{"collection":"philosophy-ethics","full_text_available":true,"graph_url":"https://unchartedknowledge.5gfusion.net/v2/api/page/gutenberg_29674/graph","html_url":"https://unchartedknowledge.5gfusion.net/v2/page/gutenberg_29674","id":"gutenberg_29674","license":"Public Domain (US)","rights_basis":"gutenberg_metadata_copyright_false","source":"gutenberg","source_url":"https://www.gutenberg.org/ebooks/29674","summary":null,"tags":["Business education","Business ethics","Category: Business/Management","Category: History - American","Category: Philosophy & Ethics","Category: Teaching & Education"],"text":"Produced by The Online Distributed Proofreading Team at\nhttps://www.pgdp.net (This file was produced from images\ngenerously made available by The Internet Archive/Canadian\nLibraries)\n\n\n\n\n\n\n_Barbara Weinstock Lectures on The Morals of Trade_\n\nHIGHER EDUCATION AND BUSINESS STANDARDS.\nBy WILLARD EUGENE HOTCHKISS.\n\nCREATING CAPITAL: MONEY-MAKING AS AN AIM IN BUSINESS.\nBy FREDERICK L. LIPMAN.\n\nIS CIVILIZATION A DISEASE?\nBy STANTON COIT.\n\nSOCIAL JUSTICE WITHOUT SOCIALISM.\nBy JOHN BATES CLARK.\n\nTHE CONFLICT BETWEEN PRIVATE MONOPOLY AND GOOD CITIZENSHIP.\nBy JOHN GRAHAM BROOKS.\n\nCOMMERCIALISM AND JOURNALISM.\nBy HAMILTON HOLT.\n\nTHE BUSINESS CAREER IN ITS PUBLIC RELATIONS.\nBy ALBERT SHAW.\n\n\n\n\nHIGHER EDUCATION\nAND\nBUSINESS STANDARDS\n\n\n\nBy\n\nWILLARD EUGENE HOTCHKISS\n\nDIRECTOR OF BUSINESS EDUCATION\nAT THE UNIVERSITY OF MINNESOTA\n\n\n\nBOSTON AND NEW YORK\nHOUGHTON MIFFLIN COMPANY\n_The Riverside Press Cambridge_\n1918\n\nCOPYRIGHT, 1918, BY THE REGENTS OF\nTHE UNIVERSITY OF CALIFORNIA\n\nALL RIGHTS RESERVED\n\n_Published March 1918_\n\n\n\n\nBARBARA WEINSTOCK\nLECTURES ON THE MORALS OF TRADE\n\n\nThis series will contain essays by representative scholars and men of\naffairs dealing with the various phases of the moral law in its bearing\non business life under the new economic order, first delivered at the\nUniversity of California on the Weinstock foundation.\n\n\n\n\nHIGHER EDUCATION AND BUSINESS STANDARDS\n\n\nLast summer, when we reached California for a year's sojourn, we had\nthe good fortune to secure a house with a splendid garden. A few weeks\nago, after the early warm days of a California February had opened up\nthe first blossoms of the season, our little five-year-old discovered\nthat the garden furnished a fine outlet for her enterprise, and she\nsoon produced two gorgeous--I will not say beautiful--bouquets. Barring\na certain doubt about her mother's approval, she was well satisfied\nwith her achievement, she felt a sense of completeness in what she had\ndone--and well she might, for she had not left a visible bud.\n\nThere is a strong tendency to go at business the way Helen went at the\ngarden. She knew what to do with bouquets; raw material for making them\nwas within her reach; what more natural than to turn it, in the most\nobvious and simple way, into the product for which it was designed.\nFrom her standpoint such a procedure was entirely correct--she was\nmaking bouquets for herself and her friends; every one in her circle\nwould share the benefit of her industry.\n\nWhenever in the past business enterprise has proceeded from a similar\nviewpoint, we have stood aside and let it proceed; it was not our\ngarden; we were quite willing to take the role of disinterested\nspectators. Recently we have discovered that it is our garden; we have\nlearned that we are not disinterested; we now see that business plays a\nlarge part in the life of every one of us. That being the case, we\nassume the right to question its processes, its underlying policies,\nand its results. We are gradually coming to think of business in terms\nof an integrated and unified national life. We desire the national life\nto be both wholesome and secure.\n\nWhat the public really wants from business, then, is a contribution to\nnational welfare, and it has become convinced that, by taking thought,\nit can make the contribution more certain and more uniform than it has\nbeen in the past. Many business men share this view; with varying zeal\nthey are trying to work out standards of organization that will insure\nthe kind of regard for general welfare which the public has come to\ndemand.\n\nThis is the new idea in business; it has already taken deep root; but\nit needs to be further developed. We have the difficult task of\nreducing an idea to a practical working plan. How shall we go about it?\nFortunately the idea itself contains a hint for further procedure. A\nnew attitude in business must be coupled with a new attitude in public\npolicy.\n\nWhen my enterprising child made an onslaught on the garden it would\nhave been easy enough to punish her; but it is doubtful if mere\npunishment gets very far in a case of that sort. Unless we can teach\nthe child to enjoy the garden without destroying it, the restraining\ninfluence of punishment will be no stronger than the memory of its pain\nor the fear of its repetition. This memory of the past and fear of the\nfuture usually wage a most unequal contest with the vivid and alluring\ntemptation of the present.\n\nBut should not the child be restrained? As far as necessary to protect\nthe garden, and perhaps also to make her conscious of an authority in\nthe world outside of her own will, yes--but that is not the main task.\nThe main task is to educate her, to develop an understanding of the\ngarden, to get her in the frame of mind in which she will derive her\ngreatest enjoyment when she cultivates it and sees it grow, and when\nshe restricts her picking to a reasonable share of what the garden\nproduces.\n\nIn the actual case before us, the child was after quick and easy\nresults, the only kind she could comprehend; she was unable to look\nupon the garden as a living thing whose life and health must be\npreserved to-day in order that it may yield returns to-morrow and next\nweek. Analyzed with adult understanding, her essential fault was a\nfailure to get beyond immediate results and to view the garden from a\nlong-time angle. We ought not to expect her to do this now, but we do\nexpect her to do it when she is grown up. We expect in time so to\neducate her that she will be able to think of the garden in terms of\npermanence and growth and to make an effective use of it from that\nstandpoint; and this same education in long-time effectiveness is what\nwe want in business.\n\nBusiness standards must be discussed from the standpoint of efficiency,\nbut efficiency needs to be interpreted. We may as well admit at the\nstart that the efficiency ideal is not entirely in good repute at this\nmoment.[1] If I may import an expression from England, we have been\nsomewhat \"fed up\" with efficiency during the recent past and the ration\nhas been rather too much for our digestion.\n\n      [1] At the time this was written, in the spring of 1916, it will\n      be recalled, the German war machine for nearly two years had been\n      demonstrating its efficiency; the Allies had not yet matched it,\n      and we did not like the work that efficiency was doing.\n\nAway back in the eighties, before the dominance of business in American\nsociety had been questioned, efficiency, as the term was then\nunderstood, had a place among the elect; it was the intimate associate\nof business success. Then came the muck-raker, and with him came also\nanti-trust cases and insurance investigations. We turned our attention\nto labor outbreaks, to graft prosecutions, and to land steals. We\ntalked about \"malefactors of great wealth.\" We even became interested\nin Schedule K. And so, during the first decade of the new century a\nwhole train of revelations, incidents, and phrases tempered our regard\nfor business and brought many business practices under the ban of law\nand hostile sentiment. Efficiency was in bad company and suffered in\nreputation.\n\nBut efficiency was able to prove an alibi; we were told that the thing\nwhich posed as efficiency was not efficiency, but special privilege,\nand we were again persuaded of the great service a regenerate and\nsocialized efficiency could render. Just at this point came the\noutbreak in Europe; efficiency was again caught in bad company, and we\nbegan to hear such phrases as the \"moral breakdown of efficiency,\"\n\"efficiency, a false ideal,\" and others of similar import. In an\narticle bearing the title, \"Moral Breakdown of Efficiency,\" published\nin the \"Century\" for June, 1915, it was maintained that pursuit of\nefficiency had led and was still leading civilization on a downward\npath.\n\nIn addition to the reputation of keeping bad company, efficiency has to\nbear the odium of many foolish and inefficient deeds performed by its\nself-appointed prophets. The quest for efficiency has called forth in\nbusiness a new functionary known as the \"efficiency expert.\" Many of\nthese men have done a vast amount of valuable work, but many others\nhave not. While the real expert has been raising the level of business\norganization, the others have been piling up a large wastage of poor\nwork and lost confidence.\n\nBut these are side issues. The main fact stands out above them. We have\nbeen steadily adding to the burdens on industrial and commercial\nequipment; even more have we increased the stresses and the strains on\nhuman life. A devastating war is now suddenly taking up the slack, and\nthe slow and painful task of making the world efficient must be\nhastened in order that society may bear the load. In these\ncircumstances we need not apologize for making efficiency the main\nsupport of business standards. Nor need we assume, as does the author\njust cited, that the efficiency ideal in any way conflicts with the\nideal of moral responsibility and service.\n\nOf course, if we reflect, the abstract and impersonal thing which\nengineers define as the ratio between energy expended and result\nobtained has no moral quality in itself. Whatever of morality or lack\nof morality the word \"efficiency\" calls forth is given to it by the\nmanner in which the terms of the ratio are defined. It is for society\nto make the definitions. Society may determine the forms and the\nlimitations under which it will have business energy expended, and it\nmay decide what are the social ends toward which it will have business\neffort contribute. Guided by wise social policy, efficiency and service\ngo hand in hand.\n\nSince business is subject to control by society, it follows that the\nefficiency factors in a particular business, in a whole industry, or in\nbusiness generally, must adjust themselves to the decisions that\nsociety has made, and they must also take account of decisions that it\nmay make in the future. And these decisions are not all recorded in the\nlaw or even in the vague thing we call public opinion. Laws and\nopinions of particular groups, group morality, individual morality,\neven inertia, and a long list of more subtle and often capricious\nreactions are channels through which social purpose finds expression.\n\nIt is worth our while to consider how these reactions may affect\npractical administration. No reflection is needed to see that in\nproportion as business men fail to take account of forces outside the\nbusiness, in that proportion they are likely to miscalculate the\nresults of business policies. Striking examples of such miscalculation\nare found in the experience of Mr. George M. Pullman back in the\nnineties, and of Mr. Patterson, of the National Cash Register Company,\na decade later. Each of these men, with apparent good faith, undertook\nto surround his laborers with conditions of physical, mental, and moral\nuplift, and each undertook to do it as an act of paternal bounty. Each\nof them, as far as we can judge, expected appreciation, gratitude, and\nincreased efficiency. But they failed to take account of the group\nconsciousness of their laborers; they did not know what the laborers\nwere thinking; and because the laborers were thinking something\ndifferent from what the employers thought, policies intended to arouse\ngratitude aroused instead resentment and a strike.\n\nBut there are many things besides too much paternalism that may result\nin a strike. Another concern of international dimensions and one whose\nofficers, I can vouch, are men of high character and public spirit,\nalso found itself confronted with a strike in 1910. This was a highly\norganized business. For years its sales department had tried to seek\nout the highest grade of talent, and the result was a selling and\ndistributing organization that was the model and the envy of\ncompetitors. But questions of employment seem to have gone by default,\nthe general policy being confined to a sincere but vague good-will\ntoward employees and acceptance of things as they were.\n\nThe issues of the strike were issues with which we are all familiar. On\nthe workers' side, grievances and no workable machinery for redress;\nresult: organization, concerted group action, force. On the other side,\nthere was a personal readiness to hear grievances, coupled with\ninsistence on the ancient right of the employer to conduct his own\nbusiness in his own way, without interference from employees or the\npublic.\n\nAfter weeks of deadlock the strain of a distressing situation, losses\nfrom the interruption of business, regard for public opinion and the\nopinion of friends, combined with their own desire to do the right\nthing, induced the employers, probably against their best judgment, to\nrecede from their position. An agreement was made providing for\nincreased wages, standardization of piece-work, a preferential shop,\nand appointment by the firm of a person to hear grievances and to\ncooperate with a representative of the union in securing redress.\n\nThe union in this case was fortunate in being represented by a\nhigh-minded man who was a real statesman. The firm selected a trained\neconomist as labor expert, and he soon had an employment department in\noperation. Together these men and their colleagues have kept peace in\nthe concern and have developed and expanded the machinery for settling\ndisputes into a model of industrial-relations organization.\n\nSome four years after the strike the business head of the firm\ntestified in a public hearing that he should scarcely know how to\nconduct his business without the organization which now obtains for\ndealing collectively with labor. He also in the same hearing expressed\nthe view that a large employer is a trustee of the public, responsible\nfor the measure of public welfare in which his business results; and\nthis man, remember, is not a reformer or even a radical, but just a\nsuccessful business man.\n\nIn this bit of labor history there were, no doubt, many fortunate but\nuncontrollable factors which, otherwise combined, would have brought a\nless happy result. But two things stand out: first, the laborers\nlistened to wise counsel--they were well led; and second, the\nemployers, when they consented to make an agreement, gave the plan\nadopted their genuine support. Combining good citizenship with business\nsense they were able to understand the new social influences that make\nthe formulas of 1880 a poor gauge of efficiency factors in 1910. They\nare now enjoying the benefits of their willingness to learn.\n\nThe effect of social forces is seen under different circumstances and\nfrom an entirely different angle in the present halting policy of\nAmerican railroads.[2] Here, in addition to other social elements in\nthe question, is the fact of definite government control. This\ncircumstance has accustomed railway managers to look at both the\ninternal and the public factors in their success. A number of years\nago, before Mr. Justice Brandeis became a member of the Supreme Court,\nhe pointed out, as many others have since done, that the railroads were\nlooking too much to the government factor, and too little to the\neconomy and effectiveness of their own internal administration. Even\nthough we concede this point, it is still clear that the highest\nefficiency of our railroads must wait upon a clarification of policy\nwith respect to the great social fact affecting railway operation--the\nfact of government control. We may not approve the precise manner in\nwhich the railroads respond to this fact, but obviously they cannot be\nefficient and ignore it.\n\n      [2] Referring to the situation early in 1916 when this sentence\n      was written.\n\nExamples, ranging all the way from accepted and enforceable legal\nrestrictions to the interplay of the most subtle group sentiments,\ncould be multiplied at will to bring out the presence of the social\nfactor in efficiency standards. Were it not that internal business\npolicies, on the one hand, and public policy toward business, on the\nother, are so frequently vitiated by failure to reckon with the\nprobable reactions which a particular measure will call forth, I should\nnot retard the discussion to emphasize a point so obvious. But though\nthe presence of social factors is obvious, how to measure them is not\nobvious. General principles that bear on a specific case are hard to\nlocate and difficult to apply. Even the broad lines of social and\nbusiness policy are not always clear, and the probable trend of future\npolicy is still less clear.\n\nJust what are the principles that are being worked put in order to\ndetermine the forms and the limitations under which business energy\nshall be expended, and how do they differ from those followed a\ngeneration ago? Take the other side of the efficiency ratio: toward\nwhat results are we trying to have business energy directed? Again,\nwhat are the instruments with which society is enforcing its purpose?\nHow effective are they, how effective are they likely to become?\nFinally, what bearing will this social effectiveness or lack of\neffectiveness have on standards of business efficiency for the\ngeneration about to begin its work?\n\nEven though we cannot answer these questions to-day, we have, to-day,\nthe task of educating the generation that must answer them. More than\nthis, the education we provide for the generation about to begin its\nwork will determine, in no small measure, the kind of answers the\nfuture will give. It is, therefore, of great importance that in our\nideals and our policies for educating future business men we should try\nto anticipate the social environment in which these men will do their\nwork.\n\nWe are in the habit of speaking of the present as a time of\ntransition--the end of the old and the beginning of the new. In a very\nreal sense every period is a period of transition. Society is always in\nmotion, but that motion at times is accelerated and at other times\nretarded. Clearly we are living now in a period of acceleration--a\nperiod which must be interpreted not so much in terms of where we are,\nas of whence we came and whither we are going. This means that we\ncannot hope to prepare an educational chart for the future without\nunderstanding the past.\n\nIn our study of business we are always emphasizing the \"long-time point\nof view,\" and we fall back upon this convenient phrase to harmonize\nmany discrepancies between our so-called scientific principles and\npresent facts. On the whole, we are well justified in assuming these\nlong-time harmonies, but it will not do to overlook the fact that many\nimportant and legitimate enterprises have to justify themselves from a\nshort-time viewpoint. Of more importance still is the fact that in this\ncountry enterprises of the latter sort have predominated in the past.\nThis circumstance has a very marked bearing on the nature of our task,\nwhen we try to approach business from the standpoint of education.\n\nThere are strong historical and temperamental reasons why\nnineteenth-century Americans were inclined to take a short-time view of\nbusiness situations. Our fathers were pioneers, and the pioneer has\nneither the time, the capital, the information, the social insight, nor\nthe need to build policies for a distant future. The pioneer must\nsupport himself from the land; he must get quick results, and he must\nget them with the material at hand.\n\nEvery one of our great industries--steel, oil, textiles, packing,\nmilling, and the rest--has its early story colored with pioneer\nromance. The same romantic atmosphere gave a setting of lights and\nshadows to merchandising and finance and most of all to transportation.\nWhether we view these nineteenth-century activities from the standpoint\nof private business or of public policy, they bear the same testimony\nto the pioneer attitude of mind.\n\nConsidering our business life in its national aspects, our two greatest\nenterprises in the nineteenth century were the settlement of the\ncontinent and the building-up of a national industry. In both these\nenterprises we gave the pioneer spirit wide range. With respect to the\nlatter, industrial policy before 1900 was summed up in three items:\nprotective tariff, free immigration, and essential immunity from legal\nrestraints. This is not the place to justify or condemn a policy of\n_laissez-faire_, or to strike a balance of truth and error in the\nintricate arguments for protection and free trade; nor need we here\ntrace the industrial or social results of immigration. We need only\npoint out that the policy in general outline illustrates the attitude\nof the pioneer. The thing desired was obvious; obvious instruments were\nat hand--immediate means used for immediate ends. From his viewpoint,\nthe question of best means or of ultimate ends did not need to be\nconsidered.\n\nIn building our railways and settling our lands the pioneer spirit\noperated still more directly, and in this connection it has produced at\nthe same time its best and its worst results. The problem of\ntransportation and settlement was not hard to analyze; its solution\nseemed to present no occasion for difficult scientific study or for a\nlong look into the future. The nation had lands, it wanted settlers, it\nwanted railroads. If half the land in a given strip of territory were\noffered at a price which would attract settlers, the settlers would\ninsure business for a railroad. The other half of the land, turned over\nto a railroad company, would give a basis for raising capital to build\nthe line. With a railroad in operation, land would increase in value,\nthe railroad could sell to settlers at an enhanced price and with one\nstroke recover the cost of building and add new settlers to furnish\nmore business.\n\nIn its theory and its broad outline the land-grant policy is not hard\nto defend. The difficulties came with execution. We know that in actual\noperation the policy meant reckless speculation and dishonest finance.\nWe know that no distinction in favor of the public was made between\nordinary farm lands, forest lands, mineral lands, and power sites. We\nknow that the beneficiaries of land grants were permitted to exchange\nordinary lands for lands of exceptional value without any adequate\n_quid pro quo_; and we know that there were no adequate safeguards\nagainst theft.\n\nWholesale alienation of public property was intended to secure\nrailroads and settlers, but the government did not see to it that the\nresult was actually achieved. Speculation impeded the railways in doing\ntheir part of the task, while individuals enriched themselves from the\nproceeds of grants or withheld the grants from settlement to become the\nbasis of future speculative enterprises. All this seems to show that in\nexecution at least our policy from a national standpoint was\nshort-sighted. Careful analysis and a more painstaking effort to look\nahead might have brought more happy results.\n\nAnd how about the railroads from the standpoint of private enterprise?\nA railway financier once described a western railway as \"a right of way\nand a streak of rust.\" The phrase was applicable to many railways.\nDeterioration and lack of repairs were, of course, responsible for part\nof the condition it suggests, but much of the fault went back to\noriginal construction. It was the wonder and the reproach of European\nengineers that their so-called reputable American colleagues would risk\nprofessional standing on such temporary and flimsy structures as the\noriginal American lines. Poor road bed; poor construction; temporary\nwooden trestles across dangerous spans--everything the opposite of what\nsound engineering science seemed to demand. Why did not the owners of\nthe roads exercise business foresight to provide for reasonably solid\nconstruction?\n\nWhat seems like an obvious and easy answer to all these questions is\nthat both the Government and the road were controlled in many cases, as\nthe people of California well know, by the same men, and these men were\nprivately interested. As public servants or as officers of corporations\nthey were supposed to be promoting settlement and transportation; as\nindividuals they were promoting their own fortunes. This result was\nsecured by the appropriation of public lands and the conversion of\ninvestments which the public lands supported. That this sort of thing\noccurred on a large scale and that it involved the violation of both\npublic and private trusts is fairly clear.\n\nPublic sentiment has judged and condemned the men who in their own\ninterests thus perverted national policy; and we approve the verdict.\nBut it is not so easy to condemn the policy itself or to indict the\ngeneration that adopted it. Looking at the matter from the standpoint\nof the nation, it was precisely the inefficiency and the corruption in\ngovernment which augmented the theoretical distrust of government and\nmade it unthinkable to the people of the seventies, that the Government\nshould build and operate railways directly. The land-grant policy\nentailed corruption and waste, of course; but what mattered a few\nmillion acres of land! No one had heard of a conservation problem at\nthe close of the Civil War. Resources were limitless; without\nenterprise, without labor and capital, without transportation they had\nno value, they were free goods. The great public task of the nineteenth\ncentury was to settle the continent and make these resources available\nfor mankind. This task it performed with nineteenth-century methods.\nFrom our standpoint they may have been wasteful methods, but they did\nget results. In its historical setting, the viewpoint from which the\ntask of settlement was approached was not so far wrong.\n\nWhen we examine the counts against the railroads as private\nenterprises, we find that the poor construction, which from our point\nof vantage looks like dangerous, wasteful, hand-to-mouth policy, is\nonly in part explained by the fact of reckless and dishonest finance. I\nam advised by an eminent and discriminating observer that the\ndistinguished Italian engineer to whom Argentina entrusted the building\nof its railroad to Patagonia, produced a structure which in engineering\nexcellence is the equal of any in the United States to-day. But the\nfunds are exhausted and the Patagonia railroad is halted one hundred\nand fifty miles short of its goal; there are no earnings to maintain\nthe investment.\n\nThe reaction of high interest rates on the practical sense of American\ncapitalists and engineers has made operation at the earliest possible\nmoment and with the smallest possible investment of capital the very\nessence of American railway building in new territory. Actual earnings\nare expected to furnish capital, or a basis for credit, with which to\nmake good early engineering defects. All this, of course, is but\nanother way of saying that the criterion of engineering efficiency is\nnot \"perfection,\" but \"good enough.\" This distinction has placed a\nlarge measure of genuine efficiency to the credit of American\nengineers, and it explains why Americans have done many things that\nothers were unwilling to undertake. It is a great thing to build a fine\nrailroad in Patagonia, but I am sure we all rejoice that the first\nPacific railroad did not have its terminus in the Nevada sagebrush. The\nstandard of technical perfection set by the Italian engineer did not\nfit the facts. It is not the failure to attain his standard but the\nfailure to measure up to a well-considered standard of \"good enough\"\nthat stands as an indictment against American railway enterprise.\n\nViewed in historical perspective the business environment of the\npioneer appears to have been dominated by two outstanding facts: one,\nseemingly inexhaustible resources; the other, a set of political and\neconomic doctrines which told him that these resources must be\ndeveloped by individual initiative and not by the State. The faster the\nresources were developed the more rapidly the nation became\neconomically independent and economically great, and since they could\nnot be developed by the State it is not strange that private initiative\nwas stimulated by offering men great and immediate rewards. These\nrewards have encouraged individuals and associations of individuals to\naspire to a quick achievement of great economic power, and their\naspirations have been realized. Such achievements have been a\ndominating feature of our business life, and we have regarded them as\nan index of national greatness.\n\nAbundance of resources, if it did not make this the best way, at least\nmade it an obvious way, for the nineteenth century to solve its\nbusiness problems. From our vantage point we can see that serious\nmistakes were made. When we set the foresight of our fathers against\nour own informed and chastened hindsight their methods appear clumsy\nand amateurish. But in the main they did solve their problems: they\ngave us a settled continent; they gave us transportation and\ndiversified industry. We now have our garden and the tools with which\nto work it. If the pioneer allowed the children to pick flowers and in\nsome cases to run away with the plants and the soil, he did not fail to\ndevelop the estate.\n\nOur inheritance from the pioneer is not only material but\npsychological. The pioneer attitude of mind has made a real\ncontribution to our business standards. The very magnitude of our\nenterprises, the fact that we have had to develop our methods as we\nwent, our success in approaching problems that way, have given us a\nconfidence in ourselves and a readiness to undertake big things without\ncounting the cost. This readiness is a large, perhaps a dominant,\nfactor in our contribution to world progress. It is not an accident\nthat the greatest problems of mountain railway building have been met\nand solved by American engineers, or that they have carried a great\nrailroad under two rivers to the heart of our greatest city. These in a\nprivate way, and the Panama Canal in a public way, are typical of\nAmerican engineering enterprise.\n\nAs with engineering, so with general business. Our pioneer managers did\nnot lack imagination; they were not afraid to undertake; they were not\nconstrained by worry lest they make mistakes. They made many mistakes.\nSome were corrected, others ignored, but many more were concealed by an\nabundant success. The pioneer could afford to do the next thing and let\nthe distant thing take care of itself, and in large measure he escaped\nthe penalties which normally follow a failure to look ahead.\n\nSubstantial forces have tended to keep the pioneer spirit alive. If\nsome resources have been depleted, other resources have been found to\ntake their place. Scientific discovery, invention, and the development\nof technique have placed new forces at our command. Products have been\nmultiplied, but the demand for products has multiplied faster. We have\nbeen able to continue offering men great and immediate rewards for the\ndevelopment of new enterprises. As labor was needed, our neighbors have\ncontinued to supply it. The result is that our business has continued\nto go ahead without being too much concerned about the direction in\nwhich it was going.\n\nBusiness has eagerly appropriated the results of science without itself\nbecoming scientific. The difficult way of science makes slow progress\nagainst the dazzling rewards of unbridled daring. So many strong but\nuntrained men have been enriched by seizing upon the immediate and\nobvious circumstance--there has been so little necessity for sparing\nmaterials or men and so little penalty for waste--that we have\ndeveloped a national impatience with the slow and tedious process of\nfinding out.\n\nAlong with our technical and business enterprise, with the courage and\nimagination of which we are justly proud, a too easy success has given\nus a tendency to drop into a comfortable and optimistic frame of mind.\nImagination, intuition, power to picture the future interplay of\nforces, courage and capacity for quick action--all these qualities are\nas essential to-day as they ever were to business success. The pioneer\nenvironment reacting on our native temperament has given us these\nqualities in full measure, but it has also given us a habit of doing\nthings in a hit-or-miss fashion. Our very imagination and courage\napplied to wrong circumstances and in perverted form have often borne\nthe fruit of national defects.\n\nThere is a strong inclination to assume that the old approach to\nproblems will bring the same results that it did in the past, and to\nforget that we are living in a new world. The problems confronting the\npioneer were not the problems we face to-day. It requires great ability\nto draft a prospectus; in many of our greatest enterprises drafting the\nprospectus has been the crucial task. But a prospectus is not a going\nconcern. There is a vast difference between promotion and administration.\nIn the promotional stage of our business life we were solving problems\nmade up of unknown quantities, problems for which the only angle of\napproach was found in the formula _x_+_y_=_z_. We still have and shall\nalways have problems of the _x_+_y_=_z_ type, but if we apply that\nformula to a problem in which 2+2=4 we are not likely to get the best\nresults.\n\nBusiness may not yet be a science, but it is rapidly becoming\nscientific. Scientific inquiry is all the while carrying new factors\nfrom the category of the unknown to that of the known, and by so doing\nit is setting a new standard of business efficiency. The more brilliant\nqualities, like courage and imagination, must be coupled with capacity\nfor investigation and analysis, with endless patience in seeking out\nthe twos and the fours and eliminating them from the equation. When it\nis possible by scientific research to distinguish a right way and a\nwrong way to do a task, it is not an evidence of courage or imagination\nbut of folly to act on a faulty and imperfect reckoning with the facts.\n\nThe person who uses scientific method takes account of all his known\nforces; he prepares his materials, controls his processes and isolates\nhis factors so as to reveal the bearing of every step in the process\nupon an ultimate and often a far distant result. In other words, he\ntries at every stage to build upon a sure foundation. His trained\nimagination and judgment working on known facts set the limit on what\nhe may expect to find, and interpret what he does find, all along the\nway.\n\nIn so far as particular business enterprises have rested on\nengineering, chemistry, biology, and other sciences, a scientific\nmethod of approach has long had large use in business; but the\nscientist in business has usually been a salaried expert--a man apart\nfrom the management--and it has been his results, and not necessarily\nhis methods, that have influenced business practice. We are now coming\nto understand that scientific method is the only sure approach to all\nproblems; it is a thing of universal application, and far from being\nconfined to the technical departments of business, where the technical\nscientists hold sway in their particular specialties, it may have its\nwidest application in working out the problems of management.\n\nThe way in which a man trained in scientific method may determine\nbusiness practice in a scientific manner finds illustration in a\nmultitude of practical business problems, ranging all the way from the\nsimplest office detail to the most far-reaching questions of policy. To\ncite an example, of the simpler sort: if an item in an order sheet is\nidentical for eight out of ten orders is it better to have a clerk\ntypewrite the eight repetitions along with the two deviations or to use\na rubber stamp? Of course, there are not one or two, but many, items in\nan order sheet and the repetitions and deviations are not the same for\nall items. In practical application, the rubber-stamp method means a\nrack of rubber stamps placed in the most advantageous position. It\nrequires also a decision as to the precise percentage of repetitions\nwhich makes the stamp advantageous. Then arises the further question,\nwhy not have the most numerous repetitions numbered and keyed and thus\navoid the necessity of transcribing them at all?\n\nThe rule-of-thumb approach to this kind of problem would proceed from\nspeculations concerning the effect of interrupting the process to use\nthe stamp, the result of such interruptions on the accuracy of work,\ndifficulties in the way of necessary physical adjustments, and many\nother questions that would occur to the practical manager.\n\nThe scientific method of approach would first inquire whether there are\nany principles derived from previous motion study or other\ninvestigations, that apply to the case in hand. In accord with such\nprinciples it would then proceed, as far as possible, to eliminate\nneutral or disturbing third factors and to arrange a test. The results\nof the test would lead, either to a continuance of the old practice, or\nto the establishment of a new practice for a certain period, after\nwhich, if serious difficulties were not revealed, the new practice\nwould be definitely installed.\n\nIt should be emphasized at this point, that there is a fundamental\ndifference between investigations or tests which contemplate an\nimmediate modification of practice and those investigations in which\nresearch--that is, the discovery of new truths--is the sole object.\nTests which are carried on within the business must never lose sight of\nthe fact that a business is a going concern and that it is\nimpracticable and usually undesirable to transform a business into a\nresearch laboratory. Scientific methods in business should not be\nconfused with the larger problem of scientific business research. This\nlarger task, if undertaken by the individual business concern, is the\nwork of a separate department. For business generally, it will have to\nbe conducted either by the Government, or by business-research\nendowments. The point at which, in practical business, research should\ngive place to action is a question that wise counsel and the sound\nsense of the trained executive must determine.\n\nAn example of the contrast between a scientific and a rule-of-thumb\napproach, as applied to a question of major policy, is found in\ndiscussions of the relative advantages of a catalogue and mail-order\npolicy over against a policy of distribution by traveling salesmen. A\nfew years ago the head of one of the largest wholesale organizations in\nthe United States, talking with an intimate friend, expressed fear that\nhis house, which employed salesmen, might be at a dangerous\ndisadvantage with its chief competitor, which did an exclusively\nmail-order business. The friend comforted him with the assurance that\nthere are many buyers who prefer to be visited by salesmen and to have\ngoods displayed before them. This fact, he held, would always give an\nadequate basis for the prosperity of a house that employed the salesman\nmethod of distribution.\n\nNeither the fear nor the assurance here expressed reveals a scientific\nattitude of mind. Careful analysis shows, on the one hand, that the\nmail-order policy is not the most effective means of cultivating\nintensively a well populated territory. On the other hand, it shows\nthat the expense of sending salesmen to distant points in sparsely\npopulated areas more than absorbs the profits from their sales.\nIndividual concerns have arrived at these conclusions by experiment and\naccurate cost-keeping and have succeeded in reaching a scientific\ndecision as to which territories should be cultivated by salesmen and\nwhich ones should be covered exclusively through advertising and the\ndistribution of catalogues and other literature.\n\nThe difficulty that business men find in applying scientific method\nconsistently in the analysis of their problems is strikingly revealed\nin the labor policy of the great majority of industrial concerns. While\nmany men of scientific training are dealing with problems of\nemployment, probably no concern has undertaken to make a scientific\nanalysis to determine what are the foundations of permanent efficiency\nof the labor force which they employ. This is not surprising, when we\nremember how complicated is the problem and how short the time during\nwhich we have been emphasizing the human relations as distinguished\nfrom the material or mechanistic aspect of business organization.\n\nTo state even a simple problem of management, like the one concerning\nthe order sheet, set forth above, is to reveal some of the difficulties\nof analysis which characterize all subject-matter having to do with\nhuman activity. This means that we should not expect results too\nquickly nor should we be disappointed if the first results of efforts\nat scientific analysis are not absolutely conclusive. As soon as we\nrecognize that business is primarily a matter of human relations, that\nit has to do with groups and organizations of human beings, we see that\nscientific analysis of it cannot proceed in exactly the same way as\nwith units of inanimate matter. The reaction of human relations to\nchanged influences, frequently cannot be predicted until the changes\noccur. Business, in other words, is a social science and, like all\nsocial sciences, must deal primarily with contingent rather than exact\ndata; likewise conclusions drawn from scientific analysis must in large\nmeasure be contingent rather than exact.\n\nAlthough we cannot always isolate our factors, control our processes,\nand otherwise apply scientific method, with results as conclusive as\nthose obtained in laboratories of chemistry, physics, or biology, we\nneed not therefore reject scientific method in favor of a\nrule-of-thumb. We should, however, be suspicious of too sweeping claims\nbased on any but the most careful and painstaking analysis of facts by\npersons who are thoroughly trained in the kind of analysis they\nundertake.\n\nWhile a scientific approach will help in solving many problems of\nbusiness detail, the substitution of scientific method for a\nrule-of-thumb approach will realize its object most completely in the\ninfluences exerted upon fundamental long-time policy, influences which\ncannot bear fruit in a day or a year. The circumstances of our history\nhave retarded the acceptance of a long-time scientific viewpoint in\nbusiness, but forces now at work are making powerfully for a scientific\napproach to business management. First among these is a realization\nthat our resources are measured in finite terms. We have begun to take\naccount of what we have, and we are able in a rough way to figure the\nloss from what we have squandered. The situation is not desperate, but\nwe can see that it may become so. To insure against possible disaster\nin the future we need to exercise effective economy in turning\nresources into finished goods, and we need to eliminate waste in the\ndistribution and the consumption of these goods. In private business\nthe need for such economy is reflected in rising prices for raw\nmaterials. In its public aspect we have labeled the problem,\nconservation.\n\nA second force making for a scientific approach to business is found in\nthe beginnings of a social policy to which I have referred. This policy\nis showing itself in limitations upon the way in which materials and\nmen may be utilized and in a sharper definition of the business man's\nobligations to employees, to competitors and consumers. As long as\nresources are to be had for the asking, while cheap labor can be\nimported and utilized without restraint, and where no questions are\nasked in marketing the product, there is not the right incentive to do\nthings in a scientific way. As business becomes more and more the\nsubject of legal definition, as the tendency grows of regarding it as a\ndefinite service, performed under definite limitations, and for\ndefinite social ends, margins will be narrowed and it will become\nincreasingly necessary to do things in the right way.\n\nThe scientific approach to business has made great progress during the\npast decade. Out of the hostile criticism to which so-called big\nbusiness has been subjected have come several government investigations\nand court records, in which policies of different concerns have been\nexplained, criticized, and compared. Besides, business men themselves\nhave become less jealous of trade secrets and have shown an increasing\ninclination to compare results. A good illustration of this tendency is\nseen in the growth of \"open price associations\" and in the spirit in\nwhich credit men, sales managers' associations, and other business\ngroups exchange information. In the same spirit, business and trade\njournals have given a large exposition of individual experience and\nincreasing attention to questions of fundamental importance.\n\nMore significant still has been the scientific management propaganda.\nMr. Brandeis's dramatic exposition of this movement in the railway rate\ncases in 1911 at once made it a matter of public interest. Later\ndiscussion may not have extended acceptance of scientific management,\nbut it has not caused interest in it to flag. The movement has become\nessentially a cult. Its prophet, the late Frederick Taylor, by ignoring\ntrade-unionism and labor psychology in the exposition of his doctrines,\nat once drew down upon them the hostility of organized labor; the\nmovement was branded as another speeding-up device. More serious than\nthe antagonism has been the spirit in which some of the scientific\nmanagement enthusiasts--not all--have met it. They seem to assume that\ntheir science is absolute and inexorable, that it eliminates disturbing\nfactors and hence needs no adjustment to adapt it to the difficulties\nmet in its application. This air of omniscient dogmatism, together with\nthe disasters of false prophets, has somewhat compromised the movement\nand has diminished its direct influence. However, business men have\nbeen stirred up. They have become accustomed to using the words\n\"science\" and \"business\" in the same sentence. They are in a receptive\nattitude for ideas. The indirect influence has been great.\n\nA final, and probably in the long-run the most permanent, influence\nmaking for the extension of scientific method in business has been the\nnew viewpoint from which universities have been approaching the task of\neducating men for business. Prior to 1900, university education for\nbusiness in the few universities that attempted anything of the sort\nwas confined to such branches of applied economics as money and\nbanking, transportation, corporation finance, commercial geography,\nwith accounting and business law to give it a professional flavor.\nThere were also general courses labeled commercial organization and\nindustrial organization, but these were almost entirely descriptive of\nthe general business fabric of the country, and had but the most remote\nbearing on the internal problems of organization and management which\nan individual business man has to face. The assumption was that a man\nwho was looking forward to business would probably do well to secure\nsome information about business, but there was little attempt at\ndefinite professional training of the kind given to prospective\nlawyers, physicians, or engineers.\n\nWithin the past few years universities have begun to undertake\nseriously the development of professional training for business. The\nresult has been that through organized research and through\ninvestigations by individual teachers and students, the universities\nare gathering up the threads of different tendencies toward scientific\nbusiness and are themselves contributing important scientific results.\nOut of all this there is emerging a body of principles and of tested\npractice which constitutes an appropriate subject-matter for a\nprofessional course of study, and points the way to still further\nresearch.\n\nOne of the earliest results of an approach to business in an attitude\nof scientific research, is the discovery that there are certain\nfundamental principles which are alike for all lines of business,\nhowever diverse the subject-matter to which analysis is applied.\nSubstituting the principle of likeness for diversity as the\nstarting-point of business analysis, has far-reaching consequences not\nonly for education and research but for management as well. First among\nthese consequences is the fact that search for elements of likeness\nleads at once to replacing the trade or industry with the function as\nthe significant unit both of research and organization.\n\nIf we start our study of business by separating manufacturing,\nrailroading, merchandising, banking, and the rest, with a large number\nof more or less logical subdivisions in each field, and then try to\nwork out a body of principles applicable to each subdivision, we soon\nrun into endless combinations and lose all sense of unity in business\nas a whole. As soon, however, as we approach business from the\nstandpoint of accounting, sales management, employment, executive\ncontrol, and when we find that lessons in statistics, advertising,\nmoving materials, or executive management, learned in connection with a\nfactory, can be carried over with but slight adaptation to the\nmanagement of a store, we at once get a manageable body of material on\nwhich to work.\n\nRecognition of the principle of likeness and of its corollary, analysis\nby function rather than by trade, marks perhaps the greatest single\nstep yet taken in the development of scientific business. The\nprinciple, however, has its dangers. Analysis by function implies\nfunctional specialization in research and a similar tendency in\nbusiness practice. Without specialization there can be no adequate\nanalysis of any large and complex body of facts. With too intense\nspecialization there is always danger that the assembling and digesting\nof facts, and especially the conclusions drawn from them, will reflect\nsome peculiar slant of an individual or of a particular specialty.\n\nThe accountant does not always go after the same facts as the sales\nmanager, and even with the same facts the two are likely to draw quite\ndifferent conclusions as to their bearing on a general policy.\nSpecialization, too, may result in setting an intense analysis of one\ngroup of facts over against a very superficial view of other facts--or\nagain, an intense analysis of the same facts from one viewpoint with\nfailure to consider them from another, and perhaps equally important,\nviewpoint. Unless these weaknesses are corrected, the business will\nlack balance; the work of departments will not harmonize; there will be\nno fundamental policy; goods sold on a quality basis will be\nmanufactured on a price basis--all of which leads to disastrous\nresults.\n\nScientific method is the first article in the creed by which business\ntraining must be guided. The growing necessity for critical and\nsearching analysis of business problems, justifies all the effort we\ncan put forth to develop plans for training into a structure of which\nscientific method shall be the corner-stone. But analysis is not all.\nFollowing analysis must come synthesis. Somewhere all the facts and\nconclusions must be assembled and gathered up into a working plan. It\nis this task of leveling up rough places in the combined work of\ndepartment specialists, that puts the training and insight of both the\nexecutive and the director of research to the most severe test. It is a\nmark of a well-trained executive that in performing his task he\ninstinctively follows principles instead of trusting alone to momentary\nintuitions, however valuable and necessary these may be.\n\nAnd here it is that the second article in the creed of business\ntraining appears. The executive's task is primarily to adjust human\nrelations, and the nature of the principles by which these adjustments\nare made, determines the relations of a concern to its laborers, to\ncompetitors, to customers, and to the public. If the executive comes to\nhis task without a mind and spirit trained to an appreciation of human\nrelations, he is not likely so to synthesize the work of his\nsubordinates as to make for either maximum efficiency within the\nbusiness or its maximum contribution to the life of the State.\n\nThe term \"executive\" in large and highly organized concerns is likely\nto mean the head of a department. A large proportion of the department\nheads now in business are men of purely empirical training. Their\nhorizon is likely to be limited and to center too much in the\ndepartmental viewpoint. They may perhaps be able to see the whole\nbusiness, but if they do, they will probably see it exclusively from\nthe inside. There is frequently nothing in their business experience\nthat has made them think of the great forces at work in society at\nlarge. As the bulk of business has been organized in the past, there\nhas been no department in which, automatically and in the regular\ncourse of business, a view looking outward is brought to bear. If it\ncame at all, it was reflected back from the larger relations and the\nlarger social contacts of the head of the business. Many general\nexecutives have been promoted from the position of head of department\nat a period in life when their habits of thought had become\ncrystallized, and it was not natural that they should entirely change\nthose habits with the change in their responsibilities.\n\nBesides, the economics of competition and a strong group sentiment\namong business men have tended to make them resist social influences\nwhich might react upon the policies of their own business. Superficial\nconclusions drawn from such experiments as those of Pullman and of\nPatterson, to which reference has been made, have seemed to justify\nsuch resistance and have fortified men in the belief that business and\nresponse to social influence should be kept separate in water-tight\ncompartments.\n\nMore recently men have been coming to understand the fundamental\ndefects in the Pullman and the original Cash Register plans and have\ncome to realize that even a separate welfare department may be\nsuccessfully incorporated in a business, if only certain fundamental\npolicies are followed in its management. Still more significant is the\nview looking-outward and the consequent harmonizing of social and\nbusiness motives, which is coming in the ordinary development of\nbusiness policies as a result of their more fundamental analysis.\n\nPerhaps the greatest step toward a fuller consideration of facts on the\noutside is taken, when a business creates a separate department of\nemployment. It is hard to see how the head of an employment department\ncan have the largest measure of success if he sees only the facts on\nthe inside. A comprehensive application of scientific method to\nproblems of employment leads a long way into analysis of the social\nfacts affecting the people who are employed.\n\nFrom different angles the same thing is true in other departments of\nbusiness, notably so in the case of advertising and sales. One of the\nmost obvious outside facts which affect sales, is the location and\ndensity of the population, and yet it is a fact which frequently is\nneglected. Another outside fact, which ultimately advertisers will have\nto consider, is the consuming power of population. They have been very\nkeen to study our psychological reactions, and in doing this they have\nundertaken the entire charge of the evolution of our wants. But they\nhave not always gone at their work from the long-time point of view.\nSometime they will have to take account of the fact that unwise\nconsumption impairs efficiency and depletes the purchasing power from\nwhich advertisers must be paid.\n\nThe next step in the scientific analysis of business is to provide for\nmore ample analysis of facts on the outside. Weakness at this point\nexplains the defects in many plans for the welfare of employees, it\nexplains the defects in scientific management, mentioned above, and it\nexplains many other shortcomings in projects for increasing the\neffectiveness of business.\n\nBut men who approach business from the standpoint of university\nresearch are not free from the same danger. In their effort to orient\nthemselves with the business facts, they get the business point of view\nand run the risk of centering attention too much on materials and\nmaterial forces. Even psychological reactions of men and women may be\nanalyzed from the standpoint of their mechanics, without ever going\nback to those impelling motives which have their roots in the human\ninstincts and complex social reactions of which the men and women are a\npart.\n\nApproached from the standpoint of scientific method, the field of\nconflict between different interests in business and between so-called\n\"good business\" and \"good ethics\" becomes measurably narrowed. I do not\nmean to give science the sole credit for achievements along this line.\nMore frequently advance in moral standards has been forced on unwilling\nvictims through legislation, public opinion, or class struggle, and\nthen men have discovered, as a happy surprise after the event, that\n\"good ethics\" was profitable. But science has done something, and might\nhave done still more, if our efforts at scientific analysis had not\nbeen so often underweighted on the human side. These very discoveries\nof harmony between wholesome practice and good business constitute a\npart of the body of fact of which a truly scientific method must take\naccount. When a review of all the cases in which compulsion has changed\nexisting methods shows an almost invariable adaptation and a tendency\ntoward better results after the level of competition is raised, a man\nof scientific training immediately asks the question, whether a\nfundamental law is not at work.\n\nA glance at social legislation during the last century reveals some\ninteresting uniformities. Every step in the development of the English\nFactory Acts as they stood at the beginning of the present war,\nstarting with the first Child Labor Bill in 1802 and ending with the\nShop Regulation Act of 1912, had been taken against the protest of the\nmost vocal elements in the trades concerned. In nearly every case\ninvestigation will show, either that the requirements of the measure\nenacted fell considerably below the practice of the best concerns, or\nthat the whole industry was in need of some outside impulse to start it\nin the way of more efficient organization. As long as it is permissible\nto employ five women and five children to tend five machines, there is\nnot the right incentive to make adjustments by which all five of them\ncan be tended by one man.\n\nIn this country in our forty-nine jurisdictions we have been going\nforty-nine times over the experience of England and other countries, in\nconnection with each effort to force up the competitive level. We have\nseemed to be quite unable to apply the most obvious lessons of\nexperience either at home or abroad to new cases, and yet essentially\nthe same uniformity of adaptation has occurred here as abroad. Like our\nemployer, whom a strike impelled to adopt an advanced policy toward\nlabor, we find after the event that we should not know how to do\nbusiness under the standards in force before the law compelled a\nchange.\n\nEnforcement of the Sherman Anti-Trust Law has been frequently cited as\nan example of unwise government interference. With respect to many of\nthe incidents of enforcements, criticism has been well founded. But the\nnet result of that enforcement has been a much sounder body of law on\nthe important subject of fair and unfair competition. Besides, we now\nhave in the Federal Trade Commission the beginnings of an\nadministrative organization for dealing with the whole subject of\nmonopoly and restraint of trade. And more than all this, we have a\nbetter prospect than ever before, of some sort of mutual respect\nbetween government and business, and of honest cooperation in working\nout their mutual problems. It is not likely that the Anti-Trust Law has\nprevented honest men from earning legitimate profits from legitimate\nbusiness service to anything like the extent which would be indicated\nby the vigor with which it has been opposed. But even if it has, we\nhave received something for the price paid.\n\nAnd so the list might be lengthened, pure food and drugs, meat\ninspection, public service regulation, industrial safety, and the\nrest,--in nearly every case, from a purely business point of view,\nopposition, in so far as it related to the main point of government\npolicy, has been a mistake. Refusal of the business men affected to\naccept a policy of regulation has tended to shut them out of the\ncouncils in making adjustments of detail. This fact has hindered the\ngovernment in performing a service which in most cases both the public\nand the business needed to have done.\n\nEven when we admit, as obviously we must, the persistence of conflict\nbetween different interests with respect to a large mass of business\ndetail, the fact of group influences and social control still remains\nan important consideration to which business analysis must give due\nweight. There has been a large mass of business in this country, in\nwhich the community has been unable to recognize any productive\nservice; it has been regarded only as a means of acquisition for those\nwho pursue it. Legislation, public opinion, and the evolution of\nenforceable standards within particular business groups are tending all\nthe while to narrow the sphere of purely acquisitive business. With\nrespect to that great mass of business which has both an acquisitive\nand a productive side, these forces are gradually bringing us to an\nattitude of mind in which we regard gain as a by-product of service.\n\nThe public is also recognizing that the purpose of goods and services\nis to promote individual and community welfare, and as fast as public\npolicy to that end can be worked out, it is carrying emphasis even\nbeyond specific products and services to the social ends for which\nthese products and services exist. In these ways society too is trying,\nclumsily perhaps, to take a long-time view of its business and to\nconserve the human values that make for progress.\n\nObviously it is but a partial and incomplete analysis of a business\nsituation that omits these human factors; a working policy that fails\nto anticipate their force and then to reduce the zone of conflict to\nits lowest limits is neglecting an important element in the definition\nof long-time efficiency. And business men are beginning to see this.\n\nA few weeks ago the manager of a large department store in San\nFrancisco was kind enough to show me his record of departmental profits\nfor a number of months. The fluctuation in relative profits of\ndifferent departments month by month was apparent, especially the fact\nthat after a certain month several departments which had previously\nearned high profits became relatively much less profitable. I asked the\nmanager to explain, and he did in this way: At the time when the change\noccurred a new policy had been inaugurated by which employment of help\nhad been centralized and standardized for the whole concern. As a\nresult, when certain departments which had been decidedly sub-standard\nwith respect to wages were brought up to standard, they were unable to\nearn anything like the profits which they had previously shown.\n\nWithout going into the question of the connection between high wages\nand profits, of which this incident in my opinion was an exception, it\nwas clear to the manager as to me that the increase in wages in these\nparticular departments had been accompanied by an immediate loss in\nprofits. Furthermore, the manager was unable to determine, from figures\navailable before and after the change, that this loss had been directly\ncompensated by gains in other departments. In order to get his\nviewpoint concerning the change at issue, I asked him two questions:\n(1) Why was he willing to make a change of such a fundamental character\nwithout being able to ascertain in advance whether or not it would be\nprofitable? (2) In the absence of facts that could be incorporated in\nthe accounts, was it his belief that the change would in time be\nprofitable, and if so, how did he reach his conclusion?\n\nHis response to the first question revealed to me an intensely natural\nbut nevertheless complex motive. He said, substantially, that he was\nconfident that standardized employment was the only acceptable policy,\nfrom the standpoint of the general manager. Given the necessity of\nstandardizing, it was necessary for the general reputation of the\nbusiness to standardize upward rather than downward. He wanted his\nbusiness to be regarded as one in which the best standards of\nemployments obtained. Furthermore, he added, \"California will soon have\na minimum wage law, and I want this business to be well in advance of\nany wage standards which may be imposed by law.\"\n\nAnswering the second question more specifically, the manager recognized\nthe advertising value of a reputation for having good conditions of\nemployment. He had discovered no tendency for general profits to\ndiminish or for the rate of increase to be retarded more than\ntemporarily. In the absence of definite facts to the contrary he\nconsidered it safe to assume that as soon as the business should become\nadjusted to the new standards, standardization of wages upward would be\nprofitable for the business as a whole. He wanted to make the change\nvoluntarily and to commence operating successfully on the new basis in\nadvance of competitors.\n\nIt is scarcely possible to discuss this sort of business situation with\na progressive manager, without feeling that he does not approach\nbusiness exclusively from the standpoint of gain; in other words, to\nuse the phrase of Adam Smith, he is not exclusively an \"economic man.\"\nThe manager of a modern business, on the contrary, is a man very much\nlike the rest of us, and being such a man he is first of all desirous\nof conforming to whatever standards are in way of acceptance by that\npart of society in which he moves. Obviously, these standards are made\nup of both selfishness and altruism, with selfishness tending all the\ntime to become more enlightened as society advances.\n\nAs we come to distinguish more clearly between reward for service and\nmere one-sided gain, there occurs a parallel change in men's motives;\nthey become more sensitive to social disfavor and to social esteem and\nless and less willing to devote their lives to activity by which no one\nbut themselves is benefited. In this reaction of altruism with\nenlightened selfishness there emerges in men's minds a new concept of\ntheir own interest and a better understanding of the kind of business\npolicy that in the long-run brings them the greatest reward. Of course,\nthis does not mean that enlightened selfish interest has ceased, or\nthat it will ever cease, to be a motive force in business. But there is\na vast difference between selfishness untempered with other motives and\nselfishness eager for the esteem of one's fellows.\n\nClearly it is a task of higher education to help promote response to\nthe more enlightened motives. The difficulty which even men of advanced\nuniversity training have in taking full account of human factors\nindicates something of the nature and importance of the task. The\nso-called \"scientifically trained\" manager tends to undervalue the\nhuman factor of his equation. His analysis is likely to be overweighted\non the material side. When the university starts--as it is starting and\nshould start--to train future executives, it needs to analyze its own\nproblem, and take full account of the dangers against which it has to\nguard. Otherwise the training itself will be overweighted on the\nmaterial side and will perpetuate the weakness that it ought to\ncorrect.\n\nThe greatest danger in this connection, as I see it, arises out of the\ndistinction between the so-called \"cultural\" and the \"vocational\" point\nof view. This distinction comes to us with a large mass of traditional\nauthority, and we have classified subjects and erected barriers on the\nassumption that the distinction is real. As far as the training of\nbusiness executives is concerned, I am confident that the distinction\nis one which ought never to be made. It is a great misfortune, when\nyoung men and women who are preparing for a serious career are\npermitted to think of culture as a non-functioning ornament; equally\nunfortunate is it for them to think of their prospective vocations as\nactivities devoid of cultural association.\n\nA few days ago a student who had already selected his profession and\nwas anxious to be about it confided to me, as many others have done,\nhow distasteful he was finding the task of \"working off his culture.\"\nDoes any one really suppose that the sophomore who is \"working off his\nculture\" under faculty compulsion, in order to get his college degree,\nis really absorbing from his study anything which, as the faculty\nassumes, makes him a better man and yet, as he himself believes,\ncontributes nothing to effectiveness in his profession? Or take the\ncase of the man who devotes himself with professional earnestness to\nhis two, three, or four years of college work--will he find that he has\ninvested his time and his money on a purely ornamental luxury that has\nno relation to his later work?\n\nThe first great element of training which the university can give to\nfuture business men is a mastery of scientific method as a means of\nanalyzing problems and synthesizing results. Quite as fundamental as\nthis is the development of an intelligent and sympathetic approach to\nquestions of human relationship. Only the beginning steps in the\ndirection of business efficiency can be taken while attention is\nconfined to the material and mechanistic side of business organization.\nNo secure basis for permanent efficiency can be established until we\nare prepared to go deeply into the question of human motives and to\nunderstand something of the complex reactions that come from individual\nand group associations. Without such a basis we cannot hope for a\nnationally effective business organization.\n\nBusiness is a form of cooperation through which men exercise control\nover natural forces and thereby produce things with which to satisfy\nhuman wants. Any subject well taught, which gives an insight into human\nrelations or into nature and man's control over it, will help prepare a\nperson to deal with the intricate problem of human relations in\nbusiness--that is, if the student has studied the subject in an\nattitude of mind to see its bearing on what he is preparing to do.\n\nThe question is not so much one of too few or too many so-called\nculture subjects, but rather of the attitude of mind in which all\nsubjects are undertaken. It is a question of getting such a survey of\nthe great facts of human experience and of so pointing their\nsignificance as to enable men to approach a problem of human\nrelationship with sympathy and something of a long-time dynamic\nviewpoint. When this is accompanied by a mastery of scientific method,\nthe foundations are reasonably secure. Without such foundations,\nsecured either in college or out, analysis of problems in a specialized\nbusiness field is almost sure to be one-sided and incomplete.\n\nThe kind of professional training that I would suggest for the future\nbusiness executive would be laid on the foundation of a college course\nof two, three, or four years in which the viewpoint and the varied\nmethods of study in several diverse branches of knowledge had been\nthoroughly instilled. When the student passed to the professional study\nof business he would be expected to master the fundamentals of business\norganization and management, including the basic elements of subjects\nlike accounting, finance, and other divisions of organization common to\nall lines of business. All of these studies would be pursued with\nconstant reference to the fact that business is carried on in a\ncommunity in which certain public policies are enforced and in\nrecognition of the fact that business should conform to these policies\nand help to make them effective in contributing to public welfare.\n\nAs the student advances, the course would proceed toward greater and\ngreater specialization, and would finally culminate in an intensive\nstudy of some fairly narrow business problem, pursued until the student\nhas mastered it in principle and in detail. The result of his study\nwould be set forth in dignified readable English which an intelligent\nlayman could comprehend and which would make the article acceptable for\npublication in a journal of standing.\n\nProfessional study of business, then, should give students a\ncomprehensive many-sided survey of business and a thorough grasp of\nscientific method as used in analyzing business facts. It should\nprepare the student to think complicated business problems through to\nthe end and to put the results of his thinking together into an\neffective working plan. Finally, it should maintain an atmosphere in\nwhich business problems are regarded in a large and public-spirited\nway.\n\nWe are well under way with professional training for business; but if\nstudents fail to get the general educational foundation for it, it will\nnot accomplish the best results. If the two, three, or four years of\ncollege study is regarded as something purely ornamental and\nirrelevant, while they are getting it, if it fails to arouse an\nappreciation both of scientific method and of human values, or if these\nvalues are thought of as something to forget when the student comes to\nthe analysis of practical problems, the university will not have done\nwhat it might do for the promotion of high standards of efficiency in\nbusiness.\n\nIn all of the discussions I have tried to point out how emphasis in\nbusiness is gradually shifting from acquisition, to production and\nservice; how there are gradually evolving in business, professional\nstandards of fitness, of conduct, and of motive; and how more and more\nthese standards enter into the measuring of business success. Our\neducational assumptions still rest too largely on the old dollar\nstandard of success with its well-known inferences about the\nblood-and-iron equipment with which that success can be attained.\n\nPsychologists tell us that we tend to get what we expect. If we fail to\ncreate enthusiasm for the opportunity for service in business; if we\nassume that young persons who enter business are going to measure their\nreturns in dollars alone; or if we continue to feature, as we have\ndone, the break between the so-called \"cultural\" and the professional\nparts of the university course, there will be danger that we shall\ncontinue to get the thing for which we plan.\n\nThere can be no doubt that many of our old assumptions about the\nrelative dignity and social distinction attaching to different kinds of\nstudy, as well as the assumption of a purely mercenary motive in\nbusiness, have impeded a wholesome reaction between higher education\nand business standards. These assumptions have created an\natmosphere--an objective and subjective attitude of mind, a set of\nmotives and desires, of appreciations and valuations, all of which\nstand in the way of the most far-reaching educational results.\n\nSo far as these assumptions can be rationally explained, they rest on\nideas that are in part mistaken, in part exaggerated, and in part\nobsolete. The application of scientific method to business has created\nan entirely new relationship between business and education. Scientific\nanalysis and social policy are establishing a new connection between\nthe material and the human facts of business. In the new atmosphere the\nbusiness executive requires those fine qualities of mind and spirit,\nand the ability to command these qualities for a given task, which\npeculiarly it is the work of the university to cultivate.\n\nIn proportion as universities have vigorously undertaken this work, and\nhave applied scientific method to their own problem of articulating it\nwith higher education in general, the line of approach to professional\nbusiness training has become increasingly clear. Among the notable\ndevelopments of the past decade has been a shifting of emphasis from\nthe training of specialists to the training of business executives. As\npreparation for executive work comes to be generally recognized as an\nappropriate field for systematic professional study, the standards that\nscientific method has already achieved will become fixed and better\nstandards of business efficiency and service will emerge.\n\n\n_The Riverside Press_\nCAMBRIDGE . MASSACHUSETTS\nU . S . A","title":"Higher Education and Business Standards","tradition":"philosophy-ethics","translated_text":null,"word_count":12554}