Judicious use of Executive Power

					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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