CHARLES BeLANO HINE 1 III ,H ? ' M ffomtH Uttivraitg jSitaeg BOUGHT WITH THE. INCOME FROM THE SAGE ENDOWMENT FUND THE GIFT OF Bcurg m. Sage 1S91 AJMAtLtb. : cmm 5931 >$?$8fcESERVED ^PR 8 419S0 JUN16 1955 EH Cornell University Library HF5500 .H66 Modern organization 3 1924 032 515 821 Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31 92403251 5821 WORKS MANAGEMENT LIBRARY MODERN ORGANIZATION AN EXPOSITION OF THE UNIT SYSTEM BY CHARLES DeLANO hine NEW YORK THE ENGINEERING MAGAZINE CO. 1912 D^ Copyright, 1912, by The Engineering Magazine Co. MODERN ORGANIZATION INTKODTTCTION" The chapters assembled in this volume appeared originally in The Engineering Magazine as a series of articles which ran from January to July, 1912. They were prepared by Major Hine by invitation of the Editors of the Magazine, as a comprehensive definition of his philosophy of management, ample enough in space and scope to permit a complete un- folding of his doctrine and practice. That philosophy, as expressed in the unit system of organization directed toward promoting efficiency in operation in one of the great engineering in- dustries, has been applied on a scale of magnitude approached perhaps by but one other example in recent experience. Its success was declared with conviction in specially informed circles ; but out- side of a rather closely specialized audience, the characteristics of Major Hine's work had not been effectively presented until these articles appeared. The ideas embodied are so fundamental, and so certain to exercise a lasting influence upon the ideals and form of industrial organization, at least in certain fields, that there is patent demand for the assembly of the several parts in a single com- plete group and their perpetuation in the more permanent form of a bound volume. The policies advocated are most interesting, be- cause they depend so little upon mechanisms of any kind, so little upon systems affecting rank and file or the equipment and materiel, and so much upon 5 6 INTRODUCTION psychological influences operating first upon and then through the directing official. They are policies largely of mental suggestion; and mental suggestion must be the final power, the ultimate effective appeal, in any successful philoso- phy of management, whether the institutions through which that management works be tradi- tional, systematic, or scientific. For mental sugges- tion creates and transforms the ideals which are the first principle of efficiency, and on mental sugges- tion depends the attitude of the workers toward any institutions and policies the management may provide. Charles Buxton Going. July, 1912. CONTENTS Chapter I. The Unit System on the Haebiman Lines Organization Closely Related to Sociology — Industrial Organization Affected by Traditions of Feudalism — Evolution of Organization Simi- lar to the Evolution of Government — Organiza- tion Teaches the Art of Directing Working Forces to the Most Desirable Total Effect — A Striking Concrete Example of Modern Organ- ization — The Harriman Lines — The Inaugura- tion of the Unit System — A Working Outline of That System — The Official Circulars by Which It Was Promulgated — Where It Is in Successful Operation — Official Positions and Duties under the Unit System 13 Chapter II. Operation op the Unit System A Distinctive Characteristic of the Railway — How the Extent of a Railway Affects Its Man- agement — Management of Headquarters in the Absence of the Chief— Evils of the Chief-Clerk System — How the Unit System Eliminates Gov- ernment by Chief Clerks — Practical Objections to the Chief-Clerk System, and Gains from Its Elimination — Relations of the Co-ordinate Offi- cials under the Unit System — The Consolidated File a Popular Feature of the Unit System — The Chief of Staff in Place of Chief Clerk 25 Chapter III. Broadening the Ideals of Line Super- vision The Unit System out on the Road — Depart- mental Jealousies under the Old System — 7 8 CONTENTS Broadening Effect of Making All Division Offi- cers Assistant Superintendents — No Conflict of Authority Arises from Uniformity of Titles — Wider Vision of Responsibility Follows the Re- moval of Departmental Prejudice — The Human Touch — Industrial Operation Has Created a New Profession 37 Chapter IV. Over-Specialization Specialization Leads to Evasion of Responsi- bility — The Problem of Developing the All- Round Man under Modern Conditions — Rota- tion between Departments as a Remedy — The Cadet System and Its Limitations — Our Prob- lem Is Return to a Balanced Specialization — The Specialist Likely to Exaggerate His Spe- cialty—Specialization Produces Centralization — Centralization Leads to Bureaucratic Admin- istration — Evils of the Bureau System and Chief -Clerk System 47 Chapter V. Fallacies of Accounting Accounts Are but a Yard Stick — A Yard Stick Gains No Value by Repeated Use — Book Bal- ances and Statistical Reports often a False Measure of Efficiency — Need of Co-operation be- tween the Director of Affairs and the Account- ant — Accounts Should Be under the Direction of Division Operating Officers, not Remotely Centralized — The Distinction between Account- ing and Auditing — The Accountant Is a Regis- trar; The Auditor Is an Inspector — Need That Engineers Should Learn Accounting — Over- estimate of Accounting often Places the Highly Paid Operating Officer under the Criticism of a Junior Clerk — Desirability that the Inspector Should Seek His Data on the Ground — Fallacy of Considering Money the Equivalent of Per- formance 59 Chapter VI. Supplies and Purchases Purchasing often Exemplifies Exaggerated Specialization — A Strongly Individualized Pur- chasing Agent May Hamper other Departments CONTENTS 9 — Purchasing Separated from other Duties on Account of the Volume of the Work, rather than Its Peculiarity — Centralized Control of De- centralized Activity Exemplified by the Pur- chasing Bureaus of the Harriman Lines — The Organization Elastic enough to Permit Dis- criminating Thought by Responsible Officers — Contrast with the Rigidity of the Santa Pe System — How the Purchasing Office Becomes Unwieldy — Requisitions a Necessary Evil — How the Evil Can Be Minimized — Advantages to the Railway from Identification with a Local Representative — The Sociological Element Rec- ognized as the Most Important Feature of Mod- ern Administration — Fallacy of the Self-Per- petuating Organization — The True Function of the Specialist Is to Instruct Others — Advantages of Amalgamation Illustrated by the Navy 73 Chapter VII. Line and Staff Executive Officers Often Ignorant of Line and Staff Principles — Origin and Definition of Line Functions — How Staff Originated — Examples from the History of Navigation— Original Func- tions of the Staff Officer — Gradual Development and Deterioration of the Idea — The Most Vital Staff Function Is Inspection or Review — The Line Officer's Impatience of Staff — Best Anti- dote for the Trouble— Chief-of-Staf£ Idea the Greatest Boon to Modern Organization 87 Chapter VIII. Genesis and Revelation of Obqaniza- tion Organization Is a Necessity — Its Type Often Accidental — Evolution of Organization from the Family Type through the Clan, the Tribe, the Government — How Government Organization Differs from Corporate — Efficiency of Modern Corporations Much Decreased by Snap Judg- ment of Financiers — The Economic Loss and Sociological Unrest thus Produced— Character- istics of the Coming Captain of Industry — Un- fortunate Unwillingness of Men to Profit by Experiences of Others — Modern Undertakings 10 CONTENTS too Large to Be Concentrated under One Man— The Chief-of-Staff Idea as a Solution— The Quantitative Limit to the Size of Industrial Undertakings — De-centralization of Detailed Activity with Centralized Control the Hopeful Principle in Modern Organization 101 THE UNIT SYSTEM ON THE HARRIMAN LINES MODERN ORGANIZATION Chapter I THE UNIT SYSTEM ON THE HAREIMAN LINES /~\RGANIZATION has been termed a ^-^ smaller sister of sociology, the science of human nature. Industrial organization, including that of transportation and com- merce, reflects and typifies in a greater or less degree the sociological development of a people. Society for centuries has been emerging from political feudalism and despotism. The emergence from industrial feudalism and despotism is coming apace. The first work- ing conception of the corporation was that of government. In the Middle Ages govern- ments were such close corporations that the common people as shareholders had little 13 14 MODERN ORGANIZATION voice in the management. Progressive grants of liberty have made their proxies more ef- fective. Since history repeats itself, the modern industrial corporation is passing through stages of development similar to those which have characterized the evolution of the greatest of corporations — govern- ments. Corporations, like most individuals, ac- quire money or its equivalent by the econom- ical expenditure of money or effort. It is always easier to expend than to acquire. The problem, therefore, is so to limit expenditure that a satisfactory margin of acquisition may be preserved. This requires the most effective team work on the part of the indi- viduals who compose the officers and em- ployees of the corporation. Organization as a science teaches the art of so uniting and directing these working forces as to produce the most desirable composite effect. An interesting concrete example of mod- ern scientific organization is furnished by the most extensive railway system in the world, the Union Pacific System-Southern Pacific Company, popularly known as the Harriman Lines. These lines comprise about 18,000 miles of railway extending from THE UNIT SYSTEM 15 Omaha, Kansas City, and New Orleans on the east to Seattle, Portland, San Francisco, Los Angeles and Mazatlan, Mexico, on the Pacific coast. The gross annual earnings aggregate about $225,000,000. The pay rolls carry from 80,000 to 100,000 employees. The operating activities of this vast system, in- cluding maintenance and new construction, have been controlled since 1904 by Mr. Julius Kruttschnitt with the somewhat awkward title of Director of Maintenance and Opera- tion, awkward and really misleading because it is difficult to conceive of continued success- ful operation without satisfactory mainte- nance. The headquarters of Mr. Krutt- schnitt, who is known as the von Moltke of transportation, have lately been removed from Chicago to New York in order that he may be in closer touch with his fellow mem- bers of the various boards of directors of the constituent corporate properties. As a result of studies and recommenda- tions made by the writer in 1908 under the direction of Mr. Kruttschnitt, there has been progressively inaugurated during the last three years a unit system of operating or- ganization. The working outline of this or- ganization can best be understood from the 16 MODERN ORGANIZATION following standard forms of official circulars by which it is promulgated : Eail Company OFFICE OF GENEEAL MANAGEE Circular No .191. The following appointments of Assistant General Managers are announced, effective , 191...: 1. Mr 2. Mr 3. Mr 4. Mr. 5. Mr 6. Mr 7. Mr 8. Mr Each of the above named officials continues charged with the responsibilities heretofore devolv- ing upon him and in addition assumes such other duties as may from time to time be assigned. The titles, "General Superintendent," "Superin- tendent of Motive Power," "Chief Engineer," "Su- perintendent of Transportation," "General Store- keeper," "Superintendent of Telegraph" and "Su- perintendent of Dining Cars," will be retained by the present holders or their successors to such ex- tent only as may be necessary for a proper com- pliance with laws and existing contracts. All persons under the jurisdiction of this office will address reports and communications, including replies, intended for the General Manager or for any Assistant General Manager, simply: "Assistant General Manager" (Company telegrams "A. G. M"), no name being used unless intended as personal or THE UNIT SYSTEit 17 confidential, or to reach an official away from his headquarters. It is intended that an Assistant General Manager shall be in charge of this office during office hours. Bach official transacts business in his own name and no person should sign the name or initials of another. All persons outside the jurisdiction of this office are requested to address communications, including replies, intended for the General Manager or for any Assistant General Manager, simply: "General Man- ager Co Bldg. ," no name being used un- less intended as personal or confidential or to reach an official away from his headquarters. General Manager. Approved : Vice-President. Division OFFICE OF SUPERINTENDENT Circular No i9i... Effective this date, this Division discontinues among its officials the use of the titles, Master Me- chanic, Division Engineer, Trainmaster, Traveling Engineer and Chief Dispatcher. 18 MODERN ORGANIZATION Mr 2. Mr. 3. Mr. 4. Mr. 5. Mr. 6. Mr. A. C. E. G. I. L. The following named officials are designated: Mr. A. B Assistant Superintendent D Assistant Superintendent F Assistant Superintendent H Assistant Superintendent K Assistant Superintendent M Assistant Superintendent They will be obeyed and respected accordingly. Each of the above named officials continues charged with the responsibilities heretofore devolv- ing upon him, and in addition assumes such other duties as may from time to time be assigned. All of the above will be located in the same build- ing with one consolidated office file in common with the Superintendent. All reports and communications on the Com- pany's business, originating on this division, in- tended for the Superintendent or for any Assistant Superintendent should be addressed simply "Assist- ant Superintendent" (telegrams "A. S."), no name being used unless the communication is intended to reach an official away from his headquarters, or to be personal rather than official, in which latter case it will be held unopened for the person ad- dressed. It is intended that an Assistant Superin- tendent shall always be on duty in charge of the division headquarters offices during office hours. The designation of a particular Assistant Superintendent to handle specified classes of correspondence and tele- grams is a matter concerning only this office. Each official transacts business in his own name, and no person should sign the name or initials of another. The principle to guide subordinate officials and em- ployees is to be governed by the latest instructions issued and received. Train orders will be given over the initials of the THE UNIT SYSTEM 19 Train Dispatcher on duty, as will messages origi- nated by him. The modifications of pre-existing organization and methods herein ordered have been carefully worked out to expedite the Company's business by the reduction and simplification of correspondence and records. It is expected and believed that of- ficials and employees will insure a successful outcome by lending their usual intelligent co-operation and hearty support. Officials and other persons above and outside the jurisdiction of this division are requested to address official communications, intended for the Superin- tendent or for any Assistant Superintendent, simply : "Superintendent Division " (telegrams "Supt"), without using the name of the Superintendent except for personal matter. Superintendent. Approved : General Manager. This unit system of organization, first in- stalled in January, 1909, on the Nebraska di- vision of the Union Pacific Eailroad at Omaha, is now in successful operation on twenty-seven operating divisions and on six general operating jurisdictions, a total of thirty-three units so organized. On many of these the application of the underlying prin- ciples has been consistent and earnest, with 20 MODERN ORGANIZATION corresponding and gratifying beneficial re- sults. On a few the application has been too timid and perfunctory to secure very percep- tible benefits. In no case, however, has evi- dence materialized of any positive loss of efficiency. There has been in the few cases mentioned a negative neglect to vitalize the latent possibilities of the new system. The personal patience of Mr. Kruttschnitt is as enduring as his official policies are far- sighted. Eealizing that however sound in principle might be the new organization, its very novelty would excite the opposition of the ultra-conservative, he declined to order its adoption but placed upon me, as his spe- cial representative, the duty of gaining official converts to the cause. This peripatetic mis- sionary work has involved traveling some 50,000 miles per year, and holding countless meetings and conferences. So fine is the spirit of official loyalty on the Harriman Lines, so splendid is the personnel, that the fatigues of strenuous travel are forgotten in the pleasant associations and delightful friendships that have resulted. To question motives or to permit honest differences of official opinion to affect personal relations would be to preserve a relic of that semi-bar- THE UNIT SYSTEM 21 barons feudalism which the new organization seeks to eradicate. The number of assistant general managers may vary with the size of the jurisdiction, but is normally eight, including the man pre- viously the assistant general manager, who to avoid misunderstanding is reappointed as the senior or number one on the new official list. Thus far the list has not included any su- perintendents of dining cars as contem- plated by the complete plan. Meanwhile it is probable that the title of the superintendent of dining cars will be changed to "chief com- missary" to avoid confusing him, the head of a department covering the whole road, from the division superintendent covering only one division. The number of assistant superintendents on an operating division varies from one on a very small division to twelve on one very large division. The normal number is six, including the man previously the assistant superintendent, who to avoid misunderstand- ing is reappointed as the senior or number one on the new list. It is now desired to in- crease this normal number to eight by taking in the division storekeeper, as has been done 22 MODERN" ORGANIZATION on one division, and the station inspector or division agent. A district comprising two or more divi- sions and under a general superintendent, is a more or less incomplete unit sometimes created intermediate between a general man- ager's property and a superintendent's oper- ating division. This is organized under the unit system by following the form of circu- lar for the general manager's office, mutatis mutandis, and appointing two or more as- sistant general superintendents, the normal number being three. OPERATION OF THE UNIT SYSTEM Chapter II OPEKATION OP THE UNIT SYSTEM A NY study of the underlying principles of ■* the unit system must take into account a most distinctive characteristic of a railway, namely, its physical extent. The head of a manufacturing plant, of a bank, or of a de- partment store, could in a few hours' time personally see every employee of the estab- lishment and observe most of the constitu- ent activities. After a railway once begins business no division superintendent even can hope ever to see all of his trains assembled or all of his employees congregated in one place. So few can come to him that he must go to them. This results in an anomalous condition. While the superintendent or other official is on the road, the routine business at headquarters must be transacted or the company's interests will suffer. Under a feudal conception that because the superin- tendent is an official he can be in at least two places at the same time, it is the custom on most railways to have the chief clerk at head- 25 26 MODERN ORGANIZATION quarters sign the name of the absent super- intendent to official communications. This dishonest violation of the fundamental laws of matter is supported by the same subtle arguments, the same legal fictions, with . which the learned men of the Middle Ages sought to bolster up the untenable conception of feudal authority. As a government of laws replaces a government of men, so must what is known as "government by chief clerks" be eradicated from corporate admin- istration. When the superintendent is ab- sent from headquarters the chief clerk per- force handles communications to such subor- dinate officials as the master mechanic, the division engineer, the trainmaster, etc., offi- cers all receiving larger salaries than the un- titled chief clerk and presumably men of wider experience and better qualifications than he. Sooner or later every chief clerk oversteps the tenuous line and in the name of routine business is consciously or uncon- sciously restricting the authority or activity of those who are in reality his official supe- riors. Here comes in an amiable failing of human nature, against which it is the prov- ince of organization as a science to impose a check. Every official flatters himself: "My OPERATION OF THE UNIT SYSTEM 21 chief clerk never does that. He knows me too well and appreciates my unwillingness to stand for such things." It is an interesting fact that the official who is most zealous in defending his own chief clerk is often the one quickest to squirm under the acid test of an inquiry as to the sense of proportion maintained by the chief clerk of the official next above. Singularly enough, promote the official to the position higher up, make the offending chief clerk his own, and the assuming marplot becomes a model of discerning judgment. The conclu- sion is obvious that such an universal state of affairs must indicate the viciousness of a fallacious system rather than the shortcom- ings of a particular set of individuals. The unit system of organization eliminates "government by chief clerks" by insisting that no person shall sign the name or initials of another. A man's name is his birthright, as his signature is his patent of enlightened manhood. The underlying sociological prin- ciple is that the individual is the indivisible unit of society. Since the business must go on and no person may sign for another, it follows that a sufficient number of duly quali- fied officers must be appointed. By giving 28 MODERN" ORGANIZATION all the uniform title of assistant this or that, every one is available for prompt compre- hensive action should occasion so require. An attempt at description in a title may be too restrictive by inferentially debarring all features not specifically included. In deal- ing with human nature a reasonable degree of elasticity is preferable to that rigidity which is often so essential in treating mate- rial things. Engineers from familiarity with working applications of the laws of matter often unconsciously impose too rigid re- quirements upon society. Engineers who de- sign and construct public utilities must study the psychology of the crowd. Apart from the basic objection to the chief- clerk system is the practical disadvantage of having outside matters decided and acted upon by a man whose experience has usually been limited to the inside of an office. This lack of sympathetic viewpoint with the diffi- culties of outside problems is often the cause of unnecessary expense on the outside. The sailor at sea, the traveling salesman on the road, the soldier in the field, the railroad man on the; line, all have their troubles with the man in the office. Human nature is the same whether engaged in navigating the ocean, OPERATION OF THE UNIT SYSTEM 29 selling goods, making campaigns, or pro- ducing transportation. The unit system min- imizes the undesirable features of the necessary partial control from a central of- fice by insisting that such inside direction shall be exercised only by officials duly quali- fied by outside experience. This requirement is worked out in prac- tice by having normally at headquarters the senior assistant, who is in effect though not in name the chief of staff. At the headquar- ters of an operating division he is, as stated, the man who was previously to reorganiza- tion the assistant superintendent of the di- vision. The former chief train dispatcher of the division is usually started near the foot of the list of assistants. His duties are unchanged and he remains at headquarters handling such endless details of operation as directing the work of train dispatchers and telegraph and telephone operators, assign- ing locomotives, distributing cars, manning trains; in fact, he is the incarnation of de- tailed administrative activity. At a normal division headquarters, then, there are two as- sistant superintendents on duty, one as chief of staff,. the other as chief dispatcher, one the senior and the other a junior, one a distinct 30 MODERN ORGANIZATION head of the office, the other in effect his sen- ior 's aide. Both assistants being clothed with authority, either can act on any prob- lem that may suddenly develop in an unfore- seen absence of the other. On divisions of very light traffic one assistant at headquar- ters may be sufficient. No distinct grade of senior or chief as- sistant is created in any unit. Normally number one, the real senior, is "on the lid," as it is termed, at headquarters, and is ex- cused from outside road duties. In case of his prolonged absence, the head of the unit, the general manager, or the superintendent, as the case may be, designates the most avail- able of the other assistants to remain at headquarters and sit on the lid. An unwrit- ten law here operates to make such desig- nated assistant the chief or senior of all the others for the time being. No formal an- nouncement of such designation is necessary. A railroad does not change its physical loca- tion frequently, as does a fleet or an army, and the chance of confusion of relative rank is remote. Advantage is taken of this elas- tic feature of assignment on some divisions to rotate various assistants through the senior chair in order to gain the splendid compre- OPERATION OP THE UNIT SYSTEM 31 hensive training for higher positions which the position affords. Assistants thus fa- vored are unanimous in expressions of ap- preciation for the valuable knowledge and experience acquired. The feature of consolidating office records in one common file is taken from the civil courts. At a city hall or a court house there may be a dozen judges occupying the benches of the various courts, but there is normally only one clerk of the court, with the neces- sary deputies, one office of record for all. When one judge wishes to know what an- other judge has done he does not write a letter and open up a file, as does frequently one corporation official across the hall from another. No, the judge sends to the clerk's office and gets the complete record in the case. Under the unit system the official sends to the file room for all the papers. The con- solidated file is perhaps the most universally popular feature of the unit system. It is es- timated that its introduction in the operat- ing department of the Harriman Lines has thus far resulted in the elimination of over half a million letters per year. These un- necessary letters were harmful rather than helpful since they retarded administration. 32 MODERN ORGANIZATION Often by attempting to think for the other man they dwarfed individual initiative. Each assistant when at headquarters signs communications to subordinates in that branch of work in which he is technically ex- pert and for which he is held responsible by the head of the unit. For example, the main- tenance assistant superintendent issues instructions to his roadmasters or track supervisors ; the mechanical assistant to his engine-house foremen or car-repair foremen ; the transportation assistant to his yardmas- ters, etc., etc. Each, however, after signing is supposed to send his communication over the desk of the senior assistant, both for the latter 's information and for review and co- ordination. This has proved a valuable check upon official caprice in issuing unneces- sary instructions. More energy is now ex- pended in seeing that instructions already issued are carried out, and less in pro- mulgating those that in themselves may unconsciously confess a laxity in previous enforcement. It is obvious that under this system the senior assistant has a most com- prehensive knowledge of the affairs of the unit. The head and the other assistants come and go between the road and the office. The OPERATION OF THE UNIT SYSTEM 33 senior assistant has a practical grasp of operation that enables him to aid the head of the unit in balancing its component elements, in minimizing departmental jealousies, and in engendering a spirit of team work. The consolidated file is helpful in producing a get- together feeling. "When the head of the unit or any assist- ant is on the road, he is represented at head- quarters not by a chief clerk but by a chief of staff, the senior assistant, who transacts business in his own name. This somewhat elaborate covering of headquarters results as intended in more traveling and in better outside supervision by the other assistants. Their increased availability for outside work is the strongest of the several strong feat- ures of the system, and will be more fully discussed in the next chapter. BROADENING THE IDEALS OF LINE SUPERVISION Chapter III BROADENING THE IDEALS OF LINE SUPERVISION /^\N most railways, if the division engineer, ^^ while riding on the rear of the train to inspect track, should tell the young flagman that the latter had not gone back far enough to protect the train, friction might result. If the flagman, mayhap of brief service and little experience, did not tell the division engineer, an old and tried officer, to go to blazes, the trainmaster perhaps would do so. The feudal notion "you have interfered with my man" would prevail, rather than the broader concept of the best interests of the company and the public. Let the division en- gineer invoke the more formal procedure of reporting the flagman. The trainmaster might take such action as an implied reflec- tion upon his own efficiency, and uncon- sciously constitute himself attorney for the defense. The papers would grind through the official baskets, and perhaps weeks later return to the division engineer in such man- • 37 38 MODERN ORGANIZATION ner as by inference to discredit his judg- ment. The natural effect is for the division engineer to lose interest in the efficiency of flagmen and to confine his attention to his own specialized activity. His salary and ex- pense account continue undiminished, and the company and the public lose just so much of his possible efficiency. Under the unit system of organization, the old division engineer is an assistant superin- tendent. Unrestricted by the limitations of a descriptive title, the presumption is in his favor rather than in that of an inexperienced employee. For the bundle of letters result- ing from a written, report, which are in the nature of a technical appeal to higher au- thority, there is substituted a man to man contact, the rough and ready justice of the police court, which is usually a pretty good brand of justice. Were the division officials a set of callow youths with immature judg- ment an undesirable condition might result. Fault finding and nagging might replace the comprehensive supervision that is desired. No such effect, however, has been encoun- tered. The officials concerned have shown themselves possessed of that poise which is to be expected from years of experience in BROADENING LINE IDEALS 39 directing their fellow men. So far from uni- formity of titles producing a conflict of au- thority, the result has been the opposite. The difficulty on the Harriman Lines has been rather in getting the officials to interest themselves along broader lines of activity. It is much better that the departure from the ideal should be in this direction, since no fatality to the general scheme is involved. The broadened usefulness must be a matter of gradual development. It was recognized in the beginning that maximum improvement could be obtained only with a new generation of officials. Experience, however, has vindi- cated the wisdom of making a comprehensive start and securing whatever gain may be practicable. Perhaps the most creditable feature of the installation of the new system is the fact that results have been obtained with the official talent at hand. No importa- tions of enthusiasts and no infusion of fresh blood have been found necessary. The good old wheel-horses have shown their ability to move somewhat faster when the way is made easier; when the ruts of narrowing special- ties and the hurdles of departmental preju- dices have been removed. The changes have thus been made without demoralizing the 40 MODERN ORGANIZATION service. This consideration for the individ- uals concerned has increased rather than de- creased the esprit de corps. Under the old order of things, if a train happened to arrive late with the master me- chanic on hoard, he would he interested only in knowing that the locomotive and equip- ment were in good shape; that the engine- men, firemen, and car inspectors had per- formed their duties properly. Whether or not the conductor had heen slow in going for orders at each telegraph office; whether or not the train dispatcher had used poor judg- ment ; whether or not station forces had been alert in handling train baggage; whether or not there had been team work as between train men and engine men, would be ques- tions of little moment to the master mechanic. In fact, if interrogated on the subject his tendency would be to minimize the shortcom- ings of the mechanical activities by empha- sizing the derelictions of the other employees. He became unconsciously a breeder of fric- tion. As an assistant superintendent, he can be held responsible for a judicious enforce- ment of all regulations, for an almost uncon- scious development of harmonious efforts on the part of all concerned. The more easily BROADENING LINE IDEALS 41 that he produces this composite efficiency, the more fully does he meet the test of his own capacity for true leadership. That tradi- tional horse which the world has been lead- ing to water, will, with proper handling, be drinking before he has time to realize the impossibility of such desirable consumma- tion being enforced. Again, the old trainmaster, now an assist- ant superintendent, after an all night chap- eronage of a freight train, may pull up at a water tank at 7:15 A. M. If by chance he then observes a section gang beginning to think about going to work, he need not, and does not, because of being an assistant superintendent, read the riot act to the be- lated section foreman. A considerate in- quiry as to "what are your working hours?" or "what time does the roadmaster (or track supervisor) expect you to turn out in the morning?" is all that may be necessary. There may be a good reason for the seem- ing departure from normal conditions. The presumption must be in favor of the faith- ful old employee. The moral effect of the official inquiry, if considerately made, will be far reaching. The examples cited from actual practice 42 MODERN ORGANIZATION indicate the extreme difficulty of adequate supervision of so extensive a plant as a rail- way. They also illustrate the necessity for that human touch which alone can restore that feeling of individual responsibility which is so vital for the successful adminis- tration of the modern corporation. All nor- mal men have an inherent respect for duly constituted authority. This natural feeling of respect is alienated when authority is ex- ercised at long range by untrained office med- dlers. It borders on the cowardly to ascribe to the labor unions alone the responsibility for decreased efficiency. The educated and entrepreneur class, the elder brothers of so- ciety and industry, have the larger measure of responsibility. The unit system of organ- ization substitutes, for- the pink-tea contact of the typewriter and the telephone, the strong coffee of the caboose and the ham-and- egg association of the dinner bucket. Superficial critics of the unit system have deplored the elimination of distinctive titles. They claim that a man loses his identity as an engineer, for example, that he cannot hope to acquire standing in his chosen profession. The answer to this is that great industrial corporations create professions of their own. BROADENING LINE IDEALS 43 The whole is greater than any of its parts. A man qualified to be an administrative offi- cial of a large corporation is directing an ac- tivity greater than any such component as civil engineering, mechanical engineering, electrical engineering, etc. If his ambition is for distinction in any of these hon- orable branches alone, he should seek general practice and not make the ser- vice of any particular corporation his life- work. Military rank has not prevented cer- tain engineers and surgeons of the Army and Navy from acquiring distinction in their technical specialties. On the contrary, the prestige of permanent status in an all-includ- ing profession creates a presumption most helpful in securing prompt recognition of specialized technique. In the immortal words attributed to the father of the railway pro- fession, George Stephenson, the greatest branch of engineering is the engineering of men. Chapter IV OVEE-SPECIALIZATION / ~T~ S HE increasing difficulty of securing men ■*• to fill the higher official positions in large corporations is due mainly to over- specialization. The line of least resistance has proved too tempting. Emerson says that we are all as lazy as we dare to be. A mani- festation of unconscious laziness may be the habit, bred by specialization, of side-stepping complete responsibility by passing the ques- tion to another specialist. The great prob- lem in organization is to develop, under modern conditions, the old-time feeling of in- dividual responsibility. A man whose mental tendency is to meet responsibilities squarely must perforce ac- quire knowledge of more than one thing. Such acquisition broadens his concept, in- creases his confidence, and should delight his superiors. Where highly specialized depart- ments are created, departmental jealousies may normally be expected. Loyalty is meas- ured by devotion to the department rather 47 48 MODEKN ORGANIZATION than to the corporation. Not only is there a negative lack of incentive in learning the work of another department, but there is pos- itive objection to crossing sacred depart- mental lines. Since owing to the size of the proposition departments are necessary, the problem is to develop the all-round man un- der such restrictive conditions. One remedy, often difficult of application, is the rotation of selected individuals from one department to another. Another is a sufficiently early elevation of individuals to positions which have dealings with all departments. The lat- ter method, by no means ideal, depends en- tirely upon the ability and the responsiveness of the individual promoted. In any case, the problem is easier where the number of de- partments is minimized. Specialization run- ning rampant is often responsible for the creation of unnecessary departments. A striking example is the tendency of corpora- tions to exaggerate the importance of such component functions as accounting, supply and purchase. Large corporations (including govern- ments, the largest of all) early discover the necessity for a cadet system of training com- petent officers. This simplifies the problem, OVER-SPECIALIZATION 49 since talent can be caught young enough for the broadest development. A cadet system may fall short if post-graduate activities are too highly specialized for too long a period of time. The railways and other industrial corporations are many of them too young, as corporate entities, to have developed as yet a cadet system. As shown by the prac- tical experience of the Harriman Lines, some men old enough to have attained official rank can nevertheless be broadened for the highest positions by a proper system of organization. The amalgamation of the steam engineers with the line of the United States Navy is another notable example. That not all old dogs can be taught new tricks is no reason for denying opportunity to those who can. Every new trick the dog learns becomes an asset of value to his master. Beyond an easily determined point of self-respect it should not be what the dog wants, but what the master needs. The Nineteenth Century in the name of specialization badly over- specialized. The problem of the Twentieth Century is to swing back to a balanced spe- cialization. All of us believe in specializa- tion. Where we differ is as to the point where logical specialization ends and over- 50 MODEKN ORGANIZATION specialization begins. The corollary of spe- cialization is centralization.* The corollary of over-specialization is over-centralization. The more highly specialized the activity, the more remote becomes the point of converg- ence of complete authority. Organization as a science demands a check against the amiable failing of human nature to exaggerate the' importance of its own specialty. -ZEsop caught the idea in his fable of the quarrel among the organs of the body- as to their relative importance. Each is use- less when alone. Each derives its import- ance from its relation to the others. Perhaps the best practical check against corporate over-specialization is the rotation of func- tions. The best farmers rotate their crops. Where man is most active and useful, Nature rotates her seasons. Biology teaches that death comes more quickly where rotation is absent. Like all other good things, rotation can easily be overdone. The permanent special- ist may be justified when he has demon- strated his fitness as an all-round man. He * Manifestly, Major Hine refers to centralization of control over functional activities — to concentration of administrative power — and not to mere social central- ization, as of individuals in cities or of labor in large industrial or operating organizations. — The Editor. OVER-SPECIALIZATION 51 can best learn everything of something when he has first learned something of everything. Epochs in the advance of society are all marked by cosmic tendencies. Modern spe- cialization had its birth in the necessities im- posed by the wonderful achievements of the Nineteenth Century. Invention cleaved its way through the ranks of civilization and scattered complete organizations of local so- ciety into groups of specialized activities. Many men mistake the immediate for the ul- timate. There was a disposition to regard this condition as permanent. The inventor and the engineer, men of tangible things, out- stripped the philosopher and the sociologist, men of intangible things. As society catches its own breath it demands more even run- ning from its leaders. As specialization produces centralization, so in turn centralization develops bureau- cratic administration. The specialist who derived his official existence from expert knowledge carefully acquired may soon lose his sense of proportion. He unconsciously drifts into feeling that any one in his depart- ment must be an expert because the head is an expert. Thus we find the chief engineer insisting that technical matters should be 52 MODERN ORGANIZATION handled by his department alone. Investi- gation may develop that such handling is turned over to a non-technical man, the chief clerk, for final action. The chief engineer feels, unconsciously of course, that even a layman, if so fortunate as to be associated with the head, must absorb both technical knowledge and divine afflatus from such con- tact. Unquestionably, the best experts are those who can impart a working knowledge to the layman. The objection to the chief - clerk system is that a half-way condition is stretched into doing duty for what should be a complete proposition. If the matter in hand is so highly technical as to demand an expert, the administrative activity should not be delegated to a layman. If, on the other hand, it has reached the stage of administra- tive routine, it makes for more comprehen- sive and harmonious results to have action taken by a duly qualified officer. Society has so far emerged from feudal- ism, politically speaking, that a stenographer would no more think of taking the place qf a judge on the bench than a lay reader would think of attempting all the functions of a duly ordained clergyman. Organized society, how- ever, as reflected through modern corpora- OVER-SPECIALIZATION 53 tions, is so steeped in feudalism that the stenographer may be habitually signing the name of the corporate officer. It is an echo of the mediaeval period when the feudal lord was considered omnipresent within his do- minions even though he might be absent on a crusade to the Holy Land. When one person signs the name of an- other the effect produced is not that of either one or the other, but of a fraction of both — an undesirable sociological condition. Col- lectivism and altruism, as indispensable blessings of modern society, fall short if the individual is not preserved as an indivisible unit. Such violations of principle were less material when society was organized into smaller groups. The advent of the modern corporation necessitates, in administrative life, the same relative checks and balances for the preservation of the identity and re- sponsibility of the individual as have been imposed by constitutional limitations and otherwise in political life. Thus when busi- ness was carried on by a family or a part- nership it mattered comparatively little if one person signed for another, since the mu- tual understanding was so thorough and complete, or because each of the persons con- 54 MODERN ORGANIZATION cerned was a part owner. In the adminis- tration of a large corporation, however, the officers and employees are trustees in vary- ing degrees of rank. When an officer is ab- sent, actually or constructively, the person who acts does not represent the absent offi- cer but the corporation. If Eichard Eoe acts in the absence of John Doe, a corporation officer, the signature should not be "John Doe, per Richard Eoe;" but should be ' ' Eichard Eoe for and in the absence of John Doe. ' ' The explanatory phrase ' ' for and in the absence of " is largely a question of good manners. It explains the seeming presump- tion of Eichard Eoe in acting, and the appar- ent discourtesy or neglect of John Doe to give the matter personal attention. The point of it all is that Eichard Eoe is acting for the corporation. He has been thrown into administrative gear, more or less automati- cally as the arrangement for succession in authority is elastic or rigid. The science of organization insists that chains of authority and lines of succession shall be carefully outlined. The ideal condi- tion would be, after developing competent men, to have the same men continuously do- ing the same work. This condition of spe- OVER-SPECIALIZATION 55 eialization is manifestly unattainable owing to the wear and tear on individuals and to the accidents of service. Specialization in assignment has therefore decided limitations. "Wise organizers recognize this fact and pro- vide sufficient officers to give comprehensive action under all conditions of service. Un- wise organizers fool themselves into believ- ing that by some hocus pocus a half-baked understudy can perform a complete part. Under the more primitive conditions of the past there has been less necessity for a knowledge of the science of organization. Supply follows demand, and the practical necessity for this knowledge is attracting the attention of thinking men the world over. Administration as an art is very old. Organ- ization as a science is very new. There are a hundred good administrators for every good organizer. That which often passes for good organization is high-class administra- tion, through splendid personal equations, of what is in fact unscientific organization. One bar to progress is the fact that nearly every man intrusted with authority over his fellows flatters himself that he is a born or- ganizer. Flattery is never more deceptive than when applied to one's self. FALLACIES OF ACCOUNTING Chapter V FALLACIES OP ACCOUNTING Q O rapid has been the growth of modern in- ^ dustry, so extensive is the volume of ac- tivity, so imperative is the necessity for a check of some kind against extravagance and corruption, that accounting as a function has assumed an importance far beyond its true proportion. Accounts are, in fact, but a measure of performance, not performance itself. Ac- counts are but a yardstick. So prone is hu- man nature to mistake incidentals for essen- tials that through long use the yardstick ac- quires a fictitious value. Experience, up to the period of obsolescence, ripens the human being and increases his efficiency. The yard- stick, however, like most inanimate things, after being once properly tested is none the better for having made ten-thousand meas- urements. This failure to distinguish be- tween the animate and the inanimate finds extensive expression in the interior organi- zation of modern society. 59 60 MODERN ORGANIZATION The accountant attempts to tell tis that money has been legally and honestly ex- pended. He is usually powerless to say whether or not the expenditure has been effi- cient and therefore economical. Any one can make vouchers match and columns balance if he fudges long enough. It is not every one, however, who can organize and direct the di- vine forces of nature, divine because they are human. At the outset too often the engineer of men finds himself handicapped by the pur- veyor of figures. Efficiency too often is meas- ured by book balances and statistical reports rather than by expert inspection of actual conditions and performances. Class consciousness is as expensive indus- trially as it is undesirable sociologically. The accountant, being human, exaggerates his own specialty, and gets away with the propo- sition because the director of men and things may scorn to meet the accountant with the latter 's weapons. Organization as a science demands that the two get together, not in combat, but in co-operation. When he wakes up, the technical director has all the advan- tage. He can learn accounts much more easily than the accountant can acquire tech- nical knowledge. A concrete application of FALLACIES OF ACCOUNTING 61 this principle is found on some railways, in- cluding the Harriman Lines and the Pennsyl- vania System. There, the disbursement ac- counts are kept by geographical operating division under the direction of the responsi- ble operating officer, the division superin- tendent. The underlying theory is that ac- counts as part of every-day working tools should be available first hand for prompt and effective measure of performance; that it is manifestly unfair to expect to hold officers responsible for results and at the same time deny them first-hand knowledge of existing conditions. On most railways and in many other large industrial corporations, account- ing is regarded as a sacred mystery beyond the ken of the every-day operating man. The result of such illogical specialization is re- flected in a remote centralization of function. The scorer is too far from the game. Indi- vidual batting averages acquire a greater rel- ative value than sacrifice hits which may bring in winning runs. One of the reasons that banks enjoy the general confidence of the public is because of their highly localized operation. The greatest financial institutions work only through more or less individualized corre- 62 MODERN ORGANIZATION spondents. Each bank is made a complete, self-contained unit under a president or man- ager, who controls directly and completely his bookkeepers. If banks had fallen into the fallacy of the industrial world, all the bookkeepers would report to a head book- keeper in a distant city and all the janitors to an alleged expert chief janitor somewhere else. Much of the local feeling of distrust against the American Telephone and Tele- graph Company and its later subsidiary, the Western Union, is traceable to the fact that in few cities is there a recognized head of the company. The work is divided up amongst specialists, who for a time, by increased and intense attention to certain details, are able to show high departmental performance. Complaints of one sort or another may be met with the statement that some other de- partment is responsible. The dissatisfaction of the public sooner or later finds expression in a demand for increased regulation of rates or public supervision of service through commissions or otherwise. A corpo- ration as an artificial person suffers enough lost motion from lack of inherent red blood without further emphasizing its vulnerabil- ity by a conscious or unconscious shifting of FALLACIES OF ACCOUNTING 63 responsibility through mistaken notions of the proper division of labor. By all means there must be some division. Where the effi- ciency doctors disagree is mainly as to the point of complete convergence of activity and authority. It is a far cry from the old-time watch- maker, who wrought every part himself, to the factory operative who knows one machine turning out a very limited portion of the works of the finished watch. Were the mak- ing of watches the chief end of man, the highly segregated activity would be ideal. There are so many other things requisite, however, to insure life, liberty and the pur- suit of happiness, that true composite effi- ciency demands, at least, such rotation of function as will prevent the dwarfing of in- dividual development. Corporations, like society in general, can- not stand still. They must and do advance. The sins of ignorance in one generation find absolution in the more enlightened practices of the next. It is predicted that ere long corporations will so see the light as to reduce accounting to its proper position. Account- ing is one of several components of opera- tion, not an independent function in itself, 64 MODERN ORGANIZATION Too often confusion comes from calling the accountant an auditor. The accountant should be a registrar, the auditor a reviewer or inspector. Here is a distinct differentia- tion of function. Constructive criticism and review have a distinct function. He who crit- icises or reviews, be he ever so honest, must be able to suggest practicable improvement, otherwise his criticism degenerates into harmful carping. It follows, therefore, that the inspector must be an expert operator. Audit is one of several components of a broader activity, inspection. The fundamen- tal defect in many modern corporations is in endeavoring to make the accountant an audi- tor, to check the books before they are made up. This results in one-sided development and more or less unconscious fudging of operation to meet rigid preconceived notions of accounting requirements. Patrons would soon leave in disgust a bank whose teller had his efficiency measured by the bookkeepers farther back from the counter. The teller of necessity relies upon the record of the book- keeper to protect the bank against the mis- takes or designs of the customer. In a small bank one may be both teller and bookkeeper. Later on the work is divided, not because the FALLACIES OF ACCOUNTING 65 bookkeeper is considered more honest than the teller, but because there is more work than one man can do and there is a self-sug- gesting division of labor. The underlying principle is that volume of activity rather than importance of function defines, planes of cleavage in the division of labor. Fre- quently this basic principle is forgotten and class consciousness encourages the belief that segregated activity derives its existence from highly technical knowledge. Organiza- tion as a science has a hard task to overcome by proper checks and balances this feeling of "we are so different" and "our work is very expert and peculiar." The problem mentioned is receiving a practical solution in a variety of ways. The primal instinct of self preservation is prompting engineers to learn more and more of accounting. Some of the large New York firms of efficiency and production engineers are developing accountants from young engi- neers. "Whether or not the accountant of the future is an engineer, it is certain that the engineer will be an accountant. Where the public accountant leaves off and the muck- raker steps in saying that something is wrong, the efficiency or production engineer ,66 MODERN ORGANIZATION stands fast and produces improvement. A prerequisite to a knowledge of physical engi- neering is a grounding in mathematical con- ceptions far beyond those necessary to cover every phase of financial accounting. The accountant begins by flattering him- self that because entrusted with records of financial transactions, he is more honest than the common run of people who deal with men and things rather than with money. By an easy process of extension this idea is devel- oped into a belief that all the employees con- nected with the accounting department are perforce of a superior degree of integrity. Apart from the baneful subjective effect of so absurd a fallacy is the objective resultant. Bobbed of part of his working tools, denied by inference the fundamental requisite of in- tegrity, the operating man sub-consciously acquires an attitude of defence or of indiffer- ence. In either case there is a distinct loss of composite efficiency through failure of the organization to co-ordinate properly all the human elements engaged in the particular activity. There results a condition of having a junior clerk in a distant office question lie acts of a highly paid officer on the ground. The presumption should be in favor of the FALLACIES OF ACCOUNTING 67 latter, but because efficiency is necessarily relative and intangible, tbe clerk has a de- cided advantage of position because he meas- ures performance from his little viewpoint with a seemingly tangible report and an ap-s parently effective unit of comparison. This undesirable condition is highly typified in the administration of the United States Govern- ment where hundreds of clerks in the ac- counting bureaus of the Treasury Depart- ment at Washington, under a false concep- tion of revenue protection, unconsciously hamper the performance of upright and zeal- ous officers and employees hundreds or thou- sands of miles away. The Bureau of Insular Affairs in the "War Department is in advance of many others in employing in the Philip- pine Islands numerous traveling auditors. As a broad proposition, the inspector should seek necessary data of audit on the ground rather than have such data seek him in a dis- tant office. It is predicted that the corpora- tion of the future, and government is the largest of all corporations, will develop for its inspection service, including auditing, a corps of high-class men, composites of the inspecting officer of the army, the National bank examiner, and the traveling railroad 68 MODERN ORGANIZATION auditor. At first, probably, sucb corps will be a set of more or less permanent specialists with, tbe intuitive faculties highly trained. Since history repeats itself in organization as elsewhere, the gradual evolution in indus- try will be, as shown by the experience of the ages in armies and navies, to insist upon periodical rotation between the staff duties of inspection and the line functions of per- formance. The mistake made by many cor- poration officers is in believing that in all such matters the ultimate has been reached. Since all life is evolution, the wise man rec- ognizes the fact that attainment of the ulti- mate must extinguish existence as surely as the variable of mathematics would be wiped out if its limit could be reached. Money itself, a measure of value, is but a symbol and a representative, and never per- formance itself. Because money brings po- sition, power, and influence it is often con- fused with the result it produces. When in a more primitive state of society a few indi- viduals were exploited at the expense of the many, the glamor of disproportionate indi- viduality often obscured the fallacy of con- sidering money or property as the primal cause of pre-eminence. When such unbal- FALLACIES OF ACCOUNTING 69 anced individualism yields to more rational collectivism, as reflected through the modern corporate organization of society, money and money accounts very properly lose in rela- tive value. The present social unrest flows not so much from dissatisfaction with the unequal distri- bution of wealth as from disappointment at the failure of its possessors to measure up to higher conceptions of stewardship. The people insist upon a regulation of wealth, and particularly upon a regulation of its uses through public-service corporations and other industrial enterprises. The struggle for adjustment now going on in the United States is but a manifestation of a larger cos- mic tendency toward equality. The problem in the United States is intensified by reason of the fact that under our theory of govern- ment political power is more or less di-cen- tralized. The tendency has been toward more and more political and governmental central- ization in Washington. All the while finan- cial power is becoming more highly central- ized in New York. Much time will be needed for harmonizing these dissimilar conditions. In Europe, the political and the financial cap- itals are usually identical as seats of central- 70 MODEEN ORGANIZATION ized power. It is interesting to conjecture the effect upon present conditions had a strong Federalist party been in power dur- ing the thirties, forties and fifties, a period of important railway and industrial develop- ment. The States Eights party then in power frowned down upon the notion of fed- eral control of railways when their similar- ity to rivers and canals was mentioned. With so many disproportionate conditions it is little wonder that corporations err on the side of unbalanced organization. Pioneers of thought may point the way, but consum- mation of scientific ideals in organization becomes fully practicable only when condi- tions are so acute that the necessity for rem- edies is self-evident, and the method of solu- tion more or less self-suggesting to the masses of those concerned in the results. SUPPLIES AND PUKCHASES Chapter VI SUPPLIES AND PURCHASES pUBCHASINO, as carried on by most modern corporations, is an example of exaggerated specialization of function. Pur- chasing is merely a component of a larger activity, supply. In turn, supply is a part of operation. A failure to appreciate this component relation often results in distorted and unbalanced administration. A strong personality at the head of a purchasing de- partment may unconsciously hamper the ef- forts of heads of other departments through a failure to appreciate the proportionate value of supply and purchase to opera- tion. Purchasing was originally segregated not necessarily because it was so different from everything else, but rather on ac- count of the volume of the activity having reached a stage where it justified the undi- vided attention of one person. Such person, being only human, gradually acquired a habit of mind of considering himself as something apart from those less skilled in 73 74 MODERN ORGANIZATION the technique of bargaining. Where all heads of departments are closely associated in a restricted area, as in that of a single manufacturing plant, daily personal touch is a wholesome antidote for this "we are so different" feeling. The trouble begins when several plants are associated under a single management more or less remote. It is then that the acute separation of function is de- fined by thicker and thicker department walls. What was originally a mathematical plane without thickness, becomes first a wall and then a fortification. Tradition says that in 1861 it was inti- mated to the veteran, General Winfield Scott, that he who had entered the City of Mexico so successfully in 1847, should have no great difficulty in capturing Richmond. General Scott replied in effect that many of the same able officers who helped him to get into the City of Mexico were engaged in keeping him out of the city of Richmond. So it is in a large corporation. The same people who in the days of small things are engaged in helping the head to enter every possible avenue of composite efficiency, are, as the enterprise grows, more or less uncon- sciously in rebellion to keep their sometime SUPPLIES AND PURCHASES Y5 allies from entering the citadel of what, through segregation, has become a sacred cause. It cannot be repeated too often that the solution of the problem lies in the earli- est practicable convergence of complete authority covering the entire activity. No exact solution is possible because the focal distance of the individuals concerned is too variable. The most hopeful sign of the times is the willingness of the leaders of industrial operation to discuss the subject. Dogmatic generalizations, induced usually from too few particulars, are giving way to a feeling of doubt as to final conclusions. True sci- ence, and organization is a science, ever finds its vindication in calm and dispassionate in- vestigation. An illuminating example of centralized control and decentralized activity is afforded by the purchasing bureaus of the Harriman Lines. The able director of purchases, Mr. W. V. S. Thorne, in New York, makes blan- ket contracts, when practicable, for such ma- terial and supplies as can be most economi- cally purchased en bloc for all the railways constituting the Associated Lines. For ex- ample, locomotives, cars, steel rails, ear wheels, bridges, etc., etc., will usually fall 76 MODERN ORGANIZATION under this class. Each of the constituent properties has its own purchasing agent who, when acquiring standard articles under the blanket contracts mentioned, becomes an ordering agent. On the other hand the pur- chasing agent of the Union Pacific Eailroad of Omaha can probably drive a better bar- gain locally for such supplies as ties, timber, shovels, brooms, etc., etc. The point of it all is that the policy of centralization is suf- ficiently elastic to permit discriminating thought by responsible officers. Too much centralization always dwarfs the initiative of the man on the ground by inf erentially deny- ing him the ability to discriminate. In brief, an attempt is made by primary organization to decide a majority of the questions in ad- Vance, a hopeless proposition. It is pre- dicted that the supply and purchase admin- istration of the Harriman Lines will be further decentralized, so that perhaps the division superintendent can buy to advantage certain of his supplies in local markets or jobbing centres. Most railways and many industrial corporations reason fallaciously that because some things can best be pur- chased from a centralized office, hence all things should be so purchased. The Harri- SUPPLIES AND PURCHASES 77 man Lines' reasoning is that experience must be the guide, that some things must be pur- chased under one method and some under another. Typical of the other view is the Santa Fe System whose officers complain that the allotted three-score years and ten are too brief a span for the countless tran- sitions of requisitions, and supply corre- spondence, between the great West and dis- tant Chicago. Could one man do all the buying and insure prompt action and delivery, the segregation of purchasing would be ideal. Soon, how- ever, the purchasing agent gathers around him a large office force entirely unsympa- thetic with the particular needs of the users of the material and supplies. The office be- comes unwieldy and deals with papers and accounts rather than with men and things. The office employee of limited experience may have a greater voice in the management than the experienced Dfficer charged with the largest outside responsibilities. The purchasing agent boasts that his bright as- sistant saved the company a dollars by con- tinued correspondence with certain firms. Meantime the company may have lost xa dol- lars because men were working to poor ad- 78 MODERN ORGANIZATION vantage while awaiting proper tools and material. Requisitions may be counted a necessary evil to be reduced to the lowest possible terms. Ideal supply would be automatic. Too often a requisition tells a distant office only what it should already have known. The largest single item of supply on a railway, fuel for locomotives, is furnished without regular requisition because the necessities are so apparent. A definite amount of fuel is shipped periodically in the absence of re- quests for variation in quantity. As admin- istration improves and official ideas broaden, more commodities will be included in the list. A start has been made by numerous rail- ways by running monthly supply cars to is- sue station and track supplies to agents and section foremen. Most of these roads per- sist in the foolish practice of sending worth- less requisitions with these cars, worthless because the responsible officer with the cars should decide on the ground the amount to be issued in each case. An estimate of the probable total requirements can be made with sufficient practical accuracy for stock- ing the cars for the trip. Apart from the wasted energy in preparing useless papers, SUPPLIES AND PURCHASES 79 is the psychological effect of causing indi- viduals to give greater weight to the requi- sition, a shadow, than to the article itself, the substance. Financiers are learning that there is a practical limit to the amount of work which can be effectively performed by a single office. There was a time when very small railways could be combined in a single work- ing system with unquestioned advantage in administration. Long ago such combination passed the peak of efficiency. A decade ago the promoters of the new Eock Island Bail- way system acquired the Choctaw, Oklahoma and Gulf, which had its general offices at Little Eock, Arkansas. About the same time they also absorbed the Burlington, Cedar Bapids and Northern, a distinctively Iowa road with general offices at Cedar Eapids. Each of the roads mentioned, with some- thing over a thousand miles of line, enjoyed a considerable degree of local popularity and, therefore, immunity from drastic legis- lation. The general officers of these roads had a distinct identity in Arkansas and Okla- homa in one case, and in Iowa in the other. When the citizens of these proud States awoke to the fact that the seats of authority 80 MODERN ORGANIZATION had been removed to far-off Chicago, that all purchasing had been centralized in that city, there was a feeling of resentment which necessarily had some bearing in shaping leg- islation hostile to corporations. To say that ties and timber cut in Arkansas can only be bought to advantage in Chicago is as ridicu- lous as it is expensive. In sharp contrast to this mistaken policy is the case of the prosperous Louisville and Nashville system, now financially associated with the Atlantic Coast Line. It is an open secret that the Louisville and Nashville controls the Nash- ville, Chattanooga and St. Louis Railway and the Georgia Eailroad ; and is a dominant factor in the Atlanta and West Point, which includes the "Western Eailway of Alabama. Each of the properties mentioned, however, is a distinct local entity with its president and full complement of general officers. It is said that not even are the mechanical appli- ances standardized as among these different roads. This is perhaps too extreme a con- dition, but it has at least the value of pre- venting an undue centralization of supplies and purchases. The general trend of thought at present is to recognize the sociological element as SUPPLIES AND PURCHASES 81 the most important feature of administra- tion. To offset the local unpopularity of the Southern Pacific in California, some perhaps deserved but much undeserved, a president with large powers has recently been placed in San Francisco. Simultaneously four other presidents were elected for Omaha, Nebras- ka; Houston, Texas; Tucson, Arizona; and Portland, Oregon. Chairman Lovett has wisely placed upon the shoulders of these five presidents the duty of acquiring that local human touch which becomes more vital as civilization advances. Chairman Lovett and his five presidents now perform with some degree of comfort the duties which killed that great genius, Edward H. Harri- man, who fell a victim to his own juggernaut of centralization. One of the temptations to which mankind has yielded from the beginning is to seek perpetual motion in administrative, as well as in physical, affairs. The hope has been that by some hocus pocus of a constitution, a scheme of government, or a chart of organ- ization, a self-perpetuating entity would be set going to govern internal affairs for an indefinite period. The sociologist sees that systems survive only as they reflect the prog- ^82 MODERN ORGANIZATION ress of a people, whether that progress be in government, in administration, or in abil- ity to become self-reliant. A phase of this general tendency is seen in the segregation of the storekeeping function for large corpo- rations. "When irregularities develop, when waste is discovered, when ignorance of mate- rials and their conservation is manifest, the fallacious remedy usually proposed is to place this peculiar activity under the control of a special body of men expert in that one feature. The true function of the specialist and the expert, let it be repeated, is to show the layman how best to perform tasks of a general nature. When a separate depart- ment is created such specialization often be- comes the lazy man's excuse for side-step- ping responsibility. The true solution lies in patient instruction of those who are re- miss, in such thorough, broadminded inspec- tion as will insure maximum hearty effort for improvement. Because an artisan is clumsy or ignorant, his superiors should not take away his working tools until they have exhausted every known method of teaching him the trade or art. The Pennsylvania Railroad, whose organization was laid out by military men a half-century ago, has SUPPLIES AND PURCHASES 83 never yielded to the temptation to create a separate supply department. It has, how- ever, fallen into the mistake of centralizing its purchasing to the extent that a clerk in Philadelphia may discount the judgment of a superintendent in Baltimore or Washing- ton. The Harriman Lines, after various seg- regations of the supply function, sometimes under the accounting department and some- times as a separate branch of the operating department, have recently amalgamated sup- ply under Operation by placing all division storekeepers under the respective division superintendents and by including store ac- counting in the division accounting bureaus. The effect has been to make the superin- tendent and his various assistants zealous conservers of store supplies, where previ- ously they unconsciously sought to draw the greatest amounts possible from the store because it was in another department for which they had no responsibility. When the bandit really reforms he is an able police chief, a guardian of law and order. The United States Navy has long had a bureau of supplies and accounts. The mem- bers of the pay corps were supposed to be interchangeable as pay officers and store- 84 MODERN ORGANIZATION keepers. This is sound organization and it is to be regretted that a movement is on foot looking to the segregation of supplies from accounts. Both logically and practically the two are closely interwoven. When the volume of business is small the same person can be both pay officer and storekeeper. "When warranted by volume the duties can be segregated to advantage, not because of the inherent importance of either, but solely because there is more work than one man can do. Off-setting this mistaken agitation is the wholesome legislation proposed for amal- gamating the pay corps of the Navy with the line. Ultimately, a generation hence, while every seagoing line officer will not be a pay- master, every paymaster will be a seagoing line officer, stripped of that class conscious- ness which is so fatal to composite efficiency. Granted the premise that in all organiza- tion such ultimate consummation is desired, the conclusion is irresistible that supplies and purchases are but a component of opera- tion, whether that operation be the mainte- nance of a really military navy, the manufac- ture of steel, or the running of great rail- roads. LINE AND STAFF Chapter VII LINE AND STAFF TT'NOWLEDGE is power. Knowledge of A *- the principles governing line and staff in organization is often sadly lacking in the training of executive officers. The sins of ignorance are costly. No field of investiga- tion will yield a larger return in efficiency than that of line and staff. Line functions are those exercised in di- rect sequence through prescribed and defi- nite channels of authoritative control. The first line officer had no staff because he had time to do both the acting and the thinking parts. As the activity grew in volume, the responsible line head found the necessity for expert advice. Perhaps this came from a lawyer, a surgeon, or an engineer. "What- ever the source, there was no suggestion of turning over to the expert adviser the direc- tion of the activity itself. In a less highly organized condition of society the distinc- tion was easily maintained. The lawyer, the surgeon, or the engineer might have many 87 88 MODERN ORGANIZATION clients. This divided patronage rendered it manifestly impossible for the outsider to be- come responsible for direction of internal affairs. In the modern corporation it fre- quently happens that the amount of expert attention demanded will justify engaging the expert to devote his sole attention to the corporation in question. Then the trouble begins. Human nature is such that, un- checked, its ambition leads to meddlesome interference with specific matters beyond its immediate concern. The problem of organi- zation is to impose such checks and balances that each component of the activity will maintain its proper proportion and relation to the others. Staff as contra-distinguished from line originates in the necessity for maximum in- tellectual attention untrammeled by the de- mands of administrative routine. Here is a distinct differentiation of function. The officer absorbed in directing large affairs, in getting things done, is of the line. For the time being at least he is too busy to origi- nate better methods or to seek the principles underlying his activities. He is the operator rather than the inventor; the actor rather than the playwright. Science and invention LINE AND STAFF 89 add to the complexities of the art and force the necessity for expert assistance. The old sailing masters had to be rein- forced by engine experts when steam was applied to navigation. Fortunately, the law of the sea demands undivided control in the sailing master, and the marine engineer has always been subordinate to the captain of the ship. Until recently this subordination has been too intense. The marine engineer in a staff corps was out of line for promotion to the captaincy. Perhaps the chief engi- neer was twice as good a man as the first offi- cer, and perhaps had double the service, but higher than a chief engineer he could not go. Since the splendid progressive amalgama- tion of the staff steam engineers of the United States Navy into the navigating line, the specialist in engineering finds no hatch- way permanently battened between the en- gine room and the deck. Under the old order of things, there was before a strong man in the engine room a constant temptation to fortify himself behind the technique of his specialty at the possible expense • of naviga- tion itself. Now that he is a navigating offi- cer, the direct purpose of the ship, namely navigation, is constantly most prominent. 90 MODERN ORGANIZATION Engine rooms exist to propel ships. Ships do not exist to contain engine rooms, except incidentally. The recent Titanic disaster has called public attention to the failure to observe the old-time custom of developing all-round men at sea. There were not enough real sail- ors to man the life boats effectively, and stewards and stokers proved poor substi- tutes for sailors. This can be traced to the failure on the modern steamship to balance line and staff, to check over-specialization, and to remember that the ship, the whole, is greater than a department, one of its parts. The remedy does not lie necessarily in in- creasing the number of sailors as such, but rather in rotating stokers and others with sailing duties and rendering them available and more effective in time of need. This means more trouble for responsible heads, more work for officers in educating and training their men. Such increased work is what officers are for. Such constant incen- tive to endeavor prevents sluggishness and inaptitude for emergencies. The first staff officer had no authority be- yond that of polite inquiry. There was no one whom he could command. Gradually he LINE AND STAFF 91 acquired an office force and assistants. Not satisfied with telling others how to do, he unconsciously began doing things himself. He thus became a line officer burdened with administrative routine precluding proper concentration on that thinking part which the staff officer was himself created to per- form. The controversies between line and staff in the Army and Navy of the United States have cost our Government untold mil- lions. Most of the railway and industrial corporations of the United States are wast- ing some money every day by permitting staff officers to attempt to exercise line func- tions. The Army and the Navy have found an effectual check by going back to first prin- ciples, by amalgamating staff and line, by judicially rotating function, and by substi- tuting periodic details from the line for per- manent appointments to the staff. Such solution is so logical and so prac- tical that it is attracting the attention of the railway and industrial world. As the sub- ject receives the attention that it deserves, the practical application of the principles involved will be prompt and intelligent. So one-sided has been the training of executive officers that most of the so-called captains of 92 MODERN ORGANIZATION industry, narrowed by specialized training, must perforce consume much time in study- ing subjects previously outside their scru- tiny. Training leaves its marks. A lawyer, called to an executive position, often fails to see the necessity for the direct and ever- present sequence of authority. If all the judges of a city leave town for the week end, little harm may result. So unusual is an application out of regular hours for a writ of injunction or a writ of habeas corpus that the inconvenience of securing a judge would not be serious. Industrial concerns and rail- ways, however, run every day in the week and every month in the year. There must ever be an alert and present incarnation of administrative authority. These administra- tors are like the firemen and the policemen of a city. There can be no haphazard, indefi- nite "take it up next week" method of pro- cedure. Constitutions of Governments follow scien- tific differentiation of function. The execu- tive is a line function, continuous in effect and direct in action. The judicial is a staff function, more or less continuous in effect, and presumably operative not directly, but LINE AND STAFF 93 through, the executive function. The legisla- tive is a staff function intermittent in action and indirect in the application of its conclu- sions. Frequently there is a departure from these scientific planes of cleavage and harm results. Just at the present time the Federal courts are engaged in a futile effort to exercise the line functions of not only regulating but ad- ministering numerous great corporations. The fundamental defect is the same as exists in receiverships. "When the court attempts administrative functions, there is no tribunal for judicial review of its own acts. As this principle is understood, receiverships will be supervised by some executive arm of the State, as is done in the case of banks both by the Federal Government and some of the State banking bureaus. Eeceiverships are seldom denied, for the reason that judges, be- ing human, covet power. "Were the receiver- ship ordered by the judge to be conducted by someone else than himself, there would be greater probability of real judicial action on his part. No military commander of modern times has dared exercise the despotic author- ity that often characterizes a court in con- ducting a corporation receivership. 94 M0DEKN ORGANIZATION The staff function of greatest vital neces- sity is that of inspection or review. The ten- dency of inspection is that of extremes. In- spection reports often become perfunctory and colorless. On the other hand, they may be hypercritical and demoralizing. True in- spection is as open as the day and as wel- come as the evening. True inspection makes the persons inspected grateful for the inspec- tion. The true inspector is so thorough in his training, so secure in his knowledge, so considerate of his subjects, so forgetful of himself, so devoted to his duty and so worthy of respect, that those whom he inspects pay the unconscious homage of admiration. Such men are rare, but they can be developed. Experience has proven that there are definite limits of time within which an officer can be assigned to staff inspection duty. Some return to the line is essential to retain that human touch with everyday requirements through which alone can the confidence of others be merited. An important component of inspection is audit. As previously stated, accounting fre- quently attempts to do duty as auditing. This is another instance of failure to differ- entiate between line and staff. Accounting LINE AND STAFF 95 is a line function, a part of operation. Audit- ing is a staff function, a part of comprehen- sive inspection. All positions contain their characteristic tendencies and inherent temptations. The line officer, because he is practical and direct, is often impatient of staff suggestion, which he regards as fantastic and theoretical. Too often this prejudice is strengthened by the unfortunate mental attitude of the staff ex- pert. Men who think out of and away from conventional grooves have usually a unique personality. Too often this is coupled with overbearing intolerance for their less gifted brethren. "With personal eccentricities that are but manifestations of narrow selfishness, the cause of efficiency has had to struggle against the handicap of the unfortunate per- sonal equations of some of its ablest expo- nents. Tactless, intolerant, and inconsiderate treatment of conscientious line officers has discredited many an honest staff expert. The true teacher makes his students love their work and respect him because the work is lovable and because his teachings are sound. The best antidote for the undesirable con- dition mentioned is periodic service in the line. It rounds off the square corners and 96 MODERN ORGANIZATION bevels the sharp edges. The staff officer in turn is more valuable when fortified by ac- tual line experience and accomplished re- sults. It is always easier to tell the other fellow how than to do the thing oneself. The most successful man is he who has done both things, who has told and has done, who knows how and who also knows why. Staff and line functions are often confused because of a loose use of the overworked word "staff." It is entirely possible for the same individual to act both in line and staff capacities. Several line officers at the head of distinct departments or groups of activity may collectively constitute the advisory staff of their common superior. Each of the nine heads of the executive departments of the United States Government in Washington is a line officer exercising direct authority over hundreds or thousands of subordinates. As- sembled at the White House, the nine become collectively the President's Cabinet, a staff body. The weakness of this governmental organization is the absence of a chief of staff, in effect an assistant president. An attempt is made to supply this defect by having a sec- retary to the President at $7,500 a year di- rect and co-ordinate for the President the LINE AND STAFF 97 activities of nine strong Cabinet officers each rated at $12,000 a year. The President of the United States is too busy a man to bring about complete co-ordination, and much goes by default. In recent months the handling of a delicate situation in Mexico has furnished numerous instances of a glaring lack of co- ordination between the State, Treasury, "War and Navy Departments. This was the fault of a defective system rather than of indi- vidual shortcomings. Evolution brings us back to first princi- ples. In the first administration of George Washington, his Secretary of State, Thomas Jefferson, was, in effect, though not in name, prime minister and chief of staff. Foreign affairs were an incident of the State Department. Today the foreign affairs of a mighty nation absorb practically the entire activities of the State Department. It no longer serves as a balance wheel for the other departments. The remedy is to create a Department of Foreign Affairs under a secretary, a member of the Cabinet, and to restore to the State Department many of its original functions. The Secretary of State, in the same building with the President, would be the latter 's assistant and chief, of 98 MODERN ORGANIZATION staff. The Department of State would, as its name implies, be the department of de- partments, balancing and co-ordinating the other nine. One of its functions would be that of inspection, including audit and re- view. It would include a comptroller who would audit the Treasury Department. The anomalous condition of having the Treasury Department audited by its own comptroller would be eliminated. The position of secre- tary to the President would join the scrap heap of discarded organization. The greatest boon to modern organization is the chief-of-staff idea, scientific in concep- tion, practical in application, effective in re- sult and as enduring as eternity itself. THE GENESIS AND EEVELATION OF ORGANIZATION Chapter VIII THE GENESIS AND EEVELATION OF ORGANIZATION fVRGANIZATION is a necessity and not ^^ an accident. Organization exists in re- sponse to some need of the social order. The type of organization adopted, however, is often accidental and frequently unscientific. There are so many more men who know how than there are who know why, that depar- tures from sound principles should he ex- pected, rather than otherwise. The first type of organization encountered among all peoples is that of the family, well termed the unit of civilization. This organi- zation is scientifically sound because based upon natural laws. The evolution of this or- ganization is from polygamy to monogamy. At first, the family served all purposes of or- ganization. As new generations came, as populations increased, the distinct limitations of the scope of the family organization neces- sitated a still larger unit, such as the tribe or the clan. "Whenever precedents are lacking 101 102 MODERN ORGANIZATION any new organization is characterized by rule by the strongest. Thus it happens that des- potism alone is able to hold together the more or less heterogeneous elements which have been grouped together to carry out an under- taking. Gradually, as the component elements crystallize along more or less definite axes of activity, there come demands for protection in the enjoyment of positions attained. In government such demands eventually result in charters of liberty, in guarantees of pro- tection to person and property, in constitu- tions written and unwritten, and in various other forms of checks and balances. Such or- ganization should be scientific, since it is based upon the practical necessity of check- ing the natural caprice of those invested with authority and power. Governmental organ- ization, however, is usually more scientific than practically effective. It accomplishes the general purposes in a highly satisfactory manner, but at an enormous and extravagant money cost. The inherent defect is the diffi- culty in checking the public official effectively, and at the same time leaving him a bal- ance of initiative and defined responsibility. There is always the conscious or sub-con- EVOLUTION OF ORGANIZATION 103 scions fear that the public official will become too powerful. Government thus differs from other corpo- rations in having its stock-holders, the citi- zens, holding back the duly constituted offi- cers. In most other corporations the propo- sition is reversed. The stockholder is so fear- ful that the duly elected officers of the cor- poration will not produce maximum financial returns that he usually leaves such officers untrammeled and, perhaps, unchecked. Here are two extremes between which must be fixed a more or less indefinable happy me- dium. That such medium is being scientifi- cally sought is evidenced, on the one hand, by the growth of commission forms of gov- ernment, and, on the other, by the increasing interest of stockholders and directors of large corporations in the performance of their officers. The student of organization as a science finds much cause for optimism in contemporaneous developments. The casualist finds a world of chance in which accident and luck play the leading parts. The scientist, in whatever branch, in- cluding organization, finds a world of uni- versal law with every recognized cause pro- ducing a corresponding effect. There is no 1M MODERN ORGANIZATION" greater evidence of the advancement of man- kind than its willingness to discuss subjects of every nature. Previous failures to con- sider organization as a science may be traced to the same fundamental misconception of individual rights and moral delicacy as has characterized consideration of the science of eugenics. Time is the best regulator of all great questions, because it permits the oper- ation of the fundamental of all laws, that of supply and demand. Organization and eu- genics are supplying a demand of a rapidly advancing world for a better grouping of better men and women. Mankind is prone to mistake the shadow for the substance. Just at present the effi- ciency of the modern corporations is meas- uredly decreased by the snap judgment of the financial centers upon too short periods of performance. This condition is reflected in weekly or monthly statements of gross earnings and of net earnings. Efficiency is judged by seeming ability to make a better showing than was made in a corresponding previous period. The result is that subordi- nate officers are tempted to strive for a paper showing rather than to conduct and conserve along the broadest lines the property en- EVOLUTION OF ORGANIZATION 105 trusted to their charge. For example, the man in the street in New York may judge the efficiency of a western railway by the size of its trainload in a given month or year. Per- haps the apparently wonderful showing has been attained by excessive strain upon the •motive power, shortening its life and reduc- ing its ultimate earning capacity. Again, so insistent is the demand for satisfactory bal- ances, periodically struck, that high corpo- rate officers find it necessary arbitrarily to reduce working forces regardless of actual conditions. Vehement and. imploring tele- grams go from New York to outlying dis- tricts demanding reduction of expenses. The local official disbands some of his working forces, lets assembled material lie idle, know- ing all the time that the ultimate cost will be greater because^of the loss of efficiency in re- organizing his forces and resuming the work. Apart from the economic loss involved is the sociological unrest engendered by treat- ing men as pawns on a financial checker- board. The offsetting argument of the mod- ern banker is that even though it cost more money later on, it is better to wait until money is more plentiful. The observing citi- zen is quick to detect the fallacy of this rea- 106 MODERN ORGANIZATION soning and quicker to condemn a financial system that, demands such departure from real efficiency. A refreshing exception to this general practice is shown hy the Chicago & Northwestern Eailway which, under the old- fashioned administration of Marvin Hughitt, has actually insisted upon increasing its equipment in dull times because labor and material are then cheaper. Men are the product of their environment, and the coming captain of industry is the man whose conception of trusteeship will be that of a scientific buffer between the finan- cial power on the one hand and the practical necessity of the property and its employees on the other. The labor unions have been quick to see the weakness and blindness of capital. The tyrannical hold of labor today is due more to unscientific methods of capi- tal, to absent treatment by large interests from New York, than to the cupidity of labor itself. A concrete case is that unscientific unit of performance, the train mile, which leads to many unsound conclusions and ex- pensive outlays in railway operation. So de- pendable is human nature, so sound is pub- lic opinion in the long run, so honest and so able is the corporation officer of today, that EVOLUTION OF ORGANIZATION 107 the solution of these great questions will come through scientific study of the funda- mental principles involved. Evolution will thus preclude the necessity for and prevent revolution. It sometimes happens that human nature must be hurried to its conclusions. The greatest present need is an antidote for the unwillingness of men to profit by the pre- vious experience of others. It would be amusing, were it not so expensive, to watch the gropings of many corporate officers for methods to test efficiency. Ignorant of funda- mental principles, intolerant of outside sug- gestion, unable to detect the analogy in other undertakings, they repeat the expensive ex- periments of the past. Nearly every large corporation today is endeavoring to inaugu- rate some effective system of inspection or review. Nearly every one is falling short, be- cause an attempt is made to have the cheap man check the work of the high-priced man. Nearly every one is disappointing its pro- moters, because of failure to differentiate be- tween accounting, an operating or line func- tion, and auditing, an inspection or staff function. It often happens that what unfolds itself 108 MODERN OKGANIZATION as a discovery to one is but a matter of prin- ciple long previously enunciated by someone else. Among the ideas that are contempo- raneously revealing themselves to searchers after truth is the principle that most modern undertakings are too large to be concen- trated in one man, however able or zealous, because it is absolutely essential that author- ity shall converge in some one individual. The false idea has gained sway that such a man alone could act in numerous cases. The application of this idea necessitates minimiz- ing the cases in which the head must himself act. By a process of evolution, the chief-of- staff idea has unfolded itself to relieve such head and, at the same time, provide compre- hensive action for a greater number of cases. Another concept that has forced its atten- tion is that effective means must be provided for a comprehensive review of performance. The railway president cannot be left indefi- nitely to report upon his own performance. Granted this necessity, a fallacious attempt has been made to check the president through inanimate accounts, through reports pre- scribed by the Interstate Commerce Commis- sion or other public bodies. It is now dawn- ing upon those who are concerned how EVOLUTION OP ORGANIZATION 109 inadequate is such, a test. A more satisfac- tory remedy is the outside expert, the disin- terested reviewer, who is qualified by train- ing and experience to report upon men and things as well as upon papers and accounts ; a man who can draw his conclusions from first-hand information on the ground rather than from second-hand data in the office. Perhaps the greatest revelation of modern organization is the consciousness, tardy though its arrival, that there is a distinct lim- itation to the size of undertakings, that vol- ume may be the determining condition. The operating activities of many corporations have outgrown a detailed direction from a central source. The self-suggesting remedy is a decentralization of detailed activity and a retention of centralized control. In many cases such efforts at decentralization are still very crude. It is hard to teach old dogs new tricks. Here again time and intelligent ef- fort will supply the adjustment which the conditions demand. Modern organization reveals to the stu- dent a far more pleasing picture than that beheld by the prophet of old. The religion of Fear, with its bottomless pit and lake of brimstone, has been replaced by a religion of 110 MODERN ORGANIZATION Love with its heights of hope and its valleys of peace. Modern requirements have brought men together in large masses. They have organized together for one purpose or an- other. Political and economic efficiency have long been their cherished desires. As weak- nesses developed in this organization they have sought improvement. Sometimes the attempt was wise, sometimes foolish, often ineffectual, but nearly always sincere. When- ever the effort ran counter to the general welfare or to the normal advancement of mankind, the organization quickly showed the defect. Out of it all, as modern organi- zation sweeps into the newer day of compo- site efficiency, comes the delightful realiza- tion that its beacon light is scientific and en- lightened altruism. THE END Efficiency By Harrington Emerson. ME. EMERSON'S much quoted and largely discussed book "Efficiency" is not merely a development of a theory; it is system of principles as applied and the results attained in practice. How to effect economies, how to increase the ef- ficiency of labor and machinery, how to attain the maximum of output from a given equipment and force — these are the subjects he writes about. And the methods he describes are being used in some of the most successful manufacturing institutions in the United States. They have proved their worth by savings amounting in the aggregate to millions of dollars annually. Mr. Emerson has said that the railways of the United States could save $1,000,000.00 a day if they would adopt scientific principles of management. A picturesque phrase, but not an exaggeration. He shows how companies, not transporting, but manu- facturing, have saved money, and even saved their existence, by adopting systems of internal economy such as he describes. 12mo. 266 pages. Cloth binding. $2.00, prepaid. THE ENGINEERING MAGAZINE CO., 140-142 Nassau Street, New York The Twelve Principles of Efficiency By Harrington Emerson. THIS second volume by Mr. Emerson is a re- duction of the doctrine of efficiency to prac- tice. He discovers twelve principles of ef- ficiency which are so definite, so constant, so true, that they may be used as gauges. Any industry, any establishment, any operation, may be tested by these twelve principles and its inefficiency located and measured. It is a book which recognizes the need of the hour and proposes a plan to meet it. Emerson writes of things as they are, as they ought to be, and as they can be made. This book is one that cannot fail to carry sug- gestion and benefit to every man upon whom rests the burden of the greater success of any industrial enterprise. A man with a real message, he forces home each important truth with firmness and a strong personality. The keynote is higher reward for the employer, for the corporation, for the nation. 12mo. 416 pages. Cloth linding. $2.00, prepaid. THE ENGINEEBING MAGAZINE CO., 140-142 Nassau Street, New York Work, Wages, and Profits By H. L. Gantt. ME. GANTT says that men specially suited to any particular kind of labor, if supplied with proper implements and intelligently directed, will do on the average at least three times as much as the average workman does; and if the limiting factor is physical exertion, the average work- man will do this increased task day after day, if as- sured sufficient compensation. The ratio of what can be done to what is done is even greater than three to one in work requiring skill and planning. The problem of attaining this condi- tion is discussed from practical experience in this book. The rewards held out are : An increase of output. A decrease in cost of product. Better workmen attracted by higher wages. Improved quality of product due to better work- men. 12mo. 200 pages. Cloth binding. $2.00, prepaid. THE ENGINEEKING MAGAZINE CO., 140-142 Nassau Street, New York Industrial Plants By Charles Day. CAEEFTJL study of the layout and construction of industrial buildings is an early step toward efficiency and economy in manufacturing. This book embodies Mr. Day's wide experience as consulting engineer in the construction of some of the most successful shops and factories in the country. The author, in fact, publishes in full the manner in which his own expert organization proceeds to de- termine the most economical layout, plan, and con* struction for a new plant, or the rearrangement of an existing one. The best plant will fail under inefficient manage- ment ; but the plant that is arranged after considera- tion of all the factors covering the product will prove to be an important feature in economical manage- ment. The book is unusually replete with suggestion. It tells how the plant should be laid out so that good management can make the most of it. 12mo. 294 pages. Cloth binding. $3.00. THE ENGINEEKING MAGAZINE CO., 140-142 Nassau Street, New York % Maximum Production By C. E. Knoeppel. A BOOK directed to the systematic management of foundries and machine shops for the im- provement of their productiveness and finance. It is written by a practical man who has abundant experience in foundry work — "brought up on the floor" — and it is intended for practical foundry men and business men. Every point having any bearing upon the subject in hand is taken up and considered in one of the six- teen chapters. The machine shop and foundry are considered as twin factors in production, so closely related throughout so large a range of metal manu- facturing that their problems can best be studied to- gether. Therefore, after laying down the principles of organization and management common to ef- ficiency operation and maximum success in both, the author follows special applications of the same ideas in the shop, and then in the foundry. 12mo. 400 pages. Cloth binding. $2.50. THE ENGINEEKING MAGAZINE CO., 140-142 Nassau Stbeet, New York 5 Cost Methods for Executives By Benj. A. Franklin. ME. FEANKLIN concerns himself only with those facts and figures that are essential to give the executive officer complete control of a manufacturing business. He does not go into the detail of forms, cards, and petty records belong- ing to the routine of the cost clerk. He does illus- trate and discuss forms of periodical reports which keep the superintendent and manager constantly in- formed of finished and raw stock on hand, use and waste of materials, profit or loss on each line of product, the cost of the salable article, and fluctua- tions in expense burden. He shows how such reports may be obtained without going into wearisome detail. The articles as they appeared serially have awak- ened active interest, and many manufacturers have put the ideas into practical use as soon as they were published. The reissue in book form is in response to a general demand. (In preparation.^ THE ENGINEEEING MAGAZINE CO., 140-142 Nassau Street, New York Distribution of Expense Burden By A. Hamilton Chdech. THEEB is no more important problem always before the executive than that of correct and proper distribution of the expense burden. Mr. Church hits hard at percentage-guessing in cost accounting. His plan is to separate at the out- set all the important factors of production, e.g., buildings, power, stores, transport, etc., and reduce them to unit charges. It is evident that the infor- mation gained by the installation of the system he proposes would more than repay all of the expense involved in its application, and when once in full swing the details would require but very little time. The demonstration is concrete enough to enable the cost accountant to apply it to his own case, and yet not lacking in the broad statement of principle that adapts it to all cases. 12mo. 200 pages. Cloth binding. $2.00, prepaid. THE ENGINEEEING MAGAZINE CO., 140-142 Nassau Street, New York Production Factors By A. Hamilton Chubch. MR. CHURCH has specialized in the subject of factory accounting, and the analysis he presents of the conditions affecting cost finding entitles his book to the highest position in the literature of the subject. It is practical from beginning to end, is concise and precise, and should be closely studied by all who are in positions of responsibility. The accurate distribution of general expense is ad- mittedly one of the most perplexing, but yet one of the most important, problems with which the manu- facturer must deal. The simple but thorough anal- ysis conducted in this volume, and the clear, com- mon-sense demonstration presented, will furnish a reliable guide to the solution of highly complex con- ditions in factory accounting. Mr. Church's method of handling the question is thorough, sound, sensible, and scientific; and while it is addressed particularly to the machine shop, it is applicable to any manufacturing plant. 12mo. Cloth binding. $1.00, prepaid. THE ENGINEERING MAGAZINE CO., 140-142 Nassau Street, New York 8 Profit-Making Management By Chaeles U. Carpenter. THE author is a successful manager of wide ex- perience, and clearly defines the benefits ac- cruing from perfected organization, and how it may be attained. He begins with the reorganization of a run-down concern, and discusses all the modern methods of re- ducing costs. The work takes up the defects in the various de- partments and explains the methods of overcoming difficulties of this character. The keynote is to obtain the best efficiency, from every unit in the works, whether that unit be human or a machine built of iron and steel. The book is suggestive as to what should be done und what should be avoided, what troubles may arise, and how they may be avoided. Octavo. Cloth Uncling. $2.00, prepaid. THE ENGINEEKING MAGAZINE CO., 140-142 Nassau Street, New York The Factory Manager By Horace L. Arnold. THIS book is designed to give such an exhibi- tion of widely differing systems of cost- keeping now in satisfactory use as will af- ford any manager, although not himself an account- ant, the knowledge needful to an intelligent compari- son between his own methods and cost-keeping meth- ods in general. The book presents first, different original cost- keeping systems, varying in complexity from one so simple that the entire history of each production order is recorded on a single printed form, up to some of the elaborate methods by which any desired degree of minuteness in subdivision of accounting can be obtained. In brief, it is intended that this book shall furnish to the factory manager a full exhibit of the latest and most advanced methods and appliances used in shop cost-keeping. Octavo. 420 pages. Cloth binding. $5.00, prepaid. THE ENGINEEEING- MAGAZINE CO., 140-142 Nassau Street, New York 10 The Cost-Keeper By. Horace L. Arnold. THIS book is made up of several complete sys- tems of factory-accounting forms, both the costing and the commercial blanks being ac- curately reproduced in arrangement, and each one having the actual size given, together with its color and the material on which it is printed. The func- tion and the exact manner of using each form are also carefully and fully detailed, so that the reader can easily comprehend its scope and employment, and make an intelligent estimate of its probable value if applied to his own uses. The manager who is not perfectly satisfied with his system, and who is aware that his accounting costs more than it should, and fails to give informa- tion in such complete detail as to point clearly the way to highly desirable savings, will find in this book information and examples of great value, show- ing the exact means by which others have reached the ends he himself wishes to attain. Octavo. 432 pages. Cloth oinding. $5.00. THE ENGINEEKING MAGAZINE CO., 140-142 Nassau Street, New York 11 Patents in Manufacturing By Edwin J. Prindle. TELLS you the things you ought to know for your guidance and safety in the early stages of your work, before it seems really worth while to consult a patent lawyer. It tells just the things you want to know about perfecting and pat- enting an invention, in just the way you want to have them told. It gives more practical information, in more compact and useful form, than any other book on the subject ever written. It tells what sort of thing is patentable, how the preliminary work should be done, and how the claims should be drawn. It tells you what protection a patent gives you, and how to obtain the most and best protection possible. It tells you what infringe- ments are, how to avoid them and how contests be- tween rival claimants to a patent are decided. It tells you what your rights are as between employer and employee, and how an assignment of a patent from one person to another may be safely made. It tells you now to patent a new invention to get the most profit from it. 12mo. Cloth binding. $2.00, prepaid. THE ENGINEERING MAGAZINE CO., 140-142 Nassau Street, New York 12 Scientific Manage- ment and Railroads By Louis D. Bhandeis. WHAT is scientific management and how does it differ from ordinary competent manage- ment? What are the examples and results of scientific management applied to manufacturing plants and to railways, which were brought out at the rate hearings in Washington and startled the business world into a more active and responsive in- terest than was ever fixed upon any industrial ques- tion? What was the basis of the assertion quoted by every publication in the United States that the rail- roads are wasting $1,000,000.00 a day? What direct testimony was offered by some of the best known and responsible American manufacturers as to the actual gains in their own business attained through the introduction of methods of scientific management ? All the pertinent testimony on these points is con- centrated in the portion of Mr. Brandeis' brief here reprinted. Octavo. 106 pages. Cloth binding. $1.00. THE ENGINEEBING MAGAZINE CO., 140-142 Nassau Street, New York 13 The Engineering Index A COMPLETE SUBJECT INDEX TO THE ENTIRE INDUS- TRIAL AND ENGINEERING PRESS SINCE 1884. A GUIDE to the published literature of all engi- neering information — telling exactly where any given data may be found. It embraces all branches of engineering, and clearly indexes alphabetically by subjects all impor- tant articles of permanent value which have appeared since January 1, 1884, in all the standard technical, weekly, monthly and quarterly journals, transactions and proceedings. Consult it whenever occasion arises to investigate" any subject — and such occasions arise almost daily in engineering practice. Consult it when you are investigating a certain subject and desire to find all published information pertaining to that subject. Consult it when you are looking for a definite item or article and have a fairly clear idea of its subject and scope. Volume I, 1884 to 1891 inclusive. . . .Out of Print Volume II, 1892 to 1895 inclusive. . .Out of Print Volume III, 1896 to 1900 inclusive, 1030 pp. .$7.50 Volume IV, 1901 to 1905 inclusive, 1234 pp. .$7.50 The Engineering Index for 1906, 412 pages. $2.00 The Engineering Index for 1907, 452 pages. $2.00 The Engineering Index for 1908, 454 pages. $2.00 The Engineering Index for 1909, 488 pages. $2.00 The Engineering Index for 1910, 528 pages. $2.00 The Engineering Index for 1911, 530 pages. $2.00 THE ENGINEEKING MAGAZINE CO., 140-142 Nassau Street, New York 14 1111 1 ill! Mi i II Ill : ;^:-l; I1il» !li illi