COMPARISON OF TWO LEADERS:

POWER GAINED AND LOST (CP8)

The words in this case are primarily taken directly from the sources in the bibliography.
I make no claim of originality, other than selecting excerpts and weaving them into a
case. It would interfere with the use of the case to clutter it with hundreds of footnotes,
so they were not included. The case is intended to illustrate two contrasting leadership
styles (of Henry Ford and lfred !. "loan, #r.$ and some of their e%ects at pivotal times in
the life of two prominent companies (Ford &otor 'ompany and (eneral &otors$.
ctually, we could speak of three contrasting leadership styles. )hile "loan*s style
seems +uite consistent over his life, Ford operated rather di%erently in the ,-./s and
,-0/s than he did prior to this 1 although core elements of his leadership style are
present throughout both periods. !lease note the +uestions at the end.
Ford to 1920
Henry Ford was born on a farm near Dearborn, Michigan on 30 Juy !8"3, one of eigh# chidren in an
undis#inguished famiy$ He died a# his De#roi# home on % &'ri !()%$ He was educa#ed in #he oca 'ubic schoo,
where he earned ma#hema#ics and aso a i##e reading and wri#ing$ *arey i#era#e when he finished schoo in
!8%(, he was fascina#ed by machinery and de#ermined #o find wor+ as a mechanic$ &# #he age of si,#een he
a''ren#iced a# Fower *ro#hers Machine -ho' in De#roi#, and a#er a# #he De#roi# Drydoc+ Com'any. he aso
#oo+ a 'ar#/#ime 0ob as a wa#ch re'airman$ 1e#urning home in !882, Ford firs# se# u' a sma machine sho' and
a#er #oo+ a 0ob wi#h 3es#inghouse as a dis#ric# engineer$ 4n !888 he married Cara *ryan#. #hey had one son,
5dse *ryan# Ford, in !8(3 / by which #ime he was chief engineer for #he Chicago area wi#h #he 5dison
4umina#ing Com'any$
*y #he !8(0s in6en#ion fe6er was swee'ing #he 7ni#ed -#a#es$ Ford*s sim'e design for a #ransmission
ed #o his de6eo'men# of a wor+ing au#omobie in !8("$ Ford 'rom'#y sod i# #o raise ca'i#a for fur#her
e,'erimen#s, and con#inued #o ma+e and se e,'erimen#a 'ro#o#y'es in #his fashion for some years$
4n !8((, wi#h ca'i#a 'ro6ided by a De#roi# umber deaer, Ford es#abished #he De#roi# &u#omobie
Com'any and resigned from 5dison #o become #he new firm*s su'erin#enden# in charge of 'roduc#ion$ 8his firs#
a##em'# by Ford a# 'roducing mo#or cars on a commercia basis was a #o#a faiure, argey because Ford +new
no#hing abou# 'roduc#ion and managed #o ma+e ony a handfu of cars$ 7nde#erred, Ford and his bac+ers #ried
again, se##ing u' #he Henry Ford Com'any in !(00$ &gain, few cars were ac#uay bui#, bu# one of #hese 'ro6ed
#o be a 6ery successfu racing car$ Ford became suddeny en#husias#ic abou# mo#or racing and negec#ed his
business, and accordingy was fired from #he Henry Ford Com'any in !(02$
His racing car #rium'hs under his be#, Ford seems #o ha6e gone bac+ #o his origina 'an, which was #o
buid chea', efficien# cars #ha# coud be sod widey on an affordabe basis$ 3i#h fresh bac+ing, Ford es#abished
#he Ford Mo#or Com'any in De#roi# in June !(03$ Ford 'ro6ided #he engineering and 'roduc#ion +nowedge, and
was a''oin#ed 6ice/'residen# and genera manager$ 8he new com'any was amos# immedia#ey embroied in a
'a#en# sui# wi#h #he &ssocia#ion of 9icensed &u#omobie Manufac#urers (&9&M), bac+ed by ri6as such as
Pac+ard and :ds Mo#or Com'any, which caimed #o ha6e soe righ#s #o manufac#ure gasoine/'owered
au#omobies$ Ford, who had earier a''ied #o 0oin &9&M and been #urned down, decided #o figh# #he sui#$ He
e6en#uay won his case in !(!!. in #he mean#ime, #y'icay, Ford con#inued on wi#h his own 'ans as #hough #he
'robem did no# e,is#$ Ford wen# ahead wi#h #he de6eo'men# of #he Mode ;, a chea' runabou# #ha# wen# on
sae in !(0" for <"00$
8o cu# cos#s, Ford began a 'oicy of 6er#ica in#egra#ion by #a+ing o6er some of his main su''iers$ Ford
ac=uired #he ser6ices of ye# ano#her #aen#ed manager, 3iiam >nudsen$ 8oge#her, >nudsen, Chares -orenson
and James Cou?ens formed one of #he grea#es# managemen# #eams #he word has ye# seen$ 3i#h Ford, #hey made
#he mass 'roduc#ion of mo#or cars ha''en and 'ro'eed Ford in#o a 'osi#ion of u##er dominance in #he indus#ry,
far ou#s#ri''ing ri6as such as #he fedging @enera Mo#ors$
8ha# dominance was founded on #wo fac#orsA #he Mode 8, aunched in !(08, and #he buiding of #he
assemby ine 'roduc#ion 'an# a# Highand Par+, Michigan, which began 'roduc#ion in !(!0$ Designed by Ford
and 3is, #he Mode 8 firs# wen# on sae for <82B, bu# Ford cons#an#y sough# #o drag #he 'rice down, #rading
!
6oume of saes for uni# 'rofi#s$ *y !(!B #he 'rice was down #o <)00 and in #he mid/!(20s 'rices fe as ow as
<2%B for a new Mode 8$ 3i#h a #wen#y/#wo horse'ower engine and ad6anced chassis and s#eering design, #he
car was #echnoogicay ad6anced when firs# aunched, ye# i#s design was so sim'e #ha# in#erchangeabe 'ar#s
coud be easiy mass 'roduced and #hen assembed$ *e#ween !(08 and !(2%, se6en#een miion Mode 8s were
sod, more #han #he #o#a of a o#her cars sod during #his 'eriod$
8he Highand Par+ 'an# was designed s'ecificay #o 'roduce #he Mode 8 and co6ered si,#y/#wo acres$
4# fea#ured #he arges# assemby ine ye# seen in #he word, and had been carefuy engineered #o increase car
'roduc#ion #o s'eeds beyond any#hing ye# a##em'#ed$ 4ns#ead of #he 're6ious !2/!) hours #o assembe a finished
car, Mode 8s coud now be assembed from s#oc+s of finished 'ar#s in an hour and a haf$ 8he o'ening of
Highand Par+ sen# a shoc+ #hrough #he 7- business word$ Ford won 'audi#s no# ony for his mechanica
engineering, bu# for his a##en#ion #o de#ai and carefuy engineered 'roduc#ion sys#em, which was based in arge
'ar# on #he me#hods of scien#ific managemen# ad6oca#ed by Frederic+ 3$ 8ayor, bu# aso owed much #o earier
mass 'roduc#ion sys#ems such as #ha# de6eo'ed by Cyrus Ha McCormac+$
4n #erms of wor+er rea#ions, #oo, Ford was seen as a 6isionary$ 4n !(!) he cu# #he wor+ing day #o eigh#
hours, beie6ing #his #o be #he o'#imum wor+ing day for wor+er efficiency, and aso ini#ia#ed #he famous <B daiy
wage, neary doube #he going ra#e in #he indus#ry$ 8he increased 6eoci#y of #hrough'u# 'ermi##ed Ford #o
reduce #he 'rice of his 'roduc# un#i i# was haf #ha# of his neares# com'e#i#or, #o 'ay #he highes# wages in #he
coun#ry for non/s+ied wor+, and s#i #o ac=uire a 'ersona for#une #ha# was arger #han #ha# of John D$
1oc+efeer or &ndrew Carnegie$
8he 'eriod !(!0220 was Ford*s heyday$ He was fe#ed as a hero in #he 7ni#ed -#a#es, where his goa of
bringing chea' mo#oring #o #he masses had brough# abou# a #rans'or# re6ou#ion in socie#y, in which e6en cer+s
and manua wor+ers coud afford a car$ :6erseas he became an amos# my#hica figure$
Howe6er, crac+s in his success had aready begun #o a''ear during #he Firs# 3ord 3ar$ Ford was a
con6inced 'acifis#, and in !(!B char#ered a 3Peace -hi'* #o sai #o 5uro'e #o #ry #o reso6e #he war by
nego#ia#ion. he aso a##em'#ed #o hand ou# 'acifis# i#era#ure wi#h each car he sod$ 8his ed #o a brea+ wi#h
James Cou?ens, #he #aen#ed adminis#ra#or and saesman in charge of Ford*s mar+e#ing effor#, who ef# in !(!B
#o #a+e u' a career in 'oi#ics$ >nudsen was #he ne,# #o go, resigning in !(2! o6er Ford*s refusa #o
coun#enance a re'acemen# for #he aging Mode 8. he 0oined Ford*s ri6a @enera Mo#ors, now being ca'aby
run by Pierre du Pon# and &fred -oan, and 'ayed a +ey roe in de6eo'ing #he Che6roe#, #he ow/'riced
com'e#i#or #ha# u#ima#ey dro6e #he Mode 8 ou# of #he mar+e#$ -orenson and 5dse Ford, who had succeeded
Cou?ens, were unabe #o ma+e much headway agains# Ford*s growing au#ocracy$
4n !(2!, Ford s#i concen#ra#ed whoy on #he ow/'rice mar+e# and com'e#ey domina#ed i#$ Ford
accoun#ed for B"C of #he 'assenger cars 'roduced in #he 7ni#ed -#a#es. @enera Mo#ors, wi#h ony !2C of #he
mar+e#, was Ford
D
s ma0or com'e#i#or$
Sloan to 1920
&fred P$ -oan, Jr$, ong/#ime 'residen# and chairman of @enera Mo#ors, was born May 23, !8%B in ;ew
Ha6en, Connec#icu# in#o an undis#inguished famiy$ He s#udied eec#rica engineering and gradua#ed from #he
Massachuse##s 4ns#i#u#e of 8echnoogy in !8(2$ He became 'residen# of a machine sho' ma+ing ba bearings in
!8(($ 4n !(!" and !(!8, #he #wo com'anies in which he was a 'rinci'a were ac=uired by @enera Mo#ors
Cor'ora#ion (@M)$ He became Eice/Presiden#, #hen Presiden# (!(23), and finay Chairman of #he *oard (!(3%),
when he rein=uished #he 'residency, remaining as Chairman un#i !(B"$ He wro#e a biogra'hy, My Years at
General Motors, and died in !(""$
@enera Mo#ors was formed in !(08 by 3iiam C$ Duran#, #he crea#or of #he *uic+ Mo#or Com'any
(which in #ha# year was #he arges# 'roducer of cars in #he coun#ry), @enera Mo#ors was #he indus#ryDs firs#
successfu merger$ For Duran#, #he 'ur'ose of merger was #o consoida#e facii#ies in order #o achie6e grea#er
ou#'u#$ His o6ery o'#imis#ic a##i#ude and his faiure #o in#egra#e his 'ro'er#ies ra#ionay, crea#e a cor'ora#e
office, and de6eo' cor'ora#e ca'abii#ies brough# @enera Mo#ors in#o financia difficu#ies as soon as demand
fe off, as i# did firs# in !(!0$ 4n #ha# year @M had #o ob#ain more financing$ @M recei6ed significan# addi#iona
financing again in !(!% and in !(20, bo#h #imes from #he Du Pon# Com'any$
4n #he boom #imes immedia#ey foowing #he &rmis#ice of ;o6ember !(!8, #he o'era#ing di6isions
=uic+y e,'anded 'roduc#ion and s#oc+ed =uan#i#ies of in6en#ory, in order #o ha6e #he su''ies #o mee# wha# #hey
2
e,'ec#ed #o be an e6er/increasing demand$ 8his was why, when #he au#omobie mar+e# coa'sed in -e'#ember of
!(20, #he com'any had such a cos#y wri#e/down of in6en#ory 6aues and why i# came so cose #o ban+ru'#cy$
@M had #o wri#e off <!00 miion in osses, and Duran# was 'ersonay in deb# #o his bro+ers for neary <)0
miion$
&f#er #his #hird financia crisis, and wi#h Ford en0oying a mar+e# share neary fi6e #imes #ha# of @M,
Pierre -$ du Pon# was a''oin#ed #o #a+e Duran#Ds 'ace as 'residen# in December !(20$ Pierre and his newy
found 'ro#ege, &fred P$ -oan, Jr$, began #o reorgani?e Duran#Ds hodge'odge of o'era#ing uni#s in#o a carefuy
coordina#ed mu#i/di6isiona en#er'rise consis#ing of au#onomous di6isions #ha# made cars, #ruc+s, o#her
commercia 6ehices, and 'ar#s and accessories, each wi#h i#s own 'roduc#ion and dis#ribu#ion organi?a#ion$
Ford=s Leaders!" St#le
He was a briian# engineer, one who was 'robaby a# his ha''ies# when designing$ 8o #he end of his days, Ford
'ossessed an amos# in#ui#i6e unders#anding of 'roduc#ion engineering and 'rocess fows$ 8ha# Ford himsef
ga6e much #hough# #o bo#h wha# he was doing and his 'ur'ose in doing i# is cear from his wri#ings$ 8he
foowing is in#eres#ing on a number of e6esA
8hrough a #he years #ha# 4 ha6e been in business 4 ha6e ne6er ye# found our business bad as a resu# of
any ou#side force$ 4# has aways been due #o some defec# in our own com'any, and whene6er we oca#ed
and re'aired #ha# defec# our business became good again 2 regardess of wha# anyone ese migh# be
doing$ &nd i# wi aways be found #ha# #his coun#ry has na#ionay bad business when business men are
drif#ing, and #ha# business is good when men #a+e hod of #heir own affairs, 'u# eadershi' in#o #hem, and
'ush forward in s'i#e of obs#aces$ :ny disas#er can resu# when #he fundamen#a 'rinci'es of business
are disregarded and wha# oo+s i+e #he easies# way is #a+en$ 8hese fundamen#as, as 4 see #hem, areA
(!) 8o ma+e an e6er/increasingy arge =uan#i#y of goods of #he bes# 'ossibe =uai#y, #o ma+e #hem in
#he bes# and mos# economica fashion, and #o force #hem ou# on#o #he mar+e#$
(2) 8o s#ri6e aways for higher =uai#y and ower 'rices as we as ower cos#s$
(3) 8o raise wages graduay bu# con#inuousy 2 and ne6er #o cu# #hem$
()) 8o ge# #he goods #o #he consumer in #he mos# economica manner so #ha# #he benefi#s of ow/cos#
'roduc#ion may reach him$
8hese fundamen#as are a summed u' in #he singe word 3ser6ice* $$$ 8he ser6ice s#ar#s wi#h
disco6ering wha# 'eo'e need and #hen su''ying #ha# need according #o #he 'rinci'es #ha# ha6e 0us#
been gi6en$ (Ford and Crow#her, !(3!, '$223)$
&s a s#a#emen# of 'hioso'hy, #his shows bo#h #he s#reng#hs and wea+nesses of Henry Ford*s a''roach #o
managemen#$ :n #he one hand #here is #he a##en#ion #o =uai#y, #o #he 'roduc# and, des'i#e his cri#ics, #o #he needs
of #he mar+e#$ :n #he o#her hand, #here is #he ignoring of com'e#i#ion and #he cen#ering of res'onsibii#y on #he
manager himsef$ Here is a 'or#rai# of #he e,ecu#i6e as su'erman, ca'abe of so6ing a 'robems #hrough
au#hori#y and con#ro$ 4# is a 'hioso'hy which, i+e #he man himsef, is fu of con#rary as'ec#s and is no#
ca'abe of being sus#ained for ong$
Cer#ainy by #he #ime #hese words were wri##en (!(3!), Ford had abandoned arge 'ar#s of #his
'hioso'hy in 'rac#ice$ He became increasingy au#ocra#ic in manner, dri6ing away mos# members of his briian#
managemen# #eam and osing access #o #he #aen# 'oo #ha# had made #he eary com'any successfu$ His buying
and humiia#ion of his son scandai?ed a around him. #he normay oya -orenson was highy cri#ica of Ford
on #his 'oin# and caed Ford*s handing of his son his grea#es# faiure$ His 'aranoia and sus'icion of a around
him changed his rea#ionshi' wi#h his wor+ force from one of ha''y coo'era#ion #o one of fear$ 8here are #wo
faces #o Fordism, 0us# as #here were #wo faces #o Ford himsef$ -orenson commen#ed #ha# Ford feared and
shunned os#en#a#ion, and ne6er seemed a# home in #he u,urious mansion he had bui# for himsef a# Fair 9ane,
ye# #ha# 'arado,icay he cra6ed #he imeigh# and did a he coud #o s#imua#e #he grow#h of #he Ford my#h$ *y
!(20, if no# earier, he had begun #o beie6e his own my#hoogi?ing$ 9i+e ;a'oeon, he wen# on #oo ong$
Sloan=s Leaders!" St#le
3
-oan, dis#urbed by #he serious 'robems a# @M, had wri##en in !(!( a 'an #o reorgani?e and re6i#ai?e
@enera Mo#ors$ 4# was no# acce'#ed by Duran#$ Howe6er, wi#hin days af#er Pierre du Pon# became 'residen# of
@M in !(20 (he aready was Chairman), he re6iewed and a''ro6ed #he 'an, amos# wi#hou# change$ 8he
o'ening sen#ence of -oanDs s#udy saidA F8he ob0ec# of #his s#udy is #o sugges# an organi?a#ion for @enera
Mo#ors Cor'ora#ion which wi defini#ey 'ace #he ine of au#hori#y #hroughou# i#s e,#ensi6e o'era#ions as we
as #o coordina#e each branch of i#s ser6ice, a# #he same #ime des#roying none of #he effec#i6eness wi#h which i#s
wor+ has here#ofore been conduc#ed$F 8he s#ruc#ure woud #hen be based on F#wo 'rinci'esFA
!$ 8he res'onsibii#y a##ached #o #he chief e,ecu#i6e of each o'era#ion sha in no way be imi#ed$ 5ach
such organi?a#ion headed by i#s chief e,ecu#i6e sha be com'e#e in e6ery necessary func#ion and
enabed #o e,ercise i#s fu ini#ia#i6e and ogica de6eo'men#$
2$ Cer#ain cen#ra organi?a#ion func#ions are absou#ey essen#ia #o #he ogica de6eo'men# and 'ro'er
con#ro of #he Cor'ora#ionDs ac#i6i#ies$
-oan 'ro'osed #o achie6e #hese aims by re'acing 'ersona con#ros wi#h ins#i#u#iona ones$ He did #his firs# by
e,'ici#y defining F#he func#ions of #he 6arious di6isions cons#i#u#ing #he cor'ora#ionDs ac#i6i#ies, no# ony in
rea#ion wi#h one ano#her, bu# in rea#ion #o #he cen#ra organi?a#ion,F so #ha# Fi# wi 'erform i#s necessary and
ogica 'ace$F He #hen assigned each of #he many di6isions in#o one of four Fgrou'sF'Car, &ccessories, Par#s,
Misceaneous$ 8he firs# incuded #he di6isions #ha# manufac#ured and sod Fcom'e#e mo#or cars''urchasing
'ar# of #heir com'onen# 'ar#s from ou#side sources, 'ar# from #he di6isions of #he Cor'ora#ion, and
manufac#uring 'ar# wi#h #heir own facii#ies$F
From one 'ers'ec#i6e'one migh# ca i# a Ford 'ers'ec#i6e'a man i+e -oan has an easy 0ob$ He has
au#hori#y$ He 'resides o6er a board of direc#ors and 're6ais in mos# ins#ances$ 7nder indi6iduas such as
Duran#, such a se#u' coud easiy become au#ocra#ic$ &nd indeed, one of #he firs# ac#ions #ha# -oan #oo+
foowing his ascendancy #o #he 'residency was #o increase grea#y #he 'ower of #he chief o'era#ing officer of #he
cor'ora#ion$
Ge# -oan concei6ed of his 'osi#ion in a 6ery differen#'and, 'erha's, more modern'way$ 4n his 6iew,
browbea#ing was no# a desirabe mode of o'era#ion$ &s he a#er recaedA F4 ne6er minimi?ed #he adminis#ra#i6e
'ower of #he chief e,ecu#i6e officer in 'rinci'e when 4 occu'ied #ha# 'osi#ion$ 4 sim'y e,ercised #ha# 'ower
wi#h discre#ion. 4 go# be##er resu#s by seing my ideas #han by #eing 'eo'e wha# #o do$F -oan hired #he mos#
com'e#en# senior grou' he coud assembe, 'aced #hem in res'onsibe 'osi#ions, #rea#ed #hem fairy and 'aid
#hem we, and organi?ed #hem in#o commi##ees where #hey discussed issues and o'#ions in de'#h and a##em'#ed
#o reach agreemen#$ F:ur managemen# 'oicy decisions are arri6ed a# by discussion in #he go6erning commi##ees
and 'oicy grou's,F -oan no#ed$ 8hus, @M o'era#ed argey #hrough adminis#ra#ion by commi##ee and decision
by consensus$
:f course, no#hing can more readiy cri''e an organi?a#ion #han a reiance on coun#ess desu#ory,
nondecisi6e commi##ees #ha# mee# endessy$ 4ndeed, in #he eary !(20s Henry Ford 6iciousy ridicued @MDs
mode of o'era#ionA F8he Ford fac#ories and en#er'rises ha6e no organi?a#ion, no s'ecific du#ies a##aching #o any
'osi#ion, no ine of succession or of au#hori#y, 6ery few #i#es, and no conferences$F -oan a6oided such
'araysis, cons#i#u#ing #he commi##eesD goas and membershi' carefuy, gi6ing #hem s'ecific assignmen#s,
moni#oring #heir 'rogress, and, a# a cer#ain momen#, guiding #hem #oward decisions$ FMuch of my ife in @M,F
he no#ed, Fwas de6o#ed #o #he de6eo'men#, organi?a#ion, and 'eriodic reorgani?a#ion of #hese go6erning grou's$F
4n a manner reminiscen# of Margare# MeadDs a''roach #o #he s#udy of con#em'orary cu#ures, commi##ees a# @M
in#en#ionay were s#affed wi#h indi6iduas from differen# di6isions and s'heres'baancing #he saes managerDs
en#husiasm wi#h #he s#a#is#icianDs ob0ec#i6i#y'so #ha# #hese coeagues coud educa#e one ano#her and come #o
unders#and #heir 'robems, 'ers'ec#i6es, and indi6idua and coec#i6e o''or#uni#ies$ -oan moni#ored #hese
'rocedures carefuy, in#er6ening when necessary$ He s'o+e of#en of #he cen#ra enigmaA FHow coud we e,ercise
'ermanen# con#ro o6er #he whoe cor'ora#ion in a way consis#en# wi#h #he decen#rai?ed scheme of organi?a#ionH
3e ne6er ceased #o a##ac+ #his 'arado,$F
9eadershi' has crucia and indis'ensabe human dimensions$ -oan may ha6e been a 'ioneer
of''erha's e6en a genius in'#he crea#ion of organi?a#iona char#s, bu# #ha# Fdomain e,'er#iseF was no# #he
'rinci'a com'onen# in his success$ -oan embodied #he 6ir#ues #ha# he sough# in his associa#es$ & #ireess
wor+er, he was in6ariaby on #o' of a of #he a6aiabe informa#ion$ He caed for s#udies of +ey issues, mas#ered
#heir da#a and de#ais, and used #heir concusions e,'ici#y in ma+ing decisions$ His 'ar#ici'a#ion in grou's
modeed #he +inds of considera#ions #ha# he deemed im'or#an# and #he mode of con6erging on a decision #ha# he
)
fa6ored$ For years, he wro#e @MDs annua re'or# himsef$
He aso de6o#ed #ime #o ge##ing #o +now his associa#es'no# ony #he chief e,ecu#i6es bu# aso ess highy
'aced indi6iduas from o#her s'heres of #he com'any$ He in6i#ed #hem in #o #a+, he wro#e and res'onded #o
coun#ess memos, and he 6isi#ed #hem a# #heir wor+ si#esA
4 made i# a 'rac#ice #hroughou# #he !(20s and eary #hir#ies #o ma+e 'ersona 6isi#s #o deaers$ 4 fi##ed u'
a 'ri6a#e rairoad car as an office and in #he com'any of se6era associa#es wen# in#o amos# e6ery ci#y
in #he 7ni#ed -#a#es, 6isi#ing from fi6e #o #en deaers a day$ 4 woud mee# #hem in #heir own 'aces of
business and as+ #hem for sugges#ions and cri#icisms concerning #heir rea#ion wi#h #he cor'ora#ion, #he
charac#er of #he 'roduc#, #he cor'ora#ionDs 'oicies, #he #rend of consumer demand, #heir 6iew of #he
fu#ure, and many o#her #hings of in#eres# in #he business$ 4 made carefu no#es of a #he 'oin#s #ha# came
u', and when 4 go# bac+ home 4 s#udied #hem$
-oan aso coud #a+e a s#rong 'osi#ion and main#ain i# e6en in con#en#ion wi#h 'owerfu indi6iduas$
For e,am'e, when Pierre du Pon# une,'ec#edy resigned as Chairman of @M in #he summer of !(28, #he na#ure
of #his de'ar#ure re6eas much abou# #he men in6o6ed$ For Pierre #he 6en#ure a# @M had aways been a
'ar#nershi' wi#h John 1as+ob (#hey had been cose associa#es and friends since !(00, before being a# du Pon#
and @M)$ 3hen 1as+ob, who i+ed #he 'ubic imeigh#, made a mo6e in#o 'oi#ics in !(28, -oan insis#ed #ha#
such ac#i6i#ies re=uired 1as+ob #o re#ire from #he chairmanshi' of #he Finance Commi##ee$ -oan dee'y
regre##ed ha6ing #o #a+e #he s#rong s#and on 1as+ob*s resigna#ion, bu# he did so, e6en when Pierre #hrea#ened #o
resign if 1as+ob ef#$ -oan main#ained his 'osi#ion and bo#h Pierre and 1as+ob ef#$ Gears a#er, he recaed i#
as #he ony rea confic# he had e6er had wi#h Pierre or #he du Pon# famiy$ -oan was #he ony member of #he
board, e,ce'# 'ossiby Fred Fisher, who coud s#and u' #o Pierre$ 4n fac#, he was #he ony 'erson in Pierre*s
ong business career who o''osed him on ma0or issues and won$
-oan shoud be seen in #wo con#e,#s$ :n #he one hand, he was an e,'er# in a domain'#he domain of
organi?ing and #hen direc#ing a com'e, indus#ria organi?a#ion, 'erha's #he mos# com'e, business #he word
had +nown #o #ha# #ime$ His e,'er#ise here grew ou# of his forma uni6ersi#y #raining, on #he one hand, and his
e,'eriences a# Hya##, 7ni#ed Mo#ors, and #he @M Cor'ora#ion, on #he o#her$ 4n carrying ou# #his 'ar# of his
wor+, -oan was func#ioning as an e,'er#A i# was crucia ony #ha# o#her members of #he domain coud a''recia#e
and a''rehend his message'his Fs#ory$
F
4n #his 6arie#y of indirec# eadershi', i# did no# ma##er wha# -oan was
i+e as an indi6idua'he coud ha6e e,ercised his infuence com'e#ey behind #he scenes$
&s @MDs 'residen#, -oan was aso a direc# eader of his ins#i#u#ion$ From #his 'a#form, -oan con6eyed
a defini#e iden#i#y s#ory #o #he #housands of em'oyees$ Par# of #he s#ory was a genera oneA 56ery @M em'oyee
is 'ar# of #he mos# im'or#an# and dynamic business in &merica, 'erha's in #he word$ *u# 'ar# of #he s#ory was a
s'ecific oneA @M is no# 0us# ano#her com'any. wor+ers and managers ai+e are members of #he word
D
s mos#
'rogressi6e and mos# 'owerfu organi?a#ion$ 8he com'any in6i#ed 'ar#ici'a#ion by a of i#s members, no ma##er
how humbe #heir 'osi#ion, so #ha# #hey coud ensure #he con#inued une=uaed =uai#y of #heir 'roduc#$ @M was a
famiy, wi#h -oan as #he benign 'a#riarch$ He embodied i#s 6ir#ues in his uns#in#ing wor+ for #he com'any, and
he e,'ec#ed his cor'ora#e offs'ring #o do #he same$
A$ter 1920
*y !(20, #he 'ace of inno6a#ion a# Ford was sowing$ Con6inced #ha# his origina reci'e for success was #he
correc# one, Ford faied #o see #ha# #imes had mo6ed on. indeed, he himsef had been res'onsibe for much of #he
change$ 8he no6e#y of car #ra6e was wearing off. now 'eo'e wan#ed more fea#ures from #heir cars and, indeed,
were de6eo'ing differen# se#s of needs and mo#i6a#ions for buying cars$ @M was wiing #o ca#er #o #hese
differen# needs. Ford was no#$ His famous remar+, a cus#omer can ha6e a car of any coor he wan#s, so ong as
i# is bac+,4 may be a'ocry'ha bu# is indica#i6e of a mindse#$ 3hen Che6roe# began cu##ing in#o Ford*s
mar+e#, Ford*s ony me#hod of figh#ing bac+ was #o cu# 'rices s#i fur#her, which mean# #ha# Charie -orenson,
now in soe charge of 'roduc#ion, had #o find new ways of cu##ing cos#s$ 8he a#mos'here in Ford fac#ories
changed, #oo$ 3ages were cu# by neary haf. wor+er educa#ion and many o#her benefi#s were done away wi#h.
Ford*s famous socioogica de'ar#men# which had s#udied wor+er mo#i6a#ion was cosed down. s#ric# disci'ine
was enforced which 're6en#ed wor+ers from whis#ing or e6en #a+ing during shif#s$
4n #he mean#ime Henry Ford was dissi'a#ing his firs#/mo6er ad6an#ages by des#roying #he ca'abii#ies of
B
his manageria hierarchy$ &f#er !(!(, when he bough# ou# his 'ar#ners, #he Dodge bro#hers, he began #o fire his
mos# com'e#en# managers$ *o#h his 'roduc#ion chief, 3iiam >nudsen, and his saes head, ;or6a Haw+ins,
immedia#ey #oo+ o6er #he same 'os#s a# @enera Mo#ors and were im'or#an# con#ribu#ors #o @M*s grow#h$ 4n
#he recession of !(2!, Ford demorai?ed his deaers by forcing cars on #hem af#er a #em'orary coa'se in
demand$ From !(2! on, Ford a##em'#ed #o adminis#er his em'ire 'ersonay$
8he resu# was disas#rous$ He con#inued #o ma+e and 'roduce much #he same car in much #he same
manner$ *y !(2B, Ford
D
s share of #he #o#a number of 'assenger 6ehices sod had dro''ed #o )0C, and #ha# of
@enera Mo#ors had risen #o 20C$ 4n !(2% Ford finay re'aced #he Mode 8 wi#h #he Mode &, a change #ha#
#oo+ a year #o carry ou#$ *y !(2( Ford
D
s share had faen far#her #o 3!C, and #ha# of @enera Mo#ors had risen
#o 32C$ 8he Chryser Cor'ora#ion had 8C and was #he main chaenge #o #he *ig/8wo$
4n #he mid/!(20s, Ford a##em'#ed #o di6ersify for #he firs# #ime, incuding unsuccessfu 6en#ures in#o
#rac#ors and air'anes$ 8he 'robems were of dis#ribu#ion, no# design$ For e,am'e, Henry Ford insis#ed #ha# his
#rac#ors be sod #hrough his e,is#ing au#omobie deaer ne#wor+$ 8hese deaers were unabe #o 'ro6ide ei#her
effec#i6e af#er/saes main#enance and re'air or consumer credi#$ 8hey did no# ha6e #he in#ima#e +nowedge of #he
farmer
D
s s'eciai?ed needs and were no# abe #o 'ro6ide informa#ion concerning cus#omer needs #o #he com'any
D
s
design and 'roduc#ion de'ar#men#s$
8he de'ression years of #he !(30s brough# ano#her #ransforma#ion in #he indus#ry$ 8he shar' dro' in
demand se6erey hur# #he smaer, medium/'rice 'roducers. for, as 6oume dro''ed, uni# cos#s rose and 'rofi#s
disa''eared$ 4n #he !(30s ony #wo of #he #hree 'roducers of ow/'riced cars, @enera Mo#ors and Chryser, had
been abe #o main#ain a #hrough'u# arge enough #o remain 'rofi#abe$ FordDs dro' in mar+e# share and 'rofi#s
was s#ri+ing$ *y !()0 i#s mar+e# share had faen #o !(C, we beow Chryser*s 2)C and far beow @enera
Mo#ors* )8C$ 4n #he decade from !(2% #o !(3%, Ford had a ne# oss of <!B$( miion and a reduc#ion in #he
sur'us baance of ano#her <8B$" miion$ 4n #ha# same decade @enera Mo#orsD ne# 'rofi#s af#er #a,es were 0us#
under <2 biion$ 8his difference of more #han <2 biion in af#er/#a, 'rofi#s em'hasi?es #he 6aue of s#rong
managemen# and carefuy #hough#/ou# adminis#ra#i6e 'rocedures in com'e#ing for mar+e# share and 'rofi#s$ For
in #hese years Henry Ford, assis#ed by his son and a #iny handfu of e,ecu#i6es, con#inued #o manage 'ersonay
his huge indus#ria em'ire$
8he !(30s saw con#inued decine in#erna #o Ford$ 5dse Ford, buied by his fa#her and increasingy i,
had os# a infuence$ 56en -orenson coud do i##e #o reason wi#h #he od man$ Ford*s new confidan#e was
Harry *enne##, a former 'ri?e/figh#er who was connec#ed #o #he Mafia in Chicago, and who now ran #he Ford
-er6ice De'ar#men#, a grou' of informers and #hugs who enforced disci'ine among #he wor+ force wi#h an iron
hand$ 8he wor+ers, #ired beyond any reasonabe imi#s of oya#y, finay rebeed and #ried #o unioni?e. when
*enne##*s men bea# u' se6era union organi?ers, #he wor+ers s#ruc+ in !()! and com'eed recogni#ion of #he
7ni#ed &u#o 3or+ers$ Ford suffered a s#ro+e in !(38, and from #hen on was bo#h 'hysicay and men#ay i,
'aranoid and, in #he words of #he normay oya -orenson, suffering from haucina#ions$ Harry *enne## was
now 6ir#uay in con#ro of bo#h #he com'any and Ford himsef$
5dse Ford*s dea#h in !()3 brough# abou# a crisis, as Ford insis#ed on resuming #he 'residency of #he
firm$ Cara Ford and her widowed daugh#er/in/aw now s#aged a rebeion of #heir own, #hrea#ening #o se #heir
shares #o ou#siders uness #he oc#ogenarian eader s#ood down$ He finay ga6e way. in#er6en#ion a# #he #o' e6es
of go6ernmen# secured #he reease of 5dse*s son, Henry Ford 44, from mii#ary ser6ice and he re#urned home #o
#a+e u' #he 'residency$ Des'i#e no managemen# #raining or bac+ground wha#e6er, Ford 'ro6ed ade'# a# his 0ob,
and in #he immedia#e 'os#war years assembed a #eam which incuded fu#ure senior Ford e,ecu#i6es 5rnes# 1$
*reech, 9ee 4acocca and 1ober# Mc;amara, and began #urning #he beeaguered com'any around$
-oan, who had rein=uished #he @M 'residency #o become Chairman of #he *oard in !(3%, remained a
6ery ac#i6e Chairman un#i !(B"$ -oan was aso a 'ubic figure, a direc# eader for miions of &mericans
in6o6ed in #he word of commerce$ He was no# ony #he 6isibe e,ecu#i6e of @M, a 'ubic cor'ora#ion wi#h
hundreds of #housands of em'oyees and o6er one miion s#oc+hoders. he was aso a 'aragon of &merican
indus#ry, oo+ed #o during cri#ica #imes (such as #he -econd 3ord 3ar), a''auded by many of his feow
indus#riais#s, bu# aso sub0ec#ed #o cri#icism from o#her business'eo'e, wri#ers, 'oi#ica figures, and segmen#s
of #he genera 'ubic$ His successor, Charie 3ison, is of#en mis=uo#ed as saying, F3ha# is good for @enera
Mo#ors is good for #he coun#ry4 (he ac#uay said 3ha# is good for #he coun#ry is good for @enera
Mo#ors$4)$ &nd whie -oan migh# ha6e a6oided such grandio=uen# wording, he was aware (and 'roud) of #he
uni=ue 'ace #ha# FhisF cor'ora#ion had come #o assume in &merican ife$
"
%!&l!o'ra"#
*uringhame, 1$ (!()()$ Backgrounds of power: The human story of mass production$ ;ew Gor+A Chares
-cribner*s -ons$
Chander, &fred D$, Jr$ (!(%%)$ The visible hand: The managerial revolution in American business$
Cambridge, M&A Har6ard 7ni6ersi#y Press$
Chander, &fred D$, Jr$ (!((0)$ Scale and scope: The dynamics of industrial capitalism$ Cambridge, M&A
Har6ard 7ni6ersi#y Press$
Chander, &fred D$, Jr$ I -asbury, -#e'hen (!(%!)$ ierre S! "u ont and the making of the modern
corporation$ ;ew Gor+A Har'er I 1ow$
Farber, Da6id (2002)$ An interview with "avid #arber $ct! %&&% (au#hor of -oan 1uesA &fred P$ -oan and
#he 8rium'h of @enera Mo#ors)$ Downoaded !J08J0" from
h##'AJJwww$'ress$uchicago$eduJMiscJChicagoJ2380)0in$h#m
Ford, H$ (!(2()$ My philosophy of industry$ 9ondonA Harra'$
Ford, H$ and Crow#her, -$ (!(22)$ My life and work$ ;ew Gor+A Doubeday$
Ford, H$ and Crow#her, -$ (!(2")$ Today and tomorrow$ ;ew Gor+A @arden Ci#y$
Ford, H$ and Crow#her, -$ (!(30)$ My friend Mr! 'dison$ 9ondonA 5rnes# *enn$
Ford, H$ and Crow#her, -$ (!(3!)$ Moving forward$ ;ew Gor+A @arden Ci#y$
@ardner, Howard (!((B)$ (eading minds: An anatomy of leadership$ ;GA *asic *oo+s$
McCraw, 8homas >$ (ed) (!(88)$ The essential Alfred )handler: 'ssays toward a historical theory of big
business$ *os#onA Har6ard *usiness -choo Press$
;e6ins, &$;$ and Hi, F$5$ (!(B)) #ord: The times* the man* the company$ ;ew Gor+A Chares -cribner*s
-ons$
;e6ins, &$;$ and Hi, F$5$ !(B%)$ #ord: '+pansion and challenge* ,-,.B,-//$ ;ew Gor+A Chares
-cribner*s -ons$
;e6ins, &$;$ and Hi, F$5$ (!("2)$ #ord: "ecline and rebirth$ ;ew Gor+A Chares -cribner*s -ons$
-orenson, C$ and 3iiamson, -$8$ (!(B%)$ #orty years with #ord$ 9ondonA Jona#han Ca'e$
-ward, >$ (!()8)$ The legend of 0enry #ord$ ;ew Gor+A 1inehar#$
Questions
,. )hat are the ma5or strengths and weaknesses of Ford and "loan as leaders6
For Ford, do this both pre1,-./ and post1,-./.
.. )hat similarities and di%erences are there in their leadership styles6
%
0. )hat were the ma5or factors leading to the declines in performance and
power of Ford &otor 'ompany and Henry Ford6
7. )hat learnings can you take away from this case that might help in your
personal leadership development plan6
8