THE BEST BOOK ON MANAGEMENT EVER Peter Drucker argues that his friend, former GM chairman Alfred Sloan, wrote it 26 years ago. Among Sloan's timeless tips: Real leaders are swayed by facts, not personalities.

(FORTUNE Magazine) – YOU CAN'T FIND a list of best-sellers these days without a good representation of business books. That is a relatively recent phenomenon. One of the first management books to make the big time was My Years With General Motors by Alfred P. Sloan Jr., who ran the automaker for 14 years as president and 19 as chairman. The book was published in 1964, the same year that the Beatles' ''I Want to Hold Your Hand'' hit No. 1 on the pop charts, and General Motors, with sales of $16.4 billion, topped the FORTUNE 500. FORTUNE played a crucial role in bringing this classic to the public. Senior writer John McDonald took a five-year leave to help GM's longtime chairman write it. Chief economist Sanford Parker contributed a detailed analysis of the automobile market and its history. And the book first appeared in our pages in six monthly excerpts. This year, GM still tops the 500 with sales of $126.9 billion, and Doubleday/Currency is reissuing My Years With General Motors with a special introduction by another eminent management expert, Peter Drucker, 80. In his reminiscence, Drucker vividly recalls the side of Sloan that he excised from his writing -- the passionate, compassionate leader of men. Most important, Drucker uncovers the guides to good management that he feels Sloan unnecessarily buried in his autobiography.

Alfred P. Sloan's My Years With General Motors was an instant best-seller when it appeared in 1964 -- two years before Sloan's death at 90. It has remained a favorite among managers and management students. Everyone to whom I have recommended it has found it fascinating and enjoyable. But Sloan himself would have been dismayed by this response. The only time he was really angry at me in our 23-year relationship was when I praised the book as enjoyable in my review in the New York Times. I had, Sloan scolded, knowingly misled the reader. The book was not meant to be ''enjoyable.'' It was meant to establish a new profession, that of professional manager, and to spell out the professional manager's role as leader and decision-maker. My Years With General Motors was written primarily to rebut -- or at least to counter-balance -- a book Sloan thought to be pernicious: my book on General Motors, Concept of the Corporation, published in 1946. Concept of the Corporation was the first study of a big corporation from within, of its constitutional principles, of its structure, basic relationships, strategies, and policies. The book was the result of two years of research undertaken from 1943 to 1945 with the full cooperation of GM management and at GM's invitation. But when it came out, GM's senior executives were so greatly offended by it that it became an ''unmentionable'' in GM for many years. It asked whether some GM policies -- for example, labor and employee relations; the use and role of central-office staffs; and the relationships with dealers -- had not become obsolescent. This was lese-majeste for GM executives, and I have never been completely forgiven. But Sloan was cut from a different cloth. When his associates attacked me in a meeting called to discuss the book, Sloan immediately rose to my defense. ''I fully agree with you,'' he said to his colleagues. ''Mr. Drucker is dead wrong. But he did precisely what he told us he would do when we asked him in. And he is as entitled to his opinions, wrong though they are, as you or I.'' That meeting marked the beginning of my personal relationship with Alfred Sloan. While working on my book, I had seen Sloan often but usually in a big meeting and at a GM office. For the next 20 years he would, however, ask me once or twice a year to have lunch alone with him in his New York apartment. There he would discuss the plans for his philanthropies, especially the Sloan- Kettering Institute for Cancer Research at Memorial Hospital in New York and the Sloan School of Management at MIT. Above all, he wanted to talk about My Years With General Motors, on which he worked for many years. He asked for my opinions and carefully listened -- and he never once took my advice. SLOAN WAS PROUD -- and deservedly so -- to have been the first to work out systematic organization in a big company. He covered planning and strategy, measurements, the principle of decentralization -- in short, the basic concepts of the discipline of management. Indeed, Sloan's work as the designer and architect of modern management was a major element in America's performance in World War II. It enabled American industry to mobilize itself from total unpreparedness and deep, demoralizing depression to record production practically overnight. And it surely was a foundation for America's economic leadership in the years following World War II, and the major lesson the Japanese learned from us and used to become a great economic power themselves. But to Sloan the discipline of management came second -- and a very distant second -- to the profession of the manager. Going back all the way to Plato and Aristotle, there have been two parallel but separate approaches to governance. One is the constitutionalist approach: Government in politics or organizations has to be based on a clear structure that, above all, provides for orderly succession and safeguards against tyranny. The other approach is what in the history of political thought has been called ''The Education of the Prince'': What matters is the character and the moral principles of rulers. We have long known that both are needed. Indeed, my own books fall into both categories. Sloan, who was an amazingly well-read man, knew both traditions. He more than once told me how he had gone back again and again to the American Constitution to develop management organization and management concepts for General Motors and for the large corporation altogether. But it was axiomatic to him that the core had to be the ruler; that is, the professional manager, as a practitioner, as a leader, and as exemplar. Expressed in today's language, Sloan criticized my Concept of the Corporation for putting management before leadership. He felt it his duty to produce the antidote. The result is an extraordinary achievement. Ostensibly, My Years With General Motors is an autobiography, and it reads like one. Actually, it is far more a succession of ''case studies.'' Yet despite its didactic purpose, the book is lively, readable, and about a person. Only the person is not really Alfred P. Sloan as he was. It is Alfred P. Sloan as a model and exemplar for the professional manager. The Sloan of My Years With General Motors is often criticized as ''impersonal'' and ''cold.'' This is, in truth, how he portrays himself in the book. He strongly believed that a chief executive must not have friends on the job. He pointed out to me that neither Abraham Lincoln nor Franklin D. Roosevelt, the most effective Presidents in American history, had friends among their colleagues and associates. And the Presidents who did -- Grant, Truman (of whom Sloan thought highly), or Eisenhower (whom he distrusted) -- had promptly been betrayed by their friends. ''A friend only too easily becomes a favorite,'' Sloan argued, ''and a CEO has to be impartial and judge only by performance.'' But until deafness isolated him in old age, Sloan had been a man of strong friendships. And not all of them were ''off the job.'' His closest friend for many years had been Walter P. Chrysler, who had been the head of GM's Buick division until Sloan persuaded him to strike out on his own. Chrysler started the automobile company that bears his name in large part because Sloan pointed out to him the opportunity created by the decline of Ford Motor Co. in the mid-1920s, but also because Sloan clearly saw that with Ford rapidly going downhill, GM, in its own interest, needed a strong competitor. Chrysler remained a close friend until he died in 1940, at age 65. ABOVE ALL, Sloan had tremendous personal warmth and was unbelievably generous -- with his time as well as with his money. Wherever I went in GM in the course of my study, I was told, often by fairly junior people, how Sloan had come to their rescue, usually unasked. How, for instance, he had given up an entire Christmas vacation to find the hospital where the badly burnt child of a plant manager could get the best medical care -- and he had never even met the plant manager. I always asked, ''To whom would you go if you were in a serious jam?'' Most people immediately answered, ''Alfred Sloan, of course.'' Sloan built GM as much through inspiring personal admiration and trust in his integrity as he did through policy and strategy. The strong chieftains who were running GM's large divisions -- Chevrolet, Buick, Cadillac -- through the 1920s and in some cases much longer had built successful large companies before selling out to GM. Each was a founder older than Sloan and infinitely richer because the accessory business that Sloan had sold to GM in 1918, which brought him into management, had been quite small. Each of these men was a very large GM shareholder. Each was intensely jealous of his autonomy and resented any ''interference'' from headquarters. But within a few years, each became a Sloan admirer and a faithful team member. To be sure, Sloan was not ''touchy-feely.'' But he was ''people-focused'' to the point of being quixotic. Sloan refused to publish My Years With General Motors as long as any of the GM people mentioned in the book were still alive. ''A manager does not criticize subordinates in public,'' he said. ''And some of the things I say in the book may be interpreted as criticism.'' On the day of the death of the last person mentioned in the book, Sloan released it for publication. Sloan also rigorously censored out of My Years With General Motors every one of his personal concerns and interests. He was deeply involved with politics -- always on the losing side -- and took an active part in the Landon campaign of 1936 and the Dewey campaign of 1948. He had a 12-year love-hate relationship with Franklin D. Roosevelt. He admired Roosevelt's effectiveness. But he detested Roosevelt, the man, and opposed the New Deal. Yet the only mention of Roosevelt in Sloan's book is of someone in remote Washington who refused to stop Michigan Governor Frank Murphy from supporting the union in the 1937 sitdown strike at GM. Of the New Deal there is no mention at all! ''These were very important events for me and for GM; but they were historical accidents and have nothing to do with the job of the professional manager,'' he said when I argued that a history of the Thirties without New Deal and Roosevelt is Hamlet without the Prince. Similarly there is only a brief mention in the book of his half-brother, Raymond, who, 18 years younger, was Sloan's ''only child.'' His death while only in his 50s ''was the greatest personal tragedy in my life,'' Sloan once said. There is no mention at all that through Raymond, who was a pioneer in the field, Alfred Sloan became deeply interested in hospital management and worked hard on the organization of Sloan-Kettering and the planning and direction of its research. ''These are self-indulgences,'' he said. ''They no more belong in a book on the professional manager than that my wife collects antiques or that a chief financial officer wears loud ties.'' FAR MORE IMPORTANT, however, is that My Years With General Motors does not, for most readers, make clear the lessons for the sake of which Sloan wrote the book. It is, I still maintain, the best management book. But it has had remarkably little impact despite its wide readership and popular appeal. That it presents itself as an ''autobiography'' explains in large measure why it is not being read as the Guide to Action that Sloan intended. When he told me of his plans, I was enthusiastic. ''But, Mr. Sloan,'' I argued, ''why not call it something like The Professional Manager, with a subtitle such as Lessons From 40 Years With GM?'' Sloan thought that far too pretentious. ''At least,'' I proposed, ''put a short section at the end of each chapter to point out the lesson.'' Mr. Sloan responded sternly: ''Mr. Drucker, I am not writing for morons; I am writing for experienced managers. They have no need for me to point out the obvious.'' But as every editor soon learns, the obvious is precisely what needs to be pointed out -- otherwise it will be overlooked. What then are the main lessons in My Years With General Motors, at least as I read Alfred Sloan's intentions? -- The first is that management is a profession and that the manager is -- or should be -- a professional. This may sound trite in 1990; it was far from obvious 26 years ago. But frankly, while most managers by now preach it, not too many yet practice it. -- Like a physician or a lawyer, the professional manager has a ''client'': the enterprise. He is bound to subordinate his own interests to those of the client. It is duty to the client that characterizes the ''professional.'' -- Managers do not make decisions by opinions nor according to their preferences. They manage through the force of facts and not through the force of personality. ''Bedside manners,'' I once heard Sloan say in a speech to GM managers, ''are no substitute for the right diagnosis.'' -- The job of a professional manager is not to like people. It is not to change people. It is to put their strengths to work. And whether one approves of people or of the way they do their work, their performance is the only thing that counts, and indeed is the only thing that the professional manager is permitted to pay attention to. I once said to Sloan that I had rarely seen more different people than the two men who during my study had run the most profitable divisions of GM, Chevrolet and Cadillac. ''You are quite mistaken,'' he said. ''These two men were very much alike -- both performed.'' -- But ''performance'' is more than the ''bottom line.'' It is also setting an example and being a mentor. And this requires integrity. -- Dissent, even conflict, is necessary, indeed desirable. Without dissent and conflict there is no understanding. And without understanding, there are only wrong decisions. To me the most fascinating parts of Sloan's book are the memoranda in which he first elicits dissent and then synthesizes dissenting views into an understanding, and in the end, into consensus and commitment. Sloan implies that leadership is not charisma, not public relations, not showmanship. It is performance, consistent behavior, trustworthiness.

-- Finally -- and perhaps the most important lesson -- the professional manager is a servant. Rank does not confer privilege or give power. It imposes responsibility. One can argue with Sloan's postulates -- indeed, he very much wanted readers to argue with them: ''. . . otherwise they won't take them seriously,'' he once said when I raised the question. But those ideas are why Alfred Sloan wrote the book and why My Years With General Motors is ''must'' reading.