According to Bill Gates the single most useful book you can read on business. I agree it is great. This book states Sloan's business ideas in the unassuming voice of a personal memoir. Sloan must have been one of the best managers the world has ever seen. Read this book, and understand where all the stuff that Drucker wrote came from. Enough laurels, what does it say?
Sloan introduced organizational structures balancing central policy with decentralized execution (a lot of the most difficult issues he considers really come with size). He gave employees freedom to act guided by objectives and incentives. He was big on grasping reality, by collecting key operational data, by working out solutions by meetings of stakeholders. He looked ahead to preempt problems and see opportunities for innovation. And he did this on a level of success where it really becomes a bit scary.
Some concrete points:
Energy and logical action in accordance with facts and circumstances.
Purpose: The primary objective of the corporation is to make money, not just to make a product -- pay dividends and increase capital value. ROI is the unifying measure for each business unit.
Value: The future of the corporation depends on the ability to design and produce products of maximum utility in quantity at minimal cost. To succeed in business in the long run you must render service to the public.
Strategy: Companies compete in broad "policy" (i.e., strategy) as well as in products. Every enterprise needs a concept of its industry and the CEO must understand the industry. Think about what you are trying to do, in addition to the constraints imposed by customer demand, competition, technology, economic conditions and evolution. Establish principles and work from them.
Measurement: Measuring, organizing and presenting the significant facts about what is going on in and around a business is one of the chief bases for strategic business decisions. Finance can not exist in vacuum but has to be integrated with ops.
Consensus: Co-ordinate by committee. The executive committee is to pass policy in a clear cut way to supply the basis for authorized executive action, e.g. on quality standards, price schemes, market and competitive moves. It should have enough representatives from operations to come to realistic conclusions. The role of the executive is policy making. Have an operations committee of all unit heads. Gets all available data about performance, and includes executives. The goal: to bring about common understanding.
The Executive: There is a need need for authority of the chief. If possible have the boss be in charge of operations. A group can make policy, but only individuals can administer policy. If a company does not execute well, all policy is for naught.
Capital approbation for projects:
- what is the relative value of the project as compared to other projects in ROI and in necessity to support company operations as a whole
- does it work as a commercial venture?
- has it properly been developed technically?
- is it proper considering company interest as a whole (not just for the unit proposing)
Small projects can be authorized by the unit manager, large ones need a procedure and approval by top management/finance, and need to present their economic and technological benefit.
Organisational structure: Independent units coordinated by central management. There is need to separate divisional and corporate functions. The juncture between staff and line can be paralyzing if it turns into a battlefield. Have line representatives on staff committees to get buy-in and adequate representation of needs. Functions include development, engineering, production, sales, finance. There should be a separation between advanced product engineering and long term research.
Have representative members in parallel function from each unit get together to exchange and co-ordinate, give them authority and power so this coordination can be constructively applied. Confine the scope to problems/info exchange of common interest. Keep away from details, focus on basic problems. Keep sessions business like and to the point. Have a secretary to support the committee.
Personal productivity: Spend days with inspection and observation, nights with discussion. Only 5 direct reports to have time for large scale issues thinking. Put all your energy and experience into your work. Even at the cost of personal sacrifice.
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