Pierre du Pont and the Modern Corporation

Pierre S. Du Pont and the Making of the Modern Corporation by Alfred du Pont Chandler.  Beard Books.

IMG_4637aThe Pierre du Pont who built Longwood Gardens in the 1920s (there were four with exactly the same name at different times) not only rescued the DuPont company and General Motors, he changed the structure of American corporations ever since.  Almost all of us has worked at one time or another as part of the system he devised (or, at least, was one of the first to put it into practice).

Before 1902 when he and his two cousins took control of the failing family gunpowder business (see posting of 1/14/2013), corporations were the creations of individual entrepreneurs, such as Henry Ford, Thomas Edison, and Andrew Carnage. They came up with an idea and ran with it, making all of the decisions themselves. But problems soon developed.

Entrepreneurs rarely consider their own demise, and when that happens, the spark is gone, no one is capable of taking over, and the company drifts into oblivion. Pierre saw this first-hand as the du Pont family business almost collapsed when their aging leader, who controlled everything, died with no successor.

As corporations grow out of a garage into a corporate center, one person no longer has all of the necessary skills or the time to properly monitor each facet of the business. Many early corporations failed because of one oversight that brought down everything else.

Pierre’s revolutionary idea was to divide up all of the skills needed by a corporation and hire separate individuals for each of those skills.  Instead of expecting one person to have twenty skills, hire twenty people with one skill each. One would know finances, another sales, another manufacturing, and so on. Support each expert with a department of their own.  The job of the company president was to coordinate their efforts.  They all served on a common executive committee who planned for the future. Not only would this provide better skills and better monitoring, one person’s death or failure would only require replacing one cog in the corporate wheel. This innovation was as important as manufacturing replaceable parts or the invention of the assembly line.

Companies ever since became conglomerates of identifiable departments, each with a specific function under a responsible director.  The departments were further subdivided in the same manner.

We now take this hierarchical organization for granted, but it did not exist before Pierre du Pont put it into practice.



About Roger Walck

My reasons for writing this blog are spelled out in the posting of 10/1/2012, Montaigne's Essays. They are probably not what you think.
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