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The Art of Success
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From these interviews, the sub-subcommittee arrived at a major insight: Each company had a single controlling head over their manufacturing and sales departments. Coup d oeil. The sub-subcommittee knew that none of these companies had so diversified a product line as DuPont. That was the point: It wanted to see how a company with a narrower product line worked. DuPont s single sales department could not handle so many different product lines. After 6 months of study, the sub-subcommittee recommended dividing the company in two, with each half being responsible for both manufacturing and sales for its own product lines, like the companies they had studied. A single general office would provide nonproduct services, like development and finance, to both. The Executive Committee rejected the proposal. But more committees followed. Finally, as of 1927, DuPont was beginning to move toward a de facto structure based on product divisions rather than functional departments. In the DuPont case, Chandler gives us a striking example of coup d oeil by committee. The new strategy came from the past achievements of other firms. It took years of resolution, but in the end it won the day.
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General Motors
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General Motors shows us two stages of creative structure. First, GM s founder, William Durant, created the general office. Then his successor, Alfred Sloan, made it work. Durant started out in 1886, making horse-drawn carriages. He developed an assembly line and specialized manufacturing plants to feed it. That made him the country s largest carriage maker. In the early 1900s, he switched to cars, entering the car business by buying out the failing Buick company in 1904. At the time, Olds was the country s leading carmaker. It produced the first low-cost automobile, the Runabout, using the same assembly-line methods that Durant used. In 1908 (the same year that Henry Ford produced his first Model T), Durant bought
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62 T H E A R T O F E X P E R T I N T U I T I O N
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out Olds. That made him the country s largest carmaker. He called the new company General Motors. Chandler describes how Durant succeeded at GM, noting that the policies he used to build the company were the same ones that he already had tested and proved at Buick and in the carriage business. So Durant was an artist of what works. He carried forward his past achievements in a new combination to fit the new situation. Durant gave GM a small general office and let the operating divisions run their own show. It was the opposite of the old DuPont structure, where the central office was far too large. So where DuPont set out to reduce its central office and give the divisions more power, Durant faced the opposite problem: He had to give the central office more power over the separate divisions. The two companies would end up in the same position, but they came to it from opposite directions. But Durant refused. He kept his central office so small that it was unable to keep up with the growth of the company. Despite booming sales, debt and cash flow problems mounted. Finally the GM board stepped in. It looked for alternatives, and it found one in 1920, when Alfred Sloan proposed a new structure. The company accepted it, and in 1923 Sloan replaced Durant. Sloan had started out at Hyatt Roller Bearing, where he became president in 1899. Hyatt served a few large automobile manufacturers. When Durant bought Hyatt in 1916, he made Sloan head of GM s United Motors, which made parts and accessories for the other GM divisions. United was a bigger version of Hyatt, except that it also made parts other than bearings, and it made parts only for GM cars. In addition, it was made up of several different companies. While the heads of other GM divisions just ran their own factories, Sloan had to coordinate production from many sources and delivery to all the divisions. Chandler tells us that Sloan solved the problem by building a general office to coordinate and expand the activities of the different operating companies. Thus, he developed a general office just for United Motors. When the crisis came in 1920, Sloan saw a chance to expand the same structure to all of GM.
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