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1920’s GM Ad The “Sloan Meetings” These were special meetings, held twice per year in Detroit, under the chairmanship of Mr. Sloan. Acute problems (across all divisions) were discussed, and this afforded yet another opportunity for the executives at the helm of GM to know and understand the problems and dilemmas faced by division management (all the way down to the plant superintendent level). Financial Control What was its role at General Motors? Sloan said … “it was on the financial side that the last necessary key to decentralization with coordinated control was found. It reduced the need to administer operations from the top. It gave a factual basis for a judgment regarding the future of any particular part of the business. Financial Control What was its role at General Motors? (continued) Sloan considers financial modeling one of the chief bases for strategic decision making, because he feels the “discipline of finance” organizes and presents the significant facts about what is going on in and around a business. This importance is seen in this quote … “At all times, and particularly in times of crises, or of contractions or expansion from whatever cause, it is of the essence in the running of a business.” Financial Control What are its components at General Motors? Cost Price Volume Rate of Return on Investment Forecasting Key element, of course, is expected sales. Sloan recognized a lack of information coming from the retail sector, and a reliable forecast was critical to attaining any reasonable control over production. Forecasting – the Watershed Event of 1924 All divisions, except Cadillac, experienced unprecedented overproduction … leading to surplus inventories. Sloan was taken to task by his Finance Committee, who demanded answers of why this occurred, and what would be done to prevent it in the future. Forecasting – Changes Implemented “post 1924” Made more extensive use of macro-economic data to predict overall automobile demand (linked to consumer income distribution). Worked out a system of statistical reports, which were sent by the dealers to the divisions every 10 days. Shortened the reaction time when a forecast appeared to be wrong. Forecasting is a Reconciliation A happy medium must be found between two camps (both of which are essential to any corporation): 1. The sales force, who, with their natural enthusiasm and optimism believe they can influence sales merely by their own efforts, and 2. The forecasting (i.e., statistical) group, who makes analyses objectively based on evidence of demand. GM’s Non-Automotive Products “We had, of course, some natural interest in diversification which might afford us a hedge against any decline in automobile sales. But we never had a master plan for nonautomotive ventures; we got into them for different reasons, and we were very lucky at some crucial points.” Why Does the Corporation Exist? The primary objective of the corporation, therefore, we declared, was to make money, not just to make motor cars. The future of the corporation and its earning power, we asserted, depended on its ability to design & produce cars of maximum utility value in quantity at minimum cost. Growth The measure of the worth of a business as a business, however, is not merely growth in sales or assets but return on the shareholders’ investment, since it is their capital that is being risked and it is in their interests first of all that the corporation is supposed to be run in the private enterprise scheme of things. Productivity “There is, to my knowledge, no satisfactory technique with which to measure productivity at General Motors, or, in fact, at any corporation which manufactures constantly changing products.” (quote from Sloan where he discusses Union Relations – pg. 399 – re. the so-called “Improvement Factor” in the Labor Agreement) Famous Sloan Quotes … In any organization men would move up form the bottom to the top. That develops loyalty, ambition and talent, because there is a chance for promotion. [If] we are all in agreement on the decision . . . then I propose we postpone further discussion of this matter until our next meeting to give ourselves time to develop disagreement and perhaps gain some understanding of what the decision is all about. If you do it right 51 percent of the time you will end up a hero. There is no resting place for an enterprise in a competitive economy.
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