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At the University of Michigan Donner got straight A's (save for one B in history), graduated Phi Beta Kappa ('23) in economics. "He had a great skill in writing and an excellent vocabulary," remembers his economics professor, Dr. William Paton, now 73. "From that, I assumed he could think clearly." Accordingly, two years after Donner's graduation, when a G.M. official came to the university looking for "a bright young accountant with an analytical type of mind," Paton recommended his old pupil. Intrigued by the fact that the G.M. job involved "dealing with projections and forecasting rather than what had happened in the past," Donner resigned his job with a Chicago accounting firm and moved into the auto industry.
Taming the Giant. When Donner arrived at G.M. in 1926, the company was just recovering from the boisterous days of Founder William Crapo Durant. A daring speculator and master promoter, Durant started assembling G.M. in 1908, within a year had stitched together the Olds Motor Vehicle Co., Cadillac, Buick and Oakland (later Pontiac). Instead of stopping there, he went right on buying up more and more dissimilar companies without a thought for coordinating their management. In 1920, when Durant led G.M. to the edge of bankruptcy for the second time, alarmed stockholders, led by Pierre S. du Pont, ousted him from control of the company. Three years later, direction of G.M. was turned over to the man who more than anyone else has shaped the company—Alfred P. Sloan Jr., now 87. As president and later chairman, Sloan ran General Motors for nearly 30 years. And at the very beginning of his regime he established "the System"—the managerial philosophy and practices that have guided the company ever since.
Sloan's seemingly self-contradictory goal was to achieve for G.M. the flexibility and the initiative that are characteristic of small, aggressive companies plus the economies and careful planning possible only in a big and highly centralized organization. His solution was to divide G.M. into a maze of manufacturing divisions and operating groups, each enjoying semiautonomy in day-to-day operations and purely internal decisions. Then, to formulate overall policy, provide central services and balance the competing aspirations of the divisions, Sloan put over them a central staff divorced from responsibility for day-to-day production.
The Response Mechanism. To make Sloan's complex organization function coherently, G.M. has come to depend above all on committees and informal "policy groups" linking the long arms of the corporation. They talk things out face to face rather than write memos. No major corporate decision can be taken without the concurrence of committees at division, group and staff level. This acts as an automatic check on would-be autocrats. Says a Chrysler executive: "One man or even a clique of men cannot effect drastic changes in the General Motors setup. Basically, the G.M. hierarchy can be described as a group of hot shots surrounded by reports that restrain them."