Robert F. Freeland, The Struggle for Control of the Modern Corporation: Organizational Change at General Motors, 1924-1970. Cambridge: Cambridge University Press, 2001. xviii + 364 pp. $59.95 (cloth), ISBN: 0-521-63034-7.

Reviewed for EH.NET by Paul Robertson, Department of Management, University of Wollongong.

In this important new book, Robert F. Freeland provides a new perspective on the management structure of a firm that is, perhaps, already the most thoroughly studied American corporation. The book is divided into two closely-related sections. The majority is devoted to a detailed discussion of the changing organizational structure of the General Motors Corporation over a period of nearly half a century, but the theoretical sections at the beginning and end more than justify the book's place as Volume 17 in a series devoted to "Structural Analysis in the Social Sciences." Although the middle portion is used to provide evidence to support the arguments on the flanks, the two parts can best be discussed independently.

To begin with the empirical chapters: On the basis of a wealth of primary material, Freeland surveys changes in the management structure of General Motors from the days of William Crapo Durant to the chairmanship of Frederic Donner in the 1960s. The person central to the argument, however, is Alfred P. Sloan, Jr. Sloan was not only president or chairman of the firm for much of the period, but has left a wealth of documentation concerning his actions and motives. Freeland's argument is that Sloan, despite any impression given by his memoirs (My Years with General Motors, 1964), did not try to create a strictly hierarchical firm in which divisional managers were rigidly separated from owners and in which financial and strategic decisions made by the owners were passed on by fiat to operating executives to be carried out on a lump-it-or-leave-it basis. Instead, although the forms of organization employed by Sloan varied in their degrees of centralization, Sloan knew that he generally needed to obtain the "consent" of divisional managers in order to get their full cooperation. To achieve this, he engaged in what he called "selling," which covered a variety of activities ranging from closely-argued written justifications of policies to consultation to active participation of divisional managers in decision making. Moreover, Sloan frequently supported the role of the divisions in undermining the authority of the owners, in this case the du Pont family and their representatives. As a result, at least at the top, General Motors relied far more on consensus than on a command-and-control structure. This part of the book provides an excellent discussion of the historical development of the firm based on a solid command of detailed evidence.

By contrast, the theoretical discussion, which is probably closer to Freeland's heart, is less satisfactory. As economic and business historians know, Freeland's topic has been dealt with before, not only by Sloan but also by Alfred D. Chandler, Jr. in Strategy and Structure: Chapters in the History of the American Industrial Enterprise (1962). Chandler, who covers much of the same ground as Freeland for the earlier period, uses GM (along with Du Pont, Esso, and Sears-Roebuck) to demonstrate how decentralized, multi-divisional structures were devised by owners and managers to cope with the growing complexity of giant corporations in the early decades of the twentieth century. Freeland, however, does not engage directly with Chandler's ideas. Instead, he conflates Chandler's discussion with the later ideas of Oliver E. Williamson, in the process turning Chandler into a mouthpiece for Williamson's transaction cost based concept of the "M-form" corporation. Not surprisingly, Professor Chandler fails as an advocate for an idea that was not conceived until some years after he wrote his book.

Freeland's book is disturbing because it creates a straw person (or more accurately a small straw army) to knock over rather than concentrating on his positive contribution -- that consent is often needed to achieve efficiency in complex organizations. In one sense, this is understandable since Freeland's point, while valid, is not nearly as exciting as killing giants. Regardless of what Williamson may contend, one wonders if Sloan and Chandler would really have contested the point that consent may improve efficiency in many cases.

Freeland's theoretical discussion also suffers from selectivity. The immediate heirs of Chandler's insights were not transaction cost economists, but sociologists and organizational theory specialists such as James D. Thompson (Organizations in Action, 1967) and Jay R. Galbraith. Their ideas, which are closer to Freeland's own, are barely covered. Similarly, there is no acknowledgement that, sixty years ago, Herbert Simon (whom Freeland ominously terms an "economist," a designation that Simon might have disputed) pointed out that experts have independent authority based on unique knowledge and may need to be consulted rather than commanded. Finally, Freeland explicitly uses "the terms 'bounded rationality' and 'imperfect information' interchangeably" (p. 10, fn. 29). In doing so, he jettisons one of the two props of bounded rationality, namely the inability of individuals to process large amounts of information efficiently. In this way, Freeland glosses over a major connection between the work of Chandler, Thompson, Galbraith and Simon, and also over one of the major connections between "consent" and the multi-divisional structure in their work.

In short, while Freeland provides a wealth of good historical information, readers should be careful in picking their way through his theoretical arguments.

Paul Robertson is author (with Richard N. Langlois) of Firms, Markets, and Economic Change: A Dynamic Theory of Business Institutions, Routledge, 1995. He is editor of several books including Authority and Control in Modern Industry: Theoretical and Empirical Perspectives, Routledge, 1999 and (with Richard N. Langlois and Tony F. Yu) Alternative Theories of the Firm, Edward Elgar, 2003.