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Any Color You Want, So Long As It’s Black

Henry Ford is well known for his influence on the auto industry in particular, but also the way manufacturing is done in general. His assembly lines made it possible to put a “car in every driveway” at an affordable price. He is not the topic of this post, however.

Ford Motor Company’s market share went from a high of 50-60% in the early 1920’s down to 20% by World War II. Meanwhile, GM’s market share jumped from 12% all the way to 50%. It was the leadership of a rival executive (and Ford’s disdain for the management practices this rival instituted) that allowed GM to make such gains. This entry is about that rival executive, Alfred P. Sloan, Jr. (namesake of the MIT Sloan School of Management), and the incredible way he managed complexity while leading GM to incredible heights. (And no, the irony of writing about auto execs as great leaders and GM as a dominant company in particular is not at all lost on me.)

The need to deal with complexity (conceptual complexity, behavioral complexity, and complex systems) increases dramatically as a leaders responsibilities increase. Therefore, the ability to manage complexity is of the utmost importance for executive leaders.

During his time as vice president of GM under Pierre du Pont, Sloan oversaw what was the creation of the first modern corporation. Sloan organized GM into relatively autonomous divisions (they were responsible for their own P&L statements) that reported to a general office comprised of the president, and VP’s of operation, finance, and other important functions. Once du Pont had returned GM to stability (following a time of uncertainty surrounding the departure of the former president William C. Durant), he handed over the reins to Sloan in 1923.

In stark contrast to Ford’s “any customer can have a car painted any colour [sic] that he wants so long as it is black,” approach, Sloan decided on a different strategy through rigorous market research and analysis: “A car for every purse and every purpose.” GM introduced new models each year encouraging people to trade in and trade up, thereby creating a flourishing used car market as well. Sloan’s ability to think broadly, and grapple with data helped create a distinct strategy from Ford, one based on new accounting methods and metrics for success such as ROI that were, to that point, not commonly used.

What Sloan demonstrated is now called conceptual complexity. Conceptual complexity refers to the ability to handle intense information processing demands. For an executive leader, the number of people affected by her decisions is greater and the span of time she must be concerned with is longer than leaders at lower levels. Executive leaders also have a larger information load and more goals which are salient at any given time. These differences are the reason conceptual complexity is so important for executive leaders. Sloan had the ability to lead one of the world’s largest companies and hold large amounts of data in his head. He had conceptual complexity in spades.

Sloan rarely used the power of his position to push his own agenda. He surrounded himself with talented people and wanted to hear what they had to say. He found being a salesman for his ideas got better results than dictating them. Sloan even toured the country visiting dealers to ask them for their input and ways the company could improve. He spoke and maintained correspondence not only with his executive team, but also with those lower on the organization chart.

These actions showed Sloan’s behavioral complexity: the ability to manage multiple organizational roles and different, sometimes competing, demands. Emotional intelligence, popularized by Daniel Goleman, is one of the most broadly known components of behavioral complexity. Emotional intelligence involves control of one’s own emotions, awareness of other peoples’ emotional states, and the ability to manage relationships. Sloan’s ability to work successfully in a team, and deftly manage relationships allowed him to get the most out of his people.

You may doubt Sloan’s approach would work today, especially in light of how the bureaucracy he created contributed to the downfall of GM. I would agree; the solutions he came up with wouldn’t work in today’s environment. It is not the solutions I am interested in, however, but the process and the skills it took for him to find the right solutions for his time. While Alfred P. Sloan Jr. was far from perfect (looking at his Wikipedia page will make this readily apparent), he is a good example of an executive able to successfully manage complexity, and that is what my next few posts will be about.

For more on Sloan check out the seventh chapter of Leading Minds by Howard Gardner and for a great read on complexity, look to The Nature of Executive Leadership by Stephen Zaccaro.


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