Abstract: Donaldson Brown (1885–1965): Twentieth-Century Financial Management Entrepreneur: The Power of an Idea over Time

Gary John Previts and Dale L. Flesher


Donaldson Brown developed the expanded Return on Investment (ROI) measure, or DuPont formula, in l914. However ROI was not his only contribution to financial management. Brown's dealer ten-day reporting system was widely and rapidly adopted throughout the auto industry. His ideas to support a variety of forecasting and planning techniques supported decentralized corporate management and his pricing processes were cutting-edge developments that others attempted to emulate. Flexible budgeting at General Motors, frequently unrecognized, also was in place during his financial administration in the early l920s. ROI remains Brown's most prominent contribution, and the technique achieved status as a dominant approach to financial management in industrial corporations by the l950s. As a national standard-of-performance measure, it was supported by varying sources including the American Management Association as well as in the teaching materials of academics, especially Robert N. Anthony of the Harvard Business School. The impact of these forms of dissemination led to ROI's being adopted eventually at the Ford Motor Company, one of GM's most intense rivals, when its previously autocratic centralized style of Ford family management, which had little need for financial management techniques, was replaced by a team known as the Whiz Kids, led by Harvard Business School alumnus Robert McNamara. This paper asserts the significance of the innovations developed and supported by Brown as being among the most important of those initiated in twentieth-century corporate America, and among the most important in the development of twentieth-century accounting and financial management thought. Brown is cited as one of the greatest innovators in twentieth-century management thought.