New Coöperation in Industry
THE Seventh International Management Congress, held at Washington in September 1938, was, for the American business men who participated, a novel and interesting experience. This conference, unlike the usual gatherings of bankers, manufacturers, or other trade groups, was only indirectly concerned with the immediate business outlook or the economic problems which make up the ordinary agenda of such meetings. Instead, major emphasis was placed upon an entirely new and perhaps epoch-making development — the emergence of a new profession, that of industrial management, and the definition of this new profession’s aims and responsibilities as they relate to owner, worker, customer, and the public.
It is indeed significant that leaders of industry are turning to serious discussion of the new social responsibilities which rest upon them, and are devoting themselves to the definition of ethical standards of conduct for all business, whether large or small. It signifies industry’s increasing consciousness of the importance of extending and improving its own social relationships.
To the revolutionary changes which have characterized the post-war era, particularly in its latter depression stages, industry has not been immune. Technological changes have come with an unparalleled swiftness; while within business leadership itself a no less fundamental change has been under way, of which the public is largely ignorant.
Too often the present-day industrialist is portrayed as a sort of antediluvian survival — a stubborn, self-centred, tight-fisted, supreme individualist, with a mind hermetically sealed against everything unrelated to his own immediate interests. Acclaim for contributions to the nation’s material advancement is no longer accorded him. Rather he finds himself viewed with such suspicion and distrust that, increasingly, every phase of his business activities has come to be threatened with regulation and policing by government.
Yet that old-fashioned picture of the so-called ‘captain of industry’ is as archaic as a daguerreotype. The old-time arrogant, rough-riding owner-manager began to pass from the scene years ago. His place has been filled by a whole new generation of executives who occupy a strictly professional status and who in no way conform to this pre-war concept of capitalist-entrepreneur.
The members of this new profession are still called business men. In reality they are scientific specialists, and in ideas, ethics, social concepts, and principles of business administration they differ radically from their predecessors.
The very complexities of the nation’s industrial life have forced the evolution of this new type of business executive. He must plan ahead with the vision of the engineer. In estimating prospective income and expenditure, he must be as accurate as the mathematician. He must have a knowledge of finance and law approaching that of the banker and the attorney. Like the research student in the laboratory, he must be keenly receptive to advances in technical knowledge. In directing his staff, he must have the qualifications of the teacher, plus the psychologist’s insight into human nature. If the business executive is to anticipate the ups and downs of the business cycle and make his decisions accordingly, he must be much more than a rudimentary economist. He also must find time to keep abreast of the literature of this new profession, which is already as voluminous as that of law or medicine, architecture or engineering.
In addition, he must be acutely sensitive and adaptable to changing social and economic thought. The tempo of the times is such that any static attitude carried over from the past becomes a positive handicap not merely in evaluating present-day conditions but in anticipating tomorrow’s developments.
The social objective for the new science of management was well stated more than two decades ago by Harrington Emerson. In The Twelve Principles of Efficiency (1911) he wrote: —
The Principles of Efficiency set forth a new view of the whole industrial problem. They define something infinitely greater than a system of management. They set forth a morality and provide practical measures for its attainment.... It is the declaration of a New Philosophy....
To forward the new morality, to extend the dominion of man over uncarnate energy and its use, to substitute highly paid thinkers and supervisors for devitalized toilers, to help each individual, each corporation, each government to meet its part of the obligation, above all to inspire those executives on whose skill all progress and all wise performance depend, is the justification of these Principles of Efficiency and of Scientific Management.
What Harrington Emerson envisioned was an emancipation from drudgery and man’s elevation in status, with the machine as the servant of the worker. In other words, the test of scientific management was its ability to provide an increased well-being for the ordinary wage earner and his family.
How far has industry progressed toward this goal? How far does it observe the principles, approach the ethical standards and the ideals, to which this philosophy gave expression?
Perhaps America has been overproud of the material progress recorded since Harrington Emerson’s time. Nowhere can history duplicate, in this short span of years, such a record of achievement. Merely to record the facts, keep the files and books of modern industry, takes as many clerks as it took wage earners to produce the manufactured goods of a generation ago. The total of wages paid in wholesale and retail distribution in 1935 alone, for example, was three times the earnings for all wage earners in all manufacturing industries in 1900. Within thirty years, there were created for the nation nearly twenty million new jobs in industry, business, trade, and other nonagricultural activities. The national wealth rose from 88 billion dollars to 362 billion, while wages paid in manufacturing increased by more than 500 per cent.
These accomplishments did not just ‘happen.’ They were the product, not of government, but of a free people, applying to the tasks at hand limitless energy and resourcefulness. They were no less the product of a great faith — a belief in freedom and democracy which for generations had made this nation a shining beacon to the oppressed of every land. But, behind all these advantages, the real driving power lay in the impelling force of invention, research, and creative management, which have been America’s distinctive contributions to industrial progress.
What is not so clearly recognized is that labor has won its own emancipation through the development of industry, and through that alone. Earning power no longer depends upon sheer muscular brawn, but increasingly reflects skill and intelligence. Wages are not set by hours of hard labor but by the productiveness of the machine. We have established a new cycle of production-consumption, unknown in any former age. The wage paid the worker is a primary source of national purchasing power; in what he spends as well as what he receives he contributes to that reciprocal action without which modern industry cannot function.
As the interdependence of different social groups comes to be better understood, so their mutual obligations to each other are more clearly perceived. The holder of an industrial job cannot produce without tools, materials, and money to finance production and sales. The shareholder cannot profit without the time, the ideas, and the dynamic energy of men supervising the uncarnate power that now drives the machines. None can have except as all, working together, produce.
All this activity made for constantly widening spheres of opportunity in which those who were enterprising could constantly better their economic position. The mainspring of our national progress has been the extraordinary fluidity of American economic and social life. The frontiers of the West disappeared almost unnoticed, or, more accurately, became merged in a completely new horizon.
In this evolution of a complex industrial society the social responsibility of management has broadened correspondingly. Management no longer represents, as it once did, merely the single interest of ownership; increasingly it functions on the basis of a trusteeship which endeavors to maintain, between these four basic interlocking groups, a proper balance of equity.
Today the executive head of every business is accountable not only to his stockholders but to the members of his working organization, to his customers, and to the public. And that accountability is now being voluntarily observed by industry in addition to being policed by public opinion and by such federal agencies as the Securities and Exchange Commission, the National Labor Relations Board, the Federal Trade Commission, with each body serving as a special guardian for a particular relationship.
The full implications which flow from this new concept of trusteeship have not yet been completely grasped by industry, and certainly not by worker and public. The traditional private status of industry has been supplanted, under changing social concepts and regulation, by a quasi-public status. The secrecy, for instance, which was the inevitable accompaniment of an intense competitive struggle for markets, has given place to Klieg lights beating mercilessly upon all business activities. The result is that decisions on industrial and economic policies, which once were made solely from the standpoint of private interest and profit considerations, must now be evaluated in terms of consequence — not merely to one individual company, but to an entire industry of which the particular company may be a comparatively minor unit. And these decisions must take into account a new factor of increasing significance — that of public relationships.
That industry should have difficulties in readjusting itself to this changed environment thus becomes understandable. For example, a moot question among business executives today relates to the kind and amount of information on operations and profits which should be made available to stockholders, jobholders, and the public. In revealing what is felt to be highly confidential data many corporations still feel a natural hesitation and reluctance. They do not appreciate that this very secrecy has been the root of most of the suspicion and distrust which have left business so vulnerable to political attack.
To meet this situation, some hundred or more corporations of varying size have now adopted the innovation of issuing comprehensive periodic reports not only to stockholders but to their employees as well. In simple and nontechnical language, balance sheets and profit-and-loss statements are made intelligible to the layman, with the sales dollar broken down into its component elements of cost for materials, labor, depreciation, and so forth. Only thus can be dissipated the myth which agitators and demagogues have used so assiduously: that industry’s earnings are ‘excessive’ and that in their distribution the worker does not receive his proper share.
In view of the distortion to which industrial statistics are subjected these days, it is most important that the true facts of the case be presented in frank and simple fashion by business itself to those who have a direct interest in the results. In this day practically all figures on industrial operations, supplied as they are in detailed reports to government agencies, are now matters of public record. It is highly desirable, therefore, that employees learn exact facts at first hand, intelligently interpreted by the company itself, rather than that they should receive a series of cold accounting statements or garbled, inaccurate, and exaggerated misinformation.
Confidence between management and men and women in the shop and office, essential if the new obligation of trusteeship is to be properly discharged, cannot be created in an atmosphere other than that of candid and complete frankness. But this wider dissemination of information among employees, important as it is, can never bridge, by itself, the gulf of misunderstanding. Hostility and recrimination are not conducive to a spirit of coöperation.
While the principle of collective bargaining is now a permanent part of our industrial procedure, the method of its application would appear to be in need of improvement. we must go back to the lessons learned in forty years of British experience. Disputes must be kept localized, and not referred to distant tribunals; equitable adjustments can be reached only on the basis of intimate contact with the actual facts, not a legalistic record of mere charges, refutations, and counter-charges. They must be confined directly to the parties at interest, and safeguarded against the interference of politicians who seek to gain some partisan advantage. And, above all, they must be kept out of the hands of lawyers who profit from turmoil. Had these factors been present in our mediation machinery, there would have been no loss of more than 93 million man-days of work in the past five years, nor would industry and business have been disrupted to the extent of some 7 billion dollars — a heavy burden to a national economy that had not yet. emerged from its convalescence stage.
Industrial peace can be achieved only as there is created a genuine mutuality of interest based upon fair dealing strictly adhered to, without the use of force or coercion.
This is the goal sought under the National Labor Relations Act. While many provisions of this piece of legislation are widely criticized as being discriminatory and obstructing rather than furthering industrial peace, yet it does mark a long forward step. As experience is gained and as mutual confidence between labor and management replaces present suspicion and distrust, its weaknesses will be corrected not. merely by amendment, but through the process of continuous consultation.
The present surface indications of controversy and strife are merely birth pains, completely deceptive as symptoms of what is really taking place. A new order of labor relations is emerging; but as yet this new order has been obscured by dust clouds of words from demagogues and radical agitators who have sought to extract personal advantage from the existing confusion. There is little doubt that, once the commotion subsides, those who have the interests of labor sincerely at heart and those who, no less sincerely, guide the destinies of industry will be found nearer to fundamental agreement and accord than they have ever been before.
On the one hand, responsible labor leadership — as contrasted with those leaders who advocate a philosophy of class hatred — upholds the principles on which rests our free economic system. On the other hand, the new generation of business leaders, trained in the profession of scientific management, recognizes the essential dignity of man as a human being and strives to increase both his standard of living and his productiveness by making him a supervisor rather than a slave of the machine.
This new concept of the mutuality of interest, this goal of constructive collaboration, is foremost among the aims of enlightened industrial management. No one minimizes the difficulties that still lie ahead. Many clearly antisocial practices, such as sitdown strikes, lockouts, production sabotage, gangster methods, and labor racketeering must be eliminated. But honest and sincere efforts toward constructive industrial coöperation cannot help being productive of the harmony so earnestly desired.
I have cited the labor situation, not in any spirit of criticism, but merely to illustrate the difficulties that confront progressive management today as it attempts to meet and discharge its own enlarged social concepts. Industry is sincerely desirous of steadily improving conditions of employment, of lessening the factors that make for job insecurity, of providing continuity of employment to safeguard the economic future for its employees.
But, unfortunately, a competitive industrial system, with wide swings in its production cycle, provides no quick ready-made short cuts to such desirable goals, nor are there any homeopathic prescriptions which can be applied uniformly to all different types of business. For only as industry operates at a profit can this level of well-being be raised. Higher wages, shorter hours, and better working conditions can be provided, not through ‘deficit financing,’ but only as industry’s income increases each year.
So much for some of the internal problems which today confront the management of American business and industry. Each individual business, of course, operates under conditions peculiar to itself; the kind of labor it deals with, its customer groupings, its markets, its products — all may be vastly different from conditions in other companies. Consequently the specific approach toward the solution of these problems necessarily differs in individual cases.
But, above and beyond methods adopted by the new science of management to resolve these peculiar problems, business men must realize that there is a broader consideration which today is a common denominator for all industry — namely, the still larger question of public friendliness or hostility toward business as a whole.
Naturally, before any firm or group of firms can expect success in public relations, their own houses must be in order; in other words, they must have made progress toward mutual understanding and coöperation with stockholder and jobholder. Granting that, their own special problem of good public relations then merges with that affecting the rest of business and industry.
Few corporation heads feel themselves competent or qualified, either by training or by experience, to serve as experts in a field so elusive and intangible as that of public relations. Compared with politicians, for example, business men are at a sharp disadvantage in attempting to diagnose public opinion; they are neophytes when it comes to anticipating popular reaction to policies or decisions which must be based upon hard, inexorable economic realities.
I spoke, a moment ago, of that precision which today is the primary characteristic of managerial success. But that quality of exactness of mind, of an almost ruthless and realistic appraisal of concrete facts, becomes a decided handicap to the business executive when he attempts to step into the abstract sphere which has to do with politics or public opinion.
The business man soon finds that industry and politics appear to operate on exactly opposite formulæ. The industrial leader who constantly checks results against costs, performance against time schedules, is a veritable amateur when he is confronted with problems where no such sharp clear outlines exist.
Political questions arc determined, not always by reason or logic, but too often by emotion and inconsequential facts. They are motivated by fear, prejudice, deeply rooted traditions, rather than by principles.
The very sharpness of this cleavage in viewpoint between business men and the so-called public places upon industrial leadership today a particular responsibility. Business leaders must cease to ‘view with alarm’ or issue pontifical statements outside their sphere of immediate knowledge; they must learn to be more imaginative and persuasive. If they are to understand what the man in the street thinks, they must be less cloistered and mingle more with people. To appreciate crowd psychology, they must do as the politician does — actually face and talk to the crowd.
These assignments may appear difficult for men already overburdened with heavy responsibilities. But only through such direct and personal contacts are the fundamentals of public relationships to be first understood and then solved.
Above all, industry must not lend itself to the re-creation of that myth of the late New Era — the myth of the socalled ‘Big Business man.’ He has been toppled from his pedestal, let’s hope for good. Instead let’s keep business as simple and unpretentious as an old shoe.
As there develops within business a new sensitivity to public opinion and popular reactions, the next important step can then be taken: the formulation of a definite creed setting forth the basic aims and principles on which modern industry operates. Such a creed must embody not merely pious words but genuine convictions as to future relationships with employees and the public. It might begin something like this: —
We who are responsible for the management of business in supplying the needs of the public for goods and services, and who recognize our obligations to stockholders and employees, believe
That we should constantly seek to provide better values at lower costs so that more of our people can enjoy more of the world’s goods;
That we should strive to develop the efficiency of industry so as to earn a fair return for the investing public and provide the highest possible reward for the productivity of labor;
That we should stimulate the genius of science and utilize the methods of research to improve old products and create new ones so as to provide continuously new fields of employment for the present and the coming generations;
That management should encourage fair trade practices in business which, whether effected by competition or coöperation, will be so shaped as to be for the best interest of our customers and of society as a whole;
That it is management’s duty to be alert to its own shortcomings, to the need for improvement, and to new requirements of society, while always recognizing the responsibility of its trusteeship;
That business in this country has never been what it could be and never what it yet will be;
That Business, Labor, Government, and Agriculture, working hand in hand, can provide jobs and the opportunity for all to work for security without loss of our liberty and rights as free men.