Centralized Control…Continued

T

he function of any individual as a member of the executive committee is quite different from his function as an executive officer. Committee action is by majority vote; executive action is by individual choice. The executive may seek the counsel and advice of any number of men on a given problem, but the decision is his. It matters not the extent to which he accepts the judgment of others, the action is his own individual responsibility. There is much truth in the saying that "what is everybody's business is nobody's business," and there can be no doubt that where committee action is applied to problems of purely administrative management, it is almost always bad [emphasis added].

Duties and Responsibilities of the Executive Committee

1. Knowledge of the business's characteristics and understanding the degree of existing coordination through the cooperative activity of departments, operating under individual responsibilities and distinct lines of authority. Knowledge of the business and the use of statistical analyses suitably designed are essential to serve this first requisite.
2. Wherever practical, lay down a concrete policy as establishing the fundamental basis upon which departments activity is based.
3. In the many cases where it is impossible to lay down general rules and yet where the question of policy is no less involved, deal with problems as they arise. There is always the danger of encroaching upon the sphere of administrative management.
4. The president is the chief administrative officer and the connecting link between policy and administrative control. So long as complete co-ordination exists there is no need for the imposition of any central authority. The president must distinguish clearly between questions of policy and questions of administrative control applying to problems as they arise, and one of the most important functions of his position is to see that there is no undue interference with individual prerogatives in the organization. Where there is any room for doubt as to what may be best for the welfare of the stockholders, he must secure from the executive committee a clear policy.
5. In rare cases, where it is impossible to draw the necessary policy distinctions, it may be justifiable for the executive committee to assume the responsibility of direct action in respect to matters of administrative character. This should be avoided, if possible, and always where such a course is necessary care should be taken to point out that the question of policy is involved and that it is impossible to secure a distinct separation of policy from questions of administrative responsibility admittedly included.

In the case of the General Motors, the board of directors has two sub-committees; a finance committee responsible for general financial policies, and an executive committee responsible for operating policies.

The finance committee includes men of large affairs identified with banking and with big business, apart from General Motors, while the executive committee is composed of men giving all their time to the affairs of General Motors. In a limited sense the executive committee is subject to the finance committee in that operations are dependent upon financial policies. At the same time, financial policies must not deprive operations of any legitimate development. Several individuals' common membership on both committees furthers cooperation between the two.

Obviously, it is humanly and physically impossible for the GM executive committee to maintain the same kind of intimate contact with the details of its business as would be practical in the case of a less diversified business. Still the responsibility to stockholders is exactly the same and the proper organization of control has been forced by absolute necessity. Otherwise the business were better split up into various units with separate ownership, even at the sacrifice of the great advantages of the existing combination, so that the stockholders of each unit respectively could elect a board of directors capable of assuming the usual responsibilities. Let us examine, first, the general way in which the separate units of the corporation are constituted.

There is never any conflict of jurisdiction with respect to capital invested. Where any given plant produces a component entering into the finished product of just one of our divisions, it is deemed proper, unless the manufacture is of a highly specialized character, that the investment in that plant and its operation be placed under the jurisdiction of the consuming division.

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