Sloan Rules: Alfred P. Sloan and the Triumph of General Motors

"Early in the auto industry's history, Alfred P. Sloan trounced the monolith that was Henry Ford, turning the ambitious but messily sprawling empire of General Motors into a smoothly-humming money-making machine. His 1964 book on management, My Years with General Motors, is a business classic, and his methods placed GM at the top of the automobile world, yet he remains unknown."—Publishers Weekly

"Very few people know the story of Alfred Sloan, even though he was one of the most innovative businessmen of the twentieth century. So much of today's car industry and corporate world—from management practices to the use of public relations firms—is built on Sloan's genius for business. David Farber's wonderful biography captures Sloan and his extraordinary time."—Lee Iacocca

"Everybody knows about Henry Ford. Much less is known about the man who defined the modern automobile industry and developed management theories that exist to this day. That's how Alfred Pritchard Sloan Jr. would have wanted it.…Nonetheless, Mr. Farber succeeds in portraying Sloan and his legacy.…The great strength of Sloan Rules is its balance. Mr. Farber might have ranted about Sloan's blindness to anything other than profit. Instead, he captures the man's accomplishments and failures matter-of-factly. 'We still live and wrestle,' he writes, 'with Alfred Sloan's truths.'"—Wall Street Journal

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[This interview was conducted in October 2002.]

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Sloan Rules
An interview with David Farber
author of Sloan Rules: Alfred P. Sloan and the Triumph of General Motors

Question: Why read about Alfred P. Sloan?

David Farber: In the immediate aftermath of the Enron debacle and other corporate scandals, the story of Alfred Sloan's hardheaded, even ruthless management of General Motors makes for instructive reading.

Sloan was the first celebrity CEO. He made GM into an icon of productivity, market domination, and stable profitability. Through marketplace performance and a relentless public campaign, he convinced Americans that the business corporation was the beating heart of the nation's political, cultural, and economic life and that men like him were indispensable to the nation's security and prosperity. Sloan's tenure at GM provides a useful reminder that great corporate leadership is mainly honest and usually brilliant. It is, also, almost always fiercely self-interested. The best corporate leaders, Sloan's life reveals, often care very little about the nation's common good. Sloan's story helps to explain both the strengths of our corporate-based economy and the weaknesses of our corporate-influenced polity.

Question: Was Sloan's book My Years at General Motors part of that "relentless public campaign"? The public made My Years a bestseller, right?

Farber: We've been inundated for some twenty years with business management bestsellers and the endless hawking of CEOs' sometimes-dubious wisdom. Sloan's My Years was the first of its kind—it was a market maker. In My Years, Sloan is remarkably cogent in explaining how he led General Motors and why he was able to make General Motors a worldwide industrial leader. It still explains a lot about how to manage in a giant corporation. And, yes, Sloan very much expected his book to convince its readers about the superiority of the rationally managed business corporation over any other form of economic organization.

My Years is also noteworthy for what it leaves out. Sloan tells readers next to nothing about his personal life. And quite purposefully he says nothing at all about his institutional and personal campaigns to affect public policy (often effective), to defeat Franklin Roosevelt and to limit New Deal restraints on corporate power (less successful), and to create and fund a web of organizations that sold the general public, politicians, and government bureaucrats on the centrality of rationally managed business corporations—and GM in particular—to the American way of life (moderately successful). Sloan Rules does not gloss over those efforts.

Question: What did Sloan create at GM? What aspects of corporate culture can be traced to Sloan? Is it accurate to say that Sloan created the corporate bureaucracy? Is that another way of saying Sloan created the corporate dinosaur?

Farber: At a practical level, Sloan figured out how to do three things really well at GM. First, as historian Harold Livesay argues, he "bureaucratized the entrepreneurial function," meaning that he kept risk-taking alive within a hierarchical, rule-bound, massive, decentralized corporation. That was no mean task, and some claim that after Sloan's departure the risk-taking that Sloan rewarded became ossified in GM's multitudinous layers of corporate decision-making. Second, and not irrelevant given recent corporate accounting shenanigans, Sloan oversaw the use of rigorous financial and statistical tools to profitably manage GM's far-flung empire. And third, Sloan turned GM into the nation's largest advertiser, marketing the hell out of a line of stylish autos—a car for "every purse and purpose." Perhaps less successfully, Sloan put a very high premium on making decisions by the available numbers and management consensus (even though on occasions he broke his own rules). All of that makes good business sense for a giant corporation that can dominate the marketplace through its financial muscle, international distribution systems, and economies of scale. It can also lead to risk aversion and a kind of corporate timidity that opens the door to faster, freer, and just plain feistier competitors—and to some extent GM has lost market share to those kind of companies.

Question: Sloan's emphasis on marketing and sales—the creation of consumer demand for GM products—was nearly fatal for GM in the long run, wasn't it? Another competing philosophy of manufacturing attempts to tune the corporation to the product that people are looking for—this is the model that Japanese car makers followed, pulling the rug out from beneath GM's market share in the 1970s. Do you think this is fair?

Farber: Sloan absolutely believed in giving people cars that they wanted. That was what made him so different from Henry Ford, who thought he could pick out the single best car for every American. Sloan was probably the first car man to accurately predict that someday most American families would have at least two cars in every garage. He was a leader in using consumer surveys and dealer reports in figuring out what kind of cars people wanted to buy. GM's problem was—and is—that they had a hard time turning on a dime. They're so big and their product development process is so complicated that they're hard-pressed to quickly change their auto line if consumer preferences shift because of some external event—like an energy crisis—or if a competitor—like Honda—creates a different approach to car sales. In general, I think GM has gotten a bum rap. How many other American corporations have hung in there for more than eighty years as a world leader? Still, GM has gone through periods during which its leadership placed way too much emphasis on "business as usual." Sloan, at least during his most successful years at GM, knew that the company had to be willing to shake up the car market. He hired the legendary Harley Earl to do just that. Recently, GM CEO G. Richard Wagoner has attempted to do the same thing by hiring hotshot "car guy" Bob Lutz to jazz up GM's lineup.

Question: If Sloan were still alive, what do you think would make him happier: to see that GM is still ahead of Ford, or to see that FDR's New Deal has been substantially rolled back?

Farber: First, and always, Sloan would have been happy to see that GM is making money. Second, he would have been immensely pleased to see that the nation has overwhelmingly accepted the idea that the business corporation and the free-enterprise system are the guarantors of American prosperity. Sloan was an outspoken advocate of international free trade (for which he was blasted by Republicans in the early 1930s!) and an unregulated marketplace. I can imagine Sloan's ghost laughing with delight—Sloan did, on occasion, laugh—when President Bill Clinton, a "new Democrat," announced that "the era of big government is over." He would be a lot less pleased to see how much of the American economy is dominated by government spending.

Question: These days of course books by CEOs are regularly bestsellers. CEOs are fodder for news and lifestyle magazines, they are the heroes and villains of our popular culture. What would Sloan think of the central place of corporations and CEOs in current culture?

Farber: Sloan would certainly have approved of the complete integration of the business corporation into American life. Under Sloan's firm hand, GM became a major presence in American culture, and he would have loved seeing corporate sponsorship of rock concerts and sports teams. The Bush Administration—chock full of CEOs and MBAs—would have pleased him to no end (though he would have been a little suspicious about the number of Bushies whose success in the private sector came through connections or via political careers). Sloan, however, absolutely hated to see corporate executives get caught doing anything that placed their corporations or the free market in a bad light (I emphasize that it is the getting caught that would offend him). I imagine that if he were still alive, he'd be out front publicly castigating some of our contemporary corporate criminals.

Question: Which CEO of a major corporation today most resembles Sloan?

Farber: I think Sloan would have seen something of himself in the just-retired CEO of IBM, Louis Gerstner. First, and most importantly, Gerstner used a Sloanesque form of "quiet leadership" based on a results-oriented strategy to reverse IBM's decline—not unlike what Sloan achieved with GM in the early 1920s. Second, Gerstner has championed the idea that America's public schools can only be saved if they model themselves after business corporations, arguing that they must adopt "simple organizational ideas like listening to customers, decentralized decision-making, measuring performance, and continuous improvement." Sloan would have loved hearing that kind of talk; he made a similar case regarding university education. He gave tens of millions of dollars to MIT to fund a graduate program in management that would directly prepare technically sophisticated people for corporate leadership. MIT honored their benefactor in 1964 by naming that program the Alfred P. Sloan School of Management.

Question: How would Sloan fit in with CEOs today? Would he be welcomed at the head of GM now? Or at GE or IBM or AOL Time Warner?

Farber: It's a tough question to compare Sloan to today's corporate leaders—a little like comparing Babe Ruth to Barry Bonds. But I think Sloan would do just fine. His basic approach to management is still the one used today—he was a numbers guy who mastered the marketplace and never stopped worrying about getting the right people into the right positions. He was not, like some of today's guys, a share-price-obsessed manager, but I don't think that obsession is so important in the current business environment. Sloan would probably, in our media-saturated era, need to learn how to communicate better to a broader audience (current GM CEO Wagoner could teach him a lot about public speaking and jollying the mass media).

There's a lot I don't like about Mr. Sloan. His steady opposition to making safer automobiles, his dismissal of workers' rights, his inability to see Adolf Hitler and his henchmen as evil and dangerous men (he once casually equated Franklin Roosevelt with Hitler), and his general disregard for issues of social justice and the common good make him a not very lovable figure. Still, one of the points I make in the book is that those kinds of failings are usually not weaknesses in a corporate manager, even as they make Sloan less than a model of good citizenship. But as we have seen over and over again in our own time, good citizenship has little to do with maximizing corporate profits. Which makes it pretty obvious to me, at least, that putting corporate leaders in charge of our public good is ill-advised. We need other kinds of people with countervailing power to keep an eye on the business community and to look after the polity.

Question: Sloan left behind no private papers or correspondence, and GM says it destroyed all his corporate papers. Did he have something to hide? How do you write a biography without such sources?

Farber: I think the reason GM destroyed Sloan's papers and makes it hard for researchers to look into their archives is that the corporation has been the target of a great deal of litigation. They see no percentage in letting people muck around in their files. Antitrust issues, auto-safety-related issues, and international investment issues, among other things, could get sticky for GM if examined from an adversarial perspective. It's just more trouble for them than it's worth. I hate to say it but what's the upside for them? That's why Sloan kept no papers—his life was so interwoven with GM that he couldn't separate his affairs from those of the corporation.

Lucky for me, the DuPont Corporation and individual du Ponts had a major interest in GM from the 1920s through much of the 1950s, and their files—culled to some extent—were open to me thanks to the wonderful archives at the Hagley Library in Wilmington. In addition, a few of the big GM men like Charles Kettering and John Pratt did keep private papers and I had a go at them. I hunted all over the country for stuff and eventually found enough to tell most of what I thought needed exploring.

Question: What would Sloan think of your biography?

Farber: I'd like to think that Sloan would, at least, accept the book as generally accurate and that my general notion that American history needs to be told with business corporations somewhere near the center of the narrative would win his approval. And I think he had enough respect for the facts to admit that some of his less publicly minded behavior during the 1930s and 1940s is well documented and worth pondering. For much of his life he was willing to consider the possibility that he could be wrong about certain things. Most of all, I hope his very low opinion of academics' work habits would be mitigated if he knew the thousands of hours I've spent gathering up the facts of his life.

Question: Your first book published by this Press, Chicago '68 is about a riot. This one is about the founding father of corporate bureaucracy. How did you get from one to the other?

Farber: Writing about Abbie Hoffman and then writing about Alfred Sloan is perfectly reasonable, to my mind. Mostly, I write about the recent history of democracy and the role of civil society in the United States. I do spend a good amount of time in Sloan Rules writing about Sloan's rise to managerial greatness within the corporation. But I am most interested in how Sloan saw the role of the business corporation in American public life—how he fought during the New Deal and into the 1940s to keep GM free from government regulation and to convince Americans that a relatively unfettered private sector, led by profit-minded corporate managers, was the key to American prosperity, national security, and a good society. Abbie Hoffman would've disagreed. Both men's stories are good for thinking about American public life and the shape of democracy in the United States.


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David Farber
Sloan Rules: Alfred P. Sloan and the Triumph of General Motors
©2002, 304 pages, 12 halftones
Cloth $27.50 ISBN: 978-0-226-23804-3
Paper $15.00 ISBN: 978-0-226-23805-0

For information on purchasing the book—from bookstores or here online—please go to the webpage for Sloan Rules.

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