Mottes and Methods

This investigation into the changing strategy and structure of the largei industrial enterprise in the
United States began as an experiment in thei writing ot comparative business history. The initial
thought was that ani examination of the way different enterprises carried out the same activity

whether that activity was manutacturing, marketing, procurement oti supplies, hinance, or
administration —would have as much value as a study ot how a singlc hrm carried on all these
activities. Such a comparativei analysis could permit deeper probes into the nature of the function
studied, i and so provide more accurate interpretations and more meaningtul evalua tions ot the
pertormance of several diferent enterprises in that activity than could a whole series ot histories
ot individual hrms. It could thus i Indicate more clearly the ways in which American businessmen
havei handled that activity over the years.

Of the several activities carried on in American business, that of admin-i istration appeared to be
among the most promising for such an experi-i ment in comparative history. Business
administration has a particular relevance tor today's businessmen and scholars. The enormous
expansion of the American economy since World War II has led to the rapid growthi of a multitude
of industrial companies. Their executives are faced withi cormplex administrative problems that
before the war concerned only those ot the largest corporations. At the same time, the growth of
unitsi that carry on political, military, educational, medical, as well as business i activities has
brought their administration to the attention of sociologists, anthropologists, economists, political
scientists, and other scholars. Yeti the historians have provided social scientists with little
empirical data oni which to base generalizations or hypotheses concerning the administra-i tion of
great enterprises. Nor have the historians formulated many theories i or generalizations of their
own.

It changing developments in business administration presented a chali lenging area for

comparative analysis, the study ot innovation seemed tolfurnish the proper focus tor such an
investigation. Fistorically, administrators have rarely changed their daily routine and their
positions ofi power except under the strongest pressures. Theretore a study ot thei creation of
new administrative forms and methods should point to urgenti needs and compelling
opportunities both within and without the hrm. For a study of such forms, that of the
organizational structure used toi administer the largest and most complex ot American industrial
enter.i prises seemed to offer the widest possibilities.

What then has been the structure used to administer such great enter-i prises And who were its
innovators A preliminary survey ot thei experience of fifty of the largest industrial companies in
the United States i helped to answer these questions. This survey showed that in recent years
what may be called the multidivisional type of organization has i become generally used by
industrial firms carrying on the most diversei economic activities. In this type of organization, a
general ofice plans, coordinates, and appraises the work of a number of operating divisions i and
allocates to them the necessary personnel, facilities, funds, and otheri resources. "The executives
in charge of these divisions, in turn, have underi their command most of the functions necessary
for handling one majori line of products or set of services over a wide geographical area, and eachi
of these executives is responsible for the hinancial results of his divisioni and for its success in the
market place. "his administrative torm, otteni known in business parlance as the "decentralized"
structure, is depictedi in Chart I (page 1o).

The first companies to devise this "decentralized" form, according toi the preliminary study,
included the E. I. du Pont de Nemours & Co General Motors Corporation, Standard Oil Company
(New Jersey), andi Sears, Roebuck and Company.' Du Pont and General Motors began toi fashion
their new structure shortly after World War I. Jersey Standardi started its reorganization in xg25,
and Sears started its in 1g29. Five otheri hrms among the hifty studied-United States Rubber, B. F.
Goodrich, Union Carbide & Carbon, Westinghouse Electric, and "he Great Atlantici & Paciic T'ea
Co.—initiated comparable changes between 1825 and 1932. Except for the last, the A. & P, these
administrative reorganizations' proved to be less creative innovations than those in the hirst
group." Therei fore du Pont, General Motors, and Jersey Standard were sclected fori study. And of
the two innovators of the new multidivisional form in thei merchandising field, Sears was picked
instead of A. & P. because its aci tivities were more complex and because intormation about the
company was more readily available.

Possibly, other large corporations not on the list of the top fity begani to set up the
"decentralized," multidivisional structure in the 1820's andieven earlier. But the tour selected-du
Pont, General Motors, Jersey i Standard, and Sears—were among the very hrst to initiate major
reori ganizations of this kind. What is important for this study is that the exec-i utives of these four
began to develop their new structure independently ot each other and ot any other hrm. There
was no imitation. Eachi thought its problems were unique and its solutions genuine innovations, as
brand new ways of administering great industrial enterprises. In time, the innovations became
models tor similar changes in many Americani corporations.

As my investigation of organizational innovation in these tour com panies progressed, several

mportant facts became clear. First, a mean ingtul analysis of the creation of the new
administrative form called for accurate knowledge about the hirm's previous organization and in
tacti about its entire administrative history. Second, changes in organizationali structure were
intimately related to the ways in which the enterprise hadi expanded. An evaluation of
administrative change, theretore, demandedi a detailed understanding of the company's methods
of growth. Third, these patterns of growth, in turn, rellected changes in the over-all Ameri-i can
economy, particularly those affecting the market or demand for thei enterprise's products. Finally,
the reorganizations were influenced by thei state of the administrative art in the United States at
the time they werei being carried out. "The hrst two ot these points required further investigai
tion into the history of the four companies selected. The third and fourthi called kor a broader
awareness ot the history of the American businessi economy.

This need to enlarge the scope ot the study made possible a broadeningi ot its objectives. One way
to ascertain the impact ot the more generali economic and administrative developments on the
growth and organiza-i tion of these industrial enterprises was to compare the experience of thei
tour studied with that of many other similar large corporations. Such ani expanded comparison
not only could make the process of innovation ini the four selected companies more
comprehensible, but could also providei information on which generalizations might be made
about the history of the industrial enterprise as an institution, and one of the most critically
important of modern institutions at that. In this way what began as ani experiment in comparative
business history was broadened into one in the writing of institutional history.

To carry out these broader objectives, the administrative histories ofi close to a hundred of
America's largest industrial enterprises were briefly i examined. The companies included the fifty
with the largest assets ini 909 and seventy of the largest by assets in 1948. The latter group con-i
sisted ot the hity used in the preliminary study which had determinedi what was the most modern
administrative form and who were its inno vators. Twenty of the next largest were added in order
to get a wideri representation in various industries. These companies and their relativei sizes are
listed in Tables I and 2. (For the second group, size in 1959 as i well as in 1948 is indicated.)

The intormation on these many companies came primarily from readily available materials such as
annual and other company reports, governmenti publications, articles in periodicals, and
occasionally business histories andi biographies. In eightcen of the more significant of these
companies, inter-i views with senior executives helped supplement the printed record. Thei far
more detailed analyses of organizational innovation at du Pont, Gen era Motors, Standard Oil
(New Jersey), and Sears, Roebuck were based, on the other hand, largely on internal company
records—business correi spondence, reports, memoranda, minutes ot meetings, and the like.
Thesei historical documents were supplemented by interviews with men who hadi participated in
the organizational changes.

Using these data, T have attempted to say something about the historyi of the large industrial
enterprise as a basic, modern American institution. In so doing, this book also provides
information about the history ofi business administration in the United States and about changes
in thei larger American economy. It tells still more about the history of the in dividual companies
examined. The book attempts to provide this in tormation by focusing on the innovation and
spread ot the moderni "decentralized" form of organization in American industry. The major
portion of the work is devoted to the administrative histories of the fouri companies that first
created the new form. As studies in organizationali innovation, these stories indicate why du Pont,
General Motors, Standardi Oil (New jersey), and Sears, Roebuck enlarged their business, took oni
new functions, moved into new lines ot businesses, and why each stchi move required a new
design for administration. They trace the way in which busy executives worked out, often slowly
and paintully, new methei ods and means for coordinating, appraising, and planning the eftectivei
use of vast and varied assortments of men, money, and materials. To make the case studies more
meaningtul, they are preceded by a broadi survey ot changing patterns in the growth and
administration of thei large enterprise in the United States, based on the experience of manyi of
the largest companies. The case studies are then followed, first by a comparative analysis of
organizational innovation in the four companics, and then by an extensive investigation into what
other industrial enter prises accepted or reiected the new "decentralized" structure, and why i and
how they did so.

The story ot how each ot the tour innovators met its changing adminiistrative needs and problems
which resulted from the expansion of its i business has been told as though it were a chapter in
the company's his-i tory. Each case study presents the events trom the point of view of thei busy
men responsible tor the destiny ot their enterprise. Only by showingi these executives as they
handled what appeared to them to be uniquei problems and issues can the process ot innovation
and change be mean .ingtully presented. Only in this way can the trials of harassed executives
faced with novel and extremely complex problems be clearly pictured, and the impact ot specihc
personalities and ot historical or accidentali situations on over-all change be adequately
presented. Moreover, it thei chronological development of the story is kept intact and it it can bei
presented as it appeared to the actors in the story, the data should havei more value to
businessmen and scholars interested in the growth andi government oft the great industrial
corporation than it they were selected i and arranged to develop or illustrate one particular
historian's theses. i

At the same time, by caretully and explicitly comparing the separatei chronological stories with
one another and then with similar develop-i ments in other great industrial companies, these
stories can become morei than mere case studies in the meeting and solving ot administrative
prob lems resulting from growth. They can provide otherwise unobtainablei inormation essential
to the understanding of the history of one ot thei most signihcant of today's institutions. Such a
comparative and institu-i tional study of American business would seem to have some real ad-i
vantages over the more traditional histories of individual firms or thei more general surveys ot the
American business economy. Not only does i it permit an analysis of signihcant decisions in tar
greater depth and dei tail than is possible even in a multivolume history of a single great com
pany, but it also makes it possible to relate these detailed analyses morei clearly and more
precisely to broader historical developments." On thel other hand, complex decisions, actions, and
events are not taken out ofi context and presented as mere illustrations as they would have to be
in ai general history of American business or of the American economy. "They i are not used to
illustrate generalizations; they are the data from whichi the generalizations are derived.

Some General Propositions

It usetul comparisons are to be made among tour companies and theni tourscore more, and if
decisions and actions in these hrms are to indi-i cate something about the history of the industrial
enterprise as an institu-i tion, the terms and concepts used in these comparisons and analyses
must i be caretully and precisely defined. Otherwise comparisons and hndings i can be more
misleading than instructive. The following set of general ortheoretical propositions attempts to
provide some sort of conceptual pre-i cision. Without reference to historical reality, they try to
explain in fairly clear-cut, oversimplihied terms how the modern, "decentralized" structurei came
into being.

Betore developing these propositions, the term industrial enterprisei needs to be defined. Used in
a broad sense, it means here a large private, profit-oriented business hirm involved in the handling
of goods in somei or all of the successive industrial processes irom the procurement of thei raw
material to the sale to the ultimate customer. Transportation enter-i prises, utilities, or purely
hnancial companies are not then included in thisi study, while those hrms concerned with
marketing and with the extrac- i tion of raw materials as well as those dealing with processing or
manu tacturing do fall within this definition. An industrial enterprise is thus ai subspecies of what
Werner Sombart has described as the capitalistic en-i terprise, which as "an independent
economic organism is created over andi above the individuals who constitute it. 'This entity
appears then as thei agent in each of these transactions and leads, as it were, a lite of its l own,
which often exceeds in length that ot its human members."6
While the enterprise may have a lite of its own, its present health andi future growth surely
depend on the individuals who guide its activities. ust what, then, are the tunctions ot the
executives responsible hor thei fortunes of the enterprise? They coordinate, appraise, and plan.
Theyi may, at the same time, do the actual buying, selling, advertising, account-i ing,
manutacturing, engineering, or research, but in the modern enterprisei the execution or carrying
out ot these functions is usually lett to such em-i ployees as salesmen, buyers, production
supervisors and foremen, tech- i nicians, and designers. In many cases, the executive does not
even personally supervise the working torce but rather administers the duties i of other
executives. In planning and coordinating the work of subordinate managers or supervisors, he
allocates tasks and makes available thei necessary equipment, materials, and other physical
resources necessary toi carry out the various jobs. In appraising their activities, he must decidei
whether the employees or subordinate managers are handling their tasks i satistactorily. It not, he
can take action by changing or bringing in newi physical equipment and supplies, by transferring or
shitting the personi nel, or by expanding or cutting down available funds. Thus, the term
admimistration, as used here, includes executive action and orders as well as the decisions taken
in coordinating, appraising, and planning the worki of the enterprise and in allocating its
resources.

The initial proposition is, then, that administration is an identihablei activity, that it differs from
the actual buying, seling, processing, or transporting of the goods, and that in the large industrial
enterprise the concern ot the executives is more with administration than with thei pertormance
ot functional work. In a small firm, the same man or group ot men buy materials, sell hinished
goods, and supervise manutacturingi as well as coordinate, plan, and appraise these diferent
tunctions. In ai large company, however, administration usually becomes a specialized, full-time
job. A second proposition is that the administrator must handle two types of administrative tasks
when he is coordinating, apprais-i ing, and planning the activities of the enterprise. At times he
must bei concerned with the long-run health of his company, at other times withi its smooth and
etticient day-to-day operation." The first type of activityi calls for concentration on long-term
planning and appraisal, the secondi for meeting immediate problems and needs and for handling
unexpectedi contingencies or crises. To be sure, in real lite the distinction between i these two
types of activities or decisions is often not clear cut. Yet somei decisions clearly deal very largely
with dehining basic goals and the course.i of action and procedures necessary to achieve these
goals, while other decisions have more to do with the day-to-day operations carried outi within
the broader framework of goals, policies, and procedures.

The next few propositions deal with the content of administrativei activities handled through the
different types of posts or positions in thei most complex administrative structures. The executives
in a moderni "decentralized" company carry out their administrative activities fromi four different
types of positions (see Chart 1). Each ot these types within the enterprise has a different range of
administrative activities. Normally, each is on a different level of authority. At the top is a general
ofjice. i There, general executives and staff specialists coordinate, appraise, andi plan goals and
policies and allocate resources tor a number ot quasi-i autonomous, fairly self-contained divisions.
Each division handles a major product line or carries on the firm's activities in one large
geographicali area. Each division's central office, in turn, administers a number oti departments.
Each ot these departments is responsible for the adminisi tration of a major function—
manutacturing, seling, purchasing or pro-i ducing of raw materials, engineering, research, hnance,
and the like. The departmental headquarters in its turn coordinates, appraises, andi plans for a
number of held units. At the lowest level, each field uniti runs a plant or works, a branch or district
sales oftice, a purchasing ofhice, an engineering or research laboratory, an accounting or other
hnanciall office, and the like. The four types of administrative positions in a largei multidivisional
enterprise are thus: the held unit, the departmental headi quarters, the division's central ofhice,
and the general oftice. These terms i are used throughout this study to designate a specihc set ot
administrativei activities. They do not, it should be stressed, reter to an enterprise's office
buildings or rooms. One ohce building could house executives respon sible for any one of the
positions or conceivably those responsible for alli tour. Conversely, the executives in any one of
the posts could be housedi in diferent rooms or buildings.

Only in the frst, the field unit, are the managers primarily involved in carrying on or personally
supervising day-to-day activities. Even here, it i the volume of activity is large, they spend much of
their time on admin istrative duties. But such duties are largely operational, carried out within the
framework ot policies and procedures set by departmental headquar-i ters and the higher ofices.
"The departmental and divisional offices mayi make some long-term dccisions, but because their
executives work withini a comparable tramework determined by the general oftc, their primary
administrative activities also tend to be tactical or operational. The generali ofice makes the broad
strategic or entrepreneurial decisions as to policy i and procedures and can do so largely because
it has the hnal say in thei allocation of the firm's resources—men, money, and materials-necesi
sary to carry out these administrative decisions and actions and others i made with its approval at
any level. .

It seems wise here to emphasize the distinction between the tormulationi of policies and
procedures and their implementation. The formulationi ot policies and procedures can be dehned
as either strategic or tactical. Srategic decisions are concerned with the long-term health ot the
enter.i prise. I actical decisions deal more with the day-to-day activities necessary for eficient and
smooth operations. But decisions, either tactical or strategic, usually require implementation by an
allocation or reallocationi ot resources —runds, equipment, or personnel. Strategic plans can bei
tormulated trom below, but normally the implementation of such pro-i posals requires the
resources which only the general ofhce can provide. Within the broad policy lines laid down by
that office and with thei resources it allocates, the executives at the lower levels carry out tacticall
decisions.

The executives who actually allocate available resources are then thei key men in any enterprise.
Because of their critical role in the modern economy, they will be dehined in this study as
entrepreneurs. In contrast, those who coordinate, appraise, and plan within the means allocated
toi them will be termed managers. So entrepreneurial decisions and actionsi will reter to those
which affect the allocation or reallocation of resources i tor the enterprise as a whole, and
operating decisions and actions willi reter to those which are carried out by using the resources
alreadyi allocated.

just because the entrepreneurs make some ot the most signihcanti decisions in the American
economy, they are not all necessarily imbued with a long-term strategic outlook. In many
enterprises the executives i responsible for resource allocation may very well concentrate on day-
to day operational affairs, giving little or no attention to changing markets, technology, sources ot
supply, and other factors aflecting the long-termi health of their company. Their decisions may be
made without forwardi planning or analysis but rather by meeting in an ad hoc way every new i
situation, problem, or crisis as it arises. They accept the goals of their enterprise as given or
inherited. Clearly wherever entrepreneurs act likei managers, wherever they concentrate on
short-term activities to the exclu-i sion or to the detriment of long-range planning, apprasal, and
coordina- i tion, they have failed to carry out effectively their role in the economyi as well as in
their enterprise. 'This effectiveness should provide a usetuli criterion tor evaluating the
pertormance of an executive in Americani industry.

As already pointed out, executives in the large enterprise work in fouri types of ofices, each with
his own administrative duties, problems, andi needs. The four types operate on difterent scales,
and their officersi have different business horizons. 'The managers in the field unit arei concerned
with one function—marketing, manutacturing, engineer-i ing, and so forth—in one local area. The
executives in the depart mental headquarters plan, administer, and coordinate the activities ofi
one function on a broad regional and often national scale rather thani just locally. Their
professional activities and their outside sources ofi intormation concern men and institutions
operating in the same speciali ized function. The divisional executives, on the other hand, deal
with ani industry rather than a function. They are concerned with all the tunctionsi involved in the
over-all process of handling a line of products or services, Their professional horizons and contacts
are determined by industry rather than functional interests. Finally, executives in the general
office i have to deal with several industries or one industry in several broadi and different
geographical regions. They set policies and procedures andi allocate resources for divisions
carrying out all types of functions, eitheri in different geographical areas or in quite different
product lines. Their business horizons and interests are broadened to range over national andi
even international economies.

While all four types of ofices exist in the most complex of industrial enterprises, each can ot course
exist separately. An industrial enterprisei can include one, two, three, or all four of these offices.
Many small fhrms i today have only a single ottice managing a single plant, store, laboratory,
financial operation, or sales activity. Larger companies with a numberi of operating units carry out
a single tunction—such as sales (wholesalei or retail), manutacturing, purchasing, or engineering.
Their over-all administrative structure comprises a headquarters and held ofhices, Soi also today
there are integrated industrial enterprises that handle severali economic functions rather than just
one. Fnally, there are the greati diversthied industrial empires, carrying on different functions and
produc- i ing a variety ot goods and services in all parts of the globe.

Since each type of position handles a different range of administrativei activities, each must have
resulted from a different type oft growth. Until the volume or technological complexity of an
enterprise's economici activities had so grown as to demand an increasing division of labori within
the hirm, little time needed to be spent on administrative work. Then the resulting specialization
required one or more ot the firm's executives to concentrate on coordinating, appraising, and
planning thesei specialized activities, When the enterprise expanded geographically byi setting up
or acquiring facilities and personnel distant from its original location, it had to create an
organization at a central headquarters toi administer the units in the field. When it grew by
moving into new i tunctions, a central oftice came to administer the departments carryingi on the
different functions. Such a central administrative unit provedi necessary, tor example, when in
following the policy of vertical integra tion a manutacturing hrm began to do its own wholesaling,
procuringi ot supplies, and even producing raw materials. Finally, when an intei grated enterprise
became diversified through purchasing or creating new i facilities and entered new lines of
business, or when it expanded itsi several functional departments over a still larger geographical
area, iti fashioned a number of integrated divisional units administered by al general office.

The thesis that different organizational torms result from difterenti types of growth can be stated
more precisely it the planning and carryingi out of such growth is considered a strategy, and the
organization devisedi to administer these enlarged activities and resources, a structure, Strategyi
can be defined as the determination of the basic long-term goals and objeci tives of an enterprise,
and the adoption ot courses of action and thei allocation ot resources necessary tor carrying out
these goals. Decisions l to expand the volume of activities, to set up distant plants and offices, toi
move into new economic functions, or become diversifhed along manyi ines ot business involve
the deining of new basic goals. New courses ofi action must be devised and resources allocated
and reallocated in orderi to achieve these goals and to maintain and expand the firm's activities in
the new areas in response to shiting demands, changing sources of supply, fluctuating economic
conditions, new technological developments, and thei actions of competitors. As the adoption of a
new strategy may add newi types of personnel and facilities, and alter the business horizons of the
men responstble tor the enterprise, it can have a protound efiect on thei torm of its organization.

Strcture can be defined as the design of organization through whichi the enterprise is
administered. This design, whether tormally or infor.i mally defined, has two aspects. It includes,
first, the lines of authority andi communication between the different administrative offices and
otficers and, second, the intormation and data that flow through these lines of communication
and authority. Such lines and such data are essential toi assure the eftective coordination,
appraisal, and planning so necessary i in carrying out the basic goals and policies and in knitting
together thei total resources of the enterprise. These resources include hinancial capital; physical
equipment such as plants, machinery, offices, warehouses, andi other marketing and purchasing
facilities, sources of raw materials, research and engineering laboratories; and, most important of
all, thei technical, marketing, and administrative skills of its personnel.

The thesis deduced from these several propositions is then that structurei tollows strategy and
that the most complex type of structure is the resulti ot the concatenation of several basic
strategies. Erpansion of volume ledl to the creation ot an administrative office to handle one
function in onei local area. Growth through geographical dispersion brought the need fori a
departmental structure and headquarters to administer several locali field units. The decision to
expand into new types of functions called fori the building of a central office and a
multidepartmental structure, whilei the developing of new lines ot products or continued growth
on a nationali or international scale brought the formation ot the multidivisional struc-i ture with a
general office to administer the different divisions. For thei purposes of this study, the move into
new functions will be referred toi as a strategy ot vertical integration and that of the development
of new i products as a strategy of diversification.

This theoretical discussion can be carried a step further by asking twoi questions: (1) It structure
does tollow strategy, why should there bei delay in developing the new organization needed to
meet the adminis-i trative demands of the new strategy? (2) Why did the new strategy, which
called for a change in structure, come in the first place?

There are at least two plausible answers to the first query. Either thei administrative needs
created by the new strategy were not positive or strong enough to require structural change, or
the executives involved i were unaware of the new needs. There seems to be no question that ai
new strategy created new administrative needs, tor expansion throughi geographical dispersion,
vertical integration, and product diversificationi added new resources, new activities, and an
increasing number ot entre-i preneurial and operational actions and decisions. Nevertheless,
executives could still continue to administer both the old and new activities with the same
personnel, using the same channels ot communication andi authority and the same types ot
intormation. Such administration, how.i ever, must become increasingly inefficient. This
proposition should be true tor a relatively small hrm whose structure consists of intormali
arrangements between a few executives as well as tot a large one whosei size and numerous
administrative personnel require a more formal dehini.i tion of relations between othces and
oflicers. Since expansion created thei need for new administrative ofhices and structures, the
reasons tor delays i in developing the new organization rested with the executives responsiblei for
the enterprise's long-range growth and health. Either these adminis-i trators were too involved in
day-to-day tactical activities to appreciate or understand the longer-range organizational needs of
their enterprises, or else their training and education failed to sharpen their perception oti
organizational problems or failed to develop their abilty to handle them. They may also have
resisted administratively desirable changes becausei they telt structural reorganization threatened
their own personal position their power, or most important of all, their psychological security. In
answer to the second question, changes in strategy which called tori changes in structure appear
to have been in response to the opportunitiesi and needs created by changing population and
changing national incomei and by technological innovation. Population growth, the shitt from thei
country to the city and then to the suburb, depressions and prosperity, and the increasing pace of
technological change, all created new demandsi or curtailed existing ones for a firm's goods or
services. The prospect of ai new market or the threatened loss of a current one stimulated
geograph ical expansion, vertical integration, and product diversihication. Moreover, once a firm
had accumulated large resources, the need to keep its men, i money, and materials steadily
employed provided a constant stimulus toi look tor new markets by moving into new areas, by
taking on new i functions, or by developing new product lines. Again the awareness oti the needs
and opportunities created by the changing environment seems i to have depended on the training
and personality of individual executives i and on their ability to keep their eyes on the more
important entreprei neurial problems even in the midst of pressing operational needs.

The answers to the two questions can be brietly summarized by restating the general thesis.
Strategic growth resulted from an awarenessi of the opportunities and needs—created by
changing population, income, and technology—to employ existing or expanding resources more
prohti ably. A new strategy required a new or at least retashioned structure ifi the enlarged
enterprise was to be operated eficiently. The failure toi develop a new internal structure, like the
failure to respond to new external opportunities and needs, was a consequence ot
overconcentrationi on operational activities by the executives responsible or the destiny i ot their
enterprises, or from their inability, because ot past training andi education and present position,
to develop an entrepreneurial outlook.

One important corollary to this proposition is that growth withouti structural adjustment can lead
only to economic ineficiency. Unless newi structures are developed to meet new administrative
needs which resulti from an expansion ot a hrm's activities into new areas, tunctions, or product
ines, the technological, financial, and personnel economies ofi growth and size cannot be realized.
Nor can the enlarged resources bei cmployed as prohtably as they otherwise might be. Without
administra-i tive ofhices and structure, the individual units within the enterprise (thei field units,
the departments, and the divisions) could undoubtedly operatei as efficiently or even more so (in
terms of cost per unit and volume ofi output per worker) as independent units than it they were
part of ai larger enterprise. Whenever the executives responsible tor the firm faili to create the
offices and structure necessary to bring together effectively i the several administrative offices
into a unihed whole, they fail to carryi out one of their basic economic roles.

The actual historical patterns ot growth and organization building ini the large industrial enterprise
were not, of course, as clear-cut as they i have been theoretically defined here. One strategy of
expansion could bei carried out in many ways, and often, two or three basic ways ot expansioni
were undertaken at one and the same time. Growth might come throughi simultaneous building
or buying ot new tacilities, and through purchasi ing or merging with other enterprises.
Occasionally a firm simultaneouslyi expanded its volume, built new facilities in geographically
distant areas, moved into new functions, and developed a difterent type of product line. i
Structure, as the case studies indicate, was often slow to follow strategy, particularly in periods of
rapid expansion. As a result, the distinctions i between the duties of the different ofices long
remained contused andi only vaguely defined. One executive or a small group of executives mighti
carry out at one and the same time the functions of a general office, ai central office, and a
departmental headquarters. Eventually, however, mmost large corporations came to devise the
specihc units to handle a heldi unit, a functional department, an integrated division, or a
diversikhedi industrial empire. For this very reason, a clear-cut detinition of structurei and strategy
and a simplihed explanation or theory of the relation ot onei to the other should make it easier to
comprehend the complex realitiesi involved in the expansion and management of the great
industrial enterprises studied here, and easier to evaluate the achievement of the organ ization
builders.

A comparative analysis of organizational innovation demands, however, more than an explanation

ot the terms, concepts, and general proposi tions to be used in assessing comparable experiences
of different enter-i rises. It also calls tor an understanding ot the larger historical situation,i both
within and without the hrm, during which strategic expansion andi organizational change took
place. The executives at du Pont, Generali Motors, Jersey Standard, and Sears, Roebuck did not
solve their adminis-i trative problems in a vacuum. Other large enterprises were meeting thei
same needs and challenges and seeking to resolve comparable administra-i tive problems. Their
responses had an impact on the history of these fouri companies, just as the experience of the
tour affected that ot many others.

The administrative story in each of the case studies falls into two basic parts: the creation of the
organizational structure atter the enter-i prise's hrst major growth or corporate rebirth, and then
its reorganizationi to meet the needs arising rom the strategies of turther expansion. Ini
developing their early administrative structures, these four firms werei tollowing accepted
practices in American industry. Here the organizationi builders could learn from others. In
fashioning the modern, multidivi-i sional structure, they were, on the other hand, going beyond
existingi practices. Here others learned from them. An evaluation of the measures i each took to
improve the administration of its business requires theretorei some knowledge of the methods
and practices of business administrationi at the time when each built its major structure and
began the reorgan-i ization that led to the fashioning ot the multidivisional torm.

One way to provide such a historical setting is to present a briet reviewi ot the growth ot large-
scale business enterprise in the United States. As i the tollowing survey is based only on readily
available printed materiali supplemented by some interviews tor only about a hundred ot the
nation's i largest companies, its hndings must be considered preliminary and tenta-i tive.' Much
more detailed study will be necessary betore the history ofi the administration or government ot
American industry can be accuratelyi and fully explained. Nevertheless, even such a preliminary
study indicates i signihcant trends in the growth and administration ot industrial corpora- i tions.
An awareness of these trends is essential for the understanding ofi the more detailed case studies
presented in this volume and ot the subsei quent changes in the structure and strategy ot the
large American indus-i trial enterprise.