak in g fi ni sh ed pro du cts la rge th an

’
s ca w as

larly v alua bl e f or co o rdin a ti on of th e buyi ng an d ma k in g o f in go ts w i th

fo rems tin g m o r e de fin it e an d pe rm an en t b asis O v er -all po li cy mak

on a .

i ng an d ap p raisal cam e t o be ha n dl ed b y a few fu ll -ti me execn ti v es w h o

Ben j ami n R . F airl es s , E dw ard R S tettin i us, .

J r .
, an d E n ders M . V o rh ees .

f o reco mi n g to Un i ted S tat es St eel V o rh ees — a hi gh ly rati o n al busi ness

,

sch oo l gra d u at e appear s to ha v e be en th e ex ecu fi v e m os t r espo n sible fo r

p uttin g th e n ew stru ct ure in to op er ati on .

dev el ope d a str uct ure th a t r ese m bl ed mo re closely th e ce n tralize d , f un c

Ce n tr al Op er ati o ns A ll a ct i vi ti es admin i st ered by Ce n tral Op erat io n s

.

w er e de pa rtm en tali zed al o n g f un cti o na l li n es A t th e sa m e tim e, th is cen .

tr al ofi ce began to s uper v ise m o re closel y th e f un ct i o na l ci

a t vit es re i m ain
I ND USTRIES NOT A CCE P TI NG NE W STR U CTURE 335
i n g in m ulti depar t men tal di visi ons th at w er e n o t d ir ectl y in cluded
th e

wi thi n Cen tr al O per ati o ns Th us a sin gle set of Ex ecuti v e V i ce-Pr esi den ts
.

beca me to a large ex ten t r es po ns ibl e f or th e a dmini strati on of th eir dif

f eren t f u n ct i on s in ev ery p art of th e co rpo r ati on Th e Ex ecu ti v e V i ce .

P r esi d ent in ch arg e o f Pr od uct i on h ad u n d er hi m V i ce P r esi den ts f or

-

003 1, stee l, an d fabr i ca tin g in C en tr al O p er ati o n s, an admi ni str ati v e V i ce

Pr esi d en t w h o k ep t i n cl o se co n ta ct wi th Co lumb iaG en ev a (a f ar w est

ern )
, T en n essee Co al ( an d u th er n )Ir on
an d a thi th e so
rd r eg i o n al ,

di visi on an d anoth er admin ist r ati v e V i ce Pr esi d en t to supe rvise th e fab ri

,
-

ca ting di visio ns in cludi n g A m eri can S teel 8: Wi r e A m eri can Bri dg e N a , ,

tio nal T ube an d A t las Cem en t T h e Ex ecu ti v e V i ce-Pr es i d en t i n ch arg e

, .

o f sal es h ad un d er h is co mm an d a V i ce-P r es i d en t f o r Cen tr al O per a ti o ns

S al es an o th er w h o han dl ed th e com p an y s w ar eh o u s in g o rgan iza ti on an d

’

its un i ts s upplyin g th e pe tr o l eum in du st ry an d a th i rd w h o h a d ch arge ,

o f s uch st afi o ffices as co mm ercial r esea rch an d sal es d ev el op m en t an d

c

w h o al so main tai n ed cl o se co n tact wi th th e sal es uni ts of th e s ub si di ari es

o per atin g o utsi d e o f Cen tr al O pe r ati ons Th e o th er Ex ecu ti v e V i ce-P r esi
.

d en ts f o r f un cti onal acti vi ti es th o se f or En gin eerin g P er so n n el Ser vi ces , ,

Ra w Mater ial s A cco un tin g an d th e o n e for o v er se s oper ati

, , a ons — also

appea r to ha v e a str on g v o i ce f or car ryi n g o ut t h ese acti vi ti es th r o ug h o u t

th e wh o l e co rpo r ati o n Co l lecti v ely th ese Ex ecut i v e V i ce-Pr es i d en ts wi th

.
,

th e P r esi d en t an d Ch airman o f th e Bo ard f o rm th e O p er atin g P o li cy

Co mmi ttee th at is r espo n sibl e f or o v er -all appr ai sa l an d po li cy plann in g .

Th us o v er th e y ea r s th er e has be en a gr o wi n g cen tr ali za ti on o f au th o rity

an d r es po n si b i l i t y at Un i ted S tates S teel with th e f un cti on al d ep ar tm en t
,

be comi n g th e m aj o r o per ati n g uni t A l th o ugh a n um ber o f in tegr ated

.

di visi o ns sti ll exi st th ey h av e be en st eadil y l o sin g th ei r au ton om y or

,

f r eedo m of a cti o n Th e stru ct ur e of Uni t ed S tates S teel is be co mi n g m or e

.

lik e th at of th e du Pon t Co mp an y pri o r to 1 92 1 th an as it w as bef o r e ,

0 lik e tha t o f G en er al M o to r s o r du Pon t af t er 1 2 1

1
95 , 9 .

Nati o nal S teel fo rm ed m 1 92 9 as a co mb in ati on o f tw o l on g-est ablis h ed

,

fir m s Weir to n S teel Co m p an y an d th e Han n a Ir on O r e Co m pan y wi th

, ,

th e n ew er G r ea t Lak es S teel Co rpo r ati on h as r ecen tly be en m o vi n g in ,

th e sam e di r ecti o n as its lar g est co m pe ti t o r I t lo n g r emain ed a l oo se .

feder ati on wh o se o v er -all administrati o n w as car r i ed o ut by its cr ea to r ,

Ern est T Weir as sist ed by t h e h ea ds of th e oth er t wo co ns ti tu en t fi rms

.
,

an d a v ery sm al l stafi Sin ce 1 954 it h as co nso li dated an d set up a f un c

.

ti o n all y d ep ar tm en tali ze d struct ur e tha t cert ai nl y seems as cen tr ali ze d as

th a t of Jon es 8: Laughl in Th e sal es d ep artmen ts o f Weirt on an d G r eat

.

Lak es ha v e been co mb in ed A n ew co rpo r ate R esea rch an d D ev el o p m en t

.

De partm en t h as been crea ted N ati on al S teel s cen tr al o ffice in cludes V i ce

.
’

Pr esi d en ts in c harg e o f S al es o f En gin eeri n g an d o f R esearch O nl y

, ,
.
33 6 SPREA D O F T HE M UL TI DI V I S I O N A L STR U CT UR E
m an u fa cturin g h as n o t: b een p ut un d er a f ully cen tr alized co n tr ol How .

ev er ,
o n e au ton o m o us u n i t th e S tra n-
S tee l Co rpo r ati o n co n tin u es to
, ,

m anu factur e an d m ar k et fab ri ca ted sp e cial i ti es f or th e b u ildin g an d t ran s

rt a tio n in d u st r i es A n d th e o ld Hanna Furn a ce Co rpo r ati o n ma k ers o f
p o .
,

m erch an t p i g i r on also r etain s its auto n o m y

, .

A rm co S teel h as n o t y et m o v ed as far t o w ards cen tr ali zati o n as N a

ti o nal an d Uni ted S tates S t eel Un til 1 954 its thr ee m aj o r ope ratin g
8
.
,

un i ts w er e admini ster ed as aut on om o us di vi si on s Th ese in cluded its .

m aj o r s teel mak in g o p er ati on s cen ter ed in O hi o th e S h effi eld S teel Co r ,

pot ati o n (lar gest st eelmak er in th e So uth w est ) an d a di vi si on whi ch ,

m an ufa ct ur ed an d so ld culv ert s an d dr ai n age st ru ctu r es In th at y ea r its .

,

o v er-all ex ecuti v e o fii ces w er e enl ar ged by i n cr easin g th e st af f t o i n clu de

plannin g an d d evelop m en t, r esearch purch as in g an d publi c an d p er

, ,
“

”
so n al r ela ti ons sectio n s Poli cy h ow ev er co n tin u ed to b e ma de by th e
.
, ,

h ea ds of th e l eadin g f un cti o n al d ep art m en ts t ogeth er with th e Presi den t

an d Ch air m an o f th e Bo ard Wh eth er thi s st ep f or great er o v er-all a d
.

min istr ati v e con tro l lik e th e earli er ch a ng es at Uni ted S tates S teeL is
,

o n e t o w ard f urth er cen tr ali zati on , o nl y tim e can t ell A t th e m om en t .

,

h o w ev er A rm co s stru ctur e is closer to th e stan dar d m ul ti di visi on al t yp e

’

th an is th at o f an y of th e o th er m etal com pani es st udi ed h er e Its sen i o r .

ofii cers h o w ev er h av e f u n cti on al o p er ati n g r espo n si b il i ti es an d ar e n o t

, ,

gen eral ex ecuti ves lik e th ose w h o gui de th e f o rtu nes of du Pon t G en ,

er al M o to rs J er sey S ta n dard an d ev en Se ar s
, , .

Certai a th e bas i c tr en d in st eel h as been to w ard cen tr aliz ati o n Th e .

cl o se r z d admin istr ati v e supervi sion if th e gr ea t in tegrated mi lls

cen t al i e ,

th e min es o r e b oa ts an d di stri bu ti n g f a cil iti es are to b e o p er ated a t a

, ,

fair ly ev en cap aci ty an d if l oss an d w ast e ar e to be av o i d ed by p ilin g up

in ven to ry in o n e dep ar tm en t o r an o th er or thr o ugh h avin g t em po r arily
i dl e f acili ti es an d o th er r eso urce s Th e con ti nu an ce an d gr o wth o f th e
.

m ulti dep ar tm en tal di visi o n m ay h av e be en ch eck ed by th e f act th at th e

d em an ds of a sin gl e m ark et wh eth er it is in o n e i n dust ry or on e r egi on is
, ,

n ot en o ugh t o k eep a si n gl e gr ea t mill o p er atin g at f ul l capa ci t y T h er e .

f o r e such m ills m ust dr aw o n th e larg er n ati on al m ar k et Y et it w o ul d .

seem th at th er e ar e i n d u stri al o r r egi o n al m ark et s such as th e o il i n dustry ,

o r th e F ar West o r S o u th w est lar ge an d di v er se en o ugh t o tak e th e

‘

en ti r e o u tput of a sin gl e m an uf a ct u ri n g uni t S uch m ar k ets w o ul d m ean.

th at th e m ulti de artm en tal di vi sio n s su ch as th o se stil l f un cti o ni n g at

p ,

J o n es 8: Laugh lin an d Un i ted S tates S teel A rmco co ul d co n tin u e to be

, , ,

o er ated pr o fi tably as
p au t o n o m o u s u ni ts N ev erth el ess t h e.h is t o ri cal ,

ex eri en ce a t N ati o n a l an d U ni ted S ta tes S teel an d th e atti tud es ex pr esse d

p
I ND USTRIES NOT A CCEP TING NE W STR UCTURE 3 37
at J o n es Laugh li n i n di cate clearly th at th e tr en d is in th e o ther direc
i
t on .

If th e m ark et, a pp aren tly h as n o t b een di ff eren t en o ugh to bri n g ab o u t

,

th e gro w th o f au to n om o u s i n t egr ated d i v i si o n s n eith er h av e str at eg i c

, ,

deci si o n s b een n um er ou s o r co m plex en o ugh to dem an d th e bui ldi n g of a

gen er al admi n i strati ve o flice with gen eral execu ti ves an d st aff s p eci ali sts .

Th e s elli n g of steel as w ell as th e o b tai n i n g o f o re an d its pro ducti o n an d

fabr i c ati o n sti ll fo llo w s a f ai rly lo n g—estab li s h ed r o u ti n e p att er n Deci si on s .

ab o u t th e bui ld i n g o f n ew pl an ts the o p en i n g o f n ew m ark ets th e d ev el

, ,

o p m en t o f n ew pr o c es ses h av e b een so f ew as t o p erm it s en i o r ex ecu ti v es

to co n c en tr ate o n t acti c s Mo s t im po r tan t o f all th e pr o ductio n an d m ar

.
,

keti n g faci liti es fo r o re an d semifi nish ed an d ev en fi n ish ed pr o ducts can

n o t b e easi ly t r an sf err ed to th e pr o duc ti on an d m ark eti n g o f n ew an d

di ff er en t pro ducts T h erefo r e th e strategy o f d i v ersifi cati o n with its i n ev i

.
,

table i n cr eas e in lo n g-r an ge deci si on m aki n g h as n o t b een a temp ti n g o n e

in th e exp an si o n o f th e steel i n du stry .

A lu m in u m
Th e largest o f th e alumi n um comp ani es h as b een u n der mo r e pr ess ure
to d ec en tr al i z e th an th e l ea d i n g s teel fi rm s A s its m ar k ets h av e b een .

m o r e d i v er se an d h av e ch an ged m o r e r ap i dly th an th o s e o f th e steel com

p ani cs its execu ti ves h ave h ad to m ak e b o th mo re t acti cal an d mo re
,

str ategi c d ec i si on s T h e A lumi n um Co m p an y o f A mer i c a (A lco a ) h as

.

l on g h ad far m o r e adm i n ist r ati ve co mpl exiti es an d ch allen ges th an th e

o th er n o nf err o u s en terpr is es st ud i ed h er e b ec au s e f r o m th e v ery st ar t a , ,

m uch larger p o r ti o n o f its r es o urces w as c o m m itt ed to th e mak i n g an d

sell i n g o f f abr i c ated fo r m s an d s h ap es fo r m an y i n du str i es an d ev en fo r

th e h o u sew i fe an d o th er fi n al co n s um er s A lco a o r i g i n all y ca ll ed th e .

,

Pi ttsburgh R educ ti o n Co succeed ed in 1 888 in c o mm erc i ali zi n g th e n ew

.
,

m etal u n d er th e pr o c ess i n v en ted in 1 886 by C h arles M H all It s o o n 9

. .

m o v ed i n to th e m ak i n g an d m ark eti n g o f fi n ish ed pr o ducts in o rder to

develo p dem an ds fo r this n ew m etal T h en as d em an d i n creased it in .
,

tegrated b ackw ard o b tai ni n g b auxite mi n es o re s h i p s an d w ar eh o u s es

, , ,
.

B efo r e Wo rld War I it h ad b ecome n o t o nl y an i n t egr ated en terpri se

,

b u t th e o n ly o n e in th e i n du s try No t u n ti l th e s al e af ter Wo rld War II o f

“

go ver nm en t pl an ts to o th er alum i n um en terpr is es di d A lco a h ave to meet

co mp eti ti o n o f o ther i n tegrated fi r m s A mo n g its n ew pr o ducts A lco a .
,

early d ev elo p ed its k it ch en w ar e li n e an d th u s w as th e o n ly met al s fi rm

,

st ud i ed th at so ld m ass co n s u m er pr o duc ts Its maj o r gro w th h o wev er .

, ,

cam e fro m great n ew i n du stri es p ar ti cul arly au to mo b i le ai rplane an d

, , ,

m issi l e By th e 1 920 s th e r es o urces o f this r ap i dly gr o w i n g en terpr is e

’
.
,

were admi n i ster ed th ro ugh a cen trali zed dep ar tmen tali zed struct ur e A s ,
.
33 8 SP REA D O F T HE M U L T I DI V I S I O N A L S TR U C T U R E
e xp an si o n co n tin u ed in all o f its f un c ti on al acti vi ti es A lco a cam e to be ,

m an aged by o n e o f th e b i gges t an d m o st el ab o r ate c en tr al o ffices o f an y

A m er i can in du str i al en terpr i se .

T h e A lco a structur e o f 1 960 is th e du Po n t structu r e o f 1 9 1 9 wr i t l arge .

A t th e c en tr al o fi ce each o f th r ee Ex ecu ti ve V i ce Pr esi d en ts h as ch ar ge

,
-

o f a gr o up o f sev er al fu n c ti o n al d ep art m en ts O n e sup erv i ses th e l egal an d .

fi n an ci al acti viti es in cludin g th e T r easu r er s Co m pt r o ll er s Legal an d

’ ’

, , , ,

S ecr etary s o ffi c es all of wh i ch exc ep t th e l ast ar e h ead ed by V i c e

’

P r esi d en t s Un d er th e S ec o d
. n V i c Pr esi d t co
e- en m e th e V i ce Pr esi den ts in
—

ch arge o f Raw Materi al s o f Sm eltin g an d F abr i cati n g o f En gi n eer in g o f

, , ,

P urch asi n g o f Per son n el an d In dus tri al Rel ati o n s A s w as tru e o f th e du

, .

Po n t Co m p an y b efo r e 1 92 1 so to d ay m o st V i ce-Pr esi den ts in A lco a h av e

,

a G en er al M an ag er to admi ni st er day to -day o p er ati on s A k ey o ffi c e

-
.

wi thi n thi s secon d gr o up is th e Pr o ducti o n Pl an n i n g D i vi sio n r espo n sible ,

fo r th e sch edulin g of all o rd er s th r o ugh th e mi ll s It h elp s to coo rdin ate .

,

m uch as J er sey s Co o rdi n ati on D ep artm en t th e r ate an d am o un t o f pr o d

’

u ct fl o w th r o ug h a l arg e i n du str i al c o mpl ex O rd er s f r o m th e S al es D e .

r tm en t c o m e to th i s o ffic e w h er e th ey are all o cated to o n e o f th e co m

p a ,

w n ty-f o ur f abr i cat in g w o rk s T h e Pr o ducti o n Pl an n i n g D i v i si o n

’

p y
an s t e .

al so pr o v i d es i nf o r m ati on th at is u sed to d eter mi n e sch edul es f o r t h e p ro

ducti on an d tr an sp o r tati on of b auxi te an d o th er raw m ateri al s .

Th e T hi rd Ex ecu ti ve V i ce-P r esi d en t h as o v er-all r espo n sib ili ty fo r th e

S al es D ep ar tm en t as w ell as th e ac ti vi ti es o f th e In ter n ati on al D i vi si o n
,

an d th e P ubli c R el ati o n s a n d A dv er tisin g D ep art men t T h e o rg an i zati o n .

o f th e S al es D ep artm en t is gear ed to fo ur m aj o r p h ases o f th e co m p an y s

’

sal es efi o rt s : m ark et pl an n i n g i n du stry s al es pr o duct s al es an d di r ect

'
, , ,

o r fi eld s al es T h e f a ct th at th ese di sti n ct ar eas are r efl ected in A l co a s

’
.

sal es o rg an i z ati o n em p h asi z es h o w m uch m o r e c o m pl ex th e c o mp an y s

’

m ark eti n g a c ti v i ti es ar e th an th o se o f th e o th er n o n f err o u s m etal s i n du s

tr i es such as co p p er an d n i ck el
, .

Each o f th ese f o ur sal es acti vi ti es is h eaded by a V i ce Pr esi den t w h o

-

r po r t to th e V i ce Pr esi d en t an d G en er al S ales M a g r
e s - n a e T h e V i c Pr esi
e- .

d en t in ch arge o f Co mm erci al R esearch an d M ark et Pl ann i n g coo rdi n ates

th e wo rk o f sp ec i ali sts in g ath er i n g i nf o rm ati o n ab o u t estim at ed pr o duc t

vo lum e typ es o f pro ducts sal es m an po w er a dv erti si n g supp o rt an d re

, , , ,

search an d d ev elo p m en t w o rk He is pr im ar ily c o n c er n ed w i th ev al u ati n g

.

m eth o d s o f d esi gn pr o c essi n g an d selli n g o f pr o ducts in r el ati o n to t h e

, ,

r equi r em en ts o f n ew an d co n stan tly ch an gi n g m ark et co n di ti o n s Th e .

seco n d s al es V i c e-Pr esi d en t is in ch ar ge o f i n du stry sal es He dir ec ts th e .

ac ti v i ti es o f a gr o up o f i n du stry sal es m an ag er s w h o se o bj ec ti v e is t o co

o rd i n ate an d sti m ul ate A lco a s fi eld s al es in six br o ad i n d ustry ar eas :

’

bui ldi n g pr o ducts tr an spo rt ati o n aircr aft an d mi ssil es co n sum er dur abl e
, , ,
 I ND U S TR I E S NOT A C CEP TING NE W STR U CTURE 3 39
goo d s in dust ri al ma ch in ery an d equ ip m en t an d co n tain er s an d p ack ag
, ,

in g T h ese catego ri es h av e evo lv ed o v er a peri o d o f tim e an d h av e be en

.

m o difi ed as mark et con diti on s ch an ged .

A third V i ce-Pr esi d en t is in ch arge o f Pr od uct S al es His d ep artmen t .

con sists of a gr o up of Pr od uct M an ag er s o n e for each of A lco a s maj o r

”
,
’

products — s uch as in go t sh eet an d pl ate f o il ext ru si on s fo rgin gs an d

, , , , ,

castin g s Pr od uct Man ager s h elp to det ermi n e pri ces for th eir r es p ect i v e
.

pr o duct s Th ey al so r eco mm en d faci liti es an d wo rk cl osely with th e

.

o per ati n g d ep art men t t o h elp coo r di n ate sal es an d pr o ducti o n A f o urth .

V i ce-Pr esi d en t adm in i ster s fi eld sal es an d di stri bu ti o n R epo rtin g t o hi m .

are th e tw en ty— o n e di st ri ct S al es M an ager s an d th e M an ag er o f D istrib u

HO D .

F in ally un der thi s s am e Ex ecu ti v

,
e V i ce-Pr esi d en t is th e Pr esi d en t
of

Wear Ever A lumin um In c an A lco a sa l es s ub i di ary ear Ever is re

-
, . s
,
W - .

spo ns i bl e f o r al u mi n um u ten si l s gif t w ar e an d h o u s eh o ld f o i l th r ee o f

, , ,

th e m aj o r pr o duct s th at th e co mp an y sell s dir ec t ly to th e fi n al co n sum er .

Because th e m ark et f or th ese pr o duct s is so d iff er en t an d b ecaus e th e

requir em en ts fo r coo rdin atin g pro duct How an d pr o duct d ev el o p m en t are
so u n l i k e th at o f th e r est of th e en terpri se thi s s al es o rg an i zati on is th e ,

o n ly o n e at A lco a th at i n co rp o r ates r esp o n si b ili ty f or bo th pr o ducti on

an d sal es Th e V i ce-Pr esi d en t in ch arge of S m el tin g an d F abri ca tin g

.

h as so m e au th o r i ty o v er th e pl an ts pr o duc in g th ese co n sum er g oo d s b u t ,

it is si gn ifi can t th at th e o nl y semi au ton om o us m ul tif un ct i on di v isi o n at ,

A lco a is th e o n e th at h an dl es its co n sum er goo ds busi n es s .

O v er -all appr ai sal an d pl an n in g ar e carri ed o n at A lco a by th e thr ee

Ex ecuti v e V i ce-Pr esi d en ts th e P r esi den t th e Ch ai r m an of th e B o ard
, , ,

an d th e Ch ai rm en of t h e Ex ecut i v e an d F in an c e Co mmi tt ees A ll b u t th e .

l ast th r ee m eet dai ly an d fo rm wh at mi gh t be co n si dered an executi ve

t eam bu t th ey h av e n o s taf f o f th eir o w n to dr aw o n Cen tr al man ag e
, .

m en t at A lco a in cludes o n ly th es e t op m en an d th e h ea d s o f th e f un c
tion al dep ar tmen ts E v en pe r so n n el r esearch an d publi c r el ati on s an d
.
, ,

a dv erti sin g ar e co n si d er ed li n e r ath er th an cen tr al staff o rg an i zati on s .

In terd ep artm en tal coo rdi n ati on exc ep t f o r th at carri ed ou t by th e Pr o duct

,

M an agers an d by th e Pr o duc ti o n Pl an ni n g Di vi si o n h as co m e to be ,

h an dl ed th ro ugh co mmi tt ees T h er e are c u rr en tly cl o se to a lzu n dred ad

.

vi so ry in terd ep artmen ta l co mmi ttees In addit i o n th er e are w eek ly m eet

.
,

ings o f th e co mp an y s d ep artmen t al V i c e-Pr esi d en ts as w ell as m an y

’

in tradep art m en tal m eeti n gs S uch d ep artmen tal an d in terdep art m en tal
.

meetin g s co m p an y ex ecut i v es str es s are aim ed at en surin g ad eq uate

, ,

c o mm u c i
n i a t o n — a v i tal n eed th at th ey feel is b es t pr o vi d ed in thi s in

fo rmal w ay .

Wh y th en h as th is in creasin gly di versifi ed an d m u lti product en terpri se

 SPREA D O F T HE M U L T I DI V I S I O N A L S TR U CTURE
so l on g r et ain ed a cen tr ali zed f un cti o n all y departm en tal ized st ructu re ?
,

Cer tainl y th e li n es of co mm uni cati o n an d auth o ri ty h ave b eco me in

creasin ly l en gt h en ed an d criss cr os se d so th at th e i n form al l in es o f au
g ,

th o rity an d r es p o nsi b ili ty h av e b eco m e pr oba bly m o r e si gn ifi ca nt th an th e

fo rmal o n es Bo th th e n atur e o f th e co mp an y s pr o duct an d its ma rk et as

’
.
,

w ell as th e atti tudes o f its sen i o r ex ecuti ves h ave played a part in the ,

co n tin u an ce o f th e o ld st ruct ur e T h e pr esen t Ch ai rm an of t h e Bo a rd

.

an d th e Pr esi d en t ar e b o th m en wi th m o r e th an 3 5 y ear s o f A l coa ex p eri

en ce R o y A
. H un t so n of th e com p an y s cofo un der f or a lo n g tim e
— .
’

th e Pr esi d en t an d n o w Ch airm an o f th e Ex ecuti v e Co mmi ttee — still

firml y b eli ev es as did Wal ter T eagl e in th e use o f per so n al info rm al

, , ,

m eth ods of m an agem en t T h e advan tag es o f such r elati o n shi ps so v alu

.

able fam ily fi rm, h e b eli ev es, can b e carried o n in his p resent
to a sm all

v ast in du strial empir e .

Bu t b esi de H u n t s s tr on g co mm i tmen t t o inf o rm al st ru ct u re, th e n eed

’

for clo se coo rdin ati on betw een th e m ark etin g an d pr o d ucti o n acti vi ties
pro vi des a po werful pr essur e fo r co n tin u ed cen tr al i zati o n A m aj orit y of .

th e co m pan y s o rd ers, lik e th o se of th e st eel co m pan i es, are m ad e to the

’

speci fi ca ti o ns of o th er m an uf actur er s T o ass ur e pro mp t deli v er y wi th

.

sp ecifi cati o ns exa ctly fi ll ed an d at th e sam e t im e, to k eep th e v ar i o us

,

fabri ca tin g p lan ts o per atin g at steady cap aci ty r equir e i n tri ca te an d com .

pl ex sch eduli n g of o rder s an d pr o duct flo w Neverth el ess, th e buildin g o f .

plan ts speci alize d en o ugh to h an dl e a sin gl e maj o r m ark et mi gh t m ake

po ssible th e pl acin g of m ark etin g, en gi n eer in g, an d m an uf acturin g fo r a
sin gl e lin e wi thi n o n e au ton o m o us di vi si on, in m uch th e sam e w ay as has
al r ea dy b een d o n e f o r th e Wear-Ev er di vi si on In an y case, a m o r e r ati o n al .

r e f o rm ati o n of th e cen tr al o fi ce on a lin e-an d-stafi b asis mi gh t w ell cut

do wn th e am o u n t o f tim e n o w r equir ed f or commi ttee m eetin gs D i ver si t y .

at A l coa coul d well brin g o rgan izati o n al chan ge aft er th e pr esen t v eter an
m an agem en t r etir es O n th e o th er h an d th e experi en ce o f th e steel in dus
.
,

try m ak es cl ea r t h e d iffi cul ty o f cr eatin g au ton o m o u s o per atin g di vi si ons

w er e th e r eso ur ces of th e en terpri se are co n ce tr ated in larg scal e O pera

h n e-

ti o ns to pr o du ce goo d s o n specifi ca ti on fo r u se in o th er bu sin esses an d

in d ust ri es .

In v ari o us m ateri als in dust ri es th e m ar k et d em an ds h av e b een

th e ,

diss imila r en o ugh to co un ter bal an ce th e cen tr ali zin g imper ati v es of v o l
u m e pr o ducti o n Lik e th e m eta l s co m pa ni es th e th r ee largest en terprises
.
,

h er e — A m eri can Can In ter n a ti o nal P ap er an d Pi tt sbur gh Plate G las s

, ,

— h av e so ld pr imari ly to bus in ess an d in d u st ria l m ark et s r ath er th an to

th e fi n al co n s um er A ll thr ee h o w ev er h av e pro du ced an d m ark et ed a

.
, ,
I ND USTRIES NOT ACCEPTING NE w STR UCTURE 34 1

wi de vari ety of go o d s th at h ave gon e to a l arger n umb er of busi n ess an d

i n dustri al fir m s A l so they h ave placed a l arger prop o rti on o f th ei r in vest
.

m en t in plan t p er so n n el an d equ i p men t in th e m ark eti n g o f fin i sh ed

, ,

go o d s r ath er th an in th e pro curi n g an d tr an s p o rt ati o n of raw m ater i al s .

A m er i can C an an d In tern ati o n al Pap er w er e b o th tur n -o f-th e—c en t ury

'

comb i n ati o n s th at s oo n co n s o li d ated i n to c en tr ali zed f un cti o n all y dep art ,

m en talized com p an i es wh i le Pi ttsburgh Pl ate G lass with its r el ati vely

, ,

s p eci ali zed pro duct d ev elo p ed a si mi l ar s tructure after cr eati n g its o w n
,

m ark et i n g o rgan i z ati on 10

B ecau se A m er i can Can s o ld its m et al co n tai n
.

ers an d c an n i n g m ach i n ery to th e p ai n t an d foo d i n du str i es w hi ch in ,

cluded a l arge n um b er o f sm all en terpr i ses it k ep t its m an uf acturi n g ,

o p er ati o n s in m an y s c att er ed an d r el ati v ely s m all mi ll s In this w ay it .

,

co ul d m o r e easi ly m eet a wi de v ar i ety o f lo cal d em an ds A s a r es ult it de .

cen tr ali zed th e admi ni strati o n of its o p erati on s in to m ultidep artmen tal re ,

i ll d fi d d i v is i h it up h A t l ti c t l ’

g on a y e n e o n s I n t e 1 93 0 s set t .e an C en r a , ,

Pacifi c an d Can adi an di vi si o n s E v en aft er th e com p an y b eg an to m o v e

, .

i n to th e m aki n g of p ap er as w ell as m etal co n tai n er s th is struct ur e s erved ,

it well Ho wever as th e r ate o f gr o wth o f th e m etal co n tai n er bu si n ess

.
,

dr o pp ed o ff an d comp etiti on as w ell as co sts o f m ater i al s an d l ab o r

,

i n creased this com p an y deci d ed to m o ve i n to th e m aki n g o f p aper an d

,

pl asti c co n tain er s on a l arge scale T h er e it co uld put its r eso urces p arti e.
,

u larly its s urplu s f u n d s an d tr ai n ed p er s o n n el to m o r e pr o fi tabl e u se ,

.

Pur ch as es o f pl asti c an d p ap er co m p an i es led in 1 957 to th e fo rm ati on o f

th r ee pro duct d i vi si o n s wi th th e o ld er m etal co n tai n er o rgan i zati o n m ak
,

in g up a fo ur th T h e g en er al o ffi c e w as en l arged t o i n clud e mo r e s taff

.

s p eci ali sts an d gen er al ex ecu ti ves S o w i th d i ver sifi c ati o n a m u ltidiv i .
,

sio n al structur e b as ed o n r egi on al b o u n d ar i es w as t r an s fo r m ed i n to o n e

b ased o n pro duct li n es .

In th e 1 920 s In ter n ati o n al Pap er a co mb i n ati o n fo rm ed in 1 89 8 w hi ch

’

, ,

so o n con so li d ated i n to a cen tr ali zed fun cti o n ally d ep artmen tali zed stru c ,

t ur e d eci d ed to apply so m e o f its r eso urces to m aki n g h eavy kr aft p ap er

,

an d b aggi n g as w ell as to exp an d i n g it s exi sti n g n ew spr i n t bu si n ess In .

th e l ate 1 93 0 s it r eo rg an i z ed its struc t ur e so th at thr ee r el ati v ely au to n

’

c m o n s m ul ti f u n c ti o n d i v i si o n s b ased o n b o th r egi o n al an d pr o duc t l i n es

admi ni stere d it s o p er ati o n s T h e n ew spr i n t di v isi on w as c o n c en tr ated in

.

Can ad a th e kr aft di v i si o n in th e S o u th w h i l e th e pl an t s an d admi n i str a

, ,

ti v e sal es o ffi ces o f th e s p eci al ti es d i v i si o n wh i ch s o ld to b o o k publis h er s ,

an d o th er p ap er u ser s in th e No r th east w er e l o c at ed cl o s er t o th e urb an ,

m ark ets .

Unl ike In tern ati o n al Pap er an d A meri can C an Pi ttsburgh Pl ate G l ass ,

di d n o t com e in to b ei n g thr o ugh co m b i n ati o n bu t exp an ded i n iti ally in ,

th e 1 8go s li k e th e m eat p ack er s by bu i ld in g a l arge m ark eti n g o rg an i z a

’

,
34 2 SP REA D O F THE M UL TIDIV I SI O N A L S TR UCT URE
i
t on of w ar eh o uses bran ch cfiices an d ev en r etail o utl ets Next it in te
, ,
.

gr ated b ackw ard by pr oducin g its o w n so da ash an d o th er in gredi en ts es

sen tial f o r glass m an uf a cturi n g Th en t o mak e full er use o f its ma rk etin g
.
,

r eso urces th e com p an y t urn ed af ter 1 900 to d evel op in g a lin e o f pai n ts

, ,

bru s h es an d r elated i tems that co ul d be so ld th r o ugh th e sam e ch ann els

,

as wi n d o w an d pl at e glas s In th ese y ea r s too it be g an to fin d m ark et s f o r

.
, ,

ch emi cal pr o ducts b ased o n soda ash Exp ans i o n in th e 1 920 s an d again .
’

af ter Wo rld War II f o ll o w ed th e lin es o f di v er sifi ca ti o n in i ti ally o u tli n ed

befo r e Wo rld War I M o r e r ecen t gr owth h as br o ugh t a cl ear sep ara

.

ti o n of th e co m p an y s st ru ct ur e in t o pr o duct di visi ons an d a g en er al c fii ce

’

wi th gen er al ex ecuti v es an d staff speci al ist s By 1 960 it h a d glass F iber .

,

glas pain t an d bru sh an d ch emi cal di vis i o ns Th e struct ur e vari es f rom

, , .

th e g en er al p atter n o nl y in th at wh i l e th e di vi si o n s h an dl e th ei r o w n

in dustri al sal es th e l o n g-establi sh ed Merch an di se Di vi si on sell s its pr od

,

u cts t o i n d epen d en t d eal er s j obber s d ist ri but o r s an d dir ectl y t o small

, , ,

cust om er s S in ce th e ch emi cal uni t sells o nl y in dust ri al goods it h as l o n g

.
,

been al m o st co m pletely auton om o us A g ain th e mark et h as shape d th e .

SU UCI I II C
' '

Be si de infl u en cin g stru ct ur e th e mark etin g r equi r em en ts of th ese t hr ee

,

en t erpri ses en co ur aged a l o n g-t erm str at egy o f exp ans i on w hi ch differ ed

fr om th at of th e m etal s co m p ani es Beca u se m o r e of th ei r in v estm en t in

.

m en m o n ey an d equi pm en t w as in m ark etin g fa ciliti es than i n raw m ate

, ,

ri al pr o perti es an d ev en in pr o ducin g plan ts an d beca use th ey ha d m uch

,

m o r e ext en si v e di str ibu ti on an d serv i ci n g o rgani zati ons th ey w er e abl e ,

to tr ans f er th eir r eso urces m o r e easi ly i n t o n ew l in es of pr o ducts wh en

th e d em an d f o r ex i stin g l in es f ell 0 5 Th eir sen i o r ex ecu ti v es as w el l as .

th ei r m ark eti n g per so nn el w er e w ell equi ppe d t o h an dl e o th er type s o f

com p ar abl e goo ds Exp an si o n via di v er sifi ca ti o n w as l ess co st ly an d em

.

pl o y ed m or e o f th eir ex i stin g r eso urces th an w oul d h av e a simi lar str ategy

by m etals en terpri ses A t th e sam e tim e m ar k ets fo r th e n ew pr o duct
.
,

l in es pr o v ed suffici en tly difi eren t to r equir e th ese co m p ani es to act as du ,

P on t h ad act ed in 1 92 1 an d t o se t up di v i si on s t o coo rdin ate th e v ari o us

,

f u n ct i o n al act i vi ti es to ea ch n ew m ark et F o r th ese r easo n s th e hi sto ri es .

,

o f t h ese thr ee en terpri ses ar e m o r e simil ar to th o se co m p an i es co ns i d er ed

in th e seco n d an d ev en th i rd gr o up of in dust ri es st udi ed h er e th an th ey

ar e t o th e ex eri en ces o f th e l eadin g en terpr i ses in th e b asi c m eta ls i n dus
p
U I CS .

INDU STRIES PAR TIA LLY A CCEPTI N G THE NEw S TR U CT URE

Th e xper i en ce o f th e l ea di ng en terpri ses in th e m etal s an d m ateri als
e

in d us tri es r einf o r ces th e pr o po si ti o n dr awn fr o m tha t o f all fo ur o f th e

IND USTR I E S P A RTL Y A CCE P TI NG NE W STR UCTURE 34 3
c ase st udi es n amely th at o n e b asi c tas k o f a r atio n ally defi n ed struct ur e
, ,

m u st b e to rel ate an d coo rdi n at e th e w o rk o f th e en terpr i se s d i ffer en t

’

f un cti o n al ac ti viti es to m ark et n eed s an d d em an d s It f ur th er i n di c ates .

th at th e fewer th e m arkets an d th e S impler th e m ark eti n g pr o ces s th e ,

easi er w i ll b e th e a dmi n i str ati o n an d c o o rd i n ati o n o f f u n cti o n al d ep ar t

men ts T h u s th o s e com p an i es th at so ld s emifin i sh ed pr o ducts t o a r el a

.
,

tiv ely f ew l arg e i n du str i al cu sto m er s r equ i r ed a c o m p ar ati v ely Si m pl e t yp e

o f struc tur e T h o se th at s o ld a l arg er v ar i et y o f o n e m ajo r lin e o f pr o duct s
.

in m uch hi gh er vo lu m e to a gr eater n u mb er o f i n du s tr i es an d bu si n esses

h ave con si sten tly c en tr al i zed th e co n tr o l of th ei r a cti v iti es th ro ugh d evel
o p i n g an d r ati o n ali z i n g th ei r f u n ct i o n ally d ep art men t ali z ed struc t ur es ;

wh i le o n ly th o se mak i n g an d selli n g qu ite difieren t lin es for i n cr easi n gly

differen ti ated gr o up s o f cu sto m er s turn ed to th e n ew m ul ti d i vi si o n al
fo rm Th e ad mi n i str ati v e h i sto ri es o f th e l arg est en terpr is es in th e rubb er
.

an d p etr o l eum i n du str i es an d o f th o se th at pr o c ess agr i cul tur al pr o duct s

pu t still greater emp h asi s o n th e i mp o r tan ce o f th e m ark et in sh ap i n g

co rp o r ate structur e an d str ategy .

Th e l eadi n g c o mp ani es in thi s s eco n d clu ster o f i n du s tr i es (rubb er ,

p etr o leum an d pro cessi n g of agri cult ur al pr o ducts) di ff ered f r om th o se

,

in th e m et al s an d m ater i al s i n du str i es in th at th ey s o ld m uch m o r e o f

thei r o u tpu t to th e m ass co n su mer m ark et th an to o th er bu si n ess fi rm s
fo r fu rth er m an uf act ur i n g r es al e o r o th er u se A n d th ey sti ll so di ff er
, , . .

Fu rth ermo r e en terpr i ses pro cessi n g agr i cultur al pr o ducts gr o wn in th e

,

Un ited S tates purch ased th ei r b asi c m ateri al s fro m a l arge n um b er o f

farm er s i n stead o f s upplyin g th ei r o w n raw m at er i al s o r buyi n g th em
fro m a few pro duc er s o f o re o r o th er pr i m ary m etal s A S l o n g as th e .

large co n cern s in this s econ d gro up of i n du str i es St uck to o n e pri n ci p al

li n e o f pro ducts fo r o n e m aj o r set o f cu sto m er s th ei r admi ni str ati ve pr o b
,

l em s r em ai n ed fo cu sed l i k e th o s e o f th e steel co mp ani es o n adj u sti n g

, ,

an d co o rd i n ati n g th ei r ac ti viti es to t h e S h i f ti n g d em an d s o f th e v o lu m e

m ark et S o agai n l i k e th e s teel fir m s th ey co n ti n u ed t o p erfect th e cen

.
, ,

traliz ed f u n c ti o n ally d ep ar tmen tali z ed structur e th at n early all o f th em

,

h ad p u t to geth er aft er th ei r i ni ti al gro w th O n ly wh en th ey di ver si fi ed

.

i n to n ew pr o ducts fo r n ew s ets o f cu sto m er s o r in th e c ase o f th e o il ,

co m an ies w h en th ey exp an d ed th ei r a c ti v iti es o n a w o rld -w i d e sc al e d i d

’

p , ,

th e o ld er o rgan i z ati o n al fo r m pr o v e i n ad equ ate S uch exp an si o n i n to n ew

.

ar eas an d n ew pr o ducts n o r m ally c am e w h en so m e o f th e a ccu m ul ated

reso urces o f th ese en terpri ses w er e n o t b ei n g fully uti li z ed an d wh en th ei r

sen i o r ex ecu ti v es b ec am e co n v i n c ed th at so m e pl an t equ i p m en t p er so n n el
, , ,

an d s urplu s f u n d s mi gh t b e m o r e pr o fi tably em pl o y ed in n ew li n es o f

bu si n ess .
344 SP REA D O F THE M ULTIDIVI SI O NA L S TR UCTURE

Processors of A gricu ltu ral Pr oduc ts

Th er e ar e so me
pro ces ser s o f agri cultur al pr o duct s w h o h av e n ot yet
attem p t ed to di v er s if y t h ei r pr o duct li n e A l th o ugh th ei r o u tpu t h as been
.

gr eatly exp an ded th eir cen tral i zed f un cti o n ally dep art men tali zed stru e
, ,

tur es h ave b een little tr o ubled by admi n i str ati v e str ai n s Oth ers h o wever
, .
, ,

wh o s e exp an si on cam e thr o ugh di v er sifi cati o n t ur n ed in every case to th e ,

n ew m ul ti di v i si o n al typ e o f adm ini st r ati v e S tructur e T h es e en terpri ses .

w er e able to emb ark o n th e n ew st rategy th at led to ch an ges in struct ur e

be ca us e th ey fo un d it r el ati v ely ea sy to tran sfer so m e of th eir r eso ur ces to
n ew l in es Ei th er m o r e o f th ei r in v es tm en t w as in th e m ar k etin g th an in
.

th e pr o ducin g an d purch asin g en d s o f t h ei r bu si n ess o r th ey h an dl ed ,

pro duct s lik e flo ur th at mi gh t b e Stil l f ur th er pr o cessed in to a n um ber o f

difi eren t en d pr o duct s .

Th e to b acco in du stry pr o vi des a go o d ill u str ati o n o f h o w exp an si on o f

v o lum e for th e s am e m ark et r ai sed f ew n ew adm ini str ati ve pro blem s T h e .

struct ur es o f th e th r ee l ea din g to b a cc o co m p an i es — A m er i can R J R ey , . .

n o lds an d L i gg ett
, Myer s to o k th eir pr esen t fo rm s sh o rtl y aft er th e
—

S upr em e Co urt d eci si o n o f 1 9 1 1 spli t up th e o ld A mer i can T o b acco Co m

p an y Th e pr esen t-d ay cen tr ali zed fu n cti o n ally dep art men tali zed S tru c
11
.
,

tur es d iffer li tt l e f r o m th e o n e o r i gin ally set up f o r th ei r ci g ar ett e busi

n es s in th e 1 8 80 s by J am es B D uk e an d hi s a sso ci ates E a ch o f th e th r ee
’
. .

com p ani es h ad its V i ce-Pr esi den ts in ch arge o f Pu r ch asin g Man uf act u r ,

in g M ark eti n g A dv ert i si n g an d F i n an ce Th at adv ert i si n g h as be co m e

, , , .

man ag ed by a s ep ar ate f u n cti on al d ep artm en t is ea sily u n d er stoo d ,

gi v en th e n atur e of th e ci gar ett e m ark et A lth o ugh con cen tr ati n g o n m ar

.

k eti n g th e co m p an i es al so h av e a h eavy i n vestm en t in th e purch asi n g

,

an d w ar eh o u s e f aci liti es n ec es sary to r e dry pr i ze s to r e stem an d cur e, , , ,

th e t ob a cco l eaf .

Th e o nl y m aj o r admi n i str ati v e ch an g e in th es e fo rm s in r ec en t y ear s

h as b een th e ad diti o n of A ssi stan t V i c e-Pr esi d en ts to h an dl e sub activ ities
o f th e i n cr ea si n gly exp an di n g bu si n ess o f th e gr o wi n g f u n ct i o n al d ep art

m en ts Th e r eo rg an iz ati o n s wh i ch h av e o ccurr ed h er e h av e un d o ub tedly

.

b een m o r e n early co m p ar abl e wi th th at o f th e du Po n t Co m p an y in 1 9 1 9

th an w i th th at o f an y o th er s ex ami n ed in thi s S tudy A t all th r ee .

co m p an i es fam i ly m an agem en t h as l asted lo n ger th an in m o st l arge A m er

,

i can firm s A meri c an T ob acco h as am o n g its sen i o r executi v es tw o g en era

.

ti o n s o f Hi ll s ; L i gg ett 8 : My er s h as tw o o f T o m s ; an d th e th i rd co m

p an y tw o o f Reyn o lds
, .

Th e S to ry is m uch th e sam e fo r som e o f th e o th er en terpri ses pro c es si n g

agr i cul tur al pr o duct s F o r n early tw o gen er ati o n s th e a dmi n i str ati on o f
.

Nati o n al B i scuit A meri can S ugar Un i ted Fru i t an d D istillersS eagrams

, , ,
I ND USTRIE S P A RTL Y A C CEP TI NG NE W STR UCTURE 34 5
h as ch an ged li ttl e B o th A m eri can S ugar an d Uni ted Frui t h ave h ad a
.
12

h ea vy i n v es tmen t in pl an t ati o n s , Shi pp i n g, an d sto r age f aci liti es A l th o ugh .

th e s ug ar c o m p an y h as a sm all sal es d ep artm en t, it sti ll r eli es , m uch

m o r e than do mo s t l arge en terpri ses, on br o k er s an d m i ddlem en to h an dle

its m ark eti n g T h e Un i ted Fru i t Co m p an y h as an ev en gr eater i n v es tmen t
.

in pl an tati o n s an d s team sh i p s D i sti ll er s C o rp o r ati o n -S eagr am s , Ltd , a

. .

family—m an aged C an adi an m ak er of wh i sky wh i ch en ter ed th e A m er i can

m ark et after Pr o h i b iti o n , h as stay ed clo s e to its m ai n li n es It h as a cen .

tral ized, f u n c ti on ally dep artrn en tali zed s truct ur e an d is sti ll u n d er f ami ly

con tro l In co n t rast, S ch en ley In du s tr i es h as cr eat ed si n ce th e en d o f

.

Pro h i b iti o n a m uch m o r e d i ver si fi ed l i n e o f alcoh o li c b ev er ages an d al s o

a l i n e o f an ti b i o ti c s an d o th er p h arm a c eu ti ca l s th at u sed S k i ll s a n d f ac i li

ti es already develo p ed in d istilli n g Wh i le th e avai l abl e d at a do n o t m ak e

.

clear th e structure of th e co n cer n , di v er si fi c ati o n cer tai n ly app ear s to h av e

bro ugh t it to w ard th e m ulti di vi sio n al structur e ev en with i n its m aj o r
li n e Its b eer an d p h arm aceu ti c al s ub si di ar i es appear to b e au ton o mo u s
. .

O n th e o th er h an d, o n e set o f s ub si di ar i es pr o duc es th e w i n es an d
di sti ll ed s p i r i ts, an d an o th er set di str i butes th em .

In th e m eat-p ack i n g i n du stry , o n ly a r a di c al r eallo c ati on o f an en ter

pr is e s reso urces h as bro ugh t th e atten ti o n of admi n i str ato r s to o rgan i z a
’

13
tio n al m atter s an d to th e a do p ti o n o f th e m ul ti di v i si o n al f o rm O f th e .

tw o lea di n g p ack er s S wift h as alter ed little eith er its s truct ure o r it s

,

strategy duri n g th e p as t h alf c en tury an d m emb er s o f th e fo u n der s

,
’

fam i ly h ave co n ti n u ed to pl ay ac ti v e p ar t s in th e m an agem en t o f th e en ter

pr i se A t A rmo ur wh er e th e f ami ly h as h ad n o r eal v o i ce in adm ini str a
.
,

ti o n si n ce 1 923 a n ew set o f m an ager s r ecen tly t ur n ed to a n ew str ategy

,

an d a n ew structu re Wh en t h ese tw o co m p an i es fi r st f as h i o n e d th ei r
.

o p er ati n g o rg an i z ati o n s m o r e th an fif t y y ear s a o th ey p i o n eer ed in th e

g ,

develo p m en t o f system s for coo rdi n ati n g th e fl o w o f pro ducts from th e

o r i g i n al purch ase o f suppli es to th ei r sal e to th e r et ai l er By 1 00 th e dif
9 .
,

feren t bran ch h o uses in each c o n cer n w er e tel egr ap h i n g th ei r o rder s to

th e c en tr al o fii ce in C h i c ago wh i ch k ep t in c o n stan t to uch w i th its s o urc es
,

o f s upply at th e p ack i n g h o u ses an d st o cky ard s T h e C h i c ago o ffic e th en

.

m ade co n tin u o u s an d almost i n s tan tan eo u s allo c ati o n s o f th e o u tpu t o f

th e p ack i n g h o u s es to m eet th e d em an d s o f br an ch es s c atter ed th r o ugh o u t

th e n ati on
14
With th i s clo se coo rdi n ati o n of supply an d d em an d o f th ei r
.

p erish abl e pro ducts th e p acker s di d n o t feel u n t il v ery r ec en t y ear s th e

, , ,

n eed to d ev el o p m ark et f o rec asts an d estimates li k e th o se w o rk ed o u t at

du Po n t G en er al M o to r s an d J er s ey S tan d ard A l so b eca u se o f th ei r

, , .

co n cen tr atio n o n m ai n pro duct li n es th ey p ai d r el ati vely li ttl e atten ti o n

,

to th e b y-pr o ducts wh i ch th ey a dmi ni s ter ed t h r o ugh th ei r c en t r ali zed

,

structure an d gave up attem p ts to m ark et s o ap glu e an d ch emi cal i tem s

, , ,
34 6 SP REA D O F THE M U L T I DI V I S I O N A L S TR UCTURE
on a l arg e s cal e Th ei r f erti li zer an d leath er busin es s es co n tin ued to be
.

m an aged as almo st co m pl etely in depe n d en t units with li tt l e gui dan ce o r

a dm ini str a ti v e co n tr o l f r o m C hi ca go .

No t un ti l th e 1 95 0 s di d fal l in g pr o fi t m argin s im pel so m e m eat p ack er s

’

to t r an sf er a p art o f th ei r r eso urc es in to l in es n o t dir ectl y con n ect ed w i th

th ei r pr im ary m eat an d f oo d pr o duct s an d b y—pr o duct s A t A r m o ur th e .

,

ini ti al step in th i s dir ect i o n w as to enl arge th e pr o ducti o n of soap an d

alli ed pr o duc ts S in ce th e o ld s truct ur e h ad imp ed ed efl ective gr o wt h
.
,

th e ex ecu ti v es set up a n ew au to n o m o us di v isi on t o admi n i st er th ese

l in es wi th o flices p h ysi ca lly sep ar ated fro m th e old cen tral o flice in th e
sto cky ard s A m aj o r d ecisi o n t o ex p an d ch emi cal s an d p h arm aceu ti
.

cals led to an ev en gr eater reo rg an i za ti o n Th e r es ult o f a th o r ough ad .

st rati v e sh ak e-u
p in 1 95 7 w as a m ul ti di vi si o n al struc t ur e m uch l i k e

th at at G en eral M oto r s O n e G r o up V i ce-Pr esi den t w as gi v en superv i

.

si o n o v er th e sev er al f oo d di vi si on s an o th er o v er th e ch emi cal an d n o n

,

foo d di vi si on s an d a thd , o v er in ter n ati o n al act i v i ti es Th ese G ro up .

V i c e-Pr esi d en ts w ith th e P r esi d en t an d Ch ai r m an of th e Bo ard co n sti

,

t u ted th e c om p an y s g en er al ex ecuti v es w h o assi st ed by a g en er al staff

’

, ,

a dm in i ster ed th e se v er al self -co n tai n ed o pe r ati n g di vi si o n s A t t h e s am e .

ti m e Regi o n al V i c e-P r esi den ts w er e se t up to co o rdin ate pur ch as in g

, ,

pr o cess in g an d s al es o f diff er en t f oo d pro duct s T o th e o u tsi der th e exact

, .
,

r el ati on betw een th e pr oduct di v i si on s an d regi on al cflices r em ain s un

cl ear Po s sibly th e com pr o mi se i n v o lv ed in th e plan m ay lea d to a co n fli ct
.

lik e th at whi ch o ccurr ed at Sear s R oebuck , .

D i vi si on s in th e ch emi cal gr o up o n th e o th er h an d b eca m e fu lly auton

, ,

c m o n s Th es e di v i si o n s f o r f erti l i z er s p h arm ac eu ti ca ls in dustr i al ch em i

.
, ,

ca ls l eath er soap s an d co ated abr asi v es an d adh esi ves are each h eaded by
, , ,

a V i ce-Pr esi d en t an d a cc o rdin g to th e 1 u l r epo rt ea ch is

“

, , 95 9 an n a ,

eq u i pp ed w i th th e S tafl an d m an ager i al f u n cti o n s an d f acili ti es to en able

” 15
it t o b e a to p-fligh t co m p eti to r in its sect o r o f A m eri can in dus try .

S i n ce th e r eo rgan i zati on A m o ur h as b een plac in g an in cr easin gly l arg er

,

S h ar e o f its f un ds an d r s n n l i n to th e c h em i cal an d p h ar m a ceu ti cal

p e o e

b u sin ess Cl early it expe cts its fu tur e gr o wth to b e i n th ese li n es In co n

. .

tr ast S w ift c o n ti n u es to co n cen tr a te o n its o ri gi n al li n es o f pr o duc ts an d ,

c o n sequ en tly its s truct ur e h as ch an ged li ttl e

, .

Th e o th er co m p an i es pro c essin g agr i cul tur al pr o du cts studi ed h er e h av e

di ver sifi ed m o r e easil y th an h av e th e m eat p ack er s A lth o ugh th e pro ces s .

o f exp an si o n h as difl ered amo n g th em th e b asi c r ea so n s f or gr o w th an d ,

fo r S truct ur al r eo rg an i za ti o n app ear to h av e b een m uch th e sam e at G e n

16
er al F oo d s G en er al M i lls Bo rd en an d Pr o ct er 8: G am bl e
, , , A ll fo ur .

dev el o p ed n ew pr o duct s i n i ti ally in o rder to use exi stin g per so n n el an d

f ac ili ti es m o r e eff ec ti v ely A fifth N ati on al D ai ry Pr o duct s w as fo rm ed
.
, ,
 I ND USTRIE S P A RTL Y A CCEP TI N G NE W STR U CTUR E 34 7
in 1 92 8 t o gi ve th e b en efi ts o f eco n o mi es of s cal e to s ever al r egi o n ally de
fin ed d ai ry—pro duct bu si n esses A t Nati o n al D ai ry th e admini str ati v e
.
,

ch allen ge b ecam e th e cr eati on o f a gen er al o ffice to i n tegr ate an d sup erv is e

th e r eso urc es o f m any s ub si di ar i es .

G en er al F o o d s h as con cen tr at ed a gr eater pr o po rti on o f its r es o ur ces in

m ark eti n g th an h av e th e m eat p ack er s Un i ted Fruit o r A m er i can S ug ar , , .

In 1 928 th e Po s t um Cer eal Co m p an y o f br eakfast cer eal f am e m erg ed , ,

with a n umb er o f o ther pr o ducer s of p ack aged foo d s i n cludi n g m ak er s o f ,

J ell o ch o co l ate cak e flo ur tap io ca salt s yrup co ff ee an d sea fo o d s Th e

, , , , , , , .

purpo se o f co mb i n ati o n w as co n so li d ati on A singl e selli n g o rg an i zati o n .

would be u s ed in m ark eti n g th e several pro duct li n es Si n ce th e d em o n ,

“

strated eco n o mi cs o f s elli n g a li n e o f pr o duct s th r o ugh a si n gl e s al es o r

ani zation wo uld b e i n cr eas ed by th e n um b er o f i tem s h an dl ed by each

g
” 17
sal es m an . T o admi ni ster th e o th er acti vi ti es i n vo lv ed in pr o duci n g
s uch a l arge lin e th e co m p an y pr o mp tly set up a c en trali zed f un cti o n ally
, ,

dep artmen tali zed structur e But as th e gen er al m ark et exp an ded in th e
.

l ate 1 930 s an d early 1 g4o s an d as G en er al F o o d s added n ew li n es l i k e

’ ’

its p io n eeri n g B i rd s Eye qui ck -f reeze goo d s th e co m p an y b eg an to h av e ,

i n creasi n g diflicu lty in co o rdi n atin g th e p u rch asi n g pr o duc ti o n an d , ,

m ark eti n g o f its m an y pr o duct s th r o ugh a S in gl e f u n cti o n ally d efi n ed or

g a n i za tio n B ef o
. r e th e en d o f W o rld W ar I I so m e o f its it em s i n clud i n g , ,

ch oco l ate s al t an d sea foo d s h ad c om e to b e admi ni stered by di vi

, , ,

si o n s th at c o n tr o ll ed b o th pr o ducti o n an d s al es T h en a m aj o r r eo rg an i z a .
,

tio n in 1 946 cr eated sixt een o p er atin g di vi si o n s n Up ed u n d er fo ur gen

er al ex ecu ti v es i n a s tr uct ur e qui te lik e th at o f G en er al M o t o r s A t fi r st th e .

o ld S al es D i v i si o n c o n ti n u ed to h an dl e th o s e pr o duct s th at c o uld s ti ll b e

effic i en tly so ld th r o ugh it m uch as in th e case o f Pi tt sburgh Pl ate G lass

, ,

18
bu t in 1 955 it too w as ab o li sh ed .

Exp an si on at G en eral M i ll s an d B ord en di ff er ed f r om th at at G en er al

Fo o ds si n ce th e dev elo p m en t of n ew pr o duct s for n ew m ark ets c ame mo r e
fro m th e d esi re to u se m o r e fu lly r eso urc es i n v es ted in pr o cessin g an d pur
ch asin g But Pr o cter Sr G am bl e s di ver sifi catio n aimed at em plo yin g
.
’

mo re eff ecti vely its m ark eti n g as w ell as pr o ducin g s k i ll s an d equi p m en t .

G en er al Mill s th e succ es so r to J am es S B ell s Wash bur n -C r o sby Co m

’
.
,

p an y b egan in th e ear ly 1 930 s to pr o cess an d dis tr ibute pr ep ar ed br eak

,
’

fast cer eal s an d o th er p ack aged foo d s u sin g th e co m p an y s flo ur In 1 937

’
.
,

it carr i ed o u t a m aj o r admi n istrati v e r eo rg an i za ti o n s etti n g up tw o l arg e ,

auto n o m o u s di vi si o n s o n e f o r fl o ur an d f eed an d th e o th er f o r gr o cery

,

pro ducts In additi o n fo ur s mall er auto n omo us di vi si o n s wer e fo rm ed

.
, ,

i n cludi n g a S p eci al Co mm o diti es Di vi si o n wh i ch at fi r st m an uf actur ed ,

vitami n s an d soo n m o ved i n to ch emi cals Furth er di ver sifi cati on i n to .

ligh t h o u seh old appli an ces so as to u se r eso urces devel op ed durin g Wo rld
34 8 SP REA D O F THE M U L T I DI V I S I O N A L STR UCTURE
War II, as w ell xp an si on in ch em i cal s led to th e buil din g of
as f urth er e ,

n ew di vi si o n s aft er 1 94 5 By th at tim e G en er al Mil ls h ad fashi o n ed a

.
,

fa irly stan dard m ulti di vi si on al struct ur e .

Bo rd en s exp an d ed o utput o f co n den se d an d flui d mil k led to th e cr ea

’

ti o n o f an ext en si v e m ark et in g o rgani za ti o n bef o r e th e en d o f th e l ast

cen tury an d later t o th e bui ldi n g o f a cen tr al i zed m ultidep art m en tal ,

stru ct ur e In th e 1 92 0 s an d i g3 o s di v er sifi ca ti o n in to ch em i cal s an d an i

’ ’
.
,

m al f ee ds n o t o n ly pr o vi d ed n ew o u tl et s fo r its b asi c milk lin e b u t al so

m ad e po ssibl e m o r e efl ectiv e use o f ex i stin g sk i ll s an d faciliti es By th e .

en d o f th e 1 93 0 s th i s m o v e h ad led t o th e f as hi o ni n g o f a m ul ti di vi si o n al
’

f o rm an d so m e fift een y ears l ater Bo rd en h ad six pr o duct di vi sions (flui d

,

mil k ice cr eam ch eese f oo d pr o duct s ch em i cal an d spe ci al pr od ucts )

, , , , ,

as w ell as a g en er al o ffi ce wi th g en er al ex ecu ti v es an d st afi s pe ci alist s In .

th e l ate 1 95 0 s B o rd en li k e A rm o ur p u t its emp h asi s on ex p ans i on in t o

’

ch emi cal s .

Pr o ct er 8: G am bl e s m o v es in to h o u seh o ld ti ssu es pr ep ar ed bak in g

’

m i x es f oo d to il et g oods an d cell ul o se pr od uct s cam e l argely after Wo rld

, , ,

War II an d us ed ev en mor e o f its di st ributin g kn o w h ow an d faciliti es -

th an o f its pr o c essin g o n es Th is br o ugh t a di v isio n al izin g o f th e co m

.

an y s a ct i v it i es al o n g pr o duct l in es in th e mi d-1 s In all f o ur food

’ ’

p 95 0

co m p an i es bo th th e a dmin ist r ati ve pr oblem s rai sed by di v er sifi cati on an d

,

th ei r so lu ti o n s app ea r t o h av e be en v ery simi l ar t o th e pr o bl em s an d an

sw ers at th e du P o n t Co m p an y .

Th e o rg an i zati o n al n ecessi ti es o f N ati o n al D airy Pr o ducts o n th e o th er ,

h an d w er e m u ch cl o ser t o th o se o f G en er al M o to r s Th e pr o bl em w as to
, .

cr eate a gen er al o fli ce an d n ot th e pr od uct di vi si o n s as in th e o th er foo d ,

co m p ani es B egi n ni n g as a m erg er o f sev er al m i lk pr o duci n g an d sellin g

.

co m p an i es o per ati n g in d i ff er en t ar eas o f th e N o rth ea st N ati o n al Da ir y ,

exp an d ed its act i vi ti es in to so m ew h at d i ff er en t b u t all i ed busi n esses su ch ,

as ice cr eam an d ch eese By th e l at e i g4 o s a f ai rly ext en si v e gen er al o ffi ce

’
.
, ,

f ashi o n ed to admi ni st er m an y sub si di ar i es h ad co m e to in clud e S taff un its ,

f o r r es ear ch qu ali ty co n tr o l m ark etin g a dvi ce per so nn el an d m an age

, , , ,

m en t tr ai n in g as w ell as a dv erti sin g purch asin g an d acco un tin g A t th e , , .

sam e time m o r e sop h isti ca ted stati sti cal an d fi n an ci al co n tro l s wer e d ev el
,

o pe d T h e m aj o r a dm ini st r ati v e c h an g es in m o r e r ec en t y ea r s h av e led to

.

th e co m b in ati on o f th e r egi o n ally d efi n ed O pe r atin g su b si di ar i es in t o a

sin gl e lar g er di vi si o n for each m aj o r pr o duct l in e T h us tod ay N ati o n al .

, ,

D ai ry s prim ar y a cti vi ti es ar e m an ag ed by th r ee di vi si o n s — S eal test

’

(m i lk ) ice cr
, ea m an d Kr aft c h eese In r e
,c en t y ear s too th e du ti es o f th e
.
, ,

g en er al staff an d sen i o r o fi cers h av e been d efi n ed m o r e specifi call y .

Un questi o n ably th e cr eati o n o f th e m ulti di vi si on al st ruct ur e in th ese

,

en t erpr i ses th at pr o ces se d agri c u l tur al pr o duct s spr an g o n ly f r o m gr o w th

IND USTRI ES P A RTL Y A CCEPTING NE w STR UCTURE 34 9
th rough d i ver sifi cati on an d n ot from exp an sio n o f vo lu me Wh y th en .

h ave en terprises in flo ur m i lli n g d ai ry p ro ducts an d so ap d i ver sifi ed an d

, ,

decen tr ali zed wh i le th o se in to b acco s ug ar an d b an an as h ave n o t ? Wh y

, ,

h as th e m eat—p ack i n g i n du stry mo ved so h esi tan tly in th i s d i recti o n ? Has

n o t th e n atur e o f th e c o m p an y s r es o urc es its equ i p m en t an d tr ai n ed
’
—

p er so n n el as well as th e tech n o lo gi cal po ten ti al o f its b asi c li n e ac

—

co u n ted fo r th e di ff eren ce ? T h e to b acco co m p an i es th e meat p ack er s , ,

Un ited Fru it an d even A meri can S ugar h ave m ade h uge i n vestmen ts
,

in pl an t equ i p men t an d p er s o n n el to mo ve v as t qu an ti ti es o f o n e t yp e
, ,

o f go o d s f ro m th e pl an tati o n o r th e f arm to th e ul ti m ate c o n su m er T h is .

i n vestmen t in pl an tati o n s in r efriger ated sh i p s an d c ar s in sp eci ali zed

, ,

wareh o u s es an d in o th er wo rld-wi de dis tri bu ti n g as w ell as pro cessi n g

,

faci l iti es c an n o t b e u sed easi ly fo r pro ducts o th er th an th ei r o r i gi n al li n es

o f go o d s O n th e o th er h an d G en er al F o o d s B o rd en
.
,
Nati o n al D ai ry
, , ,

an d Pro c ter 8: G amble h av e i n v ested m uch less in n o n t r an sfer abl e pl an t

an d p er s o n n el E v en th e r es o urces o f G en er al M i ll s are m o r e m o b i l e t h an
.

tho se o f th e to b acco b an an a an d m eat—p ack i n g co m p an i es Mo reo ver

, , .
,

G en er al M i ll s an d B o rd en al so h ave h ad gr eater o pp o r tu n i ty to d evelo p

n ew pr o duc t s th at i n cr eas e th e d em an d fo r th ei r ex i sti n g l i n es O f c o ur se .
,

n o t all c o m p an i es w ith mo re easi ly t r an sfer abl e r eso urc es n ec es sar i ly

mo ve i n to n ew li n es o f pro ducts N ati o n al B i scu i t wh i ch h as h ad little

.
,

t ur n o ver in its top m an agemen t si n ce th e early i g4o s is sti ll c arryi n g ’

o n th e s am e t yp e o f bu si n ess th ro ugh th e s am e t yp e o f c en t r al i z ed ,

fu n ctio n ally d ep ar tmen tal i zed o rg an i z ati o n as it h as do n e fo r th e p ast

sixty year s Never th el ess th e ab i lity to d i ver si fy seem s to co rrel ate clo s ely
.
,

wi th th e typ e of th e i n vestmen t requi r ed by th e en terpr i se s o ri gi n al li n e ’

o f bu si n ess R es o urc es i n v ested in m ark eti n g app ear m o r e easi ly t r an s

.

ferable th an th o se i n v es ted in o b tai n i n g raw m ater i al s in t r an sp o r tati o n , ,

an d ev en in pro duc ti o n .

T h e s p eci fi c r eas o n s fo r d i ver si fi c ati o n an d th e r esulti n g decen t raliz a

ti o n in th e d i ff er en t en t erpr is es pr o c essi n g agr i cul t ur al pr o duc ts c an n o t

b e d eterm i n ed wi th o u t a cl o s er st udy o f th e exp er i en ce o f each co m p an y ,

b ased o n reco rd s an d i n terview s A ll th at can b e defi n i tely s ai d o th erwi se

.

is th at th e exp er i en ces o f th e fo o d c o m p an i es h ave c er tai n Si m i l ar i ti es

to t h o se o f du Fo n t an d S ear s Ro ebu ck Nev er th el ess th e u n d erly i n g
,

, .
,

mo ti ve fo r d i ver si fi c ati o n certai n ly app ear s to b e a d esi r e to u se ex i sti n g

reso urces m o re efi ectively In every c ase too th e n ew str ategy i n cr eased
.
, ,

th e co m plex it y b o th o f th e S h o r t-term t ac ti c al d ec i si o n s w h i ch h ad to

coo rdi n ate th e f u n c ti o n al acti viti es to curr en t m ark et dem an d an d o f

lo n g term s tr ategi c o n es wh i ch h ad to allo cate th e r eso urces amo n g th e
-

di ffer en t pro duc t l in es in view o f f uture m arket d em an d an d gen er al

eco n o mi c con d iti on s .
35 0 S P REA D O F THE M UL T I DI V I S I O N A L STR UCTURE

Ru b ber
Th e rubber in dust ry s B i g F o ur i llu str ate ev en m o r e clear ly th e
’

r el ati o n b etw een di ver sifi ca ti o n an d d ecen tr ali zati on Th e tw o th at w er e .

l arge en terpri ses b efo r e th e co min g o f th e auto m ob il e Un i ted S tates ,

R ubber an d B F G oo dri ch h av e l o n g so ld a v ari et y o f prod ucts to

. .
,

diff er en t m ark ets an d b o th t urn ed early t o th e decen tr ali zed struct ure
, .

T h e o th er tw o — G o o dy ear T ire 8: R ubbe r an d F i r esto n e T ir e 8: Rub

be t — th at b eg an as ti r e fir m s co n c en tr ated th eir r eso ur ces
o n a m assi v e s cal e pe r so n n el an d f acili ti es to pr o c u r e o r pr o du ce r aw

m ater i al s pl an ts an d di str i bu tin g fa ci li ti es f o r a S in gl e lin e of pro ducts

, ,
.

T h ey h av e b een sl o w er to di v er sif y an d d ecen tr ali ze th an th ei r tw o m aj o r

com p etito r s .

A s early as 1 90 5 th e Un i ted S tates R u bb er Co m p an y bec am e co n cern ed

,

by th e l ev elin g off o f d em an d for its m aj o r lin e boo ts an d sh oes cause d , ,

by th e mi gr ati on f rom f arm to ci ty an d by th e in cr eased p avin g of str eets

19
an d r o a ds T h e gro w in g in dustr i al m ark et f o r bel tin g h o se p ack in g
.
, , ,

i n sul ated wir e m o lded an d o th er rubb er pr o duct s app ear ed a m o r e

, ,

pro mi sin g fi eld f o r th e u se of its r eso urc es S h o rtly af ter it m o ved ext en .

siv el
y i n to th e in du st r i al rubb e r bu s in ess th e a u t o m o b i l e sudd en ly ,

created a gr eat n ew d em an d f o r rubb er tir es Th en th e devel op m en t of .

ch emi cal pr o cesses i ni ti ally u s ed in th e tr eatmen t o f rubber bro ugh t th e

c om p an y i n cr easi n gly i n to th e pro duct i o n of an ti-o xi d es impr o v ed aci ds , ,

an d h eavy ch emi cal s In th e 1 20 s U n i ted S tates R ubber tr i pl ed its sal e

’

9 .
,

o f ch em i cal s G o o dr i ch s gr o wth f o ll o w ed a p att er n Sim i l ar t o th at o f its

’
.

l argest co mp eti to r exc ep t th at it start ed in in dustri al rubb er m o v ed to ,

fo o tw ear cl o thi n g an d su n dr i es f o r th e m ass co n su m er m ark ets an d

, , ,

th en a dd ed tir es an d ch emi cal s .

Early di v er sifi cati o n w h i ch br o ugh t it to m ark eti n g co n sum er as w ell

,

as pr o d u c er s g o o d s m ad e U n i ted S t ates R ubb er o n e o f th e v ery fi r st

’

A m er i can i n du st ri al en terpri ses to set up aut o n o m o u s pr o duct di vi si o n s .

By 1 9 1 7 o n th e r ecomm en d ati o n of th e D ev elop m en t D ep artm en t its

,
'

Pr esi d en t S am u el B Co l t h ad sep ar ated th e co m p an y s o pe r ati o n s i n to

’

, .
,

fi v e di vi si o n s (ti r e i n du stri al g en er al cl o thi n g an d ch em i cal ) an

, , , , ,

o v er seas u n i t to sup erv i se pl an tati o n s an d an o th er f o r f o r ei gn sales ,

.

Ex cep t f o r th e l ast tw o each di vi si o n h an dl ed its o w n en gi n eer i n g

, ,

m an uf a ct uri n g an d sal es H o w ev er n o g en er al o ffi ce w as cr eated at

, .
,

th i s t i m e .T h e O per ati n g Co u n cil wh i ch adm i n i ster ed th e co m p an y ,

a s a w h o l e i n clud ed th e V i ce-Pr esi d en t s in ch arg e o f th e pr o duct di v i si o n s

, ,

th o se h ead i n g th e o ld er L eg al F i n an ci al an d D ev el o p m en t D ep artm en ts
, , ,

an d t h e P r esi d en t h im self B efo r e th ese S tr u c tur al in n o vati o n s co ul d be

.

f u lly tested h o w ev er a n ew m an ag em en t h ea d ed by Ch arl es B S eger

, , .
,
I ND USTR IE S P A RTL Y A C CE P TI N G NE W STR U CTURE 35 1

a Wall wi th r ail r o ad experi en c e br o ugh t b ack a m o r e

S tr eet fi n an ci er ,

cen tr ali zed f un ct i o n ally d ep artm en tal i zed o rg aniza ti o n

,
.

A S a r esul t th e fi n al r ati o n al i zati o n o f th e co m p an y s a dm i n i str ati on

’

w as m o r e of an ad ap ti v e th an a cr eati v e r espo n se In 1 92 8 as th e co m p an y .

appr o ach ed b an kru p t cy t h e du P o n ts purch ased 3 0 p er cen t o f it

, sto ck 0
.

Th e n ew set o f sen i o r o ffic er s h ea d ed by du Pe n t tr ain ed ex ecu ti v es soo n -

a d o p ted th e m ul ti di vi si o n al S truct ur e th at h ad been us ed so eff ecti v ely

in Wilmin gton A f ter 1 93 0 th e Uni ted S tates R ubb er Co m p an y h ad

.
,

sep ar ate m u ltidep artm en tal o pe r atin g di vi si o n s f o r ti r es f oo tw ear in du s , ,

t ri al pr o ducts sun dr i es ch emi cal s an d a d ep art m en t f o r th e sal e o f crud e

, , ,

rubber an d li qui d l atex an o th er t o m ark et fi ni sh ed pr o duct s o v er seas an d

, ,

a th i rd to m an ag e rubbe r pl an ta ti o n s A t th e sam e ti m e th e co m p an y
.
,

in sti tu ted a gen er al c flice wi th g en er al ex ecuti v es an d S taff speci ali st s as

well as fin an ci al an d S tatis ti cal system s an d co n tr o ls Simil ar to th o se at
du P o n t an d G en er al M o to r s Th e m o st si gn ifi ca n t adj us tmen t in thi s
.

struct ur e ca m e in 1 w h th e g en er al ex ecu ti v es i n cludi n g th o se in

95 7 en ,

ch arge of gr o up s o f di vi si on s cam e to h ave m o r e in di vi dual r espo n sib ility

, ,

an d th e r o l e o f th e g en er al staf f w as enl arg ed .

G oo dr i ch whi ch befo r e Wo rld War I h ad d ev el o pe d a h i gh ly r ati o n al

,

an d sy stemati c f un ct i on ally dep ar tmen tali zed struct ure di d n ot t ur n ,

to th e m ul ti di vi si o n al f o r m un til 1 93 0 wh en it set Up f o ur pr o duct

,

20
di vi si o n s Th e d ev astatin g im p act o f th e d epr es si on an d w i th it r etr en ch
.
,

m en t br o ugh t a r et urn t o th e ear li er Stru ct ur e Th e r en ew ed exp an si on

, .

af ter th e d epr essi o n an d co n ti n u in g pr o duct d ev el o p m en t br o ugh t an

ev o lu ti o n to w ar d a difl eren t typ e o f o r gan iza t i on In 1 93 6 a sep ar ate .

,

di vi sio n w as f o rm ed to m an uf act ur e an d sell l atex pr o duct s ; in 1 94 3

came th e f o rm ation o f th e in tegr ated ch emi cal di vi si o n ; an d in 1 95 3 th e ,

co m p an y be cam e f ully d ec en tr ali ze d Its co m pl eted s tructur e in clud ed

.
,

b id
es e a g r al o c e six auto om o us pr o duct di vi si n s T ir e an d
en e ffi n,
o —

Eq ui p m en t In du stri al P r o duct s F oo tw ear Fl oo rin g Ch emi cal an d

, , , , ,

S po n ge R ubb er — an d tw o f o r fo r ei gn act i vi ti es — th e C an adi an an d th e

In tern ati o n al D i vi si on s .

In th e 1 92 0 s whil e G oo dr i ch an d Un i ted S tat es R ubber w er e di v er sif y

’

in g G oo dy ea r an d F i r est on e w er e exp an di n g prim ar i ly th r o ugh v er ti ca l

, ,

in tegr ati o n Co n c en tr atin g al m o st wh o lly o n tir es th ey a cqui r ed m or e

.
,

t ex til e mi lls, steel an d rimm akin g f a cto r i es rubbe r an d co tto n pl an t a ,

tions an d ext en si v e di st ri buti n g f ac ili ti es in cludi n g d ea l er s an d r etail

, ,

o u tl ets th an d i d th e o th er tw o l ea di n g rubb er co m p ani es O nl y w i th t h e

, .

d epr essi o n an d th e sudden dr o p in th e d em an d f or ti r es di d G oo dyear

an d F i r est on e t ur n h esi tan tly t o d ev el o p in g o th er lin es .

In settin g up a lin e of in dust ri al ru bber G oo dy ea r p o li cy co n cen tr ated

o n ma kin g a f ew l ar g e v o lum e i tem s o ft en o nl y o n e gr a d e o r m o d el
-
,
35 2 SP REA D O F THE M UL TI DI V I S I O NA L S TR U CTURE
whi ch co uld m ak e th e f ull est u se o f th e ex istin g plan t an d con tin ue to
b e a dmi ni st er ed th ro ugh th e cen tral i ze d fu n cti on al ly depar tmen talize d
,

stru ct ur e? Wo rld War II p ro v ed to b e a gr eater fo r ce f or ch an ge Th e

1
.

m assi v e sy n th eti c rub b er pr ogr am th at en su ed in cr eas ed G oo dy ea r s

’
-

f a cil i ti es skil ls an d oth er r eso ur ces in ch emi cal p ro du cti on In 1 94 3

, .
,

G o o dy ear o pen ed a lar g e cen tral r esearch lab o rato ry an d t w o y ears later
f orm ed th e G en er al Pr o du cts Di vi si o n t o h an dl e n early all of its n on tire
b u si n ess T h e n ext y ear an aut on om o us Ch emi cal P r o du cts Di visi o n w as
.

set up Th en i n 1 95 6 aft er th e r eti r em en t o f P aul W Lit chfi el d w h o

.
, .
,

h ad so l o n g d omi n ated th e co m pa n y s afl airs t h e o v er all st ruct ur e w as

’
-
,

systemati zed Go o dy ear s n on tir e bu sin ess ca m e to b e a dmi ni st er ed by

.
’

sev en pr o du ct di vi si on s (Ch em i cal s In dust ri al P r o du cts A vi ati on P ro d

, ,

u cts , M etal Pro duct s Sh oe Pr o du cts F o am an d F ilm an d Fl oo rin g)

, , ,

wi th th e g en er al m an ager of each r es pon sibl e f or th e ma j o r f un cti onal

act i vi ti es i n hi s l in e G oo dy ear al so h ad its In tern ati o nal D i vi si o n wh i l e
.
,

an en l ar ged g en er al o ffice co nsistin g o f ex ecut i v es wi th o ut o eratin g

, p
r espon sib ili ti es an d a gen er al st aE admini st er ed th e com pan y as a wh o l e
, .

O f th e l eadi n g rub b er en t erp r i ses Fi r est on e co n tin u es t o h a ve th e

,

?
lar g est con cen t r ati on of its r eso urces i n t h e ti r e bu sin ess D uri n g th e
d epr essi on it too k o n au tom ob i l e p arts rubber an d plasti c i tems an d
, ,

faci li ti es Wi th th e po st w ar bo o m in tir es it appar en tly dr o p p

.
, m an y m
o f th ese to co n cen tr ate o n ce agai n on its m aj o r pr o du ct If th e d em an d .

f o r tir es l ev el s o ff again F i r es to n e t oo m ay di v er sif y b ut ev en t h en wi t h

, , ,

i ts v eter an m an agem en t whi ch still in clud es F i r est o n es it m ay pr efer t o ,

sti ck wi th a test ed str ategy In an ca s e th r m t b l i t tl r s

y .
,
e e see s o e e ea o n

f o r ch an gi n g th e exist in g f un cti o n all y d ep artm en tal i z ed, cen traliz ed

st ru ct ur e u n til m o r e o f its r eso ur ces ar e t r an sf er r ed i n to n ew

P etr oleu m
Th e ch an gi n g st r u ctur e y f l ar g e o il en terp ri ses h av e m an y
d strate
g o an

p ar all els to th o se of th e l eadi n g ti r e com p an i es Th e oil con cern s t o o .

, ,

con cen tr ated th e l argest p art of th eir r esour ces in m ark eti n g m an uf ac ,

t urin g an d pr o duci n g r aw m at eri al s f or a sin gl e lin e o f go o ds f o r th e

,

h ug e n ew m as s co ns um er m ark et cr eated by th e auto m ob il e Vv i th th e l

.

d epr essi on an d th e con seq u en t d eclin e of dema n d f or gaso lin e th ey ,

b egan to d ev el o p o t h er r efi n ed pr o ducts wi th a hi gh -v o lum e m ar k et such ,

as o il fo r h o us eh o ld h eat i n g di ese l o il f o r r ailr o ads in dustri al s an d

, , ,

u til iti es an d hi gh -o ctan e g aso lin e f or aircraf t S in ce th ese w er e all p ro

, .

du ced thr o ugh th e sam e r efi n in g pr o cesses an d equi p m en t an d all used

th e sam e raw m at er i al s th e o n ly o r gani za ti o n al adj u stm en t cal l ed f o r
,
I ND USTR I E S P A RTL Y A CCE P TI NG NE W STR UCTURE 35 3
by th ei r gro w th w as th e en largemen t o f th e offi ces in th e sal es dep ar t
m en t h eadqu arter s an d fi eld u n it s h an dl i n g th em It w as Wo rld War II .

p r i cul rly ti m ul d y th ti c -r u bb er pr o gr am th at t ur n ed
an d a t a th e w a r-s ate s n e

th e o il as w ell as th e ti r e co mp an i es to ch emi c al pr o ducti o n an d en co u r

aged br o ad pr o gr am s o f d i v er si fi c ati o n S i n c e th e w ar c o n ti n u ed exp an
.
,

si on in p et ro ch em i c al s h as pr o vi ded o n e p o w erful pr essure for decen

t rali zatio n .

Bu t th ere w as an o th er pr es sure fo r setti n g up a m ulti di vi si on al stru e

t ur e in th e p etr o l eu m c on cer n s wh i ch w as l ess Si g n i fi c an t in th e t i r e an d

o th er rubb er co m p an i es B ec au se th e v o lu m e o f pr o ducti o n in th e i n d i v i d
.

23
u al o il fi rm s w as h i gh er th an th at o f th e rubb er c o m p an i es an d b ec au se

th ei r diff eren t fu n ctio n al acti viti es th ei r m ark et faci l iti es an d refi n i n g

—

an d pr o duc i n g O p er ati o n s — w er e m o r e w i d ely sc atter ed o v er t h e gl o b e ,

th e pro blem o f a ssur i n g a st eady fl o w f r o m th e gro u n d to th e cu sto m er

pro ved m uch m o r e diffi cult A S th e l argest o il co m p an ies exp an ded th e
.

o u tpu t o f th ei r m aj o r l i n e th ey exp er i en c ed m u ch th e sam e typ es o f

,

ad m i n i str ati v e str ai n s as h ad J er s ey S tan d ard b efo r e 1 925 F o ll o w i n g h er .

ex am pl e th ey t ur n ed to d ev i si n g r eg i o n ally d efi n ed
,
m u ltidep artm en tal ,

d i vi si o n s an d a gen eral o ffi ce o f gen er al executi v es an d staff sp eci ali sts .

A t th e sam e tim e m an y o f th em w er e m o v i n g i n to w h o lly n ew l i n es o f

,

ch em i cal pro ducts wh i ch c all ed fo r th e creati o n o f a s ep ar ate pro duct

di vi sio n T h u s by 1 960 wi th o n e excep ti o n th e A tl an ti c R efi n i n g Co m
.
, ,

p an y th e twelve o il co mp an i es studi ed h er e h ad dev elo p ed o r w ere

,

b egi n n i n g to m o ve to w ard th e m ul ti di vi si o n al fo rm .

Excep t fo r S tan d ard O il (N ew J er sey ) th e h i sto r i es o f all th ese co m

,

p an i cs as i n dep en d en t en terpri ses fall in th e twen ti eth c en tury D uri n g .

its fi r st tw en ty-fi v e y ear s a r ap i dly ch an gi n g m ark et th e o p en i n g o f n ew

, ,

so urc es o f crud e o il in T ex as C al i fo r n i a O kl ah o m a an d o v er seas an d

, , , ,

th e d i sso lu ti o n o f th e i n du stry s g i an t in 1 9 1 1 all s ti m ul ated r ap i d

’

gr o w th Un ti l th e l ate 1 920 s m o st m aj o r o il co mp an i es exp an ded th ro ugh

.
’

24
ver ti c al i n tegr ati on m uch li k e J er s ey S tan d ard S o m e bu ilt or purch ased
, .

r efi n eri es an d m ark eti n g o rg an i z atio n s to assur e o utlets fo r th ei r crude ;

o th er s so ugh t n ew s o urc es o f crud e t o assur e th em selv es o f ad equ at e
?5
suppl i es A fter 1 925 c am e th e l ev eli n g o ff o f th e m ark et fo r g aso l i n e
an d lubr i can ts fo ll o w i n g th e l essen i n g d em an d fo r n ew au to m o b i l es .

V ery sh o r tly th er eafter b eg an th at m assi v e o verpr o ducti o n o f crud e o il

wh i ch fo llo wed th e o p en i n g o f n ew fi eld s T h en o il executi ves turn ed .

f ro m accu m ul ati n g m o r e r eso urces to d ev i si n g w ay s to em plo y m o r e

effi c i en t ly w h at th ey alr eady h ad B etween 1 93 1 an d 1 936 G ulf O il
.
,
,

S tan d ard O il (In di an a ) Ph i lli p s Pet r o leum th e T ex as C o m p an y S o co n y

, , ,

V acuu m O il (n o w S o co n y Mo b i l O il) S i n cl ai r O il S tan d ard O il o f

, ,

C al i fo rn i a S h ell O il an d C o n ti n en tal O il all u n d erw en t m aj o r adm i n

, , ,
3 54 SP REA D o r T HE M U L T I DI V I S I O N A L S TR UCTURE
istrativ e r eo rg ani zati on s ? O n ly A tlanti c R efin in g an d S tan dard Oil
"6

Co m p an y (O h i o ) w ai ted un til th e y ear s aft er Wo rld War II t o mak e

co mp ar abl e ch anges af ter th ey too h ad co mpl eted a pr o gram of ex p ansi o n
,

an d in tegr ati o n M o st o f th ese co m p an i es co m b in ed t h ei r a cti vi t i es i n to a

.

si ngl e c en tr ali zed f un ct i o n ally d ep artm en tal i zed St ru ct ur e Bu t tw o o f

, ,
.

th e l arg est , S oco n y an d S ta n dard O il (In di an a) r etai n ed in tegr ated , ,

au to n om o u s r egi on al u ni t s In bo th co m p an i es h o w ev er th e sen i o r ex ecu

,
.
, ,

ri v es co n ti n u ed t o a dm ini st er bo th th e f un ct i o n al d ep artm en ts an d th e
aut on om o us di vi si o n s m uch as th e J er s ey D ir ect o r s h ad d o n e un til 1 2
9 7 .

In th e adm ini str ati v e ch an ges of th e 1 930 s mo st o f th e co m p ani es fo r

’

, ,

th e fi r st tim e al so gav e seri o u s att en ti on t o co o rdinat in g th e pr o duct

,

fl o w b etw een th e diff er en t uni ts wi th i n th ei r o rg ani za ti o ns .

A s th e co un try r eco v er ed fr om th e d epr ess i o n th e o il co m p an i es t ur n ed ,

o n c e m o r e t o exp an si on D uri n g Wo rld War II an d ev en m or e in th e

.

gr eat po stw ar bo om th e comp an i es enl arged th ei r tr an spo rtati on r efi n ed

, , ,

an d mar k eti n g fa ci li ti es an d in t en sifi ed th ei r sear ch f o r crud e o il N ot .

o nl y di d d em an d f or g aso l in e gr o w as th e n umb er o f au to m ob il m m an u

f act ur ed p er y ear alm o st d o ubl ed b u t th e ca ll f or th e n ew er lin es lik e

, ,

h o useh o ld an d di es el f u el in cr eased at an ev en gr ea ter r ate Th e da ily

, .

o u tpu t of g aso l in e in th e Un i ted S tates r ose f r o m b arr el s in 1 94 1

to in 1 95 1 o r r cen t wh i l e th at o f di still ate f u el r o se f r om
p e
27
in 1 94 1 t o in 1 95 1 o r p er cen t Th en
, as d em an d .

l evel ed off in th e secon d h alf of th e i 9so s o il ex ecuti v es beg an again t o ’

co n cen tr ate o n o rgan i zin g efl ecti v ely th ei r accumul ated r eso urces Th ey .

also so ugh t n ew custo m er s in o rd er to co n ti n u e em pl o yi n g th ei r m en ,

m on ey an d m ateri al s pr ofi tably
, .

Th e m o v e in to n ew m ar k ets an d wi th it th e settin g up o f n ew wi dely

sca tt er ed r efi n eri es t o serv e th ese m ark ets br o ugh t gr eat er pr es sur e f or

o rg ani zati o n al ch an g e th an di d th e o pen i n g o f n ew cru d e o il fi el ds in

man y p art s of t h e w o rld Befo r e Wo rld War II man y o f th e o il co m

.
,

p an i cs still m ark eted in o nl y p art of th e Un i ted S tates T h er ef o r e on e .

,

S tr ategy o f exp an si o n w as t o co v er th e wh o l e A m er i can m ark et Th en .

,

p arti cul arly in th e i 9so s th e o il co m p an i es co n cen trated o n fo r ei gn

’

m ark ets as o v er sea s d em an d fo r p etr o l eum pr o duct s b egan gr o wi n g m o r e

r ap i dly th an th e do m es ti c m ark et A t th e sam e tim e th ey p u t m o r e .
,

em p h asi s o n d ev el o p i n g th e pe tr o ch emi ca l busi n ess wh er e pr esen t an d ,

fu tur e pr ofi t m argi n s l oo k ed m o r e pr o mi si n g th an in selli n g p etr o l eu m ,

in th e d o m es ti c m ark et In n early all ca ses b o th type s o f ex p an si on led

.
,

t o S truct ur al r eo rg an i za ti o n .

St an d ard O il o f Cal if o r ni a o n e o f th e fir st to emb ar k o n a p o stdep res

,

si o n str ategy o f r egi o n al ex p an si o n set up i n t egr ated di vi si o n s f o r spe cifi c

,

g eogr ap hi cal ar eas ev en bef or e th e w ar Th e fi r st di vi si o n w as fo rm ed for .

I ND U STR I E S PA RTLY
'

A CCEPTING NE W STR U CTURE 355

Tex as an d New M ex i co in 1 937, an o th er fo r th e C an adi an No r th west in
1
94 ,
1 a n d a thi rd f o r O kl ah o m a aft er th e w ar A S early as 1 93 6 ,.th e

con cern j o i n ed with th e T exas Comp an y to establish a s ub si di ary, th e

Calif o r n i a T ex as Co rp o r ati o n , wh i ch c o mb i n ed th e pr o ducti o n , m ark et
in g, an d r efi n i n g acti vi ti es o f th e tw o en terpri ses in A si a, A f r i c a, an d th e
Pac ifi c ar eas T h e Califo r n i a Co m p an y, a s ub si di ary i n iti ally fo rm ed to
.

carry o u t expl o r ati on an d pr o duc ti on o utsi de o f th e Un i ted States, w as

th e i n s tru m en t th at S tan d ard o f Califo r n i a u sed to m ark et c o m p an y

pro ducts in th e Easter n p ar t of th e co u n try A fter th e w ar, th e Califo r n i a

.

O il Co mp an y, a n ew d i visi o n , a dmi n ister ed th e East Co ast r efini n g an d

m ark eti n g acti viti es A s S t an d ard o f Cali fo r n i a w as o n e o f th e fi r st o il co m
.

p ani cs to mo v e i n to p etr o ch emi cal s, so it h ad fo rm ed by th e en d of Wo rld

War II tw o auto n om o u s p etro ch em i cal s ub si di ari es, o n e fo r i n du stri al
an d th e o th er for agr i cul t u r al ch emi c al s In 1 t h c o m p an y cr eated
95 4 , . e

th e Wes ter n D i vi si o n to a dmi n ister expl o r i n g, pr o ducti on , tr an sp o r t ati o n ,

refi n i n g, an d m ark eti n g in s even wester n states, A l ask a, an d H aw aii .

With th e fo rm ati o n o f this di visio n , th e p ar en t comp an y w as completely

di vo rced f ro m o p er ati n g acti viti es an d b ecam e a gen er al o ffi ce co n si sti n g
o f gen er al ex ecu ti ves an d st aff s p ec i alist s By 1 95 4, S tan dard O il o f
.

C alif o r n i a h ad co me to m uch th e s am e t yp e o f struct ur e as J er sey S tan d ard

bu t with pr o duc t as w ell as r egi o n al di vi si on s .

Even b efo r e 1 95 4 th e Co n ti n en t al O il Co mp an y w h i ch in th e 1 940 s h ad

’

exp an d ed b o th by en l argi n g its d o m esti c m ark et an d by m o v i n g r ap i dly

i n to p etr o ch em i cal s h ad ado p ted a co mp ar able struct ur e It i n clud ed si x

, .

o p er ati n g r egi on al d i v i si on s a p etr o ch emi c al d i v isi o n an d a gen er al o ffic e

, ,

o f s en i o r execu ti v es an d st aff s p ec i ali sts S i n c e th e n ew Pr esi d en t L eo n ard

.
,

F McCo llum wh o h ad b een r esp o n si bl e fo r c arryi n g o u t th e r eo rgan i z a

.
,

tion in 1 949 an d 1 95 0 w as a fo rm er J er s ey executi ve h e u n do ub tedly led

, ,

his co mp an y to foll o w th e J er s ey p atter n even mo r e expli citly th an

di d th e o th er l arge o il comp an i es .

S tan d ard O il (In d i an a) adj u sted its st ructur e m o r e s l o wly Un d o ub tedly .

b ecau se it con cen t rated almo st en ti r ely o n th e dom es ti c m ark et it m o v ed ,

to w ard a mo r e cen tr al i zed structur e By th e en d o f th e i 93o s th e p ar en t

.
’

co mp an y w as do i n g its o w n r efi n i n g an d m ark eti n g in th e M i dwest

an d o b tai ni n g its crud e oil f r o m its S tan o lin d gr o up o f pr o duci n g pur ,

ch asi n g an d tr an sp o r ti n g sub si di aries A n o th er s ub si di ary Pan A meri can

, .
,

Petr o leum pr o duced r efi n ed an d m ark eted in th e S o u th eas t A th i rd

, , .
,

th e Ut ah O il R efi n i n g C o m p an y d i d l i k ewi se f o r so m e o f t h e m o u n tai n
,

st ates A ft er Wo rld War II th e c o m p an y co n c en t r ated o n exp an di n g its

.
,

dom esti c m ark ets p arti cul arly in th e Eas t so th at s o on it w as selli n g its
, ,

pro duc ts in every State A fter s o me pr el imi n ary ch an ges in 1 95 4 a m aj o r

.
,

r eo rgani z ati on to o k pl ace in 1 957 wh i ch ess en ti ally cen tr ali zed its admi n
,
35 6 SP REA D o r THE M U L T I DI V I S I O N A L S TR UCTURE
istratio n g fu n cti on al li n es Pr o duc in g acti vities were comb i n ed in to
l
a on .

th e Pan A m er i can P etr o l eum Co mp an y wh i ch h ad a sep ar at e s ub si di ary ,

fo r fo r ei gn pr o duc ti o n P urch asi n g w as al so di vi ded in to tw o co m p ani es

.
,

a f o r ei gn an d a d o m esti c o n e T h e A m er i can O il C o m p an y n o w r efi n ed
.

an d m ar k eted in tw en ty—ei gh t states whi l e th e Ut ah co m p an y co n ti n u ed ,

th e sam e acti v i ti es in fi v e m o u n tai n o n es A n d th e p ar en t com p an y still .

r efin ed tran spo rt ed an d m ar k eted in th e fift een Mi dwester n states A t

, , .

th e same tim e th e admi n i str ati on o f m ar k et in g pr o c essi n g an d d ev el o p

, , ,

in g p etr o ch emi cal s w as c on so li d ated in to th e A m o co Ch emi cal Co rpo r a

t i o n Co m p an y h eadqu art er s w er e en l arged to i n clud e f u n ct i o n al V i ce
.

Pr esi d en ts w h o w er e sti ll r esp o n si bl e f or o p er ati o n s in th e Mi dw est .

A t In di an a S tan d ard co n so li d ati o n o f d o m esti c acti vi ti es w as to be

,

fo ll o w ed by f o r ei gn exp an si o n A S th e 1 95 8 A n n u al R ep o rt stated : We
“
.

”
in ten d to dev el o p a sub stan ti al fo r ei gn p o siti o n n o t o n ly in pr o ducti o n ,

?8
o f crud e b u t in m ark eti n g as w ell T o d ev el o p a E ur o pe an m ark et ,

it fo rm ed a F o r ei gn M ark et Pl an ni n g G r o up u n d er a V i ce-Pr esi d en t

wi th o m ces in P ar i s If f o r ei gn m ark ets gr o w as In di an a expects th e
.
,

sen i o r ex ecuti v es w ill m ost cert ai n ly h av e to w o rk o u t a n o v er seas ad

mi n i str ati v e o rg ani zati on If so it m ay dev elo p a m u l ti di v i si o n al stru c

.
,

t ur e c o m p ar abl e wi th th at f ashi on ed r ecen tly by S o co n y M o b i l S h ell , ,

an d T ex a co .

Un ti l 1 95 8 S o co n y Mo b il s struct ur e w as qui te simil ar to th at of J er sey

,
’

S tan d ard b ef o r e 1 927 T h er e w er e th e f u n cti o n al d ep artm en ts

.
— Pr o duc
in g D o m esti c M ark eti n g F o r ei gn T r ad e M an uf actur i n g an d M ar in e
, , , ,

T r an sp o rt ati on — an d t wo i n tegr ated aflrli ates M agn o li a an d G en er al ,

Petr o l eum whi ch li k e H um bl e w er e pr im ar i ly pr o du cer s o f crud e o il

, , ,
.

A t h eadqu ar ter s th e D i str i bu ti o n D ep art m en t h ad l on g c arr i ed o u t th e

,

r o l e o f co o rdi n atin g th e fl o w o f pr o du ct th ro ugh th e fu n cti o n al acti vi ti es

in m uch th e sam e w ay as J er sey s Co o rdi n ati o n D ep art men t di d af ter
’

T h en th e r eti r em en t o f sen i o r o fficer s w h o h ad pl ay ed l eadi n g

1 2
9 5 .
,

ex ecu ti v e r o l es fo r m o r e th an a gen er ati o n h elp ed br i n g a m aj o r a dmi n ,

istrativ e r eo rg an i z ati o n T h e p ar en t co m p an y w i th g en er al ex ecuti ves an d

.

st aff sp eci ali sts r eli ev ed o f o p er ati n g r esp o n si b i li ti es b ec am e a g en er al

, ,

o ffic e li k e t h at at th e J er sey Co m p an y T w o n ew l arg e o p er ati n g di vi si o n s .

w er e fo rm ed T h e M o b i l O il Co m p an y h ad ch arg e o f all d o m esti c bu si

.

n ess . T h e o th er M o b i l In ter n ati o n al O il Co m p an y ad m i n i ster ed all

, ,

fo r ei gn acti vi ti es M ari n e tr an sp o rt ati o n r em ai n ed th e o n ly acti v i ty m an

.

aged d i r ectl y f r o m th e g en er al o ffice T h e d o m esti c d i v i si o n w as di vi d ed .

al o n g f u n c ti o n al li n es w i th a sep ar ate de armi en t fo r th e a dmi n i str ati on

p
o f th e d ev el o p m en t an d m ark eti n g o f p etr o ch em i ca l s an d p ai n t A l th o ug h .

G en er al P etr o l eu m an d M ag n o li a r etai n ed th ei r sep ar ate o rg an i zati on s ,

co m p an y ex ecu ti v es i n di c ated th at th ese sub si di ari es wo uld pro b ably be

IND USTRIE S P A RTL Y AC C E P TI NG NE W STR UCTURE 3 57
i n co rpo r ated s h o r tly i n to th e n ew domesti c d i vi si o n s fu n c ti o n al struct ur e ’
.

o n th e o th er h an d th e F o r ei gn Di visi o n i n clud ed a n u mb er o f r egio n al

,

admi n istr ati v e u n i ts Wh i l e th e sen i o r o ffi c er o f each is r es p o n si bl e fo r

.

al l fu n c ti o n s in h is ar ea th e Mi ddl e Ea s t d ep art men t c o n c en t r at es o n

,

pro ducti o n of crude an d th e oth er th ree C ari bb ean an d Lati n A m er i

,

can No rth er n an d S o u th easter n Eur o p e an d Af r i ca an d S o u th w ester n

, ,

Euro p e — are co n c er n ed m o r e w ith s al s T

e h er r
ef o e th e V i c Pr esi d en t
e- .
,

in ch arge o f S upply an d D i stri bu ti on (th at is of c o o rd i n ati o n o f pro duc t ,

flo w ) h ead s an imp o rt an t an d acti ve o rgan i zati o n in th e cen tr al offic e o f

th e o v er s eas di v isi on
29
A t S o con y th e d om esti c m ark et fo r p etr o l eum
.
,

pro ducts is co n si der ed m o r e ho m o gen eo u s th an th e fo r ei gn o n e .

Ro y al D utch -S h ell in th e same y ear 1 95 8 r eo rgan i zed th e ad mi n i str a , ,

tio n o f its bu si n ess o u tsi de o th e U i d

f n t e S ta t es T h e r ul t
e s w a s a n o v r all
e - .

s truct ur e m uch l i k e th at at S o con y T h e m aj o r d i ff er en ce b etween th e

.

tw o s tem s f r o m th e f act th at S h ell h ad m o v ed m u ch earli er an d m o r e

ex ten si v ely i n to p et r o ch emi c al s th an h ad th e A m er i c an c o m p an y In th e .

Un i ted S tates Sh ell s p etro leum bu si n ess h ad b een m an aged si n ce th e

,
’

1 93 0 s th r o ugh a c en tr a li z ed f u n c ti o n ally d ep ar tm en t ali z ed s tructur e an d

’

its ch emi cal o p er ati o n s th r o ugh an o th er auto n o mo u s di vi si o n Th e l att er .

o n ly r ec en tly r eo rg an i zed its acti v iti es i n to m u ltide artmen tal pr o duct

p
di vi sio n s By th e 1 95 8 r eo rgani zati o n S hell s acti viti es o ut si de th e Un ited
.
,
’

S tates w er e pl ac ed u n d er tw o gen er al o ffices o n e fo r th e p etr o leu m ,

bu si n ess an d o n e fo r ch em i c al s Each o f th ese tw o g en er al o ffi c es h as a

.

f ai rly l arg e st aff w ith th e S upply an d Pl an n i n g Co o rdi n ato r as a k ey staff

u ni t in th e p etro leum di visi o n L ik e S o con y s o ver seas di vi si o n th e on e
.
’

th at man ages S h ell s bu si n ess o u tsi d e o f th e Un ited S tates is d i v i ded i n t o

’

at l eas t p arti ally i n t egr at ed r eg i o n al d i v isi o n s A t th e very top Ro y al .

,

D utch -Sh ell h as s o rt of a su p ergen eral office — a s even -man M an agi n g

“

”
Di r ecto r s Com mi ttee wh i ch c o n c en tr ates its effo rt s w h o lly o n lo n g
’

term pl an n i n g an d appr ais al o f S h ell s wo rld wi d e acti viti es

-
’ 30
.

By 1 960 b o th Jer sey Stan d ard an d T ex aco h ad b egu n t o m o ve to ward

,

adm i n i st er i n g th ei r o p er ati n g acti v iti es th r o ugh c o m p ar abl e d o m esti c an d

fo r ei gn d i vi si on s Th e J er s ey Co m p an y s ch an ges in 1 95 9 h av e alr eady

’
.

bro ugh t all do mesti c o p erati o n s u n der th e admi n i str ati o n of a si n gle
i n tegrated di vi sio n Po ssibly th e n ext o rgan i zati o n al ch an ge wi ll b e th e
.

f ash i o n i n g o f a si mi l ar u ni t o r u n its for J er s ey s o ver s eas bu si n ess an d

’

p o ssi bly to o a r evam p i n g of th e p ar en t comp an y s gen er al office

, ,
’
.

T ex aco s gro wth an d i n cr eas ed admi n i str ati ve i n v o lvemen t in b o th o ver

’

seas acti vi ti es an d p etro ch emi cal s h ave al so bro ugh t st ruct ur al ch an ges .

U iln t t h e m i d-1
95 0 s th e T ex as Co m p an y pr eferr ed to h av e its fo r ei gn
’

, ,

petro l eum an d ch emi cal acti viti es h an dled th ro ugh s ub si di ari es o wn ed

,

o i n tly w ith o th er co m p an i es In 1
j 947 f or ex
. a m pl e T ex a
,c o s o ld its E ur o ,
35 8 SPREA D o r T HE M U L T I DI V I S I O N A L STR U CTURE
pean s ub si di ari es largely mark etin g o rg an i zati o n s to th e sub si di ary o wn ed
, ,

wi th Cal if o rn i a S tan dard whi ch in 1 93 6 h ad tak en o ver its fa ci liti es in

,

A si a an d A f ri ca By th e mi d-i 9so s it w as th e j o in t o wn er o f three

’
.
,

$ 1
petr och emi cal sub si di ari es Th e work do n e by th ese j o in tly o wn ed sub
.

sidi aries permi tt ed th e sen i o r ex ecu ti v es at T ex aco to con cen tr ate th ei r

atten ti on o n th e a dmi ni str ati o n o f th ei r do m esti c petr o l eum bus in ess .

A pp ar en tly h o w ev er th e T exas Co m p an y d eci d ed th at s uch in dir ect

, ,

co n tr o l of its o ver seas an d ch emi cal act i vi ti es h amp er ed th e apprai sal o f

th e u se o f its r es o ur ces in n ew o r dis tan t m ar k ets an d th e planni n g f o r

f utur e exp an si on S in ce 1 954 it h as exp an ded its o w n o v er seas mark etin g

.
,

as w ell as pr o ducti on h as buil t its ow n r esearch lab o r ato ri es an d has

, ,

mo v ed str o n gly in to petr och em i cals A s a r es ul t th e n umber of Seni o r

.
,

V i c e-Pr esi den ts wi th o ut o per atin g du ti es in th e g en er al cm cc h as been

S i n i fi can tl y enl arged Wh er e in 1 6 th r w r E x cu ti v d
g .
95 e e e e on e e e an o n e

S eni o r V i ce-Pr esi d en t in 1 95 9 th er e w er e se v en Se n i o r V i c e-Pr esi den ts

, .

Th e f u n cti on al o per atin g V i c e-Pr esi d en ts n o w h an dl e d om esti c acti viti es ,

wh il e a V i ce-Pr esi den t for crude oil pr od ucti o n o utsi de th e Un ited S tates ,

o n e fo r th e Wester n H emi sp h er e an d West A f ri ca an d on e f o r th e Ea st ern

H emi sph ere carry on th e fo rei gn b u s in ess Th ere is al so a V i ce-Presi den t

, .

w h o h ea ds th e auton om o us Petr o ch em i cal Di v isi on It seems th at bef o r e .

lon g T ex aco s st ructur e wi ll be v ery lik e th at o f So co n y Mob il an d S h el l

’
.

F o r Ph i llip s S in clai r S tan dar d o f O h i o an d G ulf th e m o v e in to pet ro

, , , ,

ch emi cal s h as been m o r e of a s timulus for r eo rgani zin g th e cen tral i zed ,

fu n ct i o n ally dep art men tal i zed s truct ur e initi ally f o rm ed in th e 1 93o s th an
’

h as th e exp ans i o n o f th e o lder lin es Phi ll i p s f or exampl e m an uf act ur es

.
, ,

an d m ark ets car b o n — bl ack pr o duct s in Eur o pe an d A fri ca b ut h as n ot ,

att em p ted to tak e its g aso lin e an d f u el-o il pr oducts o v er seas F o r th ese .

co m p ani es th en th e m o ve in to petr och emi cal s h as in crease d th e cen tr al

, ,

cm ces a dmin i str ati v e l oad an d so h as en co ur ag ed th e cr eati o n o f g en er al

’

o fi ces wh ose ex ecu ti v es are r elati v ely f r ee fr om o per at in g r es po n si b i liti es .

Up to 1 94 0 n early all A meri can oil co m p an i es s tayed clo se to th eir

,

primary lin es of pr o duct s gaso line lubri can ts f uel oil an d k ero sen e
, , , , .

Th eir h eavy in v estmen t in m en m on ey an d materi al s to pr od uce m o ve

, , , ,

pr o cess an d mark et petr o leum fr om th e w ell to th e cust o m er di sco ur aged

,

th em f r o m en terin g th e petr o ch emi cal bu sin ess A s Wi lli ams H ayn es .

po i n te d o ut in his A m er ican Ch em ical I n du stry A History :

—

Pr od u ct ion f ch emicals b y th e pe tr oleum in dus try app ear ed to be eco n omi

o

call y an d techn icall y so un d, b u t m o st etr o leu m execu tiv es co ul d n o t see

p
w h at ap pear ed to th em to be a tin y m ar k et f o r a m u ltitu de o f ch em icals
pr o du ced b y a complexity o f op eratio n s an d sold to a lon g an d diversifi ed list
o f cu sto m er s, task s f o r w h ich th ey h ad n eith er th e tech ni cal n or th e sa les
32
stafl s .
I ND USTR I E S P A RTL Y A CCEP TING NE W STR UCTURE 35 9
Ho wever , in th e rly 1940 s th e develo p men t o f n ew refi n ery
’
1 g3o s an d ea
’

pro cesses s uch as catalyti c r efi n i n g an d th e sup erfractio n atin g tech n i ques

pro vi ded n ew m ater i als as w ell as tech n i cal k n o wl edge an d exp eri en ce
in ch em i cal o p er ati o n s T h en th e w ar—en gen dered arti fi ci al rubb er pro gr am
.

pu shed th e co mp an ies sti ll f ur th er i n to ch emistry T h e w ar an d p o stw ar .

i n du str i al b oo m with its gro wi n g d em an d fo r b asi c ch emi cal s created

ma e s o
rk t ,
u tsi d e of g s
a o l i ne a d
n o il pr o duc t s fo r l arg e-s c al e lo w -u n i t-c o st
,

pro cessi n g o p erati o n s an d co n sequ ent ly an o pp o r t u n i ty fo r th e p etro leum

,

co mp an i es to apply pro fi tably s o m e o f th ei r sk i ll s equ i p men t an d fu n d s , ,

to a n ew l i n e o f bu si n es s A fter Wo rld War II n early all m aj o r o il fi r m s

.
,

mo ved r ap i dly i n to th e m ak i n g an d s elli n g of ch emi c al s .

T h e o rgan i z ati o n al r esp o n se to th is s tr ategy o f d i v er si fi c atio n h as fo l

lo wed a r egular p attern F i r s t th e ex i sti n g fu n c ti o n al dep artmen ts adm i n
.
,

istered th e n ew bu si n ess T h en a s ep arate m ark eti n g o rg an i z ati o n w as

.

fo rm ed to o p er ate i n d p en den tly o f th e s ales dep ar tmen t Th is m ark eti n g

e .

dep artmen t c ame in tim e to b e resp o n si bl e fo r pro duct develo p m en t as

, ,

well as s ales A n d fi n ally it to o k o ver th e r efi n i n g o p er ati o n s an d th u s

.
,

b ecame an auton o mo u s mul ti fun cti o n di visi on By th e m id—1 950 s Sh ell

, .
’

, ,

S tan d ard o f C al i fo r n i a Ph i lli p s T ex aco G ulf S t an d ard (In d i an a) Co n

, , , , ,

tin en tal O il an d S t an d ard O il o f O h i o all h ad i n tegr ated c h em i c al d i v i

,

sio n s In 1 960 th e p etro ch emi cal dep artmen ts at S o co n y Mo b i l an d S i n cl ai r

.
,

h an dl ed d evelo pm en t an d m ark eti n g but n ot pro ces si n g J er sey s Enjay .

’

Co m p an y sti ll r emai n ed pr i m ari ly a m ark eti n g o rg an i zati o n O f th e .

t welve o il co mp an i es studi ed here on ly A tlan ti c Refi n i n g co n ti n ued to

,

ad mi n ister its p et ro ch em i cal bu si n ess th ro ugh th e s ever al fu n ctio n al

dep artmen ts .

Whi le th e vo lume an d pro fi ts o f th e petro ch emi cal bu si n ess are s ti ll

s mall in comp ariso n to tho s e o f th e maj o r l i n es d i ver si fi cati o n h as cer ,

tain ly i n cr eased th e n u mb er o f st r ateg i c d ec isi o n s s en i o r o ffi c er s m u st

make Th u s th e mo ve i n to ch emi cal s h elp ed to sti m ul ate ad mi n ist r ati ve

.

reo rgan i zatio n in at least two of th e co mp an i es th at di d n o t t urn to

exp an d i n g o v er s eas m ark et s Ph i ll i p s an d G ulf Even th o ugh th e G ul f
, .

Co rp o r atio n h as o ver seas so urces o f crud e o il it h as m ad e l i ttl e attem p t ,

to m ark et its r efi n ed pr o ducts o u tsi d e o f th e Wester n H em i sp h er e Wh i le .

it h as b een u n der less press ure to wo rk o u t a regio n ally defi n ed struc ture
"

its n ew Presi d en t h as recen tly tri ed to i m pr o ve th e exi sti n g fun c ti o n al

o rg an i z ati o n so th at th e s en i o r o ffi c er s c o uld con c en t r ate o n st r ategi c

decisi o n s an d th e dep artm en tal h eads o n tacti cal o n es ; o r to say th is ,

in a d i ff er en t w ay to t r an sfo r m th e cen tr al o ffice i n to a m o re gen er al o n e

,

a l th o ug h th e o p er ati n g o rg an i z ati o n s r em ai n f u n c ti o n al d ep ar tm en ts

r ath er th an m u ltidep artmen tal di visi o n s W K Wh i tefo rd t h e n ew . . .

,

Presi d en t w h o en g i n eered G u lf s r eo rgan i z ati o n ess ay ed to ach i eve th i s

’

,
3 60 SPREA D o r T HE M U L T I DI V I S I O N A L S TR UCTURE
en d in tw o ways O n e w as to m o v e th e d ep artm en tal h ea dquart ers o u t of
.

Pi ttsburgh to H o ust o n, T exas, an d elsewh er e Th e o th er w as t o in sis t th at .

th e sen i o r o fi ci als w h o St ay ed in lin e po si ti o n s in Pi tt s burgh w er e t o b e

“
gen er al o fficer s, n ot fu n cti o n al speci ali sts Pitts burgh , Wh i tef o rd in si st ed,
”
.

w as to b e th e pla ce o n ly f or eco n o mi c plan nin g l o n g-r an ge pl ann i n g,

“

po li cy an d obj ecti v es It is th e n erv e cen t er, th e h ea d o f co mm un i ca

.

ti o ns.
” 33
Wh eth er th ese m easur es will pr even t th e con tin uin g ch an n elin g
o f o per ati o na l d eci si o n s t o th e t o fii r m i s t b s T h y
p o ces e a n o e een e a r e .

m o r e dr ast i c th an th ose tri ed by Pi er r e du Pon t an d Wal ter T ea gle in

th ei r attem p ts t o k eep d eci si on m ak i n g d ecen tr aliz ed wi th in a f u n cti o n

ally d efi n ed st ruct ur e Mo r eo v er, wh en j er sey S tan dard em plo yed a

.

so m ewha t simil ar stru ctur e for a tim e aft er 1 933 to a dmi ni ster its do m esti c
busin ess, its seni o r o ffi cer s app ar en tly avo i ded b ecomin g in vo lved in
o per ati on al act i vi ti es .

Th e ex peri en ce of th e oil in du stry h elps mak e cl ear that o n e fun da

m en tal purpo se o f struct ur e is t o uni te all a cti vi ti es o f th e en terprise in
m eetin g ch an gin g m ark et d em an d Wh er e a com p an y s lin e o f en d
’
.

pr o duct s w as pr o du ced by th e sam e man uf a ct urin g pr o c esses fr om th e

sam e supply o f r aw m at eri al s f or a r elati v el y f ew sets of cu st om er s th e ,

cen tr al i zed f un cti o n ally d ep art men taliz ed f o rm pr o vi ded that essen t ial
,

co o rdi n ati o n Bu t wi th th e dev el op m en t of n ew lin es f or n ew an d qu ite

.

diff er en t cus to m er s o r wi th th e o peni n g of n ew di stan t m ark ets efl ectiv e ,

in terd ep artmen tal coo rdin ati on b ecam e in cr easin gly difficul t F or th e .

l argest o il com p ani es th e strain s us u ally appear ed aft er exp an si on in

,

far aw ay lan ds led to bui ldin g r efi n eri es an d sh ipp in g f acili ti es cl o ser to

th e dist an t m ar k ets T h en th ese o il co m p an i es us u all y f o ll o w ed th e exam
.

l f th ld t d b i gg est en terpri se in th e i n dus try S tan dard Oil

p e o e o es an ,

(N ew j er sey ) by f o rmi n g i n tegr ated r egi on al o per atin g di vi si on s with a

,

gen er al office to coo rdi n ate appr ai se an d pl an th e w o rk of th e en terpr ise

, ,

as a wh o l e L ater as t h e dom es ti c m ark et gr ew m o r e n early h om o g en eous

.
,

an d m o r e cl osely kn it all o per ati o n al a cti v i ti es agai n cam e t o be m an aged

,

by a sin gl e au ton o m o us uni t T h en th ese com p ani es lik e Nati o n al D ai ry

.
,

an d A m eri can Can dr oppe d th eir r egi on al di vi si o n s wi th in th e Un i ted

,

S tates b u t o ver seas a cti vi ti es co n ti n u ed to b e m an ag ed t hr o ugh geo gr ap h

,

ically d efi n ed in tegr at ed di vi si on s
, .

Ru b ber m eat p ackin g to b a cco an d li qu o r en terpri ses al so d evelo ped

,
-
, ,

ext en si v e o v er seas a cti vi ti es in cludi n g pr o cessin g as well as di st ri bu tin g

,

fa ci li ti es Y et th ese m o r e di stant ope r ati o n s f ail ed to ex ert en o ugh pr es

.

s ur e to ca use th e buildin g of a n ew structur al fo rm Th o se co n cer ns .

d ecen tr al i zed be ca u se th ey di ver sifi ed Bu t wh en th ey di d so th ey al l set . ,

”
up th ei r In ter na tio n al D i vi si on to a dmin i ster o ver seas acti vi ti es
“
.

Wh en th e rubber fi rms an d th o se pr o cessin g agri cultur al pro ducts di d

I ND U S TR I E S P A R TL Y A C CE P T I N G N E W STR UCTURE 36 1

decen tr ali ze their admi n is trati ve sto r i es w er e com p arabl e to th o s e o f the

,

o il co m p an i es as th e l att er m o v ed i n to petr o ch em i c al s T h e o rg ani z a .

ti o n al r espo n se o f th e o il i n du st ry to d i v er si fi c ati o n i llu str ates w ell th at

th e old er structur e w as u n abl e t o i n tegr at e th e r eso urc es o f th e en t erpr i se

to th e m ark et d em an d s o f th e n ew li n es an d th at t h e r equi r em en t s fo r

such co o rdi n ati o n br o ugh t th e n ew st ruct ur e T h e d ec i si on t o pr o du ce .

petro ch em i cal s r ath er th an p erm i t th e gas es or li qu i d s to go to w aste

,

o r to b e so ld t o a ch emi cal c o m p an y fif St led to th e fo r m ati o n o f a n ew

,

o rg ani zat i o n t o m ark et th es e pr o duct s T h is n ew o rg ani z ati on w as s oon .

m ade in depen den t of th e exi sti n g sal es dep artriren t o th erw i se th e o lder ,

li n es co n ti n u ed to r ecei ve n early all th e att en ti on S i n c e eff ecti ve selli n g .

call ed n o t o n ly for k eep i n g in cl o se to uch wi th fluctu ati n g dem an d b u t

al s o fo r th e c o n ti n u i n g im pr o v em en t an d adj u stm en t o f pr o ducts acco rd

in g to ch an gi n g n eed s t ast es an d d ev el o p m ents by com p etito r s this

, , ,

mark eti n g u ni t qui ckly o b tai n ed its ow n d ev elo p m en t an d r esearch

”

dep artm en ts A s the n at ur e o f th e n ew li n es w as v ery differ en t fr o m th e

.

o ld er o n es it s oo n b ecam e m o r e pr a c ti c al fo r th e ch em i c al u n it s to bui ld
,

s ep ar ate pl an ts fo r th eir exp an d ed acti vi ti es th an m er ely to add faci liti es

at th e m ai n r efi n er i es E v en w h er e pr o c es si n g c o n ti n u ed to b e c arr i ed
.

o u t at th e o ld er w o rk s its c o n tr o l ca m e m o r e an d m o r e un d er th e ex ecu
,

tiv es in th e p etr o ch emi c al sal es an d d ev el o p m en t u n i t s T hi s th en is th e .

, ,

w ay th at t h e f ully i n t egr ated di v i si on evo lv ed an d in tim e th e c o mp an y s

’

, ,

to p a dmi n i str a ti v e o m ces an d th en its w h o l e struct ur e b ecam e r ed efi n ed .

Th e s am e g en er al p att er n s d ev el o p ed in rubb er an d en terpr i ses pr o c essi n g

agr i cult ur al pr o ducts as th ey m o v ed i n to n ew li n es .

Ev en th o ugh it led to th e addi ti o n o f n ew r es o urc es th e str ategy o f ,

di ver si fi cati o n whi ch br o ugh t d ecen tr ali z ati on w as u su ally set up as a

, ,

w ay to u se exi sti n g per so n n el an d f aci li ti es Exc ess c ap acity cr eat ed by th e .

depr essio n an d n ew pr o duct s dem an ded by th e w ar h elp ed t ur n to

d i ver si fi c ati o n en terpr i ses in all thr ee sets o f i n du str i es rubb er o il an d , , ,

th o se pro c essi n g agri cul tur al pr o du cts M o st of th e r eso urc es o f th ese .

co mp an i es r em ai n ed it sh o uld b e str essed in th eir o r i gi n al li n es F or

, , .

wh i l e th ey h ad m o r e r eso ur ces th at w er e t ran sfer abl e to o th er typ es o f

pro ducts th an did th e steel co pp er o r ev en alum i n um fir m s th ei r
, , ,

f acili ti es an d p er so n n el co uld n o t b e ch an g ed so easi ly to di ffer en t en d

pro ducts as c o ul d th o se in ch emi cal el ectri cal an d even p o w er m achi n ery
, ,

en terpr i ses . G aso li n e tir es m eat or m i lk co n ti n u ed to accou n t fo r th e

, , ,

great est vo lume o f o utput an d sh ar e o f to tal pro fi ts in th e i n di vi du al

en terpr i ses No rm ally
. h o w ev er th ese o lder pr o ducts br o ugh t a l o w er
, ,

retur n o n i n vestm en t an d lo wer pro fi t p er u n i t T h e n ewer li n es wh i ch .

,

w er e u su ally m o r e pro fit able were th er efo r e th o s e in wh i ch th e en terpri se

,

en l arg ed as it add ed o r exp an d ed it s r es o urc es .

3 62 S P REA D O F T HE M ULTIDIV I SI O NA L S TR UCTURE
D i v er si fi cati o n th
u s bro ugh t th e n ew decen tr ali zed Stru ctur e n o t b e ,

cau se it i n cr eased th e t o tal o u tpu t o r si z e o f o p er ati o n s b u t b ecau se it so ,

qui ckly en l ar ged th e n u mb er an d co m plexi ty o f b o th tacti cal an d str ategi c

a dmi ni st r ati v e d ec i si o n s By m ak i n g th e i n tegr ati o n o f a c o m p an y s f un c
’
.

tion al ac ti v i ti es m uch m o r e di fficul t it led t o th e cr eati o n o f a m ul ti

,

d ep ar tm en tal auto n o m o u s di vi si o n fo r th e a dmi ni str ati on o f each m aj o r

li n e o f pr o du cts B y fo rci n g sen i o r executi ves to pl an an d appr ais e activ i
.

ti es in w i d ely d i ffer en t i n du str i es it en c o ur aged th e bu ild i n g o f th e

,

gen er al o ffic e wh er e th e m en r esp on sibl e fo r th e desti n y o f th e en terpr i se

co uld b e gi v en th e ti m e i n fo rm ati o n an d p sych o l o gi cal co mm itmen t
, ,

n ec essary to h an dl e t h ese w i d e r an gi n g du ti es -
.

E ven a sm all am o u n t o f d i v er si fi c ati o n in r el ati o n to t o tal pr o du cti o n

r ai sed fo r th ese en terpri ses m an y o f th e sam e pr o bl em s th at th e du Po n t
Co m p an y h ad en co u n ter ed aft er emb ar k i n g on it s d i v er si fi c ati o n pr o gr am .

Y et in th e th r ee i n du str i es j u st ex ami n ed rubb er gaso li n e an d pro ces si n g

, , , ,

o f agr i cu l tur al pr o du cts th e du P o n t stru ctur e serv ed as a sp eci fi c m o d el

,

o nl y in th e fi r st A l th o ugh j er sey S tan d ard h ad pr o v i d ed th e ex am pl e for

.

r egi o n al d ecen tr ali z ati o n it w as slo w er th an so me o f its co m p eti to r s to

,

exp an d p etr o ch em i ca l s a n d so o ff er ed n o sim i l ar m o d el fo r pr o duct d ecem

traliz ati o n T h e d i ffer en t an d ev o lu ti o n ary r esp o n ses o f m o st co m p an i es

.

to th e r equi r em en ts o f th e n ew p etr o ch emi ca l l i n es sugg est th at n o p artic

ul ar ex am pl e w as fo llo wed in th e s etti n g up o f th ese n ew pro duct u nits

in th e o il i n du stry R eadi ly av ai l abl e ev i d en c e d o es n o t i n d i cate w h at
.

eff ect ei th er th e du Po n t o r G en er al M o to r s exp er i en c e h ad o n th e ch an ges

in th e fl o ur mi lk an d m eat p ack i n g fi r m s b u t th e tw o p i o n eer s u n do ub t

, ,
-
, ,

edl h d l east an i n d i r ec t i n fl u en c e By h l w h en s o m e
’

y a a t t e ate rog o s .
,

c o m p an i es pro cessi n g agri cultur al pr o ducts fi rst b egan to set up n ew

struc tur es th e w o rk o f du Po n t an d G en er al M o to r s h ad b eco me qu ite
,

well k n o wn .

INDU S TRI ES WIDELY A CCEP TI N G T HE NEW S TRU CTURE

In r
th ee i n d u stri es th e electri cal an d el ectr o n i cs th e p o wer m ach i n ery
, ,

i n cludi n g au to m o b i les an d th e ch em i cal all b u t tw o o f th e twen ty l eadi n g

, ,

co m p an i es stud i ed h er e w er e m an ag ed in 1 60 th r o ugh a m ul ti di v i si o n al
9
a d m i n i str a ti v e stru ctu r e C l early in th ese i n du str i es th e o ld er c en tr a li zed
.
, ,

d ep ar tm en tal i zed fo rm h ad f ai l ed to p erm i t eff ecti ve co o rdi n ati on an d

i n tegr ati o n o f th e fu n cti o n al act i vi ti es wi th m ark et n eed s an d d em an ds
a n d as t h e sam e ti m e h ad pr ev en ted th e sen i o r ex ecu ti v es f ro m fi n d i n g
, ,

t h e ti m e a n d i n f o r m ati o n n ec essary to h an dl e an i n cr easi n g n u m b er o f

st r a tegi c d eci si o n s T h e l ead i n g c o m p an i es in all th ese i n du str i es h av e

.

i n cr easi n gly d ev el o p ed n ew pr o duc t l i n es so ld in m ark ets qui te di fferen t

I ND USTRIE S W I DE L Y A CC EP TI NG NE w STR UCTURE 6
3 3
f om
r th ei r o r i g i n al o n e O n ly o n e
. o f th e t w en t y — Deer e Co mp an y
h as sti ll n o t m o ved ex ten si vely b eyo n d its i n iti al l i n e o f pr o ducts Th i s .

str ategy o f exp an si on th ro ugh di ver sifi c ati o n bro ugh t such p o werful
deman d s fo r admi n istrati ve r eadj u stmen t th at o n ly th e s tro n gest i n di vi d
n als h av e b een abl e to i g n o r e o r r esi st th em B o th o f th e tw o c o m p an i es
.

n o t ad o p ti n g th e n ew fo rm D o w C h em i c al an d D eer e 8: Co m p an y h av e
, ,

lon g b een ru n as fam i ly fi rm s .

T h e m o ti ve fo r th e i n i ti al d i ver si fi c ati o n by th e l ead i n g en terpr i ses in

th ese i n du stri es agai n app ear s to h ave b een as at du F o n t an d so m an y ,

o f th e fi r m s stud i ed h er e th at o f as sur i n g co n ti n u i n g an d f ull er u se o f

,

exi sti n g r eso urc es T h ese c o m p an i es w er e abl e to m o v e i n to n ew l i n es o f

.

bu si n ess m o r e r eadi ly th an m o st A m er i can fi rm s l argely b ec au se th ei r

acti v iti es call ed f o r a h i gh l ev el o f tech n o l o g i c al sk i ll s O f A m er i c an .

i n du str i es n o t pr im ari ly i n vo lved in m aki n g m i li tary pr o ducts th e ,

ch emi c al an d el ectri c al h av e devo ted th e m o st r eso urces to sy stem ati c

34
research an d devel o pm en t T h e sk i ll s of thei r h igh ly tr ai n ed p er so n n el
.

h ave been b ased o n i n du str i al tech n o lo gi es th at can b e appl i ed to th e

develo pm en t m an ufactur i n g an d m ark eti n g o f a l arge n u m b er o f en d
, ,

pro ducts S o to o h ave th ei r m an uf acturi n g faci liti es an d raw m ateri al s

.
, ,

b een u sed m uch mo r e often th an th o se in th e steel co pp er alum i n um , , ,

m eat-p ack i n g ti r e an d g aso li n e fi rm s to t ur n o u t n ew an d di ffer en t

, ,

pro ducts fo r qui te d iff er en t s ets o f cu sto m er s It is h ardly surpr i si n g th en .

th at m an y of th es e en terpr is es led th e w ay b o th in ad o p ti n g th e st r ategy

o f d i v er si fi c ati o n an d in f as h i o n i n g th e s truc t u r e n ec ess ary to ad m i n i ster

d i ver sifi ed l i n es o f bu si n ess .

In th e ch emi c al p o w er m achi n ery an d au tom o b i le i n du str i es th e

, , ,

multi di vi si o n al fo rm fi r st fash i o n ed at G en er al M o to r s an d du Po n t
, ,

s erved expli citly as a mo del in th e bu ildin g of th e n ew structures O n th e .

o th er h an d th e l ead i n g en terpr i ses in th e el ec tr i c al i n du s try w er e th em

,

selv es i n n o v ato r s r ath er th an fo ll o w er s in d ev el o p i n g th e m o d er n d ec em

tralized struct ur e T h e adm i n is tr ati v e r eo rg an i z ati o n at Westi n gh o u s e

.
,

started in 1 93 1 b egan as a cr eati ve i n no v ati on co mp arabl e wi th th o se at

,

G en er al Mo to r s an d du Po n t A t Westi n gh o u se th e pr o ces s o f i n n o v ati o n

.
,

li k e its c au ses w as in m an y w ay s st r i k i n gly sim i l ar to th at in all fo ur o f

,

th e co m p ani es st u di ed in d etai l h er e A l th o ugh G en er al E lec tr i c s reor

’
.

g an i z a tion w a s to c o m e l at er its sen i o r ex ecu ti v es h av e r ec en tly b een as

,

i n n o vati ve in admi n i str ation as an y in A m eri c an i n du stry .

Electrical an d Electro n ics

Un ti l Wo rld War b o th great electri cal co m p an i es h ad co n cen tr ated
I,
th ei r r eso ur ces in o n e b asi c area th e d evel o p m en t m an ufactur i n g an d
, , ,

mark eti n g o f equ i p men t to pro vi de electr i c p o wer an d li gh t 35

B ec au se .
 6
3 4 SP REA D o r T HE M U L T I DI V I S I O NA L S TR UCTURE
o fth ei r i n du stry s tech n o lo gi cal co mplexi ty th ei r pro duct l i n es soo n came
’

to i n clude a w i de v ar i ety o f i tem s r an g i n g f ro m h uge turb i n es an d ,

el ectr i c lo co mo ti ves to ti n y f u ses S w i tch es an d el ec tr i c en g i n e p ar t s T h i s

, , .

i n tri cate bu si n ess w as fro m th e fi rst succes sfully admi n i stered th ro ugh
, ,

a cen t r ali zed f u n cti on ally d ep ar tmen tali zed st ruct ur e Exc ep t fo r l am p s
, .

an d w i r i n g m o s t o f th i s m ach i n ery an d accesso r i es w en t to o th er i n du str i al

,

fi rm s for u se in f ur n i sh i n g th ei r o w n go o d s an d servi ces Mo reo v er th e .

,

pro ductio n mark eti n g an d o b tai n i n g o f m ateri al s for b o th th e sm all

, ,

stan d ard i zed en gi n es equ i p m en t an d o th er pr o duc ts an d th e l arge n o n

, ,

stan d ard t urb i n es gen er ato r s an d so fo rth c alled fo r clo se sch eduli n g
, , ,

an d co o rd i n ati on w ith i n existi n g d ep ar tmen ts T h e tech n o lo g i c al i n tr i c a .

ci es of this in du stry in fact led to th e bu i ldi n g o f n ew en gi n eeri n g dep art

, ,

m en ts to desi gn b o th pro cess an d pr o duct T o m eet th e co n ti n u ally .

ch an gi n g deman d s fo r n o n stan dard pro ducts th e clo sest coo p erati o n ,

b etween execu ti ves in th e s ales, pro ductio n purch asi n g an d n ew en gi , ,

n eer i n g d ep ar tm en ts w as c all ed f o r O n th e o th er h an d stan d ard pr o duct s .

,

requi red b esi de esti m ates o f mark ets an accur ate u n der stan din g o f th e
, ,

cu sto m er s c h an gi n g an d po ten ti al n eeds an d also o f n ew m ach i n es

’

devel o p ed by co mpetito rs T h e resulti n g co n stan t pressure fo r pro duct

.

im pro vem en t led th ese tw o co mp an i es to set up th e fi rst r esearch dep ar t

men ts in A m eri can i n du stry A l so b ecau se as th e l amp o r l i gh t bulb w as
.

th en its o n ly pr o duc t th at w en t d i r ec t ly to th e m as s co n su m er th e d i ffer ,

in g n eed s o f th is m ark et led b o th co mp an i es to set up au to n o mo u s di vi

si o n fo r l am p d esi gn pro ducti on an d s ale Wes ti n gh o use h ad such a
, , .

di vi si o n b efo r e Wo rld War I By co n tr ast b ecau se G en er al Electri c devel

.
,

o p ed tw o gr o up s o f l am p -mak i n g en terpr i ses it d i d n o t c o m e to a si n gle , ,

s ep arate au to n o m o us l amp u n i t u n ti l th e 1 920 s ’

.

Wh en th ese electri cal gi an ts mo ved i n to maki n g pro ducts o th er th an

th o se u sed to pro duc e el ectri c p o w er an d l i gh t th e o ld er st ruc t ure b ec am e ,

i n creasi n gly i n eff ecti ve A t b o th co mp an i es di ver sifi cati o n too k tw o

.
,

fo rm s It resulted fro m th e m o ve i n to electr i c appl i an ces s uch as w ash

.

in g m ach i n es ref r i ger ato r s v acuu m clean er s h o t w ater h eater s an d

, , , ,

sto v es fo r th e c o n su m er m ark et S eco n d it c am e f ro m co mm erc i al i zi n g .

,

th e r ad i o X r ay s allo y s pl asti c s an d el ec tr on i c d ev i c es d ev elo p ed in th e

, , , ,

co m p an ies r esearch l ab o r ato r i es T h es e n ew pro ducts wer e in a s en se

’
.

b y pro duc ts o f r esearc h c arr i ed on by th e l ab o r ato ri es o n tub es wi res

-
, ,

an d i n sul ati o n to i m pr o v e el ec tr i c l i gh t i n g an d equ i p m en t .

In b o th cases th e co m p an i es deci d ed to d i ver sify in o rder to u se th ei r

s o f r es earch em
36
exis ti n g r eso urc es m o r e ro fi tab l I f th b —pr duc t
p y e y o .

plo yed en o ugh avail able equ i pm en t an d m o r e i mp o r tan tly the tech n i cally ,

tr ai n ed p er so n n el an d if th ei r pr o duc ti o n h ad gr o w th p o ssi b i l i ti es th en
, ,

th e sen i o r ex ecu ti v es u su ally d ec i d ed to d ev el o p th e i tem s co m m erci ally

I ND USTRIE S W I DE L Y A CCEP TI N G NE w STR UCTURE 6
3 5
t em e
h s lves If n ot th ey li cens ed th e p at en ts o u t t o o th er en t erprises A gain
.
,
.
,

th e av ai lab ility o f ex is t i n g r eso ur ces h elped d etermin e th e accum ulati o n

o f n ew o n es T h e m o ti v e f or th e m o v e i n to co n s u m er appli an c es w as
.

ev en m o r e expli ci tly d efin ed as a w ay to fi n d m o r e em pl o ym en t f o r ex i st

in g skill s an d f aci l i ti es A cco rdin g to G er ar d S w ope G en eral El ectri c s

’
.
,

Pr esi den t th e m o v e w as to in cr ease th e n eed fo r th e comp an y s primary

’

l in e o f pr odu ct s by exp an din g th e d em an d fo r el ectri ci ty A t th e sam e .

tim e th e bui ldin g an d sell in g of appli an ces m ean t th at curr en t plan t

, ,

equ i p m en t an d per so n n el co ul d o per ate at a st ea di er r ate by av o i din g or

,

l
at east c u
o n te rb l
a an c i n g th e f ea t an d famin e cycl e of th e app ar at u s an d
s - -

h ea vy el ect ri c equi p m en t bu sin es s Bu t as at du Po n t di v er sifi cati o n .

,

u s ed largely en gi n eerin g an d pr o du cti o n r eso urc es r ath er th an m ark etin g

o n es Ev en t ually t h e a dmi ni str ati v e s tr ai n s it cr eat ed br o ugh t th e m ul ti
.
,

di visi on al struct ur e .

D u rin g th e rozo s bo th c om p an i es m ad e ad lzoc adj ustmen ts in th eir

’

o rg an i z ati on s in o rd er t o m eet th e n ew admi n i str at i v e pr essur es By th e .

begin n i n g of th e depr essi on G en er al El ect ri c h ad fo rm ed a sep ar ate ,

sub si di ary f o r th e h an dl in g o f X r ay equ i p m en t an d an o th er Ca rbo l o y

-
, ,

In c to a dmini ster its all o y busin ess It co n so li d ated its ch emi ca l acti vi ti es
.
, .

in t o a sep ar ate auton om o u s di vi si on in 1 93 0 an d set up an o th er f or air

,

co n diti oni n g sh o rtly th er eaft er Th e sev er est admi ni st r ati v e v ex atio n s .

,

h o wev er cam e fr o m th e n ew appli an c e bu si n ess A M erch an dise D ep art

, .

m en t w i th h ea dqu art er s in Bri dg epo rt Co n n ecti cu t w as f orm ed in 1 92 8

, , ,

to m ar k et appli an c es Whil e in dep en d en t o f th e o ld S al es D ep a rt men t

.
,

it r em ain ed o nl y a mar k etin g o rg ani zati on u n til th e l ate 1 93 0 s R ef ri ger a

’
.

tor p art s w er e m ad e at Er i e an d S ch en ect ady an d th e fin i sh ed pr o duct s

a s sembl ed at Er i e Fl ati r on s w er e m an uf act ur ed in C al if o r ni a sto v es an d

.
,

water h eaters in Chi ca go Th e o ld er fu n cti o n al dep art m en ts s uperv i sed

.

th e d esi gni n g m an u f a ct uri n g an d assemb lyin g b u t all fi n i sh ed pr od uct s

, , ,

w ere so ld thr o ugh Br i dg ep ort Th e pr o c ess o f coo rdi n atin g th e fl ow o f .

pro duct betw een an d wi thin th ese differ en t p ar ts of th e in dust ri al pr o cess

an d o f i n tegr atin g th e fl o w t o th e m ark et i ts elf be c am e i n cr easin gly m o re

diffi cul t an d co stly Un til 1 939 h o w ev er G en er al El ectri c ex ecu ti v es di d

.
, ,

li ttl e t o r el ate th e w ork of th e M erch an dise D ep art m en t an d th e oth ef

m o r e auto n om o u s n ew -pr odu ct di vi si on s wi th th e o ld er fu n cti o n al d ep art
m en ts o r th e comp an y s c en tr al oH ices
’
.

Westin gh ou se u n derw en t m uch th e sam e so rt of ad lzoc St ru ctur al

a dj u s tmen t i n t h e 1 20 s
37
T h i r x cu ti v d ci d d
’

9 en i n 1 93 1 its sen o e .e es e e
, ,

to m ak e a t h o r o ugh in v es ti g ati o n o f th e co m p an y s a dmi ni str ati v e pr o b

’

lem s an d n ee ds Po ssibly Wes tin gh o u se t urn ed to stru ct ur al pl an n in g an d

.

reo rgani zati on befo r e G en er al El ect ri c be ca use it f elt th e profi t decl in e

r esultin g fr om th e depr essi on m o r e sh arply Pr ob ably of m o r e si gn ifi can ce .
3 6 6 SP REA D o r T HE M U L T I DI V I S I O N A L STR UCTURE
w as th e f act th at its m an agem en t w as domi n ated by a sin gl e bri lliant n ot ,

ex ecu ti v e l ik e S w o pe of G en er al El e ctri c w h o in m uch th e mann er o f ,

G en er al Woo d at Sear s m ad e m o st of h is co m p an y s ba si c en tr epr en eur ial

’

d eci si o n s h imsel f .

Th e p atter n of th e r esul tin g r eo rg ani zati o n h ad m an y simi l ari ti es t o th e

ch an ges at du Po n t an d G en er al Mo to r s In th e fi r st pla ce th e sen i o r .
,

ex ecu ti v es cl early r eali zed th at exp an si o n by di v er si fi cati o n r ath er t h an

by vo lum e h ad cr eated th e admini st r ati v e diffi cul ti es In th e wo rds o f .

Westin gh o u se ex ecuti ves

A ll th e activities o f th e Co rp o r ation w er e divided u n der th e th ree f un ctions
of p r o du ctio n ,en gin eeri n g an d s al es Each o f th e thr ee f u n ctions w as th e .

resp on sibili ty o f a vice-pr esiden t an d th e r esp o ns ibility of each of th ose

,

vice-p r esiden ts so f ar as h is fu n ction w as co n cern ed cov er ed th e w h ole

, ,

di v er sifi ed an d far flu n g op er ations o f th e C o rp o ration S u ch an o rganiz a .

tio n of th e C o rp o r atio n s m an agem en t l ack ed r es po n siv en ess Th er e w as

’
.

too m u ch d elay in t h e r eco gni tio n o f pr o b lem s an d in th e so lu tion o f pr ob

lems aft er th ey w er e r eco gn iz ed A s a r esul t t h er e w as u nsa tisfact o ry co n

.
,

tr ol ov er p r o fi ts an d l osses
38
.

Mo r eo v er , th e e e x cuti ves at Westin gh o use co nsi der ed

i r pr oblems as th e

n ew an d uni qu e : In 1 93 1 th e top m an agem en t o f th e Co rpo r ati on h ad

“

be fo r e it n o r eco gni zed co ur se t o foll o w Eff o rts t o r eo rgan i ze th e Co r .

r atio n s m an ag em en t w er e n ecessa ri ly p i o n eeri n g effo rt s whi ch in v o lv ed

’

p o

a c ertai n am o un t o f tri al an d err o r an d r equ i r ed tim e f o r d ev el o p m en t

in to fi n al fo rm 39
. Whil e th e s en i o r ex ecu ti ves at th e el ectri cal com pan y
”

w er e un do ub tedly aw ar e o f th e m ul ti di vi si on al struct ur es th at du Po n t
an d G en er al M o to r s h ad d evi sed t he y pr ob ably b el i ev ed t h at th e o rgan
,

izatio n al fo rm used in a ch em i cal o r au to m o b il e com p an y h ad li tt l e

r el ev an ce to th eir busin ess j u st as Fr azer an d th e S ear s ex ecu ti ves app ar
,

en tly saw li ttl e r ela ti o n b etw een such st ruct ur es an d th e n eeds o f th ei r

m ass m erch an di sin g en t erpri se

-
.

A s h ad be en t ru e at j er sey S tan d ard as w ell as at du Po n t th e in i ti al ,

o rg an izati o n al r es po n se w as f u rth er c en tr ali zati o n Th e Pr oduct En gi .

n ee rin g D ep artm en t w as co n so li da t ed i n to th e m an u fa ct ur in g o rgani z ati o n

so th at n ear ly all n o nfi n an cial ac ti vi ti es cam e to b e admi n is ter ed thr o ugh

tw o gr an d f u n cti on al d ep art m en ts P r o duct i o n an d S al es A s thi s st ep ,

.

soo n pr o v ed t o b e in ade qu ate th e seni o r o ffi cer s n ext d eci d ed t o set Up

“

,
a
”
coo rdi n ati n g c o m m i tt ee u su ally co mp o sed of thr ee m em b er s r epr esen tin g
,

th e en gin eer in g sal es an d m an uf a ct urin g f un cti o ns f or ea ch ma j o r l in e o f

, , ,

pr o du cts o r gro up s o f r el ated prod ucts H o wev er th ese commi ttees h ad .

, ,

a s a l a ter r epo rt po in ted o u t n o o n e per so n so l ely r espo n si bl e f o r th e

“

,
”
fi n al o per ati n g r esul ts 40
Th e p ar all el h er e to th e Di vi si o nal C o un ci ls
.

at du Po n t is st ri kin g A n d a s at t h e ch em i ca l c o m p an y th e co m pr omi se
.
, ,
I ND USTR I E S W I DE L Y A C CE P TI N G NE W S TR UCTURE 6
3 7
s tructur e w as li ttl e m o re s ucces sful th an th e ear li er f
ef o rt to c en trali ze
f un cti o n al acti v iti es .

T h en , in 1 933 , cadeci sio n to exp erim en t wi th au to n om o u s i n te

m e th e ,

gr ated o p er ati n g di vi si o n s F i r st cam e th e M erch an di se D i vi si o n fo r

.

el ec tr i c appli an c es Un li k e its c o u n terp art at G en er al El ectr i c it i n clud ed

.
,

n o t o n ly th e sal es a c ti v iti es o f suc h pr o ducts as r ef r i g er at o r s el ect r i c

“

r an ges h o u seh o ld appli an ces etc b u t al so th e r el ated en gi n eer i n g an d

, , ,

m an uf actur i n g a cti v iti es wh er ever th e m ai n o utl et fo r th e pr o duct in

,
” 41
vo lved is th ro ugh m erch an disi n g ch an n el s Th e s uccess o f th is exp eri .

m en t led to th e cr eati on o f a seco n d au to n o m o u s m ultif u n cti on pr o duct ,

u n i t fo r wh at c am e to b e called th e s team di vi si o n By O cto b er 1 934 .

, ,

t h e s en i o r ex ecu ti v es agr eed to ext en d thi s typ e o f o rgan i z ati o n t o a ll

ac ti v i ti es o f t h e c o m p an y T h e n ew a dm i n i str ati v e S tr uctur e i n clud ed

.

sev er al m ul tif u n c ti o n al di visi o n s th o s e fo r el ev ato r s X ray l am p s

—
, , ,

mi cart a appli an ces steam m achi n ery el ectr i c j o bb i n g an d a d i v i si o n

, , , ,

th at too k o v er m i scell an eo u s acti viti es In di scu ssi n g th e pr o p o sed stru c.

t ur e at a m eeti n g o n D ec em b er 1 0 an d I I 1
93 4 th e e x ecu t i v es agr eed, ,
” 42
th at : A s f ar as p o ssi bl e each di visi on sh o uld b e s elf-c on tai n ed
“

, T h is .

sh o uld b e n o t o n ly as to en i n eer i n g m n uf ac tur i n g a n d m ark eti n g

“

g a ,
”
bu t al so as to acco u n tin g T o obt ai n th e n ec es sary coo rdi n ati o n an d
.

co n tro l o f th e a cti vi ti es o f th e di vi si o n th e pl an n er s f ur th er co n curr ed o n

,

th e f o r m ati o n o f a p ar en t o r g en er al o ffi c e th at di vo rced fr o m all its “

o p er ati n g ac ti v i ti es wo uld th en h av e o n ly gen er al acti vi ti es to p er

,

fo r m T h e p ar en t o ffi c e w o uld co n si st o f a G en er al (C o o rd i n ati n g )
“
.

”
Co mmi ttee an d sev er al advi so ry staff d ep ar tmen ts T h e c o m m i ttee th e .
,

o rg an i z ati o n bu i ld er s h ad d ec i d ed at an early m eeti n g in O c to b er sh o uld ,

b e c o mp o sed o f p er so n s n o t b i ased th r o ugh d i r ect co n n ecti o n w i th an y

u ni t di v i sio n in o rder th at th e n ecessary i m p ar ti al vi ew m ay b e o b tai n ed
, .

It is suggested th at th e G en er al C om m i ttee b e m ad e up o f th r ee V i ce
presi den ts o r m en o f equi val en t ab i liti es wi th th e C o m p tr o ll er as assi st
T h e ter m i n o lo gy in th ese r ep o r ts suggests th at o n ce Wes
”
in g m em b er 43
.

tin gh o u se h ad d ec i d ed o n th e m ul ti di v i si o n al f o r m it t h en b eg an t o st udy ,

th e exp er i en c e o f O th er p i o n eer s in d ec en t r ali z ati o n .

Th r ee y ear s w er e n ecessary to get th e pr o p o sed structur e i n to goo d

wo rki n g o rder T h e execu ti ves r espo n si bl e fo r c arryi n g o u t th e pl an en
.

c o un ter ed m an y o f th e sam e pr o bl em s as h ad th o se at j er sey an d ev en at

G en er al M o to r s D ev el o p i n g an effecti v e g en er al h eadqu ar ter s pr o v ed
.

ev en m o r e d i ffi cul t th an a dj u sti n g an d al ter i n g th e c o m p o siti o n o f th e

d i vi si o n s It ulti m ately b ecam e n ecessary to m o v e b o th th e gen er al an d

.

staff o ffic es f r o m th e l o n g-establi sh ed c en tr al o m ce in th e gr eat m an uf ac

t ur i n g wo rk s o u tsi de o f Pi ttsburgh to a do w n to wn o ffi ce bu i ldi n g F i n ally .

,

a gr eat d eal o f atten ti o n h ad to b e fo cu se d o n im pr o v i n g th e stati sti ca l

3 6 8 S P REA D O F T HE M U L TI DIV I S I O NA L S TR UCTURE
an d i n fo rm ati o n al d ata th at flo wed fro m th e d i vi si o n s to th e gen er al offi ce .

T h i s i nf o rm ati o n w as n eces sary fo r c arryi n g o n b o th en trepr en eur i al an d

o p er ati o n al ac ti v iti es It h elp ed, West i n gho u se o ffi c i al s n o t ed,
.

to en ab le th e C o rpo ratio n to su b ect j

b u dgetary co n tr o l in
its r
o p e atio n s to

o rd er to erm it p la n n in g b y to m an agem en t w ith respect to o ver-all

( )
I to
p p
fi n an cial po licy in th e ligh t o f a n ticip ated pro fi ts at v aryin g sales levels an d
to p ro v ide a gau ge b y w h ich to j u dge th e o p er atin g r esu lts o f th e sep arate

D ivisio n s, an d (2 ) to p erm it p lan n in g b y Divisio n Man agers w ith resp ect

to Divisio n al op eratio n s an d to dir ect th ei r atten tio n to an y sp ecifi c asp ect o f

th eir D iv isio n al o p er atio n s w h ich w as u n satisfacto ry

“
.

T h e struc tur al ch an ges at Westi n gh o u se si n ce Wo rld War II h ave

mo d i fi ed an d adj u sted s o m e o f th e r el ati o n sh i p s fi r st defi n ed in 1 934 .

T h e co mb i n i n g o f d i v i si o n s u n d er G r o up V i ce-Pr esi den t s h as b een sig

n ifi can t, b u t th e b asi c ruc ture sti ll rem ai n s as o utli n ed in O cto b er 1 934
st , .

In c arry i n g o u t th e i n i ti al an d l ater chan ges th e en gin eermg—t r ai n ed ,

Westi n gh o use executi ves h ad m uch the s ame ratio n al appro ach to th ei r
a d m i n i str ati v e pr o blem s as h ad t h o se a
45
t du Po n t an d G en eral M o to r s .

Maj o r o rgan i zatio n al ch an ges at G ener al Electri c c am e o n ly after th e

reti remen t in 1 939 o f its extremely com p eten t Presi den t G erard S wo p e , ,

an d th e C h ai r m an o f th e BG rd O w en D Y o u n g
46
S w o p e wi th s o me
a , . .
,

assi stan ce f r o m Y o u n g ad m i n istered al m o st si n gl e—h an d edly h is S

, pr awl i n g
i n du stri al em p i re S h o r tly affer Ch arles E Wi l so n to o k o fficeas S wo pe s
. .
’

succes so r h e b eg an to r es h ap
e th m p y st ruc ur T h d l y d
’

, e co a n}
s t e e w ar e a e .

h is pl an s an d in 1 946 Wi l so n t ur ned p ver th e r eo rg an i zati o n to Ralp h

,

C o rdi n er Co rd i n er s fi r st step w as to fo rm six au to n o m o u s m ul ti fu n c ti o n

’
.

d i vi sio n s Ho wever th e h ead s o f th e n ew di vi sio n s an d of so me o f th e

.
,

o ld er f u n cti o n al d ep ar tm en t s c o n ti n u ed to fo r m th e to c o mmi tt ee th at
p
h elp ed th e Pr esi den t an d Ch ai rm an ad m i n i ster G en er al E lectri c s ac ti v iti es
’
.

S o n o clear—cu t gen er al o ffice ex i sted Mean wh i l e w ar an d p o stw ar exp an

.
,

si o n by creati n g n ew sk i ll s an d faci li ties p ar ti cul arly in th e electro n i c s

, ,

fi eld by do ubl i n g th e n u mb er o f its pl an ts an d by t ri pl i n g th e n u m b er o f

, ,

em plo y ees br o ugh t i n cr easi n g pr essur e fo r sti ll m o r e struc tur al c h an g e

,
.

In 1 95 0 i m m ed i ately after h e b ecam e Pr esi d en t C o rd i n er start ed a

, ,

mo re s weep i n g r eo rg an i zati o n He bro k e do w n th e co m p an y s act1v1t1es

’
.

i n to twen ty o p erati n g d i vi sio n s T h ese in tur n ad m i n i stered th e wo rk

.
, ,
”
o f s ev en ty dep ar tm en ts By 1 960 th e n umb er o f dep artm en ts h ad
”
.
“

reach ed 1 05 So m e o f th ese were si n gle—fu n c tio n u n i ts o th er s were m ulti

.
,

f u n c ti o n d i vi si o n s T h e gen er al o ffi ce i n clud ed a l arge staff o f spec i al i st s

. .

T h e h ead s o f th e advi so ry staff d ep ar tm en ts assi sted th e si x gen er al

o fficer s in o v er —all ad mi n i str ati o n o f th e c o m p an y s aff ai r s F o ll o w i n g t h e
’
.

G en er al Mo to r s practi ce each gen er al ex ecu ti ve excep ti n g th e Presi d en t

, , ,
I ND USTRIES W I DE L Y A C C EP TI N G NE W STR UCTURE 6
3 9

h ad o ver sight o v er gro up s o f d i visi o n s A pp ar at u s In du s

on e o f th e fi v e ,

t r i al Pr o duc t s an d L am p s A ppli an c es an d El ect r on i c s D efen s e Pr o duc t s

, , ,

an d as th e fi fth th e A s so c i ated A ffil i ated an d F o r ei g n Co m p an i es C o r di

, , .

n er s r eo rgan i z ati o n w en t f ur th er th an th o se in an y o th er c o m p an y s tud i ed

’

h ere b o th in th e creati on o f a l arge n u mb er o f rel ati v ely s m all adm i n i st r a

,

ti v e u n i ts an d in th e m eth o d s d ev elo p ed to a dm i n i ster th ese u n i ts S o m e .

ex ecu ti v es m an ag ed a si n gl e i n tegr ated m ul ti f u n c ti o n o rg an i z ati o n w i th

du ti es v ery si m i l ar to th o se in th e di visio n s at du Po n t o r G en er al Mo to rs .

Bu t o th er s p arti cul arly tho s e in th e ap p arat u s gro up s up ervi sed a n umb er

, ,

o f w h at wer e es sen ti ally m er ely man u fact ur i n g d ep ar tm en ts W h o s e pr o d

u cts w r
e e os ld by s ti ll n
a o th er u n it — th e A pp ar at u s S al es D i v isi o n S ti ll .

o th er s w er e r esp o n si bl e fo r appr ai si n g plan n i n g fo r an d co o rdi n ati n g

, ,

th e ac ti v i ti es o f sev er a l m u ltidep artm en tal d i v i si o n s an d w er e in effect , ,

gen eral executi ves In all c as es th e s taff o f th e executi ve in ch arge w as

.
,

sm all For d ata an d assistan ce h e reli ed o n th e staff s o f th e s ev er al d ep ar t

.
,

m en ts h e m an aged an d th e l arge staff at th e gen er al o ffi ce He to o de .

pen ded o f co ur s e o n th e gr eat m ass o f acco u n ti n g an d stati sti c al d ata

, ,

th at h ad been develo p ed th ro ugh th e year s at G en er al Electri c Co rd i n er s .

’

i magi n ati ve i n n o v ati o n s in devel o p i n g a struct ure th at co mb i ned flexi bly

all th r ee b asi c t yp es o f ad m i n i str ati v e o ffi ces o ff er an ex tr em ely i m p o r tan t

s ubj ect fo r f ur th er research si n ce th ey s uggest future t ren d s in th e o rgan i

,

z atio n o f th e m o st tec h n o l o g i c ally a dv an c ed typ e o f A m er i c an i n du str i al

en terpr i se .

Th ese ch an ges h av e u n do ub tedly fac i l i tated G en er al El ec tr i c s r ecen t

’

di ver si fi catio n i n to n uclear p o wer j ets co m pu ter s i n du stri al auto m atio n

, , ,

s y stem s an d o th er n ew field s as well as in th e exp an si o n o f th e co m p an y s

,
’

reso urces abro ad O n th e o th er h an d th e br eak i n g up o f di vi si o n s o p erat

.
,

in g in o n e m aj o r l i n e o f goo d s i n to sti ll sm aller u n i ts w o uld s eem to cr eat e

n ew pr o bl em s o f co o rd i n ati o n an d co n t ro l as w ell as to i n cr ease adm in is ,

trative c o sts F o r ex am ple o n e w o n d er s w h eth er th e m ark ets are d i ff er en t

.
,

en o ugh to w arr an t th e cr eati o n o f a n u m b er o f au to n o m o u s m u ltif u n c

ti o n u n i ts w i th i n each o f th e th r ee l arg er c o n su mer appli an c e di v isi o n s .

T h e r eason s th at h av e br o ugh t th e o il co m p an i es to co n so l i d ati n g t h ei r

do mes ti c o p er ati n g di vi si o n s an d th e auto m o b i le fi rm s to m ak i n g an d
selli n g t h e n ew c o mp act c ar s th r o ugh ex i sti n g r ath er th an n ew d i v i si o n s

may in ti m e bri n g G en er al Electri c to reco mb i n e so m e o f its m an y au to n

o m o u s m ul ti fu n c ti o n ad mi n i st r ati v e o rg an i z ati o n s .

Wh i le th e o th er l arge en terpri ses in th e electri cal an d electro n i cs fi eld

h ave n o t go n e as far as G en er al Electri c in v aryi n g th e b asi c m u ltidivi
si o u al fo r m th e R ad i o C o rp o r ati o n o f A m er i c a an d th e sm all er S ylv an i a
,

Electri c h ad d evelo p ed decen tral i zed mul ti d i vi si o n al struc tur es by ,

In f ac t by 1 95 3 R CA V i c to r R CA s l argest d i v i sio n h ad i tself b eco m e a

’
, , ,
3 70 SP REA D O F T HE M ULTIDIVI S I O NA L STR UCTURE
mul ti d i vi si o n al rgan i zati o n with a n umb er of pro duct di vi sio n s an d staff
o

sp ec i al i sts an d gen er al ex ecu ti v es at its g en er al o ffic e Po stw ar div ersifi ca .

ti o n p ar ti cul arly in el ectro n ics also led th e In tern ati o n al Bu si n ess Ma

, ,

ch i n e Co rp o r atio n th e largest en terpri se in its fi eld to create auto n o mo u s

, ,

di vi sio n s an d a n ew gen er al o ffice O rgan i zati o n al ch an ge at IBM

48
.

cam e h o wever o n ly after th e death o f Th o m as I Watso n th e m an w h o

, , .
,

mo re th an an y o th er bro ugh t to geth er th e r eso urces th at h ad m ade th e

co m pan y o n e o f A m eri ca s i n dustr i al l eader s By 1 959 its d i visio n s in
’
.
,

cluded th o se fo r data pro cessin g gen er al pro ducts data sys tem s electri c , , ,

typ ewriter s suppl i es a F ed er al S ystem Di vi si o n fo r th e go vern men t m ar

, ,

k et an d a Wo rld T r ade o n e for th e i n ter n ati o n al market

, .

Po wer Machin ery a n d A u to m o biles

Th e leadi n g p o wer m ach i n ery an d i m plem en t fi rm s wer e amo n g th e
fi r st in th is co u n try to em b ark o n a p o l i cy o f d i v er si fi cati o n in o rder to
ass ur e c o n ti n u i n g f ull u se o f th ei r r eso urc es A ll i s C h al m er s for ex ampl e .
-
, ,

fo rmed as a co m b i n ati on an d th en as a co n so li d ati o n o f sever al steam

c o w er m ach i n ery c o m p an i es soo n b ecam e aw ar e o f th e ch all en ge o f m a

ch i n ery po wered by electri c an d gaso li n e en gi n es In 1 904 it b egan to

49
.
,

m o ve i n to th e m ak i n g o f b o th th ese pr o ducts an d by 1 9 1 0 h ad b ecom e th e ,

th i rd largest m an ufacturer of electri cal app ar atu s in th e Un ited States A t .

th e en d o f Wo rld War I it h ad go n e al mo st as f ar in cr eati n g a l i n e o f

,

ear th m o vi n g an d o th er co n struc ti o n m ach i n ery i n clu di n g t r acto r s u si n g

-
, ,

th e i n ter n al c o mbu sti o n en g i n e A ll is C h alm er s th en d eci d ed to bu i ld

- .
-

t r acto r s for farmer s as well as fo r co n structio n co n tr acto r s an d co m

p an ies T o .m ee t th e c o m p eti ti o n in thi s m ark et it d ev el o p ed a f ull l i ne ,

o f agr i cul tur al i mpl em en ts an d set up a s ep ar ate m ark eti n g o rgan i z ati on

with its o w n br an ch o ffi ces By 1 940 it h ad b eco me th e th i rd largest

.
,

pro ducer o f farm equi pmen t .

In ter n atio n al H arv ester s sto ry h as so mewh at o f a r ever se tw i st

50
At
’
.

fi r s t it appli ed th e i n ter n al co m bu stio n en gi n e to its full l i n e o f agricu l

,
-

tural i mplemen ts Th en as th e farmi n g depressi o n o f th e 1 920 s deep en ed

.
,
’

it turn ed so me o f its faci li ties fu n d s an d p er so n n el i n to th e mak i n g o f

, ,

truck s an d m ach i n ery fo r c o n structi o n an d i n du s tr i al m ark ets By 1 940 .

,

In ter n ati o n al H arv ester w as seco n d o n ly to G en er al Mo to r s an d Fo rd in

th e pr o duc ti o n o f truck s an d o th er c o m m erc i al v eh i cl es .

B o th en terpris es fi rst m ade p d h oe adj u stmen ts to meet th e n eed s o f

th i s exp an si on in m uch th e sam e w ay as di d Westi n gh o u se an d G en er al

Elec tri c A llis Ch almer s wh ere th e m ark eti n g o f tr acto r s an d i mplemen ts

.
-
,

di ffer ed th e mo s t r adi c ally fro m th at o f its o th er p o wer m ach i n ery an d

equ i p m en t c am e to h ave tw o l arge o p er ati n g u n i ts th e T r acto r D i v i si o n
, ,

an d th e G en er al M ach i n ery D i v i si o n well b efo re Wo rld War II T h e ,

.
I ND USTRI E S W I DE L Y A CCEP TI NG NE w S TR UCTURE 37 1

rel ati o n s of th e s en i o r offi cer s w h o were al so th e h ead s of th e fun ctio n al

,

dep artmen ts in th e G en er al Mach i n ery Di visio n an d o f th e o lder cen tr al ,

staff to th e o p er ati n g h ead s o f th e T r acto r Di vi sio n wer e n o t clearly de ,

fi n ed A t In ter n atio n al Harves ter it w as th e t ruck an d i n du st r i al ma

.
,

ch i n ery bu si n es s th at b ecame i n cr easi n gly s ep arated fro m th e co m p an y s ’

prim ary acti vi ti es B efo r e th e 1 g4o s h o wev er th e ch an ge h ad go n e n o

.
’

, ,

fur th er th an th e s etti n g up o f a s ep ar ate m arketi n g dep ar tmen t for th es e

pro ducts .

In ter n ati o n al H arvester w as th e fi r st in its i n du st ry to ado p t a cl ear-cu t

multi d i vi si o n al st ruc ture T h is reo rgan i z ati o n came on ly after a ch an g e
.

in th e to p co mman d Un l i k e his pr ed ecesso r F o wler Mc co rm i ck w h o

.
, ,

bec ame Presi den t in 1 94 1 h ad a st ro n g i n terest in o rgan i zati on A fter a

, .

detai l ed ex ami n ati o n b o th o f th e co mp an y s n eed s an d o f th e G en er al ’

Mo to r s exp eri en ce In ter n atio n al H arvester sh ifted in 1 943 fro m a cen

,

tralized fu n c ti o n ally dep ar t men t ali z ed o rg an i z ati o n to a d ec en t r ali z ed

, ,

m ulti d i visi on al o n e T h e n ew gen er al o ffice h ad its gen eral execu ti ves an d

.

adv is o ry staff d ep artmen t s T w o o f th e i m p o r t an t n ew s taff d ep ar tm en ts

.
,

each h ead ed by a V i c e-Pr esi d en t w er e S upply an d In v en to ry w hi ch as

, ,

si sted th e d i v i si o n s in c o o rd i n ati n g th e flo w o f go o d s th r o ugh t h ei r s ever al

fu n ctio n al ac ti v i ti es an d Merch an d isi n g S erv i ces wh i ch help ed to d evelo p

, ,

p o li ci es to im pro ve cu s to mer rel ati o n s sal es o p er ati on s an d mark et re , ,

51
search . T h ree o f th e n ew d i vi si o n s Mo to r T ruck In du stri al Po wer , ,

a d S teel
n — wer e fully auto n o mo u s wh i le th ree o th er s th e F arm T rac
—
,

t r th e F arm Im plem en t an d F i b er an d T w i n e
o , ,
— were pr imari ly en
g in e er in
g a n d m an u f ac t ur i n g o rg an i z ati o n s th at so ld t h ei r pr o duc ts
th ro ugh a G en eral Li n e-S ales Dep artmen t That dep ar tmen t w as essen .

tially th e s am e mark eti n g o rgan i z ati o n th at th e c o m p an y h ad created

sh o rt ly aft er its fo u n d i n g in 1 02
9 .

O n e o f th e p arti ci p an ts in th e r eo rgan i zatio n l i sted th ree r eason s fo r

” 52
th e di v isio n aliz in g o f th e Co mp an y T h e fi r s t w as to r educe th e
“
.

n u mb er o f burd en s o u r o ffic er s an d to x ecu ti v es h ave to c arry an d to

p e ,

m o ve th e pro cess o f m ak i n g o p er ati n g dec isio n s f ur th er do wn th e l i n e o f

co mm an d an d clo se to th e p o i n t wh ere o p eratio n s were ac tu ally c arri ed
”
T h e s eco n d w as fo r i mpro v i n g th e co o rd i n ati o n o f th e f u n ctio n s
“
on .
,

si n c e m en d n di fferen t f u n ction s w h o s h o uld h av e wo rk ed clo s ely to

“

gether were b ei n g fo rced f ur th er an d f ur th er ap ar t F i n ally : We b e

,
”
.
“

liev ed th e di vi sio n al fo rm o f o rgan i zatio n by pl ac i n g mo r e men in p o si ,

t i on s o f si z able r es po n si b i l i ty wo uld yi eld an i n creasi n g n umb er o f

,
”
sk i ll ed ex ecu ti v es .

Po stw ar exp an sio n at A ll is -Ch al m er s p ar ti cularly in n ew l i n es li k e ,

di esel s an d i n du stri al mach i n ery ulti m ately bro ugh t a m aj o r reo rgan i za
,

ti on I n 1 95 4 T h e six m aj o r pro duc t di v isio n s wer e pl ac ed i n to t w o

.
3 7 2 SP REA D o r T HE M UL TI DI V I S I O NA L S TR U CTURE
gr o up s O n e in cluded con stru cti on ma chi n ery farm equi pm en t an d die
.
, ,

sels an d th e o th er power equip m en t in du stri al equi pm en t an d general , ,

pr oducts By 1 954 o th er m ach in ery equi pm en t fi rms such as Worth in gton

.
, ,

h succ esso r o f In ter n ati o n al S team Pu m p ) S m i h h rry-Bur

( t e A O t C e , . .
,

r ell Th o m p so n Pr od uct s an d Bo rg War n er h ad ado p ted th e m ultidivi

,
-
,

sio n al f rm ? A ll b t B o rg Warn er whi ch l o n g r em ai n ed l ittl e m o r e

3 -
o u ,

th an a h o ld in g co m p an y sh i ft ed to th e n ew st ru ct ur e after car ry in g ou t
,

a po li cy o f f air ly ex ten si v e di v er sifi cati o n F o r Bo rg-War n er as at G ener al .

,

Mo to r s an d N ati on al D airy th e n eed w as f o r th e cr eati on o f a gen eral

,

o ffice t o a dmi ni ster its qui te differ en t l o n g-est abli sh ed di vi si o n s .

O f th ese impl em en t co rpo r ati o n s o nl y D eer e Co m p an y stil l h as th e ,

o ld er cen t r alize d f u n cti o n ally d ep art men tali zed st ructu r e

,
54
It h as n ot .

dec en tr ali zed be cause it h as n ot di versifi ed an d it h as n o t di versifi ed b e ,

cause its f ami ly m an agem en t so l o n g pr ef err ed to ru n th e comp an y al on g

w ell accusto m ed l in es O nl y i n 1 95 6 wi th th e r etir em en t o f th e f o urth
- .
,

gen er ati on o f fam ily m anagem en t di d a n ew se t of ex ecuti v es cr eate th e ,

co m p an y s fi r st r esearch cen ter m o v e o u t of th e bu ildin g th at h ad h o used

’

th e cen tr al o ffice si n ce t h e 1 8 7o s an d enl ar g e th e si ze o f th e t op m an age

’

m en t team Un do ub tedly th e n ew ex ecu ti v es wi ll tak e D eer e 8s Co m pan y

.
,

o n th e r o u te o f d ev el o p m en t di v er si fi cati o n an d d ecen tr al i zati on whi ch

, ,

so m an y of its co m peti to r s h av e success f ully f o ll o w ed .

D i v er sifi cati o n cam e som ewh at l ater in th e au tom o b il e bu sin ess th an

it di d in th e po w er m a ch in ery an d impl em en t in du st ry Un til th e late .

1 2 0 s all th e l ea din g au to m o b i l e co m p an i es con cen t rated on th e r ap i dl y

’

9 ,

exp an d in g au tom o b i l e m ar k et f o r p assen g er car s E v en at G en er al M o to rs .

th e gen er al o ffice h ad m o st o f its per so n n el an d fa cili ti es in t h e aut om o b il e

bus in ess Wi th th e depr essi o n G en er al Moto r s turn ed to applyi n g its

.
,

v ari ed r eso urces to a n um ber of diff er en t pr o ducts Fo rd an d Chry sl er .

,

h o w ever co n tin u ed to m ain tain th eir in v est men t in th eir sin gl e l in e u ntil
,

w artim e co n v er si o n to n o n au tom oti v e pr o ducts Wo rld War II th us .

cr eated a n ew poo l of r eso urces whi ch th ese tw o au tom ob il e co m pa ni es

fo un d th ey co uld pr o fit ably u se f o r pr o duct s o th er th an th e p assen ger car
f o r th e m ass co n sum er m ark et .

B efo r e Wo rld War II H en ry F o rd h ad actu ally often tri ed to build a

,

n ew lin e o f g oo ds He d ev el o p ed a ch eap tr act o r at m uch th e sam e t im e

.

a n d f o r m u ch th e sam e r easo n s as h ad Wi lli am C D ur an t

55
Desi gn ed . .

by F o rd en gin eer s an d m an uf act ur ed in F o rd pl an ts it pr o v ed imm edi ,

a tely po p ul ar Y et th e F o rd tr a ct o r f ai l ed co mm erci ally lar gely becau s e

.

it w as m ark eted b adly A s a co m peti to r Cyrus McCo rmi ck III n o ted :

.
, , ,

Bu t h e o v r e r an hi s o b j ect w h en h e gav e h is tract o r to h is car d eal er s to sell .

F rd deal r
o e s in th e co u n try w ere w ell acq uain ted wi th th eir cu s to m ers,
I ND US TR I ES W I DE L Y A C CE P TI NG NE W STR UCTURE 3 73
b u t n o t wi th th eir farm n ee ds ; an d F rd deal r
o e s in th e city h ad n o sales o u t

let fo r farm go ods 56

.

Fo rd bu i lt an excellen t ai rpl an e bu t agai n h e w as u n able to sell it A l , .

th o ugh h is l i gh t t ruck bu si n ess h an dl ed th r o ugh h is carm ak in g an d sell

,

in g o rg an i z atio n s w as pro fi tabl e h e m ad e alm o st n o attem p t to d ev el o p

, ,

o th er t yp es o f c o mm erc i al v eh i cl es Nor d i d h e bu i ld m uch o f a p ar ts .

an d accesso r i es bu si n ess F o rd w ith m uch th e sam e r eso urc es as G en er al

.
,

Mo to r s co uld h ave as easi ly dev elo p ed th ese bu si n esses T h e i n cr edi bly

,
.

b ad man agem en t o f h is en o r mo u s i n du str i al em p i r e wh i ch w as so cl early ,

reflected by th e l ack o f an y s y stem ati c o rgan i zatio n al structur e n o t o n ly ,

pr even ted th e F o rd Mo to r Co mp an y fro m carryi n g o ut a str ategy o f

di ver si fi cati on bu t al so h elp ed c au se th e r ap i d dro p in Fo rd s pro fi ts an d ’

S h ar e o f th e m ark et .

T h e Ch ry sl er Co rp o r ati o n w as u n der l i ttle pr ess ur e to d i v er si fy u n ti l

well after Wo rld War In 1 928 Wal ter P Ch ry sl er h ad purch ased , .

Do dg e an d cr eated th e De S o to an d Plym o u th A s h e h ad h ardly set .

up h is n ew en terpr i se wh en th e depressio n h it it r em ai n ed u n ti l th e w ar , , ,

ess en ti ally an en g i n e m ak i n g an d car-assem bl in

- c o m p an y th at w as
y g
ad mi n i st er ed th r o ugh a c en t r al i z ed f u n c ti o n ally d ep ar tm en tal i z ed stru c
,

t ure In th es e year s o f d ecli n i n g d em an d Ch rysl er h ad li ttle d i ffi culty in

.
,

o b t ai n i n g all th e p ar ts acc ess o r i es

, an d o th er m at er i al s h e n eed ed at
,

r eas on able pr i c es Po stw ar s h o rtages h o wev er fo rced th e com p an y to

.
, ,

i n tegr ate verti c ally in o rder to gai n gr eater co n tro l o ver its suppl ies A t .

th e sam e ti m e it co n ti n u ed th e m i lit ary l i n es s t ar ted dur i n g th e w ar

,

an d t ur n ed so m e o f th e r eso urc es d ev el o p ed in w ar w o rk to m ar i n e en g i n es

an d o th er n o n m i l i tary pr o duc ts F o rd al so fo u n d u se f o r w ar-exp an d ed

.

equ i p m en t an d p er s o n n el by d ev el o p i n g t r act o r s f arm equ i p m en t co m , ,

mercial veh i cles an d o th er l i n es

, .

B o th F o rd an d Ch ry s ler so o n ado p ted th e m ulti di v i si o n al struct ure .

Hen ry Fo rd II h i red Ern est R Breech an d oth er G en eral Mot o r s execu .

tiv es to m an age h is c o m p an y an d o n e o f th ei r v ery fi r st a ct s w as to cl ap

,
” 58
th e G M o rg an i z ati o n g arm en t o n to th e F o rd m an uf ac t ur i n g f r am e
“
. . .

A t Ch ry s l er com p ar abl e ch an ges f r o m th e c en tr al i zed f u n cti on ally de

, ,

p ar trn e n t alized st ruc t ur e to a m ul ti d i v i si o n al o n e b eg a n w i th th e r eti r e

men t of K f T Keller wh o m Ch ry sl er h ad sel ected as h is successo r

.
, .

Even b efo r e Wo rld War II th e G en er al Mo to r s structure h ad co m e

,

to en j o y th e au th o r i ty o f succ ess N o t o n ly h ad it h elp ed S lo an s co m p an y

’
.

to i n cr ease its sh ar e o f th e m ark et f r o m 1 2 c t t cl se to er cen t

p er en o o 5 p
0

o f th e au to m o b i l e m ark et b u t al so to c a rry o u t a br i ll i an t str ategy o f

,

di ver sifi catio n in th e 1 93o s Mo vi n g i n to th e m ak i n g o f di esel s fo r

’
.

r ai lro ad lo co m o ti ve p o wer G en er al M o to r s acqui r ed alm o st o ver n i gh t

,
3 74 SP REA D O F THE M U L T I DI V I S I O N A L STR UCTURE
n ea rly all th e lo co moti ve bu si n ess in th e Un ited S tates Its ai rpl an e en gi n e .

w as w ell r ecei ved It co m p eted m o st eff ecti v ely wi th o th er tru ck an d im

.

plemen t fi rm s fo r th e A meri can b u s an d o th er co mm erci al veh i cle m ark et .

A t th e s ame ti me its Fri gi d ai re Delco an d its p arts an d acc ess o r ies bu si

, , ,

n ess all co n ti n u ed to S h o w a f ai r r etur n o n i n v estm en t G en er al M o to r s

, .
,

too m ad e th e co n ver si o n to w ar wo rk far m o re easi ly th an F o rd F i n ally

, .

th e d ecen tr al i z ed st ruc ture ai d ed th e co rp o r ati on in establ i sh i n g exp an d ,

in g an d sy stem ati cally man agi n g th ro ugh its O v er seas G ro up its i n te

,

grated sub si di ari es in Bri tai n G erm an y an d A u str ali a

, , .

Po ssi bly F o rd an d Ch ry s ler m ay h av e b een too i mi tati ve in ado p ti n g

th e m ul ti d i v i si o n al structur e T h ey n eeded a g en er al o ffic e an d n ew d i v i
.

si o n s fo r th ei r n o n au to m o b ile pr o duc ts l i k e tr ac to r s an d m ar i n e en gi n es .

Bu t th ey al so fo ll o w ed G en er al Mo to r s by setti n g up sep ar ate d i v i si o n s

fo r each l i n e o f c ar s Wh en G en er al Mo to r s fash i o n ed its structure in
.

1 20 th er e w as go o d r easo n fo r th e sep ar ati o n A t th at ti m e each l i n e s o ld

9 , .

to a d i ffer en t pr i ce m ark et Wh en th e lo w pr i c e m ark et c am e to do m i n ate

.
-

duri n g th e depr essio n G en er al Mo to r s p erm i tted th e Po n ti ac O ld s an d

, , ,

even Bu i ck to c o m pete w i th C h evr o l et fo r th i s m ark et T h en after th e .

w ar wh en th e m i ddle-pr i ce car attr acted th e mo st v o lu me th e d i vi si o n s ,

co n ti n ued to comp ete fo r m uch th e sam e cu sto m er s T h e admi n i str atio n .

o f m an y o f th e sam e l i n es o f go o d s to m uch th e sam e m ark et th ro ugh

s ever al r ath er th an o n e i n tegrated d i vi si o n s m ay pr o ve to b e a fai rly ex

p en si ve luxury Fo rd s u n h appy exper i en ce wi th th e Edsel seem s to m ak e
.
’

th i s p oi n t as do Ch rysl er s mo st recen t o rg an i zatio n al ch an ges T h e in

,
’
.

tro du ctio n o f a n ew mo d el fo r th e m i ddl e-pr i c e m ark et h ardly r equ i r ed

th e i n v estm en t i n v o lv ed in cr eati n g a w h o lly n ew m ark eti n g pr o duc ti on , ,

an d d esi gn i n g o rg an i z ati o n S i g n i fi c an tly w h en th e B i g T h ree b egan “

.
,
”
to d ev elo p th e s m all or c o m p ac t car — th e m o st r ad i ca l pr o duc t ch an ge
“

si n c e th e 1 20 s — each d esi g n ed man u factur ed an d so ld th e n ew l i n es

’

9 , ,

th ro ugh exi sti n g n ot n ew d i vi sio n s T h e exi sten ce o f i n tegrated d i vi

, , .

si o n s c o m p eti n g in m uch th e same m ark et gr eatly c o m pl i c ated th e defi n i

ti o n an d descr i p ti on o f d i v i si o n al b o u n d ar i es an d so m u st i n evi tably in

vo lve th e gen er al o ffice in a large n um b er of tacti cal deci si o n s S uch deci .

si o n s ar i se f ar l es s o ften fo r th e n o n au to mo ti v e d i v i si o n s w h er e each

ad m i n i ster s di sti n c tly d i ff er en t typ es o f bu si n esses .

Ch emicals
In i cal i n du stry th er e h ave b een fewer b arrier s to an d mo re
th e ch em ,

en c o ur ag em en t fo r d i ver si fi c ati o n th an in an th er A meri c an i n du stry

y o .

A s b o th its pro c esses an d its pro ducts are b ased o n th e s ci en c e o f ch emis

t ry sy stem ati c r esear ch an d d ev el o p m en t h av e n o t o n ly r ap i dly i m pro v ed
,

ex i sti n g pr o duc ts b u t h av e bro ugh t fo r th a str eam o f n ew o n es A n d S i n ce .

I ND U STRI ES W I DE L Y A CCE P TI NG NE W STR UCTURE 3 75
th e 1 920 s, th e ch emi cal i n du stry h as em plo yed mo re m en an d i n v ested
’

mo re m o n ey in r esearch an d develo p m en t th an h as an y o th er o n e A mer

i c an i n du stry Fro m a si n gle sp eci al i zed tech n o lo gi cal b ase such as cellu
.
,

lo se c alci um o r ch lo ri n e ch em i stry en terpr i ses h ave qu i ckly develo p ed

, , ,

a w i d e r an g e o f pr o duct s S i n c e th e d ev el o p m en t en gi n eer i n g an d pr o c
.
, ,

essi n g o f th e new i tem s i n v o lv ed m uch th e s am e tech n i c al k n o w h o w an d -

equ i p m en t as th e o ld th e t r an sfer an d appl i c ati o n o f th e c o m p an y s re

’

so urces i n to n ew l i n es o f pro ducts h av e pro ved co mp arati vely easy .

u t d P n t d ev el o p ed ar ti fi c i al l eath er r ay o n an d o th er t ex ti l es
j s as u o , ,

p ai n ts var n i sh es an d dyes cellulo se an d pl asti c pro ducts fro m a n i tro

, , ,

cellulo se b ase so H ercules Po wder o n ce a p art o f du Po n t d evel o ped

, , ,

resi n s t urp en ti n e p ap erm ak i n g ch em i c al s i n secti ci des an d ferti li zer s by

, , , ,

co n cen tr ati n g its exp an si o n o n a n av al sto res b ase Do w Chemi cal s ever
59
.
’

wi d en i n g l i n e of pro ducts h as b een b ased o n salt ch emi st ry wh i le Mo n ,

s an to s l i n es o f fi n e ch em i cal s i n iti ally gr ew o u t o f th e ch em i stry u sed to

’

mak e sacch ari n A fter th e l atter co m p an y i n tegr ated ver ti cally to as sure
.

a supply o f raw m ater i al s it b egan to bu i ld o th er l i n es o n c h l o r i n e an d

,

ph en o l wh i ch bro ugh t it i n to rubb er ch em i c al s b en zo ates eth yl alco h ol s

, , , ,

an d a v ar i et y o f h eavy an d s p ec i al ch em i c al s T en n ess ee Eastm an o r i g i .

,

n ally set up to supply th e gr eat p h o to gr ap h i c equ i p m en t fi rm w i th its

b asi c fi lm m ater i al s gr ew in m u ch th e s am e w ay fro m a cellulo s e ac etate

,

b ase O n a si m i lar b ase th e Cel an ese Co rp o r atio n o f A m eri ca added

.
,

pl asti c fi lm s an d ch emi cal s to its o ri gi n al t exti le l i n es but o n ly after its ,

fo u n der Cami lle D r eyf u s t ur n ed o v er in 1 945 m o st o f th e en trepren eur i al

, ,

deci sio n m ak i n g to h is sub o rd i n ates Exc ep t fo r a m o ve i n to m ak i n g ex .

pl o si ves duri n g Wo rld War I A m er i c an V i sco se th e o ldest an d sti ll th e

, ,

l argest pro ducer of r ayon al so m ade rel ati vely l i ttle eff o rt to di ver sify
, .

T h en after Wo rld War II th e i n cr easi n g co m p eti ti o n fr o m o th er arti fi c i al

tex ti l es fi n ally t ur n e d it to d ev elo p i n g o th er pr o duc t s i n clud i n g n ew

fabr i c s cello ph an e an d pl asti c s

, , .

T h e co m p an i es fo rmed by m erger s h ad ev en bro ad er b ases fo r div ersifi

c atio n Un io n Carb i de fo u n d ed in 1 9 1 7 as a merger o f fi v e co m p an i es
.
,

th at suppl i ed o n e an o th er w i th raw m ater i al s an d o u tlets m o v ed r ap i dly ,

in fi v e d i ff er en t d i r ec ti o n s Fro m o n e sub si d i ary Elect r o Metallurgi c al

.
, ,

cam e a r an ge of allo y s an d allo yi n g m etal s ; f ro m a seco n d U n io n Carb i de , ,

a v ar i ety o f pr o duc ts b as ed o n c alc i u m c arb i d e ; f r o m a t h i rd Nati o n al ,

C arb o n a r an ge o f co k e—b as ed item s ; wh i le Li n de A ir Pr o duc ts an d Pr est

,

O -Li te pi o n eer ed in th e d evelo p m en t o f m an y pr o duc ts b as ed o n l i qu i d

air acetylen e an d n at ur al as A si x th d i vi si o n fo r m ed in 1 20 C arb i d e
, , g 9 .
, ,

8 : C arb o n C h em i c al w as on e o f th e v ery fi r st A m er i can en terpris es to

,

man ufact ure p et ro ch emi cal s It s o o n m o ved i n to l acquer s an d n it ro

.

cellulo se pro ducts wh i le its wo rk in acceler ato r s an d rubb er vulcan i zer s

,
376 S P REA D O F THE M UL TI DIV I S I O NA L STR UCTURE
an d, in th e 1 93 o s, butadi en e an d o ther rubb er in termedi ates bro ugh t
’
in
it in to th e rubb er bu si n ess Co n ti n ui n g w o rk o n pl asti cs led to th e pur
.

ch ase o f th e B ak eli te Co rpo r ati o n in 1 939 A lli ed Ch emi cal fo rm ed in .

,

1 920 as a c o m b i n ati o n o f c o m pl em en tary ch emi cal c o m p an i es sim i l ar to

Un i on C arb i de f ai led to di ver sif y un til Wo rld War II l argely b ecau se o f

,

th e c o n serv ati v e po li cy o f its f o u n d er s p arti cul arly O rl an do F Web er , . .

Th e M ell o n fi n an ced K o pp er s Co m p an y In c o f Pi tts burgh Wh il e l o n g

-
,
.
, ,

r em ai n i n g a h o ldi n g co m p an y m o v ed faster i n to a br o ad r an ge o f co k e
,

b ased ch emi cal s .

Wh il e th e n atur e of ch em i cal tech n o lo gy p erm i tt ed th ese en terpri ses to

apply th ei r r eso ur c es t o th e pr o duc ti o n o f n ew pr o duct s w i th r el ati v e

ease an d lo w c o st t h e m ark eti n g o f th ese i t em s pr o v ed m uch m o r e diffi

,

cult A s th e co m p an y s pr o ducts wen t o u t to a very wi de v ar i ety o f m ar

.
’

k ets u su ally to o th er pr o ducer s b u t oft en also to m as s co n sum er m ark ets

, ,

th e o p er ati o n al pr o bl em s o f Co o rdi n ati n g pr o duct fl o w w ith m ark et de

m an d an d th e en tr epr en euri al pr o bl em s of all o cati n g th e firm s r eso ur ces

’

to diff er en t li n es o f bu si n esses b ecam e i n cr easi n gly diffic ul t T h e al m o s t .

i n evi tabl e r esult w as th at m an y o th er ch emi cal fi rm s fo ll o wed du Po n t

in ad o p ti n g th e m ulti di vi si o n al s truct ur e w i th a d iff er en t di v i si on t o ,

a d mi n i ster each m aj o r li n e o f goo d s S i n c e r ap i d gr o w th o f th e ch emi cal

.

i n du stry in th e Un i ted S tates b egan o nl y in th e year s after Wo rld War I ,

th e d epr essi on c am e b efo r e m an y o f th e l eadi n g c o m p an i es h ad begun to

di ver sify seri o u sly VWth th e r et ur n of pro sp eri ty an d th e gr eat exp an si o n

.

o f r eso ur ces dur i n g Wo rld War II di v er sifi cati o n b ec am e an accep ted ,

str at egy o f gr o wt h f o r n early all th e m aj o r ch emi cal co m p an i es Th u s .

,

whi le a few fi rm s lik e H ercul es an d M o n san to h ad ado p ted th e multidiv i

sio n al struc tur e b efo r e th e w ar m an y m o r e m aj o r r eo rg an i za ti on s cam e
,

in th e l ate 1 94o s an d 1 95 0 s 60
F or m o st o f th em th e du Po n t struct ur e
’ ’
.
,

serv ed as a m o d el T o b e sur e fir m s l i k e U ni on C arb i d e A ll i ed C h emi cal

.
, , ,

an d K o pp er s w hi ch h ad start ed as h o ldi n g c o mp ani es h ad pr obl em s m o r e

, ,

li k e th o se at G en er al Mo to r s an d yet th ese co m p ani es seemed to h ave

,

lo o k ed to du Po n t r ath er th an to th e auto m ob i l e co m p an y wh en reo rgan iz

in g th ei r stru ct ur es In an y case o n ly th e m o st po w erful ex ecu ti v es w ere
.
,

abl e to r esi st th e pr essur es f o r d ec en tr ali z ati o n Ev en wh er e a v eter an .

m an agem en t h as r em ai n ed in c m cc as in th e case o f Eastm an Ko d ak an d ,

A m er i can V i scose th e n ew str u ctur e h as b eco m e accep ted

, .

A n d th er e c er tai n ly w as r esi stan c e o r at least an i n diff er en ce to s uch

o rg ani z ati on al ch an g e A t A lli ed C h em i cal O rl an d o Web er w h o do mi
.
, ,

n ated th e c o mp an y fr o m it s b egi n ni n g in 1 20 u n ti l Wo rld War II p ai d

9 ,

li tt l e atten ti on to o rg an i z ati o n al m att er s A m an o f m an y n eur o ses h e .

,

b eli ev ed in do i n g ev eryth i n g as secr etly as po s sible an d d i sli k ed th e ex

ch an g e o f i nf o r m ati o n ev en w i th i n h is o w n c o m p an y Wh i l e succ es sful .
I ND U STR I E S W I DE L Y A C CEP TI N G NE W STR UCTURE 3 77

fi n an ci ally, A ll i ed dro pp ed w ell b eh i n d du Po n t an d U n i o n C arb i de in

th e si ze o f its pl an t an d p er so n n el , in th e v ar i ety an d v o lu m e o f it s
pro du cts, an d in th e am o u n t o f ti m e a n d en ergy sp en t o n r esear ch an d
develo p m en t Th e co m i n g o f th e n ew m an agem en t in th e 1 950 s an d wi th
.
’

it a pr o gr am o f d evel o p m en t an d d i v er si fi c ati o n led to th e cr eati o n o f a

gen er al o ffice to admi n i ster th e o p er ati n g di v i si o n s Wi th th ese ch an ges .
,

A ll i ed is ag ai n m o vi n g ah ead .

C am i lle D r eyf u s h ad m ewh at Si m i l ar th o ugh less i n h i b i ti n g i m p act

a so

o n th e str ategy an d stru ct ur e o f th e C el an ese C o rp o r ati o n th at h e h elp ed

fo u n d S o to o di d a veter an m an agemen t at A m er i c an V i sco s e T h e ado p

. .

ti o n o f th e m ul ti d i v i si o n al struc tur e at C el an ese h ad to w ai t u n ti l j uly ,

1 95 6, v ery sh o r tly after D r ey f u s, w h o h ad c o n ti n u ed o n as C h ai r m an o f

th e B o ard, d i ed A m er i c an V i sc o se, wh i ch w as th e l ast o f th e n i n e ch em i c al

.

co mp an i es st udi ed to di ver sify, w as wi th th e excep ti o n o f D o w al so th e

l ast to decen tr ali ze It c ame to a full m ul ti di vi sio n al o rgan i zatio n in A u
.

gu st 1 95 8 D uri n g th e pr eced i n g y ear l o n g-establ i sh ed to p ex ecuti ves at

, .
,

Eastm an Ko d ak b egan to r ati o n al i ze its co m pl ex structur e alo n g si m i l ar

m o der n li n es .

A t D o w wh er e exp an si o n th ro ugh d i v er si fi c ati o n h as b een r ap i d an d

,

wh ere reso urces h av e b een co n cen tr ated o n research th e sen io r ex ec u ti ves ,

h ave gi v en little expl i cit th o ugh t to struc t ur e Fu n c ti on al d ep ar tm en ts re .

,

gion al o ffices as well as th ree au to n o mo u s pro duct di v i si o n s admi n i ster ,

diff er en t p arts o f th e co m pan y s vari ed acti viti es an d a si zable staff h ad

’

b een assem bled at th e to p cfli ce Rel ati o n s b etween th e dep artmen ts.
,

th e r eg i o n al o ffic es th e d i v i si o n s an d th e g en er al o ffi ce an d its s taff h o w

, , ,

ever h ave n o t b een cl early d efi n ed b u t r em ai n o n an i n fo r m al p er so n al

,

b asis A s a res ult Do w li k e A lco a h as a pleth o r a o f coo rdi n ati n g co m

.
, , ,

mittees A t b o th A lco a an d D o w th e elder sen i o r ex ecu ti v es h ave li k ed

.
,

to thi n k o f th ei r en terpr is es as th e r el ati v ely s m all fami ly fi rm s th ey w er e

wh en th e executi ves b eg an th ei r o w n bu si n ess career s .

In th o se i n du str i es — ch em i c al p o w er m ach i n ery an d el ectr i c al

, ,

wh ere th e n ew m ul ti di vi si o n al s tructur e h as b een a ccep ted en terpri ses ,

h ave bu i l t th e m o st d i ver sifi ed pro duc t li n es T h es e are al so th e i n du str i es

.

mo st clo s ely o r i en ted to mo dern s ci en ce A s early as 1 93 8 th r ee-fo ur th s o f

.
,

th e p er s o n n el wo rk i n g in o rg an i z ed i n du stri al r esearch w er e in th ese t h r ee

61
i n du s tri es an d in p etro leum an d rubb er O ther b asi c A meri can bu si .

n esses s uch as steel n o n f err o u s m etal s tex ti l es foo d an d o th er i n du str i es

, , , , ,

pro cessi n g agri cul tur al pro ducts empl o yed a goo d deal l ess th an 25 per
,

cen t o f th e trai n ed m en in th e n atio n s i n du stri al r esearch l ab o r ato ri es

’
.

T h i s p atter n h as con ti n u ed si n ce th e en d o f Wo rld War II T h e o n ly .

i n du str i es b esi de th e fi v e j u st li sted to devo te exten si ve r eso ur ces to re

s earch an d develo pm en t h ave b een th o se pro duci n g ai rcr aft an d sci en tifi c
378 SP REA D O F T HE M U LT I DI V I S I O N A L S TR UCTURE
instru men ts, bo th fin an ced l argely by mili tary dem an ds S igni fi can tly .

too th e cfi o rts
, of th e r esear ch d ep art m en ts in th en o n m i li tary en terpri ses

si n c e th e w ar h av e been co n c en tr at ed o n pr o u cers r ath er th an cons um er

d
’

good s A s a r esul t th e l ea din g co m p an i es in th e ch em i cal po wer m a

.
,

ch i nery an d el ectri cal in dus tri es ar e tr an sferrin g m or e of th eir r eso urces

,

to in du st ri al th an to co n sum er pr od ucts Thi s tr en d whi ch r ev er ses th e

.
,

in cr eas in g em p h asi s o n th e co n sum er m ar k et be tw een th e l ast deca de o f

th e nin eteen th cen t ury an d th e th i rd in th e tw en ti eth is cl ear ev en in th e ,

gr eat m ass-co n sum er en terpri ses o f th e rubber an d petro l eum in dustri es .

T h ose en terpri ses wh o se t ech n o lo gi cal po ten ti al r ests o n m o d er n sci en ce ,

as w ell as a f ew f oo d co m p an i es h av e been abl e to t ur n di v er sifi ca ti o n

,

in to a hi gh ly rati on al an d syst em ati c str ategy of gr owth S tim ul ated by .

ins titu ti o nali zed r es earch di v er sifi ca ti on in tur n br o ugh t d ecen traliza tio n
, .

Th e di stri bu ti on of n ew goo d s to th e difi eren t m ark ets an d th e r es ul tin g

n ew n eed t o co o rdi n ate diff er en t f un cti o n al a cti vi ti es to a ssur e effecti v e

pr o duct Ho w an d pr o duct d ev elop m en t r equ ir ed th e bui ldi n g of auto n

c m on s pr od uct di vi si o n s Th e i n cr ea se d pr o bl em s o f appr ai sin g th e activi
.

ti es of a hi gh ly di ver sifi ed en terpri se an d o f plan nin g an d supervi sin g its

str ategy m a d e imper ati v e th e cr eati o n o f a g en er al o ffice wh er e th e sen i o r

ex ecu ti v es h ad th e tim e an d in f o r mati on t o w o rk o u t th ese co m pl ex lo n g ,

term d eci si o n s I n o th er w o rds bo th th e o per ati on al acti vi ti es in v o lv ed in

.
,

m o vin g th e goo ds f r om th e pr o duc er s o f th e raw m ateri al s to th e ul tim ate

co n sum er an d th e en tr epr en euri al on es in vo lv ed in all ocatin g r eso urces to
assur e th ei r m o s t effect i v e o r at l ea st m ost pr o fi tabl e use h av e call ed f or
, ,

th e a d op ti on o f th e n ew stru ct ur e .

V ARIA TI ON S 0N S TRU CTURA L CHA N GE

Th e Merch an disin g E n terprises

F o r th e purpo ses of th is ch ap ter th e m ass m erch an di sin g en terpri ses
,
-

sh o u ld pr o perly h av e been d es cri bed in th e seco n d se cti o n f o r wh i l e ,

so m e o f th em h av e ad o p ted th e n ew struct ur e o th er s h av e n o t H o w ev er ,
.
,

th ey m us t be co n si d er ed sep ar at ely A l th o ugh th ey do car ry o n so m e

.

m an uf act ur in g an d tr an sp o rt ati o n th eir bus in ess li k e S ear s R oebu ck is

, , , ,

l argely th e pur ch asin g of a wi de v ari ety of goo ds th at ar e th en so ld di

rectl y t o th e u l ti m ate con sum er Th ese c o m p an i es th at th us f ac e a difi er
.

in g ext er n al S i tu ati o n an d so m ew h at diff er en t in ter n al n eed s m us t be

co n si der ed lik e S ear s as r epr esen tati v es o f a sub sp eci es o f th e m o r e gen
, ,

er al in d ustr i al en terpri ses studi ed h er e Wh er e i t m ay be saf e to gen er ali ze

.

abo u t th e co m p ar abl e a cti v i ti es o f m o r e th an 6 co m p an i es in v o lv e d in

5
th e pr o cur i n g o r pro duc in g o f raw m ateri als in m an ufact ur in g an d distri
,
VA RIA TIO NS O N S TR UCTURA L C HA NG E
3 79
buti n g wh o lesaler s o r ev en to th e fi n al cu sto m er s it is un satis
to th e ,

facto ry to do so for o n ly a h alf a d o zen r epr esen tati v es o f th i s sub s p ec i es

th e m erch an di si n g en terpr i ses S ti ll th e exp er i en ce o f th ese f ew at least

.
,

h elp s to do cum ent th e th es es th at di ff er en ces in th e m ark et an d in m eth o d s

o f m ark eti n g br o ugh t a dm i ni str ati v e co m pl exi ty an d th at n ec essary stru e

tur al ch an ges h av e o ften b een d el ay ed by th e atti tud es o f sen i o r ex ecu ti v es .

Here th e diff eren t develo pm en ts o f S ears Ro ebuck an d its m aj o r com ,

p eti to r p arall el cl o sely th ose o f G en er al Mo to rs an d F o rd .

A t M on tgo m ery Ward se Co In co rp o r ated th e admi n i str ati v e Str ai n s

.
, ,

rais ed by th e m o ve fr o m m ai l—o rder to o ver-th e—co u n ter r etail i n g w er e u n

do ub tedly si mi l ar to th o se at S ear s T o S ew ell A v ery w h o to o k co mm an d .
,

o f S ear s s co m p eti to r dur i n g t h e m i ddl e o f th e d epr essi o n th e th er apy

’

w as c en tr a li z ati o n
62
Wi th ren ewed gro wth af ter th e depressi o n cen
.
,

traliz ed co n tr o l th r o ugh a f u n c t i o n ally d ep ar tm en tali z ed struct ur e co n

tin u ed A v ery l i k e F o rd w an ted t o ru n h is em p i r e by h i m self A s a re

.
, ,
.

s ul t fo rm er execu ti v es o f Mon tgo m ery Wa rd b ec am e as pl en tif ul in th e

,

1 g4o s as th e m em b er s o f th e f am o u s F o rd a lu m n i asso c i ati o n h ad b een in

’

th e 1 920 s O n c e a n ew m an agem en t w as i n stall ed af ter A v ery w as fi n ally

’
.

fo rced i n to r eti r em en t in th e mid-1 95 0 s it qu i ckly co p i ed th e s tructur e

’

th at h ad b een dev el o p ed at S ear s j u st as F o rd a d o p ted th e o n e cr eated by

,

G en er al Mo to r s .

O f th e o th er l arge m ark eti n g fi rm s th o s e in th e foo d bu si n ess A 8: P , , . .

,

Kro ger an d S afew ay Sto r es h ave adop ted si mi l ar str uct ur e wi th au to n

, ,

o m o u s t err i to r i al d i vi si o n s an d w i th a gen er al o ffic e w i th g en er al execu

ri v es an d staff s p ec i al is ts an d o f c o ur s e a c en tral i z ed buy i n g o rg ani z a

, ,
63
ti o n . O n th e o th er h an d th o se merch an d i si n g fir m s th at s ell n o n
,

peri sh abl e goo d s s u ch as Wo o lwo r th an d j C Pen n ey were man aged in

, . .
,

1 960 much as th ey h ad b een a g en er ati on b efo r e T h ey o p er ated in m uch .

th e sam e lo c ati on s an d h an dl ed m uch th e s am e typ e o f m erch an d is e F o r .

th es e r easo n s th ey w er e b o th feel i n g th e m aj o r p o pul ati o n ch an g e — th e

,

mo ve to th e suburb s an d w er e al so aff ec ted by th e d ev el o p m en t o f n ew

retai l o utlets Never th el ess th ei r gro wth wh i ch h as n o t b een as r ap i d

.
, ,

as in th e foo d ch ai n s h as c o n ti n u ed al o n g th e sam e li n es in a pr o fi tabl e

,

en o ugh m an n er T h ey h av e n o t t f l t th d t c h g th i r bu i n ess
.
y e e e n ee o an e e s

as r a d i c ally a s S ear s d i d in 1 2 S i n ce th e pr o du ct s th at t h ey m ark et do

9 5 .

n o t r equ i r e th e fl exi b i li ty an d l o c al d ec i si o n m ak i n g so n ec essary in th e

selli n g o f fo o d an d o th er p er i sh abl es th ese fi rm s w i ll pr o b ably c on ti n u e ,

to r et ai n th ei r o ld er struct ur es Ev en so th ey m i gh t b en efi t f r o m a stru c
.
,

tur e sim i lar to S ear s an d M o n tgo m ery Ward th at w o uld p erm it o p er ati n g

deci si o n s b ased o n ch an gi n g m ark et dem an d an d taste to b e i n tegr ated

, ,

mo re i n tim at ely wi th lo cal co n diti o n s V eter an to p m an agem en t m ay h av e .

3 80 SP REA D o r T HE M ULTI DIV I S I O NA L STR UCTURE
l wed ch an ges at bo th Woo lwo rth an d Pen n ey BUt mo re study is n eces
s o .

sary b ef o r e th e ex eri en c es o f th es e m erch an di sin g co m p an i es can b e

p
pr o perly co mp ar ed an d an alyzed .

S u m mary o f th e Pr ocess f
o S truct u ral Ch an ge
with in th e E n terprise
Th i s br i ef r evi ew of th e adm ini str ati ve h i sto ry of m o re th an seven ty of
A m eri ca s l arg est in du stri al en terpri ses t ells m uch m o r e abo u t w h y an d
’

h o w th ey al ter ed th eir str ategy th an abo u t h o w th ey ch an ged th eir

st ructur es O nl y a Study o f a com p an y s in tern al busi n ess docum en t s
.
’

an d l ett er s can accur ately r ev eal th e d etail s o f st ruct ur al r eo rgan i zati o n .

Neverth el ess thi s gen er al surv ey of w h y so m e en terpri ses ado p ted th e

,

n ew st ruct ur e an d o th er s di d n o t does n o t appear to co n tr a di ct or di spr o ve ,

an d o ft en add s po si ti v e co n fi r m ati on to th e gen er al izati ons d ev el o ped ,

in th e f our case studi es b ased o n such r ec o rd s Th ese po in ts sh o uld be .

co v er ed b ef o r e r evi ewi n g th e r easo n s w h y th ese gr eat in du s tri al em p ir es

tur n ed to th e str ategi es th at n ecessi tated struct ur al ch an ge .

T h i s sh o rt surv ey n o t onl y str esses th at exp an si o n di d ca use admi n istr a

ti v e pr o bl em s wh i ch led in ti m e to o rg an izati o n ch an g e an d r ea dj us t
, ,

m en t b u t it f u rth er suggests th at th e essen ti al r esh ap in g o f a dmi ni str a

,

ti v e St ruct ur e n early alw ay s h ad t o w ai t f or a ch an ge in th e to p co mm an d .

C l early m an y em p ir e b u i ld er s — th o se in du str i ali sts w h o in i ti ally br o ugh t

vast n um b er s of m en an d am o un ts of m o n ey an d o f m ateri al s un der a
, ,

sin gl e c o rpo r ate r o o f — h ad r el ati v ely li ttl e in ter est in d evi sin g sch em es to

assur e a m o r e effici en t o v er—all m an agem en t o f th ese r eso urces Hen ry .

F o rd Wal ter P Ch rysler O rl an do F Web er H erbert H an d Wil

, .
, .
, .

lard H D o w H arry F S in cl air Cap tain A lfr ed E H un t an d hi s so n

.
, .
,
.

R o y A H u n t o f A l co a S tep h en T B i rch o f Kenn ecott Co r n eli u s F

.
, .
,
.

Kell ey of A n aco n d a Elb ert H G ary o f Un i ted S tates Steel Er n est T

, .
, .

Wi er o f N ati o n al S teel C am ill e D r eyf u s o f Celan es e an d Paul W Litch

, ,
.

fi eld o f G o o dy ear all h ad m uch th e sam e l ack o f c o n cern ab o u t sy s tem ati c

,

a dmi n i str ati o n as h ad Wi lli am C D ur an t R i ch ard S ear s an d Co l em an .

, ,

du Po n t T h e sam e w as tru e o f S ew ell A v ery w h o h ad h elp ed o rg an i ze an d

.
,

run th e U n i ted S tat es G yp sum Co m p an y b efo r e b ec o min g h ead o f Mo n t

g o mery Ward .

In gen er al th e few fi rm s am o n g th o se S tudi ed h er e th at r em ai n ed

,

fam i ly h eld h av e ten d ed to b e slo w er in ch an gi n g bo th struct ur e an d

str ategy th an th e o th er s D eer e D istiller s~ S eagram s F ir es to n e S w ift an d
.
, , , ,

S i n g er S ew in g M ach i n e as w ell as D o w an d A lco a l on g pr eferr ed to sti ck

to th e o ld w ay s O n e r easo n f o r th e l ack o f ch an ge at th e to b acco co m
.

ni es m a h v b th c ti ui g pr f t h f m i ly i n to p m an
p a
y a e e en e o n n n es en ce o e a

agem en t O r w h at is m o re li k ely th e r o u ti n i zati o n o f act i v i ti es an d th e

.
,
VA RI A TI O NS O N STR UCTURA L C HA NG E 3 8 1

-li n e fir m s mad e it easi er to k ep

lack o f str at eg i c d ec isi o n s in th es e si n gl e e

th e fami ly in th ei r to p m an agemen t O n ly o ccasi on ally h av e y o u n ger

.

memb ers o f th e o ri gi n al fo u n der s f ami ly, l ik e F o wl er McCo rmick an d

’

Hen ry Fo rd II, en cou raged structural r eo rgani zati on o n tak i n g office T h e

'

exp er i en ce o f o th er fami ly— h eld en terpr is es str ess es th e si gn i fi c an ce of Pi err e

du Po n t s deci si o n to r emo ve o r n o t pro m o te pr o mi n en t memb er s o f th e
’

fami ly wh o were n o t co mp eten t to m an age a gr eat i n du str i al en terpr i se .

Th e bro ad s ur vey o f A mer i can i n du str i al co mp an i es al so r ei n fo rces a

po i n t s uggested in th e case studi es o n G en eral Mo to rs an d S ear s, Ro ebuck
as w ell as du Po n t T h is is th at n o th i n g is m o r e cruc i al to th e l ater h i sto ry
.

o f a fi rm th an th e w ay in w h i ch its fo u n d er s o r th ei r f am i li es m ak e

th ei r term s with th e admi nistrati ve im p r ti ves o f l rg s cal e en terpr is e

e a a e -
.

O ften , th en , o rgani zati o n bui ldi n g h as h ad to w ait u n ti l th e p assin g o f

th e fi r st gen er ati o n o f admi n i str ato r s T his w as n o t o n ly tru e at F o rd,
.

Un i ted S tates Steel, S i n clai r O il, an d th e o th er comp an i es men ti on ed in

th e p ast tw o p aragr ap h s b u t al s o at In tern ati on al Ni ck el, In tern ation al

Bu si n ess Machin es, S tan dard O il of In dian a, an d u n do ub tedly o th er s .

Even in th o s e en terpr is es wh er e pro fessi o n al man ager s h ad l on g b een in

full ch arge, n ecess ary o rgani z ati o n al ch an ges u s u ally h ad to w ait for th e
dep art ur e o f th e o lder execu ti ves New an d yo u n ger top m en h ave Sh o wn
.

mo re of an i n terest in an d a wi lli n gn es s to alter th e w ay s of th ei r daily

wo rk th an di d their pr edecess o r s T h is w as th e c ase at In ter n ati o n al Har
.

vester, Ch ry sler, G en er al Electr i c, Westi n gh o u se, A rmo ur, S o co n y-M o b i l,

Co n ti n en tal O il, Nati o n al Dai ry, Un ited S tates R ubb er an d u n d o ub tedly
o th er co mp an i es In th es e c o m p an i es an d in th o s e w h i ch I h av e n o t h ad
.

th e tim e to st udy th e ev i den ce o n th e t ur n o v er o f to p p er s on n el in d etai l

— th e l atter i n clud e S tan d ard o f C al i fo r n i a S h ell G ulf H ercules Mon
, , , ,

s an to , G o o dri ch , G en er al Fo o d s, G en er al Mi ll s, B o rden , Pro cter 8: G am

b le, an d Eastman Ko dak — th e r eo rgan i zer s co n si der ed th eir pr o bl em s as
admini str ati v e r ath er th an fun c ti o n al o n es, to b e an s w er ed by n ew o rg an

izatio n al structur e an d pr acti ce F i n ally, ev i den ce in n early all th ese

.

com p an i es i n di cates th at, b efo re th e ch an ges cam e, th e s eni o r execu

tiv es were b ei n g i n cr easi n gly b o gged do wn in o p er ati o n al acti viti es But .

it is n o t d etai led en o ugh to mak e clear wh eth er en gi n eer i n g bu si n ess ,

s ch o o l o r o ther typ e o f tr ai n i n g h elp ed mak e th e y o un ger men m o r e

,

aw ar e o f th e gr o w i n g o rg an i z ati o n al n eed s .

Nor do es th i s bri ef r evi ew o f th e exp er i en ce of th es e m an y comp an i es

add m uch to th e u n d er stan di n g o f th e pr o cess o f o rg an i z ati o n al ch an g e

withi n th e en terpri se It tells li ttle ab o ut w h o fi r st sugges ted wh o favo r ed

.
, ,

an d w h o fi r st o pp o sed th e ch an g es T h e s urv ey is n o t det ai l ed en o ugh

.
,

fo r ex am ple to p o i n t ou t th e v ery si gn i fi c an t ro l e th at m an ag em en t co n
,

sultan ts s uch as McKin se m T

, y C o p an y ( a s ucc es so r t o Fr az er 8 a alb o t ,
3 8 2 SPREA D o r T HE M U L T I DI V I S I O NA L STR U CTURE
th e co n s ul tan ts in Sear s s ini tial r eo rgan izati o n ) Ro b er t Heller 8: A sso
’

ci ates C r esap McCo rmick an d Paget B o o z A llen an d H ami lton an d

, , , , ,

A T Kearn ey an d Co mp an y h ave h ad in br i n gi n g ab o u t th e ado ption

. .

o f th e n ew struc tur e as w ell as i n tr o duci n g m an y o th er a dm i n is tr ati ve in

n o v ati on s an d pr ac ti c es .

O n ly h er e an d th er e d o es th i s summ ary suggest th e i m p o rt an t v ar i a

ti o n s in th e m ulti di vi si o n al structur e A l th o ugh all w h o ado p ted it h ave
.

buil t auto n o m o u s m u ltidep artmen tal di vi si o n s an d gen er al offi ces with

gen eral execu ti ves an d staff sp eci ali sts th e i n tern al arr an gem en ts o f th e
,

gen eral o ffice an d th e sp eci fi c r el ati o n s o f th e di vi si o n to th e gen er al an d

staff ex ecu ti v es h av e v ar i ed f ro m co m p an y to c o m p an y In a few an d .
,

th ese are n early all o il co mp an i es th e gen eral office sti ll s up ervi ses th e
,

fu n c ti o n al dep ar tmen ts as w ell as th e m ul tif un c ti o n al di visi o n s S o al s o .

th er e h av e b een d i ff er en c es in th e t yp es o f i nf o rm ati o n an d s tati sti c al d at a

develo p ed to flo w th ro ugh th e structur e : m ark et an d eco n omi c fo r ecasts

an d an aly s es ; r etur n -o n -i n v estmen t an d s h ar e— o f—th e-m ark et dat a ; p er i o di c
'

r epo rt s an d vi sits to th e op er ati n g u n i ts by ex ecu ti ves fro m th e h igh er

ad mi n i str ati v e o ffic es A co m pr eh en si v e an aly si s o f o rg an i zati on al ch an ge
.

wi th i n th e gr eat co rp o r ati o n call s for m uch m o r e study .

O n th e o th er h an d th e r evi ew of th e adm i n i str ati v e hi sto ry of th es e

,

sev en ty o r m o r e c o mp an i es i n di cates ev en m o r e cl early th an th e d et ai l ed

c ase studi es w h y th e l arge A meri can i n du stri al en terpris e develop ed n ew

str ategi es o f gr o w th It al so str o n gly r ei nf o rc es th e r easo n s d ev elo p ed in
.

th e f o ur an aly ses as to w h y s tr ategi c exp an si o n r equ i r ed struc tur al r ead

j u stm en t Cl early th e m ark et w as o f o verwh elmi n g i m po rtan ce to th e

.

ch an gi n g struc tur e an d str ate y o f A mer i c an i n du str i al en terpr i se T h e

g .

ch an gi n g A m er i can m ark et sh ap ed str ategi c i n iti al gro w th i n tegr ati on , ,

an d d i v er si fi c ati o n T h e co o rd i n ati on o f th e en terpr i se s r eso urc es o ld an d

’
.
,

n ew to th e ch an gi n g m ark et c all ed fo r th e bu i ldi n g o f th e c en tr ali zed

, ,

f u n cti o n al ly d ep ar tmen tali zed s tructur e Fur th er exp an si o n o n a wi de

.

r egi o n al scal e o r i n to n ew li n es o f bu si n ess led to th e co n structi o n of dif

feren t au to n o m o u s d i vi si o n s so th at th e en larged f un c ti o n al acti v i ti es o f
th e en terpr i se c o uld b e clo sely i n tegr ated w ith d i ff er i n g m ark et d em an d s .

A n u n d er stan d i n g o f th i s i n ti m ate r el ati o n b etw een th e m ark et an d th e

ad mi n i str ati o n o f th e fir m so str i k i n gly r ev eal ed by th e ad mi n i str ati v e his
,

to ry o f m an y gr eat co m p an i es m ak es p ossi bl e a m o r e gen er al expl an ati o n

,

o f h o w th e l arge A m er i c an i n du str i al en terpr i se gr ew an d in gr o w in g . ,

s h ap ed an d resh ap ed its admi ni str ati ve structure .

 C O N C L US I O N —
CHAPTERS IN
TH E H I S TO RY OF THE G REAT
I ND US T R I A L E N T E R P R I S E

T HE CO M P A RI S O N o f th e e xp er i en ce o f a si z abl e s ample of l arge in

du strial en terpris es wi th th at of fo ur p i o n eer s in m o der n A m er i c an bu si
n ess admi n i strati o n pr o v i d es m uch th o ugh cer tai n ly sti ll i n s uffici en t
, ,

i n fo rm atio n o n wh i ch to gen er al i ze ab o ut th e gro wth an d m an agemen t of

thi s cr iti c ally imp o rt an t eco n o m i c i n sti tu ti on in th e U n i ted S tates T h e .

co mp ari so n em p h asi zes th at a com p an y s str ategy in ti me determi n ed its

’

structur e an d th at th e co mmo n d en om i n ato r o f structure an d st r ategy

h as b een th e appl i c ati o n o f th e en terpr i se s r es o urces to m ark et d em an d
’
.

S truct ure h as b een th e d esi g n fo r i n tegr ati n g th e en terpr i se s exi sti n g re

’

s o ur ces to curren t dem an d ; str ategy h as b een th e pl an fo r th e allo cati o n o f

r eso urces to an ti ci p ated dem an d T h e p erfo rm an ce of th ese co mp an i es
.

f u rth er suggests th at a self—gen er ati n g fo rce fo r th e gro w th o f th e i n du s

tr i al en terpr ise wi th i n a m ark et eco n o m y li k e th at o f th e Un ited S tat es
h as b een th e dr i v e to k eep r es o urces eff ec ti v ely emplo yed T h e s ame n eed .

h as s h ap ed th e w ay s p ar ti cul arly th e structur e by wh i ch a fi rm h as b een

, ,

m an ag ed His to ri c ally th en th e ro l e o f admi n i st r ati o n an d th e f u n cti o n o f

.
,

th e admi n is tr ato r in th e l arge A m er i c an en terpr is e h av e b een t o pl an an d

di rect th e u se o f r eso urces to m eet th e sh o r t term an d lo n g term fl uctu a

- -

ti o n s an d develo p m en ts in th e m ark et .

O f th ese r eso urces t r ai n ed p er so n n el w i th m an u factur i n g m ark eti n g

, , ,

en gi n eer i n g
, s ci en tifi c an d m an ageri al sk i ll s o ften b ecame ev en m o r e
,

valu abl e th an w areh o u ses pl an ts o ffices an d o th er ph ysi cal faci liti es

, , , .

G ro wt h an d Sh ifts in th e lo cati o n o f p o pul ati o n t ech n o l o gi c al d ev el o p

,

m en ts an d ch an ges in co n sum er i n co m e all aff ected th e m ark ets to

, ,

wh i ch th e adm i n i str ato r s appli ed th ese r es o urces O f th e tw o typ es o f .

adm i n i str ati v e d ec i si o n s o n e — th e st r at eg i c — d eal t w ith th e l o n g t er m

,
-

all o c ati o n o f exi sti n g r eso urc es an d th e d ev el o p m en t o f n ew o n es essen ti al

to assur e th e c o n ti n u ed h ealth an d f u tur e gr o wth o f th e en terpr i se T h e .

o th er — th e tacti cal — w as m o r e i n v o lv ed in en s ur i n g t h e effic i en t an d

steady u se o f curr en t r es o urces wh o se all o cati o n h ad alr eady b een d ec i d ed .

8
3 3
 8
3 4 CO N CL USI ON
If th e n ee d r eso urces pr o vi ded th e dyn ami c fo r ce th at ch an ged
to use

st ruct ur e an d st r at egy th e n at ur e o f th e i n v estm en t in th ese r eso ur ces

,

h elp ed to d eterm in e th e co ur se an d dir ecti o n o f gr o wth an d o f sub sequen t

st ruct ur al ch an ge Th e type o f in v est men t in t ur n d epen d ed o n th e
.
, ,

tech n o l o gy o f pr o ducti o n an d th e t ech n i qu es o f m ark et in g o f th e in di vi d

u al co m p an i es o ri gi n al pr od uct l in e o r l in es F i n all y th e r ate o f gr o wth

’
.
,

an d th e eff ect i v en ess in th e u se o f th e en terprise s r eso ur ces r es ted o n t h e

’

ab ili ty an d in g en ui ty o f its admi ni str ato r s to bu i ld adj u st an d apply its

, ,

per so n n el an d f acili ti es to br o ad po pul ati o n tech n o l o gi cal an d in co m e

, ,

ch an ges A l th o ugh th e en terpr i se un do ub tedly h ad a lif e of its o w n abo ve

.

an d b ey o n d t h at o f its i n di vi du al ex ecut i v es al th o ugh t ech n o lo gi cal

,

an d m ark et r equ i r em en ts c ert ai nl y set bo un d ar i es an d l imi ts to gr o wth ,

n ev erth el ess its h eal th an d efi ecti v en ess in carry i n g o u t its b asi c econ o mi c
,

f un cti ons d epe n ded al mo st en ti r ely o n th e tal en ts o f its a dm ini str ato r s .

Th e m ark et th e n atur e o f th ei r r eso urces an d th ei r en tr epr en euri al

, ,

t al en ts h av e w i th r el ati v ely f ew exc ep ti on s h ad f ar m o r e effect o n th e

, ,

h i sto ry of l arg e in dustri al fi rm s in th e Un i ted S tates th an h ave an ti tru st

law s tax ati o n l abo r an d w elf ar e l egi sl ati o n an d co mp ar able evi den ces o f
, , ,

publi c po li cy P o ssibly tax r egul atio n s h ave h ad m o re o f an im p a ct o n th e

.

str ategy o f exp an sio n S in ce Wo rld War II b u t th ei r i n fl u en c e h as n ot a

, p
pr eci ably al ter ed bro ad tr en d s in th e st ruct ur e an d str ategy of gr eat en ter
pri se O n th e o th er h an d go vern m en t acti on such as def en se or co un tercy
.
,

clical sp en d i n g th at dir ect ly aff ect ed th e m ark et by in cr easin g th e n ati o n al

i n co m e o r by m aki n g th e go vern m en t i ts elf a l arge cu stom er h as h ad a

si gni fi can t eff ec t o n th e gr o wth o f th e l arge en terpri se Th e ch an gi n g .

m u ni ti o n s m ark et w as o f f ar m o r e imp ortan ce fo r ex am pl e t o th e h isto ry

, ,

o f th e du Po n t Co m p an y th an an ti t ru t cti n A n ti t rust a ct i vi ty h as
y an s a o .

h ad pr o b ably th e gr eatest imp act o n co rpo rate structur e an d str ategy in

th o se r ela ti v ely r ar e ca ses wh er e it t r an sfo rm ed a m o n o po ly in to an

o li go po ly Y et ev en in th e case o f th e oil i n d u stry th e co min g o f a h uge

.
,

an d en tir ely n ew au to m o b il e m ark et w as as si gn ifi can t as w as th e br eakup

o f S t an d ard O il t o t h e S tr ategi es an d p a ce o f gr o wth o f G ulf T ex ac o , ,

S h ell S i n cl ai r Ph i lli p s an d o th er larg e o il co m p ani es

, , , .

Hi sto ri cally th e ex ecu ti ves admi ni steri n g A m eri can in dus tri al en ter
,

pri ses h ave fo ll o wed a r eco gn i zable p attern in th e acqui siti on an d use o f
r eso urc es Th e i n i ti al ac q ui si ti o n o f ext en si ve plan t equi p m en t an d p er
.
, ,

so n n el cam e to m eet r ap i dly gr o w i n g an d o ften n ew d em an ds f o r t h e

pro d u ct s of th ei r com p an y O r a l arge en terpri se m ay h av e co m e in to

.

exi sten ce w h en a n um be r o f sm all fi r m s th at h ad exp an d ed pr o ducti o n

co mb i n ed an d th en co n so li d ated th eir acti vi ti es in th e face o f a tem po rary

d ecli n e in dem an d T o b e sur e o f m o re ce rtai n o u tl et fo r th ei r goo d s th e
.
,

ad m i n i str ato r s o f enl arg ed en terpri ses buil t th ei r o w n di stri bu tin g an d

CO NCL USION 8
3 5
m arketi n g (u su ally wh o lesal i n g ) o rg an i z atio n ; to b e assured o f essen ti al
m ater i als th ey o b tai n ed co n tro l o ver suppli es O n ce th ese reso urces h ad
,
.

b een a cqui red th e executi v es r espo n sible fo r th e desti n y o f th e en terpri se

,

b egan to p ay i n creasi n g atten ti o n to u si n g th em m o re r atio n ally an d effi

cien tly A m o n g o th er th i n g s, t h i s c all ed fo r th e fo r m ati o n o f an adm in is
.

trativ e struc tur e to m o b i li z e sy stem ati c ally th e r eso urc es w i th i n each

fu n ctio n al ac ti vi ty an d to co o rd i n ate w i th m ark et d em an d th e flo w

th ro ugh an d to d eter m i n e th e lev el o f ac ti v i ty w i th i n th e f u n cti o n al de

rtm en ts
p a .

T h en c ame a s eco n d p er i o d o f gro wth an d a seco n d r ati o n al i z ati o n o f

th e u se o f th e fi rm s r eso urc es A s th e en terpr i se r eac h ed th e l i m its o f t h e
’
.

ex i sti n g m ark et set by av ai l abl e c o n su m er i n co m e th e st ate o f tec h n o l o gy,

,

an d th e lo c ati o n o f p o pul ati o n an d as it c am e to th e l i m its o f c o st r edu e

,

tio n th ro ugh r ati o n al an d sy s tem ati c i n tegr atio n an d u se of its r eso urces ,

its s en i o r ex ecu ti ves b egan to seek n ew m ark ets or n ew l i n es o f bu si n ess

wh ere th ey m igh t apply s o m e reso urces o n ly p ar ti ally u sed or wh er e ex i st
in g o n es m i gh t b e empl o y ed m o r e pro fi tably A th r eaten ed d ecl i n e o f
.

ex i sti n g d em an d ev en m o r e dr am ati c ally i n cr eased th e pr ess ur e t o fi n d

n ew m ark ets N o t o n ly d i d th ey s eek th es e o v er s eas b u t th ey al s o to o k

.

thei r en terpri ses i n to n ew li n es o f bu si n ess es th at were S imi l ar en o ugh to

its ex is ti n g ac ti v i ti es to p erm it a t r an sfer o f r es o urces T h e l att er t yp e o f
.

exp an si on w as pr ac ti c al , h o w ev er , o n ly if s o me sk i ll s o f so m e o f th e
p er

so n n el an d th e c ap ac i t y o f s o m e o f th e fac i li ti es c o uld b e t r an sferr ed w ith

ou t too gr eat a c o st to n ew l i n es F i n ally, th o s e co m p an i es th at d i d d ev el o p

.

n ew mark et s o r n ew pr o duc ts th en h ad to r esh ap e th e ch an n el s o f co m

m u n icatio n an d au th o r it y w i th i n th e en terpris e O th erwi se th e o ffi ces

.
,

m an agi n g th e sever al fu n ctio n al acti vi ti es lo st co n t act w ith th e n ew an d

even th e o ld m ark et s, an d th e sen i o r ex ecu ti v es h ad i n cr easi n g d i ffi culty in

allo c ati n g i n tell i gen t ly th e exp an d ed an d mo r e v ar i ed r es o urc es at th ei r

co mman d .

T h u s fo ur p h ases o r ch ap ter s can b e d i scer n ed in th e h i sto ry of th e l arge

A mer i c an i n du str i al en terpr is e : th e i n i ti al exp an si o n an d accum ul ati o n o f
reso urces ; th e r atio n al i zati o n o f th e u se of reso urces ; th e exp an si o n i n to
n ew m ark et s an d l i n es to h elp assur e th e co n ti n u i n g f ull u se o f r eso urces ;

an d fi n all th e d ev el o p m en t o f a n ew st ruc t ur e to m ak e p o ssi bl e c o n ti n u i n g

y .

effecti v e m o b i l i z ati o n o f r eso urc es to m eet b o th ch an g i n g sh o r t-ter m

m ark et dem an d s an d l o n g—term m ark et t r en d s A l th o ugh each co m p an y

.

h ad a d i sti n c t an d u n i qu e h i sto ry n early all fo llo w ed alo n g th i s gen er al

,

p atter n B ec au se all o f th em o per ated wi th i n th e sam e ex ter n al en vi ro n

.

m en t, t h ese ch ap ter s in th e co llecti v e h i sto ry o f th e i n du str i al en terpri se

o r th e h i sto ry o f th e en terpr i se c o n si d er ed as an eco n o m i c i n sti tu ti o n fo l

l o w ed ro ugh ly th e u n derlyi n g ch an ges in th e o ver-all A m eri c an eco n o m y .

3 8 6 C O N CL USION
Of co ur se , tim i n g o f th e ch ap ter s fo r th e i n di vi du al com p an ies v ari ed
th e .

In th e n ewer i n du stri es b ased o n th e i n ter n al—co m bu stion an d el ectr i cal

en gi n e an d o n m o d er n ch em i stry an d p h y si c s th ey c am e so m ew h at l ater
,

th an in th e o lder m etal s o r to b acco sugar m eat p ack i n g an d o th ers th at

, , ,

pro cess ed agri cultur al pr o ducts .

In very gen er al term s th en m an y o f A mer i ca s l argest i n du stri al en t er

’

, ,

pri ses i n i ti ally accum ul ated th ei r r eso urces in th e year s b etween th e 1 88o s ’

an d Wo rld War I D ur i n g th e fi r st tw o d ec ad es o f th e t w en ti eth c en t ury

.
,

th es e same fi rms bu i lt th ei r i n iti al ad m i n i str ati ve structures Fo r s ome .

,

co n ti n ued exp an si o n l argely th ro ugh di ver sifi catio n b egan in th e 1 920 s

, ,
’

b u t for m o st it c am e after th e d epr essi on o f th e 1 g3o s Th u s alth o ugh th e

’
.
,

p i o n eer s in th e fash io n i n g o f a n ew structur al fo rm to m an age th ese ex

an ded r eso urc es b egan th ei r w o rk in th e 1 2o s m o st en terpr i ses c arr i ed
’

p g ,

1
o u t th ei r m aj o r st ru ctur al r eo rg an i zati o n s in th e 1 nd 1
’ ’

g4 o s a 95 0 s .

Th e First Ch ap ter A ccu m u latin g Reso u rces

Th e large A meri can i n du stri al en terpri se w as bo r n an d n urtured in th e
r p i dly i n du stri ali zi n g an d urb an i zi n g eco n o m y o f th e p ost Ci vi l War
a —

year s T h e great r ai lro ad co n stru ctio n b oo m o f th o s e year s h elp ed swell

.

th e p o pul ati o n o f th e agr ar i an West It sti m ul at ed ev en m o r e th e s w i f t

.

gro wth o f th e o lder co mm erci al cen ter s th at servi ced th e agrar ian econ o m y
an d o f th e n ew i n du str i al ci ti es r i si n g to m eet th e exp an d i n g d em an d fo r

m an u factur ed g oo d s T h e r ai lro ad i tsel f cr eated a h uge n ew m ark et fo r

.

th e b asi c i r o n an d S teel an d m ac h i n ery i n du stri es T h e n eed s o f th e r ai l

.

ro ad fo r v ast sum s o f c ap ital led to th e gro wth o f th e m o der n m o n ey

m ark et in th e Un i ted S tates an d w ith it th e mo der n i n v estm ent b an k i n g
h o u se wh i ch m ade it r el ati vely easy l ater for i n d u stri al s to tap a wi de
,

p o o l o f Euro p ean an d A m eri c an c ap ital T h e co n structi o n o f th e rai lro ad s

.

a n d th e r ap i d urb an gr o w th g av e w o rk to th e u n sk i ll ed i m mi gr an ts an d

far m b o y s w h o p o ur ed i n to th e l arger c i ti es aft er 1 850 Th e n ew wo rk i n g .

fo r ce n o t o n ly pro vi ded a supply o f l ab o r fo r th e gro wi n g i n du stri al en ter

pri ses bu t also i n cr eased th e dem an d fo r th ei r pro ducts By th e 1 8 80 s
, .
’
,

n early ev ery ex i sti n g m an u factur i n g en terpr i se c o uld r each by r ai lro ad a

l arge rural an d even m o re s wi ftly gro wi n g i n du stri al an d urb an mark et .

T o m eet th ese o p p o rtu n 1t1es i n du s tr i al en terpri ses b eg an to en l arge

,

th ei r pr o duc ti v e f aci l i ti es l ab o r fo rc e an d tr ai n ed sup erv i so ry p er so n n el

, ,
.

O ften th e n ew r eso urc es w er e self -gen er ated T h e fi rm s pr o fi ts pr o vi ded

’
.

th e f u n d s fo r f ur th er exp a n si o n w h i l e th e sk i ll s o f its p er so n n el w er e
,

d evelo p ed as th e l atter c arri ed o u t th ei r d ai ly task s If th e en terpr i se .

n eed ed o u tsi d e f u n d s fo r exp an si on an d c o m b i n ati o n it w en t to th e East ,

ern fi n an c i al c en ter s In th e 1 8 o s a s r ai lro ad exp an si o n l evel ed o ff i n v est

’
.
9 , ,

men t h o u ses th at h ad gro w n an d m ade th ei r i n i ti al r eput ati o n in th e

CO NCL USION 8
3 7
marketin g han dli n g of r ai lroad s ecur iti es fi rms lik e I P Mo rgan
an d . .

8: C o ; A M Ki dder 8 : Comp an y ; L ee H i ggi n so n 8: C o m p an y ; Kuh n

. . .
, ,

Lo eb ; Bro wn Bro th er s 8: Co mp an y — all b eg an to fl o at an d t r ad e in in

du strial s ecuri ti es A ls o as r ai lro ad co n s tructi on d ecli n ed th e lab or er s

.
,

fro m abro ad an d fro m rur al A mer i ca fo u n d wo rk in th e en l arged steel

mi ll s o il refi n eri es m eat-p ack i n g elect ri c al farm m ach i n ery an d imp le
, , , , ,

men t pl an ts .

In meeti n g th e n ew deman d i n du st r i al ists h ad mo re d ifficul ty in o b t ai n

,

in g a distri bu ti on n etwo rk th an exp an d i n g pr o ductio n faci li ti es Th e m ak .

ers o f n ew typ es o f go o d s w h i ch w er e o ften b ased o n tech n o l o gi c al i n n o v a

,

tion s cr eated th ei r o w n d i stri buti n g an d m ark eti n g o rgan i zatio n s with

,

wareh o u ses t ran spo r tatio n equ i pmen t o ffices an d even r etai l o u tlets
, , , .

T h e m ak er s o f the o lder mo r e st apl e co mmo di ti es h o w ev er gen er ally

, , ,

w aited u n ti l th ey h ad co mb i n ed an d co n so li dated with th ei r fello w s b e

fo re cr eati n g m ark eti n g o rgan i zati o n s Co m b i n ati o n n o rm ally pro v ed to
.

b e o n ly a temp o r ary exp ed i en t si m ply b ec au s e it led to an d i n deed de

, ,

m an ded a li m ited u se o f th e fi rm s av ai l abl e r eso urces Co n so l i d atio n

’

, .
,

on th e o th er h an d p ermi tted th e l o weri n g o f u n i t co sts th ro ugh h igh

,

vo lume pro ductio n for th e l arge mark et Even so th e n eed to k eep th e .

,

co n so li dated pro ductio n acti viti es wo rk i n g steadi ly c alled for clo ser co o rdi
n ati o n w ith th e cu sto m er d eman d t h r o ug h th e cr eatio n o f a m ark et

in g o rgan i zat i o n Co n ver sely o n ly fi rm s o f l arge cap ac i ty c o uld affo rd to

.
,

buy o r bui ld an d to m ai n tai n n atio n wi de m ark eti n g faci liti es .

Con s o l i d ati o n an d w ith it th e fo rm ati o n o f a m ark eti n g d ep ar tmen t

, ,

w as u s u ally fo llo w ed o r acco m p an i ed by fo rm i n g purch asi n g d ep ar tmen ts

an d O ften by o bt ai n i n g c o n t ro l o f raw m ater i al s B esi d e m ak i n g p o ssi bl e .

th e eco n o mi es o f l arg e-s c al e purc h asi n g th e n ew d ep ar tm en t m ad e it ,

easi er to coo rd i n ate s uppl i es w ith th e n eed s o f th e m i ll s fo r m ater i al s .

Wh ere th ere w as a po s si b i lity o f a few o utsi der s o r even of co mpetito r s

o b t ai n i n g co n tr o l o f a c o m p an y s b asi c raw an d sem ifi n ish ed m ater i al s th e
’
,

en terpr is e o ften m o v ed i n to th e pr o duc ti o n an d tr an sp o r tati o n o f th o se

materi al s T h e mai n reason fo r th e purch asi n g o f p arts an d accesso r1es

.

fi r m s w as o ften to ass ur e th e clo s e an d steady flo w o f th ese p ar ts to th e

pri mary assemblyin g o r m an ufactur i n g acti v i ties T h u s in m an y k ey .
,

A mer i c an i n du s tr i es after th e 1 880 s a few gr eat en terpr i ses too k o v er t h e

’
-

sever al d i ff er en t s tages o f th e i n du st r i al pr o c esses th at up to th at ti m e h ad , ,

alw ay s b een o p er ated by sep ar ate r el ati vely sm all w h o l esal er s m an u fac
, ,

tu rers t r an sp o r ter s an d raw m ater i al s pr o duc er s

, , .

Th e S eco n d Ch apter — Ratio n alizin g th e Use of Reso u rces

Th e creati o n o f th ese h uge n ew v er ti c ally i n tegr ated en terpr i ses w as
th e wo rk o f th e em p i r e bu i lder s o f A mer i c an i n du st ry T h es e men , wh o s e .
3 88 CO N CL USION

a ccum ul ated to o th e
r in divi dual s . Th eir su ccessor s h a d t o develo p meth
ods f or man agin g rati o n all y th e l ar ge agglo m erati o ns of m en m o n ey , ,

th an w er e r eall y n ecessary t o m eet th e exist in g d em an d Co n t in uin g .

pr ofi ts d epen ded on th e l ow erin g of costs th ro ugh th e s yst em atizi n g of

I n th is d pe ri od th is pr es sin g task w as tw of o l d First unit costs

seco n , ,

h ad to b e r edu ced by r ati o n al izin g th e sev eral f un ct i ona l acti vi ti es an d ,

seco n d th ese f un cti on al acti vi ti es had to be cl osel y i n tegrated t o mar k et

,

flu ct uati on s T h e fir st task led to th e defi n i ti on of lin a of au th o ri t y an d

.

comm un i ca ti on wi thin a si n gl e f un cti on al depar tmen t ; th e secon d

br o ugh t a stru ct u r e f o r th e m terp rise as a wh o l e m mt h e fir st cam e the .

f o rm o f th e secon d r eflected cl os el y th e ma rk etin g r equi r em en ts o f th e

firm pr o du cts
’
5 .

F or th ose prises th at co n tin ued to sell o r es or primary metal s the

en t er ,

task w as th e l eas t co m pli ca ted H er e th e m ar k et o r gani za ti on r emain e d

.
,

small an d th e fl ow co ul d be qu i ckly a dj ust ed to cur r en t p ri ce But wh ere

, .

th e pr odu cts m u ch cl oser coordi nati on b etw een th e sellin g an d man uf ac

,

turi n g a ct i vi ti es be cam e n ecessary T o d eli v er p r om pt ly go ods m ade t o

.

a be wi ld eri n g v a ri ety o f spe cifi cati ons an d at th e sam e t im e to k eep lar ge

plan ts o per atin g f airly stea dily n eces si tated sch edulin g o f a hi gh o rder of
sk il l Wh en th e l in e o f o d s be cam e ev en m or e t ech n o l o i call y co m pl ex
.
g o g ,

as i n th e cas e of el ectri cal app ar atu s p ow er m ach i n ery an d co n structi o n

, ,

equi p m en t co m pani es th en th e co o r din ati o n o f pr od u cti o n o ft en bec am e

,

ev en m o r e difi cu l t th an in th e st eel an d m eta l fi rms A lso th e d esi gn in g .

o f n ew o r impr o v ed pr o du ct s t o m eet cu st o m er n eeds an d t o co un ter t h e

o fi eri n s o f co m peti to r s d em an d ed t h e cl ose coo pe r ati o n o f th e m ar k eti n

g g ,

m an u fa ct urin g an d en gi n eerin g d epa rtm en ts

, .

F o r th ose co m pa n i es tha t also m an ufa ct ur ed f o r th e pr o duce r s m ark et

’

b ut w h o se m o r e st an dardize d pr o du cts w er e ma d e in adv an ce o f o rder s ,

th e coo rdin a ti o n o f r eso ur ces O fi er ed so m ew h at difi eren t cha ll en ges In .

th e co m p an i es mak in g expl osi v es ch emi cal s in dust rial rubber glass

, , , ,

pa pe r m etal co n tai n ers tru cks an d fa rm impl em en ts smal l en gin es an d

.
, , ,

o th er
p o w er m a ch i n er y an d e q ui p m en t th e s ch ed ul i n g
, o f t h e fl o w
thr o ugh th e diff er en t d e a rt m en ts w as m o r e r o u tin e th an it w as f o r n o n
p
stan da rd g oo ds Bur beca use th ese pr o du cts w er e n ot ta il o r ed to s pe cifi c
.
 CO NCL USION 8
3 9
o rder s in creasi n gly accur ate estim ates o f m ark et dem an d were r equi r ed
,

so th at th e diff er en t d ep artm en ts w o ul d n o t b e ca ugh t w ith ei th er t oo

m uch o r too li t tle in v en to ry o f m ater i al s p art s an d fi ni sh ed go o d s S i n ce

, , .

th e cu s to m er s n eed s v ar i ed tech n i cally tr ai n ed pe r so nn el h elpe d co

’
,

o r din ate desi gni n g m ak i n g an d s elli n g so th at th e s t an d ardi zed pr o duct

, ,

mi gh t b e m ade to fi t th es e differ en t n eed s .

Th o se en terpr i ses selli n g pr o ducts fo r u se by th e m as s co n sum er h ad

sti ll an o th er set o f pr o bl em s B ecau s e th ey t en ded t o h av e a m uch l arger
.

vo lum e o f goo ds n o t b ased o n sp ec ifi c o rder s flo wi n g th ro ugh th eir

, ,

vari o u s acti viti es th an di d th e en terpr is es s elli n g to th e pr o ducer s m ar ’

k et th e fl o w h ad to be di r ect ed sti ll m o r e cl o sely to w ard th e s h o rt-t erm

,

fl uct u ati on s o f d em an d if r es o urces wer e to be used effici en tly A m o n g .

th e fi r st to b e f aced w i th th is pr o bl em o f c oo rdi n ati n g h i gh -v o lum e fl ow

wer e th e m ak er s of p eri sh abl e pro ducts l ik e m eat an d fru it By th e tur n .

o f th e c en t ury th e m eat p ack er s w i th th ei r h eavy i n v estm en t in distrib u t

, ,

in g an d purch asin g as w ell as in th e pr o cessin g o f all ki n d s o f m eat s h ad ,

p io n eer ed in s uch coo rdi n ati o n by develo p in g tel egr ap h i c comm un i cati on s
b etween th e br an ch h o u ses th e p ack in g pl an ts an d th e sto ckyards B o th
, , .

th e br an ch h o u ses an d t h e buy er s in th e st o cky ard s w er e in c o n s t an t t el e

gr aph i c co mm u n i cati on wi th th e c en tr al o flices in Chi cago A n d with .

such i n f o r m ati o n th e c en t r al o ffic e c o uld allo cat e supply t o d em an d

,

alm o st i n st an tan eo u s ly .

Th e m ak er s o f l ess p er i sh abl e co n s um er goo d s cam e to r equi r e ev en

m o r e th an t his i n stan tan eo u s c oo rdi n ati o n b etw een s upply an d d eman d .

Th e pr o cesses i n vo lved in co n v erti n g th ei r r aw m ater i al s in to fin i sh ed

go o ds readily av ai l abl e f o r cu sto m er u se w er e m o r e co mplex an d too k
m o re tim e to acco m pli sh th an di d th o se in m eat p acki n g an d s om e o th er
foo d i n du str i es T h i s m ean t a sti ll l arger i n v es tmen t in i n v en t o ry an d
.

gr eater di fficulty in adj u sti n g all acti vi ti es to sh o rt-term sh ift s in dem an d .

T h u s th e m ak er s o f g aso li n e ti r es to b acco an d s o m e o f th e l es s p erish

, , ,

abl e f oo d s b eg an to r ely o n l o n g-t er m a s w ell as sh o rt -t erm esti m ates o f

th e m ark et in o rder t o c oo rdi n at e an d gu i d e pr o duct fl o w th r o ugh th e

sever al d ep art men ts an d to d etermi n e th e u se o f r eso urces wi th in th e

,

f un ctio n al dep art men ts .

F o r th e pro ducer s o f c o n s um er dur abl es th e n eed w as ev en m o r e eriti

,

cal H er e th e in v estmen t w as still gr eater th er e w er e mo r e st ep s in th e

.
,

pro ces s an d each fun cti o n al acti vity w as m o re co m plex T o adj u st th e

, .

flo w w as m o r e difficul t an d th e fai lur e to adj u st m o r e co stly A l so b ecau s e

.
,

o f th e r el ati v ely exp en si v e m ater i al s in v o lv ed an d th e r el ati v ely hi gh fi n al

u n i t pri ce th e m ark et ch an ges afi ect ed uni t co st even mo r e th an in o th er

,

i n du stri es ; th at is in th e autom ob il e an d appli an ce bu sin es ses v ar i abl e

,

un it co sts r os e an d fell mo r e sh arply with an i n creas e an d decr ease o f

390 CON CL USION

l c c l co m pan i es w er e am o n g th e fi rst to dev elop statist i cal me h ods

e e tri a

fo r estimatin g l o n g-t erm an d Sh o rt -t erm d em an d o n wh i ch all curren t

a ct i vi ty be cam e based .

I n th is w ay th en th e n ee d t o apply r eso urces efi ectiv el y t o ch an ges in

, ,

sh o rt -term d eman d br o ugh t th e cr ea ti o n o f a cen tr ali zed f un ct i o nally de ,

dep art m en tal ized in o rder to ass ur e ef fecti v e an d r ati on al coo rdin ati o n ,

appr aisal an d pla n ni n g in ea ch Th e cen t ral office in t urn h a d to ma k e

, .
, ,

cert ain th e coo rdin a ti o n of th ese difi er en t acti vi ti es in r el ati on to the

to m er sd em an d S uch a n etwo rk r en der ed easi er th e accu r ate co mplian ce

’

wi th spec ifi ca ti o n s as w ell as rap i d an d pro mp t d el i v ery in th e prod ucers ’

goo ds in dustri es an d th e adj ust m en t of v o lum e of o utput an d th e m ak in g

,

of min o r ch an g es inpr od uct n ecessa ry t o m eet th e fl uct uati n g dem an ds of

Th e r ex ecuti v es at th e cen tr al o ffice of th e f un cti o na lly departm en

seni o

taliz ed st ruct ur es h a d t o m ak e st r at egi c d ecisi o ns co n cern in g th e f ut ure

al l oca t i o n o f r eso urces as w ell as ta cti cal o n es t o ass ur e th ei r effi ci en t

esti m a tes o f th e m ark et, r pr en eurial o n es be cam e in cr eas in gly base d

en t e

on est im at es an d f o r ecast s o f lo n g-term ch an ges A s th e m eth o d s for al

.

d ev el op m en t o f f o rm al budget s an d ca p i tal appr o pria ti o n pr oced ur es ,

th ei r all o ca ti o n also cam e t o be b ased o n f o r ecast s o f th e br o ad er eco n o mi c

an d fi n an cia l co n di ti ons as w ell as o f t h e an ti ci p at ed perf orm an ce o f the

spe ci fi c ma rk et T h r o u gh su ch pr oc ed ur es th ese ex ecuti v es w er e ab l e to

.
,

r ev i ew f o rm ul ate an d appr o v e plan s to m ai n tain an d expa n d th ei r sha re

, ,

o f the exi st in g m a rk et A s th e stru ct ur e w as w o rk ed o ut t h e al l oca ti on o f

.
,

fut ur e an d th e appli ca ti on o f pr esen t r eso ur ces be cam e m o r e r o u tiniz e d ,

an d b asi c en tr epr en eurial d ec is i ons becam e l eas t f r equ en t But wh en th e .

r espo nsib l e ex ecuti ves d eci d ed to m o v e in to n ew mark ets th e o lder str u e ,

t ur e be g an t o h in d er th e effici en t all o ca ti on an d u ses o f th e firm s re

’

SO UI CCS .

Th e Th ir d Ch ap ter — Co n tin u e d G r o w th
A t th e en d o f th e fi r st ch ap ter i n its h ist o ry ,
rprise h ad accu m u an en te

lated en o u gh r eso ur ces to m eet th e d em an ds o f th e n a ti o na l m a rk et an d

o fte n th o se o f f o r ei gn o n es a ccess i bl e by st eamshi p an d r ai lroa d F or t he .

lar ge co m pa n i es in th e o ld er A m eri can in dust ri es — th e m etals an d foo ds

an d so me co ns um er g oo ds l i k e r ubbe r bo o ts an d sh oes — th is per i od cam e
CONCLUSION 39 1

to an en d a o n r u d th e tur n o f th e cen t ury F or th o se in th e electr i cal .

i n du stry it l asted s om ewh at lo n ger ; wh i le man y l arge au to m o b i le p o wer

, ,

m ach i n ery g as o li n e ti r e an d ch em i c al co m p an i es w er e sti ll r o u n di n g

, , ,

o u t th i s fi r st ch ap ter in th e 1 920 s A t th e en d o f th e seco n d c h ap ter

’
.
,

admi n i str ato r s h ad d efi n ed so m eti m es w ith gr eat c ar e an d at o th er s in

,

mo re of an ad h oc i n fo rm al man n er structur es to as sure mo r e effici en t

,

u se o f th e accum ul ated r eso urc es In th e o ld er i n du s tr i es th ese s truc tur al

.
,

ch an ges u s u ally came b efo re Wo rld War I fo r th e n ewer o n es in th e ,

d
’ ’
1
9 20 s an 1
93 0 s .

T h en , as o th er fi rm s fo llo w ed th e i n n o v ato r s in d ev el o p i n g m o r e effici en t

purch asi n g, pro ducti o n , di str i bu ti o n , an d ab o v e all adm i n i str ati ve m eth o d s,
co st di ff er en ti al s b etween co m p an i es l ess en ed an d pro fi t m argi n s dro pp d .

Mo re i n ten si v e adver ti si n g, pro duct differ en ti ati on an d im pro v em en t,

an d simi l ar str ategi es mi gh t i n cr ease o n e fi rm s sh ar e o f th e m ark et bu t ’

o n ly m aj o r ch an g es in tech n o lo gy p o pul ati o n an d n ati o n al i n co m e c o uld

, ,

e xp a n d t h e o v er -all m ark et fo r a si n gl e l i n e o f pr o duc ts A s th e m ark et .

b ecam e m o r e satur ated an d th e o pp o r tun iti es to cu t c osts th ro ugh mo r e

ratio n al tech n i qu es les sen ed en terpr is es b eg an to search fo r o th er m ar
,

k ets o r to develo p o th er bu si n esses th at mi gh t pro fi tably empl o y so m e

o f th ei r p ar ti ally u ti li z ed r es o urces o r ev en m ak e a m o r e pr o fi table appl i c a

ti o n of th o se s ti ll b ei n g fully empl o yed .

2
T h e fi r st step w as to d ev elo p a fu ll l i n e o f co m p ar abl e pr o duc ts
“
.

”
S teel an d alum i n um fi rm s h ad w ar eh o u se li n es an d s p eci al o n es fo r
“

Sp ec i fi c i n du st r i es b esi d e th ei r o rd er s m ad e to cu sto m er s p ec i fi c ati o n s .

T h e h arves ter com p an i es bu i lt th ei r f ull l i n e o f agr i cul tur al i m plem en ts .

Th e m eat p ack er s m o v ed to egg s p o ult ry an d d ai ry pr o duc ts to u se th e

, ,

r efr i ger ated faci liti es of th ei r dis tri bu ti n g n etwo rk T h e el ectri c al com .

p an i cs develo p ed ev ery thi n g i n vo lv ed in s etti n g up o p er ati n g an d m ai n , ,

t ai n i n g p o w er an d li gh t s y s tem s T h e g aso li n e c om p a n i es h ad th ei r
.

lubri can t li n e T h e ti r e fir m s m ade steel r i m s as well as rubb er ti r es

. .

T h er e are n u mer o u s o th er ex am pl es A t th e s ame ti m e th ese en terpr i ses

.
,

i n ten sifi ed th ei r dri ve to co v er th e do m esti c an d i n ter n ati o n al m ark et .

Exp an si on o v er s eas o ft en m ean t th e setti n g up o f m an uf actur i n g an d

purch asi n g as W ell as m ark eti n g faci l i ti es Wh i l e so m e co m p an i es l ik e
.

In tern ati o n al H arv ester A rm o ur an d S wi ft h ad i n v ested m o r e th an

, ,

j u st m ark et i n g r eso urces abro ad b efo re Wo rld War I m an y p arti cul arly , ,

th e ch em i cal fi rm s o n ly d i d so aft er Wo rld War II

, .

Mo r e si g n ifi can t th an ei th er th e fil li n g o u t o f th e m aj o r l i n e o r th e
mo ve o ver seas w as th e develo pm en t o f n ew pro ducts th at w er e o ften
so ld to qu ite d i ff eren t sets of cu sto m er s Ei th er n ew en d pro ducts m ig h t
.

b e f ash i o n ed fro m th e exi sti n g li n es o r l ess often wh o lly n ew pr o ducts

develo p ed in r esearch lab o r ato ri es th at sti ll emplo yed s o m e o f th e co m
39 2 C O N CL USION

c
co n en t a t n r i g m ore on b y-prod uct s O f ten it
. r d
tu n e to a bran d n ew fi eld
.

pr o ducts co uld be d evel o pe d an d n ew mark ets capt ur ed In en ter prise s .

wh o se pr od ucts an d pr o cessin g w er e ba sed o n a h i gh ly com plex tech

of go ods O n th e o th er h an d, in th ose th at w er e l ess t ech no l og ica l ly

.

co m pl ex an d wh ose r eso u rces w er e co n cen t rated m o r e i n raw m ater ials

an d m an uf a ct urin g such a t ran sf er w as fa r m o r e difi cul t
,
.

F i rms wh o se r eso urces w er e co n cen tr at ed in a sin gl e f u n cti o n such as

tr an spo rt ati on h ad l i ttl e t o t r an sf er be si d es su rplus f un ds Wh en a sh i p .

pin g co n cern lik e W R G r ace 8: Co m p an y purcha se d ch emi ca l an d

, . .
,

petr o l eum co m p ani es it w as actin g largely as a Wall S tr eet in v estm en t

,

h o use f or it h a d v ery f ew f acil i ti es o r per so n n el t o t e—em plo y i n its n ew

,

Up in m en q u ipm en t to han dl e a sin gl e lin e o f pr o duct s ha ve been

an d e

m o r e r eluctan t th an G r a ce ev en t o r ei n v est pr ofi ts o utsi d e of th ei r sin gle

m aj o r lin e Th ey n ee d ed f u n ds f r om th ei r pr ofi ts t o m aintain th eir v er y
.

so urces su ch as th e prod u cer s an d sell ers o f st eel an d o th er m etal s an d

, ,

o f t o ba cco whi sky sugar an d o th er goo ds pr o cesse d h o m a gri cu ltura l

, , ,

pr oducts exp an ded ei th er th r o ugh m erg er o r purch ase or th e b u ildin g

, , ,

of n ew f acili ti es th ey usu all y di d so in o rder t o ob tai n a ful l lin e o r

,

oc ca si o n all y t o t ak e o n al li ed pr od uct s f o r m uch t h e sa m e type o f m ark et

as t h ei r o w n F o r co m p ar ab l e r easo n s tir e an d o il co mp ani es wi th h uge

.
,

r eso ur oes co n cen tr ated o n a si n gl e l in e h a v e h esi t ated t o emba rk o n a

strategy o f br o a d di v er sifi ca t i o n F or so m e pr o cesso rs o f fa rm pr o duct s

.
,

th e t as k h as been e a si er A f ar w i d er r an e of prod uct s co ul d be m a de

g .

fr o m wh ea t an d mi lk tha n f r om to b a cco ban a nas o r even m ea t , , .

Wh er e a co m p an y s r eso urces ar e in v est ed m o r e in mark etin g th an in

’

r aw m at erial s o r pr o duci n g fa cil i ti es th e o ppo r t uni t y f or di v er sifi cat i o n

,

seem s to h a v e be en gr ea ter H ow ev er th e en t er pr i ses w h ose r eso uroes w er e

.

th e m o st tr an sf er ab le r em ain ed th ose wh os e m en an d equi p m en t cam e

to h a n dl e a r an g e o f t ech n ol o gy r a th er th an a set o f en d pr od uct s In th e .

ch emi ml el ect r i cal an d el ect r oni c an d po w er m achi n ery in dus tri es t h e

, , ,

sam e pe r so n n el usi n g m uch th e sam e fa cil i ti es wi th m uch th e sa me

suppli es o f r aw m at er i al s w er e abl e t o d ev el op n ew en gi n es n ew m a ,

ch in es n ew h o useh o ld applian ces n ew syn th eti c fi be rs n ew fil ms o r

, , ,

or n ew el ectr i cal an d el ect r on i c d evi ces S in oe th e en terpri ses in .

th ese i n du st ri es r equi r ed th e h i gh est o f t ech n o l o i ca l sk ill s th ei r admi n

g
o

istr a to rs i n v est ed in cr ea sin gly la rger am o u n ts o f th ei r t o tal r eso ur oes in

CONCLUSI ON 3 93
r es earch an d develo pmen t S uch r eso urces becam e l ess an d less ti ed to
.

an y s pecifi c pr o duct l i n e A s ru bb er
. petro leum an d foo d c om p an i es
, ,

began t o develo p tech n o lo gi call y advan c ed s kill s an d f aci li ti es p arti cul arly ,

dur i n g Wo rld War II they too s tarted to build m o r e O f a di v er sifi ed

,

pro duct li n e Fo r all o f th em co n tin u ed gro wth an d wi th it th e accumu

.
,

latio n o f r es o urces cam e in th eir n ew li n es rath er th an in th e Old .

Th F th Ch t — Ration aliz in g th e Use f Exp an din g Reso u rces

e o u r ap er o

Wh ile th e strategy of di ver sifi cati o n permitted th e co n ti n ui n g an d

exp an d ed u se o f a fir m s r es o urc es it di d n ot ass ur e th ei r effici en t empl o y
’

men t Stru ct ur al reorgani zation b ecame n ecess ary If exp an sion res ulted
,

. .

o n ly in th e d ev el o p m en t o f a fu ll li n e o f go o d s th at con ti n u ed to use

much th e sam e typ e Of r es o urces th e r eo rgani zati o n Of th e m ark eti n g

,

dep art men t so th at it h ad an Ofi ce for each m aj o r typ e o f cu sto mer w as

u su ally suffici en t Bu t wh er e bu sin ess di v er sifi ed in to wh o lly n ew li n es
.

fo r quite di ff er en t cu stom er s w ith qui te diff er en t w an ts th en mo r e ,

r eo rgani zatio n w as n eeded It b ecame i n cr easi n gly diffi cul t to coo rdin ate
.

th r o ugh th e exi stin g str uc tur e th e d iff er en t f un cti o n al ac ti v iti es t o th e

n ee ds o f sev er al qui te difl eren t m ark ets .

C h ann el s O f co mm un i cati on an d au th o r ity as w ell as th e i n fo rm ati o n

flo wi n g thr o ugh th es e ch ann el s gr ew m o r e an d m o r e in ad equ ate Th e .

wan ts Of difl eren t cu stom er s var i ed an d dem an d an d t aste fluct u ated

,

diff er en tly in diff eren t m ark ets S uch ch an gi n g m ark et d em an ds an d

.

th e ac ti o n s o f co mp eti to r s br o ugh t a gr o win g diff er en ti ati n g O f t h e

m an uf ac tur e an d pro cur em en t O f raw m at er i al s fo r th e v ar i o u s pr o duct

li n es R espo n sib ili ty fo r m ai n tai n in g an d exp an di n g th e en terp ris e s
.
’

sh are O f th e m ark ets b ecam e h ar der to p in p o i n t In tim e th en ea ch .

, ,

m aj o r pro duct li n e cam e to be admi n is ter ed th r o ugh a s ep ar ate in te ,

gr ated auto n o mo us di vi si on Its m an ager b ec am e r es po n sib le for th e

.

m aj o r o p er ati n g deci si o n s i n vo lved in th e coo rdin ati o n O f fu n c ti o n al

a c ti v iti es t o ch an gi n g d em an d an d t ast e Exp an si on i n to n ew r egi on s
.

en c o ur aged th e f o r m ati o n O f co m p ar abl e di v i si o n s f o r co m p ar abl e r eas o n s .

Y et as th e differ en t geo gr ap h i cal m ark ets be cam e m o r e h om ogen eo u s

,

an d th is o ccurr ed as all p ar t s O f th e Un i ted S tat es b ecam e m o r e i n dus tr i al

(
an d m o r e ur b an i ze d an d s ubur b an i zed h r g i n all y d efi n ed di v i si o n s
) t e e o ,

in p etro l eum d ai ry pr o duct s an d co n tai n er en terpr is es ten d ed to com b in e

, ,

i n to a sin gl e u n it fo r o n e lin e o f pro duct s .

Ex p an sio n pr im ar ily th r o ugh di v er sifi ca ti o n enl arged th e r an ge n um

, , ,

b er an d com pl exi ty O f th e en tr epr en eur i al a c ti vi ti es r equi r ed O f th e s en i o r

,

ex ecu ti v es T h e lo n g—
. term allo ca ti on Of r eso urces n ow i n v o lv ed d eci di n g
b etw een th e exp an si o n m ai n ten an ce an d co n tr ac ti o n Of per so n n el pl an t
, , , ,

a n d equi pm en t in s ev er al differ en t l arge-s cal e wi despread b u sin esses

, , .
394 CONCLU SI ON
Th e pprais al Of exi st in g perfo rm an ce as w ell as th e pl an n in g o f f utur e
a

uses O f r eso urces call ed for a gen er al Office in whi ch th e ex ecuti ves wer e
gi ven th e ti m e th e inf o rm ati o n an d th e en co u ragemen t to devel o p a
, ,

bro ad vi ew all SO n ecessar y fo r th e h an dlin g O f th e n ew an d m o r e

,

co m pl ex pr oblem s Th e m ul ti di vi si o n al structur e m et bo th th e sh o rt-term

.

an d l on g term r equ i r em en ts f or th e pr o fi tabl e appli cati on O f r eso ur ces to

-

th e ch an gi n g m ark ets .

In r ec en t y ear s th e b u ild er s O f th e n ew o rgani zati o n al S tru ct ur es co uld

,

loo k to th e m o d el cr eated by du Po n t G en er al M o to r s J er sey S tan dard , , ,

an d S ear s R oebuck Bu t b efore th e 1 93 0 s th o se f ew fir m s th at h ad d ev el

’

, .
,

o pe d l in es o f busin ess w hi ch mi gh t h av e b een m o r e eff ect i v ely admi ni s

tered thr o ugh a m ul ti di v i si on al struc tur e en vi sag ed o nl y tw o struct ur al

al ter n ati v es T O th e m eat p ack er s rub be r co m p an i es an d m ak er s O f po w er

.
, ,

ma chin ery th e a cti vi ti es h ad ei th er to b e in co rpo r ated into a cen tr al i zed

, ,

f un cti o n ally dep art men tali zed struct ur e o r pl ac ed in almo st co m pl etely
in d ep en d en t sub si di ar i es In ei th er case th e ex ecu ti v es r espo n si bl e fo r
.
,

th e d estin y O f th e en terpr i se h ad li tt l e inf o rm ati o n abo u t o r un d er stan din g

o f h o w t h e r es o ur c es n o t appli ed di r ect ly to th e prim ary lin e w er e bein g

empl o y ed O n c e th e n ew typ e Of s truct ur e b ecam e k n o w n as it di d dur in g

.
,

th e 1 93 0 s its av ai l ab ili ty un do ub tedly en co ur ag ed m an y en terpri ses t o

’

em b ark on a str ategy o f di v er sifi cati on f or th e ab ili ty to m ai n tain a dmi n ,

istrativ e co n tr o l th r o ugh s uch an o rgan i zati o n al fr am ew o rk gr eatly

reduced th e r i sk s O f thi s n ew type Of exp an sion .

In f ac t th e sy stem ati zin g O f s tr ategi c d eci si o n s th r o ugh th e b u ildin g

,

O f a g en er al O m ce an d th e r o u tini z i n g o f pr o duct d ev elo p m en t by th e

fo r m ati on O f a r es earch d ep artmen t h av e in a sen se in sti tu ti o n ali zed thi s , ,

str ategy O f di v er sifi cati o n Co m p an i es wh o se pr o c esses are cl osely r elated

.

to th e sci en c e o f ch emi stry an d p h y si cs h av e t ur n ed t o d ev elo p ing n ew

pr o duct s stea dil y in o rder to assur e co n ti n ui n g pro fi table u se o f r eso urces

th at are beco mi n g in cr easin gly b ased o n a t echn o l o gy r ath er th an a

pro duct line Th e r esearch dep art men t dev el op s th e pr o duct s an d tests
.

th ei r co mm erci al v alu e T h e ex ecu ti v es in th e g en er al O ffic e fr eed f r o m all

.
,

b u t th e m o st essen ti al en tr epren eur i al du ti es can determi n e in so m ethi n g , ,

o f a r ati o n al m ann er wh eth er th e n ew pro duct us es en o ugh o f th e

,

firm s pr esen t r eso u rc es o r w ill h elp in th e d ev el o p m en t o f n ew o n es to

’

w arr an t its pr o duct io n an d sale If it do es an d if its m ark et is Sim il ar to

.

th at O f th e curr en t l i n e th en its pr o ducti o n an d sal e can b e h an dl ed

,

th r o ug h an exi sti n g di vi si o n If th e m ark et is qui te diff er en t a n ew

.
,

di vi sio n can an d sh o u ld be fo rm ed .

T h e co mi n g O f thi s n ew S tr ategy an d w i th it th e n ew S t ruct ur e is

o f p ar am o un t im po rt an ce to th e pr esen t h eal th an d f u tur e gr o wth o f

th e A m eri can eco n o m y Wh il e so m e O f th e n ew pr o duc ts h ave been

.
CO NCL USION 395
so ld in th e mass co nsumer mark et where accordin g to so me commenta
,

to r s th e techn i cal ski lls an d fa cili ti es are so m etimes w ast ed th e l arg es t

, ,

pro po rti o n o f th e o u tpu t of th e chemi cal electro ni c el ectr i cal an d po wer

, , ,

m ach in ery en terpr ises h av e go n e to th e pr o ducer s m ar k et Th e in du s

’
.

tr i ali st h as usually been m uch m o r e co n c er n ed ab o u t th e perf o r man c e

o f wh at h e purch ases fo r h is bu si n es s th an th e co n s um er h as be en in

h is per so n al buy i n g as bett er p erfo rm an ce n o r m ally m ean s cu ttin g

,

co sts Th e in stituti on al i zin g Of th e po li cy of di v er sifi cati on th us h elp s to

.

as sur e co n t in u ed pr o duct i o n of n ew pr od uct s to cu t co sts an d r ai se th e

efi cien cy o f A m er i can in d u str y S uch a d ev el o p men t is f ar m o r e S ign ifi

.

can t to th e eco n o m y s o ver-all h eal th th an pr o ducti on in cr eases in th e

’

O ld er b asi c in dus tr i es such as m etal s an d foo d Th e i n v es tmen t in r es earch

, .

an d d ev elo p m en t an d in th e t ec hn i cal s kil l s an d equi p m en t th at

h an dl e a r an g e o f pr o ducts with i n a co m p ar abl e tech n o l o gy is a far

m o re m eani n gf ul in dex o f eco n o mi c gr o wth in a hi ghly ur b an an d
in dustri al n ati o n th an is th e o utpu t o f steel m eat o r even autom ob il es
, , .

Th e ch ap ter s in th e co ll ecti v e h i sto ry Of th e A m er i ca n in dust ri al en t er

pr i se can be cl ear ly defi n ed Reso urces accum ul ated r eso ur ces r ati on alized
.
, ,

reso ur ces exp an ded an d th en o n ce again r eso urces r ati on al i zed F or ea ch

, , .

i n di vi dual co m p an y th ese ch ap ter s v ar y in l en gth si gn ifi can c e an d

, , ,

imp act S om e fi r m s n ever att emp ted to accum ul ate th e r eso urc es ess en ti al
.

to m eet th e d em an d s O f a n ati o n al m ark et S ome O f th o se co m p an i es th at

.

di d exp an d too k l on ger to r ati on ali ze th e u se Of th eir r eso urces th an di d

O th er s .S o m e set up n ew s truct ur es v ery s y stem ati cally o th er s m o r e ,

inf o r m ally S o m e beg an to m o v e in to n ew lin es an d n ew m ark et s even

.

bef o r e th ey com pl eted buildi n g th eir in i ti al admin i strati v e org an i zati on .

A gain so m e w er e m uch sl o w er th an o th er s to j o in th e search fo r n ew

mark ets ; an d ag ain am o n g th ose th at di d so m e t ur n ed m o r e qui ckly
, ,

th an O th ers to r esh ap i n g th e stru ctur e n ecessary fo r th e m o st pr o fi tabl e

em pl o ym en t o f th e exp an d ed r es o ur ces A co m p an y li k e G en er al M o t o r s
.
,

by in ven tin g a n ew typ e o f Struct ur e wh en it fi r st o rgani ze d its accum u

l ated r eso urces w as able to exp an d th r o ugh di v er sifi cati on with o ut r eq uir
,

ing f urth er si g n ifi can t struct ur al ch an ges ; w hil e J er s ey S tan d ard s in

’

fo rmal ad h oc m o b ili zati o n O f its r eso urc es aft er 1 9 1 1 m ean t th at a r ap i d

,

exp an si o n o f f ac i l i ti es an d pe r so nn el f o rced a m uch m o r e d iffi cul t an d

e

m uch l en gthi er r eo rg an i zati on in l ater y ear s .

Neverth eles s if th e gr eat in dustri al en terpr i se is co n si der ed as a co llec

,

ti v e en tity t h en th ese ch ap ter s are m o r e easily i d en tifi ed an d ex am in ed

, .

A n d if th ese ch ap ter s h av e so m e r elati o n to r eality th en th ey h av e so m e

,

S i g n i fi can ce f or th e sch o l ar busi n ess m an

, an d ev en publ i c O flicials How
, .

ev er th e d ata are stil l too f ew an d th e g en er alizati o ns d eri v ed t oo t en u o u s

,

an d too im pr eci se to be th e b asis fo r s ugg es ti o n s f or acti on Y et th er e is .

396 CONCLUSION
so me v al ue in presen tin g even a ten tati ve an d parti al a cco u n t o f th e
hi st o ry of l arge A m eri can in du stri al enterprise sim ply beca u s e th is is a
fi el d wh ere m yths abo un d wh er e m o r e po si ti ve gen er al i zati o ns th an mi n e
,

h av e been m ade o n much less spe cifi c data an d wh er e r eco mm en d ati on s ,

for a cti on h ave been ser i o us ly pro po se d o n th e basi s of s u ch gen er al i za

ti o n s If it does n o thi n g el se this explo rato ry study sh o uld pro vi de th e
.
,

stu d en t o f busin ess hi sto ry an d busin ess admi ni str ati o n as w ell as o th er

sch o lar s with so me s uggesti o ns for sign ifi can t ar eas of in vesti gatio n .

Fur th er r esear ch er s in th e gr o wth an d admin istr ati on of A m eri can in

dustry an d busin ess m u s t co n si der th e impo rt an ce of th e m ark et Th at th e .

exp an si o n an d go v ern m en t o f in d u s tr i al en t erpr i ses in a m ark et eco n o m y

sh o uld be clo sely r el ated to t h e ch an gin g n at ur e o f th e m ark et s eem s

o bvi o u s en o ugh Y et man y wr iter s d eal in g wi th p rin ci pl es of busin ess

.

a dminis tr ati o n ,oft en di s cuss l ea der s h i p comm un i ca ti on an d st ruct ur e

, ,

with onl y p assin g r ef er en ce to th e mark et O n th e o th er h an d eco n omi sts

.
, ,

an titru st l awy er s an d o th er experts o n mark et beh avi o r h ave sai d l ittl e

,

ab o u t th e imp act of th e m ar k et on co rpo r at e admini str ati o n Th e b u i l di n g .

o f th e m ul ti di visi onal st ruct ur e is fo r exam pl e th o ugh t to b e as fea si bl e

, ,

in a steel as in a ch emi cal en terpri se O r co m peti ti o n in th e s teel in dustry

.

is co n si der ed to be co m p ar abl e wi th th at in th e o il o r ch em i cal in dust ri es ,

o r admi n ist r ati v e n eeds to b e m uch t h e sam e i n o n e p eri o d o f an en ter

pri se s h isto ry as in an o th er
’
.

Nor sh ould sch o l ar s f o rget th e criti ca l ro le th at th e l arge en terpris e in

a m ark et eco n o m y play s in all oca tin g th e n ati o n s eco n o mi c r eso ur ces
’
.

Th e s uccess o r f ailur e in th e allo cati o n of fu n ds f aci liti es an d s k i lls , ,

pr o vi des a us ef ul test of th e pe rfo rm an ce an d ab i lity o f A m er i can in dus

tr i al ex ecu ti v es Th e cri ter i a f or success u sed by th e in dus t ri al ists th em
.

selv es — l o w er in g uni t co sts in cr ea sin g o utput per wo rk er an d lo n g

, ,

t erm r etur n on in v estmen t m ay by mid tw en ti eth cen tur y h ave beco m e

-
,

too n arr o w Y et ev en if p erf o r m an ce is t o be ev aluated in bro ad er so c i al

.

an d h u man t er m s r eso urces can h ardly b e em pl o y ed eff ecti v ely un l ess

,

th e m en r espo n si bl e fo r th eir us e h av e r el ev an t in f o rm ati on o n w hi ch t o

b ase th ei r d eci si o n s an d th e m ean s to carry th em ou t With o u t accur ate .

an d m ean in gf ul d ata an d w i th o u t cl ea r -c u t l in es o f co mm u n i ca ti o n an d

au th o r ity th ey ar e fo rced t o all o ca te pr esen t an d f u tur e r eso urc es in a

,

h aph azard an d in tui ti v e w ay In all in dustri al urb an an d t ech n o l o gi cally

.
, ,

a dv an c ed so ci eti es w h er e th e l arge en terpr i se ei th er pr i v ate o r publi c

, ,

h as acqu i r ed an es sen ti al r ol e in pl an n i n g coo r di n atin g an d appr ai sin g

, ,

eco n o mi c act i v i ti es a l ack o f sy stem ati c S tructur e wi thi n th ese o rg an i za

,

ti o n s can l ea d to a w astef ul an d in efi cien t u se o f r eso urc es Fur th er studi es .

o f th e w a
y i n w h i c h th e gr eat en t erpr ise h as gr o w n an d b ec o m e a dmi n

istered h av e th en mo r e th an m er e s ch o l arly v al u e
, , .
 NOTES

INTRO DU CTI O N

A lfr ed D C h an dle , Ir , Man agem en t Decen traliz atio n : A n Histo ical A n al

r r
“
I . . .

y sis,
”
Bu sin ess Histo ry R ev iew -1
74 ( u n e, , A f te th e a ticl e w as J r r
co mp leted fu rth er ,
research in dicated th at Westin gh ou se h ad b egu n its ch an ges
In 1 93 1 .

Th e Un ited S tates Ru bb e r C o m p an y maj or

in 1 9 29 w as com reorgan izatio n
’
2 . s

p leted u n der du Po n t direction ; G oo drich u ick ly ab an do n ed its in itial attemp t q

decen traliz ation , r etu rn in g to it o n ly in th e 1 9 5 0 s ; an d b y Wo rld War II,
“ ’
at

v
Un ion C ar b ide h ad m ade o n ly ten tati e step s to tr an sfo rm th e fu n ction s o f
q
its h ead u ar ters fr om th o se o f a h o ldin g co mp an y in to th ose of a m o dern ,
p om ak in g app raisin g, an d co ordin atin g u n it T h e reo rgan iz ation at Wes
licy-
,
.

tin gh o u se b etw een 1 93 1 an d 1 93 6 b egan as an in dep en den t in n o v ation , b u t th e

co m p an y s ch an g es w ere in man y w ay s o n ly a r ep etition o f th o se th at h ad al

’

ready b een p u t in to eff ect at du Fo n t an d J ersey S tan dard It seem ed w ise, .

th er efo r e, m er ely to ou tl in e th e Westin gh ou se sto ry an d to b r o aden th e scop e of

th e stu dy b y selectin g a larg e m erch an dise fi rm w ith b u sin ess activ ities u ite q
diff eren t fro m th o se o f th e in tegrated m an u factu rin g co mp an ies already ch o sen
fo r stu dy .

3 T h e com p an ies are listed b y assets in A D H K ap lan , Big En terp rise in a

. . . .

C o mp etitive S yste m (Wash in gton p p 1 4 5 1 5 5 ; also F ortu e

-
,
n .
-1 0
5 ,

J
( y, l I did n o t in clu de two co mp an ies o n K ap lan s list, Western Elec
’
u

tric an d C ities S erv ice C o mp an y T h e fi rst h as b een , f o r all in ten ts an d p u r

.

p o ses, a p art o f th e A m erican T elep h on e 8: T elegrap h C o mp an y, w h ich tak es

n early all its n on m ilitar r d ti T h d w s a u tilit s w e l l a s a n
y p o u c o n e s e con a y . a

in du strial en terp r ise u n til 1 9 44 T w o o th er large co mp an ies, G en eral Mills an d

.

Hercu les, w er e added b ecau se o f th e av ailab ility of inf o rm atio n ab o u t th em .

4 F o r ex amp le, th e seco n d v o lu m e o f th e h isto ry of th e S tan dar d O il C o m

.

p a n y (New J er sey ) , G eorge S G ibb and Ev elyn H K n o w lton , T h e Re . .

su rg en t Yea rs 1 9 1 1 - 1 2
9 7 ( ew Yo rk ,
N , say s little ab o u t th e adm in istr ativ e

ch an ges b eg in n in g in 1 9 2
5 an d do es n o t giv e v ery m u ch in fo rm atio n ab ou t
th e h istory O f J er sey s adm in istrativ e o r an iz atio n l h i f
’

g T h e e xce l e n t s t or y o .

S ears Bo ris Emm et an d J o h n E Jeu ck , Catal og u e: an d Co u n ters : A History

, .

o f S ears R o eb u ck a n d Co mp an y (C h icago ,
, h as an accu rate if b rief
descrip tio n o f th e 1 9 29 ch an ges an d of th e co mp an y s o rg an iz atio n al stru ctu re ’

at th e tim e th e b o o k w as w ritten b u t says alm o st n o th in g ab o u t th e ch an ges

,

b etw een th ese years Mo r eo v er, by co n cen tra tin g on a sp ecifi c acti v ity I cou ld
.
,

dev o te m or e tim e to lo catin g docu m en ts, an d so m y ch ap ters o n th ese tw o

co m p an ies are b ased lar el on r e r d w h i h t h th r f th e ir hi sto r ies
g y co s c e au o s o

did n o t u se .
4 0
0 N OTE S F OR P A GE S 8 — 2 0

Yor k , III , 200 T his f o m, in turn, is

instit utional gen era
. r on e of th e
th a t domi nate o ur m od ern p olitical, militar y, r eli gious, an d e du ca ti on al lif e
as w ell as th e con temp o r ary econ omi c w orl d tha t Max W eb er fir st deli n ea te d as

b ur eau cratic (H H G er th an d C Wrigh t Mills,

. . r om Max Weber (New
. . F
Yor k , pp 1 9 6 W eb er str essed : .

I t is th e p ecu li ari ty of th e h i mself as m odern r

en tr ep en eur th at he con du cts

th e first o fi cial d h is en terp rise, in th e

‘
ery sam e w ay in w hi ch th e r ul er
’
v
o f a sp ecifi call y m o dern bu r eau cra tic sta te sp o k e of hi mself as th e first ser an t
‘
v ’

of th e state Th e idea tha t th e b u r eau a ctiv i ties of th e st ate ar e in tri nsicall y

.

Is a

co n tin en tal Eu ropean n o tion an d, by w ay o f co n tr ast, is to tally f or eign to th e

A m erican w ay .
(I bid p .
, . 198 )
I a m greatly in deb ted to Dr . Frit z Redli ch f or first p oin tin g ou t to m e th is

S ozial wirren sch aften (G Ot tin gen d Th e Busin ess L eader in

“
, X , 4 89, an

(A p ril , 1 94 9 )

en t v
le els an d th e relatio n of th e f unction of th ese o fi oes to en trep ren euri al
v
acti i ties wi thi n th e en terp rise ar e w or k ed ou t in m or e detail in A lf r ed D .

F
Ch an dl er, Ir , an d ri tz Redlich, R ecen t D e elop m en ts in A m erica n Bu sin ess
.
“
v
—1
30
8 Th e
. co mpa ni es are li sted in T ab les I an d 2 . A l tho u gh th e sour ces of inf ormati on

an d o f ten f ur th er citations ar e giv en in th e p r el imi n ar y stu dy on Man ag emen t

“

D ecen traliz ation (see ftn 1 ) an d also in m y fi hae Beginn in gs of Big Bu si

” ' ‘
.

n ess in A m eri can In dustry, B usi n ess Hist ory Reoie w 33 :1 3 1 (Sp ring ,
’
-
,
“
v
an d D e elop m en t, Di ersifi ca tion an d Decen tr aliz a ti on ,
”
v
in Ralp h E r eeman, . F
editor, P ort-War Econ om ic Tr en ds in t h e United S tate: N Y
( e w or k ,
ch .

7 ,
0n w hi ch p ar ts of Ch ap ter r ar e based .

CHAP TER ] .

are n u mer ous : f or ex amp le, Iohn

Mass , Mo rison T h e R op emak err of

esp ecially ch s . r an d 2 ; S am u el E .
,

Ply mou t h (Boston chs 1 3 ; C aro lin e F Ware Th e E arly New En gla n d
—
, . .
,

Cotton Man u fact ur e : A S tu dy in In d ustrial Beginn in g: (Bo ston chs 4 , .

an d 7 ; an d A llan N evins A bram S Hewitt : With S ome A ccoun t of P ete r , .

Coop er (New York chs 5 7

—
9 A m o n g th e ma n y
, s urdies th a t in di a te
c .
, .

h ow th e ear ly A meri can m er can til e firm w as ad min ist er ed, p articu larly usef ul
on es ar e: K en n eth W . Por ter , Io h n [ ac o b A stor Busi ness Man (Camb ridge ,

Mass , I, esp ecial ly ch s .

-
3 5
2 ,
—6
, II , chs . 1 2- 13 ; S tu art W . B ru ch ey ,

R o bert Oliv er Merch an t of Baltimore , 1 7 83 - 1 8 1 9 (Bal timo re ,

esp e

cially ch .
3; an d Rob ert G A lb ion , The Ris e . o f New York P ort (New York ,

I 9 39 ) chs IN }
2 . Po rt er , A st or , II , ch . 15 . Th e d ep ar tm en tal h ead qu ar t ers w er e at St . Lou is
 —
NO TE S F OR P A G ES 20 2 5 4 0 1

an d Mack inac William . B A sto

. r aided his f ath er in th e F ur C o mp an y
’
s man
age m en t,
f actin g as its
o t en p r esiden t .

3 r i.tz F R e dli c h , T h e M o l d i n g of A m er ic an B a n k in g
— M e n a n d I deas P ar t I ,

(N e w Y o r k , pp 1 1 3
- 1 2 6 ; R egin al d C McG ran e, T h e Corr esp o n den ce
. .

of Nich olas Biddle (New Yo rk , p p 39 4 , 7 7

— 0 6 - 1 . .

4 D ani el H C alh o u n , Th e A m erica n C v l En gin eer O rigin s a n d Co n flict

. . i i —

(C a m b r i d g e , M a ss , p p 35 49 5
.
,
- 0 , 5 4
— 6 0

5 C .a lh o un , A m e ri ca n C iv il E n
g i n ee r pp 7 7 2 - 8
, . .

6 R ep o rts of th e Pr esiden t an d S u p erin ten den t of th e N ew Yo r k a n d Erie Ra il

.

r o ad t o t h e S t o ck h o l ders fo r th e Yea r E n din g S ep te m b er 30 1 8 5 5 (New Y o rk , ,

n d ) p 34 . . .
, q
u o ted in A lfr ed D C h an dl er, Ir , H n ry Va . e rn u m P or
. o — B usin ess
E dit or A n aly st a n d Reformer (C am b ridge, Mass ,
, , p 1 4 6 Rep o rt of th e
. . .

Direct ors of th e New Yo r k a n d E ric Rail r o ad Co mp an y t o th e S tock h ol ders

for th e Year En din g S ep tem b er (New Yo rk 1 85 3 ) in dicates som e ,

surp r s i in g yl a d a n c ed i d eas avb o u t s tr u c t u r e (es p e cia l ly p p 4 6 —

4 8 ) e en b ef or e . v
Mcc allu m too k th e p ost of gen eral sup erin ten den t In my P o or (pp 1 44—1 79 ) . .

v
I gi e co nsider atio n to th e b u ildi n g of th e fi r st admin istrati e stru ctures on v
A m erican railro ads .

7 Th . v
e de elo p m en t o f a sy stem atic admin istr ati e stru ctur e o n th e P en n syl an ia v v
can b e tr aced in P en n sy l v a n ia Rail R o ad Co m p a n y O rga n iz ation fo r Co n du ct .

in g th e Bu sin ess of th e R oad — A dop ted D ecem b er 2 6 1 8 5 7 (Philadelp hi a, ,

By-La ws a n d O rga nizatio n fo r C on ductin g th e B usin ess of Th e

“

”
Pen n sy l v an ia Rail R oad Co mp a n y as R ev ised a n d A pp r o ved b y th e B oard
,

o f Direct ors May 1

3 1 86 3 ( P h il,a d e lp hi a ,
B y -La w s a n d O r a n izatio n
g
fo r Co n ductin g th e Busin ess of th e Pen n syl van ia Railr o ad Co mp an y as A p
p r o v ed b y t h e B o ar d o f D ire ct or s M a y 2 8 ,
1 8 73 ( P h il a d e lp hi a,
B y
-
L a w s

an d O rg a n iz atio n fo r Con du ctin g th e Busi n ess of th e Pen nsylva n ia Railr o ad

Co mp a n y A dop ted by th e Board of D irecto rs Mar ch 23 1 8 9 3 (Phil adelp hi a

.
, ,

an d Rep o rt of th e I n v estigatin g C o mmittee of th e Pen nsyl v a n ia Railr oad

Co mp a n y A pp o in ted by R esolu tio n of th e S t ock h ol ders at A n n ual Meetin g

Held March 1 0 1 8 7 4 (Philadelp hi a, , pp 1 65
- 1 8 0 T h e co m an .
p y s an n u al
.
’

rep orts sup p ly additio nal inf orm ation , p articu larly th o se dated 1 84 9 (pp 1 1 .

1 8 5 3 (p p 2 6 an d 1 8 5 8 (9 I 6 ) , 1 8 7 1 (p p . 2 7— 2 8 an d 1 8 7 2 (p

an d 1 8 73 (p p 39
—
4 0 an d . 6 5 R a y M o rr is , R ail r o a d A d m in is t ra ti on (N e w
Y o rk , describes th e latter de elop m en t of th e P enn syl ani a stru cture v v
. .
”
v
(pp 63 ff ) an d of th e di ision al typ e o f stru ct ur e in w hi ch it p io n eer ed an d
w hi ch becam e gen er ally accep ted o n A m er ican r ailr o ads (ch S ee also Hen ry .

S Hain es, A merica n Rail way Ma n agem eizt A ddresses D elivered b efo r e th e
.
,

A merican Ra il w ay A sso ci ation an d Miscellan e o u s A ddr esses a n d Pap ers (New

,

Yo r k , i l
esp ec al y p p 1 32 1 38
—
. .

8 Th e statis tics ar e fr om th e United S tates D ep artm en t o f Co mm erce Bur eau

.
,

o f th e Ceh sus , Hist ori cal S tatistics o th e Un ited S ta tes 1

f 79 8 — 1 9 45 ( W as hin ,g t o n ,

pp 2 5 9 f o r p op u lation p
—2 . for agricu ltural in com e
, . .

S if to ry is ou tlin ed in Lo uis Sw ift T h e Ya n k ee of th e Ya ds

F — th e
’

9 . w t s s .
,
r

Bio grap h y of G u sta v u s ran klin S w ift (New Yo rk , F Th e Un ited S tates

Bur eau of C o rp o ration s, R ep ort of th e Co mmissio n er of C o rp o rations o n th e
Beef In dustry Ma rch , 1 9 05 (Washin g to n , is ex cellen t o n th e in tern al
o p er ation s an d ex tern al acti ities o f th e lar e m eat- ack in v g .
p g fi r m s Th e r e is .

addi ti o n al inf o rm atio n in th e later th r ee-vo lu m e Re or t o

p f t h e e d er a l T rade F
Co mmissio n on th e Meat-Pack in g In dustry (Washin gton , 1 9 1 8 Ru dolf
 NO TES —
4 02 F O R P A G E S 2 7 33
A C lem en , Th e A merican Liv esto ck
. an d Meat I n dustry (New Yo rk , h as
so m e us ef ul b ack groun d data T h e ann u al rep or ts p ar ticu lar ly th o se o f A rmour
.
, ,

v
p ro ide f ur th er in f o rm atio n f or th e y ear s af ter 1 9 00 .

J
S o m e in form ation o n am es B D u k e an d th e A m erican T o b acco Co mp an y .

can b e f o un d in oh n W enk in s Ia mes B D u k e Master Bu il der (New Yo rk ,

J . J ,
.
,

ch s 5 7 , an d th e co mp an y p u blica tio n ,
- .
”
S old A merica n ! — Th e irst
“
F
F ifty Years (u p , ch s 2 4
—
Mo re u sefu l w as th e United S tates Bur eau
. .

o f C o rp o r ati ons v
tw o - o lum e R ep or t of th e C o m mission er of Corp orations
’

o n th e T o b acco I n du stry (Washi n gton , 1 9 09

T h e sto ry o f Bell is o u tlin ed in am es G ray B usin ess With o u t B ou n da ry Th e J , ,

S tory of G en eral Mills (Minn eap o lis an d th at o f Pr esto n in C h ar l es M

, .

Wilson , Emp ire in G reen an d G old (New York ,

T h e early S in g er S ew in g Machin e exp erien ce is w ell an aly z ed in A n dr ew B .

Jack T h e C h an n els of D istrib u tion f o r an Inn o atio n : th e Sew in g Machin e

,
“
v
In dustry in A m er ica, 1 8 60 Exp l o ratio n s in En tr ep ren eu rial Hist or y ,

—1 1
4 (F e b , . E as tm an K o d a k s e xp er ien ce a pp ears to h a
’
e b een v
sim il ar in m an y w ays to th at o f S in ger S ew in g Machin e .

William T Hu tchin so n Cy rus Hall McCormick (New York ,

.
, II 7 04—7 1 2 , .

Har o ld C Passer, Th e Electrical Man u factu rers 1 8 7 5 - 1 9 00 (C am b ridge, Mass ,

.
, .

esp ecially ch s 2 0, 2 1 an d al so Haro l d C

. Passer D e elop m en t of .
,
“
v
L arge-S cale O rgan iz atio n — Electrical Man uf actur in g A ro un d 1 9 00, Jo u rn al of
Ec on o m ic H i st o r y
—
3 9 5 ( all,
, F
Jam es H Bridge, Th e I n side Hist ory of t h e Carn egi e S teel Co mp an y (New
.

Yo r k , pp 1 6 0 -1 6
.
4 ; Bur to n Hen drick , Life of A n drew Car n egie (New
J .

Yor , 1 9 3 2 ) , 3 0 3 1 2 ; an d V ictor S C lark , History of Man ufactu res in th e

k I 1 - .

Un ited S tates (New York , 1 9 29 ) II 3 44 - 34 5 T h e deman d f o r p ip e an d tu bes , .

w as in cr eased b y th e gr o w th of th e city an d th e p etro leum in du stry , w hile

b ar b ed w ire f or th e w estern p lain s cr ea ted an o th er m ar k et f o r th e mak ers
o f fi n ish ed ir on a n d steel p ro du cts .

A ccor din g to comp an y r eco r ds, on es J

Lau ghlin h a d its o w n w ar eh ou sin g
o ffi ce in C hi cag o as early as 1 8 5 9 T h e gr o wt h o f middlem en w h o stor ed an d .

so ld stan dar d sh ap es is in dica ted in C lar k , Hist o ry of Man u fact u res I I, 3 05 - 3 06 , ,

b u t C lar k say s n o thin g as to w h en m an u factur ers to o k o er thi s f un ctio n A n v .

v
e en m o re str ik in g gr o w th o f a larg e sales an d distrib u tin g o rgan iz atio n to

v
ser e th e n ew ur b an con str u cti o n m ar k et cam e in th e p late glass in dustry

w h er e th e Pittsb u rgh P late G lass Com p an y w as a p ion eer , see pp 34 1 -34 2 . .

Fo r details an d so ur ces, esp ecially o n Uni ted S tates Ru bb er , S tan dar d O il ,

D istil ler s S ecur ities C o rp o ratio n , an d Natio n al Biscuit see Ch an dler Begin
’ “

, ,

n in gs o f Big Bu sin ess in A m erican In du stry

‘ ’
1 0—1 8 Han s B T h or ell i
pp , , . . .

Th e F
ederal A n titru st P o licy ; O rigi n ation o f a n A merica n Traditio n (Bal ti

m or e, pp 6 — 6 2 6— 0 8
3 9 , .
3 3 p r o id es th e m o st, sat is f ac t o ry v
s umm a ry o f
v
th e ex ten si e li teratur e o f th e co m bin atio n m o em en t in th e latter p ar t o f th e v
nin eteen th cen tu ry .

A n n u al R ep o rt of th e Natio n al Biscu it C o mp a n y fo r th e Year E n din g Decem

b er 1 90 1
, J
an u ar y 3 , 1 9 02
, Ref er en ces to th e cen traliz in g o f m an uf actu rin g
.

v
facilities ap p ear in se eral ear ly rep or ts A s th is r ep or t w as w ritten b efo re .

v
Th eo do re Roo se elt h ad star ted to mak e th e S h erm an A ct an efi ectiv e an titru st
in stru m en t an d Ida T arb el l an d o th er our n alists h ad b egu n to m ak e m u ck rak j “

in g o f b ig b u sin ess p op u lar an d p r o fi table, th e Biscuit C o mp an y s sh if t in

” ’

p o l ic y co u ld h ar d ly h a e b e e n t h e r e v
s u l t o f th e p r es sur e o f p u b li c o p in io n o r
 —
N O TE S F OR P A G ES 34 37 4 3
0

r
th e th eat of g o er nm en t acti on v . Ralp h M How er
.
, Th e History o f an A dv er
tisin g A gen cy : N . W . A y er 67 S on at Wor k , 1 86 9 -1 93 9 (Cambridge Mass , .
,

1 1 5 1 1 6, 3 1 8, in dicates
2 1 6, th e sign ifi can ce of Nation al Biscu it s
’
—
pp .

p o licies f or th e v
ad er tisin g b u sin ess .

19 . Ch ar l es R lin t,
. F “
Th e G osp el of r
In dust ial S teadin ess, J a m es H Bridge .
, cd .
,

Th e Tru st : Its Bo o k (New York , pp . 8 7- 8 8 , b ased on a talk Fli nt ga v e

in Bo sto n , May 2 5 , 1 899 lin t h as comm en ts on cen traliz ed . F co mp ar able

“ ”
an d

i
conso date d m an agem en t in his In u st al Co bi atio s
d i m A ddress to
“
l r n n —
th e
Illin ois Ma n u factu rers A ssoci atio n O ct 9 1 9 00 1 90 0 ) pp 5
—6 .
, , . .

20 . Ralp h W Hidy
E Hidy, Pio n eerin g in Big Bu sin ess 1 8 8 2—1 9 1 1
. an d Muriel .
,

(New , York
—
pp 1 7 6 1 8 8, an d A llan Ne ins, S u y in P w r
t d o e —
Ioh n . v
D R ock efeller In dustrialist an d Ph ilan th r opist (New York ,
.
, II, 1 -3 .

v
Ne ins adds th at an o th er r eason f or th e m o e in to p rod u ctio n w as p ar tly v “

to limit th e n u mb er of acti e v w ells an d r edu ce th e o e v rp r o du ction o f cru de

o il ,
”
b u t h e gi es n o docum en tatio n f or this statem en t
II , 2, v .

21 . A n n ual Rep o rt of Th e A meri can A gricu ltu ral Ch emical Co mp an y A u g ust 1 4 , ,

also th e sam e co mp an y s A n n u al R ep ort dated A u gu st 2 5 , 1 90 2 In

’
1 9 07 , , .

additio n to th e ann u al r ep or ts o f th e tw o comp ani es, C lark , Hist ory of Ma n u

f act u r es,2 9 29 1 , p r o ides inf orm atio n

8 — III, Th er e is a b rief summ ary of v .

th e story of th e In tern ation al A gricu ltur al C orp or ation in Williams Hayn es,
A merican Ch emical I n dustry — A Histor y v ol III : World War I, 1 9 1 2—1 9 22 , .

(New York , p . 1 73 .

22 . Hen drick , A n drew Ca rn egie II, , ch . 1 ; B ridge , T h e In side Histor y of Car n egi e
S teel Co mp a n y , ch . 1 7 ; an d Nev in s R ock efeller II , , , 25 2 .

23 . Ida M . r
T a b ell, Th e Life o f El bert H G ary
.
, th e S t ory o f S teel (New Y or k ,

pp . 8 6 —9 7 an d Moo dy s Man ual of ’

C orp or atio n S ecu rities — 1 9 01 (New
Yo rk , p .
7 22 .

24 . A usef u l b rief su mm ary of th ese m ergers an d of th ose b y th e steel u sers as ,

w ell as a m ost co n cise an al ysis o f th e f orm a tion o f Un ited S tates S teel , is

Elio t J o n es, Th e Trust Pr o blem in th e Un ited S tates (New York ,

pp . 1 89—2 00 .

Hen dr ick Ca rn egie , , II, 1 1 6—1 1 9 .

Th e b eginn i n gs an d th e op e ati on r of th e United S tates S teel C o rp or atio n ar e

ou tlin ed in Ab rah am
Be glu n d, r Th e Un ite d S tates S teel Cor p or atio n : A
S tu dy o f G r o wth a n d Co m b in atio n in th e Ir o n an d S teel In du stry (N ew
York , A ru n del C o tt e r
Un ited S tates S teel : A Cor p or ation
,
With a S ou l ,

(New Yo rk , an d T ar b ell T h e Life of G ary S o m e u sef u l

,
. n ew in f orm a
is p r esen ted in o h n A G arr aty, Rig h t-Ha n d Ma n T h e Life of G eorge W
tion J .
,
.

Perk in s (New York , p p 93

—1 2
5 . .

27 A r th u r S D ew in g, Co rp or ate Pr o m otion a n d R eor g an iz at io ns (C amb ridge,

‘

. .

Mass , p 55. 8 H is list g i en o n - 6 6 is

pp 557 5 p ar.ti cu l ar ly u s
.ef u l f o r an v .

r
ap p eciatio n o f th e ch all en g es f acin g th e o rganiz ation b u il ders For a surv ey .

of th e m erg er s th at p r ov ed f see S h aw L iv erm or e T h e S u ccess of

“
su ccess ul, ,

In du st ial r Merger , Q u a rt er ly [ o u rn al o f Econ o mics ,

—
96 (Nov .
,

S u ch b eliefs b
a o u t th e essen tial in effi ci en cy o f large-scal e in du strial o rganiz ation
b ecam e associated in th e p u blic min d w ith th e v iew s o f Lou is D Bran deis . .

B ran deis ,
h ow e vr
e ,
h ad a m u ch m or e exp licit ideo lo gical b ias th an D ew in g
an d mic w riter s Ev en if th e n ew great en terp rises co u ld b e
o th er a ca de .

efficien tly o p er ated th ey r em ain ed in hi s ey es a thr ea t to th e o l der v alu es

, , ,
.
4 4
0 NO TES F O R P A G E S 3 8 —
5 2

In tes tifyin g b efo re a S en ate C o mmittee in 19 1 1 , B ran deis said o f Uni ted
S tates Steel :
v v
if it sh ou ld h a e b een tru e th at as a mer e en gin e of p ro du ction
e en

an d distrib u tio n this u n it w ou ld h a e b een mo re eflicien t th an a sm aller o n e, v

v
I am co n in ced th at th e in h eren t, th e in ciden tal, so cial, an d p o litical ills
w hi ch w o u ld atten d th e crea tio n of th at h u ge p ow er w ou ld b rin g ab ou t
v
e ils to th e co mm u n ity w hich w o u ld m an y tim es o u tw eigh th e ad an tage, v
v
th e sligh t ad an tage, if an y , w h ich w ou ld co m e from an in cr eased efficien cy .

Hearin gs b ef or e th e C ommitt ee on In te state C o mm er rce United S tates S en ate,

,

62n d C o n gr ess, I st S essio n cited in E dw in C Roz w en c, Ro osevelt

.
,

Wilso n an d th e Trusts (Bo sto n p 81 , . .

S F V an 0 3 5 , A merica n Railr o ads as I n v estmen ts (New Yo rk , p 2 35

'

. . . .

v
V an O ss added th at th e Pen n syl an ia s e u ip m en t, effi cien cy, an d ser ice are
’
q v “

regar ded as emb o dyin g a state of p erf ectio n to e u al w h ich sh ou ld b e th e q

v
high est am b itio n of e ery railro ad co m p an y in th e cou n try
”
.

v
Th ese de elop m en ts are in dicated in th e r ep or ts cited ab o e in ftn 7 v . .

Morris, Railr oad A dmin istration ch 4 , . .

Hidy, Pion eerin g in Big B usin ess p 329 , . .

A s th e inf o rm ation on th e co mp an ies in th is sectio n w ill b e en larged in

C h ap ter 7 , th e citatio n s to th e sou rces w ill b e gi en th ere Par ts of th is section v .

an d o f C h ap ter 7 w ere b ased o n m y D e elop m en t, D i ersifi catio n an d De

“
v v
cen traliz a tion ,
”
in Ralp h E reem an , editor, Post-War Econ omic Tren ds in the
. F
Un ited S tates (New Yo rk , ch 7 , w h ich t ells o f man y o f th ese co mp anies
.

in m o re detail .

Th e ru ral m ark et, w h ich in 1 9 00 still in clu ded 60 p er cen t o f th e p op u latio n ,

by 1 9 20 h ad fallen b elo w 5 0 p er cen t w ith m illion of th e p op u latio n listed
as r ural an d million as u rb an By 1 9 3 0, th ese fi gu res sto o d at .millio n
an d v
millio n , r esp ecti ely Betw een 1 9 1 0 an d 1 9 3 0, ur b an p op u lation rose
.

63 p er cen t an d ru ral p op u lation on ly 8 p er cen t arm in co m e dro pp ed . F

v v
e en f aster In 1 9 1 9 , realiz ed p ri ate p ro du ctio n in co m e fro m agricu ltu re w as
.

b illion an d in 1 9 29 it w as b illion , Historical S tatistics of Un ited

S tates, p p 1 4 , 25 , 29
. .

Wh ile Eastman o dak b egan b y assemb lyin g a du able p odu ct for th e mass
K r r
con sum e r r r
ma k et, it soon in teg ated b y ob tain in g its o w n su p p lies of p h o to
r
g pa hi c ch em icals In ecen t y ea s T
. en n essee r
Eastm an , th e ch em ical su r
b sidiar y,
h as exp an ded rap idly thr ou gh di v r ifi
e s cation o f its p ro duct lin e in to man y
n o n p h o tograp h ic ch e micals .

F o rtu n e, (May ,

Kap lan i
, B g E
n terp rise in a Co mp etitive S ystem, p . 1 4 9 , an d F ortu n e,

1 50 ( y 9 60 )
Iu l , 1

CHA PTER 2

1 . T h e f o llo w in g in fo m atio n r on th e co mp an y an d its ex ecu ti es v me from

ca

William 8 . B u tto n , D u Pant — On e Hu n dred an d F o rty Years (New Y o rk ,

du Po n t, E I du Pon t de Nemo u rs an d Co mp a n y : A Histo ry

Bessie G . . . ,

1 8 0 2 1 9 02 (Bo ston ,
- Mar u is am es, A lfred 1 u P d a n t — th e q amily J . F
Rebel (New York , A r th u r P V an G elder an d Hu go S ch latter, History .

of th e Exp l osives In dustry in A merica (New Yo rk , an d two

an titrust cases, Un ited S tates v E 1 du Po n t de Nemours 6 Comp any,

‘
. . .
NO TE S —
F OR P A G ES 5 2 55 4 5
0

et al in Cir cu it C our t o f th e Un ited S tates, No 2 8 0 in E u ity

. es . q
p ec ially D efen da n ts R eco r d Testim o n y
’
o ls I an d II, an d Petition er s Reco rd , v ’

v o l II, an d Un ited S tates v E 1 du P o n t de Nem o urs <9 Co mp an y G en eral

. . . .
,

Motors Corp oration et al , US District Co ur t f or th e North ern District of

, . .

v
Illin ois, Eastern D i isio n C i il A ction No 4 9 C 1 07 1 — . v
T h e fi rst case .

w ill b e cited h ereafter as du Po n t A n titru st S u it (1 9 09 ) an d th e secon d as th e

du P ou t-G en er al Mo tors A n titru st S u it .

Du tto n , D u P o n t p 1 72 A lf red u sed th e term birth r igh t in his descrip tion

“ ”
2 .
, . .

o v
f th e e en ts, ibid p 1 69 .
, . .

T o m L o h n son , My S tory (New Yo rk ,

. J p p 1 1 1 5 , 26 3 6 9 9 2
- — 1 — .
, .

r
Ha o d C asse ,
l P r T
. h e El ectrical Ma n u fact u r ers 1 8 —1 0
75 9 0 (C am b r id g e, Mass , ,
.

pp 3 34, 3 4 0
Lo rai n n ew o w n e rs so ld th e elect ric-motor an d m ak in g p art of th eir
’
s car

b u sin ess to G en eral Electric, ibid p 3 4 0 .

, . .

Du P o n t, D u P o n t A Histo ry p 1 4 0 T h e p aragrap h r eferrin g to Eu , . .

g e s adm ini stratio n reads in f ull

’
e n

v
In o n e w ay , h ow e er , an d th at a ery imp o rtan t w ay , th e fi rm s meth o ds v ’

w ere u n altered Th e b u sin ess w as en tir ely m an aged b y th e sen io r p ar tn er

. .

It w as cu stom ary f or him to con su lt th e o th er m en in m atters th at co n

cern ed th eir dep ar tmen ts o f th e in du stry , b u t h e w as in n o w ay b o u n d to

v
accep t th eir ad ice, an d tr adition made th em h esitate to o ff er it o r to ask

qu estion s T h e h ead o f th e fi rm w as ex o fii cio h ea d o f th e f ami ly T h e h o m es

. .

o f th e diff er en t p ar tn ers b elo n ged to th e co m p an y , an d it m ade an y a ddition s

v
or imp r o em en ts th at w er e n ecessar
y a n d to o k n o r en ta l F o r th e fi r s t six ty .

y ears o f its existe n ce th e in di i d u a l p ar tn er s d id n o t e en o w nv h o r se s ; w h en v

a carriage w as w an ted a message w as sen t to th e o co an d a eh icle of so m e m v
v
so r t u sually arri ed in du e time — th ere w er e n e er an
y to o m a n y o f th em v .

C h eck s w er e cash ed at th e o ffice an d all m ail w en t th ro u gh th e O ffi ce an d

w as usu al ly sorted b y th e h ead of th e firm himself Th e h ou ses w er e n ear .

to geth er an d th e p artn ers w er e m en of ery sim p l e an d do m estic tastes to v ,

v
w h om it w ou ld n e er h a e o ccu rr ed to w an t m ore m o n ey th an w as n eces v
sary fo r th e n eeds of th eir u iet li es q
No o n e o f th em e er th o u gh t of v . v
dr aw in g hi s f u ll in co m e ; th ey g a e th eir allegian ce to th e C o mp an y an d its v
ch ief an d w ith it al l th eir ab ilit
y an d co nfi den ce .

Well describ ed in Du tt on , du P on t pp 1 1 9 —1 23 , . .

F o r examp le, V an G elder an d S ch latter, Hist ory of Exp losiv es p p 609 -6 1 0 , . .

D u tto n , du Pon t p p 1 4 3- 1 4 6, an d du Po n t, D u P o n t
, . A Hist ory p p , .

1 3 6— 1 3 7 .

Pierr e du Po n t to Irén é e du P o n t F eb 2 0, 1 9 02, du Po u t-G en eral Mo to rs A n ti , .

tru st S uit, D ef en dan ts Exhi b it DP # 2 (T h e letters D E w ill b e u sed in citin g

’
.

D efen se Exhib its an d G B in citin g G o ern m en t Exh ib its Un less o th er w ise v .

in dica ted, all exhi bits an d testim o n y w ill b e fr om th e du Pou t-G en eral Motor s
A n titru st S u it In citin g th e n u m b ers o f th e exh ibits an d th e p ages o f th e
.

testim o n y fr om th is su it, th o se u sed in Un ited S tates S up reme Cou rt Rep orts ,

2 5 3 R eco rds a n d Brie

, f Un ited S ta te s E 1 d u
, P on t d e N e m o ur s <9 C o m p y
a n v . . . ,

G en eral Mo t ors et al , O cto b er Ter m 1 95 6 w ill b e gi en w h ere p ossib le, sin ce

, .
, v
v
th ese r eco r ds ar e m or e a ai lab le th an th o se o f th e District C o u r t
) .

v
Th e e en ts of th e p ur ch ase an d co n so lidation ar e co ered in detail in th e v
du Po n t A n titru st S u it esp ecially D efen da n ts Record Testim o n y I,
'

”
4 84 5 4 7 , al so Brief for D efen dan ts pp 7 1 93 an d Defen dan ts Record
- —
, .
,
4 06 NOTES F OR P A G ES 55
-
59
Testim on y II, 7 4 9 ff So m e o f this testim on y is summariz ed in am es, A lfred
, . J
1 da P an t p p 1 68-1 82 A lso useful is Du tton , D u Pan t p p 1 79 -1 8 6 A lth ough
.
, . .
, . .

th e du Pon t C o mp an y itself in 1 9 02 h ad man uf actured som e 3 6 p er cen t of th e

n ation s
’
r
b y 1 9 05 th e n ew Po w der Comp an y made
p o w de , p er cen t of all
sod a blastin g p o w der , 8 0 p er cen t o f all saltp eter an d blastin g p o w der,

p er cen t of all black sp o rtin g p ow der, p er cen t of all sp ortin g sm o k eless

p o w d er , an d , ex cep t f o r a sm all am o un t made b y th e go ern men t, 1 00 p er cen t v
o f all military sm o k eless
p ow der .

q
This u o tatio n an d th e f o llow in g on e ar e from th e du Pon t A n titrust Su it
D efen dan ts Recor d Testim on y I T h e fir st is fr om p 4 88 , th e secon d
’
, . .

fr om p 5 00 . .

v
Th ese imp ro em en ts are described in am es H Bridge, Th e In side Hist ory of J .

T h e Carn egi e S teel Co mp an y (New York , ch 1 2 T om o hnson tells o f . . J

q
his close ac u ain tan ce wi th D A Mo rr ell, A n dr ew C arn egie, an d o th er steel . .

mak er s in o hns on , My S tory p p 3 0, 3 6 Ir énée du P on t r ecalls that w h en a

J , . .

p o li cy w as discussed in th e Ex ecu ti e C o mmitt ee in th e ear ly y ears of th e v

n ew comp an y, Moxh am, w h o cam e fr om Lo rain w ith Co lem an , w ou ld co n

stan tly say :

”
No w this is th e w ay it w as don e in steel, (In ter iew with
“
v
Ir éné e du Po n t, A u gu st 2 3 , Th e earlier o rganiz ation b uildin g at G en eral
El ectric is describ ed in Har o ld C Passer, D e elop m en t of Large-S cal e Organ .
“
v
iz ation — Electrical Man u f actu rin g A rou n d 1 9 00, Ia u rn al of Econ o mic His
t ory , -
3 9 5 ( al l, F 1 95 2 )
D u tton , Du P an t, p p mb in ed w ith t wo o th er
. 1 4 6—1 5 1 . In 1 89 5 , Rep au n o co

v
exp lo si es fir ms to f orm th e Eastern D yn amite C om p an y Each fi rm co n tin ued .

to b e man aged sep arately w ith Eastern Dyn am ite r emain in g a h o ldin g com ,

p any un til 1 9 02 In 1 895 , Hask ell left Rep aun o to b ecom e p residen t of Lafl in
.

8: Ran d .

V an G elder r History Exp l osiv es 6 8 8 —8 8 2,

an d Schl atte , o f pp 59 7 00 , 1 , . 21 1, -

in dicate m e o f th ese ch an ges In th e 1 8go s th e du P o n t Co mp an y itself ,

’
so .

f o ll ow in g th e ex am p le of R ep aun o , b egan to set u p som e district sales o fi ces

o f its o w n (du Pon t, D u P an t A His tory p , .

S ee citation s in f ru 1 1 . .

Th e inf orm atio n o n th e O p er atin g D ep artm en ts cam e from sca ttered referen ces
in D u tto n , D u P an t b k 3 , ch 2 ; am es, A lfred 1 du Pan t ch 1 1 ; V an G elder
, . . J .
, .

an d S chl att er , Histo ry of Exp l osi ves p t I ch 7, p t II , c h 6, p t III, ch 9; , . . . . . . .

an d du Pon t A n titru st S u it esp eciall y D efen dan ts Recor d Testimon y

’
,

I an d II .

T h ese m eetin gs ar e w ell describ ed in Ern est D ale D u Po n t : Pio n eer in

“

S ystem atic Man agem en t, A dm n strativ

i i e S ci en ce Q u a r ter ly
— 0
4 ( u n e, ,
J
T his ar ticle an d th e on e D ale w r o te on G en er al Mo tors, cited in th e
v
n ex t ch ap ter, h a e b een r ep rin ted in su b stan tially th e sam e f o rm in Er n est

D al e Th e G reat O rga n iz ers (New Y ork ,

, D ale h as addi tio n al inf o rma
tio n o n G en eral Mo tors as an ap p en dix, ibid pp 2 39
—2 6 1 .
, . .

Th e o rgan iz ation Of th e co nso lidated S ales D ep artm en t, comp leted in ul y, J

Defen da n ts Record
’
1 90 3 is descr ib ed in th e du Pon t A n titru st S u it
,

Testim o n y I 1 5 —33 1 2 8- 1 3 7 , Petitio n er s Recor d II, 694 -7 03 ; an d V an

’

, , , ,

G el der an d S chl atter Histo ry of Exp l osiv es pp 6 1 4 —6 1 7 T h e latter says th e

, , . .

D ep ar tm en t s A ssistan t Directors h ad ch arge of p rodu cts (b lack p ow der ,

’

dy n ami te, an d sm o k eless p o w der ) , w hile th e testimo n y in th e su it says th e

o rg an iz a tio n b r eak do w n w as b y r egio n s A p p ar en tly th e D ep ar tmen t started .
N O TE S F O R P A G ES 6 0 — 66 4 7
0

on a regio n al b asis an d sh if ted to a p ro du ct b asis D ale . D u Po n t : Pio n eer in

S ystem atic Man agemen t , p 44 )
. r
desc ib es th e w o rk of th e T rade Record
v
D i isio n V alu able to o is
. C erriday, D ale Bu m stead to E
, , . . F A p ril 2 1 9 06
du Po n t A n titru st S u it D ef en dan ts Exh ib it # 2 0 1
’
.

20 . S catter ed r ef er en ces in D u tto n , D u P a n t b k 3 , ch s 2 , 4 , an d D u Po n t A n ti , . .

D efen dan ts Rec o rd T estim o n y II, an d P etitio n er s R eco rd

’
tr ust S u it
’

, ,

II Pag e 69 5 o f th e last in dicates th at th e A ccou n tin g D ep ar tm en t an alyz ed

.

r r
mo n th ly ep o ts o n sales, p ep ar ed b y G eo ge e s T ade R eco d Di ision r r K rr ’
r r v .

21 . A n n u al R p t f
e o r o E 1 d u P a n t d e Ne m o u rs C o m.
p y f
a n o r.1 9 7 pp
0 1 —2; , .

D u tto n , du P an t p 1 8 5 , . .

22 b
I i d
.
pp 1 8 4 86
— 1 .
, . .

23 . J
am es, A lfred 1 du P a n t p 2 1 6 an d D u tton , D u P an t pp
.
, .
—
.
-
203 2 04 . T h e ch an g
in g elation s b etw een th e tw o co mm ittees is in dicated in
r a letter fro m Pierre
du Pon t to th e Bo ard o f D irecto rs, S ep t 1 1 , 1 9 1 4 , G E 27 . .

2 4 Mu ch o f th e w o rk in gs o f th e in itial o rg an iz atio n al str u ctu r e is m ade clear

in th e rep o rts o n stru ctu ral reo rg an iz atio n cited b elo w T h ere w ere also stan d .

in g su b co mm ittees o f th e Execu ti e C o mm ittee f o r ser ice f u n ction s lik e v v

v
de elop men t, p u rch asin g, an d co n str uctio n T h e ro le o f th e su b co mm ittees is .

n o t clear, b u t th ey m ay h a e ch eck ed th e D ep ar tm en ts h an dlin g of th o se v ’

fu n ctio n s .

D u tto n , D u P an t p p 20 2 2 04 an d am es, A lfred 1 du Pan t p p 2 1 3 2 1 6

-
, .
— J .
, . .

C o leman w as also so o n in v lvo ed in b u ilding an d r eal estate acti viti es in New

York b ecam e
City an d in tim e
ch ain o f h o tels Bes ide th e o w n er o f a large .

v
th ose o u tside acti ities, C o leman h ad se er al b o u ts o f illn ess in th ese year s v .

’
v —v
A lfr ed s rem o al is co er ed in am es, A lfred 1 du P an t p p 2 33 24 1 A lfred s J .
, . .
’

di orce an d remarriage an d its eff ect o n th e f amily an d Wilm in gton so ciety

v
in gen eral are describ ed in detail, ibid ch s 1 2—1 3 .
, . .

Th ese ch an ges can b est b e seen b y re iew in g th e b io grap h ical S k etch es o f v

th ese men in V an G elder an d S chlatt er, Histo ry of Exp l osives an d in Du tton , ,

D u Pa n t pp 2 1 3-2 1 4 , . .

2 8 I bid
.
pp 1 —1
9 5 99
.
, . .

29 Pierr e du Po n t to C o lem an du Po n t, A u
.
g 2 8, 1 9 1 4, G E 26 . .

3 0 A n n ual Rep o rt (s) of E 1 du P an t de Nem o u rs 6 Co mp an y fo r 1 9 1 2 an d far

'
. . .

1 913 Bar k sdale sign ed th e fi st ep o t as A ctin g P esiden t, C o lem an th e secon d

. r r r r
r
as P esiden t Th e ear lie o n es h ad b een sign ed b y Pie
. r
e as A ctin g P esiden t rr r .

3 1 . rr
Pie e du Po n t to C o lem an du Po n t, A u g 2 8, 1 9 1 4 , G E 2 6, an d Jan 4 , 1 9 1 5 , . .

DE DP 9 ; V an G elder an d S ch latter, Histo ry of Exp l osiv es pp 5 4 1 —5 42 , . .

Pierre du Po n t to C o lem an du Po n t, A u g 2 8 , 1 9 1 4 , G E 2 6, an d testimo n y o f .

Pierre du Po n t, F eb 25 , 1 9 5 3 , p p 2 1 9 0—2 1 9 1 T h e follo w in g u o tatio n is also

. . . q
from th e A u g 2 8 letter . .

33 ~Pierre du Po n t to th e Bo ar d o f Dir ecto rs, S ep t 1 1 , 1 9 1 4 , G E 27 . .

34 I b
.id Th e th r
. ee f o llo w ing u o tatio n s ar e f ro m th e sam e letter q .

3 5 T h e defails o f th e su it ar e m ost su ccin ctly o u tlin ed in Du tton , D u P a n t b k I II, , .

ch 4 . .

Ibid p p 2 1 8 , 24 2- 27 3 T h e creatio n an d str u ctu re o f th e n ew ch em ical dep art

.
, . .

m en t is in dicated in D iagram o f O rgan iz ation of D u Po n t Exp erim en tal

“

S ta tio n , May 1 , 1 9 1 2 , DE D P 229 A lso w ar tim e exp an sio n led to th e f o rm a

”
.

tio n of dep ar tmen ts fr o m w h at h ad b een smaller O flices, su ch as th e m ech an ical

research , m edical, an d w elfar e dep artmen ts, A n n ual Rep ort of E 1 du Pan t . .

de Nemou rs 6 Co mp an y for 1 9 1 9 Th e ch ar t attach ed to a rep ort of th e

'
.
4 08 N O TES F OR P A G E S 66 79 —

mmi ttee
su b co on o rgan iz ation to th e Ex ecu ti v e C ommittee, Mar .
3 ,
1 1 9 1 9,

dia gram s th e str u ct ur e at th e s en d

’
w ar .

A n n ual R ep ort of E 1 du P on t de Nem ou rs 6 Com p an y for 1 9 1 9 p 1 5 . .

'
, . .

D al e ( Du Pon t : Pion ee in S ystematic Man agemen t, p 39 ) in dica tes ear ly r

“ ”
.

r r
du Po n t ap p op iation s p ocedur es S ee al so A n n ual Rep ort of E 1 da P on t r . . .

de Nem ou rs 6 :
Com p an y f or 1 9 1 8 pp, . 1 5— 1 6 .

Inf orm ati on m es fro m Wh o s Wh o in Co m merce an d I n dustry

’
on Br o w n co

(New Y o rk , 1 93 6 ) an d Dal e, Du Po n t : Pion eer in S ystematic Ma nagem en t,

“ ”

p 42
. .

F ort u n e, (O ct , an d A merican Man agemen t A sso ciatio n ,

“
Ho w
th e du Pon t O rgan iz ation A p p r aises its P erf orman ce,
”
Fi n an ci al Man agem en t
S eries No 9 4 , .

Rep o rt of Pi er re du
Direct ors, A p r 7 1 9 1 9 Pon t t o th e Boar d of .
, .

Harry Hask ell to Pierr e du Pon t F eb 1 6, 1 9 1 9 b o th a l etter an d a telegram , .

,
.

This an d th e tw o f ollo win g u o ta tions are fr om Harry Hask ell to Pierre du q

Po n t, F eb 1 6, 1 9 1 9 . .

44 Rep ort Of su b commi ttee an org an iz atio n to th e Ex ecu ti e C ommi ttee, Mar 3 1 ,
. v .

1 9 1 9 Th e o riginal r ep o rt w as dated Mar 2 6, th e o n l y ch an ge in th e fi rst an d

. .

seco n d w as a p ar agr ap h added at th e en d r ef errin g to Willia m H Moore s

’
.

r ep o rt .

Q u o ted from a r ep o rt Of B ar k sdal e to th e High Exp losiv es D ep ar tmen t in ,

Du P o n t : Pion eer in Systematic Man ag em en t, p 37

”
D al e,
“
. .

Th is an d th e f o ll o win g f our teen u o tatio ns are fr o m th e r ep o rt o f th e su b q

co mm itt ee o u org an iz a tio n , Mar 3 1 , 1 1
9 9 D al e h as sev er al l o n g u o tatio n s . . q
fr om this rep o rt th at h e dates Mar 1 9 He h o w e er , er r on eo u sly su gg ests th at . .
,
v
it r eco mm en ded th e c h an g es th at w en t in to efi ect in Sep temb e r , 1 92 1 ,
“
Du
P on t : P ion ee r
in S ystem a tic Man agem en t ,
”
pp .
— 2
47 5 .

R ep or t o f Pierr e du P on t to th e Bo a d r of D irect ors, A p r . 1 4, 19 19 .

Extr act f rom Ex ecu ti v e Co mmi ttee Min u tes , A pr . 14, 19 19, an d
“
A d ice v of

A ctio n
”
on m eetin g Th e six n ew m emb er s w er e A
th a t elix du P o n t
. . F ,

C h arl es A . P att erso n Willi am C Sp ruan ce, Wal ter E dge, C A Mea de, an d
, . . .

W . S . C arp en ter, Jr .

v
Th e T echn i cal Di ision in clu ded S afety, ire Pr o tectio n , Plan nin g In spe ction , F ,

an d C osts O ffices ; th e Welfar e Di isi o n in cl u ded Ho usin g, S u b sisten ce, P erso n n el v

Rel ation s, S ani tatio n , an d Medi cin e ; an d th e Mater ials an d Pr o du cts Di isi on v
in clu ded Work s S u p p li es, Or ders, Sal age an d R ecl am a tion , in ish ed Pr odu cts, v F
Wor k s A cco un tin g, an d A u ditin g .

A s in di ca ted in th e l ater r ep orts o n o rgani zatio n .

Th e m all er dep artm en ts — P erso n n el L egal an d R eal Estate — all o f a S taff

s , ,

v
o r ser ice n a tur e, r ep o rt ed to th e C h airm an O f th e Ex ecu ti e C o mmi ttee, w h ose v
v
ro le w as ery Similar to th at ou tlin ed f or th e fi rst V ice-Pr esiden t in th e su b
co mmittee s o rg aniz atio n r ep o rt
’
w hil e o er-all su p er isio n o f p u b li ci ty an d ,
v v
milita ry sal es b el o n ged to th e Pr esiden t, in additio n t o his p rim ary du ties .

Du tto n Du P a n t p 2 62 , , . .

Th e testim o n y o f Ir én ee du P o n t p 1 9 37 , al so p 1 966
’

, . . .

Mo xh am as th e fir st h ead o f th e D e elop m en t D ep ar tm en t m ay h a e exp licitl y

, v ,
v
to ld his r esear ch er s in 1 9 0 3 to exam in e n ew in dus tries in to w hi ch du P o n t

v
migh t m o e See Du tton D u P a n t p p 1 8 5— 1 8 6 If so littl e cam e fr o m this
.
, , . .
,

o r der , fo r th e docu m en tar

y e id en ce p r esen ted on b o th sid es in b o th th e v
du Pan t-G en eral Mo to rs A n titr u st S uit an d th e ear lier du Pon t A n titrust Suit
NO TES FO R P A G ES 79
— 82 4 9
0

mak es it clear th at n o step s w ere tak en to w ar d di v r ifi

e s catio n u n til 1 9 08 . See,
for ex amp le, u d P o n t A tit
n r u st S u it D efe n d a n ts B f pp
r ie 2 66 2 6 8
-
’

, . .

Q u o ted in A Hist ory o f th e Du Pa nt Co mp a n y s Relatio n s w ith th e Un ited

’

S tates G o vern men t 1 8 0 3—1 9 27 (Wilm in g to n , p p 6 8 , 7 1 , 9 7 T h is b o o k

, . .

w as p rep ar ed an d p u b lish ed b y th e S m o k eless Po w der D ep ar tm en t In 1 9 09 , .

v
C o n gress o ted app rop riatio n s to in cr ease fu r th er th e cap acity o f go ern m en t v
p o w der p lan ts .

A n n ual R ep o rt of E 1 d u P o n t de Nem ou rs <9 Co mp an y fo r 1 9 0 8 p 2

. .
:

, . .

Q u o ted from th e Execu ti v e C o mm ittee Min u tes o f th e d u Po n t C o m p a n y ,

D ec 1 6, 1 9 0 8 , in an A d ice of A ctio n , dated D ec 1 7
.
“
v ”
.
,
1 9 0 8 , D E D P 69 .

Pier re 8 du Po n t to William du Pon t, A p ril 2 0 1 9 09 , DE DP 7

.
,
.

Execu ti e C o mmitt ee Min u tes, Mar 4 , 1 9 09 , u o ted in an A d ice o f A cti o n ,

v . q “
v
dated Mar 6, 1 9 09 , D E D P 7 0 . .

W W Rich ards to Iréné e du Pon t, A rtifi cial Leath er — Nitrated C o tton

. .
“

q
Re u ir em en ts, Mar 1 6, 1 9 09 , G B 1 0 1 , an d an in ter iew w ith Ir én ée du Po n t,
”
. v
A ug . 2 3, 1 9 5 6 .

Th is d th e fo llow in g u o tatio n ar e fro m th e A n n u al R ep ort o f D e elo p

an q “
v
men t Dep artmen t for th e Y ear 1 9 09 , F eb 9 1 9 1 0 D E D P 7 2 A lso u sef u l .
, ,
.

v
o n th e in estig ation o f th ese in du stries an d its r esu lts is t h e testim o n y o f

Irénée du Pon t, F eb 1 7 , 1 9 5 3 p p 1 9 1 6— 1 9 3 1 .
, . .

“
v
Rep ort of th e De elo p m en t D ep artm en t o n A rtifi cial S ilk , F eb 9 , 1 9 1 0 DE .
,

DP 7 2, an d A n n u al R ep o rt of D e elop m en t D ep ar tm en t f o r th e Year 1 9 09 , v
“

F eb 9 1 9 1 0, DE DP 7 2 A lso testim on y f o r Ir én ée du P o n t, F eb 1 8, 1 9 5 3, pp
.
, . . .

1 93 2- 1 9 34 .

Th is f o llo w in g u o tation are fr o m A n n u al Rep or t o f D e elop m en t

an d th e q v
D ep artm en t fo r th e Year F eb 9 , 1 9 1 0, D E DP 7 2 . .

Rep or t to F
in an ce Co mm ittee from C ellu lo se Pro du cts D ep ar tm en t, en titled
“
History an d Pro sp ects of abrik o id In du stry, Nov 4 1 9 2 1 , G E 1 06
”
F .
,
.

In 1 9 1 3 , in o rder to o b tain a f or eign o u tlet an d p aten ts, th e du Po n t C o m p an y

fo rm ed w ith a British fi rm — th e Plu v iu sin C o mp an y — th e du Pon t ab rik o id F
C o , o f w h ich th e British comp an y h eld o n e-sixth o f th e sto ck T h e
. ab ri . F
k o id C omp an y w as on ly a legal o rgan izatio n ; n o m an ag erial ch an ge to o k
F
p lace, an d ab rik o id co n tin u ed to b e m an u factu red an d so ld b y th e du Po n t
O p eratin g an d S ales D ep ar tmen ts In 1 9 1 4 th e co mp an y p u rch ased an ar tifi cial .
,

leath er m an uf actu rin g fi rm in C an ada By 1 9 2 0 th ese co m p a n ies h a d b een .

,

q
li u idated, Rep o r t of De elop m en t D ep ar tm en t to D e elo p m en t C o m m ittee,
“
v v
O ct 1 1 , 1 9 1 2, G E 1 04 , an d History an d Pro sp ects O f
. ab rik o id In du stry
“
F .

Nov 4 .
, 1 92 1 , GE 1 06 .

R ep o t f W W Rich ards to R R M C arp en ter, S ep t 1 2 , 1 9 1 3 , D E DP 7 1

r o . . . . . . .

A lth o u gh m an y years later Lammo t du Po n t an d o th er co m p an y o ffi cials

v
claim ed th at th e ad erse decisio n in th e an titr u st case d ecided in 1 9 1 1 tu rn ed

v
th e co mpan y to w ards di er sifi catio n , co n tem p o r ar y e iden ce m ak es it clear th at v
ex cess cap acity r esu ltin g fr o m th e loss o f g o er n m en t o r ders, r ath er th an v
v
an titru st action , p r o ided th e in itial m o ti a tio n to m o e b ey o n d exp lo si es v v v .

v
Th e co u rt an d th e go ern m en t h ad, larg ely at th e u rg in g of th e A rm y an d
v
Na y, p ermitted th e comp an y to retain all its m ilitary p o w der p lan ts Neith er .

o f th e tw o n ew co mp an ies car ed ou t o f du P o n t h a d a n y sm o k eless p o w der v

o p eration s u n til after th e ou tb r eak o f Wo rld War I D u Po n t h a d ex actly as .

mu ch o f a mo n o p o ly o f th at b u sin ess in 1 9 1 3 as it h ad h ad in 1 9 03 ; an d f ro m
th e fi rst, th e di v r ifi
e s catio n p ro gram at du Po n t w as b ased w h o lly on fi n din g
4 10 NOTES F OR P A GES 82 —
86
uses f or n itrocellulose, a material used p r imarily in s mok eless po w der rath er
tha n high ex p losi es v .

67 .
“
Progress Rep o rt on Cellulo id In vestig atio n , A pr . 1 7, 1 9 1 4, GB 1 08, w hich
inclu des a summary o f an w h et rep o rt on this sam e su b ect da ted F eb 6, j .

1 9 1 4 , an d tes tim on y o f Ir enee du Po n t, F eb 1 7 , 1 95 3 , p p -

1 9 2 5 1 9 29 . . .

6 8 This an d th e fo ll o w in g
. u o tatio n are fr om q
Pr ogr ess Rep o rt o n Cellul o id
“

v ”
In estigati on , A p r 1 7, 1 9 1 4 , G E 1 08 . .

69 Th is
. an d th e q
f o llo win g th ree u o ta tion s are fro m r ep o r t O f D e elop men t De v
v
p ar tm en t to th e Ex ecu ti e Co mmitt ee on Buildin g an d O p eratin g a Cellul o id
“

”
Plan t, No v 1 1 , 1 9 1 4 , DE DP 7 3
. .

7 0 I bid O n e reason f or decidi n g on a p il o t p lan t w as Th e ap p ar en t di er sity of

. .
“
v
o p in io n r egar din g th e m ost efficien t p r ocess of o p eratio n am on g th e O l dest

an d m o st ex p erien ced m an u f actur ers .

71 .
“
v
A nn u al R ep o rt of D e elop m en t Dep artmen t to Ex ecu ti e C o mm ittee, D ec v .

3 1 ,
1 1
9 4 , D E D P 77 , an d tes t im o n y o f Ir é n ée du P o n t, F eb 1 8 , 1 953 p,
1 9 34 . . .

7 2 Th e inform ation f o r th is p ar agr ap h co mes fro m th e A n n ual R ep ort (s) of E 1

. . .

d a Pa n t de Nemo u rs C o mp a n y for 1 9 1 7 an d 1 9 1 8 ; Du tton , Du Pon t, p p .

22 6-22 9 ; Williams Hayn es , A merica n Ch emical In d ustry — A History v o l II I , .

World War I, 1 9 1 2—1 9 22 (New York , pp 1 92 —20 0 . .

73 Pi
. e rr e du P o n t to Co lem an du Pon t, Ian 1 4 , 1 9 1 5 , DE DP 1 0 . .

7 4 A n n ual R ep o rt of E I da P an t de Nem o u rs
. . . Comp an y for 1 9 1 8 esp ecially ,

pp 3 4,
—. 1 0 , an d t tim
es on y o f Ire n e e d u P on t, F eb 1 8 ,
1 95 3 p p
, 1 9 4 2 - 1 944 A c . . .

co r din g to th e ann u al r ep o rts, n et ear n i n gs r ose fr o m million in 1 9 1 4 to

in 1 9 1 5 to in 1 9 1 6 an d th en fell to in 1 9 1 7 an d in 1 9 1 8 .

v
Th e di iden d r eco rd o f E I du P on t de Nem o ur s 8: Co mp an y f or th e f ou r
. .

years 1 9 1 5 to 1 9 1 8 w as 3 0 p er cen t, 1 0 0 p er cen t, 5 1 p er cen t, an d 2 6 p er cen t,

resp ecti ely v .

7 5 Mem oran du m fro m Irén ée du Po n t to D e elop m en t D ep art men t, May 3 , 1 9 1 5 ,

. v
DE DP 7 5 ; testimo n y of Ir en ee du Po n t, F eb 1 8 , 1 9 5 3 , p p 1 9 4 7- 1 9 4 8 ; an d . .

Secr etary Of Ex ecu ti e Co mmittee to P S du Pon t, v u tur e Uses o f o ur S m o k e . .

“
F
less Po w der an d G un co tton Plan ts, Ian 2 6, 1 9 1 6, D E DP 8 2 . .

6 H l l l — Pr ogr ess Rep or t, Jan 1 9 , 1 9 1 6, DE DP 8 1 , an d al so Hun ter

“

7 . o p ew e P an t .

G ru b b to Iren ee du Pon t, Nov 4 , 1 9 2 1 , G E 2 8 5 (an un titled r ep o rt o n th e p ast

.

co n diti o n s an d f u t ur e p ro sp ects o f th e du Po n t p ain t b u sin ess) .

77 .
“
Hop ew ell Plan t — P r ogress Rep o t, r ”
Ian . 1 9, 1 9 1 6, DE D P 8 1 A l so Secretary .

f Ex ecu ti e C o mmi ttee to P

o v du Po n t, . S .
“
F u ture Uses o f ou r S m o k eless

Pow der an d G u n co tt o n Plan ts, Ian 2 6, 1 9 1 6, DE DP 8 2 . .

7 8 R.ep or t fr o m th e D e elo p m en t v
D ep ar tmen t to th e Ex ecu ti e Co mmittee on v
T h e P u rch ase o f th e A r lin g ton C o m p an y , S ep t 1 2, 1 9 1 5 , p rep ar ed b y W S
“ ”
. . .

C arp en ter , G E 1 1 0 ; A n n u al Rep ort of E 1 d u P a n t de N em o u rs C o mp an y . .

fo r 1 9 5 p 3;
1 an d t
,es t
.im on y o f Ir én é e du P o n t, F eb 2 7 ,
1 95 3 , p p 2 2 7 3
-
22 75 . .

. F
7 9 T h e ex p an sio n of th e ab rik o id o p er atio n s as ou tlin ed in Histo ry an d Prosp ects
“

o f th e F
ab rik o id In du stry , Nov 4 , 1 9 2 1 , G E 1 06, an d r ep o r t of D e elop m en t
. v
v
D ep ar tmen t to Ex ecu ti e Co mm ittee o n th e p ur ch ase o f th e F airfi eld Ru bber
Co mp an y , May 2 7 , 1 9 1 6, G E 1 07 .

8 0 R ep o r t f ro m W S C ar p en ter to Ex ecu ti e Co mmittee o n D yes tu ff s, D ec 29 , v “

. . . .

19 1
5 , DE D P 8 5 .

81 . T es tim on y o f Iren e
e du Po n t, F eb . 1 8, 1 9 53 , pp . 1 9 5 7— 1 96 5 an d D u tto n , D u
P an t p p 2 8 7—29 1
, . .

8 2 R ep or t
. to R R . . M . r
C a p en ter f ro m A D C h am ber s, . . J u ly 2 6, 1 9 1 5, DE DP 7 8 ;
N O TE S F OR P A G ES 86 —
89 4 1 1

“
r
A nn u al Rep o t o f th e D e elop m en t Dep ar tm en t, v
D ec 3 1 , 1 9 1 4 , DE DP 77 ; .

r
an d testim o n y o f I enee du Po n t, F eb 1 8 , 1 9 5 3 , p 1 94 8 . . .

83 . Hop ew ell Plan t — Progress Rep ort, Jan 1 9 1 9 1 6, DE DP 8 1 ; rep ort of De el

“ ”
.
, v
o p m en t D ep ar tmen t to Execu ti e Co mm ittee, v
T en tati e Rep or t o n G en er al
“
v
Utiliz ation o f Parlin , Carn ey s Po in t an d Hask ell Plan ts, May 1 5 , 1 9 1 6, DE DP
’

8 7 T hi s rep ort also considered b rie y th e f utu re of th e R ep au n o , Deep w ater,

. fl
an d Ho p ew ell p la n ts .

Hop ew ell Plan t — Progress Rep ort, Ian 1 9 , 1 9 1 6, DE D P 8 1

“
. .

v
Rep ort of D e elop m en t D ep ar tmen t to Execu ti e C o mmittee o n G en eral Utili v
z atio n o f Parlin , C ar n ey s Po in t an d Hask ell Plan ts,
” ’
May 1 5 , 1 9 1 6, DE DR 8 7 .

q
T h e uo tatio n o n th e Par lin p lan t is fr o m th is rep o rt .

Th e May 1 5 , 1 9 1 6, rep o rt n o ted : It is n o t exp ected th at an y o f th e p resen t

“

p o w der man u f actu rin g m ach in ery co u ld b e u tiliz ed to an y great ex ten t in th e

‘

v
m an uf actu re of arn ish b u t p ortio n s of th e gen eral e u ip m en t, su ch as bo i ler q
p lan t, p o w er p lan t, sto r e h ou ses, S to r ag e ta n k s, gr o u n ds an d b u ild in gs, as w ell
‘

as r ailr oad sidin gs cou ld b e u tiliz ed an d th e additio n al e u ip m en t r e u ir ed is q q

n o t too exp en si e
”
v .

I bid .

. T his an d f o llow in g
th e u o tatio n q
is fro m th e rep ort o f th e D e elop v
men t Dep artmen t to th e Execu ti e C omm ittee o n T h e Man u facture of v “

Pain ts an d V arn ish es at Par lin , A u g 1 1 , 1 9 1 6, G E 1 1 1

”
. .

v
Th e reaso n s for th e m o e in to p ain ts ar e listed in ibid (th e tw o fo llow in g .

q
u o tation s are fro m this r ep o r t) , re or t o f th e Develop men t Dep ar tmen t to
p
th e Execu ti e Co mm ittee onv Harrison Bros Co , No v 22, 1 9 1 6, G E
“
. . .

1 1 2, an d r ep o r t o f Lamm o t du Po n t to Ex ecu ti e Co mmittee, P u rch ase of v “

Harrison Bro s 8: Co , In c , Nov 28 , 1 9 1 6, G E 1 1 2 T h e Dep artmen t env i

. . . . .

sio n ed cr eatin g a large co n so lidated co mp an y in th e p ain t in dustry in

mu ch th e same w ay th e da Po n ts h ad do n e in ex p losi es in 1 9 02 an d 1 9 03 v
(Rep ort o f H G ru b b to Irén ée du Pon t on th e p ain t bu siness, Nov 4 , 1 9 2 1
. .

GE v
S u ch p lan s r e eal a lack of ap p reciation of mark etin g diff eren ces b e
tw een p ain t an d exp losi es v .

9 0 A s th e rep ort o n T h e Man u factu re o f Pain ts an d V arn ish es at Parlin , A u g

“
. .

1 1 , 1 9 1 6, G E 1 1 1 n o ted : F
u r th ermo re th e a erag e mak er b u ys h is alco h o l in
“
v
b arrels from a den atu rin g p lan t With o ur large p u rch ases, o u r o w n ex i sti n g .

den aturin g p lan t an d tank -cars, w e Sh ou ld h ave an ad an tage o er all o th er v v

mak ers, in some cases as mu ch as 5 to 8 cen ts p er gallo n of alco h o l A s sh own .

th e sp irit v
ar n ish es in creased o er 1 00% fro m 1 9 09 to 1 9 1 4 v
O u r C omp an y .

ou gh t to claim at least Th e r e p or t
”
of th e to tal b u sin ess .

also added, o ur b u sin ess w ou ld b e str o n gly su p p o r ted b y ou r p ro b ab le f utu re

“

man ufactur e of lin seed o il an d certain ch emical co lors ”

.

Rep ort of R R M Carp en ter to Execu ti e Co mm ittee o n Excess Plan t Utiliz a v “

9 1. . . .

tio n an d New In du stries, DE DP 8 3

”
.

9 2 Rep o rt o f H G ru bb to Irenee du Po n t o n p ain t b u sin ess, Nov 4 , 1 9 2 1 , C E

. . .

2 8 5 ; Rep o r t fro m Excess Plan t Utiliz atio n D i isio n to R R M Carp en ter, v . . .

lin t V arn ish 8: C o lo r Work s, A p r 1 7, 1 9 1 8 , p rep ared b y

F S MacG r ego r, F
“
. . .

G E 2 77 ; an d Rep o rt o f Lamm o t du Pon t an d William C o y n e, Exp an sio n in

th e Pain t In du stry,
”
A u g 1 4 , 1 9 1 8 , G E 27 8 . .

9 3 Rep o rt o n C omp leted Reco mm en datio n s o f Excess Plan t Utiliz ation D i isio n ,
“
v
Nov 23, 1 9 1 7 , DE DP 8 8, an d Excess Plan t Utiliz atio n Di isio n to R R M
. v . . .

C arp en ter, A p r 2 4 , 1 9 1 8 DE DP 2 1 7 . .
4 12 NO TES F OR P A G ES 89 —
95

9 4 D.e elo p v
m en t Dep a tmen t to Execu ti e C o m mittee, r v Mar .
3 1, 1 9 1 7 , an d Hayn es ,

A merica n Ch emical In du stry , III, 3 7 5 .

95 T h.er e are man y con temp o a y do cu m en ts on th is p o in t in th e exh ib its o f b o th rr

th e def en se an d th e go ern m en t in th e du Po ut-G en e al Mo to s A n titrust S u it
v r r .

r r
Pa ticu la ly sign ifi can t are (1 ) T easu e o f th e du Po n t C omp an y to in an ce r rr F
Co mm ittee on T h e G en e al Mo to s S to ck In estmen t, D ec 1 9 , 1 9 1 7 , G E 1 24
“ ”
r r v .

an d (2 ) testimon y of Pierr e
du Po n t, Jan 20, 1 9 5 3 , p p 1 7 1 9 , 1 732 , an d F eb . . .

26, 1 9 5 3 , p p 2 2 1 5 —2 220 Neith er Ir e

. nee n o r Lammo t du Po n t w as aw are of
.

th e sch eme p rio r to Rask ob s p r esen tatio n to th e in an ce C o mmittee

’
F .

96 . D u tto n , Du P a n t pp 27 5—2 7 6 , . .

97 . Hayn es, A merican Ch emical I n dustry III, 2 20—22 1 , .

98 . Jam es L yn ah to W S C arp en ter, Jan 6, 1 9 1 9 , D E G M 1 4 2, an d W S Carp en

. . . . .

ter to am es Lyn ah , Jan 7 , 1 9 20, DE G M 1 4 3 (T h e date o n th e fi rst letter w as

J . .

clearly mean t to b e 1 9 20 )

99 . C oo rdin ation w as made m ore difficu lt b ecau se th e su bu n its w ithin th e f u n c

tio n al dep ar tm en ts w ere n o t set up S O th at each p ro du ct h ad its adm in istrati e v
o ffices in each dep ar tmen t Fo r examp le, w h ile th ere w as on ly on e Pain t an d .

C h emicals Man u factu rin g Dep artm en t, its p ro du cts w er e so ld th ro u gh th ree

diff eren t sales o ffi ces, Pain ts an d Pigm en ts, A cids an d Hea y C h emicals, an d v
C h em ical Pro du cts Resear ch o n th ese sam e p ro du cts an d th eir p ro cesses w as
.

carried o u t b y th e Exp lo si es an d th e v
G en eral u n its o f th e C h em ical Dep art
” “

men t Moreo er, th e mark etin g f or th e n ew p ro du cts w as n o t don e b y th e lo n g

. v
estab lish ed b ran ch o ffi ces, w h ich co n tin u ed to h an dle o n ly exp losi es, b u t b y v
fi v e n ew co n so lidated sales o ffi ces (see C h arts 3 A an d B) .

1 00 . q
T his an d th e f o llo w in g u o tatio n an d also th e fi gu res in th is p aragrap h co me
fro m th e rep o rt o f H G ru bb to Iren ee du Po n t o n th e p ain t b u sin ess, Nov 4 ,
. .

1 9 2 1 , G E 2 85 A lso esp ecially usefu l w as th e rep or t f rom th e De elop men t

. v
Dep ar tm en t to W S C arp en ter, Mar 1 5 , 1 9 2 0, G E 2 8 0
. . .

101 .
“
History an d Pro sp ects o f th e ab rik o id In du stry, Nov 4 , 1 9 2 1 , G E 1 06
”
F . .

1 02 . Th is an d th e ten f o llo w in g u o tation s are from W Pick ard to th e Execu ti e q F . . v

C o mm ittee on Merch an disin g S ales ersus T o n n age Sales, Sep t 8 , 1 9 1 9 T h e v
“ ”
. .

in itial co n cern for th e sales p ro b lem , p ar ticu larly m erch an disin g, is seen in
rep o rt to Execu ti e Committee from L du Po n t an d v W Pick ard on th e . F . .

A r lin gto n , Harriso n , an d Dyestu ff s Pro du cts, A p r 1 9 , 1 9 1 9 , an d rep o r t to th e .

v
Ex ecu ti e Co mmittee from W Pick ard W S C arp en ter, an d C A Meade F . .
, . . . .

on
“
v
O er-th e-C o u n ter Pain t an d V arn ish Bu sin ess, u ly 1 7 , 1 9 1 9 T h e fi rst m en J .

tion of th e p ro b lem in th e comp an y p ain t an d arn ish b usin ess ap p ears in v

rep o rt of Excess Plan t Utiliz ation Di ision to R R M Carp en ter, A p r 24, 1 9 1 8 , v . . . .

D E DP 2 1 7 .

1 03 . T his an d th e fo llo w in g p aragrap h s are b ased o n Rep o rt of A B Ech o ls (Treas . .

u f er s O ffice) , W C Math ews (A ssistan t to th e Presiden t) , C W Ph ellis

’
. . . .

( S a le s) , A P o r ter.
(Pr o dF
u cti
.o n ), an d S M acG re g o r (D e elo p m en t) , F . . v
C h airm an , to Su b-C o mmittee o f Ex ecu ti e C ommittee on th e Q u estion o f v
Merch an dising ersu s T o n n age S ales, Mar 1 6, 1 9 20 Th e followin g twen ty-o n e
”
v . .

q u o tation s are fro m th is rep o rt A lso imp o r tan t w as r ep o r t o f A B Ech o ls o n . . .

“
Merch an disin g and Ton n age S ales, No v 1 0, 1 9 1 9 In referen ces to p ain ts an d
”
. .
“

ch emicals (see C h art ch em icals r efer to ch emicals u sed in p ain t man u fac
”

r
tu i n g .

1 04 . Th e rep ort , o th e s o n r
in du stry, m ade clear th e accep ted distin ction
lik e th e p ain t
in th e b u siness b etw een trade o r o er-th e-cou n ter an d in dustrial sales T h e
” “
v .

m o st u sefu l su mmary of th e diff eren ce in th e co mp an y s p erfo rman ce in th e

’
NO TE S F O R P A G E S 9 8 — 1 1
0 4 1
3
fi eld in du strial an d in o er-th e-cou n ter sales is in a r ep o rt from H G ru bb
of
“
v .

to Ir e nee du Po n t o n th e p ain t b u sin ess, No v 4 , 1 9 2 1 , cited ear lier . .

Pen ciled comm en t o n a su p p lem en tary r ep ort to th e su b committee f rom su b

su b co mm ittee o n Merch an dising ersu s T on n age S ales, Mar 27 , 1 9 20
“
v . .

Rep o rt to Execu ti v e C o mm ittee fro m su b co mm itt ee of Ex ecu ti v e C omm ittee

on
“
Merch an disin g vr e su s T onn age S ales, May 27, 1 9 20 .

T hi s an d th e in D ale, D u Pon t : Pion eer in

fo llo w in g q u o tation are gi v en
“

System atic Man agem en t, p 5 0 T h e dates o f this r ep ort an d th e seco n d on e o f . .

No v 1 9 , 1 9 20, ar e gi en in rep ort to Ex ecu ti e Comm ittee f r om Su b co m

. v v
mittee on Du Pon t Comp an y O rgan iz atio n , A u g 3 1 , 1 9 2 1
“
. .

Ir én é e s p ositio n w as m ade clear in No tes T ak en D ur in g D iscu ssion o n Rep o rt

’ “

of S u b -C o mm i ttee o n D u Po n t Co mp an y O rg an iz atio n ,
” ‘
A u g 3 1 , S ep t 6, 7 ,
Q
. .

192 1 He m ade th e sam e p o in ts in an in ter iew w ith th e au th or, A u g 2 3 ,

. v .

195 6 . veto es w er e discussed in th e letter to th e Execu tive C ommittee

Irén ée s
’

from H F Brow n A u g 5 1 9 2 1 . .
, .
, .

Thi s an d th e f o ur follo w in g qu o tation s ar e fro m r ep ort to Ex ecu tiv e Co m

mittee from F W Pick ar d on Pain t an d V arn ish Bu sin ess D ec 1 1 1 9 20
“
. . .
, .
,

T hi s r ep or t su mm ar iz ed th e ev en ts leadin g to th e ap p o in tmen t o f th e Pain t

S teerin g C o mmittee T h e o th er m em b er s of th e inf orm al co u n cil an d th e
.

later S teerin g C omm ittee w ere b eside MacG regor S P Wo o dbridge fro m , , . .

S ales an d E C T h omp so n fr om Pr o du ction T h e Ex ecu tiv e Co mm ittee s A d

’ “
. . .

vice Of A ction Nov 2 3 1 92 0 auth oriz ed a formalizin g of th e coun cil

, .
, , .

1 10 . Inf o rmation f o r th e sev en f o llo w in g p ar agrap h s an d th e sev en qu o tatio n s in

clu ded in th em ar e fr o m r ep o r t to Ex ecu tiv e C o mm ittee f r o m th e su b co m

mittee on C o n tro l o f Bu sin ess D ec 22 1 9 2 0

“ ”
, .
, .

Execu ti v C ommittee s f A ctio n , Mar 1 , 1 9 2 1

A d ice v
’ “
e o . .

Rep o rts to F W . . Pick ar d fr om Pain t an d V ar nish S teerin g C omm ittee, Jan . 1,

J u n e 29 , an d A ug 5 , 1 9 2 1 . .

H . F . r
B o w n to Ex ecu ti v e C o mm ittee on Co n ditio n s o f th e C omp an y
P r esen t an d P rosp ectiv e ,
”
A ug 5, . 1 92 1 ; A n n u al Rep ort o f E 1 du P a n t de
. .

Nemo u rs <9 Co mp a ny fo r 1 9 2 1 p 5 ; an d Dale, D u P on t : Pio n eer in S ystematic

“

, .

Man agem en t, p 4 6
”
. .

T h is an d th e th ree f o llow in g q u o tatio ns are fr om

“
No tes T ak en at Execu ti v e

C omm ittee Meetin g o f A u gu st 2 ,

T h o u gh Fl etch e r Brow n h ad o fi cially i lef t th e Ex ecu ti v e C ommittee aft er th e

19 19 ch an ges, h e w as sitt n g i in on its m eetin g . He m ay h av e b een a ctin g as

an r alte n ate
f or A . F
elix du Pon t, w h o in 1 9 1 9 h ad tak en Bro w n s p l ace as
’

m an ager o f th e S m o k eless P o w der D ep ar tm en t an d w h o w as n o t in Wilmin g

to n dur in g m o st of th e su mm er of 1 9 2 1 O r Br o w n m ay h a e b een m ade a . v

p erm an en t m e m b er O f th e C o mm ittee w h en th e d ep ar tu r e o f D o n al dso n Br o w n

f or G en er al Mo tors lef t a v acan cy in D ecemb e r 1 920 . T h e f o llo w in g six q u o ta

tio n s are fr om th e letter of Fl etch e r Brow n to th e Ex ecu ti v e C omm ittee, A u g .

5 , 1 92 1 .

Min u tes o f J o in t Meetin g of Fi n an ce C o mm ittee an d Ex ecu ti v e C o mmitt ee,

A ug . 2 2, 1 9 2 1 . Do n aldson Bro w n did n ot lea v e G en e ral Motors to atten d . F elix

du Pon t w as m eetin g b u t left th e city sh or

at this tly th er eaf ter .

Rep ort to Ex ecu tiv e C omm itt ee fro m su b co mmi ttee o n D u P o n t Co mp an y

“

O rgan iz atio n , A u g 3 1 , 1 9 2 1 In f orm atio n f o r th is an d th e th r ee f o llo w in g

”
. .

p ar a r
g pa h s an d th e th r ee q u o tati on s in th em ar e fr o m th is r ep o r t .

Lett er from A Felix du Po n t to Lammo t du Po n t, A u g 3 1 , 1 9 2 1 , w h ich w as

. .
 N O TE S —
4 4
1 F OR PA GES I I O I I 4
r ead at th e m eeting
f S ep t 7 dealin g w ith organiz ation Th e inf orma tio n f oro . .

this p ar agr ap h an d th e n ext co m es fr om No tes T ak en Durin g Discu ssio n on

“

R ep ort of S ub -Co mmi ttee o n Du Pon t Co mp an y O rganiz atio n,

‘ ’
A ug 3 1 , .

S ep t 7 , 1 92 1 Ir enee s u o tation is f rom th ese 11006

.
' ’
q .

v
1 1 9 S u ccessi e Pr esi den ts h a e en do rsed thi s p rin cip l e of ma or ity op in io n o n mat
. v j
t ers comin g b ef or e th e Execu ti e Co mmi ttee v .

1 2 0 Rep ort o f
. B D Edge to Execu ti e Commi tt ee, Sep t 6, 1 9 2 1 , an d W W
J . . . v . . .

Rich ar ds to J
B D Edge, S ep t 3 1 9 2 1 Ri ch ar ds di d n o t st u dy th e a p eri
. . . .
, .

en ce o f G en er al Mo tor s Uni ted S ta tes S teel , o r se eral o th er large, h ol din g , v

co m p an y typ es o f A m erican o rgani z ati o ns Nor di d th e ust-f orm ed A llied . j
v
C h emi cal h a e a cen tral p u r ch asing o ffice u n til m any y ears af ter 1 92 1 .

1 2 1 Th e Min u tes o f a m eetin

.
g of th e su b commi ttee o n o rganiz atio n, S ep t 1 3, .

1 9 2 1 A lso No tes o n Meeting to Discuss Or gan iz ati on; A u g 3 1 an d Sep t 7 ,

“ ’
. . .

1 92 1 Edge r etai n ed th e man agem en t of T r afii c as w ell as Pu rch asin g Th er e

. .

w as som e discussion as to th e ad isabili ty o f con so lidatin g all eigh t A uxiliary v

Dep ar tmen ts in to o n e S er ice Dep ar t men t h ea ded b y a Sin gle m an Th ough
” “
v .

C A Patter son an d W S Carp en ter fa ored su ch a co nso lidati o n , th e senio r

. . . . v
v
ex ecu ti es decid ed to l ea e each stafi dep a rtmen t au ton om o u s v .

12 Ex tract f r om Min u tes o f Ex ecu ti e Commi ttee, S ep t 8 1 9 2 1 Th e n ew Execu

. v .
, .

v
ti e Commi ttee w as to in cl u de Ir e nee an d Lamm ot du P on t, H Brow n , . F .

Pick ar d, an d Sp ruan ce (m em o ran dum to Em p loyees of E I du P on t de . .

Nem ou r s 8: Com p an y S ep t 25 , , .

1 23 This an d th e f o ll o w in g
. u o tati on are f ro m a R ep ort to th e Bo ar d of Directors q “

fro m th e Ex ecu ti e Commi ttee, Sep t 2 1 , 1 9 2 1

”
v . .

1 24 In 1 9 2 1 , Emp l oy ee R el ati o ns w as u n der th e S er vice Dep artm en t, an d Pu bli c

.

R el ations w as p art of th e Pu b licity O ffice Th e In tern ation al Dep ar tmen t h as .

b ecom e an op er atin g dep artm en t, gr owi n g ou t of th e older auxiliary oreign F

R el ation s D ep ar tmen t .

CHAPTER 3

I . r
Th e inf o m ati on f o r th is p ar agr ap h com es l ar gel y f om P S du P o n t to I du r . . .

P on t, N o v 2 6, 1 92 0, D ef en dan ts Exhib it, D P 5 0 in Un ited S tates a E 1 du

’
. . . .

P an t de Nem ou rs Com p an y G en er al Motor s Corp or ation ct aL, U S Dis , . .

triet C our t f or th e Nor th ern Distri ct of Ill in ois, East ern Di isi on Civ il A ctio n v
No .
49 C —1 0 1
7 ( 95 3)
1 h er eaf ter cited as du F o n t-G eneral Motors A n tit rust
S ui t . Th e lett ers DE w ill b e used in citin g Def en se Exhib its an d G E, G o v ern

m en t Exhib its Unl ess o th erw ise in dica ted all ex hi b its an d testim oni es ar e
.
,

fr om th is su it In citin g f rom th e cas e th e n u mber s of th e ex hib its an d the

.
,

f th t tim th d i U it d S t t s S u p r em e C ou rt Rep orts

p g
a es o e es o n y ar e ose use n n e a e ,

25 3 Recor ds an d Brief Un ited S tates v s E 1 du P an t de Nemou rs

, , Com . . .

p an y G en er
, al M o to r s C or p or at ion e t al , O ct o b er T er m 1 9 5 6 ar e g iv en w h er e , .
, ,

p ossi bl e as th ese r ep o rts ar e m u ch m o r e r ea dil y av ailabl e th an th e District

,

Co ur t r eco r ds Th er e is m or e in b o th th e testimon y an d exhi bits con cern in g

.

th e ev en ts of No v emb er 1 92 0 b u t this additional in f orm ation o n ly fills in , ,

details giv en in Pierre s descri p tion of th em to Ir en ee Lawr en ce H Sel tzer,

’
. .

A Fin an cial Hist or y of th e A m eri can A u tom o bile I n dustry (Bo s to n pp ,

.

20 2- 20 8 al so p ro v ides an ex cell en t sum mar y o f th is ep iso de

,
.

Du r an t r eceiv ed 4 0 p er cen t of th e co mm o n sto ck o f th e n ew co mp an y, A gr ee

“
2 .
N O TE S F OR P A G ES 1 1 6 - 1 1
9 4 5
1

m en t dated No v ember 2 2 1 9 20, betw een du Po n t Securiti es Co mp an y, William ,

C Duran t, du P o n t A m eri ca n In dustri es In c an d Ch evr ol et Motor Co mp an y

”
.
, .
,

G E 1 5 4 an d J J Ras k ob to Finan ce Co mmi ttee E I du P on t de N emours 8:

, . .
, . .

C omp an y Jan 1 7 1 9 2 1 G E 1 5 6 , .
, , .

3 D u r an
. t
’
s ear l y car eer an d hi s a c ti v ities in th e D uran t-Da rt Carria e Co m
g .

p y
an are b es t su mm ar iz ed i n C ar l C r o w T h e C ity of F lint G r o ws Up (New ,

York , p p 29 3 6 ohn B Ra e gi .
— . J . v es a g oo d e alua tion of Dur an t s v ’
ca eer r
in his articl e, Th e ab ul ous Billy Du
“
F r an t,
”
Busin ess History Review ,
27 1 (Fall ,

4 .
J . L Pratt, Dir ect T estimon y, Du F o n t-G en er al
. Motor s A n tit ru st
S u it, p 1 4 06 . .

Her eafter an y t estim o ni es cited w ill b e f rom this suit A s . Pratt p o in ted o u t,
se er alv G en er al Man agers at G en eral Motors h ad th eir start as f arm imp l em en t
o r car riage sal esm en . In 1 9 2 0, th ese in cl u ded R . H Co llins Manag er of C adillac
.
, ,

W L Da y, Man ager o f th e T u ck D i ision ,

. . W r v F . . Warn er Man ager , o f Oa k
lan d, an d A B C Har dy, Manag e o f O l dsm ob il e . . . r .

5 . Cr o w , Fli p 35 n t, . .

6 Th e
. st ory o f Buick com es r f om Crow , in - F
l t p p 5 4 7 1 ; S eltz er, , . Fi n a nci al His
tory , pp . 1 45 - 1 5 0 ; an d A rth ur Po un d, T h e T u rn in g Wh eel (G ar den Ci ty,
New York , pp 6 8— 0 P oun d is
9 .
goo d o n th e ear ly m ark etin g situ ati on
.

(p p .
359 as ar e Ralp h C Ep st ein, T he A u to m o bile I n dustry (Chi cago ,
.

5 , an d R egi nal d M Cle el an d an d S T Williamson , Th e R o ad is

ch . . v . .

You rs (New York , p 53 F o un d also m en tio ns th e m o e o f W esto n . . v

Mo tt an d of Ch am p ion to lin t (p p 1 1 1 , 4 5 6, Th es e m ov s an d th e r ea F .

so ns f or th em ar e also gi en in A lf r ed P S l oan , Ir , A dv ent u res of a Wh ite v . .

Callar Man (New York , 8

p p 4 49
— . .

7 Th .es e statis tics are fr o m S el tz er ,

in an cia l H ist or
y pp 1 -1 0
49 5 F , . .

8 Pou n d, Tu rn in g Wh eel p 8 7 an d p p 3 64- 3 65

.
, . . .

9 Th e b es t so ur ce on th es e ear ly y ear s at Buick is Wal ter P C h ry sl er, L ife of a n

. .

A merican Wor k in g Man (Phil adelp hia, r ep rin ted from S atu rday Ea c
n in g P ast 0
p p 3 34
— P o un d (T u rn in g W h,eel ch 5 ) h as som e addi ti o nal data
. .
, . .

10 . A llan Ne ins , F or d : Th e Time s th e v (New York , Man , th e Co mp a n y , pp .

— 1 1 Russell R o bb Le ctu r es on Or a n iz ation

45 0 8—
, 8
4 7 4 79 4 9 5 g, (n p , ,
. .
p .

1 3 an d [ A W S h aw Co mp an y ] E xecuti ve C on tr o l (C hi ca go -
, . .
pp , , .
43 4 5 .

11 . D ur an t is sai d to h av e to ld G eorg e W P er k ins a Morgan p ar tn er .

, ,
w h en
D ur an t an d r
B iscoe w e re tryin g t o raise fun ds in 1 90 8 : T h e tim e “
will co me
h alf a million au tom ob il es
w h en a th is coun a y ear will be ma de an d so l d ln

T o this P erk ins r epo rt edly r ep lied

”
If th a t f ell ow h as an y sen se, h e ll
“ ’
try .
,

k eep th ose O b ser ations to himself w h en h e tri es to bo rr ow m o n ey (C le elan d v ” '

v
an d Williamso n Th e R oad is You rs p Dur an t s op timism as to th e
’

, , .

u n lim ited n atur e o f th e m ark et is descr ibed in N e ins , or d : T h e Tim es t h e v F ,

Man the Comp an y p 3 86 , , . .

1 2 Th e story o f G en er al Mo tor s b egin ni n g is to ld in S el tzer , inan cial History F

’
. ,

pp 3 37 2 — 1 5
. 1 —1 6
3 an d in P oun d , T u rn
, i n g W h eel pp 1 1 3
—1 2
5 , , . .

13. I bi d pp 9 3 94
— Th e. in,co rp o r ati o n o.f th e M cL au g hlin M o t o
. r C o m p y
an , L td .
,

cam e in 1910 D ur an t h a d ear li er en ter ed th e ca rriage mark et in Can ada

.

thr ou gh a p r ofi tab l e allian ce wi th th e McLau ghlin C arriag e C omp an y, h ea ded

b y R S McLau ghlin Th e n ew fi rm,
. . o f w h ose shares w er e tak en .

b y Buick , w o u ld in tim e beco m e G en er al Mo tor s o f Canada, ibid p p 1 24 .

, .
,

2 3 5 —236 .

1 4 Not th a t all th ese p ur chases w er e su ccessf ul Du r an t p ai d o er $ 7 million in

. . v
 —
416 NOTES F OR PA G ES 1 20 1 2 3
ral Mo tors stock f or th ree electric lamp comp anies organ ized b y John A
G en e .

Hean y T h ey p r o v ed w o rthl ess sin ce Hean y s p aten ts w er e in v alidated (Seltzer

’

.
, ,

Fi
i l Hist or y p p 1 5 8
n an c a , .

15 Thi s ch an g e in co n tro l an d comm an d dur in g

.
19 1 0 is best to ld in ibid .
, pp . 1 60

1 7 2 , su p p l em en ted b y Hen ry G P earson , S o n . o f New En glan d [ m es

a [ ac /
( son

9 26 (Bo sto n ,
S t orr o w 85 4 —1 -
1 3 1 24
2
, 1 pp . .

16 . Th e sto r y o f th e S to rr o w -N ash r egim e co m es fr om P ear son , S torro w , c h .

7,
th e co m p an y s ann u al
’
rep o r ts , an d exhi b its in th e du P o n t— G en er al Mo to rs
A n titr u st S u it .

17 . Th e is bes t describe d in A n n u al R ep or t of th e G en er al Mot ors

o rg an iz atio n

C o m p y
an u ly 3 , 9 , pp 9
1 1 1 1 - 1 0 ; A n n u
,
a l R eJp or t o f t h e G e n e r al M o tors Car .
{

p or ation u l 1 1
y 3 , 9 , pp 1 2 1 0 —1 2 ; an,
d A nJn ua l R ep o r t o f t h e G en er al M o t or s .

Co rp or ation u ly 3 1 , 1 9 1 3 , p 10 , J . .

1 8 P ear so n , S t or r o w p p 1 29
.
—1
37, an d D a id E d w ar d s ,
D e l e
,g a tio n an d Co n.
t ro l v F .
“

b y th e G en er al Man ag er in a T extile Machin ery Co mp an y, in Edw ar d C

”
.

Bur sk , T h e Man agem en t Tea m (Ca mb ridg e, Mass .

, pp .
59
—6 0 .

19 . T his an fr om A n n u al R ep ort u ly 3 1 , 1 9 1 1 , p 9
d th e fo ll o w in g q u o tati o n ar e , J . .

S ee also P S t w 0— 1 L h d b een th e A ssistan t t o th e

ear son ,
o rr o pp 1 3 1 3 y o ns a , . .

F irst V i ce-Pr esiden t at Westin gh ou se an d th e senio r ex ecu ti e in Westin g v

h ou se s Man uf a ctu rin g D ep artmen t (A n n ual R ep ort of Westin gh o use El ectric
’

Man u factu rin g Co mp an y for P ou n d tells of A D Little s con trib u tio n . .

’

in T u r n in g Wh eel p 2 69 , . .

G e n eral Mo to rs C o m p an y f Pur cha sin g A gen ts, May 7 1 9 1 3 DE Meetin g

“
20 . o , ,

G M 3 7 D etails of o th er m eetin gs ar e su ggested in th e min u tes of th e m eetin gs

.

f or u n e 4 u ly 3 0 No v 5 1 9 1 3 A u g 1 9 , 1 9 1 4 an d A u g 2 0 1 9 1 5 D E G M
J ,
J , .
, , .
,
.
, ,

8— 2 Th es e exhib its al so in dica te th e ro le of th e Bo ar d o f Man a ers

3 4 .
g .

21 . P earson , S to r ro w p 1 3 0 , . .

22 . E dw ar ds, D el egati o n an d C o n t
“
r ol , p 59
.
, an d a co n vr
e sation w ith Mr . Ed
w ar ds, w h o in 1 9 60 w as C h airman r
o f th e Bo a d, S aco -Lo w ell S h o p s .

23 . S ee Seltz er, Fi i l Histo ry p p

n an c a , . 1 7 2— 1 8 2, an d P ou n d, T u r n in g Wh eel , ch s .

1 0—1 2 . Th er e is m u ch signi fi can t in f o ma tion r on th e ch an ge in th e testim o n y

an d exhi b its o f th e du F o n t-G en eral Mo tors A n titru st S u it .

24 .
“
On e of his assoc iates recalled ,
”
Ern est D al e h as w ritt en , th at he [ D uran t] ap

p ear ed to th in k o f v o lu me o f sal es as an en d in itself , m or e im p ortan t th an

p r o fi ts, D al e, C o n trib u tio ns to A dmin istratio n b y A lf r ed P S lo an ,

“
.
Jr . an d

G M, J
”
A d min ist rativ e S cien ce Q u arterly ( u n e,
Th e sco pe an d n a

tu e o f r
D ur an t s p rogr am can b e m o st eas ily seen b y co m p arin g th e list of
’

acti e o p er atin g u n its o r su b sidiar ies in A n n u al R ep o rt o f t h e G en eral Moto rs

v
C or p or atio n u ly 3 1 , 1 9 1 3 , p , J
1 0, w ith th e A n n u al Rep o rt of th e G en er al .

Mot ors Cor p or atio n D ec 3 1 , 1 9 1 8 , p 7 , an d th at of D ec 3 1 , 1 9 1 9 , p p 7— 8 , . . . . .

Sh er idan , on e o f th e tw o carm ak in g u n its, is m en tion ed in L Pr att , D ir ect J . .

T estim o n y, p p 1 4 1 5 , 1 4 1 8 . .

2 5 In 1 9 2 0, D u ran t s th r ee assis tan ts in clu ded K ar l M Z imm ersch ied

( l
’
. . G en er a

Man age of Ch e o let, 1 9 2 0 P D Wago n e , an d a p erso n al

r vr . . r secr eta ry ,

W W Mu rp h y
. . . Th eir na m es ar e listed on th e o rgan iz atio n ch art att ach ed to
A . P S lo an
.
’
s
“
G en eral Mo tors C orp o ratio n — O rg an iz atio n S tu dv DE G M 1
”
.

J . L P . ratt (Dir ect T es tim o n y , p . 1 39 4 ) also m en tio ns D u ran t s

’
sm all p e rso n al

staf f .

26 . Th e cen tral staff O fi ces existin g u n der D ur an t ar e in dicated in Co mm u n ica

tio n dated S ep tember 5 , 1 9 1 7, fr o m T S . . Merr ill (G MC ) to Pie rre S du Po n t
.

t ransmittin g list o f D ir ect ors an d O fi cers o f G en eral Mo to rs C o rp o ration , GE

NOTES F OR P A G E S 1 2 3
— 1 2
6 4 7 1

1 2 3 , an d th e cha t acco m r p an yin g

“
G en er al Motors r
Co p o r atio n — O rgan iz ati on
DE G M re P aten t D ep a tm en t Th e ou tside r
”
S tudy, 1 . L Black m o
. h ea ded th e .

legal con su ltan ts w er e from th e firm of S te v en son , Car p en ter, Bu tz el, an d

Bacch us . T es tim on y in th e G en e r l Mo tors-du

a P o n t A n titrus t S uit e m p h asiz es
th e f system atic cost an d accou n tin g da ta See, f or examp l e, A P Sl o an ,
lack o . . .

Dir ect T estim on y , p 97 3 . .

2 7 S el tz er ,
. F
in an cial Hist ory p p 1 8 3— 1 88 Th e m a o r o p er atio ns of th es e co m , . . j
p an i cs w er e,
r esp ec ti e ly , a t H ar r ison , N J ,
B r iv
sto l, C 0 n n , A n d er so n ,
In d , D ay . . . .

t o n O hi o an d ack so n , Mi ch
, ,
J .

28 P oun d T u rn in g Wh eel ch 1 2 A lso an Uns ign ed Lett er dated un e 2 9 1 9 1 8 , J

“
. . .
, , ,

to H M Bar k s dal e r etary ar e at

”
( d i i i l d h f hi
’
. P S
. u P o n t s n t a s an t os e o .s se c .

th e lo w er l ef t o f th e last p age) G E 1 3 3 , su ggests Dur an t s co n cern o er th e ,

’
v
determi n ation o f Was hi n gto n to cu t Off th e steel su p p ly f or au tom o b il es an d
o th er n o n es sen tial p r od u cts .

D ir ect T es tim on y of L Pratt, p 1 4 03 J . . . .

Th r i m h h d m i m en t in G en er al Mo tor s in v
’

3 0 . e e s u c o n t e u P o n t C o p an y s n es t

th e du Pou t-G en eral Mo tors A n titrus t S ui t Th e b es t su mm ary is in a m em o r an .

du m en titl ed History o f th e du P on t Co m p an y s In estm en t in th e G en eral

“ ’
v
Mo tors Corp oration dated A u g 1 7 1 9 2 1 , G E 1 66 A lso usef ul is th e Mem
”
,
.
,
.
“

or an dum da ted D ecem b er 1 2 , 1 9 1 8 to in an ce Co mmi tt ee fr om Ch air m an ,

”
F
GB 1 34 .

31 . F o un d, Tu rn in g Wh eel , ch . 1 3, su pp l e m en ted b y th e ann u al r ep orts of th es e

y ear s Mem oran dum da ted D ecem ber 1 2,

.
“
19 1 8 to Fi n an ce C o mm itt ee fr om
”
r
C h ai m an , G E 1 34 gi es a g oo d in di ca tion v o f Dur an t s
’
r
st ategy as its o u tlin es

mated p o st w ar cap ital exp en ditur es

esti .

32 . Direct T estim on y of J L Pr att p p 1 392- 1 39 6 . .

, .
, an d P oun d, Tu rn in g Wheel , p .

1 83 .

33 I bid
.
pp 3 8 1
.
- 82
3, o d ch o se n o t to f o llow Rask o b
. . Fr ’
s inn o v ation , w ith un h ap p y

r
esu l ts f o r his deal ers A ll an Ne ins an d an k E . v Fr . Hill F or d : , Exp a nsio n an d
Ch allen ge : 1 9 1 5—1 933 (N ew Yo rk , pp . 2 67—2 69 .

34 . Po un d, T u r n in g Wh eel , pp . 1 65 , an d A u t o m otiv e In dustries,

(A u g 3 0, 1 9 7
1 )
35 .
J . L P . ratt , Dir ect T estim on y p p , . 1 4 05 — 1 4 06 , an d A P S loan , D ir ect T estim o n y,
. .

PP 969 9 7 4
-

6 ual R ep ort of G en era l Mot or s Co rp or atio n —8

3 A.n n
f or 1 9 1 8 , pp .
7 .

Ex cerp ts fr o m m eetin g o f Bo ar d o f Direct or s Mo tor s r r

“

37 .
Co p o ation o f G en er al
of Mar ch 2 1 , 1 9 1 8, G E 1 3 1 , also Ex cer p ts fr om m eetin g of Boar d of D ir ecto s
“
r
of G en er al Mo to rs r
Co p o ratio n o f eb u a y 2 1 , G E 1 3 0 ; Co mmun ica F r r “

tio n da ted Mar ch 8 ,

19 1 8 fr om Tr eas ur er to Fi n an ce Co mmi ttee
”
(b o th o f du
Po n t) G E 1 28 ; an d an agr ee m en t b etw een W . C . D u r an t an d th e du P on t
Co m p any to f orm th e Mo tor S ecur ities Co mp an y, un da ted, D E DP 4 5 This .

las t item str essed th at G en er al Motors w as to h a v e ap p r op ria ti on s p r ocedures

si milar to th o se at du P on t .

38 Ex cerp ts fro m m eetin g f Bo ar d f D ir ectors Mo tors r ration

“
. o o O f G en eral Co p o
o f Mar ch 21, 1 9 1 8, GE 131 .

Co mm u ni ca tio n dated fr om T r eas u r er to in an ce Co mmittee, Mar ch F

“

39 .
8, 19 1 8

G E 1 2 8 lists th e m em bership of b o th th e Ex ecu ti e an d in an ce C o mm itt ees

, v F .

Ham il ton M Bark sdale lik e Hask ell, a r etir ed du Po n t o fi cial w as exp ected
.
, ,

to serv e in m u ch th e sam e ca acit

p y ; b u t h e di d li ttle because o f illn ess He di ed .

i n O ct ob er, 1 9 1 8
(P S du Pon t to H M Bar k sdale, un e 29 , 1 9 1 8, G E
. . . . . J
418 N O TE S F OR P A G ES 1 2 6 — 1
2 8
1 3 3, an d A n n ual Rep ort f
o E 1 du P on t de Nem ours
. . Comp an y for 1 9 1 8,

p .

40 . C h ry sler ,
“
Lif e o f an A meri can Work ing Man ,
”
p .
37 , an d J . L Pratt, Direct
.

T estim o n y, pp 1 4 05 , . 1417 .

4 1 . I bid p p 1 4 02- 1 4 03
.
, . .

4 2 I bid .
pp 1 3 98
.
, P . 1 39 1 -
. ratt e m p hasized Du ran t s
’
co n cern o v er v
th e a ailabil ity
o f su pp lies if G en er al Mo tors w as to achi ev e mass e ou tpu t
su ccessq y a iv .

Besi de m ak in g g en er al st udies o n th e av ailability of aluminum, p et roleum,

p late glass, an d h o us in g , P att in es tig ated th e r v v al u e o f v arious p ar ts an d as

se mb ly co mp an i es, su ch as th e Hay es Wh eel C om p an y an d man uf act ur er s of

sto ag e r
ba tteries .

43 .
“
Mem oran dum dated F eb ru ary 1 8,
Ca p en ter to P 8 du
19 19, fr om R R . . M . r . .

DE G M 1 9 5 , an d R R M Ca p en ter to Ex ecu ti e Co mmi tt ee (du Po n t r v

”
Po n t, . . .

Co m p an y ) Ma r . 1 9 , 1 9 1 9, G E 55 7 Th e latter m en tio ns th e w ork o f th e En

.

J
L Pr att, Dir ect T esti mon y, p 1 397
. . . .

4 5 R R M Ca p en ter wro te in a l ett er to th e Execu ti

. . . . r v e Co mmi ttee, Mar . 1 9, 1 9 1 9 ,

G E 557 :
Perso nall y, I men t an d th e En gin eerin g De
thi nk tha t bo th this r
ar an g e

p art men t arran gem en t sh ould be co nsi der ed as m or e o r l ess tempo rary, an d
I gath er this is th e gen er al idea of th e Ex ecu tiv e Co mmi ttee .

Wh en Pr att did go to G en er al Motors in December , 1 9 1 9, h e w en t m or e as a

p erso n al assistan t an d t ou b l e sh oo ter f o r Dur an t th an as a staf f exp er t r .

4 6 T his. f oll o w in g tw o u o ta tions ar e from

an d th e L Pr att, Dir ect T estimon y, q J . .

pp 1 4 02 -
1 4 03 A lfr ed Sloan co mm en ted o n acco un tin g w eak n esses in Dir ect
. .

T estim on y, p 97 0 By th e agr eem en t ma de bet ween D uran t an d th e du Pon t

. .

Co mp an y, G en er al Motors w as to h a e ap p r op riations pr ocedures similar to v

th ose at du Pon t, DE DP 4 5 .

47 T A. B o y d , P r of
. essi on al A m.at e u r — Th e Bio r a h
g p y f o C h ar l e s r an k in Ket
l F
ter in g (New Yo rk , pp 1 1 7
— 1 1 9 ; K W Zi mm er schi e d , A s s is tan t to th e . . .

Pr esi den t, to C M S tin e, O ct G E 599 ; an d A uto m otive I n dustri es

. . . ,

( p
A r 22 ,
K ett e rin g s o rigin al c o nn ec
. ti o n w ith th e G e n er al
’

Mo tors grou p thr ou gh th e sal e o f D elco to United Mo tors 15 described b y Boy d

in p p 8 4—8 5 O n e r esul t of th is ap p o in tm en t may h a e been th e co nstruction
. . v
Labo r atory Buildi n g attach ed t o th e cen tral o fi ce b uil din g at Detroit,
”
of a
“

w hi ch w as fi v e stories high, b uil t in f ou r w in gs of r e-en f or ced co n crete co n

“

stru ctio n an d is design ed f or r esear ch w o rk al o ng m ech an i eal , el ect rical

an d ch emi cal li n es , A n n ual Rep or t of G eneral Moto rs Cor p oration for 1 92 1 ,

p 7 . .

48 E D
. enn edy, Th e A ut om o bile I n dustry
. . K (New Yo rk , p . 1 23 .

49 P a
.tt d r
esc ib es th e p essur es f or b u yin g in r r v en to ry in his r
Di ect T estim on y, p p .

1 4 05 , 1 4 1 4 - 1 4 1 5

50 .
“
Memoran dum fr om Rask ob to inan ce Co mm ittee,
da ted Mar ch 1 9, 1 92 0 J J
. . F
du Po n t Co mp an y, G E 1 4 0, an d Hist ory of th e du Pon t Co mp an y s In est
” “ ’
v
m en t in th e G en er al Mo tors Co rp o ration dated A u gust 1 7 , G E 1 66 Th e .

v iew s an d actio ns of Du ran t an d Ras k ob in raisin g fun ds ar e co er ed in G E v

1 4 1 thr o u gh 1 44 .

51 . A n n ual Rep or t of G en eral Motor s Cor p or atio n for 1 9 22 Mar 1 9 , 1 923 , p 9 , . . .

52 . v
Ne ins an d Hill, F or d : Exp ansion a nd Challen ge p p 1 5 1 -1 52 ; A utomotive , .

I n dustries 6 8
9 , 9 5,
2 1 0 6
3 , 1,07 4, 1 08 4, 1 093
- 1 094 , an d 1 1 29 (M ar 2 5, .
NO TE S F OR P A GES 12 8 — 1
3 1
4 1
9
Apr . 15, 22, 29 , May 6, 1 3, 1 9, an d 20, an d
“
Hist ory of th e du P on t
Co mp an y
’
s In v est m en t in th e G en eral Motor s Corp oration da ted A u gust 1 7,

GE 1 66 .

53 Thi s . f o ll owin g data o n in en to ries cam e fr om A n n ual Rep ort of

an d th e v
G en eral Moto s Corp orati on for 1 9 2 2 pp 9 1 0
r —
, . .

54 . L J
P r a
.tt , D i.r ec t T es t im o n y p
, 1 4 05 , S elt z e r , i n a nci al H ist or y pp 1 98 —1 99, . F , .

an d Direct T est im on y o f A P S loan , p 97 2 . . . .

55 Th
. e dr o p in th e au to m o b il e m a r k e t is i n di ea te d in A ut o m o ti v e I n dustri es ,

43 3 6-
3 7, 1 0 1 . 1 4 5 . 1 95 , 2 37 , 4 86 , an d 636 ( ul y I , 1 5, 22, Sep t 2 an d 23. J
an d L Pr att, Direct T estim o y, p p
J . . n 1 0 —
4 4 14 05 . .

5 6 I bid
.
pp 1 4 1 6 -1 1 8
.
,4 . .

57 A .n n u al R e p o r t o f G en e r al M o to r s C o r p o ra t i on for 1 922 p 1 0 Th e fi gu r es in , . .

this sen ten ce an d th e o n es b ef or e an d af ter it ar e fr om th e A nn ual R ep ort j ust .

Lo ans o u tstan di n g dur in g th is p erio d ar e gi en in G en er al Mot o rs Co rp o ration v “

— Ba nk L oa ns O u tst an din
g en d o f each m o n th , 1 920 an d 1 9 2 1 , an d fi rs t fi ve ,

m on ths DE DP 5 1 .

5 8 N .e ins an d H v
ill , F o r d Exp ans ion an d C h al le n g e pp 1 5 2-1
54 , an d A u tom a
.
, .

tiv e I n dust ries 4 3 : 63 6 (Sep t 2 3 , , .

5 9 I bid
. 644 , 68 4 , an d 7 86 (Sep t 2 3 an d 3 0, O ct 7 an d 1 4 ,
.
, . .

60 I bid
.
(N .o v, 1 8 , an d S el tze r , i n an cia l H i st or.
y pp 1 0—2 1 2 F , . .

Pr att emp h asiz ed th e n eed f or cas h at G en er al Mo to rs in his D ir ect T estim on y ,

P 1 4 05
61 . A n n ual R ep ort of G en eral Mot ors Corp oration for 1 92 2 p 9 , . .

62 .
“
C o mm un i ca tion dated No em b e 22, 1 9 20 f om Secr eta y , in an ce Co mmi tt ee v r r r F
(du P on t) to P S du Pon t,
. .
”
GE 1 79 , an d Sloa n , A dv en tu r es o f a White—Collar
Man , pp . 1 3 1 - 1 32 .

63 F or a am p le, Excer p ts from

.
“
Mem oran dum reMeetin g b etw een Pr esi den t an d

Plan t Man ag ers , Decemb er I , 1 9 20 DE G M 1 9 6 .

64 Co mm u ni ca tion dated Decem b er fr om P S du Po n t (G MC ) to Of

“
. 29, 1 92 0 . .

fi cers Dir ect ors an d Heads of Dep ar tm en t, with accomp an yi n g organ iz atio n
”
,

cha rt, G E 1 7 8 .

65 F
ab ul o us Billy Du ran t Ch rys ler , A m er iean Work in gm an
“
Ra e,
’
“ “
.
p p 32 ,
.

an d P o un d, T ur n in g Wh eel p
p 77 7
— 8 In th e l ett ers used as exhib its in th e . .
,

G en eral Mo to rs-du Pon t A n titr ust S ui t, Sloan 1s addr essed an d r ef err ed to usu
ally as Mr Sloa n an d occasio nally b y su ch m en as Lamm o t du F on t an d
” “
.

Walter Carp en ter as A lfr ed ” “

.

66 Sl oan s ear ly y ears ar e describ ed b y him i n A dv en tur es o f a Wh ite—Ca

’
.

Part I, an d ar e summ ar iz ed by o h n B Rae, A merican A u tom o bile Man u fac J .

t ur ers — T h e irst ifty Years (New York , F -

pp 1 9 2 1 9 3 F . .

67 . S loan, A d v en tu r es of a Wh ite-Co lla r Man P arts II an d III ; A lfr ed P S l oan , , .

Th e Most Imp o rta n t Thin g I E er Learn ed A b ou t Man ag em en t, S ystem v

“ ”

the Magazi n e of Busin ess 44 : 1 37 r

(A ug , D i ect T estim o n y , A P S l oa n , . .
,

6 — 8 —1 00 Ne ins Tord : T h e Times th e Man th e C om an v

p p 95 9 5 ,
. 1 2 99 3 ; , p y , ,

PP 2 1 5 39 8 .

68 . Direct T estim o n y A P Sloan p p 9 5 9 —9 67 De p o sitio n of A P S loan , A p r

, . .
, . . . .

28 , 1 9 2 5 p p 1 1 — 1
3 is an e en b etter sour ce on his w or k at Unit ed Mo tors T h e
, .
, v .

q u o ta tio n in this p ara r a h is fr o m

g p p 1 2 Th e D e p osi ti on n o t f o r w ar de d t o . .
,

th e S up r em e Co u rt, is in th e District Co u rt r eco r ds A lso useful w as S loan , A d .

v en tur es O
f a W h ite-C ollar Man Part IV , an d Seltzer , inan ci al Hist ory p p , F , .

1 83 —1 87 .
 N O TE S F OR —
420 P A G ES 1
3 2 1 43
69 Direct T estimon y , A P S lo an , p p 969 9 7 1
. . . .
— .

A P S l t A H k ll l 1 6, 1 9 1 8 , D E G M 2 7J J
7 0 . oan . o . as e , u y . . .

7 1 D .ir ect T es ti m on y , A P S loan , pp 9 8 0—

9 8 1 an d 1 344 , . . . an d Slo an , A dv en tu res
o f a White-C o llar Ma n p p 1 1 8— 1 1 9 , . .

72 D ir ect T estimon y, A P S loan , p 97 4

. . . . .

7 3 S lo an w as close en ou gh to S torr ow to be ask ed to o in Lee, Higginso n 8: Co m

. j
p an y N o r is th er e an y reason
. to th ink th a t S lo an l oo k ed ou tside o f in dustr y to

th e A r my an d th e g o ern men t f or m od els or th at, if h e di d, h e coul d h a e v v

l earn ed an y thi n g of v al u e fr om th em .

74 .
“
G en eral Mo tors C orp or atio n — O rgan iz ation S tu dy, D E G M 1 Un l ess . o th er

w ise in dica ted,

f ollo w in g u o tatio ns in study
all th e q this section are fr om this .

7 5 Th e ch anges ar e m o st clearly seen b y com p ar in g S loan s ch art in DE G M 1

’
.

w ith th at o f th e o rg aniz ation adop ted b y Pierr e in G E 1 7 8 S ee also Dir ect .

T estim on y , A P Slo an , p p 9 8 4 —9 85 . . . .

6 I bi d p 9 8 2 D ep o sition o f A P S lo an , A p r 2 8 , 1 9 5 2, p 32
‘

7 . .
, . . . . . . .

Co mm un i ca tio n dated D ecem b er 29 , 1 9 2 0 from P S du P on t (G MC ) to

“

77 . . .

O ffi cer s, Dir ecto rs an d Hea ds of Dep art m en t, G E 1 7 8 .

7 8 G en er al
. Mo tors o rgan i z atio n ch art , Jan 3 , 1 9 2 1 , G E 1 7 8, . an d J . L Pr att, Di
.

r ectT estimon y, p 1 4 1 8 E . . . F Jh . o ns on , w h o w as at on e tim e a du Po n t

man ager, becam e th e ex ecu ti v wh e o su p er vi sed th e P arts G r ou p .

79 . J o hn D . Moo n ey su p er vi s ed this gr ou p , A ut o m otiv e I n du stries , an d 1 04 5

(Nov . 15 an d 2 3 , A n n u al Rep or t o f G en eral Motors C o rp or ation for

1 9 22 , 10
p . .

8 0 Th e
. T r eas ur er w as M . L Pr en sk y. an d th e Com p t ro ller Fran k ,
T ur n er , G en
er al Mo tors o rgani z ation ch art, Jan 3 .
,
1921 , GE 178 .

81 . P o un d, T u r n in g Wh eel , pp . 1 29 , 1 5 0 .

82 . H L . . Bar t on h ea ded th e Man uf actur ing Section an d L Black m or e th e Paten t

.

D ep artm en t (G en eral Mo tors Co rp o ration organ iz ati on ch ar t,

Jan 3 .
,

Poun d (T u rn in g Wh eel , pp . 1 2 6, 1 5 0, an d 2 33 ) tells o f Har dy Har dy . an d

J . H Main . w h o too k hi s p lace, ar e m en tion ed in A P S lo an , D ir ect T estimon y,

, . .

1 04 1 1 04 2, w hile Haw k ins is r ef err ed to in Prin ters I n k , (Sep t 29 ,

’
—
pp . .

an d in N e ins v an d Hill , F or d : Exp an sio n an d Ch allen g e — 1915 -1

9 33 ,

p p 1 4 6 an d 1 69 . .

8 3 A P S lo an , Direct T es tim on y , p
. . . .
9 89 .

8 4 I bid p p 9 8 7—9 88
. .
, . .

85 A . S lo an , Dir ect T estimon y, p p 97 0—97 1 an d 9 8 7 ,

. P . . an d A n n ual Rep ort of
G en eral Mot ors C o rp orati o n fo r 1 9 23 Mar 2 4 , 1 9 24 , p , . . 6 F or p ices see K en
. r
medy A u to m o bile In du stry pp
, , . 1 3 0- 1 3 2 .

8 6 Th e fi gu r es f or
. car s so ld in 1 9 1 9 an d 1 9 2 1 are gi v en in Seltz e r Fi
,
n an c al i His
to ry , p . 213 ; F ede a l rT rade C omm i ssion , Rep o rt o n Motor Vehicle I n dustry
(Washi ngt on d G en er al Mo to s Co p o at o
i — Co mp ari r r r
“

, pp 2 9, 3 ;
1 an . n

so n f Num b er s o an d Prop o rtion o f Mo to V ehicles (P assen ge an d T u ck ) r r r

So ld b y or d, G en er al F Mo tors an d O th e r M n uf actur ers
a DE G M 35 , .

A . P . S loan ( D ir ect T e s tim o n y, p p 9 70 9 7 1 )

— . su ccin ctly describe d th e u ality q
of th e co rp o r atio n s diff eren t cars in 1 2 0
’

9 .

8 7 A n n u al Rep o rt of G en er al Mot o rs Corp or ation for 1 9 23 Mar 24 , 1 9 24 , p 6

.
, . . .

8 8 A P S lo an , D ir ect T es tim on y, p p 97 0—97 1 an d 9 8 7

. . . . .

8 9 A n n ual Rep or t of G en eral Motors Corp or atio n for 1 9 23 p 6 ; Prin ters In k

.
, . ,

( p
S e t 29,
-
1 9 (D ec 1 3 ,
.
.
NO TE S FOR PA G ES 1 43
—1
4 6 4 2 1

90 . A n n ual Rep ort of G en eral Motors Corp oratio n for 1 9 25 F eb 24 , 1 9 2 6, p 7 , . . .

v
Th e O ak l an d D i isio n mar k eted an d sold th e Po n tiac an d in time d op p ed th e r
O ak lan d an d co n cen t ated r w h olly on th e Po n tiac .

9 1 . A n n ual Rep o rt of G en eral Motors Corp oration for 1 9 20 , Mar 2 6, 1 9 2 1 , p 8 . . .

92 . r r
D o n aldson B o w n desc ib es in te di ision al p ice an d p olicies in D ecen t al iz ed r v r “
r
O p eratio ns an d Resp o nsib ilities w ith Coo din ated Co n t r ro l ,
”
A merican Man
m en t A ssociati o n , A n n u al Con ven tion S eries No 5 7 (F eb ,
age p 10 , . . . .

93 E.x tr
“
a cts fr o m E x ec u tiv e C o mm itt ee M in u t es f or Meetin g, Mar ch 3 0, G E
90 3 A t th e m eetin g th e C ommittee m o difi ed th e o lder p olicy b y r equ irin g th e
.

ap p ro v al of th e G r ou p Ex ecu tiv es b efo re mak in g o u tside p ur ch ases .

94 J L P r D ir T im 4 4 4 5 Th e f oll o w in g qu o tation is
t —1 0
. . a t, . ec t est o n y, pp 1 0 . .

from p 1 4 05 . .

9 5 T h e Co mm ittee s n ew du ties are descr ib ed in th e Ex cerp ts fr om Mem oran dum

’ “
.

re Meetin g b etw een Pr esiden t an d Plan t Man ag er s, D ecemb er 1 , 1 9 20

DE G M 1 9 6, an d J L Pratt, Dir ect T estim on y, p 1 4 1 4 . . . .

9 6 I b
. id pp 1 4 1 6—1 1
.
4 7, . .

97 Do n al dson Bro w n , Pricin g Policy in R elation to in an cial C o n tro l, Man age F

“
.

men t an d A dm in istration (F eb , an d C S Mo tt, O rganiz in g a

“
.
, . .

G reat In du strial, Man agemen t an d A dmin istratio n M M

”
( y a ,
o tt ,

w ro te
In v en to
p ry , rodu ction resen ted ev ery 3 0 days on a
, an d sal es fo r ecasts ar e p ,

b lank w hi ch p er io d o f 9 0 dco v ers a

a y s I n t h e ca se o f a r ep o r t m a d e o n .

O cto b er 2 5 1 9 2 3 f or ex amp le th e blan k sh o w s actu al in v en to ry at O ctober

, , ,

1 w ith estim ates f or No v em b er 1 D ecem b er 1 an d J anu ary 1 w hi ch o f

, , ,

cou rse in clu de co mmitm en ts alr ea dy m ade or to b e m ade w ithi n th e p erio d .

Prod u ction an d sales f o r ecasts ar e giv en in th e sam e m ann er an d all of th e

inf ormatio n giv en as of O cto b er 2 5 is comp ar ed w ith similar in f o rm ation
g iv en as o f th e 2 5 th o n e t w o an d thr ee m o n th s p r ev io u s, T h e ac t u al r
,
esu l ts , .

ar e com p ar ed au to m a tically w ith p r ev io u s f or ecasts ; an d thi s ten ds to secure

a ccur acy in f or ecastin g .

T h ese data are giv en f or th e v ehi cle di v ision s an d f or th e in tercomp an y

p ar ts gro up as w ell O n an o th er p or tio n o f th e b lan k ar e set dow n actu al
.

p ro du ction b y m o n th s f or No v em b er an d D ecem b er 1 9 23 an d J an u ary an d ,

Febru ary 1 9 24 Data are also f urn ish ed sh o w in g th e total estimated for
, .
,

f ou r m o n th s in all v ehi cles an d p ar ts p lan ts b o th in th e Un ited S tates an d

, ,

C an ada Each m on th th eref or e op p or tu n ity is giv en to th e ex ecu tiv es to

.
, ,

o b ser v e th e clo sen ess of r elatio n b et ween f o r ecasts an d actual r es u lts Th e .

fi gu r es as th ey stan d ar e rep or ted b y th e p r esiden t to th e Ex ecu tiv e C o m

m itt ee T h e r ep o r t in th e form ou tlin ed brin gs cl early forw ar d th e co n dition s
.

of th e in div idu al p lan t in v en tories an d so o n , , .

Th e deta iled w ork i ng-ou t of p ur ch asin g an d th e u se an d day to day co n tr o l of - -

in v en to ry ar e w ell describ ed in E C ar l Wen n er lu n d Q u ality C o n tr o l o f In

“
.
,

v en to ries — Ph sical R e ulati on C o n tr asted w ith Mer e Fin an cial Inf o rm a tio n
”
y g ,

Man agemen t an d A dmin istration , —6 8 2

(J u n e, Wen n erlun d w as
h ea d o f th e acto ry O rgan iz atio n S ection , f orm erly th e Man u factur in g
th e F
S ection , of th e ad iso ry staff v .

9 8 P r
. a tt m en tio n s te n -da
y r ep orts as b eing w ork ed ou t in early 1 9 2 1 T h ey w ere
“
.

p r o b abl y op er atin g rep o r ts ( L Pratt, D ir ect T estim on y, p J . . .

99 T h ese p ro cedur es ar e car efu lly describ ed in Mo tt, O rgani z in g a G r eat In du s

“
.

trial, pp 5 2 6-5 27
”
. .
 NOTES — 1
F OR P A G ES 1
47 54
T h ese p rocedur es ar e described in A lf r ed H Sw ayn e, Mob iliza tio n o f Cash
“
1 00 . .

R eserves, Mana gemen t m

”
an d A d i i
n st ation
r —2 3 (J an , Th e system , .

ha d su ch additional ad an tages as thos e of ma k ing a ailab le m ore bank v v

cr edi t to G en eral Motors an d o f r en dering it p o ssib le to in v est ex ce
ss eash so

th at it ea n ed inte est r r .

1 01 . G en er al Mo tors Co rp o ration o rganiz ation ch a t, r Jan 3 .

, 1 92 1 , GE 1 78 . S loan

48 5 0
1 95 2. -
PP .

1 02 . Th ese p r ocedur es ar e in dicated in Th omas B or dh a m an d Edw ar d H . F .

T 1n gley, A pp lyi ng th e Bu dget to In dustrial Op erations — Co n tr ol th rou gh

'
“

Organ iza ti on an d Bu dget, Managemen t an d A dministr ati on

”
—6 2 205
, ,

20 8, an d 29 1 (J an .
, F eb .
, an d Apr .
, an d in th e a ticl es r b y Do naldso n

pp . 283—2 86 .

q
This an d th e f o llowing u otation ar e fr om Do nal dso n Brow n , Pricing P olicy
“

in R el ati on to inan cial C on trol, p 2 83

”
F . .

A lbert Br adl ey , Settin g u p a F oreeasting Program, A m eri c a n Managemen t

“ ”

A ssociation, A n n ual Con ven tion S eries No 4 1 (Man , p 8 , . . .

Donal dso n Br ow n , Pricin g Poli cy in Rela ti on to inan cial Co n tr ol, p 28 5

“ ”
F . .

This an d th e f o ll owing uo ta tion ar e fr om ibid p 1 96 q .

, . .

A n nu a l Rep ort of the G en eral Motors Corp oration for 1 92 4 , Mar . 2 3, 1 92 5 ,

an d Motor
Vehicle I n dustry p p 2 2—24 , . .

r ”
Dal e ( Con t ib u tions to A dmi nist ati o n , p 4 5 ) desc ib es S loan s t ip w est
“
r . r ’
r .

“
Ex cerp ts — G en er al Pur chasin g C omm itt ee r e Pr o du cti on Sch edule o ecasts Fr
fr om Min u tes of Co mmittee f or A p ril 1 8, J ul y 2, Sep t 5 , . 1 92 4, an d F eb . 6,
DE G M 12 5 .

B ra dl ey Settin g up a orecasti ng Progr am , p 1 3

,
“
F ”
. .

q
This u otation is from ibid p p 6-7 , an d th e tw o f ollowi ng are fr om p p 1 2-1 3 .
, . . .

F
By this tim e th e inan cial S taff h ad begun , as Br adl ey in dica ted, to use m or e
“

sop histica ted m eth ods in com p u tin

g sellin g cost s th an Do n al dso n Br o wn h a d
used tw o y ears ear lier, p p 8—9 . .

B radley ,
“
Settin g up a Fr o ecas tin g Pr ogr am ,
p 3 . .

Th e b u y ers at G en er al Motors r
f deman d w ould ealiz ed th a t th e l e v lin g
e o

p l ease th eir su p p li er s, so th at th e G en eral Pu r ch asin g Co mmi ttee agr eed tha t

“

a l et ter f r om Mr S loan deal ing wi th th e p lan f or con tr ollin g p rod u ctio n

.

w hi ch man if estly w ou ld co n tr ol th e deman d u p o n su p p liers f or th eir p r od u cts

an d matmials, w hi ch o ur Pu r ch asin g A gen ts co ul d r efer to in co n er sa tio n on
'

v
n ego tiations with su p p liers, migh t str en gth en our b u yin g p o si tio n b y co n eyi n g v
to th e su pp li er s our efi ort s to w ar d scien ti fi cal l y p r e entin g w i de u ct ua tio ns v fl
in deman d r esu l tin g fr om dr asti c ad ustmen ts of Sch ed ul es Min u tes o f j ,

G en er al Pur ch asin g Commi tt ee, Sep t 25 , 1 92 4 , DE C M 1 25 F or fi gur es o n . .

v
imp r o em en t in st ea dyi n g seaso n al u ctuations in em p l o ym en t an d o n th e fl
v
im p ro em en t in th e turn o er of p r od u cti e in en tory , see Br adley, Se ttin g v v v “

up a o F
r ecastin g Pr ogram, p p 1 5 1 8 , an d Dal e, Co n trib u tions to A dmin
”
- .
“

”
istration , PP 5 1 5 2
1 16 .

1 17 . Th e r ol e of K etterin g s ’
section is in di ca ted in Boy d, Pr ofessio n al A mateu r ,
 — 1
NOTE S s o p. PA GES 1 54 57 4 3
2

pp . 1 1 7—1 26 , an d
“
Meeting of Car Di isi o n v Managers wi th Ex ecu ti v e Co m
m ittee Decemb er 1, DE G M 1 04 . Th e w o k r o f th e S al es an d F act o ry
Sections is in dica ted in Mo tt Organizi ng
,
“
a G reat In dus t ial, r ”
pp .
— 26
54 5 ,
2

9 (
—1
in Printers In k , , , D ecff 1 (Sep t 29
3, . .

Th e initial du ties of th e Pur ch asi ng Sectio n ar e sp elled ou t in l ett er fr om

A P S loan to all G en eral Oflicers an d G en er al Man agers o f D i isio ns , Ian 2 5 ,
. . v .

1 92 1 , D E G M 4 3 A s this l etter str essed : Th e use of su ch gen eral co n tr acts

“
.

[ ]
are t o b e en tir el y a t th e op ti o n o f t h e O p e r at in g D i isi o n s a n d,
w h en us ed , v
all deal in gs t o b e dir ectly bet w een th e Sell er an d th e Pu r ch asin g Di ision
”
v .

1 1 8 A n nu al Rep ort of G en eral Motors Corp or ation for 1 9 22 p p 1 5 1 6 T h e sto ry

- . .
. ,

of th e cop p er- coo l ed en gine an d th e r esul tin g lin e-an d-stafl co n ict is b ri efly fl
v
co er ed in Bo y d, Pr fession al A mateu
o r pp 1 1 9
— 1 2 3 See a lso A ut om otiv e I n d us , . .

tri es, 7, (J un e

Mem oran dum dated December from A lfr ed P Sloan , Ir to Members

“
1 19 . 1, 1 9 24 . .

of G en er al Pu r ch asi n g Co mmi ttee, D E G M 65 .

1 20 . A P S loan , Letter No 2 5 to G en er al Man agers o f Di isi ons an d o th er O fi cers,

. . . v
May 8, 1 92 2 an d attach ed mem or an dum en titled Pr op osal f or Coor dination “

o f G en er al Mo to rs Pur ch ases, DE G M 4 9 See also A P S loan to I H Main ,

”
. . . . .

F eb 9 , 1 922, DE G M 4 8, A P Sloan , Direct T es tim on y, p 1 032 , an d Meetin g

“
. . . .

at Car Di is io n Managers w ith Execu ti e Co mm i ttee, Nov 3,

v DE G M 4 5 v . .

121 . Th e r ep lies of th e G en er al Mana gers an d th eir p ur ch asin g agen ts ar e gi en in v

sev er al exhib its in th e G en eral Mot or s-du P on t A n titrus t S ui t, DE G M 5 0—60 .

1 22 . A . P . Sloan to Di isi o n v Man ager s an d o th er O fficer s, Nov . 28 an d 29 , 1 922,

DE G M 6 1 an d 62 A P S loan to I Lyn ch (F eb 6, 1 92 3 D E G M 32 8 ) sh ow s
. . . . .
,

tha t S l oan w as Ch airm an an d Lyn ch Secr etar y of th e Co mmi ttee .

1 2 3 Mem o ran dum fr om A P S loan to P 8

. du P on t, I Rask o b , C K etterin g
. . . . . . F .
,

an d F
red B ish er , A u gust 6 1 92 3 G E 9 04
. F A t G en er al Pur ch as in g , ,

Co mmittee m eetin g on A u gu st 2, 1 92 3 Sloan ou tlin ed th e f un ctio ns of a ,

“

p r opo sed Work s En gin eer s Co mmi tt ee

”
This is p ossib ly w ha t b eca m e o f
.

th e G en er al T ech n i cal C ommi ttee, G en er al Pur ch asin g Commi tt ee Min u tes,

A ug DE G M 1 5 2 Th e co mmi tt ees ar e describ ed in Mo tt, Or ganiz in g
“
. 2, 1 9 2 3 , .

a G r eat In dustrial ,
p , 52 6 ; Do naldso n Bro w n , Decen traliz ed Op erati ons
” “

an d R espo n sib iliti es with Co o r dina ted Co n tr o l, d A P S l Di t

p 1 5 ; an oan r ec . . .
,

T est imon y, p 99 4 , an d in di ca ted i n C h ar t sh owin g G en er al Mo tors Co rp o r a

“
.

ti on Or ga niza tio n , Ia u ar y, 1 9 25 DE G M 2 Th e mak e-u p of th e Ge n er al

n , .

T echn i cal Commi ttee 15 gi en in A ut om oti ve I n dustries 5 1 :5 3 1 -5 32 (Sep t 1 8 v , .

,

1 924 )
1 24 . Comp ar e Mo tt ,
“
O rganizi ng a G r eat In dustrial , pp .
— 2
5 4 5 5,
2 w hi ch in cl u des
an o rgan ization ch art f G en er al Mo tors f or 1 92 4 (see Chart 7 ) w ith G en er al
o

Mo to rs C orp o r ation — Or gan iz ation Char ts — Ian , 1 9 2 5 an d A p ril , 1 927 , DE ,

G M 2 an d 3 Th e f oll ow i ng n am es of m em b e s ar e fr om th e 1 92 7 ch ar t
.
'

1 25 . G en er af Mo tors Co rp o ration — Or gan iz ation Ch ar ts, Ian 1 92 5 an d A p r 1 9 2 7 . .

,

DE G M 2 an d 3 .

1 26 1bid an d Do n al dso n Br o w n , Decen tr alized O er ations an d R es o ns ib ili ties “

p p
. .
,

wi th Co -o r din a ted C o n tr ol, p p 1 5 — 1 6

”
. .

1 27 . A P S loan to C
. . Kettering ul y 25 , 1 92 4 , G B 666
. F .
,
J .

1 28 _ F or exam p le, th e G en eral Sal es Co mmi ttee, 111 a m eetin in Ma

g y 1 9 25 defi n ed , ,

th e cor p or ation s p o licy o n tr ade-in an d r esal e of u sed cars T h e m emb er s

’

agr eed th a t o r d s p o lic F

y of insis ting th at th e deal ers ma k e a p r ofi t o n used
’

cars W as unr ealisti c Th e basic aim of th e d eal er sh ould b e to sell as m an

.
y
4 4
2 NOTES F OR P A G ES 1 57
— 1 65
n ew ca rs as p ossib le an d to p rofi t o n th e o v all transaction rath er th a n
er - m erely
m ak e a p ro fi t on th e us ed car sal es . Th en on Oc t . 8, 1 9 25 , th e Co mm ittee
sp ell ed o u t in detail j w ha t th e
di isi o ns w oul d
ust co rp o ration s ’

p o li cy f or all v
be o n us ed cars, Motor Vehi cle Ind ustry p p 2 1 5— 2 1 6 Th e ed eral , . . F
T rade Co mm issi o n s r ep o rt , u o tin g fr o m th e G en er al Sal es Co mmi ttee Min u tes,
’
q
th en describes later m odi fi ca tio ns an d a d us tm en ts Of th e p o licy O n p p 2 5 5- 25 8 j . .
,

th e r ep o rt cites th e Min u t es o f th e Co mm ittee o n th e f o rm ul atio n of th e

co rp o r ati on s p o li cy co n cern in g excl usi e deal ership s
’
v .

D on al dso n Br ow n , D ec en tral iz ed Op erati ons an d R esp o ns ibilities w ith Co

“

”
or din ated Co n tr o l, p 1 6 Th e G en eral Pur ch asin g Co mm ittee also set up
. .

st an dar ds an d sp ecifi ca tio ns f or p ar ts an d e u ip m en t f or all di isi o ns (Min u tes q v .

o f G en er al Pu r ch asi n
g Co mm i tt ee, D E G M 1 5 2, an d A P S loan , D ir ect T es . .

tim on y ,P
A n n ual Rep or t o f G en er al Motors Corp or at ion for 1 922 , p .
3 ; A n n ual Rep ort
o f G en er al Motor s Cor p or atio n for 1 92 4 , Mar . 2 3, p 3; 1 92 5 , . an d G en er al
Motors O rgani zation C h arts, d A pr , an d 3 Ian ,
1 9 2 5 , an . 1 92 7 , DE G M 2 .

Th e ini tial mak e-u p o f th e Op er atio n s Co mmi ttee is in dica t ed in th e ch art

Sh ow in g th e o r gan iza tion Of th e co m p an y , Ian 3 1 92 1 , G E 1 7 8 I ts later .
, .

m ak e-u p is in di ca ted in Mo tt, O r gan iz in g a G r ea t In dustr ial p 5 26

” “
. .
,

D o nal ds o n Br ow n Pricin g P o li cy in R el ati o n to

,
“ ”
inan cial Co n tr ol, p 1 95 , F .

an d A P S loan, D ir ect T estim on y , p 997

. . . .

In 1 9 25 Harry H Bass ett, G en er al Mana ger of Bu ick , w as on th e Co m mi ttee

.

as w as Law r en ce P . Fi h s er , h ea d of Ca dillac, in 1 92 7 , G en eral Motors Organ

iza tio n C h arts, Ian DE G M 2 an d 3
, 1 92 5 , an d A pr .
, 1 9 27 , .

Moto r V eh icle In dustry p p 29 —3 1 This r ap id rise w as p ar tly b ecause , . .

F T to th e A , b u t in 1 9 3 1 Ge n er al Mot ors S hare

”
f th e o r d shif t fr om th e
“ “ ’
O

w as per cen t .

K en n ed y, A u t o m o bile I n dus try , p . 21 1, cl ai ms th at this w as th e lar gest n et

p ro fi t y et ma de b y an A m eri can co rp ration o .

Motor V eh icle In d ustry p , . 29 .

Edw ar d L A ll en , E con om ics

. o f A merican Man ufacturin g (New York ,

P 29 3
A u tom oti z/ e I n dustries , an d 5 3 6 -5 37 (O ct . 28,

F or t u n e, ii .
(A p r . 1 9, A n n u al R ep or t of th e G en er al Motor s Cor
p or ation for 1 937 , Mar3 1 , 1 93 8 , .
pp 3 7 3
— 8
; .R ep o r t t o th e S tock h o l ders of
“

G en er al Mo tors Co rp o r atio n , Ma y 1 7, 1937 , pp . 2—5 ; an d testim on y an d

exhi b its in du P on t A n ti tru st Suit

th e Moto r Veh icle In dustry (p p . .

52 7 in di ca tes th at th e G en er al Sal es Co mmittee lasted u n til Sep tem ber ,

1 9 3}

Do nal ds on Bro w n D ecen tr alized Op er atio ns an d R esp o nsib ili ties w ith Co
“

o r di n ated Co n tr o l M r r al Mo to rs
”
pp 7 8 os t of th e o,
th er arti cl es b y sen io. G en e .

v v
ex ecu ti es h a e b een ci ted ear lier in this ch ap ter .

CHAPTER 4

1 . G eo ge S r . G ibb an d E v el yn H . Kn ow lto n , Hist or y o f S ta n dar d O il Can »

p an y (Ne w Iersey ) , T h e Resu rg en t Years , 1 9 1 1 - 1 927 (N ew York ,

pp 668 —66
.
9 .

2 . Ralp h W Hi dy . an d Muriel E . Hidy Histor y of ,

S tan dar d Oi l Com p an y (New
N O TE S F O R P A G ES 1 67 — 1
7 1
4 5
2

I er s ey) ,
Pio n eeri n g ( N e w Y o rBig Busin ess, 1 8 8 2—1 9 1 1
k , in pp 3 4 3 52 — 2 . .

3 Th
. e co mm it tee s r t tr a de ,
d o m est c m
in clu ded o n e each f or exp o
i ar k e t in g th e ,

mar k etin g O f lu b rican ts manu factur in g, cru de O il, p r o du ctio n , p ip e lin es, an d ,
-

tran sp o rt atio n , an d tw o fo r p ur ch asin g su p p lies, Hidy Pio n eerin g in Big ,

Busin ess p p 5 5—6 8 Wh en th ese co mm ittees w er e star ted th ey w er e th e

, . .
, ,

Hidys h av e p o in ted o u t : v ested largely, th o u gh n o t ex clu siv ely, w ith adv iso ry
“

p o w ers,
”
(ibid p Ho w ev er, th e co n tin u in g h isto ry o f Stan dar d O il, as
.
, .

described b y th e Hidys in dicates th at b efo re lo n g th ese co m mittees an d n o t ,

dep ar tm en t h ea ds or ch iefs Of su b sidiaries car ried o u t m o st O f th e adm in is

t rativ e activ ities In an y case, b y th e tim e o f th e disso lu tion o f th e co mp an y in
.

1 9 1 1 , th e Man u f actu rin g C o mm ittee clear ly adm ini ster ed a lar ge n u m b er o f

th e co mp an ies r efi n er ies .

i b
G b a d n K n o w l to n , R esu rg en t Y ea r s p p 59 8 , 6 7 8 , a l so pp 3
— 1 4 (e s p ecia lly , . .

PP 7 a n d 3 33
1 -

T h e R u m an ian affiliate, th e on ly o n e am on g th e J ersey Eu rop ean comp an ies

to p r o du ce, r efi n e an d m ar k et cam e u n der th e su p er v ision O f th e Exp or t
, ,

T rade C omm ittee Fro m 1 9 1 6 to th e en d of Wo rld War I th e Rum an ian fi elds

.
,

w ere u n der th e co n tr o l o f th e G erm an g o v ern m en t A f ter th e w ar p r o du ction .

,

in Ru m an ia w as su p er v ised b y S adler s n ew F o r eign Pr o du cin g D ep artm en t

'
' ' ’

an d its m ark eti ng an d r efi n in g b y th e Exp o r t T r a de D ep ar tm en t .

F o r T eagle an d Imp erial see G ibb an d K n o w lto n Resu rgen t Years pp 1 9 5 ff ; , , , .

fo r Weller ibid p 3 4 ; an d fo r Mo ffett T h e La mp

,
.
, .
(J u n e, , ,

“ I b id .
, (Nov .
,

0
0 G ibb an d K now lto n R esu rgen t Years p 1 7 2 T h e T uscaro ra C omp an y h ad its , , . .

o p eratin g o fi ces in Pittsb u r h ; th e O k lah o m a Pip elin e C o mp an y its in T u lsa

g , .

Th e J ersey Mar k etin g D ep ar tm en t s o rgan iz atio n is describ ed in detail in

’

Th e La mp 1 (3 ) :zo—2 6 (S ep t , an d L ou isian a s D ep ar tmen t in ibid

’

, .
,

:4 (Jan , 1 9 1 9 ) an d :3 5 (Jan
. T J William s h eaded th e J ersey .
, . .

dep ar tmen t .

I O C o rr esp on den ce in th e J ersey fi les an d co mm en ts b y G ibb an d K n o w lto n

.

(Resu rgen t Yea rs ch s 8 1 6 ) Sh o w th at Harp er, A sch e, an d T eagle h an dled

, .
,

n ear ly a ll th e a dm in istratio n O f f o r eig n tr ade S ee also Resu rgen t Years .

,

pp . 2 8 —29 an d 497 .

II . G . W McK n igh t
. to E . M . C la kr an d C G . . Black , Jan . 29 , 1 926 . T h e in fo rm a
tio n o n th e m an uf actu rin g
m e l arg ely fro m th e r ep o rts o n its o rga n iz at o n i ca

o p er atio n s an d su gg estio n s f or its im p r o v em en t T h ese rep or ts w ill b e co n .

sider ed l ater in th is ch ap ter T h e m o st v alu ab le w er e E M C l ar k to G W . . . . .

McK n igh t, Jan 7 , 1 9 24 an d to F A Ho w ar d, Jan 1 4 1 9 24 ; G W McKn igh t

.
, . . .
, . .

to E . M . C lark an d C . G . Black , Jan . 29 , 1 926 ; an d E . M. C lar k to W . C .

T eagle, A p r 2 , . 1 9 28 . In m y in te iew s w ith rv

A Ho w ar d, O Ha den , an d F . . . r
F W A b am s,
. . r th ese m en all stressed th at th e efi n eries, esp ecially th e la g e r r
New York o n es, co mp eted w ith each o th e r fo r m o n ey, m en , m ater ials, su p p lies,

an d ou tlets .

Un l ess o th erw ise in dicated, all letters cited in th is ch ap ter are f ro m th e

fi les O f S tan dard O il C o m p an y (N ew J ersey ) Wh ere a lett er is also u o ted b y . q
G ib b an d K n o w lton , a r ef eren ce w ill b e m ade to th e p ag e w h er e th ey u se it .

j
Th e gr eat m a ority O f th e reco rds u sed h ere cam e fr om th e E M C lar k fi les . .
,

w hich w ere n o t lo cated w h en G ibb an d K n o w lton did th eir stu dy .

1 2 G ibb an d K n o w lto n , R e
. su rg en t Years p p 2 6 3 1 an d 2 5 9 2 6 0
— —
, . .

1 3 T h e shift in th e m ar k et an d th e in cr ease in to tal dem an d ar e m o st clear l

.
y seen
4 26 NO TES F O R P A G ES I
7 I — I
79
in th e tab le on
“
D eli v er y o f R efin ed P rodu cts , G ibb an d Kn ow lton , Resu rgen t
p Years
68 1 A lso ed er,al T r ade C
. o m m ission ,
P etr o leu
. m In dust y
r — Prices F ,

Pr ofits an d C o mp etition (Washin gton , pp 1 4 8 — 1 4 9 This latter r ep o rt . .

—
(pp 39 1 4 0) also emp h asizes th e co n tin uin g large olum e of p etroleu m used
1 . v
fo r fu el O il in in dustr ial p ow er as w ell as in Ship s an d locom o ti es u el Oil v . F
w as so ld, fr om th e fir st, in b u lk to large in dustrial user s, Hidy, Pion eerin g in
Big B usin ess p p 4 5 2 an d 7 3 7 , . .

1 4 W C T eagle to Boar d o f D ir ecto rs,

. . . un e 4 , 1 9 2 7 J .

G ib b an d Kn o w l to n , Resu rgen t Years p p 4 4 , 1 8 7 , an d 67 8 , . .

1 6 A S on e execu ti e
. v
p o in ted o u t : Prio r to th e dissolu tio n , th e So u th P enn , O hio
“

O il, d Pr airie O il 8: G as
an r
p o tect ed th e efi n er y in estm en t o f th is r v
comp an y, w h il e to day w e h a e v no cl aim o n th em n or in sh ap in g th eir p o licies,
”

m em oran dum o f E .
J . S adle r , S ep t . 22, 19 19, cited
in G ib b an d Kn owlton ,

Resu rgen t Years , pp .

5 6 an d 1 0 8 , an d Sa dl e r m em oran dum of March 5 , 19 19,

r
p a tly q u o ted in ibid p p .
, . 1 07—1 0 8 .

17 . Ex p an sion O f p ro du ctio n O f cru de O il to 1 9 1 7 is describ ed in ibid .

, chs .
3 an d 4 .

Memoran dum O f E .
J . Sa dl e r March
, 5 , 1 9 1 7 S ee . al so r eference in G ib b an d
Kn ow lton , Resu rgen t Year s , pp . 1 07—1 0 8 .

19 . Ibid , p 4 1 2 . . .

20 . Jr
e sey ex ecu ti es co n tin u ed v to loo k on Humb le in this ligh t un til v ry r
e ecen tly .

Th e in v
m en t w as in creased fr o m tim e to time an d by 1 95 8 rep r esen ted
es t

m ore th an 9 8 p er cen t o f Hum ble s cap ital stock In 1 9 5 9 J ersey d ecided to

’
.
,

m erge m ost O f its dom estic afi liates in to a Sin gle legal en tity w ith Humble as
p erh ap s th e m ost imp ortan t p articip an t in th e m er g er (see ftn .

21 Mem oran dum o f E J S adler Mar ch 5 , 1 9 1 7

. . .
, .

22 Mem o ran dum o f E J S adler A u

.
g 6, 1 9 2 0 . .
, . .

23 Th e L amp
. :2 1 —22 (No v , , .

24 Mem o r an da of E J
. S adl er J ul y 23 A u gu st 6 1 92 0 T h e qu o ta tion is fro m. .
, , , .

th e J u l y 2 3 m emor an dum .

25 . G ibb an d Kn ow lto n , Resu rgen t Years , pp . 153 —1 6

5 an d 472 -
48 1 .

26 I bid p p 4 5 4—4 5 6 an d 67 6 -6 79 S hip p in g fi gures

. .
, . . ar e o n p 48 1
. .

2 7 I bid p 1 8 7
. .
, . .

2 8 T h e La mp
. :7 (D ec , 1 9 2 0 ) an d (J un e ,

29 . G ib b Kn o w lto n Resu ge t Years p 6 8 1

an d ,
r n , .

30 . O Har den m em o ran dum o n th e Coo rdinatio n D ep artmen t O ct 2 8 1 92 7

.
, , .
, ,

an d f or w ar di n g letter fr o m E M C lar k to W C T eagle A p ril 2 1 9 2 8 an d . . . .

, , ,

m emoran dum fr o m E J S adler to th e Bo ar d Of D ir ectors J un e 27 1 9 24 . .

, , .

3 1 . G ibb an d K n w l to n R s g tn Y ear s pp 1 1 5
—1 1
7 Thoe u se O f th e B u rt o n , e ur e , . .

Pr oc ess is to ld in ch 5 an d th e b rin gin g o f Clar k an d Ho w ar d to J ersey .

,

S tan dar d an d l ater dev elo p m en ts ar e describ ed in ch 1 7 . .

3
2 . T h e S to y o f th e b egin ni ngs o f th e D ev elo p m en t D ep artm en t is descr ibed in
r

ibid p p 5 20—5 3 1 How ard a dded in f o rmatio n in a letter to th e au th or

.
, . . ,

May 2 6 1 9 59 , .

33 . W C T eagle
. . to A . C Bedfo d, . r J un e 5, 1 9 1 9, q u o ted in G ib b an d Kn ow lto n ,

Resu rgen t Years , p 5 24

. .

Ho w ar d s Dep ar tm en t in clu ded fi v e

’
ratory ; th e u n its — th e G en e ral L ab o
R esear ch Labo ato ry h eaded b y C O J o h n s to car ry o n th e r esear ch direct ed
r , . .

to w ar d th e so lu tion o f impo r tan t ch em ical an d p h y sical p ro blem s in v o lv ed in

o ur b u sin ess ;
”
th e Exp er im en tal D i isio n v ( th e
“
co nn ectin g lin k b etween th e
Labo ratory an d P ractical O pe rations un der N . H . Loo mis, w ith r esp o n
N O TE S F OR PA GES 1 79
—1 82 4 7
2

f or th e develop men t of n ew p rocesses, equip men t, an d p r odu cts th e

S ib ili ty
“

Paten t Di v isio n , u n der C A S traw ; an d a Library an d T ech n ical Inf ormation . .

Service (A n n u al Rep o rt o f Dev elop men t D ep artm en t, Nov 2 4 , Al .

th o u gh , as G ib b an d Kn o w lto n state (Resu rgen t Years p th e O ld S tan d , .

ard Insp ect ion Lab o r atory w as n o t p laced u n der Ho w ar d s dep artm en t u n til
’

1 922 , th e G en er al Labo rato ry h eaded b y C I Rob inso n , th e Co mp an y s C hief

’
. .

C h emist, w hi ch serv es as a cen tral, an alytical, gen eral ch emica l an d O il r efi nin g

“

labo ratory Of th e Co mp an y, w as un der Ho w ar d from th e start

”
.

35 F r an k A Ho w ar d, O rg a n izin
.
g for Tech n ical P r ogress (N e w Y o r k , p 2 , .

an d his fir st A nn ual R ep o rt (No v 2 4, In this lo n g an d detail ed docu .

m en t h e exp lain ed to T eagle, mu ch as Sadler h a d in h is first r ep or t in th e

sam e y ear , w h y su ch a formal docu m en t ap p ear ed n ecessary :

Thr ou gh y o u r ow n acti ities in th e w ork of th e Dep artm en t, y ou are dou b t v

less fam iliar w ith all th e f oregoin g It w as th ou gh t desirab le, h o w e er, to . v
ren der f ormal r ep ort o n th e fir st year s acti ities Of th e Dep artm en t in o rder
a
’
v
th at y ou migh t h a e th e op p o rtun ity o f g ettin g a b ir d s- v
ey e V iew of th e
’

w h o le situ ation w ith r esp ect to this D ep ar tm en t, to determi n e to w h at ex ten t

an d at w h a t cost, it is doin g th e thi n gs it w as exp ect ed to do .

A l so How ar d s detailed rganiz atio n al char ts of his Dep ar tm en t w ere m ong

’
o a

th e fi rst su ch ch arts seen at S tan dard O il .

G ib b an d Kn ow lton , R esu rgen t Years p 1 24 , . .

Hick s w ork is ou tlin ed in ibid ch 1 8 By 1 9 23, th e Per sonn el an d T r ain in g

’
.
, . .

D ep artmen t h ad its O w n set of Ofi ces o n th e Sixth oo r at 2 6 Broadw ay fl

(G L O ln ey to E M Clar k , Dec 3
. . . . .
,

Ro y S Bo nsib b ecame h ead o f th e n ew S af ety Di isio n in

. an u ary , 1 9 21 v J .

Th e La mp (Feb , ,Fo r th e Medi cal Dep ar tm en t, see G ib b an d .

Kn o w lton , R esu rgen t Years p p 39 4-39 5 an d 5 77 A n oth er imp ortan t de elop , . . v

m en t in th e fi eld of emp loy ee r elations w as th e p u b lica tio n Of Th e La mp ,

w hich ca me to b e edited by Northrup Clarey Th e edito r co ns idered th at his .

job in clu ded p ub lic as w ell as emp lo yee r elation s He app ears to h a e r ep ort ed . v
dir ectl y to T eagle (G ib b an d Kn ow lto n , Resu rgen t Years p p 5 77 57 8 an d-
, .

For Pur ch asin g see Th e La mp (A p ril,

, ,

39 Th e L a m p :9 (
—1 0 F eb
, , .

4 0 Th eir b ack gr o un ds are b rie y describ ed in Th e La mp

. :9 (O ct , 1 9 25 ) an d fl ,

ibid .
, (Dec , O th er Dir ectors in 1 9 25 in clu ded Wal ter en n in gs J
an d F
rederick H Bedfo rd Th e f orm er too k n o p art in comp an y afl airs Th e
. . .

latter co n cern ed him self on ly w ith his Sp ecialty — th e mark etin g o f lu bricatin g
O il , esp e cially ab r o ad G ib b an d Kn o w lton , Resurgen t Year s p . 26 , . .

I bid p 60 8 .
, . .

T ea gle s attitu de to w ar d fo rmal organ iz atio n w as uite clear He w o u l d n o t

’
q .

allow his ex ecu ti es to draw u p o rgan iz ation ch arts, diagr ams v o r man u al s ,

f or th e com p an y as a w h o le Su ch forms cr ea ted m ore p rob lem s, h e in sisted, .

v
th an th ey so l ed In later y ears w h en ask ed w h eth er h e con sidered th e 1 9 27
.

reorganiz atio n as a m a or in ciden t in th e comp an y s hi story , h e rep lied : Hell j ’ “

n o Th at w asn t an ythin
.
g a t al l Th at k in d
’
O f thi n g y o u d h a e to d o an yw a y .
’
v .

T eagle m ade this co mm en t to G eorge S G ibb , coau th o r o f th e Resu rgen t .

Years E ery ex ecu ti e I talk ed to emp h asiz ed T eagle s distaste for organ iz ation
. v v ’

ch ar ts an d m an ual s .

4 3 G ibb an d Kn o w lto n , Resu rgen t Years p 5 3 7

.
, . .

44 E M Clark to G W McKn igh t, Jan 7 1 924

. . . . . . . .
 N OTES FO R P A G E S 1 83 — 1
89
This fi v e f o llo w in g u o tatio ns are fr o m th e rep o rt O f
an d th e A How ard q F . .

to G W McKni gh t, an u ary 1 4 , 1 92 4
. . J .

T h is an d th e f o llo w in g u o tation s ar e fro m a m emo ran du m o f E S adl er q .

J .

to Bo ar d of Dir ector s, un e 27 , 1 9 24 J .

This an d th e f o ll ow ing u o tation s ar e fr o m a m em oran dum of E S adler q .

J .

t o th e Bo ar d, uly 8 , 1 92 4 J .

“
v
T ab le X — Deli ery Of Refi n ed Produ cts, in G ibb an d Kn o w lton , R esu r gen t
Years p 68 1 Th e deli eries abro ad are b oth fr om A merican an d foreign
, . . v
refi n eries, an d total deli eries w ere as follo w s : v
Years D eliveries A br oa d T otal
1 9 22 (milli on s of b ls ) .
(million s o f bls ) .

1 9 23

I 9 24 59 4 I 44 9

1 9 25

1 9 26

1 9 27

W . C T eagle
. to E . M
l y 3 1 , 1 9 25 S adl er w as e en m or e co n cern ed
. C lar k , J u . v
v
o er th e p ossibili ty th at dem an d f or r efi n ed migh t o u tru n th e su p p ly o f cru de

(E .S adler to W C T eagle, F eb 4 ,
J . . . .

Th e La mp :2 6 ( u n e,
, J
in ter iew wi th O r il le Har den un e 2 4 , 1 9 57 v v J .

Har den sai d h e w en t in Black s p lace, b ecause Black , w h o p r eferr ed New York ’

to th e fi el d an d di slik ed an sw er in g T eagl e s u estio n s, cou ld al w ay s fi n d

’
q
ex cu ses to stay h o m e Th e tri
p exten ded fr om un e 2 to u n e 2 5 . J J .

W C T eagle to E M Clark , A u gu st 7 , 1 925 , an d E M Clar k to A Mo ff ett,

. . . . . .
J . .

S ep tem b er 1 6, 1 9 25 .

q
Th e u o tation is fr om O Har den , Mem o ran dum o n Mar k etin g A n alysis, .
“

Mar ch , 1 92 9 w h ere h e is ref errin g to th e 1 9 25 S itu ation

, .

G ibb an d Kn o w lto n , Resu rg en t Years p p 4 88—4 89 ; al so Mar k etin g Conf er en ce , .

mem oran dum , u ly, 1 92 5 ; an d J

Petr oleu m In dustry — Prices P r ofits an d F ,

, . . J
C o mp etitio n p 5 6 In an u ary , 1 9 2 6, ersey S tan dar d w as o nl y tw elf th am on g J
th e lar ge O il comp ani es in th e n um b er of its r etail ser ice statio n s, alth ou gh v
f our th in th e n u m b er Of its b ulk statio n sBy 1 9 2 6, it h ad, acco din g to th e
. r
F ederal T r ade C o mmi ssion , 3 8 1 r etail statio n s In 1 9 1 9 , it h ad 1 1 , an d in .

G ibb an d Kn o w lt on , Res u rgen t Years , pp 599

.
59 8— .

T h is an d th e f o llo w in g q u o ta tion ar e f om W C
r . . T ea gle to E . M . C lar k ,
A u gu st 7 , 1 9 2 5 T h e r eco mm en dation s o n m ark etin g p o licy ap p o ed b y th e
. r v
Bo ar d, A u gu st 7 , 1 9 25 , attach ed to thi s lette O f T eagle to C lar k , an d th e r
m em o an dum O f th e Mar k etin g C o nf eren ce h eld in th e last w eek O f u ly, 1 9 25 ,
r J
ar e al so v al u ab le .

W . C T eagle
. to E . M . C lar k , J u ly 31, 1 9 25 . Th e n ex t p ar agrap h , th e last in
th e letter, m p h asiz es
e th at o e v rp r o du cti o n O f r
c u de w as n ot y et a p obl em : r
“
We w an t to sto p an ticip atin g C ru de O il S h o r ta g e, T eagle w ro te, an d ru n
“

our b u sin ess w ith o u t b u g abo o han gin g o er u s th is co n stan t v .

”

NO su ch r ep o rts co u ld b e f o un d in th e ersey fi les Nor is th er e an y m en tio n J .

o f su ch r ep o rts in th e r ath er o lum in ous a ailable corr esp o n den ce, m em or an da, v v
an d o th er b u sin ess fi les o f th is p erio d No r ar e th er e an y r ep or ts O f th e dis cu s .

sion s o f th e Bo ar d as n o r ecor ds w er e k ep t o f its m eetin gs A letter fr o m .

N O TE S FOR PA GES 1 89 — 1
9 6 4 9
2

W . C . T eagle to E .
J . S adle r , O cto b e r 1 6, 1 9 2 6, do es rev iew th e decision s
ab ou t o rganizatio n m ade at th at tim e .

5 8 . Jr e sey S tan dar d C ir cu lar Letter # 1 5 9 , , S ep t 3 , . 1 9 25 , an d T h e La mp ,

(Dec ,

59 T his an d th e f o llo w in g fi v e u o tatio n s q are memoran dum o f O rv ille

fr om a

Harden o n Resp o n sib ilities an d Du ties “

o f th e C o o r din ation C omm ittee D e

p ar tm en t,
”
O cto b e r 28 , 1 9 27 . In th is m emoran du m Har den was gen erally
ex clu din g Hu mble ,
w hi ch co n tin u ed to op e ate r q u ite in dep en den tly of Jr e sey .

60 E . . M . C lar k to W T eagle, A p r 2, 1 9 2 8 , w ith w hich C lar k f o w a ded

. C . . r r
Har den m em or an dum Th e m o e deta iled data in clu ded th e statistics o n r
’
s .

“
C ru de p ro du ction ru de sup p lies th e sto ck situ atio n Cru de p ur
,
v
a ailab le C , ,

ch ases an d sales p ip elin e r u ns Cru de cost an d yield an d o th er p er tin en t data

”
.
, ,

Par ticu larly imp o rtan t w ere imp ro v ed mark etin g f orecasts T h e C o mmittee b e .

g an to g et co m b in ed m o n th ly estim ates o r r eq u ir em en t fi gu r es f o r th e n ex t
“ ”

six m o n th s as w ell as actu al m o n th ly deliv eries fo r th e p ast six m on th s th ese ,

deliv eries b ein g comp ar ed to th e p ast estim ates (Memoran dum o n Sales
“

Resear ch an d Mark et A n alysis by O Har den f orw ar ded b y E M C lark to

”
. . .

W . C T eagle,
. Mar ch 2 0,

61 . Th is an d th e fro m Har den s mem oran dum on th e

fo llo w in g q u o tation are
’

Coordin ation D ep ar tmen t, O ct 2 8 , 1 9 27 Letters from E M C lark to W C . . . . . .

T eagle on D ec 3 1 , 1 9 26, an d Jan 4 , 1 9 27 , Sh o w h o w u ick ly th ose data an d

. . q
w ith th em th e C o mm itt ee itself b egan to b e u sed fo r lo n g-ran ge p lan n in g T h e .

q u es tion to b e discu ssed b y th e C o o r din ation C o mmittee, men tio n ed in th ese

letters, w as f utu r e r efi n ery con stru ctio n .

E M C lar k to W C T eagle, A p r 2 , 1 9 2 8
. . . . . .

Mem oran du m o f E S adler to th e Bo ar d, u n e 27, 1 9 24 .

J . J .

T h is an d th e f o llo w in g u o tation ar e from ersey S tan dar d, Cir cu lar Letter q J

# 1 60, S ep t 4 , 1 9 25 . .

Thi s an d th e f o llo w in g u o tation are from S B Hu n t to E M C lark , No v 3 0, q . . . . .

1 9 25 O th er letters con cer n in

.
g th e n ew b u dg et are f r o m E M C lar k to G W . . . .

McKn igh t, Dec 2, 1 9 25 , an d fr om G W McK n igh t to E M C lark , Jan 8 ,

. . . . . .

1 9 26 .

Jersey S tan dar d, C ir cu lar Letter # 79

1 , J an 2 1 , 1 9 2 6 New b u d g ets w ere . .

b ein g sen t to Z an e s o ffice b efo re thi s date (E M C lark to G H o n es, Jan 8 , J

’
. . . . .

Jr e sey r
r # 77 Feb 1 5 1 923 Th e Eflicien cy Committee
S tan da d, C i rcu lar Lette , .
, .

p 7 1 9 22 (C ircu lar Letter # 4 7 ) w as lik e th e earlier S tatistical

ap p o in ted o n A r .
, ,

C ommittee to stu dy w h at rep o r ts migh t b e disco n tin u ed Th ey w ere k n ow n in

, .

th e comp an y as th e carb on r em o v al co mm ittees C T Whi te to L E

“ ”
. . . . .

Freem an A p r 4 1 9 2 2 an d Circu lar Letter # 77 cited abov e in dicate th at

, .
, , , ,

th ey h ad little o r n o con n ectio n w ith org an iz atio n al ch an ges to imp ro ve

coo rdin at io n as G ib b an d K n o w lto n h av e su ggested in
, Resu rgen t Years ,

pp 6 1 7
—6 1 8
. .

6 8 In ter iew w ith Wesley Zan e, u n e 24 , 1 9 57

. v J .

69 D ata o n th e fu n ctio n in g O f Z an e s dep artmen t co me fro m th e in ter iew w ith

.
’
v
j
Z an e, u st cited, an d letters in th e C lar k fi le, in clu ding E M C lark to G H . . . .

J
o n es, Jan 8 , 1 9 2 6 ; E M C lark to G W McKn igh t, Mar 5 , 1 2, 1 9 26 ; an d
. . . . . .

esp ecially W Z an e to E M C lar k , Ma

y 29 , 1 9 29
. . . .

7 0 T hi s an d th e f o llo w in g uo tatio n ar e from Memoran dum on S ales Research

.
“
q
an d Mark et A n alysis,
”
Mar .
, 1 9 29 .
43 0 NOTES F OR PA GES 1 9 6 —20
3
Th e ch anges in th e mark etin g o rganization are ou tlin e d in Th e La mp ,

5 (Dec an d ibid —1
—1
3 (Feb , , .
,

Memoran dum Of E G Barber A C Bedf ord R A Ho lb ein . .

, . .
, . .
, an d J . A V an
.

Wyn an , on
“
Mark etin g Organ iz ation , Dec 4 , . 1 9 25 . Th e op en in g sen ten ce

r efers to th e Nov ember 25 f

co n er en ce

W C T eagle to Bar ber, Bedf ord, Holbein, an d V an Wynan , D ec 9 , 1 9 25

. . . .

W C T ea gle to am es A Mofi ett, Dec 9 , 1 92 5

. .
'
J . . .

This an d th e two f o llo w in g u otatio ns ar e fr om E G Barb er, A C Bedf or d, q . . . .

E A Ho lb ein , an d A V an Wyn an to A Mo fi ett, Dec 2 1 , 1 9 25 J J

'

. . . . . . . .

W . C T eagle . to G . H . J ones, Jan 3 .

, 1 9 26 .

The Lamp :2 0 (A u g , C O Sch older, h ead of th e Louisian a sales

, . . .

un it, k ep t his p erman en t o ffice in Louisian a S h efi eld also took ch ar ge of .

mar k etin g sp ecialty p rodu cts as w ell as fuel O il A t this time, asp h alt sa les .

w ere cen tralized un der S Helm in New York J . . .

j
Th e ma or issu e b etw een th e two group s w as th e b atch ersus th e con tin u ou s v
p r oces s r efi n in g (G ibb an d Kn o w l to n , R esu rgen t Y ears p p 5 3 6—
5 37 ; in terview , .

w ith W A brams, un e 5 , 1 95 7 ; an d E M C lark to C H G raff, u n dated,

F . . J . . . .

b u t r ef errin g to a letter of W C T eagle to G W McKni gh t, un e 7 , . . . . J

In Clark s letter to G rafi , h e writes th at h e b elie es T eagle is n o t f ully aw ar e
’
v
of th e recen t ch an ges m ade in con tin u ous-
p ocess r refi ning .

Th ese in clu ded Fran k W . Ab rams , Th omas R . Par k er G eorge , G ordon, an d

P P Perk in s, th e last
. . of w h o m b ecame Sec retary of th e Manufacturing Com
mirtee after Har den left to o gan iz e th e r C oor dina tion D ep artm en t .

A s in dicated in G . W McKni gh t. an d C . E G rafi to E M Clark an d

. . . C G . .

Black , Jan . 29 , 1 9 2 6 ; an d E . M . Clark to W . C T eagle, Nov

. . 1 1, 1 9 25 .

E . M . Clar k to G . W McKn igh t Jan.

, . 1 1, 1 9 26 .

G W McKn igh t an d C E G raff to E M Clark an d C 0 Black Jan 29 1 926

. . . . . . . .
, .
, .

Th e r ep ort did r equ est th at a high er limi t b e p laced on th e am oun ts th e

Man uf acturin g Committee cou ld ap p ro v e w ith ou t r equiring f urth er app ro v al
b y th e Bo ar d Th e Bo ar d did n o t gran t this r equ est . .

W C K oehler to E M Clar k an d C G Black Mar 1 1 926 in dicates th e

. . . . . .
, .
, ,

o b j ections an d G W McKn igh t to E M Clar k an d C G Black

,
Mar 1 8 1 9 26
. . . . . .
, .
, ,

on Man uf actu rin g Comm itt ee Organizatio n giv es th e fin al decisio ns Th e

“

,
.

secon d letter b egins : Referrin g to th e Co nf er en ce of th e Man u f acturin g Co m

“

mittee w ith th e Bo ar d of Dir ectors y ester day m ornin g ; as a matter of reco r d

this w ill co nfi rm th e con clusio n s r each ed an d w hi ch w e w ill arr an ge to p u t
”
in to cfl ect .

C E G rafi
. . Black , S ep t 1 7, 1 92 6
to E . M . C lar k an d C G . . . .

W C T eagle to C E G rafi tellin g of th e Boa d s ap p o al of th e Sep t 1 7

. . . . r ’
r v .

reco mm en datio ns ; an d E M C lar k to S B Hun t, Sep t 24 , 1 9 26 . . . . . .

Th e La mp ( ,
O ct G eo ge S W edd o n,an d T R A mstr o n g r . . . r
w er e th e gen e al r assistan ts f or f oreign p rod ucin g .

Th e Lamp , (A u g .
,

E .
J . S adl e r W
C T eagle, A p r 27 ,
to . . . 1 92 6, gi v es a good exa mp le of Sadler s
’

ac tiv iti es . r
How ar d ecalls th at S adler p ref erred to do m u ch Of his o w n dep art
men tal w ork rath er th an delegate ir to o th er s (in terview w ith A H o w ar d, F . .

J u n e 28 ,

E .
J . S adle r to E . M . C lar k , J ul y 9, 1 92 4 ; E . M . C la k r to W . C T eagle,
. J u ly

1 0, 1 9 24 ; E . M . C la k r to F . H . Bedfo d, r J an .
9, 1 92 5 ; an d G ib b an d K n ow lto n ,

Resu rgen t Years , pp . 2 77 , 49 7 4 9 8

— . A rep o rt o f th e meetin g o f th e Europ ean
NOTES 20 3 —20
F O R P A G E S 7 43 1

C ommittee on D ec . 1 2, 1 9 24 , sh o w s th at it discu ssed th e u se Of G ilb ert 8:

Bark e r equ ip m en t (Jersey s
fi l iate th at m an uf actu r ed an d so ld sto es an d
’
a v
p um p )s , th e elimin ati o n o f s p e c ifi c g r a ity sp ecifi catio n f o r o n e gr a de o f v
g aso lin e, ch an in
g g ex p o r t u o ta t io n s f r o m f O b N ew York to an f O b G u lf q . . . . . .

b asis, tradem ar k s, an d p o licies as to th e p u r ch ases of Ru ssian p ro du cts an d th e

disp o sal o f O ld tan k er s A t th e m eetin g McKn igh t an d C lark discussed Eur o .

p ean r efi ni n g p r o bl em s an d de el o p m en ts v .

E S adler to E M C lark , u ly 9 , 1 9 2 4 , an d E M C lar k to W C T eagl e,

.
J . . . J . . . .

J u ly 1 0 , 1 9 2 4 .

E . M . C lar k to W C T eagle Ju ly . .
, 1, 1 9, 1 9 25 ; to G . W McKni gh t J uly
.
, 1,

1 9 25 ; to J . A . Moffett A u g 3 1 9 25 ; , .
, an d W . C T eagle
. to H Riedeman n
.
, J u ly

1 6, 1 9 25 .

E . M . C lar k to G . H . J
m em or an dum Of C E G r aff o n
o n es, A ug . 27 , 1 9 27 ; . .

A n n u al Re iew v o f Man uf actu rin g D ep ar tm en t A ctiv ities f o r un dated ;

“

an d Th e La mp , (O ct ,

I bid , .
(F eb .
,

W C T eagle . . to E .
J . S adl e r, O ct . 1 6, 1 9 26 .

Mem oran du m f C E G rafi o n A nn u al Re iew Of Man u f actu rin g D ep ar t

o . .
“
v
m en ts A cti ities f or
’
u n dated v .

W C T eagle to E M C lark , C G Black , an d D R Weller, F eb 1 5 1 9 27

. . . . . . . . .
,
.

J .M Mo ff ett in a letter to
. A How ar d, u n dated, in ans w er to Ho w ar d s F . .
’

l etter o f Mar ch 23 1 9 2 8 ou tlin es ear lier p o li cies C G S h efi eld to C C , , . . . . .

Black , May 1 6, 1 9 29 also r e iew s p o licies p rio r to 1 92 7 ch an g es v .

Rep o rt o f co mmitt ee to in estig ate th e p o ssib ility of th e f orm atio n o f a

“
v
sep ar ate co m p an y to h an dle ser ice statio ns O f th e er sey an d L ou isian a co m v J
p an i cs, A u g 1 9 , 1 9 2 6, an d T eag l e s r e l
p y.to th e co mm i ttee s r ep o r t, A u g 22 ,
’ ’
.

1 926 .

1 00 . W C Koehl er to G W McKn igh t, O ct 2 6 1 9 26 ; R G arrin ger to

. . W. . .
, J . . F . .

A b ram s, D ec 2, 1 9 26, Jan 4 , 1 9 27 ; W A b rams to G W McKn igh t,

. . F . . . .

Jan 3 , 1 9 27 ; an d E M Clark to W C T eagle, Jan 20, 1 9 27 C lar k n oted :

. . . . . . .

I v
b elie e, h o w e er, th at it w ou ld b e b en efi cial to r ef er to th e O ld
can n o t v
h ap h az ar d typ e Of organiz atio n I th in k th at Mr A b rams is loo k in g at it . .

co rr ectly an d th at th e mi n o r ch an g es h e h as su gg ested S h o uld be m ade .

A t th e sam e tim e, I belie e th at mu ch of Par k h ur st s [ th e consu ltan t] v ’

meth o ds Sh oul d b e r etain ed, th at w e Sh ou l d fin d th e ex ten sion of man y of

th em to th e Bay o nn e p lan t Of decided alu e I b eli e e w e can saf ely l ea e v . v v
this in th e h an ds o f Mr A b r ams , as fr o m my talk s w ith hi m I am sur e .

th at h e w ill car ry it th r o u gh to th e righ t con cl usion .

S ee al so Min u tes , A n n u al Co nf e r en ce of th e Man uf acturin g D ep ar tmen t ,

Jan . 27 , 2 8 , 1 9 27 .

1 01 . G . W McKni gh t . l etter dated O ct 1 7 ,

to E . M . C la k , r un dated, en cl o sin g a .

1 9 2 6, describin g means agr eed u p o n to imp r o e co n tact b etw een th e Man u v

“

factur in g D ep artmen t an d th e Bayw ay Lab o rato ries Of th e D e elop m en t D e v

p ar tmen t A Ho w ar d to W C T eagle, A n nu al R ep o r t o f th e F
”
See also
“
. . . . .

v
D e elop m en t D ep art men t, F eb 1 7 , 1 9 27 . .

1 02 . Mem oran dum o f C E G rafi , on A n n u al Re iew o f Man ufacturin g Dep art . .

“
v
men t A cti ities f o r 1 9 2 6, un dated v .

A n emp h asis o n mo r e car ef u l cost an aly sis, p ar ticu larly in o erh ead co sts, is v
in dicated in Min u tes, A nn u al Co nf er en ce Of Man u f actu rin g D ep ar tmen t,
Jan 27 2 8, 1 9 27 ; W C T eagle to E M C lark , Jan 2 1 , 1 9 2 7 ; O Har den to
— . . . . . . .
 NOTES —
43 2 F O R P A G ES 20 7 2 1 0

G . W McKn igh t .
, un dated (ear ly an d W . C . T eagle to E . M . C lar k ,
J un e 1 , 1 9 27 .

G ibb an d K n ow lto n , Resu rg en t Years , pp . 8—

5 9 5 99 . Th e fi gure is a to tal fo r
J er sey , Lo u isian a, an d Hum ble .

W . C . T eagle to H Riedem an n Nov

in ib id p 3 4 7 .
, . 2 6, 1 9 24 , q u o ted .
, . .

H Riedem an n to W C T eagle, S ep t 2, 1 9 25 u o ted in ibid p 3 49

. . . . q .
, . .

W C T eagle to P Hurll, Nov 27 , 1 9 25 , u oted in ibid p p 35 0—35 1

. . . . q .
, . .

Th e b ro ad sto ry is co er ed in ibid ch 1 4 , p articu larly p p 44 5—4 5 3 A lso v .

, . . .

u sefu l is F
ederal T ra de C o mm ission , R ep o rt o n Pa n h a n dl e Cr u de P etr oleu m ,

F eb r u a ry
3 1 9 2 8 (Washin g to n , D C , T h e sp ecifi c r esp o nses of T eagle
, . .

an d th e Bo ar d ar e in dicated in E . M . Clar k to W C . . T eagle, F eb . 1 6, 1 9 27 ;

W . C T eagle
. to E . M . C lar k , A p r . 1 8, 1 9 27 ; an d W . C . T eagl e to th e acti e v
D irecto rs (Black , C lar k , Hu n t , J o n es, Mofi ett , S adl e r , an d Weller) Ju n e , 4,
1 92
7 .

Min u tes A n n u al , C o nf e ren ce o f Man u factur in g D ep ar tmen t, Jan 27 .

W C T eagle to
. . E . M . Clar k , J
u n e 8 , 1 9 26 ; E M C lark to W C T eagle, . . . .

Nov . 29 , 1 9 26 ; W . C T eagle to. C G Black , u ly. . an d W C T eagle J . .

to G . H . J on es, J u ly 2 0, 1 9 27 .

1 10 . G ib b ,
an d Kn ow lto n
8—
p p 5 9 5 99 A b r e
a k do w n O f earn in gsResu rgen t Years , . .

v
b y fu n ctio n al acti ities w as as f o llow s : p ro du ctio n , $ 2 2 millio n (in clu din g .

lo ss in th e Uni ted S tates) ; tran sp o r tation , $ 3 7 8 m illio n , m ar k etin g .

$ 3 2 6 ; n atur al gas, an d r efi n in g an d m an u factur in g ; a lo ss o f

million Miscellan eou s ch arges o u tb alan ced in co m e fro m in terest to add

.

an a dditio n al loss o f $ 5 3 m illio n In 1 9 2 6 th e fi gur es h ad b een $ 2 o 6, . . .

$ 3 0 8 , $ 1 4 6, an d $ 2 3 4 , r esp ecti ely, an d for Miscellan eou s a loss Of $ 0 4 millio n

. . . v . .

111 . W . C T eag le
.
4 W C T ea g l
to acti e
e to G H J ovn es D ir ecto rs J un e , 1 9 27 ; . . . .
,

E M Clar k an d
. S adler J u n e 1 6 1 9 2 7 ; W C T eagle to E M C la
.
, E J rk . .
, ,
. . . .
,

O ct 1 7 1 9 2 7 ; an d W C T eagle to D R Weller O ct 1 3 19 27
.
, . . . .
, .
, .

E M C lark m en tion ed th e p rop o sed p lan s f o r r eorgan ization to W G T eagle

“ ’
1 12 . . . . .

in ar efe rin g to qu estion s T eagle h ad raised ab ou t redu ction s ln p erso nn el

l etter r

in a letter to C lar k Black an d Weller May 26 1 9 27 O n ce th ese p lan s are , , , , .

m ade eff ectiv e C lar k o n tin u ed it w ill b e th en p ossibl e to v ery material ly

“

,
c ,

redu ce th e G en eral En gin eerin g an d R esearch Dev elo p m en t D ep ar tm en ts b y , ,

co m b in in g an d ch an in
g g th eir p r es en t f o rm o r o rg an iz atio n F o t u n e giv es . r

T eagle an d S adler th e cr edit f or th e 1 9 27 ch an ges Fo rtu n e (O ct .

, .
,

W C T eagle to E J S adler, O ct 1 6 1 9 2 6 In th is lett er T eagle turn ed dow n

. . . . .
, .
,

S adler s su ggestion to p u t a m ar k eter on th e C o ordin atio n C o mm ittee, C lar k s

’ ’

earlier p ro p o sal to p u t Ho w ar d o n th e n ew Mark etin g C o mm ittee is su gg ested

in E M C lark to W C T eagle D ecem b er 4 1 9 25 A S late as 1 9 3 3 C lar k

. . . .
, , .
,

w anted to g et a m ark eter on th e C oo r din atio n C o mm ittee a n d again T eagle ,

r efu sed (E M C lark to W C . . . . T eagle, A p il r 1 3, 1 9 33 , an d T eagle s

’
rep ly ,

A p ril 1 8 ,

F o r co mp arativ e p r ofi t r eco rd see G ibb an d K n ow lton , Resu rgent Years ,

- 8—
9 1 5 9 5 99
7

E . M . C la k to r W . C T eagle, A p r . . 2, 1 92 8 .

T eag le s
’
co n ce n r f or cu ttin g do w n o fli ce p er so n n el at 26 B ro adw ay an d its
rel at o n i to th e 1 9 2 7 ch an g es are em p h asiz ed in W . C T eagle . to E . M . C lark ,
C . G . Black , an d D . R . Weller May , 2 6, 1 9 27 , an d E . M . C lar k to W . C .

T eagle, u n dated, _
a n sw er in g th at letter Of T eagle . S ee also E . M . C lark to
 2 1 0 — 2 1
NO TES FOR P A G ES 4 4 33
W . C T eagle, A p r
. . 22, 1 9 27 ; O . Harden to E . M . C la k , r May 2, 1 9 27 ; E . M .

r to G W McK n igh t u n dated (th e

C la k . .
, latter w as fi led in w ith May 1 9 27

letters) ; an d W C T eag le to E M C lark . . . .

, No v 7 , . 1 9 27 .

W . C T eagle . tor Mar 3 1 1 9 22

C G
. . Black an d E . M . C la k , .
, .

1 18 . T his an d th e fo llo w in g tw o qu o tatio n s are f ro m F A Ho w ard to W C . . . .

T eagle A n n u al Rep o rt Of th e Dev elop men t D ep artmen t F eb 1 7 1 9 27

“
.
, , .
,

1 19 . In terv iew w ith Fr an k A Ho w ar d J u n e 2 8 1 9 57 T ax con sideratio n s seem to

.
, , .

b e th e reaso n w h y th e n ew u n its b ecam e aff liates rath er th an div isio n s as at du i

Po n t an d G en eral Mo to rs .

1 20 . T h e o rgan iz atio n an d p erso nn el Of th e Delaw ar e C omp an y are describ ed in

detail in Th e Lamp —
4 7 5 (O ct
—1 T h e lead ar ticle in th at
, , ,

issue w h ich co mmen ted on th e ch an ges co n clu ded w ith

Each dep artmen ts w h ich is attain in g th e n ew statu s o f a sep arate

Of th e

en tity w ill r ep resen t a b u sin ess O f co n siderab le m ag n itu de It is th e con fi den t .

exp ectatio n th at th ese b u sin esses w ill g ain in effi cien cy by r easo n O f th e

in creased r esp o n sib ility an d au th o rity p laced in th eir ex ecu ti es an d th at v

v
o erh ead an d o p eratin g co sts w ill b e redu ced O f p ossib ly greater valu e is .

th e b r o aden in g of th e fi eld f o r th e tr ain in g O f ex ecu ti es in all p h ases Of th e v

b u sin ess o f each un it, th e ad an tage of w h ich w ill b e app aren t w h en v th e
n ecessity arises fo r matur ed an d exp erien ced r ecr u its f o r th e b o ar d o f th e
h o ldin g comp an y .

AS th e v
f th e n ew o rgan iz ation fo r execu ti e recru itm en t is n o t m en
l
a ue o v
v
tio n ed in a ailab le in tern al co rr esp o n den ce th is r easo n in g m ay h a e b een ,
v
a r atio n aliz atio n r ath er th an a b asic cau se fo r th e ch an ge .

. i
1 2 1 Ib d , .
— 1 2 (F eb , S ee also E M C lark to H Bedford, No v
. . . F . . .

1 4 , 1 92 8 Bedfo r d, th e o rgan izer Of th e Nu jo l D ep ar tmen t an d its m an ager

.

sin ce 1 9 1 6 an d th e h ead o f th e Lu b ricatin g O il D ep artm en t in 1 9 1 7 , h ad

b eco me a Directo r in O cto b er 1 9 27 .

1 22 Th e La mp
.
( u n e, , J
. v
1 2 3 T h e o er-all man u factu rin g setu p in clu din
g E u r o p ean an d L atin A m e r ican

o p eratio n s af ter th e 1 9 27 reo rgan iz ation is describ ed in a m em o ran du m at

tach ed to a letter from W C C o lb y to E M C lark , F eb 1 4 , 1 9 2 8 S en ior s

’
. . . . . .

mark etin g o rgan iz ation is describ ed in ersey S tan dar d C ircu lar Letter # J-3 8 , J
Mar .
3 1, 1 93 1 .

1 24 . Th e o rgan ization
d p erson n el O f th e S tan dard S hip p in g C omp an y are de
an

scrib ed in Th e La mp r : Bark er,

5 ( f lb
—1 O ct T h e sta tu s o G i e t 8
, ,

lik e th at O f p ip e-lin e su b sidiaries, rem ain ed relati ely u n ch an ged v .

1 25 . T h e reaso n s f o r creatin g th e 1 9 22 comp an y are gi en in A Ho w ard to v F . .

W C T eagle, A u g 1 8 1 9 22, an d C A S traw to E M C lark , Nov 23 , 1 9 22

. . .
, . . . . . .

T h e n am e w as ch an ged b ecau se th e O ld o n e w as th e same as th at O f a real

estate co mp an y in New ersey J .

1 26 . G W McKn igh t to E M C lark , S ep t 1 5 , 1 9 27 ; E M C lark to R T Haslam,

. . . . . . . . .

O ct 3 , 1 9 27 ; R T Haslam to E M C lark , O ct 8 , Nov 2 , 1 9 27 ; an d E M

. . . . . . . . .

C lark to W Z an e, D ec 20, 1 9 27 T h e details Of th e o rgan izatio n an d p erso n n el

. . .

p p v
o f th e n ew De elo men t de ar tm en t, w h ose cr eation h ad to w ait u n til C lark

return ed from a to u r Of th e Eu rop ean refi n eries in A ugu st, 1 9 27 are gi en in ,

v
Th e La mp 1 4 (D ec ,
, .

1 27 . Ibid .: 1 1 (Dec ,
,

1 28 . Memoran du m attach ed to letter o f W C Co lby to E M C lark , Feb 1 4 , 1 9 28 . . . . . .

A go o d examp le Of co o rdin atio n b etw een th e su b sidiaries an d th e cen tral

 NO TES —22 1
43 4 FO R PA GES 2 1 4
O ffice in th e de v elo p men t o f n ew p r o du cts a n d p rocesses is su ggested in E . M .

C lark to W . C . T eagle, May 2, 19 28, an d E M Clark. . to D . R . Weller ,

Jan . 21, 1 9 29 .

Th e La mp , ( un e, J ibid , .
(A p r .
, an d Bu ildin g
Dir ectory, 2 6 Bro adw ay, u n e J 28, 1 9 29 .

Th e La mp :1 5 ( un e, , J an d Bu ildin g Dir ecto y, r 26 Bro adway,

J un e 2 8 , 1 9 29 .

Bu ildin g D irecto ry, 26 Broadw ay, J un e 28, 1 9 29 . A lso th ese sa me o fl cersi

m o v ed u p to w n w ith th e p a ren t co mp an y in 1 9 33 , Th e La mp , (J u n e,

I 933 )
Un til 1 9 33 th e J ersey an d D elaw ar e C omp anies h ad th e sa me iden tical fi n an cial,
legal, an d secretarial O ffi ces Th e Lamp (3 ) :7 (O ct , , .

I bid .
, (J u n e ,

I bid , .
(J u n e ,
an d ibid .
,
—1 2
(Feb .
, Pete r Hurll
j o in ed th e Bo ard in 1 9 29 as rep resen tativ e for acti v iti es in En glan d an d F r an ce,

Th e La mp , ( t,
O c .

A S C lar k w ro te R . W Han n a. on Nov . 25 , 1 9 27 , n o t on ly w ill ou r wo k b er

rath er defi n itely design ated as co mp ared w ith th e p ast,
”
but also
“
we all h op e
to h av e mo re time to ou sel es r v .
”

F o rtu n e,
( t,
O c .

T h e th ir d v o lu me O f th e History of th e S tan dard Oil Co mp any (New Jersey ) ,

w h ich is to b e p u b lish ed sh o rtly .

Th e ch an ges are describ ed in mu ch detail in Th e La mp , vo l . 1 6, issu es O f J un e

an d A ugu st, 1 9 33 .

I bid , (J m e issu e (p ) tells Of Ab rams n ew

’
. u n e, Th e sa . 22

du ties T h e p erso n n el
. an d p o sitions Of th e n ew sales dep ar tmen t ar e listed
on p . 24 .

Ibid , .
—2
3 (J u n e, ibid (F eb .
, an d ibid , .

(lun e , I 9 34 )
Th e La mp r ep o rted : In o rder to facilitate actio n , th e Execu ti v e Co mmittee
O f th e co mp an y daily, :2 2 (A u g ,
n o w co n v en es .

F
A s o rtu n e p o in ted o u t : T h e job Of Par ish , as h e h imself defi n es it, is to
“

co n so lidate ersey s p o sition an d J to co n cen trate o n op er atio n s,

’ ”
ortu n e, F
(A p ril,
I bid , .
( u n e, J
Th e La mp :2 2 (A u g ,
, describ es th e fu n ctio n s an d th e p erson n el of .

th e C o o rdin atio n C o mm ittee H L S h oemak er w as th e C o mm ittee s S ecretary

’
. . . .

F o rtu n e,
(J u n e,

Th e ch an ges can b e most clearly seen b y comp aring th e organ iz ation as de

scr ib ed in th e F
o rtu n e ar ticles o f th e sp rin g o f 1 9 4 0 w ith th ose o f th e O cto b er,

1 9 5 0, issu e .

F o rtu n e, —1 0
5 (O ct .
,

Th e La mp ,
—1 2
(J u n e, an d F o rtu ne, (O ct .
,

Ib id .
,
—10
3, 1 74 (O ct .
,

A f teHarp er Harry G S iedel an d th en Emil E S o u b ry h eaded th e Fo r eign

r , . .

Trade Dep ar tmen t S iedel s title h ad b een acco r din g to Th e La mp co ordin ator
’ “
.
, ,

o f mar k etin g activ ities o u tside o f th e Un ited S tates Th e La mp . ,

( c,
D e an d ibid .
, 26 (F eb .
,

I bid .
, (J u ly,
 —
NO TE S F OR P A G ES 2 2 1 2 3 1
4 35
Th e A n n ual Rep o rt o f th e S tan dard Oil Co mpany (Ne w J sey )
er
for 1 945 ,

p 9 . .

Fortu n e , detailed an alysis o f th e op era

(O ct , . T h er e is a u sef u l

tio n s Of th e C oor din atio n C omm ittee an d its r elation to th e Execu ti e C ommit v
tee an d th e gen eral S tafi dep artmen ts in Hen ry O z an n e, T h e ersey Stan dard
“
J
D ecen traliz ation for Efficien cy, World Oil (Mar ch ,
”
Plan —

F ortu n e, (O ct .
,

A n n ual Rep ort o f th e S tan dard O il Co mp an y (New Jersey) fo r 1 95 9 p p , . 1 2, 1 6 .

C HA PTER 5

T h e f o llow in g summ ary Of S ears s h istory came largely f rom Boris Emmet an d
’

J
o h n E Jeu ck , Catal ogu es an d Co u n ters — A Hist o ry of S ears Ro eb u ck
.
, an d

Co mp an y (Ch icago , ch s .
—
1 18 . Some inf o rm ation w as fro m
addition al

L o u is E A sh e . r an d
Edith Heal S en d No, Mo n ey (Chi cago, an d M R . .

Wern er Julius , R osen w ald (New Yo rk ,

Natio n al Cyclop edia of A merican Biograp h y (New Yo r k , X X X V III, 39 0,

v r
gi es a b ette su mm a y O f A sh e s ca ee th an do es h is o w n r r ’
r r b oo k .

r r
T h ese p ocedu es are w ell desc ib ed in Emm et an d Jeu ck , Catal o gu es r an d

Cou n ters pp 1 3 4—1 3 6, an d in A sh e an d Heal, S en d No Mo n ey p p 1 24—1 26

, . r , . .

Jo h n Meie , D oerin g s ab le assistan t, may h a e b een e en m o e esp o n sib le th an

r v v r r
’

D o erin g for th eir de elop m en t v .

Rep ort o f Co mm ittee o n Reorg an iz atio n , dated Jan 6, 1 9 3 0, h er eaf ter cited as .

F
th e r az er Co mm ittee Rep or t Un less o th er w ise in dicated, all u n p u blish ed mate .

rials are fro m Sears, Roeb u ck an d Comp an y s fi les In 1 93 0, th e T raffic Man ager ’
.

w as resp on sib le for th e mo vemen t Of goo ds an d storage T h e Supp ly Man ager .

b ecam e “ r esp on sib le for th e p u rch ase sto rage an d distrib u tion O f exp en dable , ,

su p p lies ( Fr a z er C.o mm ittee R e o r

p t) .

T h ese two top comp an y execu tiv es w ere J o h n Higgin s w h o b ecame Secretary , ,

an d Walk er 0 Lew is w h o in tim e b ecam e T r easu r er A t th e sam e tim e an

.
, .
,

Execu tiv e C ommittee of th e Board w as fo rm ed ( Sears Roeb u ck 8 C omp an y

“
.
, :

— C ertifi cate Of In co rp oratio n an d By Law s p 1 1 Bak er L ib rary -

, .
, ,

Harv ard G radu ate Sch oo l of Bu sin ess A dmin istratio n ) Th e C omm itt ee do es .

n o t seem to h av e p lay ed a Si n ifi can t r o le in

g p o licy formu latio n .

Emmet an d Jeu ck Catalogu es a n d Cou n ters p 24 4 T h e lists o f f actories

, , . .
,

w h o lly or p artly o w n ed are giv en o n p p 24 1 —2 4 3 E P Bro ok s fo r man y , . . . .

,

y ea r s th e V ic e-Pr esiden t in ch ar e o f S ear s s f acto ries str essed th at th e

g p u r ch ase
’

o f f acto ries o r stock in manu f actu rin m i r e lt d f r m n ee d to b e

g c o p an es su e o a

secu r e in o b tain in
g go o ds at a r easo n ab le p rice an d ev en mo re o f its p rop er
qu al ity (in terview with E P Broo k s Sep temb er 2 1 . .
, ,

T h is an d th e fo llo w in g qu o tatio n are fr om Emm et an d J en ck Catalogues an d ,

Co u n ters p p 2 1 7—2 1 8 T h e n ew man ager w h o in stitu ted th ese ch anges w as

, . .

L H Crawf o rd
. . .

8 . T h eo dore V Ho u ser Th e S ears O rgan iz atio n - Past an d Presen t

.
, an a d ,

dress to th e Nation al Co n feren ce Bo ar d 1 9 5 6 p 6 , , . .

9 . Emm et an d Jeu ck Catalog u es , an d Cou n ters p , .

382 .

10 . In v en to ry v alu es ar e g i v en in i bid —
p p 20 1 2 02.
, . .

I I . T h is an d th e fo llo w in g q u o ta tion are fro m th e Fr az e r Comm ittee Rep o t r .

43 6 N OTE S F O R P A G E S 2 3 2 —
2 39
Th e Merchan dise V ice-Pr esiden t still h ad ul timate, o er-all con tro l Of in v en v
to ries (Emm et an d Jeu ck , Catal ogu es an d C o u n ter s p bu t th e Co mp , .

tr o ller w as r esp o ns ib le f or th e p r ocedu r es , r ecor ds an d f orms used thr ou gh o u t

“

th e o rgan iz ation He also h ad ch ar ge Of all S tatis tics Of th e organiz a tio n as

” “
.

w ell as all accoun ts an d is th e o ffi cer r esp onsible to th e Pr esiden t f or th e

p r ep aratio n o f all b u dgets an d estimates aff ectin g an y dep artm en t, di isio n o r v
ter ritory of th e b usin ess (Both u o tatio ns ar e fr om th e raz er Commi tt ee . q F
R ep o rt .
)
This m em o ran du m is q u o ted in Emm et an d Jeu ck , Catal ogu es an d Co u n ters ,

pp 3 39 .
—
34 0 . Wood r
st essed th at, ex cep t f or th e lo n g-estab lish ed gr ocery ch ains
lik e th e G reat A tlan tic 8 : Pacifi c T ea Co , th e ch ains h ad n o distrib u tin g w ar e
.

h ouse sy stem .

F ort u n e, M
( y
a ,

Ho u ser h a d gon e o n to Mon tgomery Ward in graduatin g fr om Iow a

1 9 1 5 afte r
S tate with a degr ee in en gi n eerin g . He h ad w ork ed closely w ith Wood durin g
th e latter s ten ur e th er e, (D d W h s Wh o in F
’ ’
ort u n e ec , an o , .

A merica .

Th e B stor es gr ew fro m 8 to 1 5 0 in 1 9 2 8 Emm et an d Jeu ck (Catal ogu es

” “
.

a n d Co u n ters pp 34 379 ) gi e th e details Of r etail stor e exp an sion at b o th

1 -
, . v
S ear s an d Ward .

In te rv iew with R E . . Woo d , J ul y 3 0, 1 95 8 .

Th is fi v e f o ll o w in g u o tation s are fro m R E Woo d, Mail O r der

an d th e q “
. .

R etailing — Pio n eer ed in C hi ca go, New co m en A ddr ess, Nov 4 , 1 94 8 (mim eo .

gr ap h ed) This addr ess gi es th e b est co n cise summary of Wood s str ategy of v ’
.

r etailing .

F
A ccor din g to ortu n e o nl y 1 p er cen t Of th e co mp an y s gr oss sal es cam e fr om ,
’

cities o er v
ort u n e (May, F ,

F
Bo th th e r az er Commi tt ee R ep ort of Jan 6, 1 9 3 0, an d a lon g r ep o r t sub mitted .

by M Bar k er to R E Wood, Jan 2 , 1 9 3 5 , su ggest this b asic strategy, as do

J . . . . .

Wood s ow n p u b lic sta tem en ts in th e 1 g3 o s A goo d examp le of th e latter is

’ ’
.

Woo d s ’
sp e ech at th e Co n feren ce Distrib u tion at Bo ston , S ep t 2 0, 1 9 37 See
on . .

also A n n u al R ep o rt o f S ear s , R o ebu ck <9 Co mp a n y for th e y ear en din g Ja n 3 1 .

,

1 94 1 .

Th e co n tinuin g p ob lemr of th e locatio n o f th e

“
B stor es is in dicated in a

r ep o rt o f F M . . G ib ian ,
“
P roblem — D ow n T o w n vs . O u tlyin g Locations,
”

J u ly 9 , 1 9 43 . Th e p ro bl em of lin es is m en tion ed in r ep o rts discu ssed later in

this ch ap ter an d in Emm et an d Jeu ck , Cat al ogu es an d Cou n ters esp ecially p p ,
.

3 5 an d
1 8
3 6 .

F t or u n e, (May ,

J M . . Ba k e r r , in an in ter iew , v J u ly 2 8—29 , 1 9 5 8 , p o in ted o u t th at W H . . Al exan

der ca me to ha v e a so rt o f g en e al r su p e rv ision o v er th e
“
A
”
stor es an d a Mr .

T im bler o v er th e
“
B
”
sto es r . Emm et an d J eu ck (Catalog ues an d Co u n ters p , .

352 ) say th at A lexan de r w as fi rst app o in te d

“
A ctin g Man ager o f th e Retail

S to r es ”
S ee also p 3 5 8
on May 27 , 1 9 25 . . .

Th e p erso n n el, m er ch an disin g, an d su p p ly p roblem s are in dicated in Emmet

an d Jeu ck , Catal og ues a n d C o u n ters ch 21, , . an d in A n n u al Rep o rt o f S ears ,

R o eb u ck <9 Co mp a n y f or th e y ear e n din g J an .

3 1 1 94 1
,
Th ey w er e . also dis
cussed in in te rv iew s w ith J . M . Bar k er an d R E . . Woo d .

In ter iew w ith R E v . . Woo d J u ly , 3 0, 1 95 8 .

 — 2
NO TE S F O R P A G E S 2 39 45 43 7
Letter S to ck h older s b y R E Woo d, Jan 29 , 1 9 3 1 , in Bak er Lib rary,
sign ed
“
to . . .

Harv ar d G radu ate S ch o ol o f Bu sin ess A dm in istratio n .

T h ese statistics ar e fr om Emm et an d Jeu ck , Catal og u es an d Cou n ters p p 64 9 , .

65 0, 65 3 .

q
Th e u o tatio n is fro m ibid p 5 4 8 .
, . .

A fter tea ch in g m an u al train in g in Massach u setts sch o o ls, D o dd b ecam e th e p rin

cip al o f th e l eadin g in du strial arts sch o o l in Bo sto n in 1 9 0 8 In 1 9 1 2 , h e too k .

th e p o sitio n O f D ir ecto r of T h e Nati o n al S o ciety f or th e Pr o m o tio n Of In du s

t rial E du ca tio n . Fiv

m emb er of th e Un ited Sta tes
e y ears late r h e b ecam e a

A rm y Bo ar d of C lassifi cation of P erso n n el, w h er e h e m ay h av e m et Wo o d In .

th e n ex t y ear , D o dd w as th e h ead O f th e War S erv ice C o mm ittee o f th e R e

tail Dry G o o ds In du stry Fr om 1 9 1 7 u n til 1 9 2 1 , h e w as Dir ector o f th e R etail
.

Resear ch A sso ciatio n an d th e A ssociated Merch an disin g Co p o r ration . T h en ,

un til 1 9 27 , h e w as Man ager
f th e Distrib u tio n D ep ar tm en t Of th e Un ited S tates o

C h am b er Of C omm er ce His k n ow ledge o f r etailin g m ay h a e b een in cr eased

. v
b ecau se o f hi s marriage in 1 9 2 1 to C ath erin e il en e of th e h ighly su ccessfu l F
Boston r etailin g f amily Wh o s Wh o in Co m m erce an d I n dustry (New Yo rk ,
’
.

Emmet an d J eu c k , Catal og u es and C o u n ters p p 3 77-3 7 8 , . .

T h ese ob j ecti v es ar e listed in ibid p 3 5 9 .

, . .

In te rview w ith J .M Bar k er, u ly 2 8-29 , 1 9 5 8

. J .

Thi s inf orm ation m es largely fr om G eorge E Frazer , First F orty Years
co .

pp 7
-1 8
, su pp l em en ted b y W h o
. s Wh o in I n du st ry a n d C o m
’

merce (New York , Wh en Fraz er set u p his ow n con su ltin g firm in 1 9 1 7,

h is an n o u n cem en t stated th at his fi rm h as b een organized f or p ractice as
“

b u sin ess organ iz atio n , accou n tin g an d in du strial m an agem en t,

”
coun sel in

(ibid p Durin g th e 1 9 2 0 s, his fir m sp on so r ed a n um b er o f b oo k s on

’
.
, .

in dus trial o rganiz atio n an d m an agem en t From 1 9 1 7 o n , h e h eld a lectur eship .

in accoun tin g at th e Un iv ersity of C hicago O n e of th e fir m s earlier asso ci

’
.

ates an d p ar tn ers, J am es O McKin sey, b ecam e a leadin g A merican man age .

men t con su ltan t .

Th is an d th e f ollow in g u o tation ar e fr o m G E raz er to R E q . . F . . Wood Jan , .

6, 1 93 0 .

Bark er an d Carn ey co n tin u ed to w ork o u t o f Ph iladelp hia .

Memoran dum fr om T V Hou ser . . on

“
C lassifi catio n of L in es o f Mer ch an di se ,

D ec . 1 4 , 1 9 29 .

G . E . Fr az e r to th e Co mmittee, D ec . 1 4, 1 9 29 , an d G . E . Fr az e r to T . V .

Hou ser D ec , . 1 8 , 1 9 29 .

Tw o u n dated m em oran da to th e Fraz er C o mmi ttee, on e o n

an d u n sign ed

th e O rgan iz atio n o f R egions an d th e Retail Districts, an d th e o th er o n th e

“ ”

resp on sibilities an d typ es of men requ ir ed f or District Man ager, District S ales
Man ager, an d stor e m an ager, en closed with a letter of G E Fraz er to C om . .

mirtee, Dec 1 4 , 1 9 29 Th e secon d of th ese m em oran da, Fraz er w ro te, w as

. .

sp ecifi ca lly p r ep ar ed b y D o dd .

G E Fraz er to th e C ommi tt ee D ec 1 4 , 1 9 29 ; L Ro sen w ald to R E Wo o d

. .
, . . . .
,

D ec . 2 6, 1 9 29 ; an d G E . . Fr az e r to R E . . Wo o d Jan , . 6, 1 9 30 .

Th e P rop er ty Man ager for th e p u rch ase, sale an d m ain

b ecam e
“
resp on sib le
ten an ce of lan d, b uil din gs an d e u ip m en t, an d f or th e p r ep ar atio n of p lan s q
an d b u dgets f or b u il din g con stru ction an d r ep air s Thi s u o tatio n is fr o m th e . q
F raz er C ommittee Rep ort, Jan 6, 1 93 0 . .
43 8 N OTE S F OR P A GE S 2 45
— 2
54

4;
43 . G E . . F r azer to L R osen w al d,
.
Jan . 1 4, 1 93 0 . F raz er u sed th e w or ds
“
R egio nal
”

”
an d T errit orial in terch an g eab ly
“
.

T h is an d th e f oll o wi n g q u o ta tions ar e me mor an du m p r ep ared by

from th e
D odd f or th e r az er C ommi tt ee on F r esp on sibili ti es an d typ es Of m en r equ ir ed

f or Distr i ct Mana ger, Di stri ct Sal es Mana ger an d M e m anag er , .

45 G E
. r azer to R E W oo d, Jan
. . F 2 8, . . . 1 93 0 .

46 .

47 . Th e Man agers of th e m ail—or der h ous es w ere giv en th e sam e p ow er of v et o,

al th o u gh th e D istri ct Mana g ers w er e n o t .

48 Th is an d th e f o llo w in g f ou r u o tations ar e f rom L R osen w al d to R E Wo od,

. q . . .

Dec 2 6 .
,

49 E. mm et an d J eu ck (C a ta l o gu e s a n d C o u n t er s p p 377 3 ) d escrib e th e activ i

- 81
, .

ti es of this De p ar t men t I n 1 9 3 2, i t w as p l aced un der th e su p er isi on Of the . v

Mer ch an dis e D ep ar tmen t, w h ere it h a d been b ef or e 1 929 .

5 0 T. C ar n
. ey t J
o L. R o sen w al d D ec 3 1 , 1 2
9 9 , an d a su pp l.em en tary n ot e a t , .

t at h ed to th at m em or an du m ; al so a m em or an dum fr om C . B . R ob ert s to

R E . . Woo d D ec 3 0, 1 9 29
, . .

51 . This an d th e f oll ow in gf rom G E raz er to R E Woo d, Jan q u o ta tio n ar e . . F . . .

2 8 , 1 9 3 0 In th is sam e l etter . razer p oin ted ou t tw o o th er ill ust rations of th e F

p r ob le m s th a t h a d ari s en irst w as t h e u esti on of w h eth er f ou r cl o thin g . F q
exp erts co ul d b e sen t in to th e fi el d as adv isors to th e r etail stor es Th e u es . q
ti on in v olv ed r ela ted to th e status of th ese m en w h en th ey w ere w or k in g in

th e fi el d r az er sai d t h ey w er e still m emb ers of th e G en er al Mer ch a n dise D e

. F
p art men t an d co m p l etel y un der i ts co n trol Th e o th er case co n cern ed th e t e .

sp onsib ili ty f or p l aci n g r emil a d vertis in g thr ou gh ou t th e cou n tr y This r esp on .

sib ili ty, Fr az er insis ted, w as cl early th at of th e R etail S al es Man ag er an d hi s

5 2 . Emm et
d Jeu ck , Catal og ues an d Cou nters p 3 86 A t th e en d of 1 9 29 , S ear s
an , . .

” ” ”
h ad 4 8 A stores, 2 37 B stor es, an d 3 4 C stores, ibid p 3 4 5 Th e sales
“ “ “
. . .
,

fig ures f or r etail an d m ail-o r der sal es are o n th e sam e p ag e .

5 3 Th is an d th e six f ollo win g

. u o tations ar e f r om a Mem or an du m of G E q . .

Hu mp hr ey un e 26 1 9 3 0 , J , .

54 .

J un e 2 7 , 1 93 0 ; H W . . Kin gsley to R . E . Wo od ,
J u ly 1 2, 1 93 0 ; an d G . E .

Hu mp h rey to R . E . Woo d J ul y , 1 7, 1930 . Whil e th er e w er e difi erences of

op ini o n on th e typ e of stafi n ecessar y, al l agr eed on its n eed .

55 . W H . . A la lan
ast m om
der, w h o w as
en t t o a tt en d th e m eeting ask ed at th e ,

f elt th at th e gr eatest di fi cul ty w as in t h e calib er Of th e top p erso n n el in th e

T erritori al O fi ce This sub ect, of course, h e told Wo o d, I coul d n o t dis
”
.
“
j “

cuss an d u n dou b tedl y it is th e m ost imp or tan t su b ect,

,
”
W H A l exan der to j . .

R E W o o d S ep t 30 1 93 0 ; al so R E Woo d to L R osen w al d, S ep t 2 4 , 1 9 3 0
.
, , . . . .

5 6 Th i
.s an d th e f o ll o w ing u o t ati o n ar e f r o m G E raz er an d A W T o rb et to q . . F . .

R E Wo od, O ct 2 9 , 1 9 3 0
. . .

5 8 Describ
. min T J . . Carn ey to R E . . Wood , D ec . 1 6, 1 9 3 1 .

59
NO TES F O R P A G ES 2 54
— 2 62 4 39
60 This
. an d fo llo w in g u o tatio n s ar e from a m emoran dum of T
th e two q .
J .

C ar n ey, O ct 1 , 1 9 3 1 cited in Em m et an d Jeu ck , Catal og u es a n d C o u n ters p

.
, , .

5 9
4 o l
.l o w in gF a r e co mm en dation made b y r az er in his secon d r ep or t, a F
p e rso nn e l o ffi ce w as set u p i n each terr ito ry u n der an ex ecu ti e w h o r ep o rt ed to v
A n drew s A n dr ew s h im self r ep orted to C arn ey D o dd s m o e is in di cated in
. .
’
v
Wh o s Wh o in Co m merce a n d In du stry (New York ,
’
He w ou ld in ,

v
1 9 3 4 , lea e Kro ger to b ecom e Ex ecu ti e V ice-Pr esiden t an d th en Pr esiden t O f v
th e A m erican Man agemen t A ssociation .

61 . R E Woo d t o th e T erritorial O fi cers D ec 2 1 , 1 9 3 1 Wo o d sen t a draft o f this

. .
, . .

m em oran du m to C ar n ey o n Dec 1 5 , R E Woo d to T C arn ey , D ec 1 5 1 9 3 1 . . . .

J . .
, .

62 . Th r ee item s fro m T C arn ey to R E Woo d, D ec 1 6, 1 9 3 1 - a lo n g m em

.
J . . . .

o ran du m , a f orw ar din g letter, an d a l ett er co mm en tin g o n Woo d s m em

’

o ran du m to th e T erritoria O fficers In th e f o rw ar din g l ett er , C ar n ey said :

l “
I .

dictated th e attach ed m em oran dum to you b efore r ecei in g a cop y o f th e letter v

y o u r
p po o se d sen di n g t o e ach T err ito r ial O fli cer
”
T h e f o llo w in g fi v e u o ta . q
tio n s ar e fr o m C arn ey s memoran du m
’
.

R E Woo d to L Rosen w ald, D ec 2 1 , 1 9 3 1 , an d R E Wo o d to th e T erri

. . . . . .

torial O fi cers, Dec 2 1 , 1 9 3 1 . .

J M Bark er to R E Wo o d, Dec 3 1 , 1 9 3 1 Bark er co n clu ded h is letter by

. . . . . .

say mg
Wh eth er o r n ot su ch b est b e u dged b y th ecen tr aliz ation is desirab le can j
exp er ien ce o f o th er gr eat o rgan iz ation s w hich h a e tried it P erso n ally I v .

can n o t see th at it w ill w o rk as w ell as ou r p r esen t p lan In an y case th e .

,

T errito rial O fficer, r esp on sib le fo r p erso n n el, b u t n o t f o r p r o fi ts, w o u ld u m

do ub tedly fi n d it difi cu lt to fi t p erson n el in to a sch em e w h en hi s ch o ice of
v
in di idu als w ou ld b e u dged b y p rofi t resu lts o er w hich h e h ad n o con tr o l j v .

Thi s an d th e fi v e f o llow in g q u otations ar e f rom F . B . Mcco nn ell to R . E .

Woo d Jan , .
5 , 1 9 32 .

McConn ell w ou ld lea v e th e selectio n of sto e sites, sto e r r design , q

an d e u ip m en t

to th e cen t al o fi ce r bu t su b ect to j th e ap p ro v al of th e T erritorial O fiicer .

R E . . Woo d to T J Carn ey Jan . .

, . 1 5 , 1 9 32 .

C A . . Wo ods to R E Wo o d Jan . .
7, 1 932
, . .

Memoran dum by Tf Jan 1 6, forw ar ded to th e

.
J . C ar n ey o n th e meetin g O .

T errito rial O fi cers f or comm en t on Jan 20, w ith th e r ev ised v ersio n b ein g .

sen t to Woo d o n Jan 2

9 McC on n ell in his letter of Jan 5 stressed th at th e
“
. . .

lack of mu tu al u n derstan din g b et ween Ch icago an d th e fi eld h ad in hib ited

”

eff ectiv e u se of th e r eserv o ir of exp er ts in C hi cago

” “
.

Th e fi rst large f ormal m eetin g o f th e S tor e Man ager s in Chi cago w as o n F eb .

8 , 1 9 32 T h ese m eetin gs b ecam e p erio dic affair s (R E Woo d, O n to C hi cag o

” “
. . .

sp eech at S tev ens Ho tel Co nf eren ce, Mar

3 0, .

Emm et an d Jeu ck Catalo g u es a n d Co un ters p p 3 62—3 63 , also m em o ran dum

’

, , .

o f J M Bark er to R E Woo d, Jan 2 , 1

. .
935 . . . .

Th e data in this an d th e f ollo w in g sen ten ce ar e fr om Emm et an d Jeu ck ,

Catal og u es an d Cou n ters p 65 3 , . .

Mem oran dum Of J M Bark er to R E Wo od, Jan 2 1 935 a mem oran du m . . . . .

, ,

w ritten at Woo d s r equ est, in ten ded to summariz e th e b asic p rin cip les in lin e
“ ’

w ith w h ich th e eff ort O f th e Retail A dmin istration O ffi ce h as b een dir ected, to
g eth er w ith a statem en t of some Of th e m aj o r p r oblem s w hi ch con fr on t S ear s,
Roeb u ck Gr C omp an y at p resen t an d f or th e fu tur e in th e dev elop m en t of retail
44 0 NOTES F O R P A G E S 2 6 2 — 2 67
st o es r . A lso us é ul on this p o in t is J M
. . Bar k er ,
“
A dmin is tr atio n in an Ex
t ens i e v
R etail O rgani za tion , a p ap er p
”
resen ted b ef or e th e Bost on Co n f eren ce
on D is trib u tio n , Sep t 2 3 , 1 9 3 5 , p 8 . . .

74 .
J M Bark er to R E Woo d, D ec 1 5 , 1 94 7
. . . . . .

75 Em m et an d J eu ck ,
C at al o g ues a n d C o u n ters 8— 1 an d in ter iew with
p p 54 5 5 , , . v
M B ar J
k er ,
. ul y 2. J
9 3 0, 1 95 8 Th e m an ual is m en tio n ed in Emm et an d Jeu ck ,
— .

Catal o guesd Co u n ters p 5 4 8 A co n f er en ce of fi eld an d p ar en t p er so nn el

an , . .

m en is des cr ib ed on p 5 5 5 . .

7 6 Th is an d th e thr ee f oll o w in g u o tations are fr om

. M Bar k er to R E Woo d, q J . . . .

Jan 2, 1 93 5 Cal dw ell , Bak er s r etail p ersonn el assistan t, r ecalls tha t vir
“ ’
. .

t uall y all his tim e w as sp en t in sp ectin g st or es an d ap p r aising th e ual ity of q

”
th e p er so nn el , Emm et an d J eu ck , Catal ogues an d Cou n ters p 55 9 , . .

j
7 7 Th ese ma or r ep o rt s in clu ded : Pr ofi t an d Loss, Ba lan ce S h eet, Merch an di se
C on di ti on , Item R ep ort o n O l d Mer ch an dise, A ge Of In en tory b y S eas on Let v
t er , In en to y S h rink age R ep o t , P eriod an d S easo nal Mar k -D o w n C lassifi ca tio n ,
v r r
Cum ul ati v
D ail y R ecor d R epo r t, D i isio nal Pay-Ro ll R ep ort , il e of A u di tor s
e v F ’

R ep orts, La tes t R ep o rt o f D ail y Stor es, an d Henry R ose S al es R ep ort .

Qu ot ed in D a id G Moo r e, Man agerial Str ategies an d O rganiz ation Dy n ami cs

v “
.

in Sear s R etailin g,
”
a do ct or al dissert atio n su b mi tt ed at th e Un i v ersity of Chi
C3 8 0, 1 9 5 4, P 77
7 9 Th e p ro bl em f h o w m u ch an d w h at k in d Of sof t lin es to car ry in th e B-1
“
o
” ”
w as m u ch lik e th a t Of th e o n e of sp ace Th e A , wi th its
“ “
—
A to .

q
s u ar e f eet, w as small in siz e as d ep ar tm en t sto r es w en t Mo r eo er , o n e . v
thir d o f its ar ea w as gi en o er t o h ar d lin es SO as Bar k er w r o te, in com v v .

p arison w ith th e Ofi erin gs of comp etiti e dep artm en t stor es, th e disp ar ity of
“
v
Th e p r ob lem o f th e
”
th e rel ati o n b etw een th e sof t lin e ar eas is strik in g .

“
B , w ith its s uar e f eet, w as e en m or e difficu lt q v
J M Bar k er to R E Woo d, Jan 2, 1 935
. . . . . .

Emm et an d Jeu ck , Catal ogu es an d C ou n ter s p 3 5 7 , . .

F r om an in ter i ew w ith R E Wo od , ul y 3 0, 1 9 5 8 ;
v M Bar k er to R E . . J J . . . .

Woo d, Jan 2 , 1 93 5 ; an d Bar k er, A dmin istr ation in an Ext ensi e Retail 01
.
“
v
”
g an iz a t io n , S ep t . 2 3 , 1 9 35 .

8 3 In ter iew w ith R E

. v . . Wood , J ul y 3 0, 1 95 8 .

8 4 This
. an d th e t wo f oll o w in g q u o ta ti ons ar e from J M . . Bar k er to R E . . Woo d ,

Ian 2 1 935 .
.

8 5 Q u o ted in Emm et
. an d J eu ck Catal ogues a n d Co u n ters p 37 1
, , . .

8 6 Inf orm ati on

. o n th e 1 9 3 5 ch an g es are fr o m J . M . Bark er ,
“
A dmin istratio n in an

Ex tens i v
R etail O rgan iz atio n , Sep t 2 3 , 1 9 3 5 ,
e
”
. an d co mm en ts b y F . B . McCo n
n ell sen t t o th e au th o by C Wo th y, D ec r J . . r . 1, 1 959 . McCo n n ell sai d th a t he
n eeded t o cl ear o n l y th e A stor e an d G r ou p ap p o in t men ts with Woo d
“
.

R E . . Wo o d ,
“
On to Chi ca go , sp eech at S te v ens Hotel Co nf er en ce, Mar 3 0, .

1 9 39 .

88 Emm et. an d J eu ck , Catal o g u es an d Co u n ter s p 5 5 3 , , . an d A n n ual R ep or t for

S ea rs R o eb u ck 6 ,
'
C o mp an y f or y ear en din g Ja n ua ry 29 , 1 93 5 T h e p erso nn el
.

m a n ag er f or actory P er so nn el al so r ep o rt ed to Mcco nn ell aft er th e p ost w as

F
f oun ded in 1 93 8 .

89 Th is an d th e f o llo w in g u o tatio n ar e fr om
. M Bark er , A dmi n istration in q J . .
“

an Ex ten si e R etail O rgan iz a ti on ,

”
v
S ep t 2 3 1 9 35 .
, .

F M n es T h e Mer ch an
9 0 or t u ne
. 1 7 : 1 0 8 ( y 93 )
a 1 8 t ells, o f th e ex p an si o n in so f t li ,
.

dis e D ep ar tm en t i n tim e ca m e to h a e its sp ecial O ffices f or soft lin es h ar d v ,

NO TES FO R P A G ES 2 67 —2
7 2 44 1

lin es, h om e fu rn ishin gs, an d ad er tisin g as w ell as f o r store p lan n in g an d dis v

l
p ya Prin ters.I n k Mo n th ly
—
7 ( u ly , 1 9 4 0 ) d escr ib es w ell th e r elatio n s b e
, J
tw een th e G r ou p an d Z o n e man ag ers an d C h icago in carryin g o u t sales p r om o
tion acti viti es .

91 . T h e fo llo w in g in f o m atio n r on th e o gan iz ation r of in dep en den t A sto res,

G ro u p s , an d th e Z o n es co m es from Em m et an d J en ck , Catal o g u es an d C o u n

4 8 7 Beside th e sales p ro motio n O ffi cers, an

“ ”
68 3 7 1 an d 4 82 A
— —
ters, pp 3 . .

r t
sto e s a ff in cl u d ed an O p era tin g S u p er in t en den t a n d h is a ssistan ts — P er son

n el, C usto m er S erv ice, an d In stallation S er ice

‘

v .

9 2 . R E . . Wo o d , O n to C hicago , Mar .
3 0 , 1 9 39 .

9 3 A n n ual Rep o rt (s)

.
f or S ears R oeb u ck (7 Co mp a n y
, f or th e ( ) y ear s en din g J an .

3 1 , 1 93 9 an d J an .
31, 1 940 ; an d R E . . Woo d ,
“
On to C h icag o
”
Mar , .
3 0 , 1 9 39 .

r
Ba k er b ecam e T reasu rer
ro ller in ea ly 1 939 He retired in A p ril an d C o mp t r .
,

1 9 4 0 w ith Hu mm b eco min C o m p tro ller a n d R J D e Mo tte T r easu rer E P

, g . .
,
. . .

Bro o k s b ecam e V ice Presiden t in ch arge o f Factories at th e same tim e th at

-

McCon n ell too k th e p osition o f V ice Presiden t in ch arge o f Retail A dm in istra -

tio n an d Perso n n el Nelso n w as made an Execu tiv e V ice Pr esiden t in ea ly

.
- r

1 939 b u t ser v ed o n ly a little o v er a

, y ea r b ef o r e g o in g to Washin g ton to b eco m e

Directo r o f Pu rch ases in th e O ffice of War Pr o du ctio n .

9 4 A n n ual Rep o rt
. o f S ears R oeb uck 67
, Co mp an y f or th e y ear en din g Jan .
31 ,

1 93 9

9 5 R E Wo o d, O n to C h icago , Mar 3 0, 1 939

. . . . .

9 6 Woo d h ad k ep t in min d an o th e alte n ati e

. r r v Wh . en th e C o mp an y w as u n de r at

tack w ith o th e r retail ch ain s du rin g m id-3 o s, Woo d p ro p o sed to

th e th e At
’

r ral s O ffi ce th at th e sep arate C omp an y migh t b e div ided in to S ix

’
to n ey G en e
region al corp oration s h avin g a cen tral p urch asin g u n it organ iz ed as a n on p rofi t
co rp o r atio n Fortu ne (May
. In o th er w o rds Wo od u n der th e
, , , .
,

p ressure o f go v ern m en t in ter v en tion w as w illin g to accep t th e altern ativ e o f ,

str o n g au to n omo u s div isio n s an d p ractically n o g en er al o ffice excep t fo r th e

essen tial cen tral b u 1n
y g organ i z ation .

97 . Emm et an d Jeu ck Catal ogues an d Co u n ters p 65 3 T h e exact fi gu re w as

, , . .

p er cen t .

9 8 A n n ual Rep ort

. o f S ears Roeb u ck <9
, C o mp an y for th e y ear en din g Ja n .
31 ,

1 94 1 .

99 . Fr o m a sp eech at A tlan ta, G eorgia, Jan . 1 5, 19 46 . relimin ary

P Rep o rt on

S ur v ey o f r
O gan iz atio n , S ep t 25 , 1 9 4 7 f or S ear s, Ro eb u ck 8: C o mp an y, su b .
”

mitted b y an ou tside co n su ltan t fi rm , h e eaf te cited as Co n su ltan t s Rep o t, r r ’

r
S ep t 25 , 1 9 4 7, in dicated th at th e Pacifi c Co ast T e ito y w as co n side ed to b e
. rr r r
a
“

gen e ral
m o del fo r later territorial u n its
”
. Th is r ep or t su gg ests th e amo u n t
o f au ton omy
giv en to th e n ew territorial o rgan iz atio n .

1 00 . R E . . Woo d to A . rrow s Dec 1 8 1 94 5

S Ba.
, .
, .

101 . Memof an dum Of A S Barro w s Ch an g es in O rgan ization 1 9 4 6

. .
,
“
D ec 1 9 4 5 , , .
, .

1 02 . T h is an d th e f o llo w in g f o u r qu o tation s are fro m th e C o n su ltan t s R ep ort ’

S ep t . 25 , 1 9 4
7 .

1 03 T h ese factories w er e m an aged alo n g th e sam e b asic o licies o f th e dele atio n

p g
.

o f au th o r it
y as w as th e rest of th e o rgan iz atio n E P Br oo k s, V ice-Presiden t . . .

in ch arge o f F
acto ries, r ecalls th at h is task s w er e to ch eck o er th e f a cto r
y v
man agers ’
rep o rts on p erso n n el an d th eir fi n an cial acco u n ts, an d th at th e rest
of h is jo b w as trou ble sh oo tin g (in terv iew w ith E . P Broo k s, S ep t
. . 21,
442 N OTES F OR PA GES 2 75
-
2 7 8
The au th o rity o f th e p aren t o f ce, fi th e Consultan t s Rep o t, Sep t
’
r . 25 , 1 9 4 7 , co n

tin u ed :

sh o ul d b e ex er cis ed lar gely in th e atmo sp h ere of cou nsellin g an d guiding

an d sh o u ld b e con cern ed p rimar il y w ith m atters o f a lon g-r an ge n atur e It .

v
sh o ul d co n tro l th e acti ities of su b or di n ate un its o n l y in th e b r o adest sense

an d sh o u l d b e th e r allyin g p o in t f or th e de elop m en t an d coor dination of v

j
ma or p o licies aff ectin g th e b u sin ess as a w h o le .

Wh a t th e con sul tan ts m ay h av e b een sayin g h er e w as th at th e sen io r execu

tiv es w ou ld u se th eir rity on ly in em ergen cy an d rely on reason li n e au th o ,

p er su asio n an d ta ct to g et th e T er r,
ito r ial O fii cers commi tted to th eir b r o ad
p lans Th e R ep ort also adv ised th at m o st l egal p ro b l em s sh oul d b e h an dl ed
.

in th e T er ritories an d th at th ose of a more gen er al n atur e co u ld b e carried on

by an law fi rm on a fee b asis T h e Rep or t m ak es n o m en
o u tside con su l tin g .

tio n o f McC o nn ell s R etail A dmini stratio n Ofli ce, ex cep t p ossib ly w h en its o r
’

g an iz ation c h ar t sh o w s a se n i o r o fficer in C hi ca go to w h om app aren tly all

T errito rial O fficer s w er e to r ep ort .

Thi s an d th e two f o llow in g u o tatio n s ar e fr om M Bark er to R E Woo d, q J . . . .

D ec . 1 5, 1947 .

E . G u dem an , Ir .
,
w as also a memb er (R . E . Wo o d to Humm Hattersley,
,

Moore Kin gsley , , G u dem an , an d C al dw ell, J an . 1 3, Th e V ice-Presiden ts

o f th e n ew d in u n e, 1 9 4 8 ( B McCo nn ell to R E
T errito ries w ere ap p o in te J F . . . .

Woo d, u n e 3, 1 9 4 8, an d Woo d s rep ly)

J ’
.

Mem oran dum fr om B McCo nn ell o n Chan ges in O rganiz ation , A p r 2 6,

F . . .

1948 .

T V Hou ser, T h e S ear s O rgan iz ation , Past an d Pr esen t, an addr ess to th e

“
. .

Natio n al In dustrial C o n f er en ce Bo ar d, 1 9 5 6 .

D escrib ed brie y in Hou ser, Th e S ear s O rgan iz atio n fl Mo ore, Sear s Retail “
.

in g, h as a goo d an alysis of th e ch an gin g relationship s Of buy ers of th e Mer

”

ch an dise D ep ar tmen t an d th e stores, pp -

2 4 3 24 8 . .

1 10 . F o r examp le, Hou ser, in an addr ess o n P erso nn el Po licies an d T ech ni u es,
“
q
deli er ed at New York Uni ersity (un dated) , p o in ted ou t th at Ou r Head
v v “

q u ar ters Person n el D ep ar tm en t is o rgan iz ed ih th e f o ll o win g u n its :

1 . Pe rson n el p lanning an d resear ch

2. S al ar y an d w age r esear ch an d administr ation
3 Psych o logical testin g, in clu ding emp lo yee
. attitu de su rveys
4 Em.
p oy ee edu catio n an d de elop m en t
l v
5 Emp lo y ee p o licies an d b en efi ts
.

r
6 Emp lo yee elation s in o l in g o ur acti ities w ith ou tside g ou p s
. v v v r
7 A .se p arate un i t w hi ch h an dl es p e so n n el a dminis tr ation f or r o ur Head
q
u ar te s O fii ces r
Mo ore ,
“
S ear s R etai lin g , pp . 2 5 5—2 6 0, an alyz es th e im p act o f decen tralization
onS ear s s p er son n el acti ities
’
v .

Memo an dum of C E Humm r . . on

“
r
O gan ization of V ice-P es r iden t s—C o mp
’

tro ll e s r Fu n ction
’

, O ct . 1 6, 1 9 4 7 .

Hou ser , T h e S ears O gani z atio n ,

“
r an d an v
in ter iew w ith C row dus Bak er , th en
rs s r ro ller A u g 1 3 , 1 5 , 1 9 5 7, al so Moore, Sears
“
V ice-P esiden t an d Comp t
’
Sea , .

”
Reta ilin g, pp .
—
25 1 2 5 2 .

Ho user Th e S ears O rganiz ation

“

, .

F o rt u n e, M
( ay ,
NO TES F OR P A G ES 2 7 8 —2 89 443
T h e q u o tatio n is f rom J M Bark er to R E Wood Dec 1 5 1 947 Bark er also. . . .
, .
, .

m en tio n s th e in terterritorial committee .

In th e late 1 g5 o s th e Board in clu ded th e gen eral O fiicers retired ex ecu tiv es
’

, , ,

tw o m emb ers o f th e Ro sen w ald f amily an d f o u r o u tsiders th r ee active b u si , ,

messm en an d th e Presiden t o f No rth w estern Un iv ersity Its Fin an ce C omm ittee .

reviews exp en ditures ov er

A rth u r Ro sen b au m ( T h e Econ om ic O u tloo k a p r esen tatio n to th e C alifo rn ia
“

Perso n n el Man agem en t A sso ciatio n A p r 2 1 1 9 5 3 ) p ro v ides an excellen t su m , .

,

m ary o f for ecastin g p ro cedu res at S ears S ome o f th e b asic data h e u sed h ad .

b een reco rded co n tin u o u sly sin ce 1 9 3 5 Th is w as th e ap p r ox imate date of th e .

f o rmin g of Ro sen b aum s dep artm en t acco rdin g to Bark er an d o th er execu tiv es
’
.
,

Bark er recalls th at h e did a great deal of this [ dev elop in g fi n an cial forecasts]
“

eith er as th e F in an cial V ice Pr esiden t or as th e ch airm an o f a su ccessio n of -

,

ad h oc fi n an ce co mm ittees J M Bark er to au th o r May 1 2 1 9 59 ,

”
. .
, , .

Beside th e adj u stm en t o f th e b o u n daries o f th e T errito ries th e mo st imp o rtan t ,

ch an g e sin ce 1 9 48 h as b een th e cr eatio n o f w h at amou n ts to a six th territo ry

for th e n ew Latin A m erican activ ities w h ich w as form ed in 1 9 55 w ith h ead ,

qu arters at Ch icago A lso th e Prop erty Dep artm en t w as sep arated from O p era
.
.

tion s Th e p erio d af ter th e adop tio n of th e n ew o rgan iz ation w as o n e o f great

'

g r o w th F r o m 1 94.6 to 1 9 55 f or ex amp le t h e n u m b er o f A a n d B-1

, stores ,
“ ” “ ”

in creased o v er 4 0 p er cen t (F B Mcco n n ell A Rep o rt o n S ears Ro eb u ck

“ ”
. . .
, , ,

F eb . 2,

C HAPTER 6

1 . J osep h A . S ch u mp ete r , Th e C reative Resp on se in Eco n o m ic Histo ry, Jo u rn al

o f Econ o mic Histo ry ,
—1
5 9 (Nov , By . Fritz Redlich
’
s more p recise
defi n itio iis, th e form ation Stru ctur e b y du Po n t an d
o f th e mu ltidi isio n al v
G en eral Mo tors w as a gen u in e, p rim ary in n o atio n , w h ile its crea tio n b y v
Jersey S tan dar d, S ear s (an d Westin gh ou se) w as closer to a p r im ary rein n o v a

tio n T h ose of du Po n t, th e G en eral Mo to rs di isio n s, an d S ears, w h ich set

. v
u p th e dep ar tm en tal an d cen tr al O fiices, w er e deri ati e in n o atio n s, w h ile v v v
th at at J
ersey S tan dar d migh t e en b e classifi ed as p rim ary rein n o v ation v .

F r itz Redlich , v
In n o atio n in Bu sin ess, A merican Jo u r n al of Econ o mics a n d
“

S ociol ogy -
29 1 (A p r ,
, .

Lelan d H en k s Early Ph ases of th e Man ag em en t Mo em en t, A dmin istra

J v
“
2 . .
,

tiue S cien ce Q uarterly —

44 7 (Dec , p ro ides an excellen t in tro du c
, . v
tion to th e b egin n in gs of r ation al, car ef ully p lan n ed o rgan iz ation of w o rk in

factories an d p lan ts Herm an Hagedo rn , T h e Man agemen t Con su ltan t as

.
J .
“

Tran sm itter o f Bu sin ess T ech n i u es, Exp l o ratio n s in En trep ren eu rial Histo ry
”
q ,

—
1 7 3 (Feb , in dicates so meth in g o f co mp arab le b egin n in gs in o ffice
.

w o rk .

S ee ch arts o f Merch an dise D ep artm en t in Bo r is Em m et an d o h n E Jeu ck , J .

Catalo g u es a n d Co u n ters: A Histo ry of S ears R o eb u ck an d C o mp an y (C h icag o , ,

1 9 5 0 ) o p p o site p
3 8 0 T h e citatio n s fo r f acts o r u o tatio n s in this ch ap ter w ill
. . q
v
b e g i en o n ly w h en th ey h a e n o t b een sp ecifi cally cited in an earlier ch ap ter v .

D exter S K imb all, Prin cip les of In du strial O rgan iz ation (New York ,
.
p .

8 9 T h e italics are Kirn b all s S im ilar iew s are exp r essed in [ A W S h aw v

’
. . . .

C omp an y ] Execu tive Co n tr ol (New Yo rk , c pp 4 4 1 — 2 I

nf o rm atio n o n . . .
 NOTES —
4 44 F O R P A G E S 3 00 3 1
3
dep ar tmen tal o rgan iz ation in o th er lar ge comp anies is sp arse, b u t th e e iden ce v
v
seem s to S h o w th at in di idu als rath er th an co mm itt ees rem ain ed r es o n sib l e
p
for decision s For examp le, th er e IS n o thin g 111 Haro ld Passer s s tu dy of G en
.
’

er al Electric s early admin istr atio n to su

ggest th at th e f un ction al co mmitt ees
’

v
rath er th an th e fun ction al ice-p residen ts h ad th e fi n al resp on sibil ity, De elop “
v
men t f Lar g e S cale O rganiz atio n — Electrical Man uf acturin g A r ou n d
o

J o u r n al of E c o n o m ic His t o ry 1 2 :3 4 3 8 7 ( all,
8 -
, C h ar les U C arp en ter F .

o f T h e Natio n al C ash Re ister C om an , o n e o f th e earliest ad o ca tes o f th e

g p y v
committ ee system in f acto ry m an a em en t, str essed th at co mmitt ees m u st n o t
g
v
in terf er e w ith in di idu al au th orit y an d resp o ns ib ility He p rop o sed th e settin g .

b o ar d to decide o n th e p racticality o f n ew ideas co n

”
u p o f a co mm 1tt ee o r
“

cern in v
g in en tion s, design s, an d p rodu cts, an d to h an dle co mp lain ts an d su g
g e sti on s O n th ese m att ers, h e w ro te:
.

This b oar d m u st b e th e su p r em e an d fi n al p ow er in th e f actory, th e o nl y

o fficial in th e o rg an iz atio n ran k in g it in au th or ity b ein g th e g en er al man ager .

v
This b oar d sh ou ld h a e a p erm an en t ch airm an sel ected b y th e co m
p an y, an d all o r ders em an atin g fr o m it sh ou ld b e is su ed in h is n ame Th e .

ch airm an o f thi s b o ar d sh o u l d b e th e
p er so n hig h es t in au th o r ity in th e
facto ry Each m em b er o f th e b o ar d sh o ul d h a
. v e cer tain dep artmen ts
allo tted to hi m acco r din g to hi s p ar ticu lar ab il ity an d exp erien ce, o v r w hi h
e c

dep ar tm en ts his au th ority sh ou ld b e co mp lete .

q
Th is u otatio n m es from Ch arles U C arp en ter, Mo n ey-Mak in g Man agem en t
co .
“

for Work sh op a n d F a t ry
c o E gi e
n n eri n g ,
M a g az in e -
7 0 0 ( F e b , ,
.

S ee also J en k s, E ar ly Ph ases o f th e Man agem en t Mo v emen t, p 44 1 This

“
. .

r
p p o osal is sur p r isin gyl sim il ar t o th e o n e H o w ar d ad v o ca ted f o r J er sey s
’

Man uf act urin g C ommittee in 1 9 24 J o h n H Patterso n Presiden t of T h e Na

. .
,

tion al C ash Register C o mp an y a p io n eer in r atio n aliz in g m an agemen t an d

,

sales meth o ds an d an ar ticu late exp o n en t o f th e delegatio n o f decisio n m ak in g,

w as ev en clearer o n thi s p o in t th an hi s su b or din ate T h e fi rst o n hi s lon g list .

o f th e p rin cip les o f m an ag em en t w as A n o rganiz atio n sh o u ld h av e b u t o n e

“

h ead C en traliz ed au th o rity m ean s n o r ed tap e n o delay in m ak in g decisio ns

.
,
.

A n arm y cann o t w in v icto r ies w ith div ided au th ority T h e sam e th in g is tru e .

in b u sin ess S am u el Cr o w th er Jo h n H Patterso n Pio n eer in I n dustrial Wel

”
.
,
.
,

fa re (G ar d en C ity N ew Y o r,
k , pp 2 —
47 4 2 8 I n tim e c o m m i
. tt ees at G en .

eral Electric an d p o ssib ly o th er l ar ge fi r m s cam e to h av e gro u p r esp o n sib ilities

f or op eratio n al activ ities T h is dev elop m en t came n o t th rou gh an y sp ecifi c deci

.

sion b u t b y u n p l an n ed ev o lu tio n ary p ro cess A t G en eral El ectr ic, su ch co m .

mitt ee man agem en t w as o nl y fi n ally comp letely elim in ated with Cor din er s
’

p os t-World War II organ iz ation ch an ges .

q
T hi s an d th e tw o f o llo w in g u o tation s ar e fr o m a r ep ort to th e Bo ar d of D i
r ectors [ of du Pon t] fro m th e Execu tiv e C ommitt ee, S ep t 2 1 , 1 9 2 1 . .

A n n u al R ep ort o f G en eral Motors C o rp oratio n f or 1 937 , Mar .

31, 1 938, pp .

37 3 8
-
.

Th ere is m or e detailed discussion r elatin g ch an ges in o rgan iz atio n stru ctu re

to th e th eo ry o f en tr ep r en eurship in A lfr ed D C h an dler , Jr , an d ritz Red . . F
v
lich , R ecen t D e elo p m en ts in A merican Bu sin ess A dmin istratio n an d th eir
“

C o n cep tu aliz atio n , Welttv irtsch aftlich es A rch iv

” — 1 30 ,

Rep o rt of th e In vestigatin g C o mmittee of t h e Pen nsyl van ia Railr oad Co mp any

A pp oin ted by Resol utio n of th e S tock h ol ders at th e A n n u al Meetin g Held
March 1 0 1 8 74 (Ph iladelp h ia,
, p 1 69 T h e P en n syl an ia s an sw er w as
. . v ’
NO TE S —
F OR P A G ES 3 1
3 3 2 1 445
to h ave fu ll-time, p aid directors, w hich mean t, in fact, on ly ap p oin tin g some
of th e seni o r execu ti es as directo rs v .

F
For examp le, rederick Harb ison , En trep ren eurial O rgan ization is a actor in
“
F
Econ omic D e el op m en t, Q u a rterly J o u r n al of v
Eco n o mics, 7 0 :3 64
—
3 7 9 (A u g, .

Ech o ls w as th e rep resen tative o f th e T reasu rer s

Dep artmen t o n th e su b -su b
’

co mm ittee th at fi rst p rop osed th e v

n ew mu ltidi isio n al str u ctu r e f o r du Po n t .

Hugh G .
J . A itk en , Tayl orism at Waterto tv n A rsen al : S cien tific Man agemen t
in A ctio n , 1 9 08- 1 9 1 5 (C amb ridge, pp . 1 5 —1 6, also J en k s,
“
r
Ea ly Ph ases
f th e Man agemen t Mo em en t, p p 44 2-44 3 v ”
o . .

While Kimb all drew o n T aylor an d Emerson in h is Prin ciples of In dustrial

O rgan iz atio n see esp ecially ch 8 , man y o f h is ideas w ere de elop ed u ite in
, . v q
dep en den tly from T aylo r s grou p T h e lack o f an y direct con n ectio n b etw een
’
.

th e F
o r d en gin eers an d T aylor is clearly in dicated in A llan Ne in s, ord Th e v F ,

Times th e Man th e Co mp an y (New York ,

, pp 4 6
,8 - 6
4 9 . .

Earn est Dale, Du Po n t : Pion eer in S ystem atic Man agem en t, A dmin istrativ e
“ ”

S cience Q uarterly ( e,
un , J
W C T eagle to C G Black an d E M C lark , Mar 3 1 , 1 9 22 ; E M Clark to
. . . . . . . .

C . Hick s, Ir , u n e 1 , 1 9 22 ; G W McKn igh t to E M C lark , u n e 6, 1 9 22 ;

J . . J . . . . J
E M C lark to W C T eagle, A p r 1 6, 1 9 24 ; an d W C T eagle to
. . . A Park . . . . F . .

h urst, A p r 1 9 , 1 9 24 A Park h urst, A pp lied Meth o ds of S cien tific Ma n age

. . F . .

ment (New York , in dicates h is con n ection w ith th at m o emen t v .

J
A t ersey, Ho w ar d at least w as aw are of th e du Po n t exp erien ce He w en t .

ab ro ad in th e w in ter of 1 9 24 1 9 25 w ith
— r ederick Pick ar d in co n n ection w ith F
th e Eth yl C orp oratio n , w h ich w as o in tly o w n ed b y ersey, du Pon t, an d G en j J
eral Mo to r s Recallin g discu ssio n s w ith Pick ard o er o rgan ization al man age
. v
men t, h e r ememb ered th at h e w as mo st imp ressed b y w h at h e learn ed of
th e du Po n t sch em e o f m an agem en t Pr o b ab ly th ese discu ssio n s ga e Ho w ard . v
th e idea of th e v
alu e o f distin gu ish in g clear ly b etw een p ar en t an d o p eratin g

v
co mp an y acti ities, a distin ction th at T eagle ado p ted as a b asis f o r h is 1 9 27

ch an ges Bu t it is clear th at an y r elation b etw een th e t wo r eo rgan iz atio n s w as

.

in deed ten u o u s Fo r o n e th in g, Ho w ard w as n o t sp ecifi cally co n su lted on th e

.

1 9 27 ch an ges ou tside o f h is o w n D e elop m en t D ep artm en t Neith er h e n o r v .

an yon e else made e en th e b riefest f o rmal stu dy of th e du Po n t o rgan iz atio nv .

More sign ifi can t to th e ch an ges at ersey w ere th e isits of Ho ward an d J v

McKn igh t to o th er o il co mp an ies .

Beside th e b oo k s b y Kimb all an d th e A W Sh aw C omp an y cited ear lier, . .

th ere w er e C h ar les B G o in g , Prin cip les of In dustrial En gineerin g (New Yo rk , .

Edw ard B o n es, Bu sin ess A dmin istration (New York , . J a n d Th e

A dmin istratio n of I n dustrial En terp rises (New York , Ru ssell Ro b b ,

Lectu res o n O rga n iz atio n (u p Hu go Diem er, In dustrial Organ izatio n .

an d Ma n ag emen t H H
(C hi cag o , a n d L e w is ane y, B u siness O rgan iza .

tio n an d C o mbin ation (New York , esp ecially ch 1 7 A ch ar t ou tlin in g . .

o rgan iz atio n al stru ctu r e ery sim ilar to th e on e p rep ared b y th e Hask ell C o m v
m ittee ap p ear ed in th e p erio dical, I n du strial Managemen t in 1 9 2 0 It h as b een , .

rep rin ted in Leon C Marsh all, Busin ess A dmin istratio n (Chicago, .
p 6 06 . .
44 6 NOTES F OR P A G E S 3 2 7
—
333

CHAPTER ?

1 . Th e inf o rmati on f or th ese comp ani es cam e from th eir ann ual rep orts an d from
ar ticles in F
ort u n e in clu din g ff (D ec ,, . . 5 .
(Jan .
, an d

ff .
(Jan
) f or A.n ac
,on da ;1 95 5 ff ( p
A r , i
t N
( ov , . . . .

1 9 5 1 ) f or K en n eco tt ; ff ( ul y, 1 9 32 ) f o r Ph elp s Do dge, an d

. J ff (Nov , . .

1 95 0 ) f or In tern atio n al Nick el A ls o al u ab l e w er e tw o b oo k s b y Isaac

. vMar F .

cosso , n M a gi c Metal
- th e S t ory of A m erica n S m eltin g an d R efin in g Co m

p a n y (New York , an d A n aco n da (New Yo r k , an d Ro b ert G .

C lelan d, A Histo ry of Ph elp s D o dge 1 83 4—1 9 5 0 (New Y ork , an d, oh n J

Th omp so n an d Norm an Beas l ey, F or th e Yea rs To C o me : A S tory of I n ter
F .

n ation al Nic el o
k f C a n a d a (N ew York an d T oro n to ,
2 A m erican Sm elti n
.
g an d R efi n in g o b tain ed fi nan cial co n tro l of G en er al Cab le
. v
C orp an d R e ere Cop p er 8: Brass, In c A nacon da, o f Am er ican Brass C o an d . .

A n aco n da Wir e 8: C able Co ; K enn eco tt, of C h as e Bras s . Co p p er Co ; an d .

Ph elp s D odge, o f Natio n al Electri c Pr o du cts Corp an d Har b ish aw C able 8: .

Wi re Co rp Ph elp s D odge h as recen tly co ns olidated its fab ricatin g su b sidiaries

.

in to th e Ph elp s D odge Co mp an y Produ cts Co rp o r ation F or th ese p ur ch ases .

an d th eir p lace in th e in dus try , see Ed w ar d L A llen , E con o m ics of A m erican .

Man ufact u ri n g (New York , pp 1 1 4

-
1 1 5 . .

3 F or exam p le, th e A m erican S teel War eh ouse A sso ciatio n r ep o rts th at durin g
.

1 9 5 1 in dep en den t w ar eh ous e distrib u tors ship p ed million ton s to th e fir st

grou p , million ton s t o th e seco n d, an d m illio n tons to th e thir d, This is
You r A merican S teel Wareh ouse A ss ociatio n (Clev elan d , p 7 Th e
. . rati o
mus t h av e b een mu ch th e sa m e f or w areh ou sin g un its o f th e r
l a ge in teg rated
en terp rises .

4 . Ge rt ru de G . S ch roeder , Th e G r o wth o f th e Maj or S teel Co mp an ies (Bal tim o re ,

gi v
b rief b u t usef ul inf orm ation on th ese co mp an i es F or on es 8:
es . J
La u ghlin , an n u al r ep orts an d inter iew s w ith ex ecu ti es p ro ided addi tio nal v v v
”
inf orm a tion , as di d th e com p an y-p u b lish ed J {r L — Th e G r o wth of A m erican
“

Busin ess (1 8 5 3- 1 9 53 ) (Pittsb ur gh , A run del Co tter, Th e S tory o f Beth

l eh em S teel (New York , th e co m p an y-w r itt en 5 0 Yea rs o n In la n d S teel ,

1 8 9 3 —1 9
43 (Chi cago, an d f or Youn gsto w n S h eet an d T u b e, 5 0 Y e

S teel (Yo un gstow n , p r o id e f ur th er in f o r m a ti o n v

on th ese st ee l fi rms .

Th e m or e u sef ul F
ortu n e articl es in clu de ff (A p r , 1 9 4 1 ) an d 5 . . .

(March , 1 9 5 3 ) f or Bethl eh em ; 6 ( p
S e t , 1 9 33 ) f o r R ep u blic ; 5. .

J
( un e, 1 9 32 ) for Nation al ; ff (No v 1 93 7 ) f or Yo u n gsto w n ; an d . ff . .

(J ul y, 1 95 8 ) f or Inl an d .

r
5 T h e e w ere sep ar ate un i ts in th e S al es D ep artm en t f or mill p o du cts, sh eet
. r
r
mill p odu cts, h o t-ro ll ed b ar s an d sh ap es, co ld-fi n ish ed b ars, tub u la p odu cts, r r
r
w ire p o du cts, an d co al ch emicals .

6 Bes ide S chr oeder , G r o w th of th e Maj or S teel Co mp a nies in ter iew s w ith execu
.
, v
tiv es, an d an n u al r ep orts, inf orm ation o n th e ch an gin g stru ctu re o f th e S teel

C o rp oration cam e fr om o rt u n e ff (Mar , F ff ( u ne,

, . . . J
ff (Man . an d ff (Jan ,
. Myr on C T ay lor sum . . .

m ariz ed th e m amm o th r eo rg an iz ati on th at h e en gin eered in A n n ual Meetin g

o f th e S to ck h o l ders o
f t h e U n ite d S tat es S t eel Cor p o ra tio n A p ril 6 1 93 8 Re , , .

m ar ks of My r on C Tay l o r (New Yo rk , .
pp 8- 22 A lso u sef ul in in . .

dica tin g in cr ea sed cen traliz atio n w as A D H K ap lan , oel B Dirlam , an d . . . J .

N O TE S F OR PA G ES 335
—
34 6 44 7
Ro b ert F . l
L anz e o tti, P ricin g in i
Bg B usin ess — A Case A pp roach (Washi n g
ton , D C, .
p 244 . . .

S ch r o eder, G r o wth of t e Maj r S te l C

h o e o m p an ies pp 5 9
— 6 0 ; an n u al r ep o r ts , , .

esp ecially 1 9 5 4 , p p 8—9 ; o r tu n e ff ( u n e, 1 9 3 2 ) an d

. F (May, , . J
an d K ap lan , D irlam , an d L an z elo tti, Pri ci n g in Big Bu sin ess p 2 3 6 Ern est , . .

Dale, Th e G reat O rgan izers (New Yo rk , ch 4 , h as an ex cellen t descrip .

tion o f th e p erson al an d inf o rm al adm in istr ation o f Ern est T Weir , th e em .

p ir e b u ilder w h o created Natio n al S teel .

F o rt u n e ff (Nov ,
, h as a go o d descrip tio n o f A rmco s p ast an d
. .
’

p resen t acti ities v .

T h e data o n A l co a came fr om ann u al rep orts, in ter iew s w ith ex ecu ti es an d v v ,

F o rtun e ff , ( pS e t,. ff (M a y a n d .
,

(O ct , C h ar l e s C .C arr , A lc oa a n A m er ic a n E n ter p ri se (N e w .
,

Yo rk , adds alm o st n o th in g b u t K ap lan , Dirlam , an d Lan z elo tti Pricin g , ,

in Big Bu sin ess p p 22 0—229 , do , . .

IO . T h e inf o rm atio n o n th ese th r ee me p rim ar ily from an n u al re co mp an ies ca

p o r ts F o r
. P ittsb u r g h Pl ate G lass , th e B r ief H ist o r y o f th e C o m p a n y
”
in th e
“

1 9 5 2 an n u al r ep o r t an d th e fairl t d d d r i ti f th r t r n iz a
y ex en e es c p o n o e p esen o g a

tio n in th e 1 9 5 9 r ep o r t w er e p articu larly v alu ab le T h ere is so m e additio n al .

inf ormatio n in Fortu n e ff (Jan , Recen t ch an g es in A m erican C an . .

C o m p an y, in clu din g div ersifi cation an d th e sh if t fro m r egio n al to p ro du ct div i

sio n s are co v er ed in th e 1
, 9 5 6 1 9 5 7 an d 1 9 5 9 r ep orts A lso u sef ul are co m , ,
.

m en ts in K ap lan , Dirlam , an d Lan z elo tti Pricin g in Big Bu sin ess pp 222 24 5 , , .
, ,

a n d F o rtu n e ff (Nov , , Fo r th e th ir d en terp rise, a co mp an y p u b

. .

lication In tern atio n al Pap er Co mp an y 1 8 98 —1 9 4 8

, an d F ortu n e , , ,

(May, 1 93 0) an d ff (D ec p r o v id ed a dd itio n a l d at a . .
,
.

I I . T h e in fo rm ation fo r th e to b acco co mp an ies cam e fro m th eir an n u al r ep or ts,

w ith som e addition al data fr om Fo rtu n e ff (D ec , o n A m erican , . .

T o b acco Co mp an y ; an d F o rtu n e ff (Jan ff (A u g , , . .

, . .

an d ff .
(D ec .
, on R .
J . R ey n o lds T o b acco C o mp an y Th e last . o f
th ese a r ticles h as a section en titled
“
o p en n ep o tis m .
”
S ol d m
A erica n ! — Th e
Fi rst Fifty Y ears 1 954 ) p ro v ides a little m or e inf orm atio n on th e o ldest
of th e Big T h r ee .

12 . Th is can b e seen b y exam in in g th e an n u al rep orts of th ese four co m p an ies .

A lso ortu n e F ff (May , , . h as additio n al in formatio n on S ch en ley .

Th e rgan iz ation of th e Un ited Fru it C o mp an y

o is desc ib ed in detail in r th e

co mp an y w ritten Th e Un it d Fru it Co m a n th e
-
p y e G en eral In str u ctio ns fo r
I n fo r mation an d G u idan ce o f A ll E mp l oyees (Bo sto n ,

13 . Beside th e co mp an y s
’
q fu ll an n u al r ep o r ts
u ite an d in ter iew s w ith v ex ecu

tiv es, inf o rm ation on S w if t cam e fro m ortu n e F , ff .

(S ep t , an d o n

A rmo u r fr o m F o rtu n e, ff .
(A p r .
, ff .
(J u n e, d .

M
( y
a , an d ff .
(O ct , .

14 . T h e Un ited S tates Bu reau

f C o rp o ration s Rep o rt of th e C o mmission er of
o ,

C orp oratio n s on th e Beef In du stry March 3 1 9 05 (Wash in gto n , esp ecially

, ,

p 21. .

15 . A n n u al Rep o rt o f A r mo u r <9 Co mp an y f or 1 95 9 , p . 1 1, an d th e rep ort f or

1 9 60 , pp . 1 3— 1 8 . The 1 9 60 r ep ort , pp . 2, 1 3- 1 6, also st essed th e sh ift in g o r f te

so ur ces to ch e m icals T h e . 1 959 an n u al r ep o rt mp h asiz ed

e th at an in ten si v e
448 N O TES F OR P A G E S
34 6 —
353
r esear ch effort mlori ng th e m erits of m istry
“
w as e en ter in g in to p r od u cti o n ch e

S tor y o f G en eral Mil ls (Minn eap o lis , esp ecially ch . 1 5, is v ery good on

ch an g es in th e stru ct ur e of th a t co mp an y Th e . co mp an y-sp o nso r ed G en er al

F oo ds, F a m ily A l bu m 1 94 8) an d In to a S econ d Cen tu ry with Procter

h as F or t u ne E .
(F eb .
, E .
(Oct .
,
Nati o n al I n dustri al Co n

1 39 p 6 7 , h as an org an iza ti on ch art of G en er al oo ds

. F an d on pp .
—
68 6 9
of G en er al Mill s N ati o nal Dairy s an n u al r ep o rt s w er e su pp l e m en ted by
’
on e .

5 6 : 1 6o (Nov .
, h as a littl e on Pr oct er 6c G am b l e s
‘
’
r ecen t de v l pm e o en ts

an d E .
(Dec
E (A p r , 1 93 9 ) on ear lier o n es
.
,
1 93 1 or u ne ) an d I 9 :7 7 . . F t
.
,

E (Nov ,.
giv es a lit tl e ba ck gr o un d o n G en eral Mills
. .

A n n ual Rep or t of G en er al oo ds C or p or ation for 1 92 9 p 1 5 F , . .

A n n u al R ep or t (s) of th e G en er al oo d s C orp or ation for 1 94 3 p 1 7 , an d for F , .

p 9 ; Natio n al Co n f er en ce Boar d, Com p an y Or g an i zation Char ts p 67,

.
, .

Th e ann u al r ep o rts of th e Un ited S ta tes Ru bber Co m p an y h av e m u ch det ail ed

inf orma tion ; i ally
esp ec u sef ul w er e th ose da ted 1 89 4 , 1 89 5 , 1 89 6 , 1 904 , 1 906,

1 9 1 0—1 9 1 4 , 1 9 1 7, 1 9 18, 1 92 1 , 1 92 9 , 1 95 7 , an d 1 96 0 . Co ns tan ce McL . G r een ,

Histor y o f Nau gat u ck Con ne cti cut , (New Ha v en, pp . 1 9 3- 1 98 , 20 1 —204 ,

to ry , v ol . V I : Th e C h em i cal Co mp a ni es (New Yor k , pp .

-
4 5 455
2

U ited S tat es
n o f A me rica v . E 1 da P on t de N emo u rs C C om p an y
. .
e
, G en er al
Motor s Cor p or ati on Uni ted S tates D istri ct Co urt f or th e N ort h ern Dist rict
et al .
,

of Illin ois East ern , Div isi on , Ci il A cti on No 4 9 0 1 0 7 1 v an d or tu n e . F ,

E (F eb . .
, p ro i d ed addi ti o nal infvorm a ti o n o n th e U ni ted S ta tes

Ru b ber Co m p an y .

In f orma t ion on G oo drich co m es fr om its an n ual r ep o rt s an d fr om Hayn es,

A merican Ch em ical I n d u stry V I 1 90 —1 95 , , .

( G ar d en C it y , N Y , H u gh Al l en , T h e .H o use of G oo.dy e ar (C l e e l an d, v
esp ecia ll y chs
7 an d 9 ; H ayn es , A mer ic an C h em ical I n d.u stry V I ,
1 95 ,

v
1 97 ; Da i d D ietz , Har v ert Res earch th e S tor y o f t h e G o o dy ear Ch em ical Divi ,

si on (A k r on, F or t u ne , (J ul y, E .
(Oct , . an d

an n ual r ep o t s r .

Th e co mp an y 5 ann ual r ep o rts tell li ttl e A lfr ed Lief T he ir eston e S tor y (New
’
.
, F
York , h as a litt l e m or e inf orm a ti o n as h as Ha yn es A mer ican Chemical ,

In dus try V I, , 1 63- 1 65 .

In 1 94 1 , f or exa mp le , th e estima ted am oun t o f n ew ru b ber consu m ed in th e

Uni ted S tates w as lo ng to ns an d in 1 9 4 9 it w as ,

w hil e in th e

p et r o l eu m in d u st r y th e av er ag e dail y ca p a city r ose fr o m milli on ba rr els in

1 939 to m illio n in 1 95 1 A ll en Econ om ic s o f A mer ican , ,
Man u factur in g , pp .

1 30 , 1 85 .

24 . Th ese v er y gen er al tr en ds ar e in dica ted b y th e an n ual repo rts o f th e large o il

NO TE S F O R PA GE S 353
-
3 6 0 449
co mp an ies listed h ere d in p ar t b y j o h n G McL ean an d R o b ert
an d an aly z e .

W Haigh , Th e G r owth of In tegrated Oil Co mp an ies (Bosto n ,

.

. v
25 T h e def en si e sear ch f or cr u de h as con tin u ed u p to th e p r esen t In 1 9 5 8 , .

S tan dar d o f In dian a, w hi ch h ad b een co n cen tratin g its acti ities w ithin th e v
Uni ted S tates, b egan a lar ge-sca le ex p lo ratio n p rogr am f or o erseas cru de A s v .

th e com p an y s an n u al r ep or t f o r 1 9 5 8 ex p lain ed : A s o ur b u sin ess grow s, th e

’ “

n eeds for p r o du c ti
o ur
on b eco m e e v
ow ner m o r e im p o r tan t C u rr en tl y o ur .

C o mp an y s r equ ir em en ts f o r cru de O il su b stan tially exceed o ur o w n p r o du ction

’
.

In th e lo n g ran g e w e bel iev e it is essen tial f or o u r C o mp an y to o w n o r co n

,

tro l th e maj or p ar t Of its cru de r esources so th at it w ill n o t b e dep en den t o n

co mp eti tors f or raw mater ial —6 ”
pp 5 , . .

26 . A m aj o r sou rce Of data f or all th ese comp an ies w as th eir ann u al r ep or ts A d .

dition al inf orm ation o n S tan dar d O il C omp an y (In dian a) cam e fr o m P au l H .

G iddens, S tan dard O il Co mp an y (I n dian a ) : Oil Pion eer o f th e Middle West

(New York , on Sh ell O il, from K en dell Beaton , En terp rise in Oil : A
History of S h ell in th e Un ited S tates (New York , an d ort u n e E F , .

(S ep t , (O ct , . on th e T ex as Comp an y , fr om Mar qui s Iam es ,

Th e Texaco S to ry : th e irst F F ifty Years , 1 902- 1 95 2 ( p 11 . .

,
on Sin clai r
O il, o rtu ne F E (Nov , . . an d E .
(A p r .
, on S o con y
V acu um O il , ibid .
, 26 : 1 1 1 E .
(Nov . an d 27 : I 1 7 E .
(F eb .
,
on

Ph il lip s P et roleu m , ibid .

, 5 7
0 : 2 E
.
(A u g , . on A tlan tic R efi nin g, ibid .
,

4 8 :1 28 E .
(A u g .
, E (O ct ,
on th e an d
G u lf O il , ihzd .
, 1 6 :7 9 . .

E , .
(F eb
Sidn ey Sw ensru d, G u lf Oil Co mp an y : th e irst ifty
. F F
Years 1 9 01 - 1 95 1 (New York ,
, an d Cr aig Th omp so n , S in ce Sp in dlet op

c on C on tin en tal O il,

. o rtu n e ( S e p t , S t a n d ar d F ,

O il Comp an y (O hio ) , ibid ( p ,

A r an d o n S ta n. d ,ar d of C a l if o r n i a, .

ibid .
, E (Nov , Nation al Co nf eren ce Boar d, Co mp an y O rgan iza
. .

tion Ch arts (p p 4 3 an d g i es o rg
. a n iz a tio n ch ar ts f o r C o n tin en ta l O vil an d
S h ell O il, r esp ectiv ely F or S ocon y-Mob il, Sh ell , G u lf , as w ell as j ersey S tan dar d,
.

this inf ormation w as sup p lem en ted b y in terv iew s w ith ex ecu ti es v .

27 . A llen , Eco n o mics of A merican Man ufacturi n g p 1 3 2 , . .

28 . Th e A n n u al Rep ort of th e S tan dard Oil Co mp an y (In dian a ) f or 1 9 5 8 , pp .

5 an d 8 .

29 . Th e man agem en t Of So con y overseas also in clu des an Ex ecu ti e V ice-Pr esident v
w h o is r esp o nsible f or li aison w ith S tan dar d-V acu um (th e su b sidiary oin tly j
o wn ed w ith J
ersey S tan dar d f orm ed in 1 933 to administer th e F ar Easter n

r
p p o e r ti es an d ac ti ities O f b o th co m p a n ies v), a V ice -Pr esiden t in ch ar e o f
g
In tern ation al S ales (A iation , Mar in e, Bu n k er, an d Wh o lesale S al es) , an d th e
v
V ice-Pr esiden t in ch arge Of in an ce F .

30 . Petroleu m Week (A p ril 1 0, pp 3 3 0 — 1 b rie

, y su mm a r iz e s th es e c h an g es . fl .

31 . T h ese w er e th e IeEerson Ch emical C omp an y ow n ed oin tly w ith A m a ican j

C yan amid, th e Coltex C orp oratio n w ith C olumb ia C arb o n , an d T ex as-US .

C h emical C o rp o ratio n w ith U S Ru b b er . . .

Williams Hayn es, A merican Ch emical In du stry — A History v ol V Decade of , . .

New Pro du cts (New York , p 21 1 . .

33 q
T h ese u o tes ar e fr om A l an Ro sen sw eet, Reorgan iz in g an In du strial G ian t, “

Pittsb u rgh Post G az ette Mar 2 1 , 22, 1 9 60, w hich p ro ides th e b est summ ary
, . v
o f th e G u lf r eor an iz atio n
g Whitef ord, w h o u sed th e term gen eral O fiicers, .
“

in sisted th at th e committees set up in th e gen eral O ffice w er e o n ly to b e u sed

45 0 N O TE S F OR PA GES 6
3 3
—
6
3 5
ad vi e an d mmi ttee decision s Mr Whitef ord
inf o rmatio n , I h ate
‘ ’
f or c co , .

If som eth in g goes w ron g, n o bo dy rem emb ers w h o m ade th e deci

‘
says

sio n b u t if it s su ccessf u l ev eryb o dy tak es th e cr edit No w , an or der must

’
.

car ry th e sign atur e o f th e in div idu al o fficer r esp o nsible f or mak in g it Thi s .

w ay, th e men on th e fi rin g lin e can alw ays get decision s A n d our top p eop le .

— th e b o ar d ch air m an an d p residen t an d vi ce-p esiden ts —r ha v e th e au th o rity

to mak e decision s .
’
A p p aren tly Wh iteford an d o th er s at G u lf too k a lo ok at

du Pon t o rgani zatio n al exp erien ce, for D on aldso n Brow n h as lon g b een
th e
o n e o f th e few ou tside Dir ectors on its Bo ar d .

3 4 V alu ab le f acts on th is p o in t are p ro ided in th e Natio n al Resear ch Cou n cil s

. v ’

sur ey b y G eo rge Per az ich an d Ph ilip M

v ield, In dustrial Research an d . F
Ch an gin g Tech n ol o gy (Philadelp hi a, esp ecially ch s 2 an d 3 an d T ables .

A -r3 , A -rs, A -1 7 , an d D-r ; Ho w ar d R Bar tlett, T h e D e elo p m en t o f In du s .

“
v
trial Resear ch ih th e Un ited S tates,
”
an d Frank h n 8 . Coo p e r ,
“
Lo catio n an d

Ex ten t f In du strial Resear ch A cti ity in th e Un ited S tates, bo th in Natio n al

o v
Resour ces Plan nin g Bo ard, Res arch e — A Natio n al Resource (Washi ngton ,
D C, . . II ; U S Bur eau of Lab o r S tatistics, Dep artmen t of Labo r, an d
. .

v
Resear ch an d D e elop men t Bo ar d, Dep artmen t of D ef ense, In dustrial Research
a n d Devel op men t A Prelimin ary Rep ort (Washin gton , D C , pp 4
—20 ; . . .

F
Natio n al S cien ce ou n datio n , S cien ce an d Engin eerin g in A merican In dustry
— A in al Rep ort o n th e 1 9 53-5 4 S u r vey (Washi n gto n ,
F esp ecial ly C h arts

5 , 8 , an d I I , an d Natio n al S cien ce ou n datio n , Resear ch an d De elop men t F “

v
Costs i n A merican In dustry, 1 9 5 6, Reviews of Data on Research an d Dev elop
men t (May ,

3 5 Harold C Passer Th e Electrical Ma n ufacturers

. .
, , 1 8 7 5 -1 9 00(C amb idg e,
Mass , r .

g i es th e b est an alysis o f Westin gh ou se

v an d G en e al Elect ic in th e r r
early p eriod A lso u sef ul w ere Th irty Year Review
. o f G eneral Electric Co m
p y
a n 1 8 9 2—1 22
, 9 ( h en ecta dy, N Y ,
S c , ohn . . J W Hamm on d Men .
, an d

Volts th e S t ory of G en eral Electric (Philadelp hia,

, Io h n T .roderick
B ,

F orty Years with G en er al Electric (A lb an y N , . Y .

, Pau l W K eatin g
.
,

La mps for a Brigh ter A merica : A History o f th e G en eral Electric La mp

Busin ess (New Yo rk , A th u r r r
B igh t, Th e Electric La mp In dustry
A .

(New York , Ben j amin G . Lamme, Ben ja min G La mme, Electrical .

En gin eer : A n A u to biograp hy (New York , an d Henry G . P r ou t , A

Life of G eorge Westin gh o use (New Yo rk ,
36 . Fo t r u n e, (Jan .
, an d Ken t San gen dorp h , Ch arles Edward Wilson ,

A merican In dustrial ist (New York ,

K en dall Bir r , Pion eerin g in I n dus
trial Resea rch Th e Histo ry of th e G en eral Electric Research La b orat ory
(Washin gto n D C, an alyz es th e , r . r .r v
di e sifi cation th o u gh p odu ct de elo p v
m en t in th e lab oratory D a id Lo th , S w op e of G E — T h e S to ry . v . . o f G erard
S w op e an d G en eral Electric in A merican Busin ess (New York , For
tu n e,3 z3 r H, 8 9 ff .
(Jan .
, F eb .
, 1 93 1 ) an d ff .
(Mar .
, an d th e
co mp an y s ann u al rep orts p ro vided addition al data on G en eral Electric
’

37 . While an n u al rep orts an d Fortun e ff (Feb p r o v ide b ack gr o un d , . .

,

inf o rm atio n f or Westin gh o u se s o rganization al ch an ges in th e 1 g3 o s th e

’ ’

p rim ary so u rce o f in f orm ation w as th e co rp oration s A p p licatio n for Relief

’

Un der S ection 7 22 of th e In tern al Reven ue Code of 1 9 39 Feb 1 1 , 1 9 52, in , .

w hich th e co mp an y h ad co mp il ed a large n um b er o f v alu able in tern al r ep or ts ,

memoran da, an d co rr esp on den ce In citin g from this do cu men t, I h av e sub .

stitu ted th e w or d Co rp o ratio n f o r th at of T ax a er D ale T h e G reat O r a n

p y , g .
NO TES FOR P A GES 3 66 -
37 0 45 1

izers , 5 h
ch as a us
. ef u l,an al ys is o f th e la te r stages of th e r eorganiz ation b u t
says n o thin g ab ou t th e de elop men ts b etw een 1 9 3 1 an d 1 9 3 5 v .

3 8 . Westin gh o use, A pplicatio n for Relief p 5 0 , . .

39 I bid p 1 7
.
, . .

40 . Ib id p 1 7
.
, . .

41 . A n n u al Rep ort of th e Westin gh ouse Electric Co mpa n y fo r 1 9 3 4 p 1 0 , . .

42 . T h is an d th e fo llo w in g q
u o tation are fro m th e m em o r an dum o f O p eratin g

Heads m eeting, East Pittsb urgh , Decemb er 1 0 an d I I , 1 9 3 4 , o n th e un it

’

stru ctur e o f th e co mp an y, an exhibit in Westin gh ou se, A pp lication fo r Relief .

43 ° Memoran dum o n Unit Di isio ns for Di ersifi ed Pro du cts w ith C en traliz ed
“
v v
v
S er icin g, Co ordin ation an d Con tro l, O ct 20, 1 9 34 , exh ibit in ibid
”
. .

Ibid p 27
.
, . .

A ccordin g to L E O sb o rn e, th e m o st in u en tial of th e o rgan iz atio n al p lan n ers

. . fl
at Westin gh ou se w as Ralp h K elley , a tech n ically tr ain ed en gin eer w h o h ad

b een in th e S ales Dep artmen t an d th en in th e S tatistical Dep artmen t He .

p layed th e leadin g ro le in th e reorgan iz atio n in hi s cap acity as th e corp ora

tion s Bu dget Man ager, in ter iew w ith L E O sb orn e, u ne 1 7 , 1 9 5 9 Postw ar v J
’ “
. . .

ch an g es are in dicated in an n u al r ep o r ts, esp ecially for 1 9 5 4 an d 1 9 57 , an d

F o rtu n e ff (Dec ,
, ( u ly,
. . an d ff (A u g , J . .

Inf ormatio n on th e r eo rgan izatio n o f G en eral Electric com es fro m o rt u n e F ,

M
( y ( y ( J
'

35 : 1 2 1 fi a ,
. u l , an d ff D ec , 6 0 t h . .

A n n u al Rep ort of the G en eral Electric Comp any for 1 9 5 1 p p I I , 1 4- 1 9 ; , .

Law ren ce M Hu gh es, G E S eek s C o n u est of Busin ess T h ro u gh an n ed-O u t

. . . q F
Man agem en t, S ales Ma n agemen t
”
ff (O ct 1 , Ralp h Cor din er ,
, . .

Th e Imp lication s of Decen tralizatio n G en eral Man agem en t S eries, No I I 3 , .

( N e w Y o r k , pp 2 — 2
4 3 ; a n d P r o b le m s of M. a n a ge m e n t a t a L a r ge
Decen tralized O rga n izatio n same series, No 1 5 9 ,pp 3 7
—1
, b o th p u b . .

lish ed by l th e A merican Man agemen t A ssociatio n .

RCA V ictor s o rgan iz atio n can b e seen most clearly in Nation al C o nf er en ce

’

47
Boar d, Co mp an y O rgan izatio n Ch arts pp r r4 —rr7 A comp an y p u blicatio n , , . .

3 3 Years of Pion eerin g a n d Pr ogress in Radio a n d Television (New Yo rk ,

v
p ro ides some b ack gro un d in formatio n o n RCA Syl an ia s exp erien ce . v ’

is summ ariz ed in A lfr ed D C h an dler, Ir , Man agem en t D ecen tr aliz atio n :

“
. .

A n Histo rical A n alysis, Bu sin ess Histo ry Review

”
-1 2
7 ( u n e, , J
b ased o n data from an n u al rep or ts, an d from Don G Mitch ell, Big Busin ess
“
.

in Small Plan ts, A dva nced Man agemen t

”
5 ( D
- ec , , .

T h e ch an g es in IBM s o rgan iz atio n are in dicated in its an n u al rep or ts, esp e

’

cially 1 9 5 6, p p —6 an d 1
5 , 9 5 9 , p 1 1 , also
. ortu n e tr (S ep t , . F ,
‘
'

esp ecially p 1 04 . .

49 T h e inf orm atio n o n A llis-Ch alm ers cam e from its ann u al rep orts an d also th e
co mp an y-s on so red 1 8 4 7—1 94 7 ; A S to ry o Men d f n du strial
p f a n o a G r eat I
Era (Milw au k ee, w h ich p ro ides a goo d b rief su mm ary o f th e co m v
h isto ry S ee also Econ o mic Co n cen tration a n d Wor ld War 11 Rep o rt
’

p an y s .
,

of th e Sm all War Plan ts Co rp oratio n to th e Sp ecial C o mm ittee to S tu dy Pro b

lems of A merican Sm all Busin ess, Un ited S tates S en ate (Wash in gto n ,
A lth h A lli -Ch alm er s b e an b u ildin it fi r t tr t r i t
p 1
.
37 o u
.
g s g g s s ac o s n 1 9 1 4 , n o

un til th e 1 9 20 s did it establish n ew T r acto r D i isio n b r an ch o ffices th ro u gh ou t

’
v
th e cou n try With th e ap p o in tmen t of H C Merritt as m an ager o f th e di isio n
. . . v
in 1 9 2 6, o p eratio ns w ere exp an ded an d n ew factories b u ilt o r p u rch ased .

5 0 C yr u s
. McCormick , Th e Cen tu ry o f th e Reap er (Bo ston , esp ecially
 N OTE S 37 1 —
452 F OR PA G ES 3 75
ch s 7 3.
; o rr es t—1
Criss ey , A l eF
x a n der L egg e 1 866—1 933 (Chicago, an d ,

th e comp an y s ann ual r ep orts In ter iew s with execu ti es w er e also m ost
’
. v v
h elp f ul .

5 1 . Th e Su p p ly an d In en tory D ep artmen t w as di ided in to thr ee dep artmen ts, v v

Esti mate O r der an d R e iew , Materials Co n tro l, an d O r der an d Dist rib u tion v .

Merch an disin g Ser ices in clu ded o ffices f or custom er relations, sales op erations ,
v
mar k et resear ch , an d cr edi t coll ectio n s . Th e o rganiz ation is su mm ariz ed in th e
A n n ua l Rep ort of H m p y f
a n or I n tern ati o n al
1 943 p p 1 —
4 51 a rv ester Co , . .

K ap lan , Dir lam , an d Lanz el otti, Pricin g in Big Busin ess p p 2 32-2 3 3 , su ggest , .

th at in coo r din atin g p ricin g betw een di isio ns th e staff h as tak en o er this v v
cri tical typ e o f o p eratin g decision .

5 2 T .h i s an d th e f o ur f o ll o w in g u o tatio ns ar e f r o m C h r isti an E I arc h o w , q .

v v
Har ester s Di ision al O rgan izatio n — A D ecade of Exp er ien ce, an addr ess
“ ’

befor e th e New O rl ean s ch ap ter So ciety f or A d an cem en t o f Man agem en t, , v

D ec 8 , 1 95 3 . .

53 Inf orm ation on th ese co mp ani es cam e from an nu al r ep o rts, an d Natio nal
Co n f er en ce Boar d, Co mp an y O rgan iz ati on Ch ar ts pp 3 6—37 1 2 6-1 2 7 , as w ell , .
,

v
as a co n ersation w ith a senio r ex ecu ti e of t h e A O Smi th Co rp oratio n , an d v . .

F
or tu n e ff (May, , on Bo rg-Warn er . .

5 4 Th e inf orm atio n on D eer e 6: C omp any ca m e from its ann ual rep o rts
. .

5 5 Th ese gen er ali z ations abo u t or d an d his comp an y are b ased lar gely o n A llan F
Ne ins , or d : Th e Times Th e Man Th e C omp an y (New York
v F an d
, , ,

A ll an N e i ns an d v F
r ank E Hill, or d : Exp an si on an d Ch allen ge 1 9 1 5 1 93 3 -
. F ,

(New York , eder al T r a de Co mmiss io n F

Rep or t o n Motor Vehicle ,

I n dustry (Washin gton , an d ort u n e 3 5 : 8 2 ff (Ma y F , .

,

(Mar , an d. ff (S ep t , . .

Mcco rmi ck , Cen tu ry of th e Reap er p 1 98 , . .

Inf ormation on Ch rysl er cam e fr om th e R ep ort o n Motor Veh icle

I n dustry Wal ter P Ch rysler Life of an A mer ican Wor k man (Philadelp hia,
, .
, ,

rep rin ted from S atu rday E ven in g Post th e comp an y s ann ual r ep orts, ,
’

an d ort u n e F
1 2 :3 o fi (A u g , , (D ec , 3.8 : 1 o3 ff (O c t . . . .

I 9 4 8 ) , 49 3 27 E (A p r ,
( un e, 1 95 8 ) . J
Fo t r u n e, (May ,

Ex cell en t b ief r su mm aries of th e histo ry of all th ese ch emi cal con cerns can
b e f oun d in Hayn es A merican Ch emical In dustry, mmaries w er e , V I Th ese . su

su p p l e men t ed b y an n u al r ep or ts an d at Uni on Car b ide an d All ied C h emical

, ,

w ith in ter iew s w ith v ex ecu ti v es . So m e of th e m or e v al u able Fort u n e articles

ar e 5 .
(D ec .
, 1 9 59 ) on Celan ese ; ff .
(D ec .
, 2 3 :6 1 ff .
(J un e ,

fl . an d 5 7 ff .
(J ul y , S ep t , an d ff .
(F eb .
, 1 9 57 ) on Uni on
Car b ide ; (J un e ff f f (D ec
.
, . .
, (Oct ff . .
, an d

ff .
(O ct 1 9 5 4 ) on A llied Ch emical ;
.
, ff (Jan 1 9 5 2 ) on K op p er s ;
. .
,

ff .
(J uly 1 9 5 4 ) on Eastman ; an d
, ff (A p ril
. 3 (D ec , . .
,

ff (Dec an d . .
, (May 1 952 ) on Dow Mu rray, .

C am p b ell an d Harr iso n Ha tt on Her b ert H D o w Pion eer in Cr eativ e Ch emis , .

,

try (New Yo rk ro v ide b ack gr oun d for that comp an y Edi th T Penrose
, p . .
,

Th e G ro w th f th e Firm — A C ase S tu dy Th e Her cu l es Po w der Comp an y ”

“
o : ,

B si ess Hist ory Re iew

u n —2
3 (Sp rin g is excell en t K ap lan Dir lam
v , , .
, ,

an d Lanz elo tti P i cin i B ig Bus es p p 24 1 24 2 p r o v ide usef ul da ta for

i s —
g n , r n , .
,

Un ion Ca b ide T h e cur ren t organization of m os t of th ese comp ani es can be

r .
NOTE S F O R P A G E S
37 6 39
— 1
45 3
f o un d in K enn eth R K ern , cd , Co rp orate Diagra ms <9 A dmin istrativ e Per . .

so n n el of th e Ch emical In du stry (Prin ceton ,

60 S ee Ch ap ter 1 , p 44
. . .

6 1 S ee citatio ns in ftn 34
. . .

62 Inf o rm ation on Mo n tgom ery War d came fr o m its ann u al r ep o rts an d fr om

.

F
ortu n e ( J an , , 33 : 1 1 1 ff M
( ay, (May,. .

an d 6 (Nov , Th e A n n u al Rep ort of Mo n tg o mery Wa rd ér

’

. .

C o m p y f
an o r 1 9 5 7 p p 8 9 , p ro ides a detailed ch ar t o f th e comp an y s stru e
—
, . v ’

tur e aft er its r eorgan iz ation in 1 9 5 6 T h e 1 9 5 6 ann u al r ep or t n oted : E ery .

“
v
j
ma or O fiicer of th e Co mp an y, w ith a sin gle ex cep tio n h as b een elected to hi s ,

p r esen t r esp o ns ib ili ti es w ithin t h e p ast tw o y ear s, p 4 . .

63 For A 8: P , see Morris A A delman , A 6 P; A S tu dy in Price — Cost Be

. . . .
'

h avior an d Pu blic P olicy (C ambridge, pp 2 - 6 1 1 0—1 1 2 T h

7 3 , e in f o rm a . .

tion o n Kr oger an d S af ew ay came fr om th eir ann u al r ep or ts Th e an n u al .

rep orts of Penn ey an d Woo lw orth can b e sup p lem en ted b y Norm an Beasley ,

Main Street Merch an t : Th e S tory of I C Pen n ey a n d Co mp an y (New Yo rk , . .

ort u n e 4 2 : 1 0 F
1 f f ( p
S e t , an
, d th e co m -s on so r ed
p y p
an W
. o o l .

w o rth s irst 7 5 Years (n p F an d ff (No v , F

’
or tu n e . .
, . .

(A p r , an d
. ff (Jan , . .

C O N CLU S I O N

1 . I did h a e th e op p or tu ni ty
n ot v to r ead Edith T . Penrose, Th e Th eory o f th e
G ro wth o f th e ir m (O xfor d, F mp leted m y m an u scrip t un til I h ad co .

Whil e u sin g som ew hat difi eren t data an d ask in g som ew h at diff eren t qu estion s,
Dr P enrose s fi n din gs h av e man y simil ar ities w ith mi n e Her su p erlativ e stu dy
’
. .

f o cus es on th e econ omics of gro w th an d n o t o n stru ctur e an d o n its r elation

to strategy My emp irical data, h ow ev er , cer ta
. do h elp to su pp or t h er m
th eor etical con cep ts ab ou t th e gr o w th of th e fir m w hi ch are defi n ed m or e
rigorou sly th an th e m or e imp ressionistic gen eral iz ation s dev elop ed h ere Par .

ticu larly r elev an t to my g en er aliz atio n s ar e h er C h ap ter 5 , I n h erited Resources

“

an d Ch ap ter 7 , T h e E co n omi cs of D iv ersifi

”
an d th e Dir ecti o n of Exp an sion ,
“

”
catio n .

2 . T h ese de v elop d in som ew h at m or e detail in A lfr ed D

m en ts ar e su ggeste .

C h an dl er, Ir , I n tegr ati on an d D i ers

. ifi i
cat o
“
n as B u sin ess S tr t
a ge ies — A His v .

torical A n alysis,
”
a p ap er gi en b ef or e th e Bu sin ess His to ry C o n f er en ce at th e v
v
Uni ersity of Illin o is, eb ru ary 1 4 , 1 9 5 9 (mimeograp h ed) F .
 I NDEX

A 8: P
. .
, see G reat A tlan tic 8: Pacifi c T ea Co . A rmco S teel Co .
, 33 1 , 33 6
A b ms,
ra Fran k W .
, 2 02 , 2 0 6, 2 1 2 , 2 1 7 , 430 Armou r Co .
, 2 6, 4 0, 4 7 , 69 , 7 2, 9 4 , 3 4 5 ,
ftn 7 9 4 3 1 ftn
.
, . 1 00 3 4 6, 3 4 8 , 3 8 1 , 3 9 x
A dl er, Max , 23 1 , 23 4 A rm stron g , T R , 4 3 0 f tn 8 7 . . .

A dm in istratio n , defi n ed, 8 , 9 , 3 1 0 F

A sch e, rederick D , 1 68 , 1 9 6 .

J
A fiiliates ( ersey S tan dard) , defin ed, 1 65 A sh er, L ou is R .
, 2 2 6- 22 8

A itk en , Hu gh G J 317 . .
, A ssociated Merch an dising Co rp .
, 4 3 7 f tn . 29

A lcoa, see A lu m in u m C o
f A m erica . o A sto r, J oh n J b aco , 20

A l ex an der, W H , 4 3 6 ft n 23 , 4 3 8 ftn 5 5
. . . . A sto r, William
B , 4 0 0 ftn 2 . .

A llied Ch emica l Co , 4 5 , 1 3 8 , 3 7 6, 3 7 7 . A tl an tic Refin in g Co , 1 65 , 3 5 3 , 3 5 4 . 3 5 9 .

Al lis-Ch almers Co , 3 2 , 4 1 , 4 6 , 3 7 0—3 7 2 . A tl as Cemen t Co , 3 3 5 .

A lu min um CO o f Am erica , 9 4 , 1 2 4 , 3 2 7 ,
. A tlas Po w der Co .
, 4 5 , 63
—
3 4 o, 3 7 7 , 3 8 0 A v ery, S ew ell, 4 8 , 3 7 9 , 3 8 0
A merican A gricu ltu ral Ch em ical Co , 3 4 .

B
A m erican el l T elep h o n e Co , 3 0 . B ak elite Corp 3 76 .
,

B
A merican rass Co , 3 5 , 4 4 6 ftn 2 . . B al ti m o re 8 : O h io Railroad, 2 1 , 22 , 56
B
A merican ridg e Co , 3 5 , 3 3 5 . B ark er, Jm
a es M .
, 24 2 , 25 0 , 25 8- 2 6 8 , 27 0 ,

A m erican Can Cc , 3 5 , 4 1 , 4 7 , 3 2 7 , 3 4 0 , .

3 4 1 . 3 60
‘

B ark sdal e, Hamilto n M

5 6, 5 7 , 63 , 6 4 , 67 .
,

A m erican Car 8: Fou n dry Co , 3 5 , 4 1 . 6 9 , 7 2 . 7 3 , 3 1 7 . 3 1 8 , 4 1 7 in 3 9

A m erican Ch emical In dustry 3 5 8 , B arro w s, A rth u r S , 2 7 0 , 2 7 1 .

A merican Fur Co , 2 0 . B ar to n , H L 4 20 ftn 8 2

. .
, .

A m erican Lo co mo ti e Co , 3 5 , 4 1 v . B assett , Harry H 4 2 4 ftn .

, . 1 33

A merican Machin e 8: Fo u n dry Co , 4 6 . B ay o n n e refi n ery, 1 6 8 , 2 02

A merican Man agemen t A ss n , 1 5 0 , 1 60 , 3 2 1 ,
’
B ayw ay refi n ery , 1 68, 1 7 8, 20 0— 2 0 2 , 2 0 6,

3 22 3 20
A ma ican O il Co .
356
, B ecto n 89 Ch emical Co .
,

A merican S h eet S teel Co .

, 35 B df d A Cl k 9 6
e or , . ar e, 1

A merican Sm el tin g 8: Refi n ing Co .

, 3 2, 3 7
2 5 B df d A C t 8 8 8 8 9
e or , . ot o n , 1 1 , 1 , 1

3 29 , 4 4 6 ftn 2 . B df d F d i k H S
e or , 5 4 7 ft re er c .
, r .
, 21 , 2 n .
40
Am erican S teel Ho op Co .
, 35 B df d F d i k H I 7 6 7 7
e or , re er c .
, r .
, 1 , 1

A merican S teel 8: Wire Co .

, 35, 335 B ll J m S 7 3 4 7
e , a es .
, 2 ,

A merica n S u gar Cc , 4 7 , 3 4 4 , 3 4 5 , 3 4 7 . B th l h m S l C 3 3 3 3
e e e tee o .
, 1 , 2

A merican T el ep h o n e 8: T elegrap h Co .
, 3 99 B iddl Ni h l e, c o as, 2 0

ftn 3 . Bi h S p h 3 9 3 8
rc , te en , 2 , 0

A merican T in Plate Co , 3 5 . B l k Ch l G 8 8 9
ac , 4
ar es .
, 1 1 , 1 , 20 0 , 20 , 20 7 ,

b
A merican T o acco Co , 4 0 , 4 1 , 3 4 4 .

A merican V isco se Co , 4 5 , 8 9 , 3 7 5 -3 7 7 . Bl ack mo re, L , 4 2 0 ftn 8 2 . .

A mo co Ch emical Corp , 3 5 6 . Bo n sib , Ro y S , 4 2 7 ftn 3 8 . .

A nacon da Co , 3 2 7 -3 3 0 , 3 8 0 , 4 4 6 ftn 2
. . Boo z , A ll en an d Hamilto n , 3 8 2

A naco n da Wire 8: Ca le Co , 4 4 6 ftn 2 b . . Bo d

r en C c , 47, 34 6—
3 49. 3 8 1
.

A ndrew s, Ira R , 25 4 . B o rg - Warn er Co .

, 4 6, 3 7 2
A rlin gton Co , 8 5 , 9 3 . B o sto n Fruit Co .
, 27

455
45 6 I N DE X
B dl y A lb t 4 4 8 5
ra e , er , 1 1, 1 , 1 0— 1 5 2 , 3 22 Ch ase B r ass 8c Co p p er Co .
, 4 4 6 ft n . 2
B di L i D 4 3f 7
r an e s, ou s .
, 0 tn . 2 Ch err y B
- urrell Co .
, 4 6, 3 7 2
B h E
reec 3 73 , rn est , Ch ev ro let Co .
, 1 22, 1 25 , 1 3 5 , 1 41, 1 43
B idg p W d Fi i hi g C
r e o rt oo n s n o .
, 89 C hr y sl er , Wal ter P .
, 1 1 8, 1 2 2 , 1 2 6, 1 3 2, 2 9 5 ,

Bi B j mi
r scoe , 8 9 en a n, 1 1 , 1 1

B k E P 435 f 6 4 4
roo s, . .
, ru .
, 1 ftns 9 3 . an d Chr y sler Co rp .
, 4 6, 1 6 0 , 3 7 2— 3 7 4 3 8 1 ,

1 03 Citi es Se rvi ce Co .
, 3 9 9 ft n 3 .

B ro w n , F . D o n al dso n , 1 81, 1 9 3 , 3 1 6, 3 1 7 , Cl ar ey , No rth ru p , 4 2 7 ft n 3 8 .

3 2 2 , 4 1 3 f tn 1 15, 4 5 0 f tn 3 3 Cl ark , Ed gar M , 1 7 8— 1 9 2 p assi rn .

, 2 0 0—2 1 6
at du Po n t, 6 7 , 7 3 9 4 , 9 9 , 1 0 1 , 3 0 6 , p as si m 2 2 4 , 3 0 4 , 3 1 6, 3 2 0,

at G M, 1 4 2— 1 62 p as si m 3 0 7 , 3 0 9 , , 3 1 0, Clar k William , 2 8 , 2 9
,

3 1 9, 3 2 I Co fi n , Ch arl es A .
, 2 85

B ro w n , H . Fl etch er, 63 , 1 05 , 1 0 6 , 2 9 6, 3 0 6, Co lga t e 8: Co .

, 94
3 1 7 , 3 1 9 , 4 1 3 ft n . 1 1 5 , 4 1 4 ft n . 1 22 Co llin s, R . H .
, 4 1 5 ftn .
4
B r o wn B r os . 8: Co .
, 3 87 Co l o n ia l B ea co n Co .
, 217

B r o wn - Lip e -Chap in Co .
, 1 24 Co l t, S am u el E .
, 350
B uc k n er, Edmun d G 5 9 .
, Co lu mb ia Car b on Co .
, 45
B u dg etin g , 6 6, 6 7 , 1 0 3 , 1 2 6 , 1 47, 1 4 8, 1 89 , Co mm ittee m an ag em en t, 7 1 , 7 2 , 1 03 , 1 05
—1
1 93 95, 215, 219, 22 0, 23 1 , 2 3 2, 1 07 , n o, 1 27 , 1 5 7, 1 5 8, r 69 , 1 97
2 4 3 , 2 7 5 - 27 9 , 29 3 , 4 3 6 ft n 13 1 9 9) 20 1 : 2 02 : 24 9 , 4 43
s ee also S ta tis tical co n tro ls 4 4 4 ftn 4 , 4 5 0 in .
33
En fi al o Metal Go o d s Co .
, 1 24 Co nn ab le, F r ank L .
, 63
B u c i k Mo to r Co .
, 11 6—1 2 0 , 1 22 , 1 25 , 135, Co n tin en tal O il Cc .
, 4 8, 3 5 3 , 3 5 5 , 3 5 9 , 3 8 1
Co r din er , Ralp h , 4 7 , 3 68 , 3 6 9 , 4 4 4 f tn 4
B urro w s, F . E .
, 2 62 Co rw in , A F , 1 7 4 , 2 0 2
. .

B urt o n , William M .
, 17 8, 1 79 Co x , Ch ar l es , 3 2 9
Cran e, Harry , 1 5 6
Ca dil lac Co .
, 1 1 8, 11 9, 1 22 , 1 41, 1 43, 294 Cr esap , McCo rmi ck 8: Paget, 3 8 2
Calif o rn ia Co .
, 355 Cro w , Carl , 1 1 6
Calif o rni a O il Co .
, 355 Cru cib le S teel CO . o f A merica , 3 4
Calif ornia T exas Co rp .
, 355, 35 8 Cu dah y Co .
, 26

Ca m bir a S teel Co .
, 34 b
Curtis Pu lishi n g Co .
, 94
b
Car ide 8: Car b on Ch emi cal Co .
, 3 75
Car b o l oy , In c .
, 3 65
Car b o ru n du m Co .
, 45 Day , W . L .
, 4 1 5 f ru 4 .

Car n egi e, A n dr ew , 5 6 , 4 0 6 f tn 1 3 . Dayt o n En gi n eerin g La o rato ries Co , 1 2 3 b .

Car n egie S teel Cc , 2 9 , 3 4 , 3 5 . D ayt on Wrig h t A irp l an e Co , 1 2 7 3 0 1 .

,

Car n ey , T h om as J , 2 3 5 , 2 4 2 , 2 4 5 , D ecen tr alized O p erati o ns an d R esp o nsib il

“
. 25 0 , 25 5 '

”
2 5 7 , 2 5 9 , 2 6 0 , 2 6 9— 2 7 1 ities wi th Co o rdin ated Co n trol , 1 6 0 ,

Carp en ter, Ch ar l es U .
, 4 4 4 f tn 4 .
3 21
Car p en ter , R R . . M .
, 63 , 7 3 , 82 , 8 8, 89 , 3 06 Deer e 8c Co .
, 3 63 , 3 7 2 , 3 8 0
Carp en ter , Walter S .
, Jr 7 3 , 82,.
, 85 , D elaw are Co .
, sec S tan dard Oil (New
9 4, 1 0 0, 3 0 6, 3 1 8 , 4 0 8 f tn .
4 8, 4 1 4 J ersey )
ft n . 121 De Mo tt e , R .
J .
, 441 ft n 9 3 .

Carri ng er , J . R .
, 2 0 6, 2 0 7 D ep artm en tal o ffice, d efin ed , 9 , 1 1— 1 3

Ca rt er car Co .
, 1 1 9 D elco -Lig h t Co .
, 1 23 , 1 2 7 , 301
Cart er O il Co .
, 1 67 , 1 69 , 1 7 , 74
2 1 —1 6 1
7 , 87 , D ew in g , A rth ur S , 3 6 3 7 .
,

Diam o n d A lk ali Co 4 5 .
,

Ca w ley , Clar k 8 : Co .
, 89 Diem er , Hu go , 3 2 1
Cel an ese Co rp of A m erica , 45, 3 75 , 3 7 7 , D istill er s an d Ca tt le Feed er s T ru st , 3 2
3 80 D isnll c -Seagrams , 4 7 , 3 4 4 3 4 5 3 8 0 , ,

Cen tral or div is io nal o fi ce, i defi n ed 9 , , 1 1- 1 3 D istill er s S ecuriti es Co , 3 2 .

Cen tral Trust Co .

(NY C) , 1 20 Div ersifi ca tio n , d efi n ed , 1 5
Cha mp io n , A lf red , 1 1 8 history , 4 2 -
49
C h am p io n Igni tio n Co .
, 1 1 8 , 1 25 in du Po n t, 6 6 , 7 8—9 1 , 1 05 , 1 1 3

C h ar do nn et Co 8 1 .
, in G M, 1 6 1 , 1 62
I N DE X 45 7
Di v ersifi catio n , relation to admin istrati e v in du Po n t , co mp ariso n w ith v ar io u s in du strial
no v atio n s, 29 1 , 2 9 9- 3 02 , 3 14, 3 21 firm s, 3 2 4 3 3 2- 3 3 6, 3 3 8 , , 3 4 2, 3 4 4 ,
in v ariou s in du strial fi rm s, 3 3 7 , 3 4 2—3 5 3 3 4 5 3 4 8 3 5 1 , 3 62 , 3 6 3
, , , 3 65 , 3 6 6,
var-ri m 3 6 1 — 66
3 , 6
3 9, 37 , 3 73 395
. 0 —

du Po n t F a b ikr o id Co .
, 4 0 9 f tn 6 5 .

Dodd , A l vi n , 2 4 o~2 5 4 3 6 p assim , 2 67 , 3 05 , 1 Duran t, William C .

, 11 4
—1
4 7 p assim , 1 57,
D od d , S C T , 4 0 . . . 15 8, 1 62 , 1 66 , 1 81, 22 8, 297 , 2 9 8,

D o ehler Die Castin g Co , 1 2 4 .

3 01
D o erin g , O tto C , 2 2 7 , 2 2 9 , 2 3 0 , 2 3 4 2 3 5
.
, Duran t-Do rt Car riag e Co .
, 1 1 6
Dor t, JD all as, 1 1 6
.

Do w , Her ert H , 3 8 0 b .

Eag le fi n ery 1 6 8
re
D o w , Will ard H , 3 8 0
,

Eastern D y n amite Co , 4 0 6 ft n 1 4
.

Do w Ch emical Co , 3 63 , 3 7 5 , 3 7 7 , 3 8 0
. .

Dr eyfu s, Camille 3 7 5 , 3 7 7 , 3 8 0
.

Eastman o d ak Co K
4 5 , 3 75 3 77, 3 8 1
— .
, , 4 04
ftn 3 4
,

J
Duk e, ames E , 2 7 , 3 4 4 .

Eato n , T
.

8: Co
du Po n t, A F elix , 9 4 , 4 0 8 ftn 4 8
.
, .
, 23 9 , 2 4 0

Ech o ls, A n g u s, 3 1 7 , 4 1 2 ft n 1 0 3
. .

du Po n t, A lfr ed I 5 2 , 5 3 , 5 5 , 5 7 , 5 8 , 62
.
,
Edg e, J B
D , 7 3 , 1 1 1 , 3 0 6, 4 0 8 ftn 4 8
. . . .

du Po n t, A lfr ed V icto r, 5 3
Edw ar ds, D a id 1 22 v F
Electr o Metal lu rgical Co 3 75
du Po n t, Co lem an , 5 2 , 5 3 , 5 5 —5 7 , 6 1 — 6 6, 7 8 ,
.
,

Elmo r e Co .
, 1 1 9
Em er so n , Harrin gt o n , 24
4 0 7 ftn 25
B
Emm et , o r is, 2 2 8 , 2 2 9 , 2 3 1 , 25 1
.

du Po n t, Eu gen e, 5 2— 5 4 , 4 0 5 ftn 6
E n g in eerin g Mag az in e 318
.

du Pon t, Henr y , 5 4 , 5 5 , 65
,

En gi n eerin g train in g, 3 1 7 - 3 2 0, 3 23 , 3 3 0,
du Pon t, Henry F , 1 2 6
3 68, 4 5 1 h a 4 5
.

du Po n t, Iren ee, 5 5 , 63 , 6 4 , 6 7 , 7 3 , 7 9 , 8 0
du Po n t , 5 2 , 5 3 , 5 6, 6 7 , 8 0 , 8 3
,
at
9 9 , 1 0 0 . n o , 3 03 , 3 0 5 , 3 0 6 , 4 1 4 ftn at G M, 1 3 0

an d G M,
1 22

1 2 6, 1 3 2
at J ersey S tan dar d, 1 78
1 1 4, 1 1 5, at S ear s, 2 4 0, 2 4 2 , 4 3 6 f tn 15
du Pon t, La mm o t, 5 4 , 66, 67 , 7 3 ,
.

1 00 , 1 1 0,
En iay Cc .
, 359
4 1 4 ft n 1 2 2
En tr ep ren eu r , defin ed,
.

1 1 , 12
du Po n t, Pierr e S , 2 1 7 , 2 2 4 , 2 9 4 , 29 5 , 3 1 6,
E n trep ren eu rial decisio n s, defin ed,
.

1 1
3 1 7 , 3 1 9 , 3 6o , 3 8 1
Er ie Can al , co n stru ction o f , 2 1
a t du Po n t, 5 2— 7 2 p assim , 7 8 , 8 0, 1 00,
Erie Railro ad, 21 , 22

G M, 1 22 , 1 2 5 , 1 2 7 — 1 3 0 ,
E5 5 0 S tan dar d, see S tan dard O il (New
at 1 14, 1 1 5, 1 4 0, J ersey )
Eth y l Co rp , 4 4 5 ft n 15
defin es du ties
. .

f cen tr al o fi ce, 6 4 , 6 5 o
Ew in g Co 11 9
r ejects f am ily admi ni str atio n , 6 4
.
,

view s, 6 7 — 7 3 , 8 4 , 8 6
du Pon t, Will i am , 65 , 66 , 8 0 F b
a r ik o
id Co , 8 1 .

du Po n t de N em o urs, E I , 8: Co , 4 2 9 , 3 2 , . . .
, see also du Po n t Fa rik o id C o b .

—
43 45 , 47} 49 5 1 1
-
1 1 41 1 1 5, 1 33) 1 34: Fairfi eld Ru er Co , 8 5 , 4 1 0 ftn 7 9 bb . .

Fairless, en jamin R , 3 3 4
B .

ch ap . 2 ( 5 2-1 1
3 , esp . co mm itt ee o n m ar Farish , Wil liam F , 2 1 5 , 2 1 8 , 4 3 4 ftn 1 4 2 . .

k etin g p robl em s, 9 4 —9 9 1 0 3 ) , Federal S teel Co , 3 4 , 3 5 , 5 3 .

co mp ariso n w ith G M, 8 9 , 9 0 , 1 0 1 , 1 0 6, Field u n it, defin ed, 9 , 1 1 — 1 3

1 22 , 1 2 4— 1 2 9 : 1 3 2— 1 34) 1 41: 1 45: Fir eston e T ire 8: Ru er Co , 4 5 , 3 5 0— 3 5 2 , bb .

I S7 3 80
co mp ariso n w ith J ersey S tan dar d, 1 63 , Fish er , 4 2 4 ft n 1 3 3
Law rence P .
, .

1 64 , 1 70, 1 7 8, 1 81, 1 8 6, 1 89 , 1 93 , Fi h er B od y Co 1 2 4
s .
,

1 95 , 1 9 6, 1 9 8, 21 6, 21 8, 2 22, 224 Flin t Ch les R 3 3 3 6

, ar .
, ,

co m p ariso n w ith S ears, 225 , 23 7 , 2 4 0, Foo d M chin ery an d Ch emical Co

a .
, 45
—2
79, 28 r Fo d Henry 1 1 5 1 1 9 1 2 3 1 2 9
r , , , , , , 1 44, 1 60,
com p ar ison in ad mini strati v e inn o v atio n s, 3 0 1 , 3 7 2 , 3 7 os 3 8 0
2 8 3 — 3 23 p assim Ford , Henry II , , 3 73 , 3 8 1
45 8 I N DE X
Fo rd Mo to r Co .
, 4 6, 1 1 8, 1 31, 1 41, 1 43 , 3 01 , G o ldm an , Sa ch s 8: Co .
, 2 27 , 2 2 9

G o o drich , B . E .
, Co .
, 2, 4 3 , 4 5 , 3 5 0, 3 5 1 ,
F o recast n g, i 1 00 , 1 01 , 1 03 , 1 4 6, 1 51, 1 5 2, 3 8 1 , 3 9 9 ft n 2

191, 1 9 2, 1 95 , 1 9 6, 21 8, 21 9, 23 1 , G o o dy ear T ire 8: Ru bb er Co .

, 45 , 1 24 , 350
23 2, 275 , 27 8, 27 9 , 2 8 8—2 9 2 , 3 2 8,
3 1 , 3 8 9 , 3 9 0 , 4 2 1 ftn 9 7 , 4 2 9 f tn G o rdo n , G eorge, 4 3 0 ft n 7 9
2
.

1 G race, W R , 8: Co , 3 9 2 . . .

Fo rmu la tio n o f p o licies, defi n ed, 3 1 0 G rafi , C E . .

, 2 0 1 - 2 03 , 2 05 , 2 0 7 , 2 1 2

For t u n e 4 6 4 9 2 1 8 , 2 1 9 2 2 1 , 3 2 5
, , , , G ran t, W . T .
, Co .
, 235

Frank lin Co 1 1 8 .
, G rass elli Ch emi cal C o , 2 9 1 .

Fraz er , G eorg e E .
, 2 4 0—2 4 3 , 24 7, 25 0, 3 05 , G reat A tlan tic 8: Pacifi c T ea Co .
, 2, 4 8, 3 7 9,
3 0 8 , 3 1 6, 3 2 2 , 3 66 4 3 6 ftn . 1 3
Frazer Committ ee, fi rst rep o rt, 2 4 1 —2 5 1 , G reat Lak es S teel Co rp .
, 335
G uar dian Frigerator Co rp .
, 1 24

seco n d rep ort, 25 2-2 6 1 p assi m G u gg en h eim f amil y , 3 2 9

Fraz er 8 T albo t 3 8 1
: , G u lf O il Cc .
, 4 8, 1 71 , 1 87 , 3 5 3 , 3 5 8, 3 5 9 ,
Frick Henry Cl ay 5 6
, , , 2 85 3 8 1 , 3 8 4 , 4 5 0 ftn 3 3
G unp o w der Tr ade A ss n , 5 4 , 5 5
’

G a ry, El b er t H
3 4 3 6’ 5 3 : 3 3 4 , 3 8 0 '
s
-

<3d Ch emical Co , 4 5 .

G en eral A sp hal t Co , 23 3 . Hagu e Ro ert L 1 7 5

, b .
,

G en eral Ca le Corp b .
, 4 4 6 f tn . 2 Hall Cha rles M 3 3 7
, .
,

G en eral El ectric Co .
, 2 8, 29 , 3 3 , 4 3 , 4 6 , 5 6, Han ey Lewis H 3 2 1
, .
,

5 7,
-
3 7 0 , 3 8 1 , 4 4 4 ft n 4 . Han na Fu rn ace Corp 3 3 6 .
,

G en eral Foods Co .
, 4 7 , 3 4 6, 3 4 7 , 3 4 9 , 3 8 1 Hann a I ron Or e Co 3 3 5 .
,

G en eral Leath er Co .
, 1 24 Har bish aw Ca le 8: Wire Co rp b .
, 4 4 6 ft n . 2

G en eral Mill s Co 4 7 3 4 6—3 4 9 3 8 1 .

, , , Harden Orvill e 1 8 7 1 8 9 —1 9 3
, , , , 1 95 , 1 9 6,
G en eral Mo tors A ccep tan ce Corp 1 2 4 1 3 5 .
, ,

G en eral Mo tors Co rp 4 2 9 3 6 4 1 4 4— 4 7 .
, , , , , ,
Har dy A C 1 4 1 4 1 5 ftn 4
, . B . .
, , .

Harp er D L 1 68 1 7 6 2 0 3 2 1 5 2 1 9
, . .
, , , , ,

ch ap .
3 ( 1 1 4
—1 62 , esp . O rgan izatio n Har riso n r os 8: Co 8 8 9 3 B . .
, ,

S tu dy ,
"
1 3 2 -1 0
4 ) Harrison Radia tor Co 1 3 2 .
,

co mp ar ison w ith du Pon t, 8 9 , 9 0 , 1 01 ,

Hask ell Commi ttee o n r eo rgan ization , 68
7 3 , 9 4, 1 1 0 , 2 8 8 , 2 89 , 2 9 4, 3 0 0, 3 0 4 ,
co mp aris on w ith J ersey S tan dard, 1 63 , 321
6 4 , 1 66, 1 7 0 , 1 8 1 , 1 8 6, 1 8 9 ,
1 1 95 , Hask ell Harry , , 63 , 6 7 , 6 8 , 7 0 , 1 3 2, 3 1 6,
1 9 6 2 1 6, 2 1 8 , 2 1 9 2 2 2 , 2 2 4
, ,

comp ariso n wi th S ear s, 2 2 5 , 2 3 1 , 23 7 , Hask el l J ,

- . A mory , 5 2 , 5 6, 5 7 , 63 , 6 4 , 68 ,
2 4 0 : 2 4 5 , 27 7- 2 7 9 : 2 8 1 7 3 , 1 2 6, 1 3 2, 1 4 0 , 4 0 6 ft n 1 4 .

co mp ariso n in ad min istrati v e inn o v atio n s, Hask el l Sm ok el ess Po w der Work s, 8 2 , 8 3

p assim
2 8 3 — 3 23 Hau p t, Ch arl es H , 1 8 0 , 2 0 0 , 2 0 3 .

com p aris o n w ith ar io u s in du stri al fir m s, v Haw k in s No r al 1 4 1 1 5 4 , v , ,

6
3 3 4 3 3 , 3 4 5 3 4 8 , 3 5 1 , 3 62
— -
3 63 , , Hay es Wh eel Co 4 1 8 ft n 4 2 .
, .

3 66 Hay n es William s 3 5 8
, ,

G en er al Mo to rs Exp o rt Co , 1 2 0 . J
Hea n y o hn A 4 1 5 — 4 1 6 ft n 1 4
, .
, .

G en er al Mo to rs o f Can ada , 1 25 Hel ler Ro ert 8: A sso cia tes 3 8 2

, b , ,

G en eral Mo to rs Tru ck Co .
, 1 20 Helm , J
S 4 3 0 ftn 7 7 . .
, .

defi n ed , 9 , 1 1 - 1 3 Hercul es Po w der Co 4 5 63 3 7 5 3 7 6

'

G en er al o fl ce, i .
, , , , , 381
G en eral Petro leu m Co , 3 5 6 , 3 5 7 . Hey den Newp o rt Ch em ical Co 4 5 .
,

b
G il ert 8: B
ark er, 1 6 5 , 1 66 , 2 1 5 , 29 8 , 43 1 Hick s Claren ce J 1 8 0 2 1 4
, .
, ,

ft n 9 0 4 3 3 ft n 1 2 4
.
, . Hig gin s Io h n 4 3 5 ftn 5
, ,

G il reth , Fran k 2 8 4
b , Hil l f amil y 3 4 4 ,

G lidden Co , 4 5 . Ho lman Eu g en e 2 2 0 , ,

G oethals G eo rg e W , 2 3 3 2 4 2
, .
, Ho p f Harry 2 8 4
, ,

G o ing , C h ar les B , 3 1 8 , 3 2 1 . Houser T h eo d o re V 2 3 5 23 9— 2 4 2

, .
, , , 24 5 ,

G o ldm an , Harry , 22 7 2 5 2 , 2 69 , 2 7 7 ; 3 0 5 , 3 1 6, 3 1 7
I N DE X 45 9
Ho w ard , Fran k A .
, 1 7 8— 1 80, 1 8 2— 1 8 5 , 198, In du str ial firm s, largest in U S . .

2 00 , 20 1 , 2 03 , 2 07 , 20 9 , 2 1 0- 2 1 4 , siz e o f , 49, 5 0
2 1 9, 22 4 , 24 0 , 2 87 , 2 89, 2 9 2, 3 04 , v
su r ey s o f , 2 — 4 , 1 6 — 2
7 , 4 , 3 5 3 7, 3
2 8 0— 82
3
3 1 6 , 3 1 7 , 3 2 0, 4 2 7 ftn 3 5 , 4 4 5 i tu In l an d S teel Co .
, 33 1, 332
S I In tern atio n al A gricu l tu ral Co rp , 3 4 .

b
Hum le O il 8: Refi ning Co .
, 1 73, 1 91, 202, In tern atio n al u sin ess Machin es Co rp B .
, 47 ,
213, 215 , 217, 21 8, 220 , 223 , 29 8 ,

3 5 6 , 4 2 6 ft n . 20 In tern atio n al Harv ester Co .

, 3 2 , 3 5 , 4 1 , 4 6,
Humm C E 4 4 1 f tn 9 3
, . .
, .

Hu mp h rey G ilb ert E 2 5 0—25 3 2 67 3 0 8

, .
, , , In tern atio n al Nick el Co .
, 3 27 , 3 3 0, 3 8 1
Hu n t A lfr ed E 3 8 0
, .
, In ternati on al Pap er Co .
, 3 2, 3 4 , 4 7 , 3 27 , 3 4 0 ,
Hun t Ro y A 3 4 0 3 8 0
, .
, , 341
Hun t S eth B 1 7 2 1 7 3 1 9 4 2 1 6
, .
, , , , In tern ation al Petro leu m Co .
, Ltd .
, 1 66 , 1 67 ,
Hyatt Ro l ler B earin g Co 1 2 3 1 3 0 1 3 1 .
, , , ,

In tern ation al Sm ok el ess Po w der 8: Ch emical

Ck h s 7 9
In tern atio n al S team Pump Co .
, 3 5 , 4 6, 3 7 2
Ill in o is Cen tral Rail ro ad, 2 1 , 23 3 see also Worthin gto n Co rp .

Illin o is S teel Co .
, 29, 34
Imp erial O il Co . of Can ada, {6 5 , 1 6 6, 1 7 2, J en n in g s, Walter , 4 2 7 ftn 4 0 .

Jeu ck , J oh n E .
, 22 8 , 2 29 , 23 1 , 2 5 1

see also In tern atio n al Petro l eu m Co .

, Ltd . J o h n s, C O . .
, 4 2 6 ftn 3 4 .

In du strial en terp rise, defi n ed, 8 J hn s-Man ille Co , 9 4

o v .

In du strial fir ms, agricu ltural imp lemen ts, 24 , Jo h n so n , E F , 4 2 0 ftn 7 8 . . .

Jo h n so n , T o m L , 5 3 , 4 0 6 ftn 1 3 . .

agricu ltural p rocessin g, 5 , 6, 27 , 28, 47, Jo n es, Edw ard D , 3 2 1 .

~ 6a,
3 2 6, 6 3 8 6,
-
3 44 3 4 9,
—
s o s 3 77, l
Jo n es 8: Lau gh in , 9 , 3 4 , 3 3 3 3 3 , 3 3 5 3 3 7
2 1

3 92
au to s an d p o w er m ach in ery 5 6 4 2 , , , , 43, K y A T
earn e d C , . .
, an o .
, 3 82
K ll K T 3 7 3
e er, . .
,

3 74 , 3 8 6, 3 8 9 , 3 9 1 . 3 9 2 , K ll y C li F 3
e e , o rn e us .
, 28 , 3 80
K ll y R lp h 4 5 f
e e , a , 1 tn .
45
ch e m ical , 6 , 4 2 , 4 4 , 4 5 , 3 6 1 — 3 63 , 3 7 4 Kelv in ator Corp .
, 46
K enn eco tt Cop p er Co .
,
— 2
3 7 3 9,
2 3 8 0, 4 4 6
l
e ectrical an d electro n ics, 5 , 6, 24 , 2 8 , 2 9 , ftn . 2

4 2, 43 , 6
4 , 47, 3 2 6 , 3 6 1 —
3 70, 3 77 . K etterin g , Ch arles P .
, 1 27 , 1 39, 1 41, 1 53,

f ertiliz er, 3 4 Kidd A M 8 C 3 8 7

er , . .
, : o .
,

food , o th er th an m eat p ack in g , 27 , 43 , Kim b ll D S 3 8 3a , exter .

, 1 , 21

Ki g l y Hi m W 5
n s e , ra .
, 2 0

mass merch an disin g 6 4 2 , , , 4 8, 2 25 - 2 8 3 , Ki l Ch l M 3 3 3 4

t t e, ar es .
, 2 , 2
—
3 80 Kl C 3
ax o n o .
, 1 2

meat p ack in g , 2 4— 2 7 , 39, 4 1, 44, 3 0 2, 34 1, K hl W Coe 6

er, . .
, 20 0— 2 02 , 20 , 2 07

3 45 3 47,
—
3 49, 3 6 0, 3 62 , 3 63 , 3 8 6 , K h B G 56
oet er, . .
, 1

K pp C 45 3 76
o ers o .
, ,

n on ferrou sh 6
s, , 3 0 2 , 3 2 6— 0 —
3 3 , 3 3 7 3 4 0, K g G y d B ki g
ro er rocer an a n Co .
, 4 8, 25 4 ,

3 61 , 6 8 6 —
3 3 , 377, 3 : 39 0 3 9 2, 3 95 3 79
o il, 5, 6 , 3 9 , 4 2 , 4 7 , 4 8 , 3 2 6 , 3 5 2- 3 63 , K resge, S S . .
, Co .
, 23 5
—
3 93 K uhn , Lo e b8 : Co .
, 3 87
ru bb er , 5: 6: 4 2 , 4 3 : 4 5 , 3 2 6: 3 5 0- 3 5 2 ,
3 60
—
3 94 Lack aw an n a S teel Co .
, 34
steel , 5 , 6, 24 , 29 , 34 , 35 , 39 , 3 02 , 3 2 6, Lafl in 8: Ran d , 5 2 , 5 4 , 4 0 6 ftn . 14

3 27 , 33 1-3 3 7 , 3 4 0, 3 43 : 3 6 1 : 3 63 , Lago Petro leu m Co , 22 0 .

Lak e S u p er io r Co rp , 3 4 .

b
to acco . 2 7 , 4 7 , 3 02 , 3 4 4 , 3 4 9 , 3 6 0 , 3 8 6 . Lee, Higgin so n 8: Co , . 1 20 , 1 3 2, 3 8 7 , 4 20
li n -7 3
4 60 I N DE X
Lehm an B ros , 2 2 7 , 22 9 Morg an I , P 8 ’
CO ” 3 4 , 5 3 , 1 1 4, 1 1 7, 1 1 9,
Lelan d, Henry , 1 22

Lewi s, Walk er O 4 3 5 .
, fu n 5 Mo rr ell D A 4 0 6 ftn 1 3
, . .
, .

Ligg ett a My ers 3 4 4 , Morr is Co 2 6 .

,

Lin de A ir Pr odu cts Co .

, 3 75 Mo tt Ch ar les S 1 1 7
, .
,

Lin e-an d-sta fi l

r e ation s hip , 7 0, 7 1, 6— 8
9 9 , Mowin ck el J ohn A 2 07 2 1 5 , .
, ,

1 09-1 1 1 , 1 3 1 , 1 3 9, 15 4
-1
5 5, I 7 Q, Moxham A rth ur I 5 3 5 7 , , , 63 , 64 , 4 08
1 8 0, 1 83— 1 90 , 1 94 , 97 , 1 1 9 8, 21 4, fm 5 4 »

215, 222 , 2 6 8, 2 86—2 8 9 , 2 9 4 —2 9 5 , Murp h y Edw ar d M , 1 1 9

, .

3 3 9 , 3 4 0 , 4 2 3 ft m 1 1 8 Murp h y, W W , 4 1 6 f tn 2 5 . .

Litchfi eld, Paul W , 3 5 2 , 3 8 0 .

Little, A rth ur D In c ,
.
, . 1 21 , 139
Nash Ch arl es W , 1 1 8 1 2 1 — 1 2 3 1 2 5 1 5 6
, .
, , ,
Loeb , A l b ert, 2 2 7 , 22 9 —2 3 3 , 2 95
N ash Mo to rs Co 4 6 .
,

Lo omis , N H , 4 2 6 f tn 3 4 . . .

B
N ation al iscu it Co 3 2 3 3 3 6 3 4 4 .
, , , ,
L o rai n S teel C o .
, 3 4 , 5 3 , 5 6, 5 7 B
Natio nal u tch er s Pr o tecti v e A ss n 2 6
’

Ly n ah , J am es , 1 56 Nati on al Car o n Co 3 7 5 b .
,
,

Ly o n , Tr acy, 1 21 1 22
,
Nationa l Cash Regis ter Co 4 4 4 i tu 4 .
, .

N ati ona l D airy Pro du cts Co 4 7 , 3 4 6 —3 4 9

Mccallu m Dan iel C 2 1 2 2
.
, ,

3 6o , s7 a , s 8 1
, .
, ,

McClosk ey L eo 2 2 0 Nati onal E l ectri c Pr o du cts C o 4 4 6 f tn

, ,
2
McC o ll u m Leon ar d F 22 0 3 5 5
.
, .

, .
, ,
Na tio nal En am elin g 8: S tam p in g Co 3 5
McCon n ell Fo w ler B 2 5 8—2 60
.
,

2 6 6 —2 6 8 ,
, .
, ,
Nation al S teel Co 3 4 3 5 , 3 3 1 3 3 3 3 3 5 .
, , , , ,

McC ormi ck Cyrus 2 8 2 9 , , ,

Nation al T ub e Co , 3 5 3 3 5
McCo rmi ck Cyru s III 3 7 2
.
,

, , ,
Nel so n , Do n al d M 2 3 4 23 5 , 23 9, 243
Mcco rmi ck Fo w l er 3 7 1 3 8 1
.
, , ,

, , ,
2 4 5 , 25 5
Mcco rmi ck Reap er Co 2 8 .
,

McG r eg or Fr ank S 1 0 0 1 0 1
, .
, , , 1 04 , 3 1 7, 4 1 2 J
N ew ersey l aw o f 1 8 89 , efi ect o f , 3 0, 3 1
fru . 1 03 , 4 1 3 f ru . 1 09
N wY
e ork Ce n tral Railr oa d, 21 39
McKinsey Jam es O 4 3 7 f tn
,

, .
, .
33 Nob el s Exp l osiv es Trad es L td 1 2 8
’

McKinsey 8: Co 3 8 1
, .
,

,
North w ay Mo tor 8: Manuf acturin g Co
.

1 20 ,
McKni gh t G eorg e W 1 8 2
.
,

, .
, , 1 84 , 2 01 , 2 03 ,
1 25
2 1 2, 44 5 fru . 1 5 Nu s b au m A ar on E 22 6
McL au ghl in R S 4 1 5 f tn 1 3
, .
,

, . .
, .

McLau gh lin Carri ag e Co 4 1 5 f t n .

, . 13
O ak l and Co
McLau gh lin Mo tor Car Co L td .
, .
, 1 1 9, 4 15
.
, 1 1 9, 1 41, 1 43
O k l ah oma Pip e Lin e Co , 1 6 7 , 4 1 5 ft m 8
ft h 1 3
.

O lds, Ran som E , 1 1 7 , 1 1 9

Magn o li a Co , 3 5 6, 3 5 7 .

Mo tor Wo rk s
.

O lds 60
Mai n H , 4 2 0 f t n 8 2
J , 1 1 9, 1 41, 1 43 , 1

O liv er Minin g Co
.
, . .

Man ag em en t an d A dm in istratio n , 1 4 9, 3 21
.
, 3 33
O p er atin g d ecisio ns , d efin ed,
Man ag ers defi n ed 1 1 , ,
1 1

Maro k en e Co 8 5 .
,

Max w ell -B riscoe Mo to r Co 1 1 9 .

, Pan A merican Petrol eum Co .
, 355, 35 6
Mea de C A 4 0 8 ft n 4 8
,
. .
, . P ar k er, Th o m as R .
, 2 02 , 2 0 4 , 43 0 f ru 7 9 .

Merseles T h eodor e 2 3 4 2 3 5 2 3 8
, , , , P ark h u rst, F 3 2 0, 4 3 1 f t n 1 0 0
. A .
, .

Michi gan Cen tral Railr oa d 2 1 , P atterso n , Ch ar les A , 4 0 8 f tn 4 8 , 4 1 4 ft n . . .

Mi chi ga n S ou th ern Railr o ad 2 1 , 1 21

Min n eso ta Ir o n C o 3 4 .
, P atterso n , Char l es L .
, 5 6, 5 8 , 5 9 , 6 4 , 7 3
Mo b il In tern ati o nal O il Co 3 5 6 .
, P atterso n , J o hn H .
, 4 4 4 ftn .
4
Mo b il Oil Co 3 5 6 .
, Payn e, Ch risty , 21 8
Mo ff ett J am es A Ir 1 6 6 1 7 6
, .
,
.
, , , 1 81, 1 88 , Pear so n , Hen ry G .
, 1 22

1 9 6, 1 97, 1 99, 2 03 , 2 04 , 2 0 6, 21 6 Pen n ey , J . C .

, Co .
, 23 4, 23 8 , 2 4 0, 3 7 9 , 3 80
Mon d Ni ck el Co Ltd 3 3 0 .
,
.
, Pen nsy lv an ia Railr oad , 2 1 — 23 , 3 8, 3 9 , 5 8,
Mo nsan to Co 4 5 3 7 5 3 7 6 3 8 1 .
, , , ,

Mo n tg o m ery War d 8: Co 4 8 2 2 6 .
, , , 2 3 3 — 23 7 , Perk ins , G eo rg e W .
, 4 1 5 f tn . 1 1

Perk ins , P P . .
, 4 3 0 ft n .
79
I N DE X 4 6 1

Ph ell is, C . W .
, 4 12 f tn . 1 03 Resear ch , in dustrial firms , 3 2 8
at v ar ious

Ph elp s Do d ge Co 4 4 6 fru 3 3 9 p as sim, 3 4 8 , 3 5 2 , 3 5 8 , 3 6 1 , 3 63 ,

—
.
, 3 7 3 3 0,
2 . 2

3 9 3 9 5 Farrim
Ph elp s D od g e Co mp an y Produ cts Co rp fi m —
446 6 8
-
.
, 3 4, 37 2 37 v ar 1 ,

ft n R etail Resear ch As s n , 4 3 7 fru 2 9

’
. 2 .

Phillip s Petr ol eum Co .

, 45, 4 8, 353, 3 5 8, v
Re er e Co p p er 8: rass , In c , 4 4 6 ftn 2 B . .

Reyn olds fam ily , 3 4 4

Pick ard, Frederick W .
, 67 , 7 3 , 9 2 , 9 3 , 9 9 Reyn o lds, R J , T o acco Co , 3 4 4 . . b .

1 04 , 1 0 6, 3 0 6, 3 1 8 , 4 1 4 f tn 1 2 2 .
, Riedem ann , Heinrich , 2 07 , 2 1 5
4 4 5 f tn I S Ro bb Russell , 3 2 1
,

on co mmitt ee on m ark etin g p ro lems 9 4 b , , b

Ro erts, Ch ar les B , 2 5 0 .

95 b
Ro inso n , C I , 4 2 7 ftn 3 4 . . .

Pitts b ur g Co al Co .
32 , R oessler 8: Hasslach er Ch emical Co , 2 9 1 .

Pitts b urgh Co k e 8: Ch emical Co .

, 45 Ro sen w ald, ul iu s, 2 2 6—2 3 4 J
Pitts b urg h Pl ate G lass Co .
, 4 7 , 3 27 , 3 4 0 , 3 4 1 , Ro sen w ald, Lessin g J , 2 2 9 , 2 3 5 , 2 4 2 , 2 4 3 .
,

3 4 7 , 4 0 2 ft n
6 . 1 247

b
Pitts urgh Redu ctio n Co , 3 3 7 . Ro y al Du tch -Sh ell Co .
, 357
Plu v iusin Co , 4 0 9 ftn 65 . . see a lso Sh ell O il CO .

Po lk , R L , an d Co , 1 5 0
. . .

Po ll ock , Em il J , 2 3 5 , 2 4 2 , 2 4 3 , . 25 5 , 2 63 ,

27 8 S adl er , Ev erit J .
, 1 7 2 —1
74 , 1 7 6, 1 81, 1 82,
Po rt er, A F . .
, 4 12 ft n . 1 03 1 84, 1 85 , 1 89 , 2 0 2- 2 0 5 , 2 09 , 2 1 2,

Po stu m Cer eal Co .

, 3 47 215, 21 6, 21 8, 21 9, 224, 2 4 0, 29 5 ,

Po un d , A rth ur , 11 8 3 05 » 3 1 7
Prairie O il 8: G as Co .
, 4 2 6 ftn . 1 6 S af ew ay S tor es, 4 8 , 3 7 9
Pratt , J o hn Lee, 1 2 6, 1 27 , 1 29, 135, 1 41, J
S ay , ean ap tist e, 3 1 4 B
1 4 2, 1 4 6, 1 47, 15 6, 1 62 , 3 0 6, 3 1 7 , S ch en l ey In du stri es, 3 4 5
319 S ch o lder , C O , 4 3 0 ftn 7 7 . . .

Pratt , Rich ardso n , 2 02 , 2 1 2 S ch u mp eter, o sep h A , 2 8 4 J .

Prens k ey , M . L .
, 1 4 6 , 4 2 0 ft n . 80 S ch w arzsct 8: S u l z b erg er, 2 6

Prest-O -Li te Co .
, 375 S cien tifi c man ag em en t, 24 , 2 85 , 3 1 7 , 3 1 8,
Presto n , A n dr ew , 27 3 20
Princip les of I n dustrial E n gi n eerin g 3 1 8 , v
S co ill Manu f acturing Co .
, 94
Princip l es of I n dus trial Organ izatio n , 3 1 8 Scrip p s- B oo th Co .
, 1 42
Proct er a G am le, 4 7 , 9 4 , 3 4 6—3 4 9 , 3 8 1 b S eagrams , Distil lers-S ea gr ams
see

S ears, Rich ar d, 2 2 6 —22 8 , 3 1 5 , 3 1 6, 3 8 0

b
S ear s, Roe u ck 8: Co , 4 , 4 4 , 4 8—5 1 , 3 9 4 .

Radio Corp . of A merica , 4 7 , 3 69 ch ap 5 (22 5 — 2 8 2 )

.

Railroad ad ministratio n , 1 9, 2 1 —2 3 , 3 8, 3 9 co m p ar iso n w ith du Po n t, 1 1 2

Rain ier Co .
, 11 9 co mp ariso n in ad ministrati v e in n o v ation s,

Ramsay , Will iam G .

, 83 2 8 3 —3 2 3 p assim
Rask ob , J o hn J .
, 63 , 7 , 9 0, 1 0 6, 1 1 4, 1 24, co mp ariso n with v
ario u s in du strial firms ,

3 2 4 , 3 3 6, 3 4 6, 3 4 9 , 3 66, 3 7 8 , 3 7 9 ,
Redlich , Fritz , 4 00 ftn 6 , 4 4 3 ftn . . 1

Rem y El ectrical Co .
, 1 23 S eco n d B an k o f th e Uni ted S tates, 20

Reo Co .
, 1 1 9 S eg er, Ch ar l es B .
, 3 5 0, 3 5 1
Rep aun o Ch emi cal Co .
, 5 2, 54, 6
5 , 5 8—60, S eligm an , J . 8: W .
, 8: Co .
, 1 20

2 8 4 , 2 85 , 2 9 0, 4 0 6 f tn . 14 Senio r , J o sep h H .
, 1 7 6, 2 1 3 , 2 1 5

b
Rep u lic S teel Co .
, 3 4, 3 3 1 , 3 32 S h aw , A . W .
, 321
Resear ch , 4 3 , 4 4 S h efi el d, C G . .
, 1 7 6, 18 0, 1 97, 2 0 6, 2 1 2

at du Po n t , 5 7 , 6 0 , 6 6, 7 1 , 8 0- 8 9 , 9 1 , 1 00 S h efi eld S teel Co rp .
, 336
at G M, 1 3 9 , 1 4 1 , 1 5 3 , 1 5 6 S h elb y S teel T u be Co .
, 35
at J ersey S tan dard, 1 7 8, 1 79, 1 84 , 20 0, S h ell Oil Co .
, 4 5 , 4 8, 1 7 r, 2 23 , 35 3, 35 6
2 0 8—2 1 4
at S ear s, 27 7 , 27 9 S h eridan Co .
, 1 42
r elatio n to ad min istrati v e inn o v ati o n s, 2 8 7 , S h erman A n titr ust A ct, 63 , 1 64 , 4 02 ftn . 1 8
2 93 , 2 9 4 , 3 04 S h erw in -Williams Co , 9 2 .
4 62 I N DE X
S h oemak er , H . L .
, 4 3 4 ft n . 1 44 S ta ndard O il of New J ersey in co rp o rated in
S iedel , Har ry G 4 3 4 ftn .
, . 150 Delaw ar e (Delaw are see S tan d

S in cl air Harry E , 3 8 0
, . ar d O il (New er sey ) J
S incl air O il Co .
, 3 5 3 , 3 5 8 , 3 5 9 , 3 8 r, 3 8 4 Stan dard O il o f New ork , 1 65 , 1 7 1 , 1 7 2 , Y
S in ger S ewin g Mach in e Co .
, 28, 33 , 3 80 1 76

S k inn er, J . Fl etch er , 22 7 — 2 3 0 S tan dard O il o f O hio , 3 0 , 4 8 , 3 5 4 , 3 5 8 , 3 5 9

S loan , A l fred P .
, Ir .
, 3 6, 4 1 , 11 4, 1 23 , 130 S tan dar d O il o f Pen n syl ani a , 2 1 7 v
1 43 , 1 5 0, 1 5 3-1 5 8, 1 60— 1 6 2 , 1 93 , S tan dard O il D e elop m en t Co , 2 1 3 , 2 1 4 v .

3 1 6, S tan dard S hip p ing Co , 2 1 3 , 4 3 3 fru 1 2 4

24 0, - 0
3 01, 3 4 3 7,
0 3 09 , 3 1 0 , . .

3 1 7: 377 b
S tan ley , Ro ert C , 3 3 0 .

Smi th , A O . .
, Co .
, 3 72 S tan nard, E T 3 2 9 .

Smi th , A dam , 3 1 4 S tatistical co n tr o ls, in du Po n t, 6 0 , 6 1 , 67 ,

F
Smith , rederick L .
, 1 19

S mi th , G . Harriso n , 21 5 , 21 8 in G M, 1 4 0 , 1 4 1 , 1 4 5 - 1 5 3
S mith , J
hn T , 1 4 1
o . in J
ersey S tan dar d, 1 8 1 , 1 9 0—1 9 6, 2 1 5 ,

S mith , Llo y d, 2 2 0 4 2 9 ft n 6 0 .

b
Soco n y Mo il O il Cc , 3 5 3 , 3 5 6, 3 5 8 , 3 5 9 , . in S ear s, 2 3 1 , 2 3 2 , 2 62 , 2 63 , 2 7 4 , 2 7 5 ,
3 81 2 7 7 - 2 7 9 , 4 3 6 tta 1 2 o

Socon y V acuum O il Co , 4 8 , 2 2 3 , 3 5 3 , 3 5 4 , . rel atio n to admin istrati e inn o atio ns, 2 8 6 , v v

357 2 8 8— 2 9 3 , 2 9 6 , 2 9 8 , 3 1 0 , 3 1 1

So mb art, Wern er , 8 v
in ario us in du strial fi rm s, 3 68 , 3 8 9 , 3 9 0
So u b ry , Emil E .
, 4 3 4 ftn . 150 S tau fi er Ch em ical Co , 4 5 .

S o u th Pen n Co .
, 4 2 6 fru . 1 6 S teenstru p , P eter, 13 1

S p ragu e El ectric Co .
, 67 S tetso n , Fran cis L .
, 1 19

Sp ruan ce, Will iam C 7 3 , 9 9,

.
, 1 0 1 —1 0 3 , i 06 , S tettiniu s, Edw ar d R .
, Ir .
, 334
3 06, 3 1 7 , 4 0 8 ftn 4 8 , 4 1 4 ftn . . 1 22 S tew art , Ro b ert G .
, 217, 21 9

S q uires, J . E .
, 1 27 S tew art, W . E .
, Co .
, 1 19

S tan co , In c , . 21 2, 21 5 S torro w , Jm a es J .
, 1 2 0- 1 2 3 , 1 25 , 1 27 , 1 33 ,

S tan dard De vl e op men t Co .

, 213 1 3 8, 1 39, 1 5 6, 29 8 , 3 0 4 , 4 2 0 ftn 73
S tan dard O il of Califo rnia, 4 7 , 4 8 , 1 65 , 1 82, S tr an -S teel Co rp , 3 3 6 .

355, 35 9, 3 8 I S trategic decisio n s defin ed, 3 83

- 1 1,
,

S tan dar d O il of In dian a, 4 8 , 1 65 , 1 7 8, 1 8 2, S trategy , defi n ed , 1 3, 1 4 , 3 83

3 5 6 , 3 5 9 , 3 8 1 , 4 4 9 ftn
6 —
20 1 , 3 , 353
1 S traw , C A . .
, 4 2 7 f tn 3 4 .

25 S tructur e, defi n ed , 13, 14, 3 83

S tan dar d O il f Lo u isian a ,
o 1 65 - 1 6 7 , 1 7 2, S tu de bk a er Co .
, 1 1 8
1 87 , 1 8 9 , 1 9 1 , 1 9 6, 1 97 , 20 1 , 202 , Su b idi
s ar y (Jer sey S ta n dard) , defi n ed, 1 65 ,
2 04 , 2 0 6, 2 1 3 , 2 1 5 , 21 7, 21 9, 2 20 , 1 66
Su rface, Frank M .
, 22 1

S tan dard O il (New J ersey ) , 4 , 3 2, 3 4 , 4 0 , S w ain , Ch ester O .

, 21 1 , 21 6, 21 8
—
5 r, r r 2 , r 62 S w ift, Edw in , 25

ch ap .
4 ( 3 6 — 22
4, 1 esp . D elaw are Co .
, S wift, G u sta v u s, 2 5 — 2 7

2 1 2— 2 1 7 p assim , 22 0, 2 2 2, 2 23 , 43 3 Sw ift Co .
, 33 , 4 0, 3 80
f tn 1 2 0 , an d Esso S tan dard, 22 0)
. S w op e, G erard, 4 6 , 3 65 , 3 66, 3 68
comp ariso n w ith S ears 2 2 5 2 2 6, 228 , , , v
S yl ania Electric Co , 4 7 , 3 6 9 .

79 28r
-2
,

co mp ariso n in admin istrati e in n o atio n s, v v T actical decisio ns , defi n ed, 1 1 , 3 8 3

2 8 3 — 3 2 1 p assim T aylor, Fr ederick W , 2 4 , 20 6, . 284, 3 1 7,
co mp ariso n w ith ario u s in du strial firms, v
2 6 8
3 4, 33 4 3 3 , 33 , 3 45 3 53 3 5 7,
—
, , T ay lor, Myro n C .
, 33 4
T eagle, Walter C
, 66 —2 2
4 p assim 2 4 0 , 2 8 8 ,
. 1 ,

see al so G il b ert 8: B ark er , Imp e rial O il Co . 2 9 5 : 3 0 1 : 3 0 6 , 3 0 7 , 3 1 5 : 3 1 6: 3 2 0 !

f Can ada, La go Petro leu m co 6 f

'

o s .
, 3 2 1 , 3 4 0 , 3 0 , 4 4 5 tn 1 5 .

S tan co , I nc m en t .
, S tan dard De vle op T enn essee Eastman Co , see Eastman odak . K
Co , S tan dard O il o f Penn syl an ia
. v , Co
S tan dard O il De elo p m en t Co , S ta n d v . T ex aco , 4 8 , 1 7 1 , 1 8 7 , 3 5 3 , 3 5 5 -3 5 9 , 3 8 4
ar d Ship p in g Co . T h omp so n , E C . .
, 4 1 3 ft n 1 0 9 .
I N DE X 6
4 3
T h o mp son Produ cts , 4 6, 3 7 2 Wear -Ever A luminum Inc 3 3 9 3 4 0 , .
, ,

b
Th o rn e, Ro ert J , 23 3 , 2 4 2 . Web er Max 3 22 4 0 0 fth 5
, , , .

T o ur f amil y , 3 4 4 Web er O rl an do F 3 7 6 3 8 0
, .
, ,

Tu rck , S o lo mo n , 5 4 Weddon G eorge S 4 3 0 ftn 8 7

, .
, .

Turn er , Frank , 4 2 0 ftn 8 0 . Weir Ern est T 3 3 5 3 8 0

, .
, ,

T u scar ora Co .
, 1 67 , 4 2 5 ft n 8 . Weirto n S teel Co 3 3 5 .
,

Welch Co 1 1 9 .
,

U n io n Car ide Co b .
, 2, 45, 13 8 , 3 7 5 —3 7 7 , Weller Dan iel R 2 04 2 1 3 2 1 5
, .
, , ,

3 99 h a 2 Weller Fr ederick W 1 66
, .
,

U nio n O il Co . f California,
o 1 8 0, 1 82, 20 1 Wen n erlu n d E Carl 4 2 1 ftn 9 7 , .
, .

U n ited Cop p er Co , 1 3 8 . West In dian O il Co 2 1 3 .

,

U n ited Fru it Cc .
, 27 , 4 7, 3 44 , 3 45 , 34 7 , 3 49 Western Electric Co 3 9 9 ftn 3 .
, .

U n ite d Mo tors Corp .

, 1 23 , 1 25 , 13 1, 1 3 2, Westerv el t W I 2 4 0 2 4 9 2 9 3 , . .
, , ,

Westingh ou se Electric Co 2 2 8 2 9 .
, , , , 4 3 , 4 6,
U n ited Motors S erv ice , In c , . 13 1 4 7 , 5 6, 6 9 , 7 2 , 1 21 , 6 - 68
3 3 3 , 3 7 0,
Un ited S tates G yp su m Co 3 8 0 .
, 3 8 1 , 3 9 9 ftn 2
Uni ted Stat es Ru er Co , 2 , 3 2 3 3 4 3 , 4 5 bb .
, , , Westo n -Mo tt Co 1 1 7 .
,

3 5 0 , 3 5 1 , 3 8 1 , 3 9 9 f ra 2 Whitef ord W K 3 5 9 4 4 9 ftn 3 3 , . .

, , .

Un ited States Ship p in g o ard, B 1 75 Williams T J 1 8 1 4 25 fru 9, . .

, , .

Un ited S tates S teel Co rp .

, 3 5 , 4 0, 4 9 , 5 3 , Wil so n Ch arles E 3 68
, .
,

1 21 , 1 33, 13 8, 1 64 , 3 3 1 , 3 3 3 -3 3 6 , Wilso n 8: Co 6 9 7 2 .
, ,

Wo od Ro b ert E 2 3 3 — 2 82 p assim
, .
, , 2 9 3 , 2 95 ,

Un ited States T ir e Co , 9 4 .
3 0 2, 3 03 , 3 05 , 3 08, 3 r 5 —3 r 7 , 3 2 2,
Utah O il Refi n in g Co , 3 5 5 , 3 5 6 .
3 66
vi w F
e s on raz er rep o rt , 2 5 4 , 2 5 5

V acu u m O il Co .
, 1 65 W db idg S
oo r e, . P .
, 4 1 3 ftn . 1 09

V ertical integr atio n , 5 3 , 8 2 , 8 4 , 8 7 , 11 6—1 20 , Woo ds C A 25 0 , . .

, , 25 8
1 2 2— 1 2 4 , 1 44, 1 63 , 171, 1 8 5 , 22 8 , Woo lw orth F W , . .
, Co .
, 23 5 , 3 79, 3 80
23 6 Wo rthington Corp .
, 4 6, 3 7 2
defin ed, 14 see al so In tern atio nal S team Pu mp
V irgin ia-Car o lin a Ch emical Co .
, 34
V o rh ees, En ders M , 3 3 4 ~
. Yo u n g, C E . .
, 1 7 6, 1 7 7

You n g , O w en D .
, 3 68
Wago n er P D 4 1 6 ftn 25
, . .
, . Yo u n g, R . M .
, 202 , 2 1 2

Warn er F W 4 1 5 ftn 4
, . .
, . Yo un g sto w n S h eet 8: T u b e Co .
, 33 1 , 3 32
Warn er T W Co 1 2 4
, . .
, .
,

Wash b u rn -Cro sb y Co 27 3 4 7 .
, , Z W
an e, l 9 4 , 1 9 5 , 2 04
es ey , 1

Watso n T h o mas J 3 7 0
, .
,
Zimm ersch ied , arl M , 4 1 6 ft n K . . 25