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The Enterprise Waves – Part 1 of 4

Pioneers and influencers often don’t realise that they are at the cusp of something. It often starts with a need to change something, bring some order, create new order and just do something that makes sense in the given context taking a bold swing away from what tradition dictates.

When Alfred P. Sloan was elected president of General Motors in 1939, little would he have known that he would be called the father of the first wave of organizations. He just strived to do something that made GM profitable and manageable. His system of disciplined, professional management that provided for decentralized operations with coordinated centralized policy control made General Motors the industry leader for the next 23 years. His system of management also unleashed another kind of revolution across all industries, helped quite well by his book “My years with General Motors” which went on to become a Management classic.

His biggest influence was to create a structure for Organizations which helped organizations divide the work load and manage the corporate efficiently. We follow this structure to date, creating functions like Human Resources, Sales, Marketing, Operations, Customer Service, Research, Finance and Admin. This kind of a structure neatly divided people based on their skills and allowed them to do repetitive tasks efficiently and accurately. Sloan called it “Federal decentralization”, which assigned definite accountabilities for each business unit and let them run independently albeit managed through strong financial controls. Every function had a certain performance goal to be achieved.

This model suited the nature of work at that point in time very well. It was the era of machines and assembly lines. Most of the work was labour and manual. Employees worked certain set work hours and they had to physically report to work for their work to be accounted for and paid. Employees generally stayed with the employer they started their careers with and hardly switched jobs or roles.

Thus what the Sloan system established were defined departmental structures based on command-control hierarchy and a strict accounting system. This enabled standardization and manageable growth that allowed GM and other companies to grow into huge industries. Towns and suburbs were born and survived because of such companies. Sloan, the father of modern corporates, left his mark for a pretty long time until disruption came in the form of computers and Jack Welch. We will go into that in the next part of the series.


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