Peter Drucker’s The Concept of the Corporation, and Alfred Sloan’s My Years at General Motors are probably the two most influential management texts ever written. The two had nothing in common but acute intelligence and deep interest in business.
Peter Drucker, who died this month, was introduced to Alfred Sloan in 1943. As a result of that meeting, both men wrote books. Drucker’s The Concept of the Corporation, and Sloan’s My Years at General Motors are probably the two most influential management texts ever written.
The two men had nothing in common but acute intelligence and deep interest in business. Sloan was an entrepreneur from Brooklyn whose business had been acquired by Billy Durant, architect of General Motors. The company’s shareholders tired of Durant’s inability to manage the sprawling organisation. The ambitious Sloan was ready with a plan and was soon appointed the company’s president. Under Sloan’s leadership, GM would overtake Ford and become the largest manufacturing company in the world. Sloan had postponed retirement to lead GM’s contribution to America’s war effort. When he met Drucker he was 68 years old, a private and unprepossessing figure dependent on a large hearing aid.
Drucker was half Sloan’s age, the son of a senior civil servant under the Hapsburg empire. The milieu in which he had been raised was one of the most vibrant intellectual communities of history. But by the time Nazi storm troopers marched into Vienna in 1938, most of Austria’s leading intellectuals had fled and Drucker had obtained an appointment at Bennington College, an undergraduate school in Vermont.
The meeting between Drucker and Sloan had been engineered by Donaldson Brown, the company’s chief financial officer. Brown had created the systems that made it possible to run an organisation the size of GM effectively. The contrast between GM’s meticulous processes and the shambles of Ford in the last years of its founder’s life could hardly have been more marked. Brown wanted this story told.
Sloan had no great enthusiasm for the project, but committed to it and gave Drucker what today’s business school professors call access on a scale that modern professors only dream about: GM paid Drucker’s salary and Drucker would accompany Sloan to meetings; they would retire together to discuss what had emerged.
Drucker had proposed a book in order to give focus to his research. Hard though it is to believe today, Drucker, Sloan, GM executives and big publishers all thought there was little market for a book about the inside workings of business. The first edition of The Concept of the Corporation was produced by the little known Transaction Publishers.
The book was a bestseller. But its contents and its thesis were not what Sloan and Brown had envisaged. Both Drucker and GM understood that Sloan and his team had created the practice of modern management. Their organisational structures did not rely, as large businesses before GM had done, on the inspiration of idiosyncratic geniuses or on mimicking military hierarchies. These systems relied on professional managers with the same kinds of skills that were sought from lawyers, doctors or public service: refined intelligence, specific knowledge and commitment to professional rather than personal goals.
But while GM wanted to focus on the implications of these developments for the management of business, Drucker’s primary concern was with the consequences for the organisation of society. The professionally managed corporation was a new type of institution. Sloan and Brown wanted a description of its functioning to bequeath to their successors. Drucker wanted to explore the responsibilities of such an institution, and what rendered its enormous authority legitimate – questions his paymasters did not much wish to raise. GM ignored Drucker’s book.
Both questions – how best to run a large multidivisional corporation? and what is the proper role of business in society? – remain relevant. But never again would GM bring to them the intellectual firepower of Sloan and Drucker. The anti-intellectualism that Sloan’s team feigned would become real. In the 50 years that followed, General Electric, not General Motors, would pioneer the development of new management principles in practice. The results can be seen in the differing status of these corporations today.