Strategy and Structure: Chapters in the History of the American Industrial Enterprise [ペーパーバック]

Chandler tells us that during the Civil War era most American enterprises were managed by a superintendent, almost along the lines of an agrarian model, like a mechanized plantation. But with the coming of Ford Motor, Standard Oil, General Motors, DuPont, Sears, and other familiar names in America's business pantheon, the larger organizations could no longer rely on the superintendent, or owner - even if aided by able men - to operate on such a large scale, let alone build industrial empires.

What I think is key in Chandler's analysis is that, like a Möbius loop, the strategy drives the structure while the structure drives the strategy of an organization. The layering of management and the span of control become crucial and delegating the day-to-day details of entire management functions becomes inevitable. The various senior managements created autonomous divisions. That was one thing. Yet having the divisions mesh smoothly in a gear-work structure, that was another, and one that these organization-builders solved as their corporations rose to industry leadership. And Chandler shows that it was not an overnight thing and how management wrestled with the intricacies of making it all work.

The book really has three basic parts. The first part, the introduction, gives us the landscape before the rise of the modern corporation. In the second part, Chandler presents four well written examples of how business leaders struggled with putting corporate structures together at DuPont, General Motors, Standard Oil, and Sears Roebuck - certainly four different industries that had somewhat overlapping and somewhat different products, channels of distribution, and hence, somewhat different, yet somewhat similar problems. Some authors would be very dry, but Chandler makes this at least as interesting as any article targeted toward the reader of "Fortune," "Business Week," or "The Wall Street Journal." He makes the characters come alive and the problems become real and immediate. His third part, one which only now as a more senior manager I have come to grasp more fully, is why these organizations became what they were. It had to do with the personalities of the leaders and certain common traits they demonstrated.

Chandler copyrighted "Strategy and Structure" in 1962 and that might turn some readers off, believing that his facts and issues are out of step and out of date. Yet, Sun Tzu's "The Art Of War," written in 500 BC, is read by modern managers because certain lessons transcend their times. The word "strategy" comes from the Greek, "strategos," "the art of generals." On the one hand there is the span of control. An army of five million soldiers can be managed by eight levels of management with no "manager" managing more than seven individuals below him or her. That is, at each level an "officer" supervises seven who in turn each supervise seven, and so on down the line. Layering of management, the modern bugaboo of many business leaders, is not the issue. Chandler points the reader to the issue of finding seasoned leaders who bring wisdom and experience to each level of the organization. He goes into some depth about the distinctive characteristics that those leaders demonstrated. Likewise, he acknowledges that corporate folklore make a definitive analysis thorny as it is difficult to parse the men from the enterprise itself.

In chapter six Chandler delves into the character of the business leaders who shaped these corporations. In large part they were engineers - even Houser at Sears had a degree in electrical engineering. Many had graduated from MIT or other acknowledged technology institutes and seem to have applied an engineer's, or scientist's, systematic approach to problems by creating systematized organizational structures. "Management through chaos" would not have been their style.

Some had military experience and at least one was a West Point graduate and, like the military, the corporate leaders understood how to combine different elements much as a general might understand how to use armor and infantry in combination with air support - all very different elements with their own uniqueness, but which achieve a specific result when placed in the hands of able subordinates. Chandler suggests there was an espirit de corps, a shared system of values that the organization imparted even to its non-technically trained managers that the non-technical managers readily adopted.

Finally, in chapter seven, Chandler takes the basics of his premises and with a broad brush looks at scores of other firms that adapted similar centralized structures in the wake of the industry leaders - DuPont, GM, Standard Oil, and Sears.

Today's manager deals in an increasingly far-flung supply chain and the seemingly "virtual" corporation. What makes this book relevant are the strategy and structure issues that are mirrored in those of 1962, or 1902. Regardless of who owns the assets, the problems of organizational structuring and strategy are at least as large, if not larger, than they were a century or more ago.

In my view this is what makes Chandler's book a classic and which I read and reread, each time seeing more deeply and understanding more clearly the organization issues that face modern enterprise.

I highly recommend this book for those who seek to better understand organizational structures.

Chandler summarizes the history of the expansion of the nation's largest industries during the past hundred years. He then examines in depth the modern decentralized corporate structure as it was developed independently by four companies - Dupont, General Motors, Standard Oil, and Sears.

In all fours cases, firms had to deal with their growing business. When firms had a good strategy, they developed the proper organization. Without a good strategy, various reorganizations were required. However, the growing economy solved many of their organization and strategy problems.