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Sloan s 1920 plan for GM followed two basic principles:8
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1. The responsibility attached to the chief executive of each operation shall in no way be limited. Each such organization headed by its chief executive shall be complete in every necessary function and able to exercise its full initiative and logical development. 2. Certain central organization functions are absolutely essential to the logical development and proper control of the Corporation s activities.
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The first principle continued Durant s previous achievements in acquiring different car manufacturers and running them along the same lines as Buick. The second principle followed Sloan s own achievements in setting up a general office for United Motors. Sometime in 1920, Sloan had a coup d oeil about how to combine these two prior achievements for GM as a whole. And there may have been a direct precedent for the combination: DuPont s proposed reorganization plan. Pierre DuPont was chairman of the GM board. He took over as president from Durant during the 1920 crisis. He orchestrated a bailout with funding from the DuPont company and J. P. Morgan. Meanwhile, over at DuPont, the sub-subcommittee s reorganization plan was presented in May 1920 and came up again in November of that year. Pierre s brother Ir n e rejected it both times. Back at GM, Pierre accepted the Sloan plan within less than a month of an emergency GM meeting, also in November 1920. Sloan cited no sources for his plan. Chandler thinks that there was no link between the DuPont and GM plans, even though both plans called for autonomous operating divisions and a general office consisting of general executives and staff specialists. According to Chandler, Pierre and Ir n e DuPont did not consider the two plans in any way comparable because GM s problem was too little centralization, whereas DuPont s was too much. But elsewhere, Chandler presents the two plans as very comparable indeed. He gives us four different companies DuPont, GM, Standard Oil, and Sears that ended up with a similar general
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office structure. So why would the DuPonts and presumably Sloan think that such similar plans were not in any way comparable Perhaps the reason was the lawsuit. DuPont s bailout of GM led to the General Motors-du Pont Antitrust Suit. For Sloan to admit that he had studied the DuPont plan before the bailout would only have added fuel to the fire. If there had been no legal fears, perhaps Sloan would have come right out and cited DuPont s plan as a precedent for his own.
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John D. Rockefeller founded Standard Oil in 1870. It grew rapidly, capturing so much of the U.S. market that the government broke it up into several separate companies in 1911. Standard Oil (New Jersey) was the largest and most diverse of those companies. To handle its complex operations, Jersey made decisions by committee. Representatives of the different operating companies within the larger firm sat on every committee. There was a committee for every activity that cut across the various operating companies: for transportation, pipelines, production, manufacturing, export trade, domestic trade, and for the purchase of supplies. Over time, the committees made more and more decisions involving greater and greater detail, such as the amount of crude oil to run per day in a specific refinery or the amount of kerosene a branch office or sales subsidiary should sell. Walter Teagle inherited this structure when he became president of Jersey in 1917. As long as business was good, the structure seemed to work. Then a slump in demand in the mid-1920s showed its weakness: Despite all the committees, there was very little coordination. On a trip out west in 1925, Teagle found the oil wells still pumping far beyond storage capacity or demand. The solution Another committee. But this one, the Coordination Committee, was different. Teagle gave it a staff: the Coordination Department. The model was the Export Trade Department, which since 1912 had effectively
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