The changing economic conditions of the United States had a major impact on the nature of management of the nations business firms (Blackford pg 237). New management methods were required because of the broadened range of consumer goods produced by so many companies. As companies grew in size and increased in numbers, the central management systems that were used just not adequate enough. The officers in the head office could not manage the growing complexity of the company's work. They could not oversee the daily operations of their firm and at the same time, could not plan for the future (Blackford pg 237). Business leaders were forced to revamp their centralized management structures from 1920 - 1922. To cope with their problems, a decentralized system of management was adopted. The head office would concentrate on the planning for the entire company and delegated most daily operations to semiautonomous divisions organized around product lines.
Decentralized management is sometimes referred to as federalized decentralization (Blackford pg 238). It is also called the M-form of management, with M standing for multidivisional (Blackford pg 238). This type of management gave companies a flexibility to react to changing situations.
After World War I, business opportunities changed dramatically. America evolved from a producer dominated to a consumer-oriented society (Blackford pg 228). Alfred Sloan, the president of General Motors in the 1920's, stated, "My thoughts have always revolved around one concept which contains considerable complexity in theory and reality, the concept that goes by the oversimplified name of decentralization. General Motors led other firms in the 1920's, 1930's, and 1940's from centralized to decentralized management systems. After World War I, Sloan and other executives were developing an innovative marketing conception of their firms (Blackford pg 227)
Alfred D. Chandler, the chief student of decentralization, contends...