My Years With General Motors

The 1922 revisions also related the employee’s level of responsibility to his eligibility for bonuses. Since the simplest measure of an employee’s level of responsibility is his salary, eligibility for the bonus was set on that basis: for several years, beginning with 1922, the minimum salary for bonus eligibility was $5000 per year.

That still left us with the problem of finding the right combination of freedom for the divisions and control over them. The combination could not be set once and for all, of course. It varies with changing circumstances, and the responsibility for determining administrative organization is a continuing one.

We poured many millions of dollars into this unproven product at a time when many of the customers for it were in serious financial condition or bankrupt and the majority of them appeared to be totally uninterested in innovation; and we thereby helped the railroads back to solvency — a fact that is acknowledged by railroad management today.

Several kinds of economies are made possible by centralized staff operations. Among the most important are the economies that derive from the coordination of the divisions. These arise through the sharing of ideas and developments among general officers and divisional personnel. The divisions contribute ideas and techniques both to each other and t

In General Motors we do not follow the textbook definition of line and staff. Our distinction is between the central office (which includes staff) and the divisions.

Any rigidity by an automobile manufacturer, no matter how large or how well established, is severely penalized in the market — as we have seen was the case with Mr. Ford in the 1920s, when he stayed too long with his old and once dominantly successful concept of the business.

One of the basic purposes of our incentive program is to make our executives partners in the business. Part of this concept has been that bonus awards should be made in General Motors stock. Common stock is purchased in the market from month to month to meet each year’s needs for bonus purposes. Originally, the entire bonus award was payable in sto

policy which we defined simply as “a car for every purse and purpose”.

The Bonus Plan also provides much more flexibility on the up side than is possible under a salary system. It may be difficult to reward a man for superior performance by raising his salary, since the increase may upset the whole salary stratification. A salary increase, moreover, commits the company indefinitely, whereas the bonus makes it possible