5500 
 1^7 
 
 THE LIBRARY 
 
 OF THE 
 
 NEW YORK STATE SCHOOL 
 
 OF 
 
 INDUSTRIAL AND LABOR 
 
 RELATIONS 
 
 AT 
 CORNELL UNIVERSITY 
 
The original of tliis bool< is in 
 tine Cornell University Library. 
 
 There are no known copyright restrictions in 
 the United States on the use of the text. 
 
 http://www.archive.org/details/cu31924002680050 
 
LECTURES ON 
 ORGANIZATION 
 
 DELIVERED IN THE COURSE ON INDUS- 
 TRIAL ORGANIZATION IN THE GRADUATE 
 SCHOOL OF BUSINESS ADMINISTRATION OF 
 HARVARD UNIVERSITY 
 
 BY 
 
 RUSSELL ROBB 
 
 PROPERTY OF LIBRARY 
 
 NEW YORK STATE SGHOOL 
 
 INDUSTRIAL ^m mm mmn^ 
 
 CORNELL UNIVERSITY 
 
 prtbatel^ IBrinteD 
 
COFYSIGHT, I9IO, BY RUSSELL ROES 
 ALL RIGHTS RESERVED 
 
CONTENTS 
 
 Organization as affected by Purpose and Con- 
 ditions 1 
 
 The Limits of Organization 24 
 
 The Organization of Administration 47 
 
 5500 
 HI 
 
 PROPERTY OF LIBRARY 
 
 NEW YORK STATE SRWflOL 
 INBUSTRIAL m LABGH RFI ATinilS 07082 
 
ORGANIZATION AS AFFECTED 
 
 BY PURPOSE AND 
 
 CONDITIONS 
 
 As an industry or business begins to involre large 
 size, great numbers, and complexity, organization 
 becomes necessary simply for the direction, control, 
 and handling of affairs, quite aside from any question 
 of direct economy. It becomes necessary to set off 
 groups of workers, to divide responsibilities, duties, 
 and processes, so that affairs may be kept within the 
 scope and ability of those who are directing the under- 
 taking. A virtue has, however, been made of this 
 necessity for division, because it becomes possible, by 
 dividing duties and functions, to conserve special 
 skill, ability, and use, and to direct all effort into 
 definite paths, to which it becomes accustomed and 
 thus gains in efficiency. 
 
 It is of little importance how the great growth in 
 industries has come, — whether a realization of the 
 benefits that arise with division of labor and conserv- 
 ing of skill induced us to gain size so that these ad- 
 vantages might be brought into play, or whether 
 size came first and the advantages were a fortuitous 
 accompaniment. It seems, however, to be true in 
 most cases that the need for having matters more 
 
2 ORGANIZATION AS AFFECTED 
 
 thoroughly in hand, the need for better command of 
 affairs by administrative officers, usually results in a: 
 division that makes plainer the lines of authority, that 
 places responsibility more definitely, and secures dis- 
 cipline, while in the consideration of the economies 
 to be secured in the different parts of the organiza- 
 tion, attention is more often given to questions of 
 division of duties to secure specialization in skill and 
 plant, to the limiting of duties to functions instead 
 of parts only. 
 
 If, for instance, one were suddenly required to 
 organize a body of thousands of men to clear the 
 streets of a city from an abnormally heavy fall of 
 snow, it is probable that these men would be divided 
 into divisions, each with a chief, and that these 
 divisions would be divided into squads, each with a 
 foreman. The division would be divided into similar 
 kinds of units, headed by men in absolute authority 
 over their units and with no collateral relations to 
 cause complications and delay. The organization 
 would be for the purpose of control, for the purpose 
 of intimate command and effective direction. If, how- 
 ever, one were to organize a great industrial estab- 
 lishment to manufacture machines that had very close 
 competition both as to quality and price, the greatest 
 care would have to be given in the organization to the 
 different functions in the manufacture, and to the 
 segregation of such functions as designing, purchas- 
 ing, and selling, so that every advantage could be 
 taken of special knowledge and specialization of effort. 
 
BY PURPOSE AND CONDITIONS 3 
 
 Other activities that are not industrial, such as the 
 church, the civil government, the army, the navy, 
 educational organizations, charitable organizations, 
 all involve size and numbers and complexity, and 
 they are all organized ; but good industrial organiza- 
 tion will be likely to differ from these other organiza- 
 tions, and all organizations will differ somewhat from 
 each other, because the objects, the results that are 
 sought, and the way these results must be attained, 
 are different; and, moreover, the material out of 
 which the organization is made, differs in kind. 
 
 It is, of course, true that there is much that is com- 
 mon to all effective endeavor : the definite knowledge 
 of what one wishes to accomplish ; the principles of 
 directing and controlling effectively large numbers 
 of people; making the most of different kinds of 
 skill ; the securing of cooperation, so that each one 
 helps instead of hinders another ; the systematic and 
 orderly way of doing things, so that there are no 
 neglected steps, no false movements, no lost time — 
 are all common to good organizations of all kinds. 
 But, with differing purposes, the factors that make 
 organization have varying importance. With one 
 purpose in view, the principle of the division of labor 
 for specialization of skill may be all-important ; in 
 another situation, this may become insignificant in 
 comparison with the proper control and direction of 
 large numbers. The problem in another organization 
 may be the systematization and division of work 
 mainly to bring order and efficiency into a situation 
 
4 ORGANIZATION AS AFFECTED 
 
 of complexity. The significant feature in another 
 case may be almost wholly a question of dispatch, 
 where the question of economy even may hinge much 
 more on the time required than on any other factor. 
 Again, we may have success hinging upon systems of 
 accounting, records, and statistics, where the accurate 
 knowledge of costs and other details of the business, 
 and the system for securing these, may be the central 
 factor about which the organization is constructed. 
 
 It is interesting to consider some of the different 
 forms that organizations take and some of the results 
 that are sought, because such a consideration brings 
 out more clearly this question of purpose and con- 
 ditions and material, and helps to prevent one from 
 assuming that organization always means the appli- 
 cation of a perfectly definite method or system to the 
 carrying out of any large and complicated under- 
 taking. 
 
 In the popular mind, perfect organization usually 
 is associated with the army. The division of the men 
 into companies and regiments, the clearly defined 
 duties and authority of the ofBcers, the discipline 
 that secures precision in all evolutions and obedience 
 to all commands of the superiors, suggest to most 
 people the perfection of concerted action, and furnish 
 the type to which they feel that all organizations should 
 conform as nearly as possible. And so, when they see 
 that an industrial establishment is large, they speak 
 of its members as an " industrial army " and its head 
 as a " captain of industry." The regularity of hours 
 
BY PURPOSE AND CONDITIONS 5 
 
 in an organized industry, the definite and formal 
 orders, and the established lines of authority, all 
 suggest to us that very old type of organization that 
 has had for its purpose the handling of large numbers 
 of men in fighting. An army in modern times, with 
 its different branches of service, its attention to 
 commissary and sanitation, its great multiplicity of 
 technical appliances of war, its connection with the 
 activities of civil life, becomes very complex ; but in 
 the beginning, military organization was a necessity 
 in order to direct and handle efPectively large num- 
 bers of men, and so to prevent the hordes who went 
 fighting from being merely a mob. The great numbers 
 acting together could not act effectively unless there 
 were order and system in all their evolutions, and an 
 organization binding the order and system together. 
 Moreover, the product came in one supreme moment: 
 the organization was for an emergency. Its whole suc- 
 cess or failure was shown by the action of the army 
 at a critical time ; and for this reason military organi- 
 zation has taken a severe line, in which everything is 
 subordinated to obedience and definiteness of pro- 
 cedure and certainty of predetermined evolution and 
 action upon command. Authority and responsibility 
 taper down with evenness, each one knowing his ex- 
 act limitations and his part. Each one in authority 
 must be trained to assume instantly all the duties of 
 the one next above, for the captain of one moment 
 may be colonel in the next. 
 
 Military organization has contributed much to all 
 
6 ORGANIZATION AS AFFECTED 
 
 other types of organization through its example of 
 the value of discipline, the usefulness of definite 
 procedure, and the effectiveness in administration 
 of placing responsibility, but it has been the cause of 
 mistakes in building up other organizations, through 
 the forcing into prominence of the main features of 
 a military organization when the end that is sought 
 is much more influenced by other factors, when the 
 necessity for control is less than for specialization 
 of effort and for the coordination of different kinds of 
 action. This becomes plainer when one considers, for 
 instance, an industrial organization depending for its 
 success very largely upon the ability with which the 
 principles of division of labor are applied. There are 
 many examples. Take the making of watches. Here 
 we have great numbers working together, but they 
 are not interchangeable units, nor are those who di- 
 rect the workers interchangeable and in direct line of 
 authority. There are numberless processes, in each 
 of which workers are trained and practiced until their 
 skill vastly exceeds that of a novice. There are large 
 numbers of different machines, — processes are di- 
 vided and subdivided and simplified, to attain the 
 acme of the worker's deftness, and to sift from his 
 duties all but the one in which he is supreme. The 
 military virtues here are stiU desirable to an extent, 
 but they are only incidental. They are not the factors 
 that determine whether good watches are or are not 
 to be turned out at a low cost. The success or failure 
 of the watch-industry would not depend upon instant 
 
BY PURPOSE AND CONDITIONS 7 
 
 obedience, upon definite evolutions of men, upon pre- 
 determined movement in emergency, upon a definite 
 line of succession in authority; it would depend 
 upon such things as study and care and economy in 
 purchasing materials, upon the development of pro- 
 cesses to make the most of each worker's special skill 
 and ability, the saving of time in the handling of the 
 product, the working of the plant to save interest and 
 rent, the discovery of consumers, and the prompt 
 delivery of the product. The main purpose is differ- 
 ent from the main military purpose, and the organi- 
 zation must vary accordingly. 
 
 Large and complex construction is often under- 
 taken where, in the words of contracts, " time is of 
 the essence." The need for the structure may be vital 
 to the integrity of an important business already 
 established. The saving in interest and in earning 
 power, if the work is completed in months instead of 
 in a year or two, may be a large amount. The organi- 
 zation for such an undertaking will not be the same 
 as for deliberate construction systematized in all 
 details for the lowest total construction-cost. It may 
 be necessary to cut " red tape " that would be de- 
 sirable in other situations, it may pay to take the 
 chances of less thorough deliberation of plans, the 
 lines of authority even may be changed, — all be- 
 cause the relative importance of factors is changed. 
 The harmony of the organization is upset, and modi- 
 fications must be made to suit the new conditions. 
 
 This was shown two years ago when the Boston 
 
8 ORGANIZATION AS AFFECTED 
 
 Elevated Railway Company discovered that it must 
 have very large additions to three different power- 
 stations in order to care properly for its maximum 
 load the following Christmas. There were but twelve 
 months in which to design and build the stations. 
 The organization of a street railway could not eco- 
 nomically provide for emergency construction of such 
 magnitude, and even the engineering company that 
 did the work found it necessary to make important 
 modifications in its organization in order to secure 
 dispatch, even at the risk of losing the greatest 
 economy in all details. It was necessary to place 
 as much responsibility down along the line as possi- 
 ble, so that time would not be lost in referring ques- 
 tions for confirmation. It was necessary that the work 
 be segregated, so that in functional departments 
 there would be no question of " right of way." The 
 specialization was in the direction of " Boston Ele- 
 vated work," not in the direction of " electrical engi- 
 neering," or " purchasing," or " drafting." A special 
 smaller organization was set off for this particular 
 piece of work. The construction manager in charge 
 had complete authority over it, except as he was re- 
 sponsible to the president of the engineering com- 
 pany. He had under him three assistant construction 
 managers, each of whom was responsible for one of 
 the stations. Each of these assistants had a night 
 and day engineer in charge of the actual construction. 
 Each station had its own inspectors and its own sur- 
 vey corps. The special organization for this work had 
 
BY PURPOSE AND CONDITIONS 9 
 
 its own draftsmen and its own purchasing depart- 
 ment and its own accounting department. There 
 was no attempt to serve it from the functional de- 
 partments of the engineering company organization. 
 Every endeavor was to secure short-cuts in time. 
 The stations were operating in ten months from the 
 time they were begun, and ordinarily it had taken a 
 year and a half or two years to accomplish the same 
 thing. This was an organization for dispatch, — to 
 get a piece of work done in order to save the expense 
 of delay, which would have greatly overbalanced any 
 economy there might have been in a less military 
 but more functional form of organization. 
 
 The construction of the great irrigating reservoirs 
 in India, where a few years ago during the famine 
 so many of the natives were employed, furnishes a 
 good example of the variation in organizations ac- 
 cording to the material one has to work with. One 
 can imagine approximately what sort of an organi- 
 zation would be necessary in most other places to 
 undertake the vast excavations necessary to form 
 reservoirs in great irrigating works : there would be 
 a large mechanical equipment of steam-shovels, with 
 the minor organization of drivers, mechanicians, and 
 superintendents, the systems of records, of fuel-sup- 
 ply and repairs ; the placing of equipment ; the or- 
 derly procedure of the work ; the great number of 
 workmen to direct and supervise ; the systems of pay, 
 shelter, commissary, sanitation, — all would have to 
 be moulded into a great comprehensive organization. 
 
10 ORGANIZATION AS AFFECTED 
 
 In India there were no steam-sbovels, mechanicians, 
 fuel-supply, repairs, shelters, or commissary. The 
 excavation was done directly by hordes of natives 
 in gangs of twenty or thirty, each with his or her 
 basket, and one with his little " scooper " or koiti. 
 When the basket was filled, it went on the worker's 
 head and was carried to the dump, where the native 
 received a small tag that entitled him to payment 
 for one basketful of excavation. The workers con- 
 sisted of gangs, over which were the foremen who 
 furnished the laborers for the work. There was no 
 system of housing, for there were no shelters : ail 
 slept on the ground in the open. There was no com- 
 missary organization, for the workers " found them- 
 selves," and in any case would have refused any 
 food prepared for them, because of caste prejudice. 
 The payment of workers required no elaborate sys- 
 tem of pay-rolls and receipts, because each worker 
 simply cashed in the tags he had received. No doubt 
 those in charge of these Indian excavations had their 
 problems of organization, but they were different 
 from our problems, and probably the most of our 
 approved systems would have been of about as much 
 use as an American typewriter to a Chinese mer- 
 chant. 
 
 There are all kinds of industries, and one is per- 
 haps as good as another for the purpose of illustrat- 
 ing organization. If one is credibly informed, the 
 organization of some of the patent-medicine compa- 
 nies differs considerably from that of other manu- 
 
BY PURPOSE AND CONDITIONS 11 
 
 facturing companies, and yet they are still ably 
 organized. There is at least one where two or three 
 rooms in a large building are devoted to the manu- 
 facture of the medicine, a minor function in the or- 
 ganization. The remainder of the building is largely 
 devoted to a printing establishment for the prepa- 
 ration of advertising matter, to advertising depart- 
 ments, correspondence-clerks, and stenographers. 
 Here we have a manufacturing establishment, but 
 the purpose and conditions require special atten- 
 tion to the office-system. The accomplishment of 
 the purpose is not greatly affected by attention to 
 manufacturing methods and details, but is very 
 greatly affected by skill in advertisement and system 
 in the departments where the real effort and most of 
 the expense lie. 
 
 Four or five in particular of the insurance com- 
 panies learned at the time of the Chelsea fire to 
 appreciate the importance in their organizations of 
 complete and systematic records, and will doubtless 
 have increased respect for this factor in their organ- 
 izations. As soon as it became known that the con- 
 flagration would be wide-spread and cause great loss, 
 one of the insurance companies card-indexed all 
 its risks in the burned district. From their records 
 they were able to set down at once the different com- 
 panies that were interested in the insurance, and 
 what the amounts of their risks were. Four or five 
 of the companies cooperated, all necessary informa- 
 tion was compiled, and members of the group were 
 
12 ORGANIZATION AS AFFECTED 
 
 able to write each policy-holder within a day or two 
 that the companies were ready to make appointments 
 with the insured and the adjustment-bureau, and 
 settle claims. The satisfaction of the insured may 
 well be imagined, for the ordinary procedure would 
 have required about a month; thus the efficient 
 recording systems proved their great value, not only 
 as an adjunct in office-system, but as a very impor- 
 tant factor in the relations between the company 
 and those with whom it did business. 
 
 There has grown up in this country of late years a 
 new form of business organization that is of inter- 
 est in this consideration of different purposes and 
 material. This is the organization for the selling of 
 negotiable securities, principally bonds to investors. 
 The larger bond houses have a very large number 
 of salesmen, — a number large enough to suggest in a 
 manufacturing establishment division of labor, lines 
 of authority, systems of time-keeping, and other 
 approved principles for the securing of good and 
 economical work. But these particular principles 
 of organization in a bond house sink to a very subor- 
 dinate place. These salesmen are very nearly inde- 
 pendent units ; many of them have their own clients ; 
 they will have their own ways of finding, meeting, 
 and convincing investors. Organization here takes a 
 different line : it is in the direction of systematic 
 buying of securities suitable to offer to purchasers, 
 of acquainting the men with the principles of the 
 house, the systematic presentation to them of the 
 
BY PURPOSE AND CONDITIONS 13 
 
 merits of the security they are to sell, the card-in- 
 dexing of customers, records of transactions, dissem- 
 ination of information, canvassing of fields ; but not 
 very much thought about the principles of division 
 of labor or of the military virtues. 
 
 Most organizations have grown gradually, and the 
 conditions surrounding this growth often influence 
 greatly the form that the final organization takes. 
 Long existence of customs and methods, and the 
 consequent knowledge of the plan throughout the 
 organization, may be of more importance than 
 the features that might be secured by a theoretically 
 better structure. It is understood, for instance, that 
 the very successful Studebaker organization is admin- 
 istered by an executive committee of five members, 
 each member of which is at the head of a functional 
 department of the business. Committees are not 
 ordinarily very effective as heads of undertakings. 
 They have difficulty in reaching decisions, and one 
 member is likely to prove dominant and carry his 
 ideas without being responsible for the results. The 
 Studebaker organization, however, has grown up 
 about a family of five brothers, all able and active 
 in the business. From small beginnings they had 
 threshed out their problems together and had learned 
 the art of conference. They had found how to draw 
 from each his contribution to the general knowledge 
 and to the particular question, and they had dis- 
 covered ways of reaching conclusions without inter- 
 minable discussions or unplaced responsibility. One 
 
14 ORGANIZATION AS AFFECTED 
 
 might hesitate to form a new organization on this 
 plan, but he would just as surely fail to discard it, 
 when so completely established and so well proved 
 in efficiency. In parts, at least, of many organiza- 
 tions, one finds variations from the theoretically best 
 plan on account of the personality or particular abil- 
 ity of important officers or heads. The individual 
 ordinarily has small influence on the general plan of 
 very large organizations, but in the lesser ones the 
 failure to benefit from exceptional ability in broad 
 grasp and direction, or the failure to make the most 
 of unusual knowledge and skill in special directions, 
 may lose to the undertaking far more than the seem- 
 ingly perfect structure could secure. 
 
 It will be unfortunate if the emphasis given here 
 to the diversity of conditions and to the difference 
 in the purposes of undertakings should be construed 
 as an argument that no general principles can be 
 applied to organization. It is intended simply to 
 show that there is no " royal road," no formula that, 
 once learned, may be applied in all cases with the 
 assurance that the result will be perfect harmony, 
 efficiency, and economy, and a sure path to the main 
 purpose in view. This is not an imagined difficulty. 
 We all are inclined to get a bit twisted toward some 
 favorite panacea, and if one is to attempt to better 
 a business organization, it helps greatly to be able 
 to approach the problem with an open mind, and not 
 to have a special predilection toward a factor that 
 one has somewhere found admirable. One sees fre- 
 
BY PURPOSE AND CONDITIONS 15 
 
 quently men who are biased in favor of military 
 organization, — they have admired the precision, the 
 definiteness, and the well-defined authority and re- 
 sponsibility, and once enamored, they would apply 
 it indiscriminately. Another man in his experience 
 has seen kinds of work clearly defined and important 
 in their functions, and has been impressed with spe- 
 cial skill. He becomes twisted toward specialization, 
 and would apply " functional organization " every- 
 where, often regardless of the advantages of clearly 
 defined responsibility for results as a whole. Now 
 and then when a man discovers in his business some 
 remarkable facts, through the medium of records 
 and statistics, he begins to look Tipon these as em- 
 bodying real organization, and this may become one 
 of the most fatal of twists, because of possible records 
 and statistics there is no end. It is one of the im- 
 portant factors in organization because it has to do 
 with the very first principles, — our knowledge of 
 what we are accomplishing and can accomplish ; but 
 in an organization for doing things, this gathering 
 of knowledge has its limits, — in organizations of 
 some kinds it has narrow limits, and our enthusiast 
 for records and statistics becomes sometimes like the 
 perennial student, who absorbs during all his life 
 and never produces. 
 
 There has been a tremendous advance in the last 
 generation in " system." So great has been the im- 
 provement in the method and order with which busi- 
 ness of all kinds is conducted, and so important is 
 
16 ORGANIZATION AS AFFECTED 
 
 it in the prevention of waste, that we find many 
 who look upon the systematic doing of things as 
 organization itself. And so it is nearly the whole of 
 organization in some cases ; but it is easy here to 
 fall into thinking that a system that saves much in 
 one organization is a universal factor, and will be 
 just as effectual wherever applied. An illustration 
 of this is a detail in the letter-filing system of a 
 certain business house. The needs of this particular 
 business often require that letters be referred to 
 several different departments, that notations or re- 
 marks be made by one or more department heads, 
 and sometimes that letters be retained by a depart- 
 ment pending investigation. It was found that nota- 
 tions were often so many that a special tag attached 
 to the letter was advisable, and moreover that letters 
 were often missing from the files when wanted, and 
 it was necessary to search many departments to find 
 them. There was danger of important letters being 
 lost altogether in their wanderings. The difficulties 
 are met by pasting on each letter as it is received a 
 tag about four inches by five. On this tag is stamped 
 the time when it is received, a serial number, the 
 department to which it is referred, spaces for re- 
 marks, and spaces for noting date of answer and 
 date of filing. In a record-book is entered by the 
 mailing department the date and serial number of 
 every letter as received, the department to which it 
 is referred, and the number of the correspondent. 
 Every letter that is referred from one department 
 
BY PURPOSE AND CONDITIONS IT 
 
 to another is taken by a mailing-department boy, 
 and the change is noted on the record-book. In this 
 way there is a record of every letter, who has had 
 it, and where it is. This all, of course, is a detail in 
 a system, but in the particular organization where 
 it is used, it is an important detail and has saved a 
 tremendous amount of the time of the head men 
 directly and indirectly, as well as furnishing assur- 
 ance that important letters can always be placed 
 when wanted. Now, in certainly nine out of ten or- 
 ganizations this system of recording letters would 
 be an over-elaboration. It would be a needless ex- 
 pense, and would often clog rather than lubricate the 
 machinery of business ; yet if one of the mail-clerks 
 brought up in this system were called upon to sys- 
 tematize a mailing department in another organiza- 
 tion, it would be perfectly natural for him to base 
 his system on the one that he knew had proved a 
 good one. 
 
 Yet, in spite of the wide differences in organi- 
 zations, we do, to use a mathematical term, know 
 the "dimensions" of organization. We do know the 
 quantities which, of some magnitude or other, accord- 
 ing to purposes and conditions, are the component 
 parts. 
 
 We can conceive of no real organization, for in- 
 stance, without a structure of some kind, without 
 a definite plan. However work is apportioned, and 
 by whatever means it is directed and carried out, 
 we may be sure that the method must have definite- 
 
18 ORGANIZATION AS AFFECTED 
 
 ness. We may choose the wrong kind of men to do 
 things, we may not plan to bring their work to them 
 so that their time is most efficiently used, we may 
 not use care that special skill is conserved; but if we 
 have some plan that assigns definite duties, if we 
 have some order by which all the necessary action is 
 taken, we have made a beginning in orgauizatioa. 
 
 We have, too, from our earlier organizations, tiie 
 examples of the value of lines of authority. They 
 add to definiteness. They provide the control and 
 direction by subdividing for that purpose. As author- 
 ity tapers down, it relieves from responsibility except 
 in the fields for which men are fitted. It provides a 
 definite court of appeal in case of difficulty, and thus 
 saves endless disputes and arguments and consequent 
 confusion. This tapering authority never leaves 
 affairs without a head, and it assures the steady 
 progress of the undertaking because it provides a 
 properly trained supply of new men to fill vacated 
 superior positions. 
 
 We know also the value of the factor of responsi- 
 bility in organization, the great incentive there is to 
 careful and energetic work when praise and blame 
 can be accurately placed, and we know that, as this 
 responsibility is segregated, as men are relieved from 
 divided responsibility, initiative increases, and we 
 get the vigor of independent action and leave ability 
 untrammeled. 
 
 As undertakings become more complex, the factor 
 of division of labor, of specialization, grows in impor- 
 
BY PURPOSE AND CONDITIONS 19 
 
 tance. We use great care in choosing men for their 
 difPerent duties according to their fitness, and we 
 increase this fitness and create special skill by nar- 
 rowing duties so that all attention and study and 
 practice are confined in one direction. In division of 
 labor, advantage is taken of a natural tendency. 
 Men do most readily what they can do best. It 
 increases their interest and enthusiasm and efficiency. 
 
 We know that a. great factor in organization is 
 " system," the mechanism of the whole. It transmits 
 intellectual power, physical power, and skill to the 
 main purpose. It touches all parts of the undertak- 
 ing, for it is the introduction everywhere of order 
 and method. It relieves those who direct from the 
 details of execution, and it relieves the man with 
 special skill from the duties for which he is less well 
 fitted. It brings work to men in condition for the 
 application of their particular function. It moves all 
 in accustomed routine so that the waste involved in 
 initial effort is avoided. It insures that important 
 steps will not be forgotten. It makes use of mechani- 
 cal aids to save human labor and thought. It arranges 
 the processes so that the greatest good is secured 
 from the use of the property devoted to the undertak- 
 ing, and it introduces method into the use, so that the 
 property is not idle, — so that time, the opportunity 
 for accomplishment, is not wasted. 
 
 With system and order, the value of discipline 
 appears as a factor, for it holds all to the chosen 
 system of working. It has to do with the rules and 
 
20 ORGANIZATION AS AFFECTED 
 
 regulations necessary to carry out the system, with 
 securing obedience to these rules, and with the train- 
 ing and instruction that assures full understanding. 
 As a part of the maintaining of the system, is the 
 provision for watchfulness and supervision to keep 
 the movement in the right direction, and the provi- 
 sion for checks to insure against dishonesty, against 
 errors in judgment, and errors from carelessness. 
 
 We have another very important factor in organ- 
 ization, in accounting, records, and statistics, for 
 these furnish the chart and the compass, the sound- 
 ing-lead and the log. They are to show us where we 
 are, where we have come from, where we are tend- 
 ing and how fast, and where the shoals lie, and they 
 can tell us, too, how the craft is working. They must 
 be largely depended upon to acquaint those who are 
 directing undertakings with the progress and with 
 the conditions, and this becomes more marked as 
 organizations become larger and more complex, be- 
 cause it becomes increasingly difficult for those at 
 the top to gather their knowledge from their own 
 observation. It is not only from lack of time to 
 observe that this is so, but in the complexity of 
 modern organizations a great amount of analysis is 
 necessary, simply to segregate information, so that a 
 problem may be clearly presented. One hears less in 
 these days of the successful and shrewd old men of 
 affairs who kept little more than memorandum-books 
 and had all the detail of their business in their 
 heads ; that was a possibility in competing with 
 
By PURPOSE AND CONDITIONS 21 
 
 lesser men doing the same thing, and in a time when 
 the product of even a very rough organization was 
 worth much more than the cost of all that went into 
 it. Modern industrial organizations are by no means 
 wholly a fortunate development that widens the dif- 
 ference between cost and value of product. They are 
 also born of necessity to save a margin growing 
 smaller ; and when one has to do with disappearing 
 margins he can no longer depend upon inclinations 
 and rough judgments. He hjis to deal with figures, 
 and his system of figures must represent the true 
 state of affairs. Naturally enough, it is here that one 
 usually finds the greatest difference between indus- 
 trial organizations and other organizations, because 
 it is the price of the life of an industry, — this know- 
 ledge of exactly what is being accomplished and what 
 it is costing to accomplish it. 
 
 An organization is much looked upon as a machine, 
 as a cold-blooded product of synthesis, as an artificial 
 sort of being that recognizes such realities as order, 
 system, discipline, skill, and ability, but has no place 
 anywhere for the " spirit " of anything. But if we are 
 to look upon " organization " as something more than 
 " system," if it is to be a sort of organism, we must 
 recognize another factor, and that is esprit de corps. 
 It induces enthusiastic and unselfish working to- 
 gether, with regard more to the whole result than 
 immediately to one's own personal part in the achieve- 
 ment. It leads one to do his part well for the 
 advancement of the whole. It leads one to see the 
 
22 OKGANIZAHON AS AFFECTED 
 
 advancement in big part because the whole is gaining 
 in achievement and stability. If we have the military 
 groups, it makes those groups support one another 
 and act together as one ; if we have the functional 
 groups, it removes the friction, it covers the border- 
 land, it helps to coordinate. It is not easy to define 
 this spirit exactly. It is not mechanical and is not 
 obtainable on command, but it gives life and power 
 to the organization. It will not exist without some 
 understanding of the whole and without respect for 
 the purpose and methods. It comes down from the 
 top. It is a reflection of the feeling and the policy 
 of those directing, a reflection of the respect of the 
 superiors for their purpose, and of their earnestness in 
 their work, and of their feeling toward those farther 
 down who are joining in the work. It is a spirit of 
 the whole, and cannot exist without consideration 
 of the units. Organizations are not difficult to sketch 
 out on paper. They always have there a definite and 
 workable look, as if nothing could escape a far-reach- 
 ing arm that would pull all into the hopper some- 
 where ; but in the working organization, unless it 
 be the most ^mple, there is constant call for the 
 unscheduled cooperation, for the action that can be 
 secured only through a genuine, lively, and loyal 
 interest in the success of the whole undertaking. And 
 it is interesting here to note that this sort of thing is 
 often expressed by a simile that is the outcome of the 
 activities of intercollegiate life, for we urge tUs spirit 
 by urging " team play." 
 
BY PURPOSE AND CONDITIONS 23 
 
 Thus, we know pretty definitely the factors tbat 
 make organization. They are structure, lines of au- 
 thority, responsibility, division of labor, system, dis- 
 cipline ; accounting, records, and statistics; and esprit 
 de corps, cooperation, " team play " ; but when we at- 
 tempt to determine the parts played by these factors, 
 we find that their relative importance changes with 
 purpose, conditions, and material. We begin to real- 
 ize that there is an art of organizing that requires 
 knowledge of aims, processes, men, and conditions, 
 as well as of the principles of organization. 
 
THE LIMITS OF ORGANIZATION 
 
 The gain from organization is so evident when it 
 is applied to a confused situation, and the satisfaction 
 so great in having affairs run smoothly, that, as we 
 continue grouping forces and introducing system, we 
 easily become convinced that we cannot have too 
 much of it. Like the " diminishing returns in agri- 
 culture, " however, the returns from increasing organ- 
 ization do not continue proportional to the effort, and 
 limits are reached, beyond which one may well pro- 
 ceed with care. It becomes necessary sometimes to 
 remind ourselves that organization, as an end in it- 
 self, is of no value. A business organization is for 
 the purpose of accomplishing definite pieces of work, 
 of arriving at a definite result with the least expend- 
 iture of labor and material, the smallest expenditure 
 for plant, and the shortest time of use of the plant; 
 and if organization does not prevent waste or enable 
 us to get results attainable in no other way, it has no 
 value. 
 
 To increase the efficiency of effort, we must go be- 
 yond the perfection of the organization machinery as 
 machinery: we must know in what directions effort 
 will yield the greatest returns, which factors in a 
 result have the greatest bearing and will best repay 
 
THE LIMITS OF ORGANIZATION 25 
 
 study and attention, which items are unimportant 
 and the last that should have consideration. 
 
 Many years ago there was a course of study at the 
 Institute of Technology that was purely a technical 
 course for the benefit of engineering students in their 
 professional work. The subject of the course was 
 "The Precision of Measurements," and it may be 
 assumed that it was not intended to be specially help- 
 ful in practical business; and yet to those of us who 
 were interested and were impressed with the princi- 
 ples that were established, this course went much 
 farther than to furnish a sound method in physical 
 measurement — it was found to be broadly applicable 
 to much other work, and even suggested to many of 
 us a basis for a philosophy of effective endeavor. 
 
 The principles emphasized were that most final 
 results are not single measurements, but are the re- 
 sults of the combination of several quantities of dif- 
 ferent kinds and of a more or less complex computa- 
 tion ; that the measurement of energy, for instance, 
 in foot-pounds, would involve the combination of 
 measurements of distance and weight, and that the 
 measurement of the work done upon one side of the 
 piston of an engine in one stroke, as another instance, 
 would involve the combination of measurements of 
 diameter of piston, the mean intensity of pressure, 
 the length of stroke, and would also involve a more 
 or less precise value of ir. It would not be possible 
 to have perfection in these measurements, and the 
 accuracy with which the different components could 
 
26 THE LIMITS OF ORGANIZATION 
 
 be determined would vary gresttly. In measuring the 
 work done upon the piston, it would be easy to get 
 a pretty accurate measurement of the diameter of 
 piston and length of stroke, but the pressure is diffi- 
 cult to measure, and the accuracy would be much less 
 than with piston and stroke-measurements, and of 
 course far less than the accuracy of the value of ir, 
 which can be carried out as many places as desired. 
 Moreover, it also appears that for the best precision 
 in the final result it will be worth while to measure 
 the diameter of piston more carefully than the length 
 of stroke, because in the final result the diameter i^ 
 squared, and is thus a factor of greater importance. 
 It also was proved to us that nothing was gained in 
 precision by carrying out the value of ir to a great 
 many places, or by measuring the length of stroke 
 as accurately as we could, because in any case the in- 
 fluence in the final results of the rather rough mea- 
 surement of pressure would entirely overshadow the 
 refinements in the accuracy of the other components; 
 that the really significant figures in the value of ir, 
 for instance, would in the example given be very 
 few, and after four or five places would be insig- 
 nificant. 
 
 We were tstught to lay out our problem in advance, 
 to learn before we began that we must measure length 
 and diameter and pressure, and to determine in ad- 
 vance what influence each of these factors had in the 
 result. We were urged to learn our limitations in the 
 determination of each of these different factors, so 
 
THE LIMITS OF OKGANIZATION 27 
 
 that we should not waste time in fruitless refinement, 
 or end with a false idea of the precision of the result. 
 This seems a perfectly obvious procedure, that the 
 exercise of common sense would always lead us to 
 follow ; but in reality we are not likely to follow it 
 unless we make a studied attempt to do so. When we 
 know that we have to measure factors like length of 
 stroke or diameter of piston, there is a tendency to 
 go straight to work at them ; and if we pride our- 
 selves on being thorough, we devise ultra precise 
 methods to get as near perfection as we can before 
 we pass to the next factor. When we get to the deter- 
 mination of pressure, we discover that no precise 
 measure is possible, and that the bearing of this fac- 
 tor on the whole result is such that we might just as 
 well have rested content with approximate and easy 
 measurements of our linear quantities. We are so 
 constituted, however, that we cannot help a virtuous 
 feeling when we contemplate our length-standards 
 corrected for temperature and our micrometer adjust- 
 ments arranged with such painstaking care. We 
 pride ourselves that at any rate we have done the 
 best we can, and have a lot of work carried out sys- 
 tematically to show for it. Yet all but two minutes 
 of it was worth nothing whatever. 
 
 It is very easy to fall into this way of doing things. 
 A year or two ago the price of copper-wire was in a 
 verjunstable position. It had been selling unusually 
 high, and then began dropping a quarter and a half 
 cent a pound in a few days. No one knew whether 
 
28 THE LIMITS OF ORGANIZATION 
 
 he would have to pay in a month's time twenty cents 
 or fifteen cents a pound, and yet in some of the 
 estimates of the period one would he likely to find 
 results predicated on the existing market price, — he 
 would find elahorate calculations to show the advis- 
 able type of electrical machinery to use in a given 
 case when the dominating factor was changing so 
 fast that no one could determine the result within 
 a wide range of probability. Such estimates were 
 not an example of accurate and praiseworthy work. 
 They were unmeaning and foolish. They produced 
 only insignificant figures, because the variation in 
 an important factor was overwhelming in its influ- 
 ence. 
 
 Within the memory of all of us, the bicycle indus- 
 try was exceedingly profitable and growing like a 
 weed. There seemed no limit to the possible output 
 of factories. The manufacture involved many parts 
 and processes, and involved much special skill. 
 Every bicycle manufacturer could see that thorough 
 organization of his business would result in better 
 product at lower production-cost. Some of the manu- 
 facturers introduced all approved methods, enlarged 
 the scope of their concerns to include practically all 
 of the parts of the complete machine. They built 
 substantial and elaborate plants that the investiga- 
 tions of specialists and the calculations of engineers 
 showed were best adapted for the work. Much of this 
 organization was admirable and justified. If any of 
 us had been asked at this time which establishment 
 
THE LIMITS OF ORGANIZATION 29 
 
 had the best organization, we should doubtless have 
 picked out one of the very complete ones, one with 
 model and substantial factories, but we should very 
 likely have been wrong, because it was proved in 
 very few years that the organization that happened 
 to have in its administrative staff a good student in 
 human nature, an expert on the stability of fads 
 and fancies, was the one that had the really effective 
 organization. The great activity in the industry was 
 short-lived. Those who realized that it probably 
 would be short-lived, organized as well as they could 
 for the operating expenses, but they were wary about 
 large permanent investments, for these required 
 many years of successfid business to justify them. 
 One of the most important factors in the business 
 was the time it was to last, and some apparently gave 
 it little thought. 
 
 Some of this may sound rather technical and not 
 specially applicable to business organization, and 
 some of it may seem perfectly obvious, but it brings 
 out some general principles in the attainment of any 
 result, which we may know perfectly well, but which 
 we often fail to apply with any care. It makes us 
 realize more clearly that in every problem there are 
 many factors — in any undertaking there are many 
 things that influence the result ; that we shall make 
 the best use of time, labor, and money if we keep all 
 these factors in view, if we develop the whole in 
 harmony, consider the bearing of the factors, and 
 work for their improvement in proportion to their 
 
30 i?HE LIMITS OF ORGANIZATION 
 
 influence, instead of getting twists in one direction 
 because it happens to interest us or is easy of pro- 
 gress, or because it is in plain view. It helps us to 
 an appreciatiou of the true kind of thoroughness, of 
 the value of attention to what is significant, and the 
 elimination as a waste of time and effort of what in 
 our " Precision of Measurements " was represented 
 by the insignificant figures. It saves us from seeking 
 too great a degree of perfection in a detail because it 
 teaches us that perfection in one detail may add only 
 in an infinitesimal degree to probable perfection in 
 the whole. 
 
 This question of thoroughness is well illustrated 
 by an example furnished by an Institute of Techno- 
 logy graduate some twenty years ago. At that time 
 it was rather the fashion for electrical engineers to 
 go upon graduation to the factories of the Thomson- 
 Houston Electric Compaliy at Lynn, Mass. They en- 
 tered there what was called the Expert Departnient. 
 The company at that time was much in need of 
 trained men to superintend the installation of electric 
 plants, and in order to give these men a fairly com- 
 prehensive idea of electric construction, the Elec- 
 tric Company arranged an expert course to last two 
 or three years. During this time the technical-school 
 graduates spent a little time in all important branches 
 of the factory Work, gettiiig in this way not detailed 
 knowledge of manufacturing, but a fairly complete 
 idea of all the factors that made up a sufficient 
 knowledge of plant-construction. They learned some- 
 
THE I^IMITS OF OEGANIZATION 31 
 
 thing about electric-wiring, about winding arma- 
 tures, tested the different types of machines, learned 
 about their adjustment, and gained some familiarity 
 with all branches of the business as it was then con- 
 stituted. One of the Institute graduates who went 
 to Lynn was not at all satisfied with this method. 
 He thought that it resulted in a superficial smatter- 
 ing of knowledge about a great many things, and it 
 did not at all suit his earnest and conscientious way 
 of going about things. He decided that he would do 
 differently, because he wanted to know the details ; 
 so he obtained permission to take a different sort 
 of course of his own. Eheostats, or resistance-boxes, 
 were considered pretty important pieces of appara- 
 tus in those days, and he thought that a good place 
 to begin was in the rheostat department, where he 
 intended to stay long enough to know thoroughly 
 every item of the construction, so that if at any time 
 it became necessary for him to make a rheostat, or 
 know what the matter was with a defective one, he 
 would have the most intimate knowledge of its con- 
 struction. He accordingly set off six months for this 
 work and spent his six months building rheostats. 
 He had just about finished his time when the com- 
 pany decided it would change the type of rheostat, 
 and they were thereafter built after an entirely dif- 
 ferent design. This man's whole six months' work 
 had gone for nothing except for such incidental ex- 
 perience as he obtained. 
 It is dangerous to criticise old sayings, they usu- 
 
32 THE LIMITS OF ORGANIZATION 
 
 ally have so much truth in them, but one wishes 
 that the familiar saying, " It is the little things that 
 count," were not quite so short and were more spe- 
 cific, for it is responsible for much of this wrong kind 
 of thoroughness. No one would contend, of course, 
 that a multitude of little things do not in the aggre- 
 gate amount to much, and there usually comes a time 
 when every detail must in its turn be studied. But 
 there is always the same old problem, " how many 
 significant figures ? " how far is it worth while to go 
 in accuracy of detail in connection with one factor 
 before one is sure he has taken into account all 
 factors ? Certainly in a business organization one is 
 likely to reach better results if he first makes sure 
 that all the factors are taken into account, and that 
 endeavor is toward coordination and a real organ- 
 ism, than he will if his mind is down close to de- 
 tail before the general plan and method are deter- 
 mined. 
 
 One sees often this close attention to very perfect 
 systematization in departments of a business, and 
 at the same time very little attention to some factor 
 that is overwhelming in its importance. A few years 
 ago a manufacturing concern had some difficulty in 
 making a profit from its products, and to determine 
 the cost more accurately, it established a very com- 
 plete system of shop-cost records, so that it might 
 be known which products were causing a loss. Much 
 time and care were given to the accurate determina^ 
 tion of all factors that entered into the shop-cost. A 
 
THE LIMITS OF ORGANIZATION 33 
 
 period of trial showed various margins in the differ- 
 ent classes. The overhead costs, the general expenses, 
 administration, and selling were known to be high 
 for the amount of business, and a larger business 
 was depended upon to correct this ; but it was only 
 some time later that it was discovered that one of 
 the classes of products showing a very good shop- 
 margin was costing so much in general expense and 
 cost of selling that there was no hope of ever making 
 a profit, regardless of the perfection of shop-organ- 
 ization alone. Certainly in business organization, 
 fully as much respect must be accorded the old 
 warning about " saving at the spigot and wasting at 
 the bunghole" as we accord to the saying, " It is the 
 little things that count." 
 
 Now and then there are men who seem to go at 
 once to the root of a question, and who, from a mass 
 of detailed explanation, exposition, and talk, seem 
 suddenly to pick from the medley the two or three 
 salient features, — the things of such transcendent 
 importance that all else drops away as if mere com- 
 ment. Such men have a proper sense of proportion 
 and the true sense of thoroughness, because they do 
 not get involved in detail before they have blocked 
 out the plan. 
 
 When it is urged that it is not worth while to 
 follow all detail in every direction, when it is urged 
 that one must first make sure that he knows in which 
 direction it is most profitable, in a broad sense, to 
 work, this must not be mistaken as advising a policy 
 
34 THE LIMITS OF ORGANIZATION 
 
 of " good enough," for it is not that ; it is the policy 
 of refusing to waste our resources on the non-essen- 
 tial and the ineffectual ; it is bdng dissatisfied with 
 the accomplishment of the infinitesimal in one direc- 
 tion when accomplishment of magnitude is possible 
 in another ; it is refusing to be like the man who 
 thinks he is progressing through space when he walks 
 forward in a train that is backing up at forty miles 
 an hour. It is not to get short cuts and save work, 
 but to make effective work, to expend the time and 
 energy where it will accomplish the most. With an 
 individual, so much depends upon his peculiar abili- 
 ties and upon the interest and enthusiasm that he 
 brings to any work, that there is less opportunity 
 perhaps for choosing the lines of effort that appear 
 upon cold analysis to be most essential to the for- 
 warding of a result; but as work becomes more 
 complex, as greater numbers cooperate to carry out 
 undertakings, as we mould great bodies of workers 
 into an Or^nization, this principle of choosing the 
 dominant factors for special attention and of lopping 
 off the insignificant becomes a great principle of 
 procedure. 
 
 In business this principle is more clearly recog- 
 nized than it is in other activities, because business 
 is self-supporting -^ it is one of the conditions of its 
 life that it produces more than it consumes. It is a 
 vital error here to exaggerate the insignificant or 
 to slight the chief factors of existence. In other lines 
 of endeavor, we may say, " This is a good thing to 
 
THE LIMITS OF ORGANIZATION 35 
 
 do, I will do it " ; but in industry, business, com- 
 merce, we say, " This seems a good thing to do ; I 
 will do it if it justifies the time, labor, thought, and 
 sacrifice, — the cost of doing it ; I will do it if 
 the same time, labor, thought, and sacrifice will not 
 accomplish something else that I can do that is 
 better." The fact that business uses a standard of 
 value by which to measure desirability, by which it 
 can gauge the value of production and its cost, 
 enables it to apply these principles of effective 
 endeavor, but the particular standard of value that 
 is used does not affect the principles, and they can- 
 not be ignored when the standard is changed. 
 
 Many lines of endeavor have not at all money- 
 value in view, — their ends are not at all material, 
 — and yet, if their organization is to be effective, if 
 it is to produce the best result for the expenditure of 
 labor, time, and sacrifice, the cost by some standard 
 of value must be counted, the ability of workers 
 must be conserved ; the same general principles of 
 action apply as if the measurement were by the 
 money-standard of value, ^- it makes no difference 
 whether the direction of the endeavor is government 
 of a people, the conversion of the heathen, the pro- 
 duction of goods, scientific research, the winning of 
 a game, or social regeneration. 
 
 The balancing of factors, the cutting out of the 
 insignificant, analysis, judgment, and the choice of 
 the " worth while," are not heroic accomplishments ; 
 they rather excite the impatience and contempt of 
 
36 THE LIMITS OF ORGANIZATION 
 
 those who are looking to the ends alone and will 
 not count the cost. We are in a fair way to see the 
 term " commercial," so much used in derogation and 
 disparagement of the principles of business, gradu- 
 ally grow worse in its meaning, until it bears about 
 the same relation to its original intent that 
 " villain " does to " serf " or " peasant," and that 
 " despot " does to " master." But, nevertheless, there 
 is a true spirit of commerce, industry, and business, 
 and these activities will continue to be of use to all 
 branches of endeavor by the examples they furnish 
 of choosing the essential and important and discard- 
 ing the insignificant ; and it is a principle that must 
 be followed in any undertaking, or we end, after 
 expending our resources, possessed of nothing worth 
 having. 
 
 This may all seem a bit removed from the ques- 
 tion of organization, but it really emphasizes some- 
 thing that organization does not tend to secure unless 
 care is taken to preserve it. As business becomes or- 
 ganized and as duties become specialized, this ques- 
 tion of cost does not always come home to each 
 individual as it did when the individual had a hand 
 in all questions and could see the bearing of all op- 
 erations. The problem of organization bears a close 
 resemblance to engineering problems. It requires 
 analysis, it involves balancing and setting values, it is 
 a constant estimation of the relation of parts to the 
 whole, the function of these parts in the purpose of 
 the whole, and we gain in setting about the problem 
 
THE LIMITS OF ORGANIZATION 37 
 
 with these ideas of proportion and relative value in 
 our minds. It becomes one of the most important 
 functions in the administration of an organization to 
 preserve harmony and proper proportion in its work- 
 ings, to provide for broad consideration of this ques- 
 tion of cost and this question of " worth while," so 
 that action will not be taken and work done simply 
 because it is " good to do," regardless of the time, 
 labor, thought, and sacrifice that it demands. The 
 more we specialize to secure concentration of interest 
 and economy in effort, the more carefully this must 
 be watched, because the zeal of interested workers 
 leads them to exaggerate the relative importance of 
 their particular function. Each group of workers, 
 each department in a business, is laboring at one 
 component in the result, and the more zealous the 
 leader of a group and the greater his ability, the 
 more possibility there is that he may seek for results 
 in his province that would not be justified if his 
 factor were considered in relation to the whole pur- 
 pose and result. 
 
 It is not an uncommon criticism of engineers and 
 architects that they have a tendency to design the 
 perfect structure, the one that all the most approved 
 standards declare the best and that is the ideally 
 suitable. The criticism is not devoid of basis because 
 these men are specialists. It is not their province 
 ordinarily to determine whether other factors in the 
 whole result dictate a quality less than the perfect. 
 Such questions, among others, as whether the struc- 
 
38 THE LIMITS OF ORGANIZATION 
 
 ture is to be comparatively temporary or is to last 
 fifty years, or whether the money necessary for con- 
 struction can be raised on a four per cent basis or 
 must be raised on a seven per cent basis, are ques- 
 tions for administrative officers to determine ; and if 
 they simply turn the structure design into an organi- 
 zation hopper, they run the risk that the zeal of the 
 designer will exaggerate the relative importance of 
 his function. 
 
 The national government has very greatly increased 
 its functions in the last generation ; and in this very 
 large organization there are many specialists work- 
 ing hard and earnestly to turn out worthy products 
 from their bureaus. But there is no necessity here 
 that the value of the product exceed the cost. There 
 is no " spirit of commercialism " to hold the course 
 true to a definite end without meaningless excursions ; 
 and thus we see some elaborate products of the zeal 
 of specialists that an administrative ofEcer, consid- 
 ering the efficiency of his organization and with any 
 standard of worth to work by, would have to cut out 
 as " insignificant figures." 
 
 The street-railway organizations of many of the 
 large cities have been furnishing in tiie last ten years 
 an example of the danger of trusting to effective 
 organizations for the extension and operation of the 
 properties, without sufficient exercise by administra- 
 tive officers of their function of preserving propor- 
 tions and determining the relative importance of 
 factors. The prices paid for the securities of street 
 
THE LIMITS OF ORGANIZATION 39 
 
 railways have been so greatly influenced by increas- 
 ing gross earnings and economical operation, that the 
 organizations have been stimulated to their greatest 
 activity to secure growth and economy ; and now the 
 street railways begin to find that the desire for more 
 business has saddled them with such long hauls and 
 such onerous conditions, submitted to in order to 
 secure growth, that it becomes a question whether 
 the result is worth the time, labor, thought, and 
 capital devoted to the undertakings. 
 
 In perfecting any business organization, we usually 
 find parts that lag behind in effectiveness — that re- 
 main unsystematized even after others are carried to 
 a high degree of refinement. It is an indication that 
 one factor has been measured to a high degree of 
 precision, and that there has been little more than 
 guessing at another. This neglect of our " Precision 
 of Measurement" principles is illustrated by the 
 condition of the electric-lighting organizations some 
 fifteen or twenty years ago. The dollars-and-cents 
 accounting even at that time was pretty well system- 
 atized : other industries had developed principles of 
 accounting that made possible the early adoption of a 
 system well adapted to the electric lighting industry. 
 Good systems were being introduced in the operation 
 of the plants, the stations were better planned for 
 economical working, they were weighing all coal, 
 measuring and counting all supplies, establishing 
 «tock-rooms, systematizing inspection, repairs, and 
 construction ; but there was a curious anomaly in 
 
40 THE LIMITS OF ORGANIZATION 
 
 the organizations. Those carrying on the electric- 
 lighting business had considered it a business of sup- 
 plying light and not of supplying electrical energy. 
 All the companies were counting pretty accurately 
 the cost of operating their plants, and yet very few 
 of them had any means of measuring the thing they 
 produced and were selling. When it was a question 
 of accounting for every cent that came into the com- 
 pany, or that was paid out, the system was perfect ; 
 but when it came to knowing what was produced, 
 how many kilowatt hours of electrical energy went 
 out over the wires, there was no system at all. These 
 were organizations in the process of forming, and it 
 shows well the possibility there always is of neglect- 
 ing entirely an important factor in a result. Happily 
 the electric-light companies are now almost univer- 
 sally provided with meters that measure every kilo- 
 watt hour of output, and a unit is secured by which 
 all items of income and expenditure may be judged. 
 With a zeal, however, that is perhaps born of the 
 delay in securing this new facility, we sometimes now 
 see lighting men breaking another rule for efficient 
 endeavor by magnifying the insignificant, and calcu- 
 lating kilowatt-hour costs for every item they can 
 discover. 
 
 The ambition of men to make their establishments 
 great and inclusive, the desire for a complete organi- 
 zation, leads sometimes to its extension into unwar- 
 ranted fields. The successful shop comes to grief as 
 a department store too small to gain the advantages 
 
THE LIMITS OF ORGANIZATION « 
 
 of specialization ; and the factory proving its useful- 
 ness in a limited field is carried down because a 
 foundry to supply its castings or a wood-working 
 shop to supply other parts seems to add to the com- 
 pleteness of the organization, but is not justified by 
 the size of the business. It might seem to improve 
 and complete a construction organization, for in- 
 stance, to add to its force inspectors of material, 
 who would watch manuf actiire and test the product ; 
 and yet such a move might be wasteful and accom- 
 plish comparatively poor results, if it were possible 
 to employ for this purpose a firm who did much 
 inspecting and testing, and that alone. It is always 
 a pleasure to see a thing run like " clock-work," but 
 it is not always safe to use this quality as a crite- 
 rion of value, because an organization may run like 
 "clock-work " and yet accomplish poor results with 
 great waste. There is such a thing as over-organiza- 
 tion, excess of systematization, excess of division for 
 specialization. Dividing out a function that is inde- 
 pendent of other activities simplifies, gives definite- 
 ness to the plan, places responsibility more accurately, 
 and increases the product of effort through speciali- 
 zation ; but when we attempt divisions that are too 
 fine, when we get to dividing functions that are not 
 naturally independent, we weaken the connection of 
 the activities with the nerve centre that coordinates, 
 and we increase greatly the difficulty of cooperation. 
 If we attempt to make duties independent that are 
 not naturally independent, we may get two depart- 
 
42 THE LIMITS OF OEGANIZATION 
 
 ments attempting to do the same thing, or, in their 
 effort to avoid the friction and confusion resulting 
 from this, they both avoid the duties about which 
 there is question and matters fall between them 
 unattended to. This forced independence results in 
 duplication of work. To maintain independence, each 
 of several groups sometimes provides for facilities 
 that cauld easily serve all groups. Thus organization 
 carried along wrong lines, though it seems an ex- 
 tension to the structure, may in reality have the same 
 result as no organization. The National Government 
 unfortunately furnishes examples of this. The recent 
 discussion of the reorganization of the Navy Depart- 
 ment has brought out the waste and lack of harmony 
 that come from the separation into bureaus that are 
 forced to be too independent, and that are without 
 means for the coordination that must exist in effect- 
 ive administration. Keeping to the old divisions 
 made for the purpose of control and the fixing of 
 responsibility, the department has been left with no 
 one responsible for the coordination of the bureaus 
 and for the elimination of the duplication of plant 
 and work. The simple dividing up and separating of 
 complex duties brings one kind of order, but it is 
 not a very high form of organization, because it can 
 usually be only temporarily effective. A change in 
 conditions may make the division a wrong one, and 
 the arising of relations between the divisions puts 
 too much strain on pure cooperation. Moreover, these 
 very definite divisions often leave the same kind of 
 
THE LIMITS OF ORGANIZATION 43 
 
 work to be performed by many different depart- 
 ments, and all advantage in concentrating and sys- 
 tematizing a particular branch of work is lost. There 
 necessarily arises in this way much duplication in 
 facilities and in work. It is probably too much to 
 expect coordination not only between the bureaus of 
 the same government d'epartment, but also between 
 different departments. An amusing illustration of 
 the independence of the different government depart- 
 ments is the experience recently of a Boston business 
 house. The Census Bureau requires of this house 
 each year rather elaborate returns regarding its busi- 
 ness. They are prepared with care and are on file in 
 the Census office. There appeared one day a man 
 from the Department of Justice ; he wished certain 
 information about the business, but was told that it 
 was too bad he had come all the way to Boston for it, 
 because exactly that information was on file in the 
 Census office in the very form he wished it. But, said 
 he, "We haven't anything to do with the Census 
 Bureau ; that is in another department." By a curious 
 coincidence, while the Department of Justice man 
 was in the office a letter was received from the De- 
 partment of Commerce and Labor, which wished the 
 same information about the business. " This is easily 
 arranged," said the business house to the Department 
 of Justice man : " we will simply write the Depart- 
 ment of Commerce and Labor to see you ; that we 
 have just given you all the information." " Don't 
 do that," said the Department of Justice man. " He 
 
44 THE LIMITS OF ORGANIZATION 
 
 couldn't get anything from me. The departments 
 are separate." 
 
 It is safe to say that those responsible for any 
 established business or industry have constantly to 
 be on their guard against the continuance of out- 
 grown systems and against the gradual adding of 
 detail to an old method for the purpose of meeting 
 new conditions, when a new and simpler method 
 would be far more efficient. It is one of the benefits 
 of organization that it provides established ways of 
 doing things ; but there is an element of weakness 
 in this very advantage, if we grow to look upon the 
 established order as inviolable because of custom 
 and long use. This is conspicuous in the "red tape" 
 that results from perfunctory approval. Wherever 
 there are systematic ways of doing things, checks 
 are used to guard against errors of judgment, neg- 
 lect, or carelessness, and as several persons may be 
 required to catch all possible errors, it may be neces- 
 sary that letters, papers, material, or work pass 
 through several hands to receive approval. One may 
 note at times in just such procedure the hanging on 
 to an outgrown system by the requirement of this 
 inspection and approval that has long before lost its 
 significance. It is the force of habit in organization, 
 the discipline that holds to established methods. Ac- 
 counting, records, and statistics help us in discover- 
 ing the useless and ineffective, but these detecting 
 agencies rarely turn against themselves, and we have 
 need of caution here also to see that analysis does 
 
THE LIMITS OF ORGANIZATION 45 
 
 not become directed to the non-essential, and that 
 we are not recording facts of little moment. We 
 sometimes get over-organization that results in doing 
 more than is necessary, following out work to greater 
 refinement than is worth while. This is sometimes 
 true in the determination of costs. The attempt to 
 keep close watch over all wastes sometimes results in 
 a system for the purpose so elaborate that the cost 
 of the system itself becomes an important factor. 
 While it pays to know costs, it also pays to find out 
 how much it costs to know costs. 
 
 But though we find elements of weakness in the 
 very process of organization, they are not weaknesses 
 that necessarily grow greater with the size of the 
 structure. The limits are not limits that come only 
 with size. With the growth of the structure comes 
 still further division into groups and greater need 
 of coordinating ability in administrative officers, but 
 there remain always the same underlying principles 
 of efficient endeavor : the choosing of the things 
 worth doing, the emphasizing of factors that have 
 the greatest bearing on the result, and the elimina- 
 tion of that which has no significance. It is true that 
 in the end we have to say that this choosing and 
 this judgment is the important matter, but we must 
 realize that it is not to be supposed that organization 
 will take the place of business ability. Organization 
 is but a means to an end ; it provides a method. It 
 can never take the place of business judgment, or 
 intuitive sense of what is wise to do, or vigorous 
 
46 THE LIMITS OF ORGANIZATION 
 
 initiative that sets things in motion ; but it can help 
 to secure these by relieving from detail those who 
 must exercise the judgment, and by bringing to them 
 the premises they need ; and it can help the execu- 
 tion by providing orderly procedure for carrying out 
 the action that is determined upon. 
 
THE ORGANIZATION OF 
 ADMINISTRATION 
 
 When able and efifective business administration 
 is mentioned, probably to most of us there comes to 
 mind the kind of man that for so long has been the 
 type of the efficient business administrator, the figure 
 that in so many industries has stood in the com- 
 manding position, knowing all details at first-hand. 
 He is the man who owns and administers his under- 
 taking. He has been the conceiver of the purpose, the 
 one who has seen all branches of the business de- 
 velop ; who knows the bearings of all factors ; who, 
 in lieu of a system for securing discipline, has per- 
 haps subjected himself to discipline and furnished an 
 example of strict and systematic attention to business 
 in his own adherence to routine ; who, as the creator 
 of the processes, the administrator of each part, the 
 builder of the structure, is of unquestioned superior- 
 ity and the one with supreme authority. 
 
 There is good reason why such a man represents 
 to us efficient administration. As long as the busi- 
 ness that he administers is within his range and has 
 not grown in size beyond his grasp and ability to 
 control and direct in detail, he is able, by himself, to 
 be the means of securing the benefits of many of the 
 
48 THE ORGANIZATION OF ADMINISTRATION 
 
 factors that we have found are necessary in con- 
 structing an effective organization. There is no in- 
 definiteness as regards authority and responsibility, 
 because they rest in him except as he delegates them 
 specifically, and, as far as administration alone goes, 
 he is sure of esprit de corps, cooperation, and " team 
 play," because the units to be harmonized are al- 
 ready one. 
 
 This type of man is passing, however, to some 
 extent. The type of organization that he presided 
 over and the type of administration by means of 
 which he presided have been largely superseded, be- 
 cause large size has secured advantages and brought 
 economies that exceed the benefits that can be de- 
 rived from the superior executive power of the older 
 type of administration. Moreover, the increasing 
 size of industries and various business undertakings 
 has brought the necessity of organizing the contri- 
 bution of capital. The business corporation has come 
 into being, by means of which great numbers may 
 join in furnishing capital for the carrying out of 
 undertakings. 
 
 Many or even all of these contributors may be ig- 
 norant of the business they have invested in. They 
 intrust their contributions to those representing the 
 corporation, and the statutes authorizing the form- 
 ing of these corporations have had to specify some- 
 what the form the organization shall take, because 
 of the necessity of protecting the individuals who 
 contribute the capital, and also those who may be- 
 
THE ORGANIZATION OF ADMINISTRATION 49 
 
 come the creditors of the whole body. There thus 
 immediately become introduced into undertakings 
 carried on by corporations, factors in the administra- 
 tion that did not exist when one man owned his busi- 
 ness and directed it. Authority and responsibility 
 are to some extent forced into definite places. The 
 law provides that there shall be a body of directors 
 who represent the owners and are responsible to 
 them for the proper conduct of the business. It pro- 
 vides that there shall be a president as the head ex- 
 ecutive authority, that there shall be a treasurer who 
 is responsible for the proper use of the funds, that 
 there shall be a secretary who shall record the acts 
 of the directors. Here begin to arise many of the 
 difficulties of corporations, because the law specifies 
 the form of organization necessary for protection, 
 and this form is not always the one that would be 
 chosen with regard only to the effective carrying out 
 of the purposes of the organization. 
 
 In the theory of corporation administration, the 
 owners are to delegate to certain of their number the 
 responsibility of directing the affairs of the company, 
 of deciding upon the officers who are to manage the 
 affairs, and of passing upon the acts of these officers. 
 Five or six men, joining together in corporate form 
 to develop an enterprise or carry on a business, find 
 the process comparatively simple. They give their 
 time, attention, and judgment to all matters, and if 
 the interest of each in this enterprise bears a large 
 proportion to his total interests, and they all have 
 
60 THE ORGANIZATION OF ADMINISTRATION 
 
 expert knowledge of the undertaking, the affairs 
 may be nearly or quite as well handled as the affairs 
 of the partnership or of the individual. When, how- 
 ever, the number of stockholders becomes hundreds 
 or thousands, an entirely different condition exists. 
 The government of the corporation becomes a repre- 
 sentative government, with a probability either of 
 unequal representation by dominant men, or of re- 
 presentation by men not familiar with the property or 
 business, nor free to give the time necessary to know 
 sufficient detail for wise and independent judgment. 
 Ten or twelve representatives acting together cannot 
 give effective administration. Numbers are good for 
 conference, to protect against prejudice and against 
 warps and twists, to bring out by discussion all 
 relevant factors, to thrdw upon problems side-lights 
 from varied experience, and to assure regular pro- 
 cedure ; but the autocrat's command is superior in 
 effectiveness. It saves time, and permits quick action 
 upon conclusions formed, but not formulated. There 
 is much denunciation of corporation autocrats, but it 
 is probable that the dominance of single strong men 
 in corporations is much less due to a desire for self- 
 ish advantage, than to the impatience of vigorous 
 executives over the delay necessitated in presenting 
 questions with full and orderly exposition to bodies 
 of men, and in bringing them to a conclusion by dis- 
 cussion and argument. 
 
 But whether it seems best from the point of view 
 of effective administration or not, we shall undoubt- 
 
THE ORGANIZATION OF ADMINISTRATION 51 
 
 edly have to consider in an increasing degree the 
 presentation of information to boards of directors, 
 and to some extent to representatives of the public 
 as well. It is a factor that must be reckoned with 
 in the organization of the administration of corpo- 
 rations. The corporation's capital is contributed by 
 many people, the work of the corporation is carried 
 on by great numbers whose lot in life is cast with the 
 project, the product of the corporation's activities 
 becomes in many cases essential to the well-being 
 of those it serves, and it will hardly be permitted 
 that the integrity of such enterprises shall rest upon 
 the rise or fall, upon the wisdom or foolishness or 
 honesty, of one man. The results become too far- 
 reaching to be dependent upon the life and health 
 of one man, however able and honest; and whatever 
 may seemingly be gained in this way temporarily, 
 through vigorous and able direction, is more than 
 offset by the instability or uncertainty of the corpo- 
 rate affairs. Organizations are thus having brought 
 to them a new problem ; they have to provide sta- 
 bility in administration as well as efficiency, to pre- 
 serve the vigor of initiative of the individual, and 
 yet to benefit by the judgment of many, and they 
 have to assure the continuity in administration that 
 is demanded by the span of life of the corporation, 
 and the increasing time necessary to earn enough to 
 return with interest the capital contributed to the 
 undertaking. 
 These needs are not inconsistent with good organi- 
 
62 THE OKGANIZATION OF ADMINISTRATION 
 
 zation and efficient administration. The mere size 
 and complexity of modem undertakings necessitate 
 for tlie information of administrators much of the 
 system for gathering facts and for their orderly 
 presentation that is necessary in acquainting repre- 
 sentatives of stockholders or public with the essen- 
 tials of the business. These corporate needs and the 
 great size of undertakings do, however, require that 
 administration be organized with the same care that 
 is given to the productive processes themselves. It 
 becomes impossible, as in old-time business, that 
 administrators shall have intimate and expert know- 
 ledge of all details and all processes. If they attempt 
 to gather this at first-hand, they arrive in adminis- 
 trative positions at an age when they no longer have 
 the vigorous initiative of youth with which to attack 
 administrative problems, and some of their detail 
 knowledge is already antiquated and inapplicable. 
 
 In some cases, it becomes necessary to treat 
 administration almost as a function in itself ; to 
 choose administrators for their power of initiation, 
 for their sense of proportion, for their ability to pick 
 the essential, and to supplement them with organiza- 
 tion that brings to them the conclusions of the expert 
 in the finer detail of the parts. The mechanism 
 through which the administrative officers gather their 
 knowledge about the progress and the working of 
 the organization, and the means by which they coordi- 
 nate the parts and carry out their policy of procedure, 
 vary with the plan on which the structure is built. 
 
THE ORGANIZATION OF ADMINISTRATION 53 
 
 There is always the question, in organizations, of 
 the relative importance of subdividing into parts 
 having the same general characteristics as the whole, 
 and subdividing into parts involving one function. 
 This has been mentioned before, but it is worth 
 while for illustration to apply the two forms to the 
 same case. If, for example, one were to organize 
 the feeding of a community, and should go to the 
 extreme in subdividing into parts similar to the 
 whole, he would divide into households or families, 
 placing each in the care of one person, who would be 
 responsible for everything in connection with the 
 feeding of his household, buying food of all kinds, 
 cooking this food, serving it, and disposing of the 
 waste. These families would be grouped into dis- 
 tricts, and subordinate officers would have charge of 
 these groups. It would be an organization similar to 
 a part of the military organization, where the cap- 
 tain commands the company as a part of the regi- 
 ment commanded by the colonel. If one should go to 
 the extreme in subdividing according to functions, 
 he would attempt to gather his community into one 
 or more centres for meals. He would divide the 
 functions so that buying would form one depart- 
 ment, cooking another, serving another, and dispos- 
 ing of waste another. He might even subdivide 
 these functions. 
 
 It is clear that the first method tends to facility of 
 direction and control, and has no limits to its appli- 
 cability ; new families and new groups of families 
 
64 THE ORGANIZATION OP ADMINISTRATION 
 
 oould be added without introducing confusion or 
 overloading administrative offices. However bad 
 and wasteful the feeding may be, no widespread diffi- 
 culties can arise; each unit is independent, and 
 responsibility can be definitely and quickly placed. 
 There are no large problems of coordination, and the 
 quality of the service will vary with the individuals 
 having charge of the different households. The 
 functional organization will be more complex, but it 
 brings into play division of labor and the conserving 
 of special skill. The systematic purchasing by a de- 
 partment that does nothing but purchase, will result 
 in better food for the same expenditure. It will be 
 possible to have cooking that is better and more uni- 
 form. It is conceivable that the economies from wise 
 purchasing, the division of labor, and the saving of 
 waste, might result in very great saving, or in very 
 superior service for the same cost as by the first 
 method of organization. But this functional organi- 
 zation would have its difficulties. There would be 
 trouble in coordinating the duties of the different 
 departments. The Cooking Department would dis- 
 agree with the Purchasing Department about the 
 quality of the food, the Cooking and the Serving 
 Departments would have their disagreements as to 
 the quality of the cooking, and the way the food 
 was delivered to the servers. Mistakes or catastro- 
 phes or inability in one department would seriously 
 affect the whole result, because the parts would be 
 interdependent. Besponsibility for results as a whole 
 
THE ORGANIZATION OF ADMINISTRATION 55 
 
 would be difficult to place. The establishment would 
 require great skill and ability in administration. It 
 would be in unstable equilibrium, and would not 
 automatically, and without skillful direction, give 
 even a fair degree of service. 
 
 One can easily imagine many combinations of 
 these two methods. The purchasing might be done 
 for all, and yet the households remain independent. 
 The whole community might be divided into half a 
 dozen units, each of which was functionally organ- 
 ized. There might be many independent units, with 
 advisory boards divided according to functions. 
 
 Most organizations really combine the two princi- 
 ples, and as affecting administration, the important 
 question is the extent to which functional organi- 
 zation shall be carried. It is broadly true that, as 
 one divides into independent subdivisions, instead 
 of by functions, the grasp of situations as a whole is 
 strengthened, there is greater ease of coordination, 
 the facility of control and direction is increased; 
 and it is also broadly true that as one divides ac- 
 cording to functions, economy of effort and quality 
 of work are secured. The extent to which functional 
 organization is carried in the administrative organi- 
 zation varies greatly with different businesses, be- 
 cause there is a great difference in the degree to 
 which the different functions are interwoven and in- 
 terdependent. The loss on account of difficulties of 
 coordination sometimes more than counterbalances 
 any advantage from economy that can come from 
 
66 THE ORGANIZATION OF ADMINISTRATION 
 
 functional division. One commonly finds the more 
 plainly independent functions separated. In indus- 
 trial companies it is usual to find an administrative 
 officer in charge of production, another in charge of 
 financial matters and accounting, another in charge 
 of selling. These are likely to be pretty independent 
 functions, and such coordination as is necessary can 
 usually be secured by meetings of the different sub- 
 heads with the head of the organization. Such an 
 organization appears to be completely functional, 
 and if it is not large, it may be considered so. But 
 imagine it very large. We immediately meet most 
 of the problems over again. Production, for instance, 
 has been set off as a functional department, but when 
 we begin to get great size, we have again to consider 
 an extension and elaboration of the organization. 
 Shall we subdivide the broad function of production 
 into minor functions, separating processes or duties ; 
 or shall we subdivide into separate plants, each, so 
 far as production goes, an independent unit ? 
 
 Many of the telephone companies have recently, 
 it is understood, reorganized on the functional basis. 
 A general manager is at the head of the operating 
 organization; under him are three administrative 
 officers, one of whom has general charge of all sell- 
 ing of telephone service, all relations with the 
 subscribers and public. A second administrative 
 officer has general charge of the operation of the 
 exchanges and other plants. His province is to pro- 
 vide the service. The third administrative officer 
 
THE ORGANIZATION OF ADMINISTRATION 57 
 
 has general charge of the construction and mainte- 
 nance of plants. He must provide the means for 
 giving service. These three officers are at the head 
 of their functions over the whole territory. This 
 territory is subdivided into divisions, and in each 
 division there are three functional heads correspond- 
 ing to the general heads. The divisions are further 
 divided into districts, so that even in one city there 
 may be these three men on the same level as to 
 rank, but with different functions for which they 
 are responsible and over which they are in authority. 
 One can assume with some assurance where the 
 advantages and where the difficulties in such an 
 organization lie, but no one, of course, except the 
 telephone people, is qualified to judge the relative 
 importance of these advantages and difficulties. It 
 is safe to say that business-getting will be much 
 more effectively carried on, that operation and the 
 giving of service will be of better quality and show 
 better efficiency of effort, that plants will be better 
 built and better cared for at lower cost. The concen- 
 tration of effort, the conserving of special skill, the 
 coordination and cooperation within each functional 
 division, will all help in perfecting each function as 
 a thing in itself. On the other hand, one will natu- 
 rally look for difficulties in coordinating the different 
 functions. Serious differences of opinion on ques- 
 tions involving all three functions, unless the supe- 
 rior functional heads agree, will have to travel up 
 to the general manager before a crossing point is 
 
68 THE ORGANIZATION OF ADMINISTRATION 
 
 reached ; before any one is found with authority in 
 all the three divisions of the business. 
 
 In many businesses this would be an insuperable 
 difficulty. Probably, in the early days of the tele- 
 phone it would have caused too much confusion to 
 be warranted by advantages in other ways. The 
 telephone business has now become established on a 
 definite basis. Its plant is more nearly standardized 
 and its methods are more nearly fixed. The sections 
 of the telephone system are not so much independent 
 plants as they were, and there is not the same pro- 
 portional creation of new telephone territory. If the 
 business were nearer the time of its formation, when 
 franchises in different places had to be secured, when 
 the securing of subscribers, the nature of the service, 
 and the extension of plant into new sections, all 
 became parts of larger questions and were inti- 
 mately interwoven, it is quite likely that grasp of the 
 situation as a whole would seem, as it apparently 
 did seem, of first importance, and would dictate a 
 type of organization that provided for at least one 
 in authority for each section. 
 
 Such an organization as the telephone companies 
 have adopted seeks to provide the chief administra- 
 tive officer in the operating department with an 
 effective advisory board of three members. They 
 cover the three branches of the business, and come 
 to the general manager with expert knowledge of 
 these branches, and with the records, statistics, and 
 conclusions that their own departments have com- 
 
THE ORGANIZATION OF ADMINISTRATION 59 
 
 piled. They have had experience in conference. 
 They have argued out and settled between them- 
 selves many questions involving the three functions, 
 that have not come to the general manager. If three 
 men must agree, there is assurance against unwise 
 action, and a larger number of questions are left for 
 them to decide. The chief administrator may be 
 chosen for his qualities as an administrator rather 
 than for his detailed knowledge of the functions. 
 He may be chosen for his skill in coordinating, in 
 weighing the importance of factors, in discounting 
 the narrower view of the specialist, in initiating 
 new or better policies. All essential factors neces- 
 sary for decision and for initiative come to him in 
 systematic form. He is relieved from detail and can 
 consider matters broadly. His own knowledge is in 
 the form to pass on to directors, and thus to meet 
 the provisions of the law's requirements for corpo- 
 rations. The directors may not direct in the sense of 
 taking the initiative, but this operating executive is 
 in a position to prove to the president and to the 
 directors that his proposed initiative is right. He 
 may not be the autocratic dictator, but it is in his 
 power to gain much of the effectiveness in adminis- 
 tration that the dictator gains, because if his con- 
 clusions are right, he has every advantage in present- 
 ing them with convincing force to the checking body 
 that the law requires. 
 
 These things are necessary in effective adminis- 
 tration, but they have sometimes to be secured by a 
 
60 THE ORGANIZATION OF ADMINISTRATION 
 
 different type of organization. The organization that 
 Stone & Webster have built up for the administra- 
 tion of the affairs of public service corporations is 
 interesting in this connection because it is an organi- 
 zation purely for administration and management, 
 and the administrative problems stand out more 
 clearly than when they appear more closely con- 
 nected with the operating and producing parts of an 
 organization. It would not be found applicable in 
 all administration. It takes its form because of its 
 purposes and necessities, but a consideration of it 
 will indicate some of the problems that all adminis- 
 trative organizations have to meet. 
 
 The Stone & Webster management organization 
 is a separate corporate body. It is not administering 
 a single corporation, but thirty or forty. The activi- 
 ties of these corporations are not in one city, or one 
 state, or one country. They not only operate in sep- 
 arate places, but with two or three exceptions, one 
 corporation has no relation whatever with another. 
 Each is a distinct corporate entity, with its own list 
 of stockholders, its own board of directors, and its 
 own funds ; but the administration is the same in 
 all cases. The management organization chooses the 
 local manager for each company and the local assist- 
 ant treasurer, who has charge of local accounts and 
 funds. It directs the local manager, and instructs 
 the assistant treasurer and audits his accounts. It 
 decides upon plant and equipment, does much of the 
 larger purchasing, directs the policy of the com- 
 
THE ORGANIZATION OF ADMINISTRATION 61 
 
 panies. The officers of the companies are chosen 
 largely from the administrative officers of the organ- 
 ization. It places the companies' loans, it decides 
 upon advisable extensions, and it negotiates the sales 
 of securities for providing fresh capital. It must do 
 these things with the approval of the boards of direc- 
 tors, and must carry out in all the thirty or forty 
 companies the legal procedure that the statutes re- 
 quire. It is conceivable that such a managing organ- 
 ization could be set up after a functional plan ; that 
 the operation of the properties should be one depart- 
 ment, the choice and construction and maintenance 
 of the plants another, the relations vrith the public 
 and the securing of business another, and the financial 
 affairs another ; and at the head an executive who 
 would coordinate all, bridge the gaps, and take the 
 comprehensive view of the whole. 
 
 There are many reasons why this is impracticable. 
 The companies are not subject to the same operating 
 conditions. Their equipment is not and cannot well 
 be standard. The state laws to which they are sub- 
 ject differ. The procedure for the raising of money 
 differs. The rates at which they can attract new capi- 
 tal differ widely. The lopal feeling toward corpora- 
 tions is different, and the public demands that the 
 companies must meet are by no means the same. 
 Constant coordination ig necessary between financial 
 questions and construction questions, between finan- 
 cial questions and operating questions, between the 
 getting of businesa and the providing of plant. 
 
62 THE ORGANIZATION OF ADMINISTRATION 
 
 Local questions, territorial questions, the companies' 
 attitude and policy, the broad view of their affairs as 
 a whole, need constantly to be considered. Whatever 
 economy might be secured from a functional plan 
 in the managing organization would be wiped out by 
 the losses from failure to coordinate, from the weak- 
 ening of a company's position by the less comprehen- 
 sive and less strong grasp of its affairs as a whole. 
 
 The type of organization that has proved to be the 
 best in this case is one for firmer grasp and fuller 
 knowledge of each local situation as a complete 
 situation and problem in itself. The local operating 
 organizations, which we are not at the moment con- 
 sidering, are largely functional. The administration 
 organization begins with the local manager, who is 
 at the head of all local affairs. The thirty or forty 
 companies managed by the administration organi- 
 zation are grouped into six territorial divisions. All 
 the managers in one of these divisions or districts 
 are directly responsible to a district manager, who is 
 broadly and directly responsible for local company 
 operation, upkeep, and development, including rela- 
 tions with the public. There remain many ques- 
 tions in the administration of corporations of this 
 kind. There are negotiations in connection with the 
 purchase of properties to be consolidated, a great 
 number of questions regarding corporate organizar 
 tion, reorganization, relations of holding companies, 
 the securing of charters, conferences with attorneys 
 regarding corporate acts, the holding of directors' 
 
THE ORGANIZATION OF ADMINISTRATION 63 
 
 meetings, and the preparation of matter to be pre- 
 sented at these meetings, the preparation of finan- 
 cial plans, and the carrying out of these plans when 
 approved by company directors, and the issue and 
 sale of securities. 
 
 These are Boston affairs. They must be cared for 
 in Boston, where much of the money has to be raised 
 for fresh capital, and where the directors of the com- 
 panies live and meet. They are matters a step beyond 
 the district managers, and are attended to by three 
 vice-presidents of the administration organization, 
 each of whom is at the head of the companies in two 
 districts. At the head of the organization is a presi- 
 dent, who harmonizes policies and initiates modifi- 
 cations, who consults with the vice-presidents, who 
 coordinates, and who rules any border-land of indefi- 
 nite responsibility. 
 
 The board of directors of this management or- 
 ganization is composed of the leading men in the 
 organization, and it meets once a week to confer on 
 questions of policy, to discuss questions that will be 
 helped toward a solution by the combined judgment 
 and varied abilities and points of view of the men at 
 the top. They together approve the choice of man- 
 agers ; they decide upon changes in organization and 
 upon standard procedure. From their number, and 
 sometimes with the addition of experts, they form 
 committees for the threshing out of problems that 
 affect all companies. It is a body of discussion and 
 conference. 
 
64 THE ORGANIZATION OF ADMINISTRATION 
 
 There are many tilings that this administration 
 organization does that are in the nature of functions, 
 and there are functional departments, but they 
 do not affect the general plan of the structure or 
 interfere with the lines of authority and placing of 
 responsibility. The organization is planned to give, 
 above all, broad grasp of the local companies, direct 
 control, and efiPective direction. The functional de- 
 partments in this case are auxiliaries. They are 
 assistants. They separate out duties that an adminis- 
 trator would perform himself if he had the time, 
 and the special knowledge and facility; if attention 
 to these duties would not distract him from more 
 important matters in his broad supervision; and if 
 it did not save great duplication and waste to have' 
 them performed for several administrators by the 
 same force of men and the same equipment. 
 
 These functional departments instruct the local 
 offices in regard to the keeping of local books, audit 
 the companies' books and vouchers, file company 
 documents, see that properties are properly pro- 
 tected by insurance, compile and compare statistics 
 of operation and costs, decide upon suitable plant 
 and equipment, make the larger purchases where 
 combined orders are an advantage, negotiate loans 
 and sales of securities, prepare statements and re- 
 ports to stockholders, prepare financial statements 
 and information for ofiicers and directors, and pre- 
 pare systematically matter for directors to act upon, 
 consult company attorneys and assure that all votes 
 
THE ORGANIZATION OF ADMINISTRATION 66 
 
 are in proper form and all corporate acts legally car- 
 ried out, keep calendars of all corporate events so 
 that no necessary action will be forgotten ; and one 
 of these departments keeps records too of the men in 
 the organization who will be eligible for promotion, 
 the kind of ability they have, the quality of the work 
 they have been doing, and the reports about them or 
 about their Work by their superiors. 
 
 There are heads to the different departments who 
 are responsible for the work done there, and the func- 
 tions are important; but the administrative organi- 
 zation could not be built up about these departments, 
 because their work is on the detail of the adminis- 
 trative work. They are simply to assist the adminis- 
 trators to see that accounts are accurate accounts, 
 that figures represent truly the conditions, that in- 
 formation is properly analysed and presented for 
 the formations of conclusions, and when conclusions 
 are reached, to determine what procedure must ba 
 followed, to take all detail steps, and to assure also 
 that there is coming along always a supply of men 
 who are qualifying for executive positions. These 
 departments do the things that the administrator of a 
 single company is likely to do in his own office, well 
 or ill, according to his particular bent or prejudices. 
 Within these departments duties may be definitely 
 assigned, and there is definiteness in the division of 
 duties between depa'Ttments, but there is no difficulty 
 in the fact that three vice-presidents have authority 
 over these departments, because the work they do 
 
66 THE ORGANIZATION OF ADMINISTRATION 
 
 for these different officers is distinct. It has to do 
 with different companies and different territories. 
 
 This organization for its particular problem gives 
 in this way its solution for the modern needs in ad- 
 ministration. It preserves in a single head the con- 
 trol and broad grasp of a company's affairs, fixes 
 the responsibility, and thus preserves initiative and 
 vigor of action. It relieves this head from detail, and 
 leaves him free for the exercise of the judgment and 
 executive ability for which he is chosen. It provides 
 for conference and discussion to eliminate prejudices 
 and twists, to help coordinate where it is necessary, 
 and to bring out all factors to be considered. It pro- 
 vides machinery for bringing to the boards of direc- 
 tors all pertinent information, all premises and de- 
 ductions and plans for action. It assures that all the 
 checks and safeguards provided by law are respected, 
 that all legal regulations are followed. It attempts 
 to provide a continuing stream of skill and ability 
 working along through the activities of the organi- 
 zation, so that the well-being of the companies will 
 not rest on the life and health of an individual. 
 
 It has been plain in this consideration of different 
 plans for the division of work and responsibility that, 
 when we talk about functional organization and or- 
 ganization for broad grasp and control, we are not 
 discussing two radically different types, two " schools " 
 of organization. We are only discussing the advis- 
 able bounds of duties. These bounds are sometimes 
 drawn about territories or about parts that are simi- 
 
THE ORGANIZATION OF ADMINISTRATION 67 
 
 lar to the whole in their structure ; sometimes they 
 are drawn about functions that are a part of the 
 whole. Whether, for effective administration, it is 
 best to draw these bounds in one way or the other, 
 depends upon the independence of what we include 
 in a group. All social activities are divided into 
 functions. We discuss the organization of a railroad, 
 and yet the business of a railroad is but one of the 
 functions of modern society. In its organization, the 
 operation is set off as a distinct part or group of 
 duties, and this is done because this function is largely 
 independent. It is less interwoven with traffic affairs, 
 for instance, than the whole of the railroad business 
 in one territory is interwoven with the whole of the 
 railroad business in adjoining territory. When the 
 reverse is true, and territories become the more in- 
 dependent factors, the organization of the railroad 
 changes. 
 
 In the Stone & Webster management organiza- 
 tion we have seen that territories were the independ- 
 ent factors and dictated the plan of the organization. 
 Yet this management of properties is but a function 
 in the whole organization of the firm of Stone & 
 Webster, because this comprises also a construction 
 business and a banking business. In the plan of the 
 whole business, the parts that are most independent 
 have been most definitely set off ; and in these parts 
 that have been set off, the smaller parts, around 
 which bounds could be drawn, have formed the main 
 elements of the structure of the minor organizations. 
 
68 THE, ORGANIZATION OF ADMINISTRATION 
 
 The time that- one man can deyote Ut a duty ia 
 limited, and his capacitiy is limited. It ijs no longer 
 possible for the head of a great organization to know 
 all the dietail of an undertaking, or even to know 
 of all the minor coordination. He can be directly 
 responsible for but little of the actual action, but 
 he must know when the action goes wrong. He must 
 know the result toward which action is tending. He 
 is responsible for the result. His province is to initi- 
 ate, to set activities in motion^ to keep t^e sense of 
 proportion, to recognize the essential, to coordinate 
 the activities. But as in the administrative system 
 of our own bodies, he, the mind of the organization, 
 must leave to lower ganglia, to lower nerve cen- 
 tres, the minor coordinations. He is the cerebrum 
 and must care for the higher coordinations. He must 
 know all that goes on in the organization, but it 
 must not take his time and attention to secure the 
 knowledge. He must be provided with information, 
 analyzed, sifted, and compiled, ready for the applica- 
 tion of his judgment. He must initiate new policies, 
 new kinds of action, but he must be provided with 
 a working system that responds to his initiative. 
 
 The administrative officers are in this way in posi- 
 tion to present to the directing body reqnjred of cor- 
 porations by the statutes, conclusions systematized 
 and fortified and definite in their plan. The directors 
 may remain the safeguard they were in theory to be, 
 but if the administrative officers are effective, the 
 administration of the corporation is effective. 
 
HFSSOO.R?"""'""'™""'"-"'™'^ 
 
 ■-ectures on organization, deiivered in th 
 
 3 1924 002 680 050