^tate OfoUege nf JKgritultuw At afarnell MntwraitH 3ttfata, ST. g. 2Iibrarjj . ,_ ,„ Cornell University Library HF 5500.G75 The selection and training of the busjne 3 1924 013 823 822 The original of tliis book is in tlie Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924013823822 THE SELECTION AND TRAINING OF THE BUSINESS EXECUTIVE THE MACMILLAN COMPANY KEW YOKZ ■ BOSTON ' CHICAGO ■ DAUJU ATLANTA • SAH FRANCISCO MACMILLAN & CO., LuoTED LOmON • BOUBAY ■ CALCUTTA UELBOUKHZ THE MACMILLAN CO. OF CANADA, Ltb. TOKONTO THE SELECTION AND TRAINING OF THE BUSINESS EXECUTIVE BY ENOCH BURTON GOWIN ASSISTANT PROFESSOR OF COMMERCE, NEW YORK UNIVBRSITY SCHOOL OF COMMERCE, ACCOUNTS AND FINANCE. SECRETARY, THE EXECU- TIVES' CLUB OF NEW YORK. MEMBER, STAFF ALEXANDER HAMILTON INSTITUTE. MEMBER, COMMITTEE ON EXECU- TrVB TRAINING, NATIONAL ASSOCIATION OF COR- PORATION SCHOOLS. AUTHOR, " THE EXECU- TIVE AND HIS CONTROL OF MEN." I 'Sim fork THE MACMILLAN COMPANY 1918 AU rights reserved Copyright, igi8, By the MACMILLAN COMPANY Set up and electrotyped. Published September, 1918. DEDICATED TO EMPLOYERS OF THAT FINE TYPE OF WHICH JOHN H. PATTERSON, HENRY FORD, E. C. SIMMONS JOHN WANAMAKER, THOMAS EDISON, AND THEODORE N. VALL ARE REPRESENTATIVE PREFACE A CERTAIN group of men, representative of big business at its best, recently met in New York to discuss the idea of an American International Corporation which was being evolved in the minds of some of them. It was not the question of finding the money that troubled these capitalists and other men of large affairs, since to them the securing of $50,000,000 was a small matter. But, as a lead- ing member of the group. President Vanderlip of the Na- tional City Bank, put it, "how to vitalize the $50,000,000, how to make America a financial and industrial power throughout the world, how to send the American dollars into other lands to open the way for American merchan- dise — that was the one great problem. "It was management, not money, that exercised us — brains, practical experience, judgment, vision, energy, plus patriotism. We scanned the whole country in search of the proper man." From an abxmdance of experience in dealing with cor- porations of aJl sorts, both successful and otherwise, these men recognized the vital connection which exists between efficient management and satisfactory profits. And the necessity which they felt of placing at the hehn of their corporation a carefully selected executive is common to all corporations, whelier newly organized or going con- cerns of many years' existence. The subject which we have here under consideration, consequently, the selection and training of the business executive, is of much concern to all corporation officials, particularly those more directly responsible for the per- viii PREFACE soimel; and, if the author has achieved reasonably well the purpose intended, the statement of the problems, involved therein and the solutions which appear most feasible, even though tentative, should prove helpful to them. While the discussion deals primarily with the corporations popularly known as industrials, it is believed that those concerned with the management of other enterprises, such as public utilities or railroads, wiU also find in the book something of value. So far as the author personally is concerned, he feels the more constrained to issue the book now when, the Great War in our midst, of all times we need seriously that high type of democratic efficiency which it is the larger purpose of this study to inculcate. Its message, he trusts, will be of some assistance to managers in their patriotic endeavors now and during the scarcely less stirring era which awaits American business after the war. It is a pleasure to acknowledge the very real assistance rendered by the considerable mmiber of officials whose questions, suggestions, and information have been freely supplied. Particularly does the author wish to thank the chairman of the Committee on Executive Training of the National Association of Corporation Schools, Mr. Norman CoUyer of the Southern Pacific Company, and the Presi- dent of the National Association of Corporation Schools, Mr. J. W. Dietz of the Western Electric Company, for their encouragement and various helpful criticisms. Mr. William A. Markert, of C. E. Knoppel and Company, has also very kindly submitted several suggestions and criticisms. In the discussion of heredity as a factor in the selection of executives the author owes much to Professor Fran kl in H. Giddings of Colimibia University, Dr. C. B. Davenport, Director, and Mr. H. H. Laughlin, Superin- tendent, of the Eugenics Record Office, and Professor W. E. Castle of Harvard University. Professor Harry L. Holling- PREFACE k worth of Columbia University critidsed in a constructive way the proposed list of qualities essential to the business executive; Mr. Mark M. Jones, Supervisor of Personnel of Thomas A. Edison, Inc., is to be credited with the ex- cellent diagram of a personnel department shown in the final chapter; and Professor Edward D. Jones of the Uni- versity of Michigan very obligingly selected the twenty-five leading books dealing with business administration. E. B. G. New York, April 15, 1918. TABLE OF CONTENTS CHAPTER I PAGE Executive Positions i CHAPTER n The Asset Value of Executives 12 CHAPTER HI The Essential Qualities op an Executive 33 CHAPTER IV Nature and Nurture 46 CHAPTER V Phrenology and Physiognomy 61 CHAPTER VI Methods of Selection 74 CHAPTER Vn The Problem of Selection Standards 95 CHAPTER Vm Experience and Training 112 CHAPTER IX Methods of Training 130 xii CONTENTS CHAPTER X PAGE The Trainino Progeam iS8 CHAPTER XI Incentives for the Executive i8i CHAPTER Xn The Policy Regarding Personnel 211 Index aig THE SELECTION AND TRAINING OF THE BUSINESS EXECUTIVE THE SELECTION AND TRAINING OF THE BUSINESS EXECUTIVE CHAPTER I Executive Positions The executive as he organizes an enterprise, delegates its various duties to subordinates, and supervises their accomplishment of these tasks, functions as a vital center. To him come various questions, proposals of poKcy, com- plaints, reports, and other matters of business; and from him issue the directions with which the owners of the enter- prise, its employees, and the pubUc are alike concerned. Each of these three groups, should the enterprise be wisely conceived and managed with skill, benefits from his activi- ties, whereas experience has demonstrated that an enter- prise which lacks such positive managerial guidance in- variably suffers a diminution of its productivity, if not the cessation in bankruptcy of its career as a going concern.^ Upon the basis merely of adequate return from the cor- poration's expenditure, we must conclude that the execu- tive in securing for the owners satisfactory dividends, for the workers better wages and working conditions, and for the consumer a superior commodity at lower cost, per- forms a distinct service. In order to estimate more accurately these services per- formed by the executive, they should be viewed in their relation to the size of the business imit or, as it may pref- erably be termed, the size of the representative firm. At 1 Cf. Ch. n. 2 THE BUSINESS EXECUTIVE any given time there is a certain size of business unit which demonstrates itself to be the most economical, or ef&cient, producer. Its management has under its control all the land, labor, and capital it can properly utilize, but no more; and the enterprise represents, to use the figure sug- gested by Professor Marshall, a full-grown tree in a primeval forest surrounded by both aspiring young sapUngs and overgrown, deca)dng trees struggling with it for a share of earth and sunlight.^ The outcome of this struggle for business existence and advantage demonstrates the su- periority of the representative firm, which thereby comes to dominate industry. The representative firm changes in size tmder what, broadly speaking, we may term the conditions of industrial evolution. While not all businesses are subject to it, the tendency has been in general for the very small establish- ments to decrease in number, whereas the very large es- tablishments have shown the most rapid rate of gain. The result, the dominancy of industry by large-scale pro- ducers, is a fact common to aU highly civilized countries.* • Cf. Principles of Economics (4th ed., London, New York: Macmillan and Company, 1898), pp. 397, 422, 450, 514- ' Cf., for example, the statisties cited by Taussig, Principles of Economics (New York: The Macmillan Co., 1913), I, ch. 4. According to the returns of the Thirteenth Census, the number of manu- facturing establishments whose annual product is valued at $1,000,000 or over had increased from 1,900 in 1904 to 3,060 in 1909. While these estab- lishments even in the latter year were relatively insigniJBcant in number, comprising only i.i per cent of the whole, their product in 1904 represented 38 per cent of the total manufactured product and in 1909 an increase to 43.8 per cent. Cf. Vol. VIII, Manufacturers, p. 182. Certain industries exhibit a higher concentration than others. While in 1909 the establishments whose annual product was in each case $1,000,000 or over represented in the brick and tile industry but 4.7 per cent of the total production and in the fur goods industry but 7 per cent, similar percentages for other industries were as follows: Agricultural implements 64.3, automo- biles, including bodies and parts, 68.4, petroleum refining 88.0, glucose and starch 89.0, and lead smelting and refining 99.2. Ibid., p. 183. In his testimony before the Senate Committee on Interstate Commerce, Chairman Davies of the Federal Trade Commission presented statistics to show that 60 per cent of the United States' annual production of 40,000,000 tons of pig iron was produced by twelve companies; that 72 per EXECUTIVE POSITIONS 3 The war has accelerated the tendency toward large-scale production and it is beheved that the industrial invasion following the war will be undertaken by corporations con- siderably larger than have been witnessed before. This expansion in size of the representative firm since the Industrial Revolution late in the eighteenth century has been due to certain advantages which the large-scale enterprise possesses as a producing unit. The more im- portant of these advantages may be thus summarized: * Strategic location of subsidiary plants, agencies or stores, and the adjustment of each unit to its particular field. Increased use of machinery. Utilization of by-products. Superior purchasing. Wider latitude in choosing the marketing plan. Saving in cross freights. Better supervision of credits. Variety of talent in the management. New devices perfected by research staffs. Interchange of ideas and comparative data. Regularization of production and of prices. Profits secured in financing the enterprise. While it is true that any one enterprise could scarcely hope to secure for itself all these advantages, the possibiUty of deriving substantial benefits from at least some of them affords business managers a strong incentive. In conse- quence, on the operating side already referred to there has been brought about an increased size of the establishment and on the financial side the growth in the corporate form cent of the 43,000,000 tons of steel ingots produced annually were made by thirteen companies, although 200 companies were operating in this field; that 62 per cent of the steel bars were produced by elglS'companies; 89 per cent of file shapes by five companies; and 66 per cent orthe plates by seven companies. Watt Street Journal, September 21, 1917. ' Various lists of these advantages have been prepared; see, for instance, Taussig, Principles of Economics, Chapter IV; Seager, Principles of Eco- nomics (New York: H. Holt & Co., 1913), 166 ff.; and Marshall, Principles of Economics, Book IV, Chapter XI. The twelve advantages above speci- fied I have arrived at in the main from a somewhat extensive acquaintance at first hand with corporate enterprises. 4 THE BUSINESS EXECUTIVE of organization. It does not require much investigation of these large-scale enterprises, however, particularly of the corporations formed in such unusual numbers during the years 1898-1900, to realize the weight of the observa- tion that these advantages constitute merely an oppor- tunity, not a guarantee, and that large-scale production is subject to rather definite limitations.^ The management, desirous of conducting a business enterprise in such a way that profits wiU accrue, accord- ingly seeks to discover and remove these limitations, or at least to expand them somewhat. Investigation, how- ever, reveals the fact that the limitations of the large-scale enterprise are usually a matter of its own organization and management; ^ and the managdrs in seeking increased profits thus are obliged to study their own science and technique. The development of better methods in the organization and management of a business comprehends two closely related processes, viz., an increased standardization and an increased division of labor. The various advantages cited of large-scale production, in fact, appear to resolve ' A tabulation made by the Wall Street Journal and printed in its issue of October 24, igo3, shows that the shrinkage in the market value of one hundred industrial corporations' securities was $i,7S3,793, a loss of 43.4 per cent from the high prices touched by the various issues during the pre- ceding three years. Cf . also Moody, The Truth about the Trusts (New York, Chicago: Moody Publishing Company, 1904), and Dewing, Corporate Pro- motions and Reorganizations (Cambridge: Harvard University Press, 1914). * In Professor Taussig's view, "The limitations on large-scale production arise mainly from the infirmities of human nature. The extension of the scale of operations means an ever increasing reliance upon hired labor and an ever lessening reliance on spontaneous self-interest. If all men worked with as much energy and spirit for an employer as they do for themselves, the spread of large-scale production would be almost without bounds." Loc. oil., p. ss. While I should be the last to minimize the importance of the interest ele- ment specified in Professor Taussig's concluding sentences, it does appear to me that the foregoing quotation, along with numerous others in similar vein which have been made concerning corporate organization and manage- ment, is open to criticism. There is a considerable difference in corporate organization and management existing between wanting to and knowing how and the emphasis which I have seen fit to adopt in the present work is upon the latter of these two factors. EXECUTIVE POSITIONS 5 themselves into the two advantages that the large enter- prise in comparison with the small does permit more readily a higher degree of standardization and division of labor. It is the custom among managers to contrast standardiza- tion with so-called rule-of-thumb, by which they mean methods such as are hit upon by chance. Standardization represents a more definite development, the aim being to learn the best way of doing things and to render this best way uniform throughout the establishment. Time-study men, systematizers, a research stafif, technically trained inspectors, cost accountants, auditors and controllers, are among the spedahsts more directly concerned in this de- velopment and their procedure in arriving at standards serves as a good illustration of the scientific method.^ The standards when developed are analogous to the laws and principles established by the scientist. In saying that the large-scale enterprise, in comparison with the small, is better able to utilize such specialists, we deal with one concrete aspect merely of the second general ' In order to obtain satisfactory specifications for the materials needed in the plant, the Westinghouse Electric and Manufacturing Company pur- sues the following plan: "The Materials Section of the Research Division accumulates the necessary information from records, tests, conferences, investigations, personal visits to manufacturing plants, and many times from sad experience. "In some cases all needed data are obtained within a very short time while again even after years of research complete data are not had. In- formation once at hand, the specification is written, it is then sent to the interested engineers and others for approval or criticism, then to the Pur- chasing Department who forwards same to the interested manufacturers for their comments or approval, and finally to the Materials Committee for final approval. "Performance is essential rather than composition or method of manu- facturing and above all else the final results in the use of material must be sought. ... All specifications to be effective must be kept up to date by constant revision." T. D. Lynch, Research Engineer, "Purchasing De- partment SpeciScations," a lecture delivered at the Westinghouse Club, Feb. 26, 1913. Such procedure is the same in kind as pursued by the biologist or the chemist, although, it may be added, as a rule it is much better organized. 6 THE BUSINESS EXECUTIVE advantage, the division of labor. The large-scale producer, simply because his operations are large, can separate these operations into highly specialized duties, delegating to managers, technical experts, clerical workers, skilled me- chanics, laborers and machines, tasks which imseparated in the old-time shop were all performed by a single man, the proprietor. The business, to use a phrase from the Spencerian definition of evolution, passes from an indefinite, incoherent homogeneity to a definite, coherent hetero- geneity. This means that organization has been introduced. There has been an assignment of duties with appropri- ate lines of authority and responsibility, a schematiza- tion which renders the business organization comparable to two huge fimnels brought tip to tip, the stockholders at the one extreme and the rank and file at the other being brought into effective relations by the management sta- tioned at the focal point. The accompanying diagram indicates with some detail this view. (See Figure i.) Inasmuch as the corporate form of organization has proved superior in several respects to the individual pro- prietorship or the partnership, it is throughout the present work taken for granted. The stockholders elect the board of directors who in turn elect officers, fixing their salaries and term of tenure subject to such restrictions as the stock- holders may have seen fit to specify in the by-laws. These officers and their duties are in general as follows: ^ The President as a general thing is the most important officer of the corporation. He presides over board meet- ings, serves as chairman on important committees, binds the corporation in most routine matters, affixes the cor- porate signature to all documents requiring such signature, exercises a general supervision over all phases of the busi- ' Conyngton on Corporate Organization (3rd ed., New York: Ronald Press Company, 1905), Ch. XXVn-XXVUI. EXECUTIVE POSITIONS ness, and reports his findings to the board and to the stock- holders. The Vice-President performs the functions of the presi- dent in the absence, disability, or refusal of the latter to Board of Directors Office Manager if Sales Uanagor io SB. Is. i Fig. I. — ^An organization chart of a corporation act. At times several vice-presidents, designated and ranked as first, second, third and so on are elected, pos- sibly to provide honorary positions for members of the board or to raise certain department heads above the usual confines of their positions. The Secretary sends out notices of meetings to stock- holders and directors, records the proceedings of these 8 ■ THE BUSINESS EXECUTIVE meetings, notifies officers of their election, issues stock cer- tificates, signs or countersigns such corporate instruments as the board may direct, and keeps safely all such corporate instruments and records as do not pertain to the work of the treasurer. Usually he prepares the various state re- ports required. The Treasurer has charge of all funds and securities, and he signs checks, endorses negotiable paper and de- posits the moneys of the company, under such restrictions as to bonding and countersigning as may be prescribed. In small corporations the treasurer may take actual charge of the details of bookkeeping, whereas in the larger cor- porations a finance committee takes upon itself many of his duties and responsibilities. The General Manager is an operating official, engaged primarily in the company's purely business activities and concerned only incidentally with its corporate affairs. While an officer due to his selection by and reporting to the board, he is not so in the same sense as are the others. The general manager's activities center consequently in three of the four phases of business, financing being under the control of others; viz., producing a commodity, selling it, and recording the transaction. These ftmctions, directed by the production manager, the sales manager, and the office manager respectively, are in turn subdivided into numerous departments, shown in generalized form as per Figure i. The commodity in its Journey from raw materials in some supply house to finished product in possession of the consiuner requires either directly or in- directly the attention of designer, purchasing agent, super- visor of personnel, foremen, cost accoimtant, chief account- ant, credit manager, chief correspondent, chief order clerk, traffic manager, advertising manager, district manager, and branch manager. These department heads in turn employ still further EXECUTIVE POSITIONS 9 the division of labor. Although the degree to which this specialization is introduced varies with the particular business and department, the organization in the New York Telephone Company's Advertising Department can . ! 1 FnbHcity and Advertising Directories Dp-stata Advertising L Direct Adv. Msnaeer Copy Manager Editor Tel. Review Directory Manager Sales Manager HndiaonDiv. Sob. Mgr. 1 S Division Sapervisore 6 Copy Writers 1 Artist 1 Clerk 1 Stenog- rapher 1 Assistant 1 Chief Clerk 1 Stenog- rapher 1 Clerk 9 Salesmen 1 Special Agent SCrerEa 1 Sfenos- rapher- ICUef Clerk 9 Clerks 6 Stenog- raphers 2 Special Agents IDept. Accountant 2 Stenog- raphers 28 Clerks 1 Stenog- rapher 6 Typists BMessengen Cen&alDiv. Adv^Agr. General I 1 4CIerlB 1 Stenog!- rapher 1 Messeng^ 1 Clerk I Stenog- rapher 7 Clerks I Stenog* Western 1 I IBP Adv. Mgr.j Fig. 2. — The organization chart of an advertising department. be taken as typical of the general ten,dency.^ (See Figure 2.) By means of the two diagrams, Figures i and 2, the division of labor can be traced from stockholder to clerk. In managing an enterprise the stockholders' ideas, which are more or less vague and general, vmdergo successive modification until they reach the rank and file as specific directions. The different positions through which this • Johnson, "The Organization of An Advertising Department," Printers' Ink, March g, 1916. lo THE BUSINESS EXECUTIVE process functions is approximately as follows, the adver- tising department being retained as an illustration: Stock- holder—Director — Executive Committee Man — President —General Manager — Sales Manager— Advertising Man- ager—Division Advertising Manager — Division Super- visor — Chief Clerk — Clerk. Which of these persons shall be termed executives? It is evident that by employing the term in a very loose way both a small stockholder who has a few words to say at the annual meeting of the board and a clerk who super- vises a single typist could be called executives. While this emphasizes the fact that between the two extremes, the small stockholder whose chief function is regarded as the supplying of funds and the subordinate whose worth to the corporation depends upon what he is able to do first- hand at specific tasks, there exist many gradations of the managerial forces before reaching the officials whose worth is measured by what they get done through organized effort, the term executive in this study will be restricted to those grouped reasonably near the pivotal point between stockholders and workmen. These men, comprising the presidents, the general managers, the production managers, the office managers, the sales managers, and the heads of the several departments directly responsible to them, are the executives with those selection and training the fol- lowing chapters are concerned. In the evolution of industry, particularly during the past decade, the fimctions of these men have assvmied both an importance and a distinctiveness. Under the growth in size of the business imit and the refinement of the cor- porate form as a means of securing funds, proprietorship has gradually become more or less completely severed from managership; similarly there has been such an ex- pansion in the numbers of employees and in the complexity of business operations that the average employee can no EXECUTIVE POSITION ii longer easily mount into the ranks of authority which of necessity under the new conditions extend tier upon tier above him. The strategic location thus created between these two groups, the owners and the operatives, consti- tuting as it does the pivotal position upon which the needs, the desires, the hopes and the suspicions of both groups are centered, demands for its successful incumbency a greater soimdness of knowledge and a much more thorough re- finement of managerial technique than men have attained under the old school. These in reality are professional requirements, for which men must be selected and trained. CHAPTER n The Asset Value of Executives In order to carry out its purpose of earning profits, the corporation must have in its possession or, should it be a newly formed organization, must acquire certain assets. These items, such as lands, buildiugs, machinery, cash, merchandise, notes and accounts receivable, are contributed by the stockholders and it is the theory of the law that against these contributions is to be issued an equivalent in capital liabilities. Such an enterprise, we may say, would be capitalized at its present value; and to the so- called man on the street this seems equitable. Assets to him mean tangible property, capitalization the amount for which this property should sell or, it may be, its cost to replace. In practice, however, conditions very different from those contemplated by the above theory of the law are found to exist. It may be for one reason or other, perhaps because of its being a close corporation, that the size of the stock issue is a matter of indifference to the owner or owners. In such a case the capitalization is frequently kept low in order to avoid the various charges, such as fees, which a high capitalization would incur, and accord- ingly is not based on value. Or, as is more often the case, the incorporators issue a capital stock based not upon present but future values. It is evident that imder these circumstances much depends upon the accuracy with which these future earnings are estimated, in highly specu- lative enterprises particularly the divergence between the THE ASSET VALUE OF EXECUTIVES 13 estimate and the results later achieved rendering some businesses grossly over-capitalized, some quite as grossly under-capitalized. In considering these bases of capitalization it should be remembered that presumably the corporation was organized and its shares purchased for the profits which are to be declared as dividends. As a policy year after year these dividends can be paid only from earnings, hence earning power in the last analysis determines what the shares in a particular enterprise are to be worth. It is foimd upon investigation that equal earning power can be shown by corporations varying widely in their tangible assets.^ The same amounts of land, buildings, equipment, raw materials, and other forms of tangible assets as a usual thing, in fact, produce unequal percentages of profits per dollar invested. The practice has in conse- quence developed of including in the balance sheets of those corporations whose profits in proportion to their tangible assets are above the average certain intangible factors or, as they may be termed, immaterial assets. In arriving at the value of such assets the following plan has often been employed: Preferred stock is issued to the full value of the material assets, and the sum required for the dividends on this preferred stock is deducted from the total net earnings. The remainder of the net earnings is then capitalized at whatever percentage may appear wise and common stock is issued for such amount. Among the various items which are comprised in imma- terial assets corporation accounting has in the main de- voted itself to the factor termed good will. This, accord- ing to the definition of a leading authotity in accounting, "represents the value of business connections, the value 'Cf., for examples, various corporate statistics presented in Moody's Manual of Railroads and Corporation Securities, preferably the latest annual edition. 14 THE BUSINESS EXECUTIVE of the probability that present customers will continue to buy in spite of the allurements of competing dealers." ^ If a company because of its well-known trade-mark or special formulae or old-established location possesses thereby an added earning power, it is entirely legitimate as has long been recognized by the courts and by accountants to capitalize this additional earning power and include it among the assets.^ In the consideration of immaterial assets, however, it is believed that the usual view is much too narrow, that such items as "patent rights," "fran- chises," "trade-marks" and "trade names," have been so over-emphasized as to obscure seriously the true r61e of these intangibles. The germ of every business first existed in the mind of some man as a thought. This thought in the usual processes of business is continually modified and supplemented, until an experience of considerable value comes to be recorded in the firm's office and in its organization. This collected experience in managerial poUcies and methods, a concrete expression of which is the ability on the part of its execu- tives and other employees to work together with effective- ness, we may term the corporation's larger brain. This larger brain represents an expenditure of time, money, and effort, and its possession or non-possession, it is easy to conceive, affects directly the corporation's earning power. *H. R. Hatfield, Mod*m Accounting (New York: D. Appleton and Co., 1909), p. 107. ' In the case of Washburn v. National Wall Paper Company the court held: "When an individual or a firm or a corporation has gone on for an unbroken series of years conducting a particular business, and has been so scrupulous in fulfilling every obligation, so careful in maintaining the standard of the goods dealt in, so absolutely fair and honest in all business dealings that customers of the concern have become convinced that their experience in the future will be as satisfactory as it has been in the past, while such customers' good report of their own experience tends continually to bring new customers to the concern there has been produced an element of value quite as impor- tant — in some cases, perhaps, far more important — than the plant of machin- ery with which the business is carried on." 81 Federal Reports, cited by Hatfield, ibid., pp. 107-8. THE ASSET VALUE OF EXECUTIVES 15 The discussions of good will, however, as typified by the defiiiition stated above, seem to imply that it is a matter of selling whereas acceptance of the view that the one justification of a valuation of good will is the existence of some transferable right which secures to the purchasers of an enterprise profits in addition to the normal returns on the amount of capital invested in the business ^ would oblige one to conclude that each phase of a business — ^pro- duction, selling, recording or financing — ^is subject to its influence. Particularly would this appear true of the or- ganization as a whole. If by assets we refer to those items upon which depend the corporation's earning power, it seems evident that a balance sheet in which the immaterial assets are specified under such heads as patents, trade-marks, or trade names does not set forth adequately the situation as it exists. The executives in charge of particular departments and the way these men with their subordinates are fitted into the organi- zation as a whole, it is quite possible in certain corporations, considerably outweigh such items in respective importance as reflected by earnings. It is believed that such obscurity ought not to persist. We are faced here with the problem of arriving at a correct valuation of the management. And since the ac- countant, skilled and conscientious as he may be in estab- lishing the values of the corporation's material assets, can scarcely be held responsible for the accurate appraisal of its human assets, the answer must be sought from the management itself. A number of corporation officials con- sequently have been asked to estimate the value to the company as an asset of certain department heads. They made replies of which the following are t)^ical: "We do not find it possible to give the estimate." "It is practically impossible to estimate the value of ' The criterion stated by Hatfield. Cf ., loc, fit., p. iii, i6 THE BUSINESS EXECUTIVE the average department head. In our own organization it so happens that the President is the General Manager, and it would be impossible to place an asset value upon him." "It would be pure guess-work to attempt to answer this question; some new men in coming to us from other concerns in the same line of business, might be superior to the men whom they succeeded." "I have no idea; I never tried to estimate it." One official did assume it might be $i,ooo since in his company that amount was spent in training the average salesman. The only definite reply, since it does not seem this term should be applied to the answers as above, is that made by a plate glass manufacturer; his estimate was "ap- proximately $20,000." ^ It would appear from these replies that the respective officers were not accustomed to thinking of the problem in this way. I A leading pump manufacturer, the author has been informed by a labor consultant, estimates the asset value of its company's salesmen as $2,000, as they take a young man into the plant and give him a training which costs them this amount more than he produces for the time being. Deer & Com- pany according to information secured by Boyd Fisher (aimals of the Amer- ican Academy, May, igi6, p. 145) thinks that it costs $1,000 to break in a new foreman. Norman Collyer of the Southern Pacific Company in a letter to the author suggests that the bonus occasionally paid to attract the services of an es- pecially talented executive should constitute a rough index, not necessarily of his asset value to the employing corporation, but of what the management of that corporation believes his asset value will amount to. Similarly the bonus sometimes paid to retain the services of the executive should repre- sent the management's appraisal of his asset value. Mr. Collyer dtes the Interstate Commerce Commission Decision No. 6834, July 31st, igis (in I. C. C. Reports, Volume XXXVI, pages 48, 49) which contains some interesting testimony in the Rock Island case with re- spect to bonuses paid to various officers. "One curious item," says Mr. Collyer, " is the special bonus of $450,000 bonds paid to L. F. Loree to induce him to relinquish after ten months' service a five years' contract under which he was to receive a salary of $75,000 per annum and in addition was to be paid a bonus of $500,000 at the expiration of the contract. This apparently is a case where an executive became a liability to be got rid of rather than an asset to be retained." THE ASSET VALUE OF EXECUTIVES 17 Let us approach the problem indirectly through a study made by Magnus Alexander of the labor turnover in twelve metal-working factories in 191 2.1 The number of em- ployees on the pay roll at the beginning of the year was 37,274, at the end of the year 43,971. The net increase was thus 6,697, but in order to secure this increase in the work- ing force 42,571 had been hired. It was estimated that one per cent of all employees die annually, four per cent are sick for sufficiently long periods to necessitate their re- placement temporarily or permanently, eight per cent withdraw from service for imforeseen or unavoidable rea- sons or are discharged for justifiable causes, eight per cent are temporarily needed on account of normal fluctuation of production, and eighty per cent constitutes' a readily attainable efficiency of an employment department. On the basis of these allowances the engagement of 13,843 ad- ditional employees would be justified, which added to the 6,697 increases in the labor force would accoimt for 20,540 of the 42,571 hirings. 22,031 persons were, therefore, en- gaged above the apparently necessary requirements. This excess of 22,031 involves several items of expense to the employer: The clerical work in coimection with hiring, the instruction of new employees by foremen and assistants, the increased wear and tear of machinery and tools by new employees, the reduced rate of production during the early period of employment, and the increased amount of spoiled work by new employees.* These of ' Turnover may be defined as the change in personnel brought about by hiring and termination of employment. The results of this study were first presented by Mr. Alexander in an ad- dress before the National Association of Manufacturers, May 26, 1915. See Reports of Proceedings of Twentieth Annual Convention. The address has since been delivered elsewhere. Cf. Annals of the American Academy, May, 1916, to which articles the following page references refer, pp. 128- 144. Mr. Alexander was at the time connected with the General Electric Company. ^ Mr. Alexander recognizes that these items do not represent the full cost. He also says, "Unquestionably the skill, experience and intelligence of a new i8 THE BUSINESS EXECUTIVE course would be less so far as certain items are concerned in case the new employee was more or less familiar with his duties through a previous connection with the firm, or was engaged for unskilled work. The totals, arrived at in this way, are as follows: New Employees Re-Bired Group ' Employees Eirint Instruc- Wear and Reduced Spoiled Total Total lion Tear Production Work A So. 50 57.50 Sio.oo $20.00 $10.00 $48.00 $10.00 B SO 1500 10.00 18.00 15.00 58.50 20.00 C SO 20.00 10.00 33.00 10.00 73.50 35.00 D 50 2.00 1. 00 5.00 8.50 5.00 E 50 7.50 1. 00 20.00 29.00 10.00 "When these values are multiplied with the nimiber of supposedly and imnecessarily engaged new and re-hired employees in each group," Mr. Alexander concludes, "the result shows that the apparently unnecessary engage- ment of 22,031 employees within one year in the twelve employee have much bearing upon the amount of money that needs to be expended for his training. Another important consideration is whether the new employee is working on expensive or low-priced machinery or with high or low-priced tools or on expensive or cheap materials; and to a certain extent wheUier or not he has been employed before in the same shop and particularly on the same class of work." Ibid., pp. 135-136. Mr. Boyd Fisher, using Mr. Alexander's study as a basis, has carried the analysis somewhat further in his address before the National Conference of Employment Managers, held at Philadelphia, April, 191 7. ' In respect to the quaUty and quantity of the instruction required for the new employee and the effect of lie work of new employees upon the eco- nomical conduct of the business Mr. Alexander classified the employees into five groups: "Group A comprises highly skilled mechanics who must have practiced their trade for a number of years in order to attain the required degree of all- around experience and proficiency; "Group B comprises mechanics of lesser skill and experience who can ac- quire an average degree of proficiency within a year or two; "Group C contains the large munber of operatives usually known as pieceworkers, who without any previous skill or experience in the particular work can attain fair eflSciency within a few months, somewhat depending on the character of the work; "Group D includes all unskilled productive and expense laborers who can readily be replaced in the course of a few days; and "Group E is composed of the clerical force in the shops and oflSces." Ibid., p. 136. THE ASSET VALUE OF EXECUTIVES 19 factories under investigation involved an economic waste of $83i,cxx>.3o. This amount will be considerably greater and will reach $1,000,000 if the decrease of profits due to a reduced production and the increase of expense on account of an enlarged equipment investment are taken into con- sideration." ^ Serious as this situation undoubtedly has been found to be it must not be overlooked that the executives of a corporation similarly are subject to this phenomenon of labor turnover, and that these officers in so far as their capacity to affect the weal or woe of their respective com- panies is concerned are far more important than the classes above considered. In engaging executives the cost is con- siderably greater than in the case of men for the lower ranks.^ The instruction involved is much more time con- simiing and otherwise expensive.' The increased wear and tear of machinery and tools by new employees has its counterpart in the increased wear and tear upon the or- ganization brought about by the new executive. It is the new manager of all who sets about destroying and rebuild- ing. The reduced rate of production and the numerous mistakes entailed as a consequence of the new officer's regime certainly as a rule surpass in seriousness the similar effects produced by a minor subordinate of this officer. These losses as they are usually discussed, however, fail to include what it seems reasonable to regard as the chief factor, viz., the profits that are not made. While the elimination of waste is by no means unimportant, the policy it involves is largely negative whereas the success of the corporation depends in the main upon positive factors such • lUd,., pp. 139-140. ' cj . chs. vi-vn. ' This also will be discussed in later chapters. An officer in a leading automobile factory states, "In general we feel that it would take at least a year for a department head to become thoroughly familiar with his duties and even longer than that to become knit into the organization." 20 THE BUSINESS EXECUTIVE as its organization's working under conditions of maximum productivity and the rapid and complete utilization of new opportunities. Accordingly, it is not so much through his mistakes as his inability, due to lack of experience, to grasp Length of Tentieb of the First PnEsroENTS LENBTH OF TENURE JM YESRS 1 2 3 4 5 6 1 & 9 10 HIS 18 14 15 16 18 19 20 21 22 23 24 25 K 14 13 n S 10 : « ° 8 S 7 1 6 ^ 6 4 S 2 1 1 \ \ / / ' \ / i -] / \ \ / / \ / / \ \ f V 1 A _J /N Fig. 3. — The length of tenure of the one hundred men appointed presidents upon the formation of their respective corporations is here shown graphically. The average length of tenure is 8.19 years. the opportunities his predecessor would and his difference in loyalty and abiHty to cooperate that the new executive lays the heaviest charge upon his corporation. It now becomes pertinent to inquire as to the tenure or, in terms of the previous discussion, turnover, of executives. For this purpose the corporations promoted in the main during the late nineties were investigated as to the changes which had taken place in their presidencies from the date of their incorporation to the present time.' Data of the ' The two lists compiled by John Moody were taken as a basis (see his Truth about the Trusts, pp. 453, 467), 305 companies in number. Of these the corporations which had imdergone reorganization or for other reasons were not easily traced in the financial manuals were omitted, leaving 100 in all. THE ASSET VALUE OF EXECUTIVES 21 sort desired were secured of loo corporations. The length of tenure of the first presidents of these loo corporations and of the present presidents is being shown graphically. (See Figures 3 and 4.) The total number of presidents Length of Tenttre of the Present Presidents 2 S i r_6 6 LENQXa OF TENURE IN nTEARS 7 8 9 10 11J12 13 14 15 16 17 18 19 20 21 22 23 24 25 15 14 13 12 310 " 9 u. 8 a ' m 1 6 = 5 4 3 2 1 I \ \ \ \ \ / i 1 ^v \ / \ 1 \ / 1 1 / N 1 / 1 / / \ _^ ^ ^ /N Fig. 4. — ^The length of tenure of the present one hundred presidents of the same corporations is here shown graphically. Nine presidents had held office less than one year. The average length of tenure is 8.17 years. identified with these corporations is 235, an average per corporation of 2.35 with an average variation from this number of .90. The average length of tenure is 6.83 years. ^ It should be added that these statistics repre- sent the situation as to tenure too favorably rather than otherwise since of the original 305 corporations from which this list of 100 was compiled data were not secured from those corporations which have dissolved or undergone re- organization or for other reasons were not readily traced in the financial manuals. ' From a different source the tenures of five additional corporation presi- dents have been secured; the average, 6.9 years, agrees closely with the above. 22 THE BUSINESS EXECUTIVE The length of tenure of certain lesser officials of corpora- tions has also been investigated although, as the number of cases in the table indicates, the inquiry has not been of wide scope. These were necessarily secured by individual inquiry and the data secured in this inquiry were not drawn from the same corporations nor do they cover the same period of time. These results are shown in Table I. TABLE I Length ot Tenure of Certain Corporation Officials Number Years tenure in present Total years with the Official of position firm Cases Average Ave. Var. Average Ave. Var. Purchasing agent 6 s-4 4-3 i8.o ii.8 Factory supt 6 3.4 2.5 7.2 3.9 Emplosrment agent 2 4.5 2.5 15.5 7.0 Chief accountant 6 3.9 1.4 11. 5 7.2 Office manager 2 7.5 1.5 10.7 2.2 Credit manager 4 5.5 1.2 11. 7 5.$ Sales manager 7 2.7 2.7 14.2 6.0 Adv. manager 4 2.5 10 9.7 5.7 Averages 4.1 12.0 Estimated averages ' 2 19.0 General manager 6 9.6 8.7 11. 7 3.5 President S 6.9 $.2 12.7 10.2 As an aid in determining whether the corporation has lost or gained through the length of tenure shown by these statistics let us consider the executive as an asset subject, as are other assets, to depreciation.^ In the terminology of accounting, depreciation may be defined as "that part of the original outlay on fixed or circulating assets which has disappeared, either through wear or tear, lapse of time, 1 Two corporation presidents have given estimates covering all their de- partment heads, the estimates being 18 and 20 years respectively. ' This fact is ignored as a rule in the consideration of tenure. See, for in- THE ASSET VALUE OF EXECUTIVES 23 or obsolescence;" ^ and it is the practice of all conservative managers in order properly to equalize profits during dif- ferent years to charge off systematically such amounts as will offset this depreciation. The application of this prin- ciple to an executive, however, is qualified iq one important respect, that of the probabiKty of his increasing in value. A machine is at its highest point in value shortly after being put into operation but a man under normal condi- tions should appreciate in value for years. After a time, needless to say, depreciation of the human asset inevitably follows. The process may be made clearer by diagram. (See Figure 5). The newly appointed officer for the time being, it may be, is worth less than nothing as an asset. At least those responsible have selected him not for the results he may be able to accomplish the first day, the first month, possible the first year or two, but rather in view as to what he can do after the "breaking in" process, be this long or, short. The asset value curve accordingly starts low, then rises rapidly as the incimibent cultivates his position with stance, the following table of " Men Employed by Us ' ' prepared by an official of the John B. Stetson Company: "MEN EMPLOYED BY US" "20 years and over 324 "is years and not 20 230 '■ 10 years and not 15 663 " 7 years and not 10 857 " s years and not 7 854 " 2 years and not 3 462 " I year and not 2 262 4,2S9 "It must be remembered that while we now employ about 4,400 people twenty years ago we only employed about 600 and more than half of these are s^ in our employ." — Gehris, "Employment Problems of the John B. Stetson Company," Annals of the American Academy, May, 1916, p. 159. There has been no attempt made to analyze these statistics. ' T. W. Mitchell, Accounting Principles (New York: Alexander Hamilton Institute, 1917), p. 297. (Modern Business, DC.) 24 THE BUSINESS EXECUTIVE skill and intensity. But the rise after a time becomes less rapid and finally the decline sets in. If the asset value is thought of not as a lump sum but in terms of earning power as being so many y dollars for a given x period of time, we Appreciation and Depkeciation Curve TENURE IN PERIOD OF X YEARS X 2a; 3x 4x 5x 6x 7x 8x 9x lOx 1 X -ay lOj/ h a [L O CD 62/ u ttl ^ — ^ ^ v s, ^ ^ .-. — — — — — \ / .-• "' S •«• / • \ / / / 1 / 1 1 f / / / y ^ Vj «SE ET VA UE - — SA -arI HE VI. VM NT i y / _ Fig. s- — ^It is assumed in tlie case of the executive whose career is here shown graphically that whereas he is overpaid both at the beginning and the close of his tenure the corporation for many years finds him an asset of value. Needless to say, this is a hypothetical case since the accurate determination of data represented by these two curves is a problem whose importance is not as yet appreciated, much less solved. may add a second curve representing the compensation paid during the same period. (See Figure 5.) Were the foregoing statistics on tenure examined in the Ught of this, as we may term it, curve of appreciation and THE ASSET VALUE OF EXECUTIVES 25 depreciation, it seems safe to conclude that these averages indicate lengths of tenure considerably shorter than would be revealed were a man to follow what would be termed his normal career as is shown by the curve; 6.83 years tenure for presidents, 9.6 for general managers, and 4.1 for depart- ment heads are terms too brief to be accounted for by a theory of himian depredation in business as we know it in terms of a management buttressed by biology and psy- chology rather than subject to the vicissitudes of the "hire- and-fire" policy. It is of course true that these averages are of tenures still unterminated and it may be urged that before termination they will have been considerably length- ened. Doubtless there is truth in this contention although the frequency tables from which these averages were com- puted show that only forty of the one htmdred and five presidents ^ and two of the thirty-seven department heads have as yet held their positions over ten years. Moreover, the tenures of the first presidents are not subject to such qualification, being with the exception of one case terminated (see Figure 3) ; and it is impossible to reconcile this curve in its skewness with the appreciation and depreciation curve. The decided variation in the nimiber of their presidents shown by corporations organized at approximately the same time (see Figure 6) emphasizes the same conclusion, that causes other than the usual ap- preciation and depreciation of these men were responsible for the determination of their length of tenures. The clear recognition of this fact is perhaps the most essential step in the elimination of the wasteful practices themselves,! and such recognition apparently develops whenever the causes for corporation success or failure are studied in a penetrating way. Dr. Arthur S. Dewing, who has traced with much care the promotion and reorganiza- ^This includes the names drawn from both sources (see footnote, page 21). 26 THE BUSINESS EXECUTIVE tion of a considerable number of corporations, concludes: "I have been irgipressed throughout by the powerlessness of mere aggregations of capital to hold monopoly. I have been impressed, too, by the tremendous importance of Number of Presidents in the History of the Company NUMBER OF PRESIDENTS 12 3 4 5 6 7 38 36 SI 32 SO 28 |26 £24 o22 o °18 §16 ii4 z 12 10 8 6 i 2 y \ / \ /' \ / \ / \ / N \ N \ V, \ \ V \ s V, s \ _ > — — _ __ Fig. 6. — ^The average number of presidents in the history of these same one hundred corporations is 2.3s, and the average length of tenure of all the presidents is 6.83 years. individual, innate ability, or its lack in determining the success' or the failure of any enterprise." ^ Mr. Francis Cooper, whose experience in the financing of corporate enterprises is extensive, says that of the three essentials ' Corporate Promotions and Reorganizations, p. 7. In the same work (pp. 565-6) Dr. Dewing puts it this way: "One at least of two conditions was necessary for the success of a consolidation. It must have had at its com- mand executive ability of an unusual order such that the various human dif- ficulties which beset the administration of a large business were success- fully met; or it must have been secured against unrestricted competition through having a monopoly control some essential raw material, some patent, or some franchise. In rare cases only are these conditions realized." THE ASSET VALUE OF EXECUTIVES 27 of a successful enterprise — a sound undertaking, sufficient capital, and efficient management — "the author would give good management much the highest place if the matter is to be viewed from the point of actual value to the enter- prise. All three are obviously necessary to the best suc- cess, but no matter how good the undertaking or how liberal the supply of money all may be ruined by bad man- agement, whereas, even a poor undertaking, or a good undertaking crippled by lack of money, will, imless the handicap be too heavy, be brought to a successful issue by good management." ^ H. L. Gantt, an industrial en- gineer who in the course of his professional practice has studied with care the operations of a considerable number of enterprises, states: "A wise pohcy is of more avail than a large plant; good management, than perfect equip- ment. . . . The factory invariably reflects the manager. The real problem of to-day is, then, how to select and train, or rather how to train and select our industrial leaders." ^ Our captains of industry have expressed similar views.' 1 Financing an Enterprise, I, 42. ' Ibid., Industrial Leadership (New Haven: Yale University Press, 1916), pp. 12, 13. ' A statement often cited is Mr. Carnegie's to the effect tliat he valued his organization far more highly than he valued his plants, and were he obliged to lose either he would much prefer to part with the plants because they could be replaced mere quickly than his organization. John D. Rockefeller says, although unfortunately the source of this quota- tion has not been preserved, "I tried to attract only the able men: I have always had as little as possible to do with with dull business men." The testimony on this point given the United States Industrial Commis- sion (Xm, 13s) by Mr. J. M. Waterbury is worth noting since this gentle- man as former president of the ambitious but ill-fated National Cordage Company spoke from a wealth of experience: "Q. (By Mr. Jenks) Do you think there are any other industries besides those that control patents and trade-marks that can make any special sav- ings or economies through combinations? "J. M. Waterbury. It is largely a question of wonderful executive ability. "Q. Just as in the individual case? "A. Yes; here is a man of great executive ability. He can run one plant and make a success of it, or he may be able to run a combination success- 28 THE BUSINESS EXECUTIVE These general statements, while they afford the opinion of experts that a close correlation exists between a corpora- tion's profits and the efficiency of its management, do not provide a very definite basis for the determination of the executive's asset value. For this purpose it consequently appears preferable to (a) estimate as accurately as the con- ditions of managerial technique now permits the profits which the corporation derives each year from a given executive; (b) capitalize this sum at the current rate of interest; and (c) test the asset value thus obtained accord- ing to the appreciation and depreciation principle described above. The appreciation and depreciation with which the cor- poration is interested does not concern the executive as an individual primarily but his productivity in those managerial policies and methods which compose what we have termed the corporation's larger brain and which directly affects its earning power.^ The fact that such poKcies and methods can be externalized in such a way within the company that they may be transferred to a purchaser, irrespective of the personalities involved in their original production, justffies their inclusion, under the term good will, among the assets. That with which we have here to do, accordingly, is not a life curve but a business career curve of appreciation and depre- ciation. Nevertheless, imder ideal conditions there will be a con- fully. Other people might try to get a number of plants going, get them to- gether, and make a failure of it. It depends upon executive ability. To nm a number of plants together is very difficult, and takes a high order of in- tellect to do it successfully." Says Charles M. Schwab, of the Bethlehem Steel Corporation: "There are more jobs for forceful men than there are forceful men to fiU them. Whenever the question comes up of buying new works we never consider whether we can make the works pay. That is a foregone conclusion if we can get the right man to manage them." Ibid., Succeeding With What you Have (New York: The Century Company, 1917), p. 25. ' Cf. also Ch. XI. THE ASSET VALUE OF EXECUTIVES 29 siderably greater correspondence between these two factors than prevails to-day. The president, for instance, who has been selected and trained according to the proper methods and is so rewarded that he becomes wiUing to give up his best toward the upbuilding of the corporation's managerial brain will not be exploited and ready for the discard in less than nine years. It is for this reason that in the following pages the developing of managerial assets is commonly spoken of as a matter of developing executives, since the means described for their selection, training, and rewarding wiU, it is believed, bring about a close correspondence be- tween individual valuations and managerial valuations to the firm. It is agreed that imder the conditions of managerial technique now existing a valuation considerably less ac- curate than the appraisals of the corporation's real estate, machinery, or even the good wiU inhering in its trade-mark, wiU likely be secured. Nevertheless these latter appraisals are in reality only estimates, rendered reasonably accurate through a prolonged development of the appraising meth- odology. In view of the important connection existing be- tween a corporation's profits and its managerial staff, can it be that the problem of appraisal wiU long be ignored be- cause of undeveloped method? It is believed not. The balance sheet and the more or less detailed treas- urer's report upon which it is based will, it is here predicted, be so broadened in the future as to include appraisals of the corporation's executive assets. While it is difficult no doubt to reduce to definite terms the worth of an executive, the items comprising the inventory being in the main psychical, the procedure which appears most feasible is the expression of such items in more readily apprehended terms. Ac- cordingly we may expect to find the annual report sup- plemented by information answering questions such as the following: 30 THE BUSINESS EXECUTIVE Length of Tenure How long have the present executives occupied their positions? Been connected with the company in some capacity? Are many or few new executives being engaged? What is revealed by a study of the executives who have severed their connection with the firm? Methods of Selection Are the best possible grades of appUcants secured, or is dependence placed upon whoever applies? Are the best apphcants selected? By what means is this result tested? To what extent does each executive hold the position for which he is best fitted? Methods of Training Have the best methods of management been developed by the staff? Are newly-elected executives trained for the performance of their duties, or are they left to learn as they can? What is the cost of such training? or of such non-training? Expense of Management Upon what unit basis should this establishment estimate its expense of management? What is the present unit cost of management? How does it compare with similar establishments? Would an increased expenditure for purposes of man- agement prove more or less profitable than were the same sum expended in other ways? THE ASSET VALU J: OF EXECUTIVES ~ 31 Remuneration . Are the executives now overpaid or underpaid? How is this being determined? What has been produced by the various executives? Do the methods of remuneration in use stimulate in- creased productivity? Service or Welfare Methods Do the executives work under proper conditions of Hght, heat, and ventilation? Are the executives supplied with the oflSce equipment, clerical assistance, and freedom from minor interruptions which favor increased productivity? Have the executives, due to their connection with the company, undertaken any social or civic work outside of business hours? Esprit de corps Are the executives in harmonious co-operation? Do they value and steadily cultivate esprit de corps among the employees? Have the executives an interest in the business as theirs, or are they ready at any time to go elsewhere whenever a larger salary is offered? Asset Value What is the estimated asset value of the present man- agerial staff? How nearly does this value represent their maximum effectiveness? Are the valuable men or the incompetents being elim- inated from the organization? 32 THE BUSINESS EXECUTIVE By what systematic means are the corporation assets in its executives being increased and conserved? This outline represents roughly certain elements in the inventory of a corporation's executives, which, refined con- stantly as the technique of management develops, will eventually become able to render a reasonably accurate appraisal.^ Such appraisal in itself will go far to insure among those directing our corporations this the correct point of view, that executives are assets of value which like assets in general should be effectively utilized. Certain detailed means through which such effective utilization can be made operative within a corporation will next be examined. 'This problem will be considered in later chapters. C/., especially, ch. XI. CHAPTER III The Essential Qualities of an Executive In order to increase the effectiveness of their executives business concerns have adopted a considerable variety of plans, with a result that whereas some firms (and, be it granted, very successful firms at times) claim, to have f oimd in the manner of compensation their solution other firms Just as consistently beheve that loyalty or careful training or any one of many additional factors has been responsible for the success which they enjoy. Such claims will be crit- ically examined later, ^ but at this point we may anticipate to the extent of saying that for increasing the effectiveness of the firm's executives a program rather than any one method is to be desired. We are now to consider certain factors of which such a program is composed, the one for immediate attention being selection. It is recognized as a preliminary that a candidate for a position and the position itself are both highly com- plex; hence the well-worn phrase of fitting round pegs into square holes or vice versa, as a matter of fact represents the situation only in a simple and naive way. It were more accurate to liken the selection problem to the seeking of the combination necessary for openiug some bank safe pro- tected by an intricate lock, the qualification being that whereas the safe cannot be opened at all save by the one correct combination the selection problem admits of solu- tions of all possible degrees of correctness. Li seeking to fit men into positions much depends, it is • Cf. ch. X and XII. 33 34 THE BUSINESS EXECUTIVE evident, upon the accuracy and completeness with which both the position and the person are analyzed. The spirit and program of scientific management during recent years have incited business men to attempt such analyses, the general object being to standardize the process of selection and a very common result being what is termed written specifications for hiring. As examples of the analyses of particular positions, since this is what such specifications really are, we may examine the following: Foreman "Department X — Section X "Ideal: all Foremen "Dependable, willing, competent man who can strike best practicable adjustment between the factors of maximum production, minimum time, most efficient motion, least effort, best quality and promote 'Spirit of the Hive' by reciprocity, cooperation and mutuality." ^ Purchasing Agent "He should have good judgment, be well balanced, shrewd, cautious, and well fortified with the knowledge which he can scientifically accimiulate. . . . Shrewdness is essential to the purchasing agent and tactfulness will help him over many rough places and assist in the con- simiption of many advantageous transactions. ... It is axiomatic that the man in charge of these purchases must be tactful and diplomatic in his dealings with the other men interested and in addition he must to attain the best bar- gains possess good business training and be a keen student of market values." ^ 1 Specifications used by the Detroit Steel Products Company. Cf., R. J. Burke, "Written Specifications for Hiring," Annals of the American Academy of Social and Political Science, May, 1916, pp. 176-181. 'Specifications enumerated by H. B. Twyford. Cf. ibid., Purchasing (New York: D. Van Nostrand Company, 1915), pp. 26, 27, 29. ESSENTIAL QUALITIES OF AN EXECUTIVE 3s Executive (In Department Store) "Organizer: AbiKty to detect weak points in the present organi- zation. AbiKty to look ahead and provide for future needs. Ability to locate and build resources for securing em- ployees of a better tjrpe than the average applicant. "Analyst: AbiUty to judge men with limited opportimity, as in en- gaging new men with more favorable opportunity than men already with the firm. Ability to recognize limitations of men. AbiKty to recognize possibilities of men, "Executive: Qualities of leadership. Ability to handle men, to secure loyal service and the best ability of each. HandHng the forces to the greatest advantage for efficient and economic service. Initiative. "Educator: Ability to provide training for people of promise for posi- tions of larger responsibility. AbiKty to provide that each person shall be personaUy equipped with a thorough knowledge of the duties of his position. "Education: Sufficient to enable him to meet intelKgent men on an equal footing. Sufficient to make him a trained thinker. Sufficient to make him successful by the use of his mental equipment, combined with hard work. "Experience: Of an executive nature; preferably in a large organiza- 36 THE BUSINESS EXECUTIVE tion in a capacity where he has been responsible for results of his own ability as an organizer. "Character; Personality:" ^ Analyses such as these, it is evident, are really neither accurate nor complete; in any technical sense of the term they cannot rightly be called scientific. Moreover, such incomplete and inaccurate analyses represent with fair adequacy the status of the selection problem in this respect since no psychologist, not even those who have devoted considerable attention to the matter, has as yet satisfac- torily analyzed any occupation.^ At the present time the analysis of positions must be regarded as a hope in process of fulfillment. If the position, which of the two factors is the more tangible, has proved difficult to analyze it may be assimied at once that the analysis of the candidate has even less fully been worked out. The business man has found human nature quite elusive and he has accordingly fallen back upon some rather vague and general terms in his discus- sions of it.* The psychologist has labored with considerable ' Specifications used by the William Filene's Sons Company, a depart- ment store of Boston. Cited by J. W. Fisk, Retail Selling (New York, Lon- don: Harper and Brothers, 1916), pp. 257-258. ' In speaking of tests which may be useful in the selection of individuals for certain occupations, Professor G. M. Whipple, whose two-volumed text entitled Mental and Physical Tests is a standard work on this subject, says, "The attempts in this direction have been so academic and theoretical in character as to make little impression upon the hard-headed man of business, or even upon the expert's colleagues." Annals of the American Academy, May, 1916, p. 196. ' James Logan, the general manager of the United States Envelope Com- pany, presents the problem faced by the business man as follows: "I sug- gest that our immediate problem is the problem of showing greater under- standing of the human element in business when working with our help. This has always been as difiScult a problem as any in business; to-day, for reasons which I have explained, I think it is the most important problem, barring none. " Now just how is this problem to be solved? What are some of the knacks to remember when dealing with our help? These are not easy questions to answer. It is true that most of the problems which we have to solve are human problems, but there are scores of varieties of human nature and our ESSENTIAL QUALITIES OF AN EXECUTIVE 37 success, it would seem, in developing a science of mind, but the application of this science to the problem of selec- tion, particularly to the selection of executives, has not progressed very far although certain of its methods have in them much of promise.^ In devising tests for purposes of selection much depends upon the kind of work imder consideration as to the difficul- ties to be encountered. It has been found in cases where technical conditions assume high importance, as in typing, telephoning, telegraphing, machining and allied occupa- tions, that the duties can either be analyzed into their psychological elements and the individuals tested with regard to those elementary functions or those technical demands in the position can be reconstructed in miniature and the subject brought into situations which are models of their real work.^ But when technical conditions are constant contact with human problems does not help us so much as it might otherwise. Moreover, a larger number of these varieties of human nature are represented in the average store or factory, so we encounter the problem at practically every turn. "It is the easiest thing in the world to recognize the man who has unusual ability for handling men, but the hardest thing in the world to define his methods. To deal with men in trying business situations calls for patience, and for judgment and for tact, and also for a lot of things which the best of us can not learn from books. You can see the effects of this knack of work- ing with men smoothly, but for the life of you you can't put your finger on it." Ibid., "Men — the Biggest Problem in Business," System, Decem- ber, 1916. ' Professor Hollingworth, a recognized authority in this field, says in com- menting upon psychographic accounts of the personality of genius, "It is true that these psychographic methods do not yet yield results which are sufficient to inform us why the particular individuals examined were so much more successful in their work than were others who seem to have been equally favored and equally dilligent. Nor have they yet revealed in any adequate way the nature or degree of the qualifications requisite for success in the vocations from which the representative men have been selected. Nevertheless the individual psychograph constitutes a suggestive method of research for the vocational psychology of the future. It represents the intensive development of the older type of 'biography,' based on direct observational data rather than on hearsay, conjecture and anecdote." Ibid., Vocational Psychology (New York: D. Appleton and Co., 1916), pp. 88-89. ' Miinsterburg's study of motormen is an exajnple of the latter pro- 38 THE BUSINESS EXECUTIVE eliminated, as is largely the case with commercial work, it is found that the tests devised so far have been confined in the main to the grading of subjects in what may be caUed general intelligence. Yet general inteUigence does not suffice as a test when it is desired to select men for special- ized positions in business. There are presimiably different kinds of intelligence, which enable one man to display a superior intelligence with respect to promotion, another with respect to salesmanship, and a third in executive work. What is needed are simple tests for detecting such dif- ferentiation. This is a problem upon which psychologists are interested to work, but they are much retarded by the little attention so far devoted to the matter by men in business. The psychologist and the practical man are thus in general too far apart for an intelligent cooperation to take place. The sensing of the situation in this way has induced the author to imdertake the investigation whose results are to be presented later in this chapter. The need seemed to be for someone to assist in clearing the field in order that a more intelligent cooperation could be secured between business man and psychologist, and this in connection with one narrow phase only of the general selection problem the author has sought to do. In the selection of executives as business men now con- duct the process there is danger that candidates be ac- cepted or rejected on the basis of what after all, so far as the major requirements of the position are concerned, may be nonessentials. It is accordingly something in the main to be commended that managers and others in thinking over the requirements of certain positions have come to draw up more or less definite Hsts of qualities. These quali- ties as they have been employed have served the purpose cedure. Cf. his Psychology and Industrial Efficiency (Boston: Houghton Mifflin Company, 1913), pp. 63 flf. ESSENTIAL QUALITIES OF AN EXECUTIVE 39 of useful concepts. Let us examine several of these lists of so-called essential qualities for success as a business executive. (See Table II.) In preparing a list of qualities, of which these six shown in the acconipan3Tng table can be taken as typical, one serious difficulty lies in securing what may be termed funda- mental traits. The list is very likely along with its funda- mental or xuiit traits to contain compounds, and the pres- ence of these compounds, in turn, possibly will result in much overlapping.^ Accordingly a logical schemetization of the himian nature ensemble is well-nigh impossible.^ The list of qualities which is here presented has been prepared according to the view that human nature is a composite entity whose respective components, to employ the analogy of a mountain chain, arise from it not as iso- lated peaks but as separate eminences whose bases blend. As the names for the qualities which possess a certain dis- tinctiveness though their bases are inextricably confused ' Both these criticisms, it seems, apply to the list of qualities character- istic of the men of science prepared by Professor Cattail. Twenty-four traits were enumerated as follows: Physical Health Reasonableness Mental Balance Clearness Intellect Independence Emotions Cooperativeness wm Unselfishness Quickness Kindliness Intensity Cheeriulness Breadth Refinement Energy Integrity Judgment Courage Originality Efficiency Perseverance Leadership Cited by Hollingworth, Vocational Psychology, p. 127. * At the present stage of our knowledge of human nature, a complete and logically accurate classification cannot be made. The author had been for some time in grave doubt as to the feasibiUty of preparing a list of qualities which was destined inevitably to be inaccurate and perhaps should not have made the present attempt had he not pondered over the list by Professor Cattell just cited. The inclusion in this list prepared by an eminent psychol- ogist of the three terms intellect, emotions and wiU, for example, appears to the author as a yielding to the exigencies of the situation fully as complete as he himself would be obliged to do. Hence the present list was prepared. 40 THE BUSINESS EXECUTIVE in the depths of human nature, the following terms have been chosen. Explanatory terms have also been included in order to render clearer the meaning which has been attached to the quahties. (See Table III.) ^ TABLE II The Essential OtrALmES or an Executive as Listed by the Following Persons '^ Dean J. F. Johnson Frederick W. Taylor Decision Good health Expert knowledge Brains Judgment Honesty Self-reliance Special or technical knowledge Patience and grit Grit Concentration Energy Enthusiasm Tact Imagination Judgment or common sense Executive ability Education Hugh Chahners H. Gordon Selfridge Health Energy Honesty Punctuality Ability Methodicalness Knowledge Promptness Initiative Sense of justice Industry Open-mindedness Tact Alertness Open-mindedness Openness to conviction Sincerity Generosity Enthusiasm Logicalness Initiative Calmness Resolution Manners Judgment Imagination 1 In the preparation of this list the author has received some valuable suggestions from Professor Harry L. Hollingworth of Columbia University, Professor James E. Lough of New York University, Secretary Ralph G. WeUs of the Boston Emplojnnent Managers Association, Mr. H. J. Gardner, Employment Manager of Cheney Brothers, Mr. James Madden, Employ- ment manager of the Charles William stores, and Mr. W. F. Eemble, Labor Standardizer. _ ^ Dean Johnson has for many years been head of the New York Univer- sity, School of Commerce, Accounts and Finance. Frederick W. Taylor is commonly conceded to be the father of scientific management. Hugh ESSENTIAL QUALITIES OF AN EXECUTIVE 41 TABLE III iNITIATrVE (Alertness, imagination, originality, independence in thinking.) AcGSESSIVEISrESS (Energy, courage, domination by will.) COOPERATTVENESS (Unselfishness, kindness, cheerfulness, tact, loyalty.) Perseverance (Industry, ambition, concentration.) Judgment (Reasoning ability, accuracy in conclusions, abiUty to profit by experi- ence.) Competitiveness (Interest in playing the business game.) Health (Bodily vigor, good sight, hearing, etc., included.) Appearance (Well-groomed appearance, good carriage, pleasing facial expression, voice, etc.) Refinement (Courtesy, manners, general culture.) Integrity (Truthfulness, honesty, sincerity.) Organizing Ability (Systematizing, classifying according to functions, planning and dele- gating.) Control of Emotions (Freedom from outbursts of anger or touchiness.) Sense of Hdmor Open-mindedness (Reasonableness, teachableness, openness to new ideas.) It will not be at all necessary, we presume, to discuss in turn the importance of these various qualities nor to illus- trate how each operates in the executive's work. Not a quality, it may be safely assumed, but what in any gather- ing of executives would have its adherents, each ready to illustrate by some concrete case drawn from his own ex- perience how the possession or the lack of the quality specified proved decisive in some of business' crucial tests.' Chalmers is the founder of the Chalmers Motor Car Company, and was form- erly vice-president of the National Cash Register Company. H. Gordon SeUridge is a leading merchant in London and was formerly the merchandise manager of Marshall Field and Company. ' The following from a journalist illustrates this very nicely: "To accom- plish the great things in life one must have that qualification which, in our in- adequate phraseology, is best expressed by the word 'vision.' When you meet a person with true vision you are in the presence of a superman, and 42 THE BUSINESS EXECUTIVE In fact, practically every good quality imaginable has had its claims at one time or another presented by its respective adherents. The list of qualities if allowed to be thus aug- mented would become interminably long and at the same time quite useless for purposes of selection. What is needed here is a ranking of qualities according to their importance, since the problem at hand concerns neither an absolutely essential quality nor one absolutely nonessential but simply the qualities which are relatively essential. If this degree of relativity could then be expressed in quantitative terms we might well have a very helpful list of qualities. The investigation now to be described has had this for its chief purpose. The qualities were printed upon a card on the top of which appeared these instructions: ^ Qualities tor the Rating of The Business Executive (Education and Experience as Such Omitted.) Please rank as first, second, third, etc., the following fourteen quali- ties in what you regard as the order of their importance. At the left a marginal space was left for the rankings.' These cards were then presented to the following groups of persons for rating: you soon realize it. Mr. Durant looked down the lane of years, saw — and saw rightly. Vision, belief and courage — these are the three cardinal quali- ties which produce tie Rockefellers, the Camegies, Harrimans and Durants. There is no stopping such a combination of attributes." B. Powers, "Wil- liam C. Durant," Magazine of Wall Street, Oct. 28,i9i6,p.78. In his Empire of Business (New York: Doubleday, Page and Co., 1903), p. 88, Mr. Carnegie, whose success has been specified as due to vision, beUef, and courage, says, however, "There is not anything better than a good laugh. I attribute most of my success in life to the fact that, as my partners often say, trouble runs ofiE my back like water from a duck." ' Education and experience as such were omitted because what was wanted was a statement of &e relative importance of the respective quaUties un- complicated by the problem of how such qualities are attained. * In order to avoid the possibiUty that those fillmg out the cards be uncon- sciously influenced by the relative positions of the qualities as printed on the card, the printer was instructed to print in the order shown by copy one- third the number required, then shift the type for the printing of the second third, following whidi the type was again shifted for the printing of the re- maining cards. ESSENTIAL QUALITIES OF AN EXECUTIVE 43 Salesmanagers. — ^These men have charge of sales de- partments in many of our largest and best known firms. They are presumably the leading salesmanagers in the United States and they were asked to rank the given quali- ties as an answer to this question, What qualities are most important in enabling a man to make good as salesmanager? Advertising Managers. — If the word advertising be substituted for sales, the above explanation applies to this group equally as well. The men comprising this group are leading advertising managers and they were asked to rank the qualities from the viewpoint of their specialty. General Managers. — Practically the same applies to this group. These men are leading general managers and they "were requested to rank the qualities from the view- point of this position. Purchasing Agents, Auditors, and Treasurers. — So meager were the retmrns received from these groups that very little can be determined from them, but at any rate each man was asked to consider the rating from the view- point of his specialty. Lesser Executives. — ^The above groups were drawn exclusively from large corporations. But certain local executives connected with firms of small or only moderate size expressed an interest in filling out this card and their oflFer was very gladly accepted. These men (who were only a few in number) ranked the qualities as they believed the business man in general should possess them. Young Business Men. — ^The blanks were submitted to four groups of young men whose opinions on account of the experience these young men had had in business and their interest in studying it as a science were regarded as valuable.^ Three of these groups in rating the qualities, ' These young men composed the membership of the following classes in the New York University, School of Commerce, Accounts and Finance: Business Administration, Labor Management, Practical Economic Prob- lems, and Retail Store Management, during the academic year 1916-1917. 44 THE BUSINESS EXECUTIVE had in mind the requirements for the presidency of an industrial corporation, the fourth that of the head of a department store. Members of Employment Managers' Associations.— The purpose of the employment managers' associations which have been formed in various cities is to discuss the problems connected with employment, the best methods for the selection, training and management of employees as revealed by the experiences of executives and others in charge of the persormel work of large commercial and in- dustrial establishments. Members of the Boston, Chicago, Philadelphia and New York Associations have been inter- ested to rank these qualities, the viewpoint in each case being that of the presidency of a large industrial corpora- tion, and their "ratings should have special value since in such a problem as this these men possess the views of an expert. The rankings received from the members of the above groups have been tabulated and, although the results group by group will be considered in Chapter VII, the general averages will now be presented. (See Table IV.) It is believed that this constitutes the most definite answer now available to the question. What are the essential qualities of a business executive? The courses were being studied in the evening and those attending were abnost without exception engaged in business during the day. ESSENTIAL QUALITIES OF AN EXECUTIVE 45 TABLE IV QUALTTIES FOR THE RATING OF THE BUSINESS EXECUTIVE (Education and experience as such omitted) As ranked by two himdred seventy-six business men Order determined Oualitv Average rank by average rank ^ ^ ' assigned 1 Judgment _ 3 ■ 21 (Reasoning ability, accuracy in conclusions, ability to profit by experience.) 2 Initiative 4-3° (Alertness, ima^ation, originality, inde- pendence in thinking.) 3 Integrity 4S8 (Truthfulness, honesty, sincerity.) 4 Organizing Ability 4 -71 (Systematizing, classifying according to functions, planning and delegating.) 5 Health S-QS (Bodily vigor, good sight, hearing, etc., in- clude^a.) 6 Perseverance 6.40 (Industry, ambition, concentration.) 7 Aggressiveness 6.83 (Energy, courage, domination by will.) 8 Open-mindedness 7 -09 (Reasonableness, teachableness, openness to new ideas.) 9 CoSperativeness 7-97 (Unselfishness, kindness, cheerfulness, tact, loyalty.) 10 Competitiveness 9.60 (Interest in playing the business game.) 11 Control of Emotions _ 9 81 (Freedom from outbursts of anger or touchi- ness.) 12 Refinement 10.30 (Courtesy, manners, general culture.) 13 Appearance _ 10.51 (Well-groomed appearance, good carriage, pleasing facial expression, voice, etc.) 14 Sense of Humor ^ 12-26 CHAPTER IV Nature and Nurture The selection of an executive, involving as it does an analysis of the candidate and the position sought together with a mutual adjustment of the components of each, we may compare with the operation of a large telephone ex- change in which the exceedingly mmierous incoming and outgoing calls are brought into proper connection. The official who, according to the story well known to employ- ment managers, refused to engage a certain accountant because the latter wore rubber heels, it being the said official's experience that men wearing rubber heels were dishonest, illustrates the danger inherent in the selection process, viz., the making of a wrong connection. Similarly we may dispose of not a few legends as to how squints and biunps and voice fibers show inventive ability, veneration, persistence, etc., or their absence. In the main, such views represent chance, not causal, connection. The methods of selection which we seek are those by means of which reasonably accurate causal relations can be established between candidate and position. The ap- parent simplicity of the problem as thus stated should not deceive us as to its extreme complexity and to the fact that its final and complete solution doubtless will never be attained. Inasmuch as this is the case, our problem at present is one of improving the methods of selecting executives now in use. It is believed that, while complete and in all respects accurate causal connections between candidate and position cannot be made, an attempt to in- 46 NATURE AND NURTURE 47 crease the accuracy of these connections is entirely feas- ible. Of the several methods which are to be considered ia these chapters we have here to do with heredity as a factor in the selection process. Heredity, as J. Arthur Thomson defines it, is "a convenient term for the genetic relation between successive generations, and inheritance includes aU that the organism is or has to start with in virtue of its hereditary relation." X The consideration of an applicant's heredity thus lengthens by far the range of the prospective employer's data concerning him and, provided these data are trustworthy and intelligently used, it should by that fact make for increased accuracy. The genetic relation between successive generations does not fully accoimt for any creature, much less a highly cultivated mind; the fertilized egg-cell is to be regarded as a rudiment which for its realization requires an environ- ment supplying food and oxygen and liberating stimuli of many kinds. * Nature and nurture necessarily cooperate. Nevertheless, it would appear from the foregoing list of essential qualities that executive capacity is relatively nonspedaUzed. Judgment, initiative, integrity, organizing ability and health, the qualities which ranked highest, indicate that in comparison with a mechanical or a techni- cal man the business executive is broadly rather than nar- rowly qualified.^ Is it not possible, therefore, that for him, less dependent as he is upon technical knowledge and skill, the equipment gained through hereditary relations has a superior value? It is believed that such is the case. It is a condition of mental development, to mention a further point in which the value of hereditary equipment is emphasized, that one's acquired qualities or character- ' Heredity (London: J. Murray, 1908), p. 6. * Thomson, ibid., p. 6. » Cf. Chap. Vni. 48 THE BUSINESS EXECUTIVE istics are less firmly held than his natural endowments. Hence under conditions of stress the person whose ac- quirements are more or less artificial runs greater risk of breaking down than one whose qualities, all other things being equal, hark back to a more distant past. lii terms of the man on the street, it is said the former person lacks "class." ^ Since the executive necessarily is imder heavy responsibility and obliged oftentimes to decide important matters quickly, it appears that in his case particularly the possession iq a highly positive degree of the basic qualities comprising inheritance affords an equipment desirable if not absolutely essential if he is to endure and advance. In considering a person's capacity as the product of two cooperating factors, nature and nurture,^ it is inevit- able that a question as to their respective importance should arise. In terms of the business man, is the executive bom or made? 'In the world series baseball games the "breaks" commonly favor the winning team which is thereby termed "lucky" by the spectators. It would be more nearly correct to say that the "breaks" favor the team which has better "class." The usual determinant then is not luck but nerve equip- ment, a higher grade of playing technique more deeply inbedded in the nervous mechanism. The need for a somewhat similarly rapid yet accurate transaction of affairs in business is indicated by the term "live wire" which passed upon an exec- utive by his fellow business men is regarded as a decided compliment. Want advertisements often specify that the applicant desired is a "live wire." The quality which is here referred to, that of being a "live wire," has its bases in the same neural conditions above specified. While it does not depend solely upon hereditary equipment, such hereditary equipment provides the essential foundation. Cf. Chap. VIII; also the author's The Executive and His Control of Men (New York: Macmillan Co., 1915)1 P- 6i. ' The meaning of these two terms, so far as the purposes at hand are con- cerned, is well stated by Sir Francis Galton: "The phrase 'nature and nur- ture ' is a convenient jingle of words, for it separates under two distinct heads the unnumerable elements of which personality is composed. Nature is all that a man brings with himself into the world; nurture is every influence from without that affects him after his birth. The distinction is clear; the one produces the infant such as it actually is, the other affords the environment amidst which the growth takes place, by which natural tendencies may be strengthened or thwarted, or wholly new ones implanted." English Men of Science, Their Nature and Nurture (London: Macmillan and Co, 1874), p. 12. NATURE AND NURTURE 49 It may be well before attempting to answer this ques- tion to present the respective claims of nature and nurture as set forth by perhaps the most illustrious adherent of each, Sir Francis Galton and Professor Lester F. Ward respectively. As a result of the research undertaken in the prepara- tion of his classic work, Hereditary Genius, Galton con- cluded that nature was the factor of decisive influence. "I am sure that no one who has had the privilege of mixing in the society of the able men of any great capital, or who is acquainted with the biographies of the heroes of history," he says, "can doubt the existence of grand human animals, of natures preeminently noble, of the individuals bom to be kings of men. . . . Such men, biographies show to be haunted and driven by an incessant craving for intellectual work. If forcibly withdrawn from the path that leads toward eminence they will find another way back to it, as surely as a lover to his mistress. They do not work for the sake of eminence but to satisfy a natural craving for brain work just as athletes cannot endure repose on account of their muscular irritation which insists upon exercise. It is very unlikely that any conjimction of drcimistances should supply a stimulus to brain work, commensurate with what these men carry in their own constitutions. The action of external stimuU must be uncertain and in- termittent owing to their very nature; the disposition abides ... I beheve and shall do my best to show that, if the 'eminent' men of any period, had been changelings when babies a very fair proportion of those who survived and retained their health up to fifty years of age, would, notwithstanding their altered circumstances, have quickly risen to eminence." ' The views of Ward are diametrically opposed. Instead of finding innate ability the factor chiefly responsible for ■ Hereditary Genius (London: Macmillan and Co., 1869), pp. 24, 38, 40. so THE BUSINESS EXECUTIVE the advance of leaders to positions of authority, as did Galton, Ward discovered capacity widespread, waiting only a favorable environment in order to reveal itself as genius. "So far as the native capacity, the potential quality, the 'promise and potency' of a higher life are concerned, those swarming spawning millions, the bottom layer of society, the proletariat, the working classes, the 'hewers of wood and drawers of water,' nay, even the denizens of the slums . . . all these are by nature the peers of the boasted 'aristocracy of brains' that now dominates society and looks down upon them." ^ The reason why this view fails of recognition. Ward believes, lies in the fact that, repressed by environment, these masses are denied the opportimity of demonstrating the existence of the capacity inherent within them. Such men, the great majority, are hence potential, not actual, geniuses. The number of actual geniuses in a given popu- lation, accordingly, "are useful in forming an estimate of the resources of society but they are in themselves no measure of those resources. These may be compared to mineral resources which lie hidden in the earth. The actual workers would then represent the surface indica- tions which the mining prospector sees as he surveys a given region. A few glittering grains and an occasional nugget he on the surface and he knows that if a shaft is sunk at the proper place rich veins will be revealed. The comparison soon fails, however, for the treasures of the earth are segregated and exist only in rare spots while the treasures of human genius are somewhat uniformly dis- tributed, and there is no region which, if properly worked, will not yield them." ^ The doctrine voiced by Ward is as a rule very appealing •"Eugenics, Euthenics, Eudemics," The American Journal of Sociology, XVIII (1913), p. 754. * Applied Sociology (Boston: Ginn and Co., 1906), pp. 266-267. NATURE AND NURTURE 51 to Americans. Our dominant political philosophy as enun- ciated in the Declaration of Independence, particularly in its famous phrase "We hold these truths to be self-evident that all men are created equal," has from colonial times never been confined to affairs of government but as a sort of general truth or democratic slogan has been believed in by the multitude and applied by it rather widely and, we may add, oftentimes most imthinkingly. It was also to be expected that in the transfer of various peoples from Europe to a new coimtry such as ours, family traditions and lines of descent would lose much of their former binding force. The emphasis during pioneer times is upon personal effect- iveness in performing crude tasks, hence the laudation of material success and accomphshments in which seemingly genealogy had little part. The more ready were some of our people, no doubt, to accept these views since they had no genealogy in fact worthy of the name,. being recruited, or descended from ancestors so recruited, from the scum of the earth. As a result of such facts and opinions inter- mingled, popular opinion tends toward the laudation of the individual achiever and the more or less open ridicule of the man who seeks to prove fitness by citing his descent. As a policy of corporation management, in consequence, business men have had little to say concerning the heredity of executives, or, so far as that is concerned, employees in general. It seemed to be a subject difficult to broach to the applicant and of doubtful importance anyway. Moreover, inheritance was felt to carry with it such a tinge of fatalism, of rating any employee upon the basis of something which, try as he might, he was powerless to change, that in the interests of organization esprit de corps the matter was tabooed, save perhaps in a derogatory way.^ ' In the course of a fairly extensive reading of employee house organs and attendance at meetings where employees were addressed by their executives, the author has oftentimes had occasion to note this fact. 52 THE BUSINESS EXECUTIVE In the course of his testimony before the United States Commission on Industrial Relations, Mr. Henry Ford stated thus his views: ^ "My idea is to aid men to help themselves. Nearly all men are willing to work for adequate reward. We have all kinds of cripples in our employ, and they are making good. We have a great many who have been in prison- and who are outcasts from society. Every- one of them is making a good showing and is gaining in self-respect and strength of character. We wiU guarantee to take every man out of Sing Sing and make a man of him." These ideas Mr. Ford elucidated somewhat further in response to questions: Chairman Walsh: "May I ask you, Mr. Ford, without, of coiurse, intimating the name of any such person, what distinction, if any, is made in the treatment of a man or per- son who has been so unfortimate as to have been confined in prison, as compared with other employees of your in- stitution? " Mr. Ford: "We do not let the other employees know anything about it." Chairman Walsh: "Is there any treatment accorded to him other than what might be called economic treatment as set out by your plan? He is, to your idea, properly fed, properly fed (sic)?" Mr. Ford: "Yes." Chairman Walsh: "Therefore properly fed and clothed and placed in a position of economic independence? " Mr. Ford: "Yes." Chairman Walsh: "And you find from that that it estab- lished his moral standard? " Mr. Ford: "Yes, sir." The testimony of Mr. Ford, in so far as it can be taken ' Report of Commission on Industrial Relations (1916), VIII, 7630. ff. The newspapers following Mr. Ford's testimony announced upon various occasions that the plant was receiving convicts daily. Cf. New York Times, January 25, 1915, February i8, 1915, March 10, 1915. NATURE AND NURTURE 53 as typical of all employers, it would appear, indicates that business leaders have scant respect for views such as pro- pounded by Galton, whereas the claims of Ward that capacity is widespread and opportunity wiU permit its appearance meet their cordial support. The difficulty of securing proof upon the problem under consideration may be illustrated by a study of the Fair- banks family of Vermont.' (See pedigree. Figure 7.) James Fairbanks, designated by the figure i in line i, married Fig. 7. — Pedigree chart of Fairbanks Family. Phoebe Paddock. Her two brothers, i, 3 and 4, were iron workers; of the three sons bom of this union, Erastus, ii, i, at the age of nineteen moved to St. Johnsbury, Vermont, and began to manufacture stoves, plows, etc., Thaddeus, ii, 3, a natural mechanic, invented the platform scales, and Joseph P., ii, 5, was a lawyer with literary tastes. Erastus had two sons of whom the elder, iii, i, went into the scale business, showed much inventive ability and a strong taste for natural history. The second son, Horace, iii, 3, was an excellent administrator and became governor of Vermont. ' C. B. Davenport, Heredity in Relation to Eugenics (New York: H. Holt &Co., i9ii),p. s8. 54 THE BUSINESS EXECUTIVE The son of Thaddeus, Dr. Henry Fairbanks, iii, 6, went into the ministry but was driven by his love of invention into the iron business. He combined mechanical and literary gifts. Of the two sons of Joseph P., iii, 8, was a minister and iii, 9, a sagacious and exact man was secretary and treasurer of the Fairbanks Company. The inventiveness combined with executive ability which this family demon- strated chiefly in the iron business, some, of course, would explain as due to environment; the boys were reared under conditions of high grade with abundant opportimity and incentive to specialize in a particular industry. Others, however, would account for the similarity in terms of in- heritance, a matter of transmission through the germ plasm. Either explanation, it is evident, possesses a certain plau- sibility. The study of family pedigrees, however, as it has been carried on by the Eugenics Record Ofl&ce seems to establish with some definiteness both the view that mechanical skill is inherited and the method of such inheritance.^ The considerable body of data which this ofl&ce has collected deals similarly with a variety of traits, including items such as stature, eye color, hair form, speech defects, crumnality, feeble-mindedness, and ability in artistic composition. In respect to these traits a relationship has been found to exist between succeeding generations, which relationship, more- over, as to its method in some cases has been so well estab- lished as to be termed a law of inheritance. With regard to stature, for instance, should the four grandparents vary widely in height, the adult children will also vary, whereas when the grand parental statures are closely alike those of the children wiU be also. Again, when both parents are tall, the children all tend to be tall; but should both parents ' This institution, which is a branch of the work of the American Breeders' Association, is located at Cold Spring Harbor, New York. Its researches have been well summarized by Davenport in the work previously cited. For data on inheritance of mechanical skill see pp. 57-58. NATURE AND NURTURE 55 be short some of the children will be short and some tall in ratios varying from i :i up to 2 :i.' So far as physical traits are concerned most people are ready to agree that the relationship between generations is a matter of inheritance, not environment. But is not the fact that two mentally defective parents will produce only mentally defective offspring,^ for example, equally as con- clusive as to psychical traits? Karl Pearson in a statistical study of the fraternal resemblances in physical and psychical characters of school children, a study which was carried on for several years by trained investigators and which in- cluded data drawn from between 3,ocx5 and 4,000 schedules, says, "We are forced, I think Uterally forced, to the general conclusion that the physical and psychical characters in man are inherited within broad lines in the same manner, and with the same intensity. The average home environ- ment, the average parental influence is ia itself part of the heritage of the stock and not an extraneous and additional factor emphasizing the resemblance between children from the same home. "But we are not yet at the end of our conclusions. By assuming our normal distribution for the psychical charac- ters we have found, not only self-consistent results — linear regression, for example, as in the case of the inheritance of intelligence — ^but we have foiuid the same degree of re- semblance between physical and psychical characters. That sameness surely involves something additional. It involves a like heritage from parents. The degree of resem- blance between children and parents for the physical char- acters in man may be apphed to the degree of resemblance between children and parents for psychical characters. We inherit our parents' tempers, our parents' conscientious- * Davenport, ibid., pp. 42, 43. ^This has been demonstrated by D. H. H. Goddard who has studied scores of defective families at the Vineland (N. J.) Training School for De- fectives. S6 THE BUSINESS EXECUTIVE ness, shyness and ability, even as we inherit their stature, forearm and span." ^ 'The hypothesis which Pearson set for investigation was, "if fraternal resemblances for the moral and mental characters be less than, equal to, or greater than fraternal resemblances of the physical characters we may surely argue that parental inheritance for the former set of characters is less than, equal to, or greater than the latter set of characters." The evidence upon which Pearson drew the above conclusions is summarized as follows. (See Tables VI and VII.) The Huxley Lecture for 1903, on the " Inheritance of the Mental and Moral Characters in Man, and Comparison with the In- heritance of the Physical Characters," Journal of the Anthropological Insti- tute, XXXin (1903), pp. 179-237. TABLE V Inheritance of the Mental Characteristics School Observations on Children Character Brothers Sisters Correlation Brother and Sister Vivacity Assertiveness Introspection Popularity Conscientiousness . Temper AbiUty Handwriting Mean 47 S3 S9 SO S9 SI 46 S3 43 44 47 S7 64 49 47 S6 49 52 63 49 63 S9 44 48 52 SI 52 TABLE VI Inheritance op the Physical Characters School Observations on Children Character Brothers Sisters Correlation Brother and Sister Health Eye Color Hair Color. . . . Hair Curliness. Cephalic Index. Head Length . . Head Breadth. . Head Height... Mean Athletic Power. 52 54 62 5° 49 SO 59 55 51 52 S7 S2 S4 43 62 52 57 53 55 52 43 46 54 49 54 53 51 72 75 49 NATURE AND NURTURE 57 The evidence which has just been presented is, of course, only a very small part of what any reader so inclined may consult for himself; ^ but it suffices, we believe, to substan- tiate the conclusion that in the selection of executives in- heritance is a matter not to be ignored. The officers of a corporation, being business men primarily, very likely will not interest themselves to any great extent in the method- ology of the inheritance process but the candidate as he appears before them they ought to regard not as an isolated being but as a man derived from and his capacities condi- tioned by the germ plasm of his aUcestry. Take the problem of labor turnover, for instance, as it is affected by the impulse to wander or nomadic tendency of an employee. Dr. J. Harold Williams in stud)dng the family history of two groups of delinquent boys, alike save that one group of twenty-four was distinctly nomadic and the other group of twenty-four non-nomadic, finds that of three hundred and twelve persons included in the family histories of the nomadic group 30 per cent were nomadic, while of three himdred and eighteen persons in the non- nomadic group only four, or 1.2 per cent were nomadic.^ In the opinion of Dr. C. B. Davenport, who has examined the family histories of approximately two hundred nomadic persons, the impulse to wander which characterizes such nomads is due to the absence of the germinal determiner which makes for sedentariness, stability, domesticity, in other words, it is a matter of defective heredity.' The feebly inhibited persons accordingly prefer occupations such as explorer, tramp, missionary, itinerant tinker, chauf- ' Cf. particularly, the works of Sir Francis Galton and Karl Pearson. Cj. also J. Arthur Thomson's Heredity; and Heredity and Eugenics, a course of lectures delivered at the University of Chicago and published by the Uni- versity of Chicago Press. ^ "Heredity, Nomadism and Delinquency,'' Journal of Delinquency, September, 1916. 'The Feebly Inherited: Nomadism or the Wandering Impulse with Special Reference to Heredity." Carnegie Institution of Washington, 1915. S8 THE BUSINESS EXECUTIVE feur or jockey, rather than occupations such as factory hand, farmer, or accountant, in which success requires per- sistence and stability. The presence or absence of such germinal determiner in the prospective employee's in- heritance, were he able to know it at the time of iaterview, would be a fact of distinct value to an employer, particu- larly the employer of an important executive.^ It is beUeved, however, that business men would be more ready to agree that heredity is a matter well worth their consideration were they not alienated by the undue and prejudiced claims as to its r6Ie, of which, we may say, the foregoing statement of Galton is typical. But in the same work, Hereditary Genius, Galton himself says, "I acknowledge freely the great power of education and sodal influences in developing the active powers of the mind, just as I acknowledge the effect of use in developing the muscles of a blacksmith's arm, and no further;" ^ and in a work on Noteworthy Families published thirty-seven years later he agrees that " success is a joint result of the natural powers of mind and body and of favorable environ- ment." * There can be no quarrel over the reasonableness of this statement. On the other hand, Ward, whose emphasis upon the im- portance of environment may have implied the denial of all claims as to heredity, says in speaking of Galton's argu- ment that genius is hereditary: "Notwithstanding the dif- ficulty of the subject and the consequent defects in the evidence, he has, as I believe, sufficiently proved his thesis. The weak point in his argument is not in this main issue, but in another collateral thesis, if it can be so designated, which he seems to think essentially bound up with the first, viz., that the actual genius is the natural genius." * The views of Ward, therefore, that lacking opportunity a con- 1 Cf. ch. II. 2 P. 14. ' P. XX. * Applied Sociology, p. 115. NATURE AND NURTURE 59 siderable amount of native capacity never comes to frui- tion is in substantial accord with the idea of Galton that success requires not merely natural powers of mind and body but favorable environment as well.^ Nature and nurture, it must appear evident, are not two antagonistic forces but cooperative factors in the develop- ment of the executive in whom we are interested.^ The business man in his selection and traitiing of the executive has a problem analogous to that of the machinist in work- ing up a highly finished product from raw material; the workmanship may be ever so skillful but were the original raw materials of inferior grade the final product has to be rejected by the inspector. The usual practice in case defective materials are encountered is to stop the process of fabrication at the earhest possible stage, but coihmonly such below-standard raw materials are rejected in advance through the appHcation of rigid specifications in purchas- ing. The man added to the managerial staff of a corpora- tion similarly has to imdergo an expensive finishing process, or training program, before he is fully competent to dis- charge the responsibihties intrusted to him. The corpora- tion, it is here insisted, should be concerned over the native capacity, or hereditary equipment, of those who are later to guide its destinies. Are corporations, as represented by their officials, thus 1 Compare, for instance, Ward's Applied Sociology, the first half of p. 116, with Galton, Noteworthy Families, p. 21. ' Dr. C. B. Davenport, the leader of the eugenists in America, states his position as to the claims of nature and nurture most fairly when he says, The thoughtful mind must concede that as is so often the case where doc- trines are opposed, each view is partial, incomplete and really false. The truth does not exactly lie between the doctrines; it comprehends them both. What a child becomes is always the resultant of two sets of forces acting from the moment the fertilized egg begins its development — one is the set of internal tendencies and the other is the set of external influences. What the result of an external influence — a particular environmental condition — shall be depends only in part upon the nature of the influence; it depends also upon the internal nature of the reacting protoplasm." "Euthenics and Eugenics," Popular Science Monthly, January, 191 1, p. 18. 6o THE BUSINESS EXECUTIVE interested or are they not? The views of Mr. Ford cited on a preceding page would seem to indicate that they are not. But in order to arrive at the matter more definitely, the author has put this query to some twenty-five employ- ment managers, Do you believe the executive is born or made? As a rule this proved to be a difi&cult question to answer; the replies were in the main quite labored with numerous questions and definitions and qualifications, al- though as to general import the following given by an em- ployment manager of a large elevator manufacturing works may be taken as typical, "Made — ^but the foundation to build on must be there." There was not a single reply which did not include both factors. It is believed, ac- cordingly, that the statement heretofore quoted does not represent the real views of business men, but that they are sound in their ideas as to the importance of inheritance itself. An appreciation of the importance of this factor, never- theless, does not vouch for the efl&ciency of the technique employed in arriving at a correct knowledge of heredity, nor does it assure an accurate statement of the problem itself. Very commonly employers regard the candidate's inheritance and record as synonymous, and in the investiga- tion made concerning the positions previously held and the degree of success attained in each they conceive that his inheritance is satisfactorily made known. Viewed in the light of the preceding discussion of nature and nurture, does it not appear evident that a man's business record comprises the elements both of heredity and environment, and that in consequence what often is accepted as a measure of inherent capacity constitutes nothing more than a test of environmental opportunity or its lack? These are mat- ters which appear to merit attention in later chapters. CHAPTER V Phrenology and Physiognomy A STUDY of the essential qualities of an executive and of the broader aspefcts of our problem involved in the respec- tive claims of nature and nurture having now been com- pleted, we turn to the more detailed phases of the process of selection. The analysis of one's fellows, whether with the aim of facilitating social relations in general or for pur- pose of their possible selection as employees, constitutes a problem of perennial interest. Men have been drawn to it and their more or less penetrating thought has evolved explanations or systems such as the following: astrology phrenology clairvoyance palmistry cleidomancy physiognomy podomancy character analysis spasmotomancy intuition chrigonomy physical tests chirography mental tests metaposcopy Certain of these on accoimt of their value in the selection process and others on account of their vogue merit brief consideration in this and the succeeding chapters.^ The ' As an instance this advertisement in the Oct. ii, 1917, issue of Printers' Ink may be dted: "Wanted, a first class man with experience for perma- nent position on staff of Vice President to siiape and direct the advertising policy of a trunk line railroad. To save time and trouble to both applicant and employer, kindly send in photographs — i full length, i exact profile view (bust) and i front view (bust) full face holding hands close in front of body, one palm outward and other hand palm inward. Call for recommen- dation and personal interview will come later. 'Vice-President,' Box 16, care Printers' Ink." 61 62 THE BUSINESS EXECUTIVE first eight of these systems appear not to merit considera- tion here, however strongly from time to time their claims have been championed, so we commence wth the ninth, phrenology. Phrenology, as defined by O. S. Fowler, a leading Amer- ican adherent of the system, "professes to point out a connection between certain manifestations of the mind, and particular conditions and developments of the brain." * The system was first formulated by Dr. F. J. GaU, an anatomist whose attention was early drawn to the subject by his failure as a schoolboy to compete successfully with certain pupils, possessing prominent eyes, who were able to learn by rote with great faciUty. His later experience at the university reinforced his earlier impression, that the relation of prominent eyes and abihty to remember was not merely a coincidence. After further reflection, he conceived that if memory for things was indicated by an external sign the same might be the case with other powers of the mind; hence all individuals, particularly those dis- tinguished either by any remarkable ability or unusual de- ficiency, as criminals, became the objects of his attention. Empirically, and upon the basis of very slender evidence, it must be said. Gall after a time came to the conclusion which he thus stated: "The brain is composed of as many particular organs as there are propensities, sentiments, and faculties, which differ essentially from each other. And as the organs and their localities can be determined only by observation, it is essential that the form of the head or craniiun should represent, in most cases, the form of the brain and should prompt us to seek the means by which we can ascertain the fundamental qualities and faculties and the seat of their organs." ^ *0. S. and L. N. Fowler, Phrenology: Proved, Illustrated, and Applied (New York: W. H. Colyer, 1836), p. 7. ' Ibid., Functions of the Brain (Boston: Marsh, Capen and Lyon, 1835), PHRENOLOGY AND PHYSIOGNOMY 63 In 1796, Gall commenced giving courses of lectures at Vienna which, if one may judge from the action of the Austrian government in surpressing them later as danger- ous to reli^on, must have attracted considerable attention. In company with the pupil who was to be his powerful ally, J. G. Spurzheim, GaU quitted Vienna in 1805 for a tour of investigation and lectures in Germany, following which he took up his abode at Paris. Spurzheim continued the lectures in the British Isles and later in America. The widespread discussion aroused by these two propagandists, the societies formed in their wake, the phrenological maga- zines foimded and the adherents gained among noted people, it is difficult for those of a later date to appreciate; the subject itself was of pecuKar interest and the methods employed by its propagators aroused both execration and devotion. The system of phrenology, founded by Gall and furthered by many others, in its essentials consists of four proposi- tions.^ These as stated by O. S. Fowler, mentioned above as a leading American adherent, we may now examine: I. "The brain consists of as many different portions or organs, as the mind does of faculties." The mental faculties as the phrenologist distinguishes them comprise items such as veneration, individuality, creduUty, sadness, and jealousy. According to the above assimiption the feeling of veneration arises from the ac- tivity of a certain portion of the extreme top of the brain, jealousy from a portion just above the eyebrow, etc. The localization of faculties thus claimed must be sharply distinguished from the locahzation of functions as worked 1 The view that intelligence resides exclusively in the brain, it may pos- sibly appear should be considered as a fifth. What we are seeking here, however, are phrenology's most distinctive tenets. The view just stated is to be found in Hippocrates and with considerable elaboration in Des- cartes and others. Fowler states these propositions, in the work cited, on pp. 17, 21, 22, 24. 64 THE BUSINESS EXECUTIVE out by the scieaitist. The cerebro cortex has been found to possess more or less well-defined regions in which the sense organs and the motor capabilities function; ^ in con- sequence of this knowledge, a movement of the leg, for instance, can be referred to one section of the cortex, the sense of sight to another. Information such as this is useful to the surgeon, at times, in enabling him to perform operations upon the brain with less harm due to imneces- sary damage of the skull. Yet, whereas the taste of an orange, let us say, has its connection with a certain portion of the brain surface, the taste, aesthetic in this instance, for paintings by the old masters cannot thus, or even similarly, be localized. ^Esthetic taste, as well as the other faculties specified by phrenologists, sadness, faith, curiosity, etc., represents a general mode of the organism's reaction and the claim that such reactions depend upon their respective cortical areas violates the concept of mind as the psychologist knows it. 2. "There exists a reciprocal proportion between the relative strength and power of the various mental faculties, and the size of those portions of the brain, or those organs, by which they are severally manifested." A head of large size, according to popular estimates, is a sign of wisdom or unusual mental ability in some en- deavor. It is true, the brain weights of certain eminent men lent credence to this view, yet the evidence, such as it is, cannot be considered conclusive. Brains over sixty oimces in weight, in itself imusuaUy large, are frequently found in qmte imdistinguished persons, and even in idiots sixty ounces has been recorded.'* The nature of mental action, in fact, is not well known; it is believed to be the result of certain molecular changes in the gray matter but their precise nature and extent, 1 Cf. Sherrington, "Brain: Physiology," Ency. Brit., nth ed. * Parsons, "Brain: Anatomy," Ency. Brit., nth ed. PHRENOLOGY AND PHYSIOGNOMY 65 particularly their connection with the phenomena of thought and feeling, remain yet to be demonstrated. A view which possesses considerable plausibility is that mental abihty depends upon the texture and activity of the cortical cells, in other words, upon quahty instead of mere quantity of brain matter.^ 3. "The shape of the brain may generally be ascertained by the form of the skull." This in popular speech is referred to as "reading the bimips." Or as stated by Fowler,^ "It remains, then, for the phrenologist merely to ascertain what portions of the brain are employed to manifest the various faculties and, also, what are the indications upon the skull and the rela- tive size of these organs . . . and then he will have suffi- cient data from which to determine even the minutie of the character and talents, and of the various mental quali- ties of any and of every individual." The brain case, however, is foxmd not to be of imiform thickness, and the presence here and there of supporting tissues and cerebro-spinal fluid, together with a variety of malformations, still further renders the skull exterior an inaccurate or at least uncertain index of the brain con- formation.* 4. "The history of the discovery of phrenology, fur- nishes ample demonstration of its truth. "Like all the other exact sciences," continues Fowler,* "every operation of it was discovered, and brought to its present state of perfection, entirely by induction — ^by an observation and classification of facts." The correctness of this statement may be examined by citing the methods employed by Gall himself. A beggar 1 Cf. Sherrington, Integrative Action of the Nervous System (New York: C. Scribner's Sons, 1906. ' Ibid., p. 24. » Cf. Macalister, "Phrenology," Ency. Brit., iithed. ♦ Ibid., p. 24. 66 THE BUSINESS EXECUTIVE who had attracted the doctor's attention by his ex- traordinary manners and who was continually reverting to his pride and aversion to labor was found upon examina- tion to possess, Dr. Gall says, "On the upper and back part of the middle line, a prominence extending from above downwards, which could arise only from the development of the brain beneath. I had not previously observed this prominence in other heads, and for this reason, I was very anxious to discover what it indicated. ... A prince in Vienna was remarkable for his ridiculous pride, his stiff gait, and his practice of constantly quoting his ancestors. Happily he was bald in the region of the head, where I had noticed the prominence in the mendicant's head and I thus assured myself that he had the same conformation. These facts were sufl&dent to produce the idea, that pride is a fundamental quality, connected with a particular organ of the brain." ^ Similarly, the propensity for theft was located by dividing a crowd of errand boys into three classes, those who took pride in stealing, those who ab- horred it and those indifferent to it; a certain long promi- nence of the skull was found well developed in the first, flat in the second, and moderately developed in the third.* The location of the disposition to murder was hit upon by chance in comparing the skull of a parricide with that of a robber murderer; "there was, in each," observes Dr. Gall, "a prominence strongly swelling out immediately over the external opening of the ear." * Induction such as this, it is needless to say, does not convince.* ' Ibid., Functions of the Brain, TV, 166-167. */iid., IV, 128-129. » Ibid., IV, 51. * The adherent of phrenology will complain that the cases cited do not indicate fairly the very great labors of Dr. Gall and his followers. This ia true. Yet the careful reader of Dr. Gall's six-volume work from which these instances are drawn wiU find numerous cases, it is believed, where the evidence is quite as slender as with those dted. The evidence adduced by O. S. Fowler is oftentimes too fragmentary to be taken seriously, a sort of anecdotal method of localization. Cf. ibid.. New Illustrated Self-Ith- PHRENOLOGY AND PHYSIOGNOMY 67 It appears, consequently, that each of the so-called principles of phrenology is fallacious. Its localizations were arrived at with but little supporting evidence, the brain and the exterior of the cranium do not conform as assumed, the relation between size and functional power is too crude to prove acceptable, and the division of the mind into the given faculties is entirely arbitrary. Such was the system, erroneous not simply in detail but in its fimdamental assumptions, which charlatans have long proclaimed all sufficient in the diagnosis of character and which the credulous, due to their interest in its subject- matter, applied with scant discrimination and, upon the whole, mischievous effects. We turn now to consider a second means of analyzing men, physiognomy. As defined by Lavater, commonly though erroneously known as its foimder, physiognomy is "the art or science of discerning the character of the mind from the features of the face, or the art of discovering the predominant temper or other characteristic qualities of the mind by the form of the body, but especially by the external signs of the countenance, or the combination of the features." ^ It accordingly, as compared with phre- nology, is much less restricted in its scope since the latter, strictly speaking, concerns itself with the cranium alone whereas physiognomy, especially in the way the system has been put into practice, includes in its purview items such as facial expression, shape of nose, length of fingers, color of eyes and hair, skin texture, clothing, posture and gait. It is reasonable to suppose that data upon such topics when skillfully analyzed and classified would yield slrtictoT in Phrenology and Physiology (New York: Fowler and Wells, i8s9)> especially Section IV. The variations among the phrenologists with re- spect to the number, names and locations respectively of the so-called fac- ulties indicate the same thing, that they were arrived at by a method of pure empiricism and for the most part with little real evidence. » Stanton, System of Physiognomy (Philadelphia: F. A. Davis, 1890), p. 7. 68 THE BUSINESS EXECUTIVE results considerably more definite than the phrenologist would find possible.* The study of facial and bodily characteristics dates from the earliest writers. Homer puts these words into the mouth of Nestor when the latter meets Telemachus: "By certain signs which I discern upon thy face, O illus- trious youth, I recognize whose son thou art. I do not wonder to see such splendor in thy eyes. Thy face is proud and generous, thy great eloquence and thy reason recall to me thy father. What youth could such a one as thou be, were he not the son of the great Ulysses." In his Prov- erbs Solomon observes that "a haughty person, a wicked man, walks with a froward mouth, he winks with his eyes, he speaks with his feet, he teaches with his fingers"; and Ecclesiasticus says "the heart of a man changes his coim- tenance, whether it be for good or for evil; and a merry heart makes a cheerful coimtenance. ... A man may be known by his look and one that hath imderstanding by his coimtenance when thou meetest him." It was Aristotle, however, who developed the first sys- tematic treatise of physiognomy, a discussion comprising six chapters and some twenty-five pages.'' "It is stupid to believe in one sign only," he declares, "But when many signs accord of one thing, it may be the more confidently admitted that the signs are true." In consequence, Aris- totle first presents a classification of persons according to their characteristic attributes and he next proceeds to analyze these attributes with some detail. For several centuries following Aristotie, physiognomy, if one may judge from the extensive literature devoted to 1 The distinction between phrenology and phjrsiognomy is among prac- titioners commonly much cottfused, if not entirely obliterated. The author has yet to meet a phrenologist who confines himseU to a study of the cranium or a physiognomist who in his reading gives it no consideration. ' Aristotle's Works, translated by Thomas Taylor (London: The Trans- later, 1809), IV, 427. PHRENOLOGY AND PHYSIOGNOMY 69 it, enjoyed a considerable vogue, the sixteenth century being especially prolific in reprints and new publications. But during the two centuries which succeeded, owing ap- parently to the development of a more accurate knowledge of anatomy, the interest in physiognomy steadily declined, those who might have been its adherents busying them- selves instead with anatomical studies or being absorbed by the expounders of the phrenology which arose about this time, the beginrdng of the nineteenth century.^ Physi- ognomy is accordingly a very old system, long since, so far as popular opinion is concerned, decadent; and the sub-title of a recent work published in the attempt to revive it. The New Science of Judging Men, is, of course, quite misleading. Physiognomy could never have attained its considerable vogue wittout the possession of certain merits nor would it have become decadent without cause. Hence it may be of value to attempt an estimate of these merits and de- fects. The systematic exposition of Aristotie, it may be assumed, was fully abreast of such conceptions of anatomy, physiology and psychology as were current at the time; but the development of these sciences by later investigators, particularly by Bell, Darwin, and modem experimental psychologists, provided certain more definite concepts concerning the validity of the principles, so-called, formu- lated by physiognomists. The attempt to read the mind by noting its outer mani- festations necessarily must assimie that some reciprocal influence exists between mind and body. Psychologists are agreed that such assumption is correct.^ This fact of psycho-physical parallelism, however, guarantees to the ' Macalister, "Physiognomy," Ency. Brit., nth ed.; P. Mantagazza, Physiognomy and Expression (3rd ed., London and Newcastle-on-the Tyne: W. Scott Publishing Co., 1904), Chap. I. * "Mental phenomena," says William James, "are not only conditioned a parte ante by bodily processes; but they lead to them a parte post. That they lead to acts is of course the most familiar of truths, but I do not merely mean acts in the sense of voluntary and deliberate muscular performances. 70 THE BUSINESS EXECUTIVE physiognomist nothing. His task, it still remains, is to connect the exceedingly numerous and oftentimes evanes- cent mental states with their respective external concomi- tants, to such degree of accuracy as will render his correla- tions of value. This problem difficult in itself, is further complicated by the fact, pointed out by Darwin, that whereas certain ac- tions once were of direct or indirect utility in relieving or gratifsdng the desires or sensations accompanying their respective states of mind, the tendency exists through the force of habit or association for such actions to be per- formed whenever a giveii state of mind is induced, even though they may not then be of the least use. Similarly, under the influence of a directly opposite sensation or emo- tion, actions of a directly opposite kind, also of no use, tend to be performed.^ In other words, we must look upon human nature as the product of an evolution thousands of years in duration, and bearing in its present make-up not a few odd survivals from the past. The physiognomist, in consequence, must decide whether an observed feature or expression is an index of the individual disposition or an heredity ethnic character, a still further complication of what was already an elusive task. It is not meant to imply that the mind expresses itself externally without semblance of order, quite by chance. This is not the case; the research carried on by men such Mental states occasion also changes in the calibre of blood-vessels, or altera- tion in the heart-beats, or processes more subtle still, in glands and viscera. If these are taken into account, as well as acts which follow at some remote period because the mental state was once there, it will be safe to lay down the general law that no mental modification ever occurs which is not ac- companied or followed by a bodily change." Principles of Psychology (New York: H. Holt and Co., 1913), I, 5. Cf. also ibid., II, 363, 527. ' Darwin terms these the principles of serviceable, associated habits and of antithesis respectively. Cf. his Expression of the Emotions in Man and Animals (London: J. Murray, 1873), p. 28. James doubts that Darwin's doctrine of antithesis expresses any causal principle, adding that most critics have considered this the least successful of Darwin's speculations on the subject. Principles of Psychology, II, 484. PHRENOLOGY AND PHYSIOGNOMY 71 as Bell, Duchenne, Spencer, Darwin, and Mantegazza, has resulted in the formulation of principles. But these are few in number and very general in nature. As such they do not meet satisfactorily the needs of the profes- sional physiognomist, intent upon application and of mak- ing the proper conunercial impression.^ The latter, accordingly, prepares a list that does meet his needs, however intermixed with fancy and dogma his set of assiuned relationships may be. To illustrate. Dr. Blackford, the most widely advertised of the so-called character analysts, has this to say of color: "In brief, al- ways and everywhere, the normal blond has positive, dsoiamic, driving, aggressive, domineering, impatient, ac- tive, quick, hopeful, speculative, changeable, and variety- loving characteristics; while the normal brunette has nega- tive, static, conservative, imitative, submissive, cautious, painstaking, patient, plodding, slow, dehberate, serious, thoughtful, specializing characteristics. "In appljdng this law of color to people of the white race, the method is simple. The less the pigmentation in any individual, the more marked will be the characteristics of the blond in his physical, mental, and psychical nature; the greater the degree of pigmentation, the more marked the characteristics of the brunette." ^ Space does not permit citation of the numerous and equally positive deductions made concerning various other features of the person vmder observation. Suffice it to say that this system takes for its basis nine factors, termed variables — color, form, size, structure, texture, consist- > Compare, for instance, the statement of these principles by Macalister, "Physiognomy," Ency. Brit., nth ed. with the following statement by Stanton, Encyclopedia, of Face and. Form Reading (and ed.; Philadelphia: F. A. Davis Co., 1895), p. i. "The art and science of physiognomy, as shown in the 'Encyclopedia of Face and Form Readmg' will put the reader in possession of this almost superhuman power to read faces by rule and law settled and defined." 2 K. M. Blackford and A. Newcomb, The Job, the Man, the Boss (Garden City, N. Y.: Doubleday, Page and Co., 1914), PP- 141-142- 72 THE BUSINESS EXECUTIVE ency, proportion, expression, and condition. Even granted that this be a complete classification, which at best is con- siderably beyond the limits of probability, these nine variables constitute exactly what their name indicates, items which are in themselves subject to almost iimumer- able variations. Evidently we have here a system too fearfuUy and wonderfully made to justify the precise re- sults claimed for it.^ The astrologers sweeping the heavens in their search for the determiners of hiunan fate estabhshed, at least to their own satisfaction, causal connections between certain planets and certain individual traits. The child bom tinder Cancer, for instance, was thereby phlegmatic, indo- lent, and gentle tempered; but born when Mercury was low on the horizon he was fated to be of "small stature, with small insignificant features, and very small and quickly moving eyes, and in character shifty, a boaster, foolishly loquacious, and a great liar." ^ The error here, we now recognize, is that of claiming a definite causal coimection between factors where the relation was either accidental or nonexistent. . ' In regard to this phase of the system, we are told that readers "will doubtless find many apparent discrepancies and contradictions, but these discrepancies and contradictions are only apparent. The laws of human nature, like all other laws of nature, are orderly and uniform in their opera- tion, and do not admit of exceptions." Ibid., p. 176. In a lecture given in a New York public school during the time (1914-15) he was serving as educational consultant to the Board of Education, Dean HermanSchneiderof the College of Engineering, University of Cincinnati, said in speaking of Dr. Blackford's system, "This seems to be a development of the old idea of phrenology. It is claimed in this system that physical char- acteristics indicate certain abilities. For example, a directive, money- making executive will have a certain shaped head and hand. A number of money-making executives were picked at random and their physical char- acteristics charted. We have not found that they conform at all to any law. Also, we found men who had physical characteristics that ought to make them executives, but they were anything but executives. A number of tests of this kind gave negative results. We were forced to the conclusion that this system was not reliable." ' R. Baughan, The Influence of the Stars (London: G. Redway, 1889), p. 13. PHRENOLOGY AND PHYSIOGNOMY 73 This fundamental error vitiates practically aU the so- called systems specified at the beginning of the present chapter, and if certain of them are worthless it is merely because their methodolgy is such that this error carmot be eliminated and if others are deemed valuable it is due to the fact that their methodology successfully reduces the risk of wrong causal connections. So far as phrenology and physiognomy are concerned they should be regarded not, as some employment managers mistakenly view them to-day, as sciences in their infancy but as pseudo-sciences, hoary with age and in the main, due to their high percentage of error, neglected because untrustworthy. With respect to the selection of executives, extraordinary claims have been made for them but their results are at best questionable.^ The discussion of phrenology and physiognomy thus far, though largely negative, it is believed will sufficiently warn the reader of the very great ease and danger of ac- cepting chance coimections — such as rubber heels and dishonesty, a mole on the root of the nose and a pleasant wit, a certain deep wrinkle in the pahn and long life, curly hair and constitutional vigor, etc. — as true causal rela- tions; and will also convince him of the important role oc- cupied by charlatans in the careers of the pseudo-sciences. In the words of a most acute critic, appUcable quite as well to physiognomy as phrenology, "Die SchadeUehre ist aUerdings night so sehr Irrthum in der Idee als Charla- tanerie in der Ausfuhrung." * " Cf. as an example of the usual platitudes and errors Stanton, System of Physiognomy, pp. 561, Sd^t S68. 2 Cited by Macalister, article on "Phrenology," Ency. Bnt., nth ed. The study of human nature, however, as delineated by a candidate's outward signs, to use the term employed by Aristotle, has a distinct value, as we shall attempt to point out in the following chapter. In the opinion of the author, accordingly, Professor Hollingworth is imduly severe when he concludes his otherwise excellent chapter with the statement, "The mere facts of physical structure, contour, shape, texture, proportion, color, etc., yield no more information concerning capacities and interests than did the incantations of the primitive medicine-man or the absurd charts of the phrenologists." Vocational Psychology, pp. 55-56- CHAPTER VI Methods of Selection In a preceding chapter a list of fourteen quaKties was presented, the various qualities being ranked in the order of their importance as the business men responsible for these ratings viewed the requirements for a position as executive. The claims of heredity as a factor worthy of consideration in the selection process were next considered, following which the two pseudo-sciences, phrenology and physiognomy, have been discussed. The decision as to these was, in the main, adverse although, as was pointed out, certain features deemed of value were to be brought forward in the present chapter. We are now to consider briefly the following methods of selection as they apply to the executive: the interview, heredity tests, physical tests, mental tests, performance during training, and per- formance at work. The degree of accuracy with which the first four of these methods are to be applied will be considered in Chapter VII, the concluding chapter with respect to selection per se} Of the four selection methods here under consideration, the interview is by far the most commonly employed, and, it may be added, the most difficult, no doubt, to bring under rules of procedure which may rightly be termed scientific. The ability to select competent men is regarded quite correctly as a valuable accompUshment, but since the interview during which this selection commonly takes 1 The latter two methods wUl be considered in Chaps. X and XI. Cf. especially pp. 175 £f. and 209 ff. 74 METHODS OF SELECTION 75 place is a man-to-man affair, its results difficult to check, officials are foimd as a rule firmly convinced of their par- ticular ability to judge candidates with a rare precision. In fact, the author does not recall that he ever has heard any corporation official or employment manager admit any deficiency when it came to picking out men, to use the common expression, although he has had pointed out to him in numerous cases how other officials and employment managers were lacking such abihty. Yet it seems reasonable to suppose that the ability to select by means of the inter- view does vary, the difficulty being not so much that men possess in this respect unequal capacity as that such varia- tions are not known. Evidently, there exists the need for submitting the interviewer's capacity to some definite test. In an experiment which he conducted in a large sales organization of the American Tobacco Company, Pro- fessor Walter Dill Scott has made such a test in so far as it relates to the interviewers of prospective salesmen. Twenty-nine applicants, numbered alphabetically for con- venience in making the test, were to be interviewed, of which number fifteen men were to be selected. The inter- viewers, numbered I to VIII, seven of them being sales- managers and the eighth a division manager, the superior officer of the seven salesmanagers, occupied separate rooms and as the apphcants appeared in turn each interviewer rated the man in whatever order of merit his judgment dictated, from one to twenty-nine. Each interviewer was permitted, even encouraged, to use whatever method he was accustomed to employ in the selection of salesmen. The respective ratings were as follows (see Table VII) : ^ ' From address delivered before the Salesmanship Club of Detroit, Jan- uary 27, 1916. C/. Printers ' Ink, February 17, 1916. 76 THE BUSINESS EXECUTIVE TABLE Vn A. T. Company November, 1915 Average I H IHIVV VIVnvin A 4 18 9 S 21 2.S 2S 3 II B s 8 3 II. s 3 2-5 14s 26 s C 7 4 3 ii-S 6 IS 20 IS 4 D II. s 19 IS 7 21 9 II 3 17 E I 2 3 19 2 23 I 3 2. s F 14 I 9 13. S 24. s 9 2.S 22 24 G IS 20. s 9 13s 16. S 12 8 27 2.S H 10 9 9 24. s 8 6 8 18 15.5 I 3 28 3 6 45 12 4S 3 9 J 2 7 3 4 4S 23 12. S 6 6.S K 19 IS 24 21 13 23 2S II 6.$ L 6 II 9 10 I 12 12. s 19 I M 9 26 IS I 8 9 16. s 3 iS'S N 21 13 24 17 26 23 8 10 26. s O II. s 14 9 8.S 21 2.S 8 17 22 P 24 16 26. s 24. s 10. s 23 2S 20 13 Q 13 3 20 8.S 13 IS 20 13 II R 18 28 20 24. s 16. S 2.5 16. s 7.S 22 S 26 24 IS 18 28 23 14. s 2S 26. s T 22 20. s 9 20 16. s 23 20 23. s 19 U 17 23 24 3 21 6 8 16 28. s V 8 6 IS 2 8 23 4. s 12 14 W 16 10 29 iSS 13 6 18 9 II X 23 22 20 22 10. s 23 2S 7.S 22 Y 27 17 IS 28 28 23 22 28 19 Z 20 12 20 15. s 24.5 23 2S 14 3 AA 2S s 20 24. s 21 IS 29 21 2S BB 28 28 26.5 29 16. s 23 23 29 19 CC 29 2S 28 27 28 23 2S 23. s 28. s Correlation with Interviewers — .70 -41 76 -73 -70 -47 -74 .5S -65 Applicant A was ranked eighteen by the division manager (Interviewer i), and twenty-one by a salesmanager (Inter- viewer IV), judged by these two men alone he would have been rejected. He impressed the other six interviewers much more favorably, some, it would appear from the ratings 2.5, 2.5, and 3, very favorably indeed. In the final rating he becomes man number four and is accordingly by a considerable margin, engaged. The diversity of judgment shown by the various interviewers in this and other in- METHODS OF SELECTION 77 stances is striking. In consequence, no single appKcant was rated among the first fifteen, the number to be selected, by all the interviewers; nor did they agree upon as many as six men for purposes of rejection. What this means if any one of these interviewers had been alone responsible for the applicant's selection or rejection, as had been the practice with the American Tobacco Company and is very commonly the case elsewhere, is evident. The fiiteen men thus selected were put into the field and after some six weeks' active service in selling it was decided by their respective superior officers that C, D, G, and M were "star" salesmen. Yet according to the record shown in Table VII not one interviewer of the eight had rated aU four of these men definitely among his fifteen deemed worthy of selection. ^ C was rated twentieth by one inter- viewer, D also had one rating as twenty-first, G one as twenty-seventh, and M one as twenty-sixth. Since these four salesmen had demonstrated their capacity, it appears that the test of performance confirms the showing made in the table, that certain of the interviewers were subject to rather serious variations in judgment when selecting men. The fact that these interviewers varied so widely in their judgment implies that possibly some were, so far as the ability to select salesmen is concerned, superior to others. This was tested by means of what Professor Scott termed the concensus of opinion and the variation of the individual interviewer from it, it being assumed by him that the man who agrees most closely with the concensus of opinion is the best judge. Interviewer II by this test ranked superior; his judgment to the degree of seventy-six per cent coincided with that of the group. Interviewer I, the division manager and the superior officer of the group, had the lowest per- * In the printing of this table as it appeared in the source from which the author derived it a typographical error has evidently been made since with the figures as they are it would appear that Interviewer III had placed these four men within the given fifteen. 78 THE BUSINESS EXECUTIVE centage, forty-one per cent, and is rated as the poorest in- terviewer of the eight. In practice, the interviewer's task is rendered more difficult owing to the fact that applicants very commonly have little knowledge of the requirements for the position sought nor of their own capacities to fill such position sat- isfactorily were it tendered them. They need very seriously vocational guidance, but in its lack they are, to use the common expression, willing to take a chance. For this reason, the interviewer cannot take it for granted, merely because they have called, that fitness for the position de- sired is assured,^ nor can he depend impHcitly upon the can- didate's estimate of himself in terms of capacities required. The candidate very likely does not know,^ or it may be, impelled by the view very frequently encountered that in selling one's services let the buyer beware, he gives the situation a much more favorable aspect than the conditions justify. Since it appears that the interview has not attained the precision desired were it to constitute the sole means em- ployed in the selection of executives, we may consider the evidence concerning a candidate's heredity in the light of a desirable supplement or check. Inasmuch as the importance of the heredity factor has already been considered in a pre- ceding chapter we shall here concern ourselves with the methods by which information concerning inheritance is to ' E. St. Elmo Lewis voices a plaint common among employers: "Of the men who have come to me to study advertising, many have known abso- lutely nothing about business and have had no taste or sHll in either de- signing or writing, yet these men were entirely willing to waste their time and mine learning something in the practice of which they could not possibly make good and from which they could never extract an iota of happiness." ' A reason for this is the fact that in our country the barriers between occupations are by no means fixed. The University of Illinois in a study of 3663 of Its students found them so distributed in the various schools that the conclusion was drawn, so far as was indicated by its study, that a son does not usually follow his father's occupation. C/. the University of Illinois Press Bulletin — Club of Agriculture— January 25, 1915. METHODS OF SELECTION 79 be secured. This problem, in those cases in which the pro- spective employer is convinced that something should be known of the candidate's family stock, is commonly con- ceived in much simpler terms than is warranted; as, for example, when a certain banker, a self-made financier, let us say, is found to have a son desirous of following his father's vocation, the assertion is made that "banking runs in the blood." Yet if the father as a result of an accident in his youth had gained a peculiar bump on the forehead should the son also be expected to possess such a formation on the ground that in his case a certain bump runs in the blood? What we have to do with here is the problem of the inheritance of acquired characters, and it may be well be- fore discussing it further to describe briefly the method of inheritance as biologists understand it to-day. Since heredity is merely a convenient term for the ge- netic relation between successive generations, the origin of this relation so far as it applies to human beings is to be sought in the protoplasm from which the new individual evolves. The germ cell of the male, termed a sperma- tazoon, in the reproductive process combines with the germ cell of the female, termed an ovum, to form the fer- tilized egg from which the new individual, exhibiting qual- ities common to his progenitors, develops. The problem is how to account for these common quaUtieS. It was once held that the fertilized egg in itself was a preformed embryo, later that the spermatazoon instead was the miniature being, which, penetrating into the egg during fertilization, was there nourished in its growth. Although as thus stated these views have been discarded, they contain an element of truth; egg and sperm, one representing the properties of the female, the other the properties of the male progenitors, unite to form a mixed product, which has inherited the peculiarities of both parents.^ In other words, the study 1 Hertwig, "Advances and Problems in the Study of Generation and In- 8o THE BUSINESS EXECUTIVE of the fertilized cell as it develops and undergoes successive divisions demonstrates that in the newly formed cells, the daughter cells, so called, a precisely equal partition of the maternal and paternal contributions has taken place. But although fertilization thus implies the subtle mingling of two minute organisms so that they became physiologically one, each of them, egg cell and sperm cell, was already the complex product of ancestral lineage.^ It seems evident, therefore, that in so far as the heredity of offspring is concerned, the qualities acquired by the parents cannot be transmitted directly as such but only through the influence which the possession of such qual- ities may have exerted upon the germ plasm. Of this in- fluence biologists are very sceptical.^ It has been beheved by Weismann, as stated in his celebrated theory of the continuity of the germ plasm, that somatic variations, that is, variations acquired by the body, are not transmitted because they do not affect the germ plasm, it being his assimiption that within the organism but unlike the sub- stance composing the perishable body of the individual is a specially organized and living heredity substance trans- mitted from generation to generation.' While as a result of his later studies Weismann admitted the possibility of some direct modification of the germ plasm being brought about by the body's influence,* the implication of his theory is this: A child resembles its parent not because produced from this parent but because both child and parent are pro- duced from the same stock of germ plasm. heritance,'' Congress of Arts and Sdence, Universal Exposition, St. Louis (1004), V, 2g4-29S. 1 Thomson, Heredity, pp. 50-52; Davenport, Heredity and Eugenics, pp. 269-270. ' Cf., Doncaster, Heredity in the Light of Recent Research (Cambridge: The University Press, 1910), p. 97. 'Ibid., The Germ-Plasm (trans, by W. N. Parker) (New York: 1898). Cf. especially p. 395. * Cf. ibid., 417 ff. METHODS OF SELECTION 8i It is beKeved that the r61e of inheritance as here described reinforces the claim presented in a preceding chapter that heredity is a factor worth considering in the selection of the business executive; at the same time, it is true, the pros- pective employer may have come to suspect that recondite laboratory processes were to be recommended as necessary in the appUcation of such knowledge of heredity to the selection process itself. This is not the case, however. Professor W. E. Castle of Harvard University, a biologist well known for his research in the problems of inheritance, has commended to the author such a practical method that his remarks are being quoted in full: ^ "How to secure and evaluate information on this head is a purely practical ques- tion on which the ideas of business men are likely to be of more value than those of scientists inexperienced in judging men as to their qualifications for business positions. "I should suppose that questions addressed to the candi- date or his references as to the occupations of his parents might be of value. For example the questionnaire might call for: "Occupation of father. "Positions of honor, profit or trust held by him, with duties. "Business or social situations held by mother, including offices in societies honorary, business, religious or social in character. "Often a woman never actually engaged in business may display unusual executive ability in the way she manages her household, or some church, social or pohtical organiza- tion with which she is connected. Such characteristics in the mother (no less than in the father) are likely to crop out in the sons. Questionnaires should be carefully formed to draw out such information. "Whether executive ability is a matter of heredity or » From letter to the author, January 27, 1917. 82 THE BUSINESS EXECUTIVE not, the home environment of an individual should coimt for training him for executive work. Still more important is his individual experience. The boy who has captained a ball team successfully has executive ability, especially a scrub team. The one who has managed a cooperative enterprise of boys successfully certainly has it. "But this is beyond the scope of your question which concerns heredity alone. I think inquiries about the parents might be well worth while in this connection, but I should always value them below information about the career of the individual himseK, even as a boy before he entered business at all. Inquiries about the grandparents I should not consider worth while. No information here would be of much value unless it related to all eight grand- parents and were fairly complete, a quite imattainable result in practice." In short, Professor Castle commends the method of arriving at the genetic relationship between successive generations by tabulating the most essential parts of the information existent as to how the heredity factor has indicated itself in various concrete ways, the information being valued the more highly the more directly it bears upon the person in whom our chief interest centers, the candidate himself.' ' The methods used by two leading corporation presidents are worth not- ing in this connection: Says Frank A. Vanderlip of the National City Bank; "The right kind of man should have a lot of friends. If he has been presi- dent of his class in college, or president of his alumni association, or a club director, or connected in a big way with commercial or banking, or. social or charity associations — anything to show that his friends had picked him out as a man worthy of their highest regard and favor — that would count strongly for him. This does not mean being a 'good fellow', a clinker of glasses, or a mere handshaker. It means that people respect him, that he has personality, that he is broad enough in his information to interest people." /6i(i., "How I Pick a $25,000 a Year Man." American Magazine, Lxxxn, 19. J. W. Earle of the Remington Typewriter Company says, "In few phases of life do the temperamental differences of individuals show themselves more markedly or prove greater helps or hindrances than in business in which a man's attitude becomes either an asset or a liability. So important do 1 METHODS OF SELECTION 83 The facts of heredity, to whatever stage of complete- ness and accuracy it shall be deemed feasible to develop them/ are in turn to be supplemented by information concerning physique. In a study which he made of one thousand and thirty- seven executives, a group which was not confined to busi- ness but included governors. United States senators, mayors of leading cities, imiversity presidents, bishops, etc., as well as merchants, manufacturers, insurance company and railroad presidents, the author found 71.4 inches the average height,^ and 181. i pounds the average weight. When these averages were compared with similar statistics secured from intellectuals, men such as authors, artists, philoso- phers, psychologists, and inventors, the executive was found to exceed the intellectual by .7 of an inch in height and 18.2 pounds in weight.^ We may quote as follows from the work in which these statistics have been presented: * "In noting the favorable relationship between these important executives and their size, one is led to inquire if there may not possibly be some connection between the executive's physique, as meas- ured by height and weight, and the importance of the position he holds. Upon this question some interesting consider the temperamental qualifications of a man that I employ no one for a position of responsibility in our organization until I know him per- sonally, and can establish the sort of personal relationship that alone can lead to an adequate understanding of an individual. His schooling, his experience in business, his home life, his associations and affiliations, indicate his temperament and the influences that have molded and directed it. And all of this information is vital not so much because it shows a man's training for one specific task, as because it shows the discipline and influence to which he has been subjected and which will find expression in his attitude towards and aptitude for the large responsibilities ahead of him." System, November, 1913, P- 539- ' The problem implied here is to be discussed m the following chapter. Cf. especially pp. 105 S. ' This includes shoes. ' The results will be found presented with some detail in the author's The Executive and his Control of Men, pp. 23-33, 3I4-33S- * Ibid., pp. 31-32. 84 THE BUSINESS EXECUTIVE data have been collected, and although the results are not as conclusive as one might desire (see note on page 85), they are still well worthy of consideration. "Statistics have been received from preachers in small towns and vUlages where the total amount raised for church support was imder $1,000 annually; presidents of small colleges whose enrollment was under two hundred and fifty and annual budget under $12,000; principals of small public schools whose monthly salary did not exceed $75; county attorneys from six different states; salesmen of typewriters; and station agents in town not exceeding five hundred inhabitants. "In no way is it to be implied that stigma attaches to any of these men. They are merely filling less important positions than the bishops, imiversity presidents, city school principals and others with whom they are compared. Their respective heights and weights are as follows. (See Table VIII.) In each case the larger position is held by the larger man." It does not suffice to consider merely size and weight but, as is evident from the high rank which was accorded health in the hst of fourteen quaUties, functional vigor deserves a close consideration. The interviewer is able to estimate this in a more or less superficial way, a method which has been judged too inaccurate and otherwise \m- trustworthy by the considerable number of firms who have instituted the pohcy of medical examination of applicants. While the medical departments as a rule have been in- stalled for a variety of reasons they have proved of much value in connection with the selection process. Since the medical examination, correctly administered, surpasses by far in its ability to estimate the applicant's physical status the diagnosis of the average interviewer, it accord- ingly would seem an instrument well adapted for use in the selection of executives. METHODS OF SELECTION 8S TABLE Vm Physioub in Relation to Position ' Class Height Difference Weight Dijfference 1. Sishops S : 10.6 S :8.8 176.4 159- 4 2. Preachers Small Towns 1.8 in. 17.0 lb. 3. University Presidents S : 10.8 181. 6 4. Presidents Small Colleges . . . S : 9-6 1.2 m. 164.0 17.6 lb. S. City School Supts S : IO-4 5 • 9-7 178.6 IS7-6 6. Principals Small Towns .7 in. 21.0 lb. 7. Presidents State Bar S : 10. s 171S 8. County Attorneys S : 10. • Sm. 162.4 9.1 lb. 9. Sales Managers S : lo.i 5 : 91 S : IO-9 182 8 10. Salesmen I.I in. IS7-0 186.3 25.8 lb. II. Railroad Presidents 12. Station Agents S : 9-4 1.5 m. IS4-6 31.7 lb. ' The averages given in the above table were computed directly from the original schedules, but for the benefit of those who may wish to apply more refined methods to these data the items have been arranged in frequency tables (class intervals i in. and 10 lbs. respectively) from which the following have been deduced: Class Number Average St. Dif. in Number Average St. Dif. in Number Cases Height Dev. Inches Cases Weight Dev. Pounds I 81 70.8 2.4 82 178.2 26.9 2 30 69.2 2.7 1.6 31 160. s 21. 1 17.7 3 S8 71.2 2.4 61 183.9 23.0 4 26 69.7 1-7 i-S 26 1654 2S-S 18.5 S 25 703 1.8 26 180.0 22.2 6 28 69s 30 .8 29 159- 5 21.7 20.5 7 38 69s 2.7 37 173 -I 25-1 8 31 69.1 1.8 ■4 31 156 -3 14. 1 16.8 9 23 69s 2.1 23 184.6 19.7 10 5° 68. s 2.1 I.O 54 159 I 19.7 25-5 II S3 713 1.9 54 188. 1 23 -4 12 30 68.8 i!.4 2-5 29 156.4 19.8 31-7 Another factor to be considered is that age affects weight, and since the two groups compared are not of the same age a correction should be made in this respect. In the Medico-Actuarial Mortality Investigation the data are presented upon which a rough approximation of this correction may be made (page 13) . The younger group in each case is the second and as weight 86 THE BUSINESS EXECUTIVE With a view to determining in a general way the extent of such use of the physical examination among firms of high grade which already possessed medical departments, the author corresponded with the medical directors of the following companies: Cheney Brothers S. Manchester, Conn. Eastman Kodak Company Rochester, N. Y. General Electric Company Schenectady, N. Y. B. F. Goodrich Company Akron, Ohio. International Harvester Corp. . . . Chicago, III. Metropolitan Life Insurance Co. .New York City National Cash Register Co Dayton, Ohio. Prudential Life Insurance Co. . . . Newark, N. J. John B. Stetson Company Philadelphia, Pa. Travelers Insurance Company . . . Hartford, Coim. Underwood Typewriter Co New York City. Western Electric Company Chicago, 111. Westinghouse Electric & Mfg. Co. E. Pittsburgh, Pa. Winchester Repeating Arms Co... New Haven, Conn. The replies of the medical directors tabulated indicate these facts in regard to examination and reexamination, particularly with reference to whether the ofl&cers of the company were or were not exempt. during the periods under consideration increases with age, these corrections may be deducted from the weight dififerences shown in the table: Preachers i.S lb., presidents colleges .4 lb., principals 6.8 lb., attomeys4.i lb., salesmen 5.9 lb., and agents 8.1 lb. These corrections are based upon the average age as shown in the statistical summary, pages 320-3 23, and, as will be recognized by those familiar with more refined methods, are rough approximations. METHODS OF SELECTION 87 Item Total numbers of firms Medical examination given applicants ' Exemptions allowed executive applicants ". Medical reexamination of employees ^ Exemptions allowed executives * Number of Cases 14 13 S 3 2 Of the firms administering the medical examination to applicants, it is evident, approximately two-thirds require that the candidates for executive positions shall be tested similarly. The proportion which provide for reexamiaa- tion at stated periods is less than twenty-five per cent and of these only one firm, apparently, is testing the physique of all its executives according to a regular system. The chief defect of the physical test as administered by these firms is well illustrated by this statement from ^ This one firm now administering no medical examinations for applicants writes: "The process is due to begin in the very near future but probably will not include the officials. ' ' 'One firm states, "We have not required the department heads or our officers to undergo our usual physical examination. This is for the reason that we find that a very large majority of our upper organization undergo a regular physical examination at the hands of their physicians." A second firm stated, "We believe that it is feasible and advisable for a corporation to require the same medical examination of all applicants for emplo)fment irrespective of the grade of position for which they apply. We also believe that it is advisable to include all officials in the reexaminations unless perhaps the highest executive officers are excepted. We certainly think that persons appointed directly by the officers of the company should be required to pass the same examinations that are required of those who seek employment through other regular channels." This firm was not in- cluded here, however, since it was not their practice, further investigation developed, to require such examinations and reexaminations of executives. ' Two additional firms were about to institute reexaminations at stated periods, one of them planning to include all officers. * One of these two companies has a plan which, while it is optional with the officers, comes very near the no-exemption class: "It is our custom to conduct an aimual physical examination of all superintendents and fore- men on the theory that this group being the back bone of the organization it is especially important that their health be supervised and conserved as much as it is feasible to do so. I can say that about 90 per cent of all super- intendents and foremen avail themselves of this opportunity and are ex- amined by the medical department." 88 THE BUSINESS EXECUTIVE a medical director whose firm has no system of reexamina- tion: "If a new executive were to be appointed from out- side our organization, naturally his physical condition would be considered. As a matter of fact, however, all our executives have been developed from within the organi- zation" — which means that there are really no physical tests for these executives. In considering the situation thus disclosed it is well to recall that these fourteen firms are not typical of the large nimiber of industrial and commercial establishments in this country but are of the highest rank, all decidedly above average. The inadequacy of the average firm's knowledge of its executives' physical condition is apparent; its medical department does not as yet carry on systemati- cally the simplest of the many constructive measures which might well come under its jurisdiction.' ' The medical director of one of these firms takes this advanced, but very proper, stand: "I would say that we made it a rule to examine the depart- ment heads and high-priced employees even more thoroughly than the rest of our employees. It is self-evident that the higher the grade of employee, the greater the risk of the employer, and for this reason we considered it poor judgment not to lay stress on their physical condition. " Because of the amount of work we have been doing, we have not under- taken a wholesale reexamination of the employees, but' a number of super- intendents and other officers have been examined by the medical depart ment." Those interested in health service for firms may find the work performed by The Life Extension Institute, 25 West 4Sth Street, New York City, of helpful suggestion. Circulars descriptive of the service will be sent upon request made of its office. It may be added that in cases where a medical department has been in- stalled, a condition which is becoming increasingly common among business firms and which seems likely to persist, the examination of executives at the time of their selection and at such stated re-examinations as the firm may conduct need occasion no special difficulty. The chief medical ex- aminer of one of the above companies in writing of reSxaminations states, "Several times when similar movements have been introduced the highest officials of our company have been in the first line. This has set such a good example to the lesser lights that we have experienced practically no diffi- culty." The medical director of an insurance company specializing in group insurance informs the author that the officers as compared with the rank and file are found unusually willing to cooperate. For instance, in one or- ganization where opposition was developing to the proposed examination of employees the president aimounced, "I want to be the first man ex- METHODS OF SELECTION 89 In much the same way that the physique is more search- ingly studied by medical examiners than by interviewers, do mental tests in the hands of the skilled psychologist yield a more accurate knowledge of those factors compre- hended by the general term mind.^ The reader must be referred elsewhere for an account concerning the very interesting history of the development of sujch tests and for a critical discussion of the four different methods of testing devised for purposes of selection: " 1. The vocational miniature. The work or some selected part of it is reproduced on a small scale. 2. The sample. The applicant is given a trial upon the actual work to be performed and his ability is judged by his success in this trial. 3. The analogy. A test is devised which requires sup- posedly the same psychological functions as the real work. 4. The empirical method. A variety of tests under varying conditions and with subjects differing in ability as demonstrated on the work concerned are administered, and the results compared in the hope that significant facts wiU be developed. The appKcation of these methods to the selection of the executive is a new problem upon which, as yet, but little has been done — ^upon which but little has been attempted, is possibly the fairei: way of stating it. However, two examples may be presented as indications of the sort of amined." The vice-president was second and the examiners experienced no further trouble. '■ The claim is made by Professor Thomdike: "There is excellent reason to believe that it is literally true that the result of two hours' tests properly chosen from those already tested gives a better diagnosis of an educated adult's general intellectual ability than the result of the judgments of two teachers or friends who have observed him in the ordinary course of life each for a thousand hours." Cited by Hollingworth, Vocational Psychology, p. 211. * Chap. Ill of HoUingworth's Vocational Psychology summarizes the his- tory of tests excellently. These four methods are described by Hollingworth, ihid., Chap. V; and Miinsterburg, Psychology and Industrial Efficiency, Chaps. VII-X. 90 THE BUSINESS EXECUTIVE thing that may be expected to develop more fully in due course. In an attempt to rate the ability of the executives em- ployed at the New York headquarters of a large corpora- tion Mr. William Fretz Kemble submitted these executives to the following tests: ^ Speed of thought Personal opinion Ethical views Observation Hard questions General information Writing speed Estimating Concentration Comprehension Mathematical speed Patient analytical detail Memory for names and faces Tact Of the fourteen tests only four revealed what Mr. Kemble considered significant results in the comparison between executives and clerks: 1. In the personal opinion test the answers to thirty questions such as "Do you believe that war is ever justi- fiable?" and "Do you believe it can ever be possible to build a tower ten times as high as the Woolworth Build- ing?" in the case of the executives rated seventy-three per cent, in the case of the clerks less than fifty per cent. 2. In the general information test the answers to ten questions such as "Of what are bricks made?" and "About what is the present price of pig iron per ton? " in the case of the executives rated from eighty to ninety-five, the clerks averaging approximately fifty. 3. In the comprehension test the subject was called upon to follow certain rather difi&cult directions in connec- tion with a diagram containing numerous small squares. The executives evinced an abihty approximately twice the grade of the clerks in comprehending these directions. 4. In the patient analytical detail test ten problems in ' Cf. "No. I, Standard Tests for Human Character," The Engineering Magazine, New York, for the tests in full. METHODS OF SELECTION 91 arithmetic were set, such as "A manager wishes to intro- duce piece work and also do justice to the operators. In what time by exact calculation in seconds, should an em- ployee perform an operation, provided it was found he took three hundred seconds, with one-third lost motion easily avoided? In this operation, he should receive a credit of fifteen minutes divided over a ten-hour day for setting up his machine. Give the answer in seconds, and drop the decimals or fractions of seconds in the answer." The average person was foimd to solve correctly approxi- mately two of these ten problems, whereas a few of the executives attained a rating of ninety. Upon the basis of their ratings made in these four tests Mr. Kemble ranked in order the executive of this cor- poration.^ Professor Walter Dill Scott who has devised a number of mental tests recently undertook the rating of nineteen executives connected with the organization of Cheney Brothers, South Manchester, Conn. The president of the company, Mr. H. B. Cheney, on the basis of his personal knowledge of these executives also ranked them in order of merit. The two methods show what it seems reasonable to regard as a very high degree of agreement. (See final column of Table IX.) ^ The correlation between these ratings was .93. The mental tests enable the qualifications of the ap- pKcant to be determined quantitatively, a fact which in itself will do much to place the problem of selection upon its proper basis. General and meaningless expressions and the wide variations in the judgments of interviewers to- I For a more detailed discussion of tliese tests as well as a chart showing the final ratings, Cf. W. F. Kemble, Choosing Employees, by Mental and Physical Tests (New York: The Engineering Magazine Co., 1917). 'For samples of Professor Scott's tests see his article on "Selection of Employees by Means of Quantitative Determinations," Annals of the Ameri- can Academy of Social and Political Science, May, 1916, pp. 182-193. 92 THE BUSINESS EXECUTIVE TABLE DC Correlation between Tests and Personal Ratings Ranks n-zr Official B. B. Cheney By Tests of Ranks A I 2-S i-S B 2 ■6 4 C 3 4 I D 4 2.S IS E S 7 2 F 6 I S G 7 6 I H 8 lO 2 I 9 S 4 J lO 9 I K II II o L 12 13 I M 13 IS 2 N 14 17 3 IS 12 3 P i6 14 2 Q 17 i6 I R i8 19 I S 19 i8 I gether with the lack of any definite check upon the selec- tion process itself will gradually be eliminated upon ^e development and more general adoption of mental tests. METHODS OF SELECTION 93 It may be well to point out, however, that with all due allowance being made, these tests are not tc be taken as adequate for testing candidates with respect to all fourteen qualities specified in an earlier chapter. In fact, these qualities, integrity, perseverance, initiative, cooperative- ness and the others, are by the psychologists regarded as descriptive terms, general in their nature and in conse- quence subject to such further division as may be desirable. Were this process of division continued, the individual's full complement of reaction tendencies, multitudinous in number, would be presented in their correct but highly specialized form.^ It is with the testing of such detailed constituents of human nature that the psychologists have concerned themselves and so far as the intellectual factor is concerned the tests devised have attained trustworthy results. Yet the degree of intelligence possessed by the candidate for an executive position is only a part of the necessary equipment. WiU he cooperate loyally with his fellow- workers? Is he dependable, open-minded, and of sound morals? Does he love business as a game and will he per- severe until the things desired come to pass? Has he or- ganizing ability? Such are the questions implied by the list of fourteen qualities and in regard to these as yet mental tests have no full solution to offer. Such tests do afford, however, a method of research by means of which, we feel confident, the consulting psychologist in due time will be enabled to lay before the prospective employer a reasonably complete and well correlated set of quantitative deter- minations concerning the candidates for an executive position.^ 1 Hollingworth, ibid., pp. S&-S9- 'As for the present, the words of Professor C. E. Seashore, himself a psychologist of note, are a propos: "The considting psychologist does not yield unduly to pressure for results. One of his chief duties is to forestall the precipitous rush into estensive application of what may be at best but a 94 THE BUSINESS EXECUTIVE species principle. He will dare to say, 'I do not know,' even if it should take him years to search for the seemingly trifling fact. While we but little dream of the possibilities in command of applied psychology, there is in the present atmosphere entirely too sanguine a feeling in regard to what it can do at short notice. Instead of being hazardous at guessing, the consulting psychologist must have courage to demand that he have the privilege of making patient search before he prescribes. Thus he has to pass through the narrows with the dangers of dissipating his energies in aimless search for truth's sake on the one hand, and, on the other, the danger of hasty and ill- advised rush into practice." Ibid., "The Consulting Psychologist," Popular Science Monthly, LXXVIII (igii), 288. Cf. also HoUingworth, ibid., pp. 214-221; and Miinsterburg, ibid., pp. 126-127. CHAPTER VII The Problem of Selection Standards The problem with which we are next concerned, the several methods of selection having been presented in the preceding chapter, is the degree of accuracy to be expected of these methods when applied. A Chicago manufacturer, who incidentally held a humble position at five dollars a week twenty years ago but has since developed a certain industry which he foimded imtil it now employs two thousand workmen in its seven factories, states thus his ideas on selection: "I usually know whether a man is our grade or not the moment he comes in the door. His head particularly interests me, and his mouth. Out of five or six, I usually make but one mistake." This last sentence is one to which it is desired to call special atten- tion since it involves the problem of selection standards. It is often assumed by business men, at least theoretically, that a standard is an exact measure; but as a matter of practice inasmuch as absoluteness in process or result very commonly caimot be attained, the standard is conceived as being more or less abandoned for the sake of expediency or, what is even more frequently the case, it is denied that a standard exists. The data concerning heights and weights presented in the preceding chapter may be taken as an illustration. The average height of the 1,037 executives, it will be recalled,' was 71.4 inches, average weight 181. i pounds. From the viewpoint of selection standards what do these 'C/.P.83 95 96 THE BUSINESS EXECUTIVE data mean? It has been assumed by some that the execu- tive should be no taller nor no shorter, should weigh no more nor less, than this. Indeed, not a few have looked upon these statistics as possessing something of fatalistic import and they have been found, at times under condi- tions of some Httle anxiety, deciding that certain indi- viduals could and certain could not become executives, because their stature as indicated by the data on height and weight did or did not agree with the given averages. Others, particularly certain reviewers who seemed not to have read with care that about which they wrote, in dis- cussing these data stoutly denied that the evidence pos- sessed any validity whatever, because as a matter of the critic's personal knowledge several small-statured men were successful executives, this coimterevidence, so ran the usual course of reasoning, being decisive and absolute. The records of their heights and weights as shown by the respective 1,037 individuals, however, were found to vary man with man. When tabulated according to classes whose intervals were one inch and ten pounds respectively, these individual data were simimarized into the following frequency table. (See Table X.) ^ It is evident from these tables that a few executives were extremely heavy; but that most of them ranged in height from five feet nine to six feet one; and in weight from one hundred sixty to two hundred pounds. In other words, even were 71.4 inches in height and 18 1.8 pounds in weight taken as standards for the executive (which so far as these given statistics are concerned means the executive in general rather than the business executive in particular) these averages, it would still be essential to bear in mind, have been computed from items which themselves varied considerably, some being above and some being below said averages; and any at- tempt to employ such averages in a hard and fast way, ' Gowin, The Executive and his Control of Men, pp. 326-327. SELECTION STANDARDS TABLE X Frequency DiSTniBTmoN According to Height and Weight * 97 Height in Inches Executives Weight in Pounds Executives 6i — 3 100 — I 62 — I no — 4 63- 2 120 — 22 64- 2 130 — 36 6S- 6 140 — 8S 66 — 34 ISO — 80 67- 42 160 — 144 68 — 93 170 — i6S 69- 114 180 — 14s 70 — ISO 190 — 127 71 — IS6 200 — 8S 72 — 176 210 — 66 73 — no 220 — 49 74 — 74 230 — 18 7S — 39 240 — 3 76- 16 250- 14 77 — 14 260 — 3 78- 3 276 — 4 79 — I 280 — I 80 — I Number of cases 1037 Number of cases I0S2 Average height 71-4 Average weight 181. 1 Probable error ±•054 Probable error =t-S8 Standard deviation. 2.6 Standard deviation 28.1 Coefficient of variation 4 Coefficient of variation 16 in the sense of absoluteness and without regard to this fact of the variation of items as shown in the frequency tables, would be liable to prove disastrous. It does not suffice, however, to predict the possibility of disaster. The problem remains as to whether the candi- date's variation in height or weight is to be considered significant or a negligible quantity. Suppose, for purposes of illustration, that the height and weight of every successful business executive in industry were secured and upon being tabulated found to fall within the exceedingly close limits of five feet eleven and six feet one in height and one hun- ' The accuracy of the conclusions to be drawn from these figures is com- mented upon in the author's work above cited, footnotes, pp. 326-327. 98 THE BUSINESS EXECUTIVE dred and eighty to two hundred pounds in weight; more- over, that similar data were secured from every executive whose industrial establishment had failed during several years past and upon being tabulated were found limited 210 200 W) — « Exe ntli IB } \ ,/ \ Poll 11 BJilde 8 1 uo Sl40 ^lao / \ y r \ J r / \ \ / A ' \ V \ (§80 60 / t' \ \ 1 / \ 40 / 1 \ y r / 1^' V \ ^ r ,^m* / > ■>v '■"" :vJ &1 6:2 6:3 6-A, 6:5 5:6 6t7 6:8 6:9 6:10 5:11 6:0 6a 6:2 6:3 . iiA. 8iS (it Cil ICelght liLFeet imd Imiliea Fig. 8. — Executives and policy holders compared in height.' sharply in height five feet three to five feet six and in weight one himdred and thirty to one hundred and fifty. Clearly here are two well-defined groups and upon the basis of the given assumptions would a corporation ofl&cial not be jus- tified in rejecting the applicant for an executive position whose height was five feet five and weight one hundred and thirty? Yet we need only compare the assumed data with the statistics under consideration to note how far short of the definiteness characterizing this hypothetical case falls ' The number of policy holders, 221,819, has been reduced proportionately to the same as that of the leaders, 1037; the frequency distribution being of course kept unchanged. The class interval being one inch, the above figures on height should be followed by a minus sign which has uninten- tionally been omitted. SELECTION STANDARDS 99 the data actually collected. For one thing, data from bankrupts could not be secured; they failed even worse in responding to such requests than they did ia business.^ Failing this it was decided to compare the data secured from executives with those of the average man, the so- called man on the street. Unfortunately, no satisfactory data concerning the average man was to be secured, hence as a substitute, not in several respects satisfactory but at least the best that is at the present available, the insurance records of policy holders were taken. Even these could not be compared as desired with respect to weight so the comparison is confined to height alone. (See Figure 8.) ^ Instead of the closely restricted and distinctly separated groups mentioned in the h3^othetical case, the curve in- dicates dearly a wide variation with considerable over- lapping. The variation which was observed in connection with the statistics of height and weight also characterize the Judgments of the two hundred and seventy-six business men in their ranking of the fourteen qualities. Accordingly, it does not suffice to heed merely the respective positions of these quahties; the deviations in the judgments expressed concerning a certain quahty should also be considered since these indicate the amount of leeway or allowance, to borrow a term from the machine shop, which should be made in their use for purposes of selection. For this reason, the average deviations in addition to the averages have been computed. (See Table XI.) This table indicates that whereas judgment occupies first rank it was not so ranked by all the two hundred and seventy-six men. Some placed it second, third/ fourth, even as low as eleventh in one case: and its average rating is 3.21. Around this average the different rankings varied, as has just been pointed out, some above and some below, ' Loc. cit., p. 322. ' Loc. cit., p. 30. loo THE BUSINESS EXECUTIVE TABLE XI The Essential Qualities or the Business ExECunvK Average Rank Avarage Demotion Quality 1 3-21 I-S7 Judgment (Reasoning ability, accuracy in conclu- sions, ability to profit by experience.) 3 4-3° 2.80 Initiative (Alertness, imagination, originality, inde- pendence in thinking.) 3 4-S8 3.01 Integrity (Truthfulness, honesty, sincerity.) 4 4.71 2.72 Organizing Ability (Systematizing, classifying according to functions, plaiming and delegating.) S 5-98 3.67 Health- (BodUy vigor, good sight, hearing, etc., in- cluded.) 6 6.40 2.36 Perseverance (Industry, ambition, concentration.) 7 6.83 2-43 Aggressiveness (Energy, courage, domination by will.) 8 7.09 2.32 Open-mindedness (Reasonableness, teachableness, openness to new ideas.) 9 7-97 2.29 Cooperativeness (Unselfishness, kindness, cheerfulness, tact, loyalty.) lO 9.60 2.43 Competitiveness (Interest in playing the business game.) II 9.81 2.56 Control of Emotions (Freedom from outbursts of anger or touchiness.) 12 10.30 2-37 Refinement (Courtesy, manners, general culture.) 13 10.51 2-57 Appearance (WeU-groomed appearance, good carriage, pleasing facial expression, voice, etc.) 14 12.26 1.87 Sense of Humor the average man reporting a ranking which was 1.57 places away from the general average of 3.21. This 1.57 indicates how closely the men were in agreement. In respect to only one other quality, the sense of humor, was the agree- ment approximately as close, this quahty being placed fourteenth with an average deviation of 1.87 places. In SELECTION STANDARDS loi contrast with these two qualities, the ratings of health and integrity show much less unanimity, the average deviation being 3.67 and 3.01 respectively. These averages and average deviations, however, are drawn from rankings made by business men who did not all have the same type of executive in mind. As has been pointed out above, four different executives were con- sidered, viz., presidents of industrial corporations, pur- chasing agents, sales managers, and advertising managers. So far the ratings given have been of these four groups, but we shall now consider the returns in greater detail. (See Table XII.) These more detailed ratings shown in Table XII afford certain evidence bearing upon these two ques- tions, (a) With respect to the quahties required is there a decided variation among different executive positions ? (b) Is the agreement as to the respective importance of these quahties closer when the requirements of these par- ticular positions are rated ? Certain differences are to be noted in an examination of these respective ratings. Whereas judgment, for instance, in the general averages was ranked first, for the position of president or of purchasing agent it was rated second. Similarly the advertising managers rated initiative higher than did the other business men, and integrity lower. Health, also, the advertising managers rated lower than did the sales managers. The purchasing agents placed aggres- siveness considerably lower than did the others, and the same is true of open-mindedness. Less justifiable, it would seem, is the rating of organizing ability somewhat higher by ad- vertising managers than it was rated for the position of president. In regard to the closeness of agreement with which the qualities were rated, the average deviation as to judgment, for instance, was for president 1.65 places, for purchasing agent 1.21 places, for sales manager 1.37 places, and for I02 THE BUSINESS EXECUTIVE TABLE xn Essential Quauties General Averages QuaUty Rank Average Z. ^-* 4^—' il 1 Judgment i 2 Initiative 2 3 Integrity 3 4 Organizing Ability. . . 4 5 Health S 6 Perseverance 6 7 Aggressiveness 7 8 Open-mindedness .... 8 9 Cooperativeness 9 10 Competitiveness .... 10 11 Control of Emotions. 11 12 Refinement 12 13 Appearance 13 14 Sense of Humor 14 3-21 1-57 2 3S3 1.6s 430 2.80 3 4.86 2.09 4S8 3.01 I 2.34 ..87 4.71 2.72 4 S-ii ^•97 5-98 367 S S-93 436 6.40 2.36 8 71S 2.64 6.83 2.43 7 7.09 2.41 7.09 2.32 6 7.08 2-39 7-97 ii.29 9 7.64 2.36 9.60 2-43 13 10.65 2.13 g.8i 2.56 10 9-25 2.58 10.30 2.37 II 10.44 2.56 10.51 2-57 12 10.52 2.74 12.26 ..87 14 II. 71 2.l8 advertising manager 1.37 places, an average for the four of 1.40 places as compared with the deviation of 1.57 places shown in the general average. The last colimrn of Table XII, which gives the average of the four average deviations, when compared with the average deviation shown in the fourth column from the left indicate that what has been pointed out as true of judgment prevails with respect to the other qualities as well. The establishment of norms for various executive posi- tions, it seems evident, is a task of which the above table represents merely a beginning. Since considerable work remains to be done before the requirements for various executive positions can be considered as fully standardized, it appears clear that meanwhile what lists of requirements or specifications are available should be utUized with a due regard to the allowance necessary. The standardization of the interview is a subject which, in view of the wide dependence upon the interview for pur- SELECTION STANDARDS 103 TABLE Xn Essential QtrALinES Purchasing Agent Sales Manager Advertising Mgr. Average Rank Avg. Avg. Dev. Rank Avg. Avg. Dev. Rank Avg. Avg. Dev. of four Avg. Dev. 2 2.63 1. 21 I 317 1-37 I 2.50 1-37 1.40 I 4 4.80 1.94 3 4-13 2.16 2 30s 1.30 1.87 2 1 1.66 ■99 2 3 40 2.36 4 4.66 3.06 2.07 3 3 4-30 1.76 4 5" 2.94 3 4,20 2.50 2.S4 4 6 6.50 3-70 S S-4I 2.82 8 7.20 3.28 3-S4 5 7 7.00 2.40 6 6.48 2.22 9 7.60 1.76 2.2s 6 11 9.20 1.72 7 6.88 2. II 6 6.37 2.71 2.23 7 9 8.20 2.22 9 7.88 1.89 S 6. II 2-33 ;i.20 8 S S-og 2-34 8 7.87 ^.71 7 7.07 1-93 2-33 9 13 10.00 2.40 II 9-8s Z.42 10 913 2.50 2.36 10 12 9-31 ^•05 10 8.96 307 12 10 -33 2.13 2.20 II 8 8.00 2.80 12 10.72 2.24 II 10.20 2.40 2.50 13 10 8.36 2-39 13 10.80 2.41 13 10.56 2.92 2.61 13 14 12.42 1.38 14 "•7S 2.44 14 12.71 1. 18 1.79 14 poses of selection, has received as yet but very little serious attention. The experiments undertaken by Professor Hol- lingworth, however, deserve mention. While the reader must be referred to Professor Hollingworth's book ^ for a full discussion of these experiments, one of them will be cited as an illustration of the method employed. In an attempt to answer the question "Is one who pos- sesses a given trait in high degree a better or worse judge of that trait than is an individual in whom the trait is less conspicuous?" Professor HoUingworth first tested a nimiber of students for the purpose of arriving at the degree to which each student possessed the traits in question, following which he conducted a test which purposed to in- dicate the "judicial capacity" of the various students. In both these tests the student judged himself and was also judged by others as to the trait in question. From these data two sets of correlations were prepared. (See Table XIII.) "In the cases of neatness, intelligence, humor, refine- * Vocational Psychology. Cf. espedally pp. 41-53, 143-161 . 104 THE BUSINESS EXECUTIVE TABLE XIII Showing the Relation Between Possession of a Trait and Ability TO Judge Self and Others in that Trait (All coefficients are positive unless otherwise indicated) Trait Neatness .... Intelligence . . Humor Beauty Refinement. . Sociability. . . Vulgarity. . . . Snobbishness . Conceit Judgment of others Judgment of sdf .22 •45 49 59 59 87 23 38 48 IS 83 47 — 24 — 37 • — ■ 33 — 27 19 — 22 ment and sociability," observes Professor Hollingworth/ "the coefficients are all positive and fairly high. Thus in the case of humor the coefficients of .59 and .87 indicate that that individual whom others consider humorous tends to be the most correct or representative of the group in her judgments of the humor of herself and of others. The coefficients of .49 and .59 in the case of intelligence indi- cate that that individual who impresses others as being intelligent is a good judge of intelUgence both in herself and in others. The same is to be said of neatness, refine- ment and sociabihty. In the case of beauty the coefficients, although positive, are very low and hence not very reliable. They seem to indicate that in this case there is no relation of any sort between the possession of the trait and the ability to judge it. "In the cases of the definitely 'undesirable' traits, vul- garity, snobbishness and conceit, the coefficients tend to be negative, and although none of them is very high, they suggest that the possession of these traits to a given degree tends to disqualify the individual to that degree as a judge of those traits, whether in herself or in others. These re- sults also confirm the results in the case of certain of the */WFor discussion of Mendelism cf. Thomson, Heredity, ibid., Chap. X; Doncaster, Heredity in the Light of Recent Research, Chaps. V-VI; Castle and others, Heredity and Eugenics, pp. i8, 40, 85, 100, 104; Davenport. Heredity in Relation to Eugenics, Chap. II; Bateson, Mmdel's Principles of Heredity (Canabridge: The University Press, 1909). The latter work is th« more complete and authoritative. SELECTION STANDARDS 107 Needless to say, it is the individual in which the prospec- tive employer's interest primarily centers; his concern in the appKcant's family stock is, at most, derivative from this primary interest. Accordingly, it seems feasible in dealing with heredity as a factor in the selection process for business men to concentrate upon the sort of informa- tion specified by Professor Castle in an earlier chapter, with the emphasis placed upon those elements of the candidate's business record which serve most faithfully as indices of inherent capacity. With respect to this latter procedure, what the prospective employer seeks to do is to separate as well as he can the twin influences of nature and nurture, and having thus with respect to one factor rendered other things equal — to employ a Spencerian phrase — estimate the sufl&ciency of the hereditary equipment with which the candidate is possessed. Viewed in this light, the providing of the desired technique is a problem whose solution can be approached in either but preferably both of these ways: (i) Means for a correct appraisal of an executive's contribu- tion to the company. This appraisal can be approached directly, as will be pointed out in a later chapter, and its evidence stated in terms of dollars and cents. (2) Means for supplementing the business record and thus lengthen- ing the period xmder which the person's hereditary equip- ment shall be submitted to study. This second phase of the problem, comprising as it does the facts of inheritance as the term is applied in its narrower and more strictly technical sense, proves a diflEicult one upon which to obtain rehable information. This has been found to be true in England, even in the case of such dis- tinguished personages as the Fellows of the Royal Society; * it may be expected even more so to be true in this country, particularly with respect to business men, whose natures, it seems, are not congenial to passion for genealogical re- • Cf. Gallon's plaint in Noteworthy Families, p. 10. io8 THE BUSINESS EXECUTIVE searches. Moreover, it appears from what has been said of the nature of inheritance that some little expertness, at least, is to be required not merely in the collection of the information but . in determining its significance. While the implications here are that the services of some one ex- pert in handling such material would be necessary, it ap- pears further, owing to the nature of the problem itself, that a few minutes' testing by such expert stationed in an adjacent laboratory (a process analogous to the medical examination as now administered) would not sufl5.ce. The facts of heredity are too deeply buried in the germ plasm for such brief laboratory test to reveal them. They must be sought objectively by trained field workers. For some years past the Carnegie Institution of Wash- ington in its Department of Experimental Evolution lo- cated at Cold Spring Harbor, Long Island, has been train- rag such field workers. The course is conducted under especially favorable circumstances inasmuch as aU the family pedigrees, thousands in number, collected by the Eugenics Record Office are accessible to these students and their training is under the personal direction of Dr. C. B. Davenport, the leading American authority in this field. Following the completion of their course these stu- dents have taken positions in various parts of the United States and it is accordingly merely a matter of time until such trained field workers will be available for the securing of information bearing upon the inheritance of candidates born and bred in any part of the country. The charge made for securing such information and giving it the critical interpretation desired wiU be only a few dollars and the scientific accuracy of the work will be maintained through supervision of the field workers by the home office at Cold Spring Harbor. It does not seem possible, however, in view of the mon- grel nature of the average person, the knowledge all too SELECTION STANDARDS 109 limited as yet of inheritance in general, and the far from complete information desired concerning the candidate's inheritance in particular, to regard the heredity test at present as standardized. Consequently those utilizing this test in the selection of executives should recognize its present tentative state and avoid a dogmatic spirit in its application. Considered as an indicator it has a value, but in the hands of a man wedded to a theory of predestination its results could scarcely fail to prove mischievous. In a general way what has been said of the heredity test is also true of the development to date of mental tests. The tests which have been devised so far are restricted in the main to what may be termed the intellectual factors, and as such are incomplete since the instinctive, emotional and voKtional elements are of decided importance in the executive's work. Nor has it yet been demonstrated that these important nonrational determinants of executive capacity correlate so closely that the intellectual tests may be taken as indices of the degree of their possession. Fur- thermore, the data secured of a certain candidate by the present tests caimot be checked against standards so that the significance of his variations may be determined, for the reason that such norms have not yet been developed nor can they be developed short of years of intensive work.* Complete and .accurate mental tests, the sort desired for purposes of selection in the case of executives, are in conse- quence a matter of confident expectation rather than present realization. The four tests which have been so far discussed, and which, it may be added, are much more complete and searching than those commonly employed, have been ' HoUiflgworth, Vocational Psychology, p. 218. The views of the late Professor Miinsterburg coincided in the main with those expressed by Professor Hollingworth. Cf., ibid., Psychology and /»- dustrial Efficiency, pp. 136-127. no THE BUSINESS EXECUTIVE found in each case not yet standardized. The interview, the physical test, the heredity test, and the mental test are being studied according to methods which we confi- dently beheve wiU in the course of time render them en- tirely trustworthy instruments, yet meanwhile their use for purposes of selection should proceed with a due regard to their present incompleteness and their inability in con- sequence to yield precise residts. It is for this reason that statements such as the following by Harrington Emerson, the efficiency expert, are especially mischievous: "To what extent, any way, at any time, in any department of human activity is the proper person for a position scientifically, perfectly, and infallibly selected in advance? "When I buy and test belting or steel wire or babbitt on specifications, I am not taking any chances. When the United States Government supervises the manufacture of marine boiler plate and of anchor chains, it is not taking any chances. When I specify a Burroughs Adding Machine I am not taking any chances. Also, when I specify in ad- vance the qualities required for a particular position and then find the person with the qualities, I am not taking any chances. "Is it possible to predetermine the essential quaUties for positions? Yes. We can make an elementary begin- ning by specifying health, intelligence, honesty and in- dustry. "Is it possible by analysis and test to select applicants with the essential aptitudes? Yes. Health, intelligence, honesty, and industry are not beyond predetermination. "If this is possible, organization becomes a definite science, as much as bridge or boiler designing and con- struction." ^ Even granting that the purchasing agent, owing to his dependance upon specifications, is not taking any chances, ' Cited by Er St. Elmo Lewis, Getting the Most Out of Busitiess, p. 6. SELECTION STANDARDS iii the assiunption that the selection of employees in its free- dom from error is comparable to the purchase of marine boiler plate or a Burroughs Adding Machine is little less than ludicrous. The final conclusion drawn from these assimiptions is equally fallacious. Needless to say, it is not because of the thing sought, the accurate selection of employees, that statements such as these shoidd be criti- cized but because by asserting prematurely the solution as reached they hinder in a most mischievous way the attainment itself. The man convinced that a fixed correla- tion exists between rubber heels and dishonesty seeks no further, and only when he has put away such childish things can he attain the truth which makes him a reason- ably accurate judge of men. CHAPTER Vm Experience and Training It is popularly supposed that in the selection of an execu- tive the unknown candidate is ushered into the presence of the captain of industry who thereupon, with a swift, intuitive glance, reads his innermost nature and accepts or rejects him upon the spot. The methods of the Chicago manufacturer mentioned at the opening of the preceding chapter are illustrative of this sort of selection process and may be taken as typical of the many stories passing cur- rent among business men regarding this so-called myste- rious faculty by which men of superior grade are to be chosen. While it is not intended to deny the r61e of intuition, particularly that which passes for intuition because in the rapidity of the reasoning process the steps are obliter- ated, there is no doubt that an untrained intuition is a dangerous guide and that the progress of scientific man- agement is marked by the substitution of definite methods based upon experiment and record for these interesting but by no means always rehable impulses from the sub- conscious. It will be recalled, to revert to the case of the Chicago manufacturer once more, that he admits making one mistake in every five or six instances, although one might weU wish to discover how he knew the proportion is not one to three or four. The discussion in the four chapters which have preceded has concerned itself with the means by which ah intuition commonly builded of phrenological and physiognomical EXPERIENCE AND TRAINING 113 lore intermixed with much inconclusive and uncritically accepted experience might be, if not supplanted, at least supplemented by better interviewing and the use of physi- cal, heredity and mental tests. What we are now con- cerned with is that the selection problem have its correct setting. As a policy of management the corporation's officers are commonly fotmd to hold certain views upon the ques- tion whether in securing executives the firm shall or shall not draw from outside its own ranks when vacancies occur. Li considering with a niunber of firms the methods which they employ in the selection of executives, the author sought evidence as to the source of supply, to use the em- ployment manager's phrase, of the candidates. Inciden- tally, some of this evidence can be presented statistically ^ (See Table XIV.) Over one-half of the department heads had been subordinates within their respective departments and their selection was a matter of promotion only. Ap- ^ The informatioB presented in Table XIV has been obtained from the following corporations, although, it may be added, the data as a rule do not include all the executives of any one company: American Brass Company, American Steel Foundries Company, American Stove Company, American Vulcanized Fibre Company, American Writing Paper Company, Automatic Electric Company, Borden's Condensed Milk Company, Buick Motor Company, Consolidated Wagon and Machine Company, Colorado Fuel and Iron Company, Gottlieb-Bauemschmidt-Strauss Brewing Company, J. I. Case Threshing Machine Company, Indian Refining Company, Locomobile Company, New York Dock Company Pittsburgh Plate Glass Company, Standard Sanitary Manufacturing Company, Standard Underground Cable Company, The Studebaker Corporation, United States Envelope Company, United States Gypsum Company. 114 THE BUSINESS EXECUTIVE TABLE XIV The Source of Supply Promoted from Transferred Secured from 71 i J . rr J subordinate from another outside organ- », , , Department Head p^,iti„„^th. Dept.ofovm ization ^'^ in own dept. organization Purchasing Agent Factory Supt Employment Mgr. Chief Accountant Office Manager . . Credit Manager. . Sales Manager. . . Advertising Mgr. . Total 4 2 C S 2 2 6 I 23 2 2 I O I I I 2 lO 39 Higher Officials General Manager. . . President Total General Total 4 6 lO 33 3 7 lO 20 O 4 4 lO 24 63 proximately one-quarter had been transferred to their positions as department heads from elsewhere within the same organization. Less than a sixth had been secured from outside their respective organizations. With respect to the general managers much the same holds true although of the cases upon which information was secured none had been drawn from outside.^ With respect to the presidents, while a somewhat larger percentage had been secured from outside, three-quarters of the appointments were in the nature of promotions. The average length of time these various executives had been connected with their respective firms before being assigned to their present positions was, it may be recalled from the data presented in an earlier chapter,^ seven and nine-tenths years. In so far as the experience of these firms can be taken as ' It may be added here that in several instances the president held the position of general manager. In such cases the information was tabulated as pertaining to the president alone. ' Cf. p. 22. EXPERIENCE AND TRAINING 115 typical (the cases, it will be noted, are only sixty-three) how considerably different from the popular idea of a swift intuitive glance being thrown upon the unknown candidate is this selection of a co-worker whose perform- ance can have been under scrutiny for years! While in several respects this simpMes the selection problem, particularly in that it tends to emphasize the value of certain selection methods not yet discussed, it raises another problem which, it may well be, is quite as difficult to solve. These men chosen to be department heads and higher officials were as a rule, along with many others who stiU so remain, once members of the rank and file. As such, they were paid small salaries because their values as assets were low, and they are now paid large salaries presvunably because their values as assets are high. The idea that an organization should be considered a productive enterprise is very common yet from the view- point here urged such productive capacity is not to be regarded as of materials alone but also of men developed into valuable assets. It is not meant to imply by this that a corporation's primary business is man building, a view which is fre- quently assimied, at times expressly stated ^ but which in the opinion of the author is unsound. But strictly from the standpoint of good business management within the corporation it is claimed that the increased asset values represented by the development of rank-and-file workers into executives deserves the consideration of the com- pany's officials. The average employee begins at the bot- ' The Ford Idea in Education has been thus stated in a pamphlet bearing that name issued by the company (1917): "The impression has somehow gotten abroad that Henry Ford is in the automobile business. It isn't true. Mr. Ford shoots about fifteen hundred cars out of the back door of his fac- tory every day just to get rid of them. They are but the by-products of his real business, which is the making of men. . . . Mr. Ford's business is .the making of men, and he manufactures automobiles on the side to defray the expenses of the main business." ii6 THE BUSINESS EXECUTIVE torn but becomes more valuable to the company as he nears the top. Should this progress from lower ranks to higher ranks be left a matter of chance? The advance of a firm's prod- uct from raw materials to finished stock is not left to chance but, under the close control characteristic of scientific management, has its journey expedited at every possible stage. The old-times handicraftsman in his httle shop did not need such methodology but the productive proc- esses now existent are so complex and large in scope that only by careful planning, scheduling, routing, and follow-up can the organization fulfill its appointed function. Proc- esses analogous to these which transfer the materials from rough stores to shipping room with maximum ac- curacy and expedition should be devised for the executive in embryo, or otherwise, under the burden of routine, the never-ending details connected with some one phase of production, sales, accounts, and finance, he may degenerate into a mere cog. In a symposium on National Education published in 1901 certain English thinkers, after dwelling upon the changes which were being brought about in Great Britain's industry, predicted conditions whose advent the Great War has hastened: "The struggle of the future must inevitably be be- tween a number of great nations, more or less equally well equipped, carrying on production by the some general methods, each one trying to strengthen its industrial and commercial position by the adoption of the most highly developed machinery, and all the methods suggested by scientific research, policy or experience. Under these conditions, it is no longer possible for the individual mer- chant, or for small groups of merchants, to acquaint them- selves, by personal experience alone, with more than a fractional part of the causes which affect the business in EXPERIENCE AND TRAINING 117 which they are engaged. The spread of the modem in- dustrial system has brought with it the modem state, with its millions of consimiers, its vast area, its innumerable activities, its complicated code of industrial and com- mercial law. At the same time, the revolution in the means of transport and communication has destroyed, or is tend- ing to destroy, local markets, and closely interwoven all the business of the world. "Events in the most distant countries, industrial and commercial movements at first sight unrelated to the concerns of the individual merchant, now exert a direct and immediate influence upon his interests. The technical training of the factory or the office, the experience of busi- ness, the discharge of practical duties, necessary as they are, do not infalHbly open the mind to the large issues of the modern business world, and can never confer the de- tailed acquaintance with facts and principles which lie outside of the daily routine of the individual, but are none the less of vital importance." ^ The United States, quite the same as Great Britain, essays to play a foremost part in this era of world business, even though it requires a superior managerial ability and imposes a far more serious burden than heretofore upon the corporation officials responsible for its development. The school of experience, which sufficed during the era of small business afifairs and in which most of the men advanced to high positions during the period of rapid corporate pro- motion had received their training, is, now that the distance between chief official and beginner has in the evolution of large-scale business so lengthened, too slow to suffice. Con- sequently, the problem faced by the corporation's officials is, having placed the candidate in the position justified by his ability, how best to accelerate his progress. 'National Education: A Symposium (1901), cited by Hewins, "Eco- nomics," Ency. Brit., nth ed. ii8 THE BUSINESS EXECUTIVE The term commonly employed to comiote all those va- rious means employed for the acceleration of what normally takes place slowly as a process of the individual's experience is training. The bases of its claims for eflScacy wiU appear somewhat more clearly if the nature of the reasoning process itself is first mentioned. Reasoning may be defined as pur- posive thinking which solves, or tries to solve new prob- lems.^ As such it differs from simple associative thinking, such as the house dog exhibits in scratching at the door, his usual means of securing entrance, even after he has wit- nessed the family depart in the motor car or workmen show in setting up a machining job at the usual feed and rate of operation irrespective of changed hardness in the steel sup- pHed them. The bonds of concrete habits and particular associations are broken by the reasoner, however, since his method of attack enables him to deal with novel data. The unaccustomed situation is not to the reasoning per- son a vague mystery before which he stands in bewilder- ment, but a mass into which he analytically carves his way in the search of what is for the particular purposes at hand the essential attribute. The item chosen, the abstraction, simplifies the situation and, provided it be correctly chosen, leaxis easily to the possible consequences. The problem at hand, accordingly, with its maze of concrete details and connections sufBicient to lose a most hardy but uninitiated thinker, is not attacked en bloc but piecemeal and systemat- ically. Heads of classifications, general principles, have been evolved; thinking becomes an organized procedure. What we wish to emphasize here is the value of general principles as compared to knowledge of detail. In order to live the mental life at aU people have long since been obHged to seek some avenue of escape from the distractions ' E. L.Thomdike's definition. Ibid., Elements of Psychology (New York: A. G. Seiler, igoy), p. 267. C/., also James, Principles of Psychology, II, 329-330. EXPERIENCE AND TRAINING 119 of a multiform daily experience, and their solution very commonly is a curious philosophy, crude, anthropomorphic, and unscientific, but able to secure them the relief desired. So we may account for such current superstitions as "A rainbow at night is the sailor's delight" and for the perennial popularity of such proverbs as "A bird in the hand is worth two in the bush." While these naive elements of folk- thought serve a purpose, their inaccurate and at times mis- leading character has perpetually challenged the more thoughtful to undertake a better systematization. In the various departments of knowledge, consequently, such systematizers, commonly termed scientists, are at work. Their aim is to evolve principles at once more accurate and more comprehensive, it being the ultimate goal of science, as Karl Pearson puts it, to express the universe in shorthand symbols. It was the view of Sir Francis Bacon, arrived at, it may be said, largely as a justifiable protest against the unpro- ductive metaphysicians who had been dominating the world of thought during preceding centuries, that the true scientist should with a mind freed from all bias or pre- possessions set about patiently collecting data, content to believe that the truth sought would gradually evolve.' This method advocated by Bacon also proved unproductive in practice, since it made of the thinker a mere collector, a sort of intellectual packhorse rather than a systematizer. Instead of starting with a mind tabula rasa and patiently groping through the labyrinths of detail, it has been dem- onstrated that the most effective way to master a subject is first to grasp clearly its general principles. This is not equivalent to saying that certain abstractions are to be learned by rote, since such parrot-like work never consti- tutes mastery; but the process is one in which under skilled ^Ibid., Novum Organum (2nd ed., Oxford: The Clarendon Press, 1S89). CJ. espedally Aphs., 36, 68, 97. I20 THE BUSINESS EXECUTIVE direction the learner recapitulates at vastly accelerated pace the evolution of a certain body of knowledge centuries, it may be, in the making. The young law student retraces in three years the essentials of a legal experience over which jurists have toiled some three thousand; the medical youth at the close of his four years' training knows the best of what has been done since Hippocrates; and the college graduate, from a cultural standpoint the heir of all the ages, in sixteen years has traversed in great thought strides the toilsome journey from cave man to contemporary. In the attempt to apply this same sort of procedure, the mastery of a subject-matter through the intensive study of its general principles, to the training of the prospective executive much necessarily depends, it is evident, upon whether or not the business management through which he functions possesses such general principles. This is a matter which merits examination. The individual corporation in the conduct of its business builds up gradually a valuable experience, an asset to which the name good will may be applied or, in terms of scientific management, the organization's larger brain. These val- uable data are in part, of course, the product of trial and error but only in part; they represent as well much severe reasoning appKed to the corporation's problems by those interested in it and responsible for its progress. In the form of production methods, ofl&ce standards, credit ratings, sales plans, company pohcies, even esprit de corps, etc., these data constitute in large measure with most firms the enter- prise's directive force. In the sense then of "a settied rule of action, an opinion or belief which exercises a directing influence on the Ufe and behavior," to employ the definition of Webster, the corporation does possess in its management certain general principles; and to deny the validity of train- ing is to assume that these principles evolved by the cor- poration in the course of its experience are not more val- EXPERIENCE AND TRAINING 121 uable than the methods the novice would hit upon by chance. Yet in the process of developing its principles of man- agement the corporation is not restricted to its own nec- essarily limited experience. Outside are competitors and cooperators whose organizations are quite as alert, and whose contributions to the developing science of manage- ment only shortsighted and surface thinkers will ignore on the pretext that "Our business is different." * The business world, consequently, the multitude of corporate and other enterprises whose activities interrelate, is as one vast laboratory in which each day countless experiments are being performed. The experimenters themselves, these business executives, engage in this enterprise not alone that profits may accrue but from the joy which a creative mind, freed from rule-of-thumb and buttressed by principles, discovers in the apphcation of a science itself.^ ' Says Charles De Lano Hine, the organization expert: "The greatest present need is an antidote for the unwillingness of men to profit by the previous experience of others. It would be amusing were it not so expensive to watch the gropings of many corporation officers for methods to test efficiency. Ignorant of fundamental principles, intolerant of outside sug- gestion, xmable to detect the analogy in other imdertakings, they repeat the expensive experiments of the past." * Quite correctly President Vanderlip points out that in the popular mind the motives of business men are often maligned. "I know leaders in the business world," he says, "who have as little concern for personal reward in what they seek to accomplish as would be the rule with men engaged in scientific research. These men are devoted to certain commercial ideals. The making of money happens to be inseparably connected with those ideals, but the making of money is not the great moving force. They are interested in the expansion and development of business, in the discovery of new fields of operation, and in the introduction of improved methods. Their interest in that work is no more ignoble than is the interest of any other specialist. Men who already have more than most ample means are not for personal gain pursuing business with an absorbing intensity. It is empire building with them, perhaps on a small scale or perhaps on a great one. Their lives are not sordid. They may be narrow, as the lives of all specialists are nar- row, but the popular idea in regard to men whose lives are given to com- merce, the view that these men are devoting their existence to mere money getting, is in great measure erroneous. They have the same high type of imagination which usually marks men who attain eminence in any other line of activity. They are, in a large way or in a small way, as may be de- 122 THE BUSINESS EXECUTIVE In developing a science of management, however, these business executives are not upon territory de novo. For the business organization is a group engaged in the collective struggle for existence and advantage, and as such its prin- ciples of operation are alhed to those principles proved effective in the activities of various other social groups and which it is the task of sciences such as economics, biology, political science, ethics, technology, geography, sociology, and psychology both to develop and state. Since these sub- jects have imdergone a long development with a consequent enrichment in their store of general principles, the younger science of business management by adopting and adapting certain of these principles from the older sciences is enabled to accelerate its own advance.^ termined by their environments, using qualities similar to those that make great statesmen, great scholars, or great scientists." Ibid., Business and Education (New York: Duffield and Co., 1907), pp. 34-35. ' Consider what a flood of light the following principles, drawn at random from these older sciences and few in number compared to the stock available, throw upon the problems encountered by the business executive. "Evolution is a change from an indefinite, incoherent homogeneity, to a definite, coherent heterogeneity; through continuous differentiations and integrations." H. Spencer, First Principles (New York: D. Appleton and Co., 1865), p. 2r6. "All plants and animals are engaged in a struggle for existence, in which selection takes place and the fittest survives." Darwin, Origin of Species (6th ed.; D. Appleton and Co., 1912). "The entire nervous system may undoubtedly be regarded as a vastly complicated molecular mechanism." G. T. Ladd, Outlines of Physiological Psychology (New York: C. Scribner's Sons, 1892), p. 175. "It is the essence of all consciousness (or of the neural process which underlies it) to instigate movement of some sort." James, Principles of Psychology, II, 5Si- "Impulsive social action, as a rule, varies inversely with the habit of attaining ends by indirect and complex means." F. H. Giddings, Inductive Sociology (New York: Macmillan Co., rgoi), p. 177. "Tradition is authoritative and coercive in proportion as its subject- matter consists of belief rather than of critically established knowledge." Giddings, ibid., p. 207. "The causes of competitive profits originate in change and are important because it takes time to adjust economic relations to changed conditions." Seager, Principles of Economics (New York: H. Holt and Co., 1913), p. 121. "At any given time, there is a point in the investment of labor and capital upon natural agents beyond which further investment yields a less than pro- EXPERIENCE AND TRAINING 123 As is commonly the case with a body of data undergoing process of transformation into that condition of definite- ness deserving the name science, the advance does not take place with equal rapidity at all points but is like a skirmish line moving forward over irregular terrain. For practical purposes solely, both because it expedites the systematiza- tion of business knowledge in general and particularly be- cause it corresponds to more or less well defined phases of the organization itself, the data pertaining to management are to be classified under four heads: Production, sales, finance, and accounts. So far as these are concerned from the standpoint of scientific procedure, it probably is not far from correct to say that up to the present accounting has attained the most definiteness in its principles, follow- ing which comes production, finance and sales in the order named. That doubt arises at times as to correct procedure, which is equivalent to sa)dng that its data are not an exact science, will be agreed by any thoughtful executive in these four departments.^ The same is true, of course, of their ensemble. portionate return." R. T. Ely and G. R. Wicker, Elementary Principles of Economics (New York: Macmillan Co., 1904), p. 129. "The rules of the social game are respected by the many good men chiefly because they are forced upon the few bad." E. A. Ross, Social Control (New York: Macmillan Co., 1901), p. 125. "The nations of our time cannot prevent the conditions of men from be- coming equal; but it depends upon themselves whether the principle of equality is to lead them to servitude or freedom, to knowledge or barbarism, to prosperity or to wretchedness." De Tocqueville, Democracy in America (Translated by Henry Reeve, New York: Colonial Press, 1900), II, 348. " Class codes of morals are sanctions, under the caption of ideals, of un- criticized customs; they are recommendations under the head of duties, of what the members of the class are already most given to doing." J. Dewey, Ethics, a lecture delivered at Columbia University in the series on Science, Philosophy and Art, March 25, 1908, p. 26. "All rules of action for the guidance of life must be of possible social ap- plication, even though in their origin they are announced and urged by in- dividuals." Baldwin, Social and Ethical Interpretations in Mental Develop- ment (New York: Macmillan Co., 1897), p. 524. ' The expert recognizes very well the inexact state of his own specialty although as an amateur viewing some other field he is apt to seize upon as settled truths conclusions which the experts of this latter field consider still 124 THE BUSINESS EXECUTIVE While it is true that the general prinaples of managing an enterprise which have been already established are of de- cided value, the individual executive finds equally help- ful, in fact, in the less developed phases of business, even more helpful, the method of science. It supplies him a means of attack, a plan of procedure in dealing with the numerous and detailed problems arising continually in the day's work which are not yet standardized.^ The work of Frederick W. Taylor, quite appropriately called the Father of Scientific Management, is therefore germinal in its na- ture; Mr. Taylor solved a few problems but above all he bequeathed a method of approach plus an inspiration for others to do likewise.^ in process. This attitude prevails not alone among business men but also scientists in general. To an executive earnestly seeking the development of a science in manage- ment these words of Professor John Dewey bear comfort, concerning as they do the tendencies prevalent in a. field long tilled by scholars: "Unstable equilibrium, rapid fermentation and a succession of explosive reports are thus the chief notes of modern ethics. Scepticism and traditionalism, em- piricism and rationalism, crude naturalisms and all embracing idealisms, flourish side by side — all the more flourish, one suspects, because side by side." Ibid., loc. cit., p. 19. • Cf. the remarks of Charles M. Schwab, Chairman of the Beard of Direct- ors, Bethlehem Steel Corporation, on the value of a college education for purposes of business: "I am not against a college education. I never have been. Whatever may have been true in the past, there is no doubt that to-day industrial conditions favor the college man. Old crudities are dis- appearing; science is dethroning chance. Business is conducted on so vast a scale that the broadening effects of higher education gained through proper application, write a very large figure." Ibid.. Siuxeeding with What you Have, pp. 30-31. ' That Mr. Taylor himself would agree with this estimate of his work ap- pears in this remarkable passage, in which the Father of Scientific Manage- ment ranks himself a profound psychologist, or philosopher: " Scientific man- agement," said he, "is not any efficiency device, not a device of any kind for securing efficiency; nor is it any group of efficiency devices. It is not a new system of figuring costs. It is not a piece-work system; it is not a bonus system; it is not a premium system; it is no scheme for paying men; it is not holding a stop watch on a man and writing things down about him; it is not time study; it is not motion study nor an analysis of the movements of men; it is not the printing and ruling and unloading of a ton or two of blanks on a set of men and sajdng, 'Here's your system; go use it.' It is not divided fore- manship or functional foremanship; it is not any of the devices which the average man calls to mind when scientific management is spoken of. I am EXPERIENCE AND TRAINING 125 Of the four principles enunciated by him, "First: The development of a true science. Second: The scientific selection of the workman. Third: His scientific education and development. Fourth: Intimate friendly cooperation between the management and the men," ^ the three latter are in reality corrolaries of the first, since they indicate how the first broad generalization is to be applied. The analysis of this first principle in turn, par- ticularly the explanations given by Taylor as to how it was to be applied, shows that which we really have here is what imder other circumstances has been variously de- nominated scientific method, logical thinking, and rea- soning. In so far as they can be separately distinguished without distorting the nature of the mind's operations, the steps in these processes are five in number: ^ not sneering at cost-keeping systems, at time study, at functional foreman- ship, nor at any new and improved scheme of paying men, nor at any effici- ency devices, if they are really devices that make for efficiency. I believe in them; but what I am emphasizing is that these devices in whole or in part are not scientffic management; they are ustful adjuncts to scientific manage- ment, so are they also useful adjuncts of other systems of management. "In its essence, scientific management involves a complete mental revolu- tion on the part of the workingmen engaged m any particular establishment or industry — a complete mental revolution on the part of these men as to their duties toward their work, toward their fellow men, and toward their employers. And it involves the equally complete mental revolution on the part of those on the management's side — the foreman, the superintendent, the owner of the business, the board of directors — a complete mental revolu- tion on their part as to their duties toward their fellow workers in the man- agement, toward their workmen, and toward all of their daily problems. And without this complete mental revolution on both sides scientific management does not exist." Hearings before the House of Representatives Sp. Com. on The Taylor and Other Systems of Shop ManagementjWa.shiagton,!). C, 1912, m, p. 1387. Cf. also Taylor, The Principles of Scientific Management (New York: Harper Bros., 1911), and Shop Management (New York: Harper Bros., 1911). ' Ibid., Principles of Scientific Management, footnote, p. 130. ' Dewey, How We Think (Boston: D. C. Heath and Co., 1910), p. 72. Says Professor Dewey: "The trained mind is the one that best grasps the degree of observation, forming of ideas, reasoning, and experimental testing required in any special case, and that profits the most, in future thinkmg, by mistakes made in the past. What is important is that the mind 126 THE BUSINESS EXECUTIVE 1. A felt difficulty. 2. Its location and definition. 3. The suggestion of a possible solution. 4. The development by reasoning of the bearings of the situation. 5. Further observation and experiment leading to its acceptance or rejection. The method of scientific management, therefore, is essen- tially the method of the trained mind, and the distinctive contribution of Frederick W. Taylor, as the author con- ceives it, is that his efforts have advanced to a marked degree the cause of the business scientist. The evidence as to the possession by the management of both general principles and scientific method would perhaps be most conclusive if presented in the nature of internal evidence itseK. Since this in view of the space limitations and the relevancy of the topic itself does not appear feas- ible,^ two brief items of evidence will instead be presented. In studying the careers of twelve presidents and general managers previous to their attaining such positions, the author inquired concerning the respective departments in which these officers had had most experience. To use the emplo3mient manager's phrase, an answer was sought to the question as to the source of supply. The results are as follows, several of the officers specifying more than one department. (See Table XV.) While these cases are too few to be conclusive in them- selves, they suggest certain conclusions which observation seems to corroborate: Men advance to the higher executive positions from various departments, thus confirming the view previously presented that the requirements are gen- should be sensitive to problems and skilled in methods of attack and solu- tion." Ibid., p. 78. 1 In another work, The Executive and His Control of Men, the author has attempted to state these principles of management and at the same time set forth the methodology of the executive. EXPERIENCE AND TRAINING 127 TABLE XV Depaetmbnts from which Prbsidbnts and General Managers have Advanced Department No. Department No. Legal I 2 3 3 3 Credits ' 4 4 S 6 12 Technical 0£&ce ManasfinsT Financial Purchasine: Arrniinting, . , , Works Supermtending eral in nature. Furthermore, there appears to be a rough correlation between the niunber of men promoted from them and the degree of the tmspedalized nature of the work required by the different departments. Legal and technical training has been drawn upon least, while works superintending and sales managing have been found con- siderably more prolific in preparing men for advancement. Were there no science of management results such as this, it seems, would not appear. The test which the business man applies so commonly that it may almost be termed instinctive is that of, "does it work"; and the science of management he would rate by the profits attained through its aid and the salaries paid the men professing to possess such science. While this test in certain respects is narrow, no doubt, much could be said in its defense were this regarded as necessary. At any rate, with respect to the second test, the salaries received by those trained, some statistical evidence is here presented. The New York University, School of Commerce, Ac- counts and Finance, has been for several years offering courses for the training of public accountants, bankers, manufacturers, merchants, stock, bond and produce brok- ers, fire and life insurance men, credit men, teachers in commercial high schools, consular service men, sales and advertising men, real estate men, and journaUsts. The course of study has been imtil the academic year 1916- 128 THE BUSINESS EXECUTIVE sssssssss >-WU*ilUW«IWU I i I i i I i I ooooeooo 1 § M s 4 » a •»afli»0*«i« « flk « « • w « 1 a a J a a a a £ ! : : 1 1 va «so / tou / uu / MJ / 490 s. ■■ > / 40U / \ / AM / \ / SH / ' y / i!OU 180 >/ /^- ^ /^ lUO » Fig. io. — Average salaries of the graduates of the New York University School of Commerce, Accounts and Finance. The chart above shows the average monthly salaries of the members of each graduating class. The figures are derived from signed returns received from over 500 alumni.' ' The author is indebted to Mr. H. H. Huggins, Director of the Efficiency Bureau, New York University, for the above chart since the statistics were secured and compiled by him. EXPERIENCE AND TRAINING 129 191 7 three years in length and the students under con- sideration took ten hours of class work per week for thirty weeks each year, a total of nine hundred hours. Instruc- tion was given in the late afternoons and evenings, prac- tically all the students being engaged in business during the day. The requirements for admission to the school have been: (a) for the regular students a qualifying cer- tificate issued by the Regents of the University of the State of New York or graduation from a high school giving a four year full course recognized by said Regents; and (b) for special students an age of twenty-one years or more and two or more years of satisfactory business experience. The salaries of the various classes average as shown in Figure 10. Although these statistics are not conclusive since no data are available concerning the salaries of young men similar in all respects save the attendance at the New York University, School of Commerce Accounts and Finance, it is believed that to those somewhat familiar with the earnings and rate of advancement attained by youjig men in business the figures are an indication worthy of note and corroboratory of the general argument here presented, viz., that for managerial effectiveness under present conditions, experience must be supplemented by training. CHAPTER IX Methods of Training We have seen that much valuable knowledge pertaining to a firm's progress has been accumulated, while consider- ably more could readily be accimiulated, and that, whereas left to chance the executive in the making comes into pos- session of this knowledge through the slow, expensive, and uncertain method of experience, the purpose of training is to accelerate this transmission of knowledge, to raise the executive to heights otherwise not reached, and to secure a greater imiformity of procedure. In order to attain these desirable ends in practice, certain methods of training need to be employed. Several of these methods will now be discussed, following which the results of an investigation into the methods now in vogue wiU be presented, and in conclusion some criticisms of these as well as suggestions for improvement will be made. The most frequently employed perhaps of all methods is the plan of having the man under training serve as an assistant to a higher ofl&cial. Hence in industry such titles as Assistant General Manager, Assistant Sales Manager, and Assistant Superintendent are very common. The assumption is that the chief, a man of ability who has very likely himself earned his promotion by advancing from this same position in the department, knows thoroughly the requirements of the position and the qualities necessary in an assistant department head. In practice, however, it is found that the relations between chief and assistant are necessarily personal as well as business, and that in 130 METHODS OF TRAINING 131 consequence matters of temperament count for much. The chief in selecting an assistant on the basis of the tempera- mental qualities involved possibly has secured an agreeable personality as a complement to himself but not a man with capacity for the advancement contemplated. Hence an estimate as to the value of an assistantship as a means of training the executive must depend in part upon the means used in any given instance for the selection of this assistant. The position as assistant considered from the standpoint of its value as a method of training possesses this distinct advantage, it affords direct contact with the work itself. It must not be overlooked that the corporation's primary interest is not in training men per se but in getting certain work done at a given cost, the training program being of value because it expedites the attainment of such result. Accordingly, the opportunity here afforded of getting the work done has so engrossed the attention that the possi- bilities of traimng at the same time have not received the consideration warranted. The assistant takes hold of the work itself, his efforts can be closely supervised, his errors being corrected and suggestions given at the most appro- priate time; and he presumably has at all times the inspira- tion of being near a master workman, his chief. Under conditions such as these growth in executive ability should be rapid. Yet such is by no means always the case. It does not necessitate extended investigation to discover that the superior officers of a corporation differ widely in their ability to develop men. Some are able, and take justifiable pride in so doing, to point to man after man whom they have "made"; others apparently are sterile, and of these not a few possess unenviable records, were their careers investigated, of the men whose abilities they have dwarfed. In getting at the reasons for the above difference in the ability to develop men it seems that, whereas some officials in their intellectual operations flash from step to step so 132 THE BUSINESS EXECUTIVE quickly that they neither realize the slow pace of a novice nor are able to explain the matter to him, in many cases the present-day executives have attained their knowledge of business through experience alone and now possess it as an ill-assorted conglomerate, an intuitional mass whose opera- tions we commonly term rule-of-thiunb. Only by chance is the practice dictated by rule-of-thiunb correct, and the training given the assistant by an executive of this school thus is practically certain to perpetuate wrong methods in business. Inasmuch as the chief often does not feel he can afford the time and effort required for explaining the rea- sons, even as he sees them, for a proposed operation, the training afforded the assistant is apt to be narrow, and however weU it may have sufl&ced in the chief's case, in- adequate for the era in which the assistant's powers are to reach their fruition. It is not only the degree to which he knows business as a science which affects the chief's ability to train but the mat- ter of attitude as weU requires consideration. The chief, relatively speaking, occupies the position of power, and the possession of such power affords a subtle test of an execu- tive's capacity in the qualities, good or bad, which it brings to the forefront. Possibly the chief likes to dominate and prefers to surround himself with mediocres in order that his own surpassing excellence may be all the more clear; or it may be that he has a fondness for flattery, a weakness which is indulged by the bestowal of proper rewards upon those who sing most loudly and long his praises; or again the chief seeks only ordinary talent in an assistant and forces out a man of capacity by withholding promotions and training because he fears the loss of his own positi6n. Should an executive suspect, perhaps upon good grounds, that a competent assistant was being assigned him prepara- tory to his own forcing out or should he, at enmity with the organization, time his resignation in order that his leaving METHODS OF TRAINING 133 might affect its interests most seriously, it is easy to surmise the quality of training afforded an assistant meanwhile. Noir should the contrary be overlooked, that assistants may be disloyal and attempt to supplant their superior officers, emplojdng means worthy only of unlawful con- spirators. It is true that the display of such traits by execu- tives and assistants are properly regarded as reprehensible, and that the right sort of officers try to surround themselves with assistants of capacity, the view being that to do other- wise is to be disloyal to the company, the subordinate, and oneself. There is much to be claimed for this view, as we shall attempt to point out in a later chapter. We are con- cerned here, however, with the situation as it exists and there is not the slightest doubt but that the evils specified do prevail widely.^ ' The usual arguments offered a chief in order to induce him to devote his best efforts to training an assistant L. Wertheimer, manager of several New York department stores, thus states: "In my stores I make it clear to the buyers that they endanger their positions more by not having well-trained assistants than by having them. I make it plain that, so long as they do sat- isfactory work, I do not want to let them go, and show them why it would be bad business for me to do so. In addition to this, I point out to them the opportunities for advancement, either in position or earning capacity, that exists for them in my plans for the future, and I make it plain to them that they cannot have these promotions unless they have trained assistants who can carry on the work from the points they leave off. The result is an or- ganization that is built up something on the order of the German Army, the efficiency of which is imquestioned by fair-minded men, regardless of what other opinions they may have." New York Tiwcj, December 17, 1916. Were the matter as simple as this manager attempts to indicate it would cause little difficulty, but unfortunately it is not. The executive functions most vitally in an organization during its periods of stress, when the enter- prise is in its formative stage or when alternating periods of prosperity or depression threaten its existence as a going concern. Yet such conditions do not last always. T. Coleman Du Pont in the following remark concerning his own activi- ties supplies an interesting setting to the problem here considered: "The first thing we did was to amalgamate all the many different companies and the scores of sub-companies controlled by the Du Fonts into one corporation. This meant efficiency and economy in every department. The consolidated concerns were systematized and standardized and the best methods put into practice, departments created and the managers given responsibility and offered premiums for results. "I knew nothing of the manufacturing of powder except the general chem- 134 THE BUSINESS EXECUTIVE It does not follow, however, that even though the assist- ant be selected and trained properly, enjoying the proper attitude of his superior officer meanwhile, that upon the latter's quitting his position the former should invariably be advanced. The particular method of organization which prevails has to be considered as a factor upon which the feasibility of such procedure depends. In a corporation's New York headquarters, to cite a concrete illustration, the secretary and the third vice-president were found in charge of duties organized respectively as follows. (See Figures ii and 12.) It appeared to be a matter of common knowledge in this organization that were the secretary's position to be- come vacant the assistant secretary would be promoted, but that were the vice presidency open none of his four subor- dinates, each a competent specialist, would be elected to the vacancy. Without doubt, in cases where an assistant is able to assimie his chief's duties at any time, the payment to him of a salary somewhat above the compensation normally pertaining to his position can be justified on the grounds of istry which I had learned at school. My cousins had this knowledge and experience. I was familiar, however, with the use of it commercially and had successful experience in organizing and systematizing several industries. "We engaged the best men we could find. We paid six men very large salaries — and they were the cheapest labor we had, for their brains could make thousands for the company annually." "Now that the building has been completed and its organization working smoothly, it does not call for my attention. I like conceiving, planning, organizing, systematizing and getting a project established successfully. Then I want to start something else. Just now I am out of a job." Leslie's, October 5, 1916. Since Mr. DuPont is a multi-millionaire with varied interests, our sympa- thy need not be unduly exercised that in consequence of his organizing ability he rendered his own services unnecessary. But suppose he were an exec- utive dependent upon his position? What we really have here is an open- ing up within the corporation of special opportunities, "pioneering" is the usual business term for it, with attendant rewards and attendant rides in the security of tenure with respect to these larger rewards. When the special opportunity has been exploited, some men prefer to move on to other com- panies, some try to locate other rich "strikes" within the same company, while others will drop back to their former spheres of responsibility and earn- ings. Cf. p. 187 ff. METHODS OF TRAINING 135 insurance. The organization which has fortified itself with capable understudies to its leading executives occupies a more secure position. Yet it is obvious that the desirability of insurance varies not only with the degree of risk but with Secretarr- Asat, Secretary Best. Head Dept. Head Offlcs Manager 1 Dept. Head Dept. Head OMrd 1 TJce-Preeident'l a Dept. Head Dept. Head Dept. Head Dept. Head Figs, ii and 12. — The plans of organization developed by two executives within the same corporation are here shown in contrast. the rate of premium which must be paid. And it is here suggested that in businesses highly systematized, where the chief is a skillful organizer and perhaps as well con- sidered a more or less permanent member of the staff, it may not- pay to provide an imderstudy sufficiently compe- tent to merit advancement to the department's headship at any time. Should the organization be small, even condi- tions opposite to these frequently will not justify the provi- sion of competent imderstudies. In an attempt to estimate the value of an assistantship as a method of training executives, we may conclude, these questions are pertinent: 1. Is the assistant's selection due to objective standards or personal idiosyncrasies? 2. Is the chief able to develop men? 3. Is the assistant's training based upon standards or rule-of-thvunb? 136 THE BUSINESS EXECUTIVE 4. What attitude is held by chief and assistant respec- tively? 5. Under the given conditions of organization can an assistant qualified for promotion be employed with profit? The information disclosed by questions of which the above are typical indicates the value of this method of training executives, a value, needless to say, which varies according to factors such as the degree to which the indus- try is standardized, the espit de corps prevailing within the particular organization and the types of personahties in- volved as chief and assistant. This value, moreover, is to be taken in a relative sense since whether or not this method should be employed depends upon what results are attain- able by it in comparison with the other methods to be con- sidered. It is not unusual to liken a business organization to an army, there being an analogy, it is pointed out, between the way small units within each are builded into larger and the method as well by which authority passes step by step from the superior officer down the fine xmtil the rank and file is reached. There is much truth in this analogy, as even those industrial executives who oppose the so-called military type of organization will admit. Yet such discussion is inaccurate in that, while the lines of authority from su- perior to inferior are made prominent, little or no attention is paid to the fact that without additional influences the organization is not fused into a unit. This defect has serious practical consequences as corporation officials discovered upon taking charge of their vast combinations some years since; the industrial organization constructed upon the lines merely of authority and obedience proved when com- pared to the smaller units of competitors both unwieldy and wasteful. The large-scale enterprise had its advantages but since these were not being realized to the degree desired the METHODS OF TRAINING 137 more progressive of these officials soon set about remedying the difficulty through certain modifications in the plan of management. The need was felt for a higher degree of cooperation, both between subsidiaries of the corporation, between different departments of a subsidiary, and within the various de- partments themselves.^ It was also seen that the officers elevated at the time of consoUdation to positions whose scope transcended by far their former positions did not rise easily to the new demands, that of supervising the corpora- tion's activities in the same close way to which they had been accustomed. Moreover, there were additional officers not admitted into the higher ranks of the new company who in the pre-combination period would have secured ' It is a natural tendency of the average department head to measure all the company's activities from the standpoint of his own speciality, and to assume eventually, unless measures are taken by which this warping in- fluence may be counteracted, that the entire organization revolves about his particular department. Hence the credit man's arrogance in rejecting certain orders, possibly upon safe grounds so far as the likelihood of pajonent is concerned, which the sales department wishes to put through at once, the sales manager's naive view that the production department's sole duty is to turn out the goods of which the sales organization has disposed, to men- tion two of many similar cases which, in the opinion of the general manager, like Banquo's ghost will not down. The view held by the broader-minded department heads is well illustrated by this quotation from the reply made by Charles Austin Bates to a young man desirous of becoming a copy writer in an advertising department: "I have trained and attempted to train many copy-writers, and my most difficult task was to convince them that words were the least important part of their work — that first they must get clearly in their minds the kind of people who could use articles of the class to be advertised — why they should use such things in general — why our particular article should honestly be preferred in its class. Knowledge and conviction on these points can come only from concentrated study — ^first, of people and their needs and desires; second, of the article — its uses and how it is made; third, of the methods by which it must reach the user. "The writer must have in his mind a clear and vivid picture of the whole operation of making, selling and using. Then if he is convinced that the article is superior and is desirable to the user — ^if he knows why, the words ought to come easily." All the departments of an organization, in fact, are interrelated, and the effective specialist should accordingly possess much general knowledge in addition to his technique. 138 THE BUSINESS EXECUTIVE positions of importance with their smaller establishments but now feeling themselves shorn of personal initiative and authority were inclined to be restive imder the changed conditions. Flexibility had been lost and individual initia- tive was not being enlisted to the extent considered nec- essary. A device introduced, which, while it was not the only means utilized, has proved so successful in operation that practically every corporation employed it in some form, may be termed the conference method. It is true that the military organization has its council of war and that even in the case of small industrial concerns the manager was apt to consult subordinates more or less regularly, but the open recognition of the conference as a device of manage- ment and its assiduous cultivation is something recent for which our corporation ofl&cials deserve much credit. Since human nature has had the groimd patterns of its interests shaped centuries ago under conditions of face-to-face rela- tions it appears that when memoranda and printed instruc- tions do not suf&ce to secure the results desired the feasible plan is to reinstate the personal contact. Inasmuch as the conference system is widely prevalent among directors and other groups of higher officials and is, according to the experience of numerous firms being successfully installed lower and lower in the ranks, it affords a rather common method of training the executive.^ It is in this particular phase, of course, that our interest here centers. • The experience of a prominent lithographing company in New York is worthy of note in this connection. All employees who have been with the company for fifteen years or more of continuous service are thereby elected to the honorary directorate. Whenever the company plans to set on foot a new enterprise, such as taking over a new plant or making some distinct change in plans, these honorary directors drawn from the ranks are present at the board meetings held twice a year and take an active part in the discus- sion and voting. It is felt that their long service and association with the company entitles them to a closer contact with its affairs, and the plan adopted has been found to disseminate a general confidence among all the employees thus represented at the conference. This leaven of official in- METHODS OF TRAINING 139 The conference method, quite the same as the assistant- ship, concerns itself with the corporation's business affairs primarily, the training which it affords being in the main incidental. Hence the plan possesses a reaUty to the student executive. This reality, it is evident, depends con- siderably upon the conferee's feeling of responsibility as he takes part in the discussion. Should the chief oflBlcials use the conference in the main for purposes of announcing what they had already decided upon or should the conferees, hav- ing authority only to recommend, enforcement being left to others at the latter's discretion, discover that as a matter of record the recommendations submitted were being re- jected without due grounds, the conference likely will not evoke any particular feeUng of enthusiasm or responsibility. Those concerns which are utilizing the conference system most effectively do not permit higher ofl&cials to make of it an empty shell, some of them going to great lengths in assuring the conferee of his responsibility.^ A solution formation carried among the rank and file by the one hundred and fifty employees made honorary directors to date promotes in a very effectual way internal harmony. ^ The Patton Paint Company of Milwaukee is one of these firms as is indicated by the following account of its plan of governing by the confer- ence method submitted the author by the secretary of the company, Mr. Ludington Pa>tton: "Our governing body is comprised of two Councils, the Office Council and the Factory Council. We have these two instead of one, because of divided interests — the Office Council, of course, being but remotely concerned with factory problems, and vice versa. All Depart- ments are represented by their respective Heads at these Councils. Meetings are held weekly for each. "The scope of these Councils is very broad, all questions appertaining to the organization being submitted to and decided by them, the majority of votes ruling. The separate functions of any one Department are not con- sidered by the Councils, but any matter in which another Department is concerned is handled by the Councils. The Chairmanships are held in ro- tation, and minutes and accurate record of Committee proceedings are kept by the Secretaries, who hold permanent office. "As stated above, all questions concerning classification of duties, hours, routine, production, etc., are submitted to these Councils and after being put to vote, the decision of the majority is final and obtains. "It need hardly be said that we use perhaps more than ordinary care in selecting additions to our organization, giving preference to those who we 140 THE BUSINESS EXECUTIVE which has much to commend it is the assigning in a more or less definite way limits to the authority of each conferring group within the organization. Cooperation between the various groups may be secured by an arrangement whereby an official, possibly the secretary of a group possessing su- perior authority, serves as chairman of a group next in authority. Yet even under such conditions it often occurs that not much business is transacted, the conference being rather a discussion prolonged interminably by certain wordy mem- bers, perhaps even a monologue indulged in by the chair- man or possibly someone who has usurped the latter's functions. In consequence, the remarks made during the conference by no means always correlate closely with the members' ability in their respective positions nor is there provided the feast of reason which for purposes of training might be desired. Nevertheless, the opportunity for each to give his best and learn the most has been afforded, at least in theory, even though under the practical difficulties of the situation this has not been utilized. Very likely it is the chairman's fault, although successfully conducting a conference requires a degree of pedagogic skill somewhat beyond the usual qualffications of an executive. The conference, as usually conducted and viewed from the standpoint of its efficiency as a means of training execu- tives, performs its chief service in the development of co- operation and allied qualities. The student executive through his attendance comes to know his fellow workers and their problems, and how he may play his r61e as an believe broad enough to appreciate and advance our standards. We con- sider our metiiod an ideal one under which to operate, in fact, we believe it is the only one which will insure the absolute good-will and cooperation of the employees. Misunderstandings or disagreements of any moment are impossible because all grievances are adjusted promptly and adjusted ac- cording to their own sense of right or wrong. The organization is so perfect and the plan so efficient that we find little, if any, personal supervision necessary." METHODS OF TRAINING 141 organization member more effectively. ^ These are no mean results in themselves. Moreover the conference affords the opportunity, often utilized in our leading corporations, for the appointment of committees, whose assignments, in- vestigations and reports call for a high grade of intensive study, group criticism, and constructive effort. A third method in certain aspects similar to the confer- ence plan just mentioned is the use of study clubs, within the organization. At times these clubs are conducted in the nature of debating societies, at other times as informal discussional groups or, perhaps more commonly, the mem- bers are addressed by some speaker, after which a general discussion takes place. As a usual thing these club meet- ings, as compared with the conference, are held outside working hours, are to a large extent controlled by the mem- bers themselves, and as a form of serious study very fre- quently are subordinated to recreational features. The subjects discussed do not as a rule bear so directly upon the day's work as is true of a conference, yet at the same time this permits a much more fxmdamental consideration of the factors involved. In a small organization or in a large organization which is highly specialized, the subjects considered by the study club are necessarily somewhat general in nature in order to appeal to the diverse interests of the membership. While this serves excellently the purpose of training in cooperation and in providing a certain breadth of view, it does not afford the specific aid the members generally desire. With ' In speaking of the conferences which he was permitted to attend as a young officer of the Standard Oil Company, Mr. A. C. Bedford, the present head of the Standard Oil Company of New Jersey, recently remarked: "It was an invaluable experience for me to rub shoulders with these men daily at such an eventful time. I drank in the business and financial wisdom they had accumulated during several decades of activity in the handling of gigantic afiEairs. It was an inestimable privilege for a comparatively young man." Leslie's, May 3, 1917. 142 THE BUSINESS EXECUTIVE the requirements of the day's work foremost in conscious- ness, they are apt to be disinclined to consider general prin- ciples, particularly if these are^ presented as abstractions. A solution which has seemed to meet this difl&culty very satisfactorily consists of meetings of specialists, the mem- bership of the given association being not confined to any one firm but embracing such scope as its respective adher- ents decide. Typical of such associations are the following: The American Society of Mechanical Engineers, The Associated Advertising Clubs of the World, The Economic Club of New York, The National Association of Manufacturers, The American Iron and Steel Institute, The National Association of Corporation Schools, The National Electric Light Association, The Taylor Society, The National Commercial Gas Association, The Purchasing Agents' Association, The Credit Men's Association, The Executives' Club of New York, The Detroit Executives' Club, The Employment Managers' Association of Boston, The Philadelphia Association for the Discussion of Employment Problems, The Industrial Council of Rochester, Chambers of Commerce (in various cities). Necessarily among associations such as these considerable diversity obtains as to personnel of membership, scope from which the membership is drawn, place and frequency of meetings, the time and lengths of sessions, the prominence of the speaker, the nature of his address, and the character of the discussion.^ In consequence, the efficiency of each association as a means of training must also vary, but that ' The activities of three of the above associations, to select these for pur- poses of illustration, are as follows: The Economic Club of New York in its membership represents upon the whole big business. Its meetings number four per year and are held in the evening preceded by a formal dinner. Dues per individual are $15 annually. Each meeting is devoted to some one sub- ject of current interest. The speakers, usually five in number, are men of prominence. The Employment Managers' Association of Boston endeavors through the METHODS OF TRAINING 143 business men find in the meetings of such associations much of value is evidenced by the steadily increasing number of associations and their enlarging membership. The spirit of cooperation upon which these associations depend for their helpfulness similarly renders possible the utilization of another method of instruction to an extent of which managers of the old school could scarce conceive, viz., inspection visits and trips. With certain railroads, for example, it has been the practice to send groups of operating officers, headed by a division or general superintendent, on tours of inspection of other roads. They travel in an official business car, examine all important terminals and points of interest, and upon their return render a report of their observations and of new features worthy of adoption. These reports are useful, but the greatest value of the plan Kes in the extent to which it promotes the knowledge, en- terprise and skill of the visiting officers. Needless to say, those upon whom they have called also have benefited. Under the strict guarding of methods which has been heretofore in practice managers not infrequently resorted to the use of spies, and the present policy of more friendly give-and-take represents accordingly an ethical gain as weU as an effective means of training. The recognition on the fnedia of meetings, discussions, industrial visits and committee work to aid its members in solving their personnel problems and in keeping them in- formed regarding the latest development and the best methods of handling employment work. The membership is composed of men in charge of the employment and personnel work of large commercial and industrial estab- lishments. The annual dues are $20 per year, per firm. This includes the membership dues of one active member and of three associate members, aU of whom have the privilege of attending the meetings and participating in the activities of the association. The National Association of Corporation Schools, unlike the two associa- tions above mentioned, does not confine itself to a local territory but includes in its membership the educational directors and others concerned with the training problem of corporations here and there throughout the coimtiy. Meetings are held annually, the sessions extending over three days. A re- port of these proceedings is issued to members together with a monthly pub- lication. The dues are $100 annually per firm. 144 THE BUSINESS EXECUTIVE part of managers that even their competitors are not competing in every aspect of a business, the noncompeti- tive phases being fit subjects for the exchange of informa- tion; the perfecting of management as a science, thus enabling men in diverse businesses to learn more readily from each other; and the growth of the cooperative move- ment itself are among the factors upon which the increased utilization of this method of training can be predicted. In several respects qmte different from the training meth- ods already described but nevertheless a plan which con- tains much of promise is the corporation school. It was found that the public schools necessarily gave a training general in nature whereas the service required of the em- ployee by the corporation called for specific attainments. Inasmuch as only the corporation knew what these special requirements were and was primarily concerned in meeting them, it seemed obliged to supply the training through whatever means were found to be most feasible. The school maintained by the company itself, having demonstrated its value as a solution of the problem, has now become a char- acteristic feature of the training program of practically every large corporation. Among the courses arranged by the educational directors of the corporation schools we may note such as these: Alternating-current apparatus, Arithmetic, Bookkeeping, Comptometer operating, Eleipents of electricity, English to foreigners. Personal hygiene, Sales correspondence. Salesmanship, Stenography, Switch-board operating. Typewriting. METHODS OF TRAINING 145 An examination of these courses, however, indicates that, although the material covered may be extremely valuable and the results attained by the instruction excellent, those piirsuing such courses are in the main the rank and file, and not executives. It is true that executives earlier in their careers very frequently have taken these courses and doubtless with good effect; yet the corporation school when dealing with such material can scarcely be said to be en- gaged in the training of executives. There are certain reasons why the corporation school to date has done so little directly in this respect. The school represents an attempt to apply to training the same prin- ciples of specialization of fxmction and mass production which have proved effective long since in other departments of a business, particularly the works. Inasmuch as the executives in comparison with the rank and file are few in number, it appears wise for the school to concentrate first upon the sort of instruction needed by the large nimibers. Moreover, the materials of instruction represented by sub- jects such as dealt with in the above courses are relatively well wrought out, and in consequence are workable in the hands of the instructional staff. The same cannot be claimed of the materials of instruction drawn from the company's managerial policies and elsewhere, which are desired for the training of its executives, which indeed are necessary if this training is to proceed expeditiously. It is accordingly difficult to secure instructors should a course for executives be contemplated, some higher official per- haps being pressed into service, but the instruction even with him being much more likely to be informal and con- ference-like than a systematic presentation of essentials. Typewriting and bookkeeping, to mention two courses presented successfully by many corporation schools, are pretty thoroughly systematized; the same is true of arith- metic and stenography, and the other subjects under the 146 THE BUSINESS EXECUTIVE close analysis and checks to which they are being subjected in progressive concerns are rapidly attaining a similar definiteness. But the methods employed by an executive the average educational director finds for purposes of in- struction comparatively intangible, their results less definite and more difficult to check. Nevertheless, now that a fairly weU systematized metho- dology has been attained in the task of training the rank and file for their specified duties, those educational directors occupying the front ranks of their profession are reaching the conviction that developmental work as compared with fitting in work is the next forward step. In other words, they recognize that training men for advancement logically foUows that instruction which fits them for specific tasks. Accordingly, the point is now reached in the formal training of executives when the importance of better foremanship is emphasized. Ways and means for solving this problem are being tested, and in due time courses for executives will be evolved by the corporation school. Certain organiza- tions in which the operations have been more fully stand- ardized are, in fact, already through their own schools systematically developing minor executives.^ The same specialization of function and mass production whose benefits are responsible for the development of the corporation school indicate the desirability of the corpora- tion's cooperation with the public system of education, particularly the universities engaged in higher commercial education, in securing for its executives a training which the corporation's own school at present does not find it feasible to give. These commercial schools regard business as a profession and their faculties have as a chief aim the presentation of its principles systematically. "I know the ' The activities of the National City Bank in training men to become man- agers of its foreign branches and of the United Drug Company in training men to become managers of its various drug stores may be cited as typical of this sort of thing. METHODS OF TRAINING 147 majority of business men trained in the school of routine work," says President Vanderlip of the National City Bank,^ "will doubt the feasibility of teaching in the class- room, in a scientific and orderly fashion, those principles which they have gained only through years of hard expe- rience and which they even yet recognize more by a sort of intuition than by conscious analysis. The engineers of an earlier day thought that blue overalls and not a doctor's gown formed the proper dress for the neophyte in engineer- ing, but we have come long ago to recognize that the road to success as an engineer is through a technical school. So, too, I believe, we will in time come to recognize, though perhaps not to so full an extent, that the road to commercial leadership will be through the doors of those colleges and universities which have developed courses especially adapted to the requirements of commercial life." The United States Commissioner of Education in his annual report for 1916 states that during the preceding year 109,697 students were pursuing commercial courses in high schools and commercial schools, an increase in the enrollment of some 60,000 over 1914.^ It is estimated by the Commissioner that were a full report secured from all schools, including normal schools and universities, giving commercial courses the enrollment would exceed by far 425,000. Unfortunately the number of students in com- mercial schools of university grade has not been reported by the United States Bureau of Education for a number of years, hence the availability of such students as candidates for executive positions caimot be determined with any degree of accuracy. It is safe to conclude, however, from the mmiber of commercial departments being opened in universities and the growth in registration of the better ' Business and Education, p. 29. 'C/. Ibid., II, 529. The statistics concerning increase are not strictly comparable due to the fact that whereas 3,618 sdiools reported in 1914 the number was 3,468 in 1915. 148 THE BUSINESS EXECUTIVE known institutions, that the increase in the enroUment of such students is going on rapidly. (See Table XVIII.) The curricula of these university schools of conunerce are shown, usually in some detail, in catalogs issued by the respective institutions. TABLE XVI Student Enkollment in Certain Leading Schools op Business School 'oS-'oQ 'og-'io 'lo-'ii 'ii-'ii 'n-'ij 'i3-''4 '"H'S 'JS-'i6 'i6-'i7 '17-18 New York University 1079 1240 1632 1879 2260 2823 4396 4328 University of Pa. 472 494 535 544 62s 787 916 io8s 1384 1023 > Northwestern University 255 Harvard University 80 369 539 507 519 650 752 85s 1017 804 > 91 94 97 120 117 166 190 232 Dartmouth College 32 35 34 S3 SI 64 77 88 88 28 1 Boston University 274 378 82s 1438 219s These statistics refer to the respective schools of business and not to the enroUment of these universities as a whole. In adjusting these graduates of commercial schools within the organization it is found that while their qualifications as a rule are excellent the young men are apt to impress their co-workers as too theoretical to be at once placed in positions of responsibility. In other words, while they know the principles of business management they do not yet possess the special technique necessary for the effective application of this knowledge, withia their organization. They still need training, although only of a special sort. The solution as worked out by a number of firms is that of assigning these men successively to various positions throughout the organization, the aim being to familiarize them within a brief time, perhaps six months or a year, with each phase of a firm's business and in consequence place them safely in a position of responsibility.^ In case the • Covers the first semester only. ' The Westinghouse Electric and Manufacturing Company of East Pitts- METHODS OF TRAINING 149 student has pursued his cojmtnercial course while engaged in business at the same time, a plan which is made feasible by the considerable number of evening courses offered by our schools of commerce, this system of rotation may be rendered unnecessary inasmuch as at graduation he is also burg, Pennsylvania, during the past sixteen years lias enrolled in such a course over 2,500 graduates of technical schools. Its present plan contem- plates first a careful selection of the student. Representatives of the com- pany visit each year the leading technical institutions with which relations have been established, where promising candidates in the senior class are in- terviewed upon the recommendation of the faculty, fellow classmates, and especially of the men in the company's training sdiool who knew these ap- plicants as under-classmen during tiieir own college careers. The careful investigation which each student imdergoes before selection is supplemented by close checks upon his progress in the company's school, it being under- stood from the first that continuance with the course depends at all times upon the proficiency maintained both in his class and in his shop work. In the shop course each student covers four manufacturing departments, spending approximately six weeks in each, and two testing departments, approximately three months in each. The work thus so varies that by the end of the year a student has had experience in widely differing manufactur- ing and testing departments. Here the student becomes a workman, get- ting the regular workman's point of view, and — an experience which proves especially valuable to him as a manager — ^has an opportunity to "make good" with many different foremen and managers. This experience in the shop is supplemented by the dass training offered by the educational de- partment. Each student reports for a three-hour recitation period each week at whith time subjects such as general machine-shop practice, special processes of manufacturing, cost and pay systems, labor conditions, and methods of handling orders and materials with which he has just been dealing at first hand in the shop, are discussed systematically. In addition, all students are expected to take advantage of the lectures offered by the study clubs, which are delivered in the evenings at the Westinghouse Club. This general course of one year in length is followed by specialized training, the student as a result of his experience in the different departments and con- ferences with the instructors of the educational department being assigned to that branch of the company's business in which it appears he will be most effective. Advanced class training is provided during the continuance of this specialized training. The students are paid 20 cents per hour during the first 1,370 hours, 22 per hour for the next 1,370 hours, and 24 cents per hour for any further time spent upon the general course. During the time of the specialized course they are on the pay-roll as regular employees. The company reserves the right to discharge a student at any time, or a student may leave in good stand- ing at any time by giving a notice of one week. The course as conducted has demonstrated its ability to train men for executive positions with the Westinghouse interests, it being estimated that over one-half of the company's leading officials were once students in this course of training for technical graduates. ISO THE BUSINESS EXECUTIVE to a considerable degree an experienced business man. It may be urged that a man cannot do justice to his position while engaged in study outside, yet it must not be over- looked that the two interests in this case are not so much antagonistic as supplementary. The statistics heretofore given as to earnings and salary increases of men who were at the same time studying do not indicate that their em- ployers found them neglectful of their duties. While this plan is here mentioned in connection with the placing of college graduates, it is in reaHty a method of training in itself which has much to commend it as a de- veloper of executives whether they be college trained or not. The executive in comparison with the average em- ployee must be broadly trained, and if, as is usually the case, his particular position will not thus qualify him it may very possibly be that certain transferring of him accom- plishes the end sought.^ This is one explanation, at least, ' The way this method is applied by the Goodyear Tire and Rubber Com- pany is as follows, the author being indebted to the firm's librarian, Mr. P. H. Tarr, for the information: "From the standpoint of production the main objective has been to educate a considerable number of operatives on all our manifold processes so that they will not only be able to perform each more intelligently but in order that, through the shifting of these from one de- partment to another, excessive absence, or shortage of labor, in a depart- ment may be offset and the balance of production maintained. To this end the Goodyear Factory School has offered courses in rubber manufactur- ing practice to the production "Flying Squadron" which is an organization of picked workmen from the various rubber manufacturing departments. The course is of three years' duration, leading to the degree of Master Rubber Worker, and consists of two lectures a week for twenty-six weeks aimually, beginning with a study of the power plant, followed by a study of the raw materials and methods of preparation, and thence leading through detailed descriptions of all the operations which create the finished product. These men are also trained in English and arithmetic. The idea of such a course is to supplement and round out the experience gained by these men in the various departments; it gives them a rational, not a blind, conception of particular tasks, and in consequence vastly increases their general availabil- ity around the plant. "Results obtained by the Goodyear Factory School in this direction have been very gratifying. Squadron No. i (so called) was organized May ist, 1913, was graduated last spring, and about 65 per cent of these graduates have been promoted through real capacity and merit to foremen or assistant- foiemanships. Other Squadrons or classes to the nimiber of six have been METHODS OF TRAINING 151 of the fact that planning clerks, methods men, and others whose duties bring them into contact with various phases of the company's business, to a relatively high degree de- velop into executives. A method of training whose advance during the past few years has been even more rapid than that of university schools of commerce is the correspondence school. Clas- sified according to the character of ownership and control, these schools faU into three groups:^ Public correspondence schools — those connected with certain state universities, such as Wisconsin. Private — a class represented by such schools as the In- ternational Correspondence Schools. Quasi-public — such as the National Commercial Gas Association and the American Institute of Banking. So far as the training of executives is concerned, some of the correspondence schools merit scant consideration since their courses are devoted to technical subjects. The schools which offer general commercial training are relatively few in number, the leading representatives being: The Alexander Hamilton Institute, The Business Training Corporation, the Industrial Extension Institute, the La Salle Extension University, and the American School of Correspondence. Even in the case of these five institutions, the courses exhibit this marked distinction: Instruction which covers the entire field of business systematically but in a general way, the aim being primarily the development of a well-rounded busi- ness man; and instruction which deals intensively with one organized at intervals so that the plant now has at least 300 thoroughly trained rubber workers of immense value to the production departments of the factory. Since Squadron men, in a majority of instances, have had only a limited amount of previous education, they are very eager and make every minute of the school time coimt." 'Galloway, "Correspondence School Instruction by Non-Academic In- stitutions," Annals of the American Academy of Social and Political Science, September 1916, p. 4. 152 THE BUSINESS EXECUTIVE phase of business, such as accoimting, traffic, business Eng- lish, business administration, and foreign trade, the purpose being primarily the development of an effective business speciahst. In a rough way what we have here is a distinc- tion between the general culture college and the profes- sional school, the difference being that with these corre- spondence schools business in both cases is the subject of study. Outside of the above difference the instruction, however variable in quality, follows more or less standardized lines. There are texts or lessons; lectures dealing wili special phases of the subject; lesson assignments; problems; and service, the activities of the latter being the criticism of the student's problem solutions, the answering of his various questions, and, in general, the maintaining of his interest throughout the course. A fairly accurate index of the efficacy of the instruction which results is the munber of students enrolled. Of the above schools, one in its four main courses — accounting, law, traffic management and business administration — ^has already enrolled 90,000 stu- dents, another offering a general course for executives has put 40,000 enrollments upon its books during the past five years.^ What is not so readily appreciated at present, however, is the facility with which instruction by correspondence can be utilized by practically every large corporation, par- ticularly those who have numerous branches widely sepa- rated in distance. The corporation can prepare its own courses, which will enable its executives to pass along effec- tively the best practice as such is developed. The correspondence school in its emphasis upon the intensive utilization of time, well expressed in its slogan ' Galloway, ibid., p. i. METHODS OF TRAINING 153 "learn while you earn," has no doubt had a strong in- fluence in stimulating among executives and would-be executives the use of the last method here to be discussed, viz., the reading of books and trade papers. We need not discourse upon the value in general of serious reading since this theme has received from others, in some measure at least, the laudation it weU merits.^ What may be em- phasized, however, is that no other method possesses more flexibility in individual cases for the roimding out of certain deficiencies revealed, for instance, in comparing a person's present qualifications with the desired qualification^ of the executive as shown in the list of fourteen qualities rated by business men, or, to put the matter positively, for the development of a man's capacity in certain desired direc- tions. In the more limited field of business itself — to distinguish it from the general field covered by literature although at the same time granting the distinct value to the executive inherent in works such as, to mention only a very few of the many which merit inclusion, the Bible, Shakespeare's Plays, Franklin's Autobiography, Emerson's Essays, James' Talks to Teachers on Psychology and to Students on Some of Life's Ideals, Marden's Pushing to the Front, and White's History of the Warfare of Science with Theology — a rapidly developing body of material is appearing in the form of books and trade papers. It is reported to have been the prediction of the late Frederick W. Taylor that the next generation will see the publication of 50,000 books on busi- ness, and the indications drawn from a study of the past decade are that this prediction wiU be fulfilled.^ Whereas a score of years since but few books treating business in. a • Cf. John Ruskin, Sesame and LilUes (New York: T. Y. Crowell and Co., 1896), and Vanderlip, Business and Education, pp. 82-93. ^Cf. Lynd, "Increasing Interest in Sound Business fiiformation," Print- ers' Ink, July 26, 1917. 154 THE BUSINESS EXECUTIVE serious way were to be had, the supply available to-day has already reached goodly proportions. (See Table XVII.) TABLE XVn Business Books Available Year No. pub. Total Year No. pub. Total 1867 I 1893 2 15 1868 1894 3 18 1869 189s 3 21 1870 1896 4 25 1871 1897 3 28 1872 1898 4 32 1873 1899 2 34 1874 I 2 1900 13 47 187s 2 1 901 13 60 1876 2 1902 13 73 1877 2 1903 20 93 1878 2 1904 31 124 1879 2 190S 32 156 1880 I 3 1906 34 190 1881 2 S 1907 56 246 1882 S 1908 6S 3" 1883 S 1909 89 400 1884 5 1910 116 S16 i88s I 6 1911 iS8 674 1886 6 1912 123 797 1887 6 1913 153 950 1888 I 7 19 14 198 1 148 1889 7 1915 181 1329 1890 I 8 1916 135^ 1464 1891 4 12 1917 18* 1482 1892 I 13 *This table was compiled from S. B. Ball, 1600 Business Books (second edition, revised and enlarged to 2,100 titles: Wiiite Plains, H. K. Wilson Co., i9r7) and the apparently poor showing of 1917 is due to the book's date of publication having been May. The publication of business books has now assumed a sufficient importance in the estimation of several well- known pubHshers to justify the addition to their respective organizations of departments especially devoted to such activities, and certain other publishers devote their entire attention to this field. In the narrower sense of management as distinct from METHODS OF TRAINING iSS YEAR 1910 '19U 1912 1913 1914 1915 1916 1917 25 a 23 y f^ X' 21 20 19 18 17 S16 S15 .14 = 13 ^12 iu 10 e 8 7 6 S 4 3 2 1 ^ ^ / / / / f / ,/ / / / r / / ^ _^ -- f y / / j / / / y ^' _J _ Fig. 14. — Development of Books on Business Management. In the preparation of this graph a considerable list of books dealing with business management was submitted to Professor Edward D. Jones of the University of Michigan with the request that he prepare a list of the twenty-five best works.* Following this, the dates of publication were found, which dates presented graphically indicates not only the recency with which these books have been made available but also the promising nature of the prospects for an increased availability of books dealing with business administration. subjects such as business finance, accounting, or advertis- ing, the development of a business literature has made similar progress. There are more books and better books dealing with the science and technique of management now •The twenty-five books selected by Professor Jones as the best are as 156 THE BUSINESS EXECUTIVE than ever before, with the indications all in favor of a con- tinued development. (See Figure 14.) The situation with respect to trade journals is much the same. A beginning was made in 1888 with the publication of what has since been developed into the leading journal for advertising managers and sales managers. In the early nineties the technical magazines commenced to print occasional articles on such phases of management as the location of a shop and the labor policies of mills and fac- tories; last year one of these magazines changed its name in order that this might accord more closely with the new policy of the publisher, viz., to serve not technical men primarily but industrial managers. Two magazines now well recognized as leading in the class of business publica- tions were started in 1900 and 1907 respectively. What appears more significant than the mere increase in numbers is the decided improvement in the contents of these and other business journals.^ Although the foregoing seems to render clear the belief that in so far as the availability of business Uterature is concerned more than an auspicious start has been made, the mere publication of such books and trade papers, due to the fact that the respective publishers are business men intent on maintaining a profitable business, to a fairly definite extent insures their perusal. However, the amount of serious reading done by a group of executives does not depend alone upon the efforts of publishers but in part as well upon the corporation's own activities. In consequence, follows, the name of the author only being given on account of space limi- tations: Annals (May, 1916), Brinton, Drury, Emerson, Gantt, Gilbreth, Going, Goldmaik, Gowin, Hartness, Hearings on Taylor and other systems of shop management, Hoxie, Jones, Kimball, Knoeppel, Leffingwell, Nat'l Civic Fed. Rept. on Profit Sharing, Price, Library of Factory Managment, Taylor (2), Thompson (2), Schulze, Tuck Conference. 'C/., the unusually complete and accurate list of business journals in Ayre's Newspaper Directory, the latest edition. METHODS OF TRAINING 157 a great many companies now make some provision for their executives' reading by furnishing them certain books and trade papers, while a number have attacked the matter systematically through the installation of a library, presided over by a trained librarian, its use encouraged by more or less continuous appeals.^ ' The activities of the National Cash Register Company's library, as ex- plained to the author by the firm's librarian, Miss Phail, are in tie main as follows: Ordering books, magazines, reports and special articles deemed of inter- est to the company. Submitting lists of suggested readings on special subjects, such as adver- tising, retail business, reference work, and production methods. Preparing reference lists upon any special subject. The various foremen and other officials called upon recently to address groups of employees dur- ing the noon hour made requests for such reference lists almost invariably. Analyzing the contents of books and magazines in the search for special articles to which the attention of certain members of the force should be called. Writing brief articles on subjects deemed of interest. The "N. C. R. Power Plant," to mention this four-paged mimeographed pamphlet as an illustration, states succinctly the requirements necessary for becoming a professional engineer in the company's plant, follows this with several suggestions both practical and inspiritional on self-advancement and con- cludes with a list of books treating this subject which may be borrowed from the library. Making graphic charts of certain statistics, from sources such as the United States Census Bureau or the company's accoimting department, which it is believed deserve a display for the time being upon bulletin boards in the library windows. Chpping extensively from current newspapers and periodicals. Classifying and indexing the library's various materials so that they may be rendered readily accessible. The company's house organ for employees is useful in extending the use of the Ubrary's facilities, as is true, of course, of other phases of the com- pany's educational work. In its monthly issue. Grits and Grinds, the house organ of the Norton Com- pany, gives tides, references, and abstracts of the important current articles pertaining to grinding; and the Fore River Log, the house organ of the Fore River Shipbuilding Corporation, presents the titles of several recently pub- lished books on marine engineering and allied subjects, the list being fol- lowed by a form to be filled out and mailed to the company library by per- sons interested in borrowing any of the volumes. The use of public Ubraries by business men is discussed by Miss Adelaide R. Hasse, of the New York Public Library, in American Industries, January, 1917; The Library Journal, April 1917, and October 1917; and The Genera} Federation Magazine, April 1918. CHAPTER X The Training Program^ In the two preceding chapters we have considered the efficacy of training as a means for developing executives and, in case this idea of training be adopted, several of the chief methods by which it is to be put into operation. Be- fore proceeding further it seems desirable to have before us the situation as it exists to-day among our leading corpora- tions. When the status of the training of executives has thus been indicated we may conclude the discussion of training with certain criticisms of the practices which now prevail and indicate some of the changes which might profitably be instituted. A number of corporations have submitted data, the in- formation coming in the main from educational directors although higher officials frequently have been responsible for the statement of their firms' policies. Part of the data were secured by personal interview in calls made by the author upon local firms and during a fairly extensive trip through the Middle West undertaken by him; part were secured by questionnaires sent those companies upon whom it had not been found convenient to call yet whose policies were deemed representative of the most advanced practice. In all, data are included from forty-four corporations.' In- formation such as this does not lend itseM readily to statis- tical presentation, due in part to the means employed in its ' On account of space limitations it does not appear feasible to list the names of all these companies. However, they comprise the leading estab- lishments of the country — ^four department stores, one mail order house, two public utilities, and thirty-seven industrials. IS8 THE TRAINING PROGRAM 159 collection but as well to the nature of the problems involved. The latter fact wiU be commented upon later. ^ It has ac- cordingly been considered desirable to cite in brief quota- tions the views of various corporation officials,^ since these excerpts wiU serve to supplement the statistical tables and thus better achieve the purpose intended, that of setting forth the present status of the training of executives. TABLE xvin ASSISTANTSHIPS Method used Number Yes 24 20 No "We do naturally make use of this method although no systematic effort, we beHeve, is made this way, the training being largely by force of example and practical experience in daily work." "Every man of importance to the institution should have an understudy." "Assistants to department heads are of course expected to be in line for promotion and unless something develops during their tenure of office it is reasonable to expect that they will secure that promotion whenever it is due." "We do have assistants to department heads but only in a few instances is the assistant able to assume the larger duties." "Assistantships are not very satisfactory as a method of training because eighty per cent of the assistants are really * Cf. p. 171-172. ' The names of the gentlemen responsible for these various statements are not being given (although it would add considerablyto the value of the statements were this possible) since the information was secured under con- ditions which render it more or less confidential. The sources of this in- formation in general have already been indicated. i6o THE BUSINESS EXECUTIVE assistants, that is, they are only assistants and have not the capacity to advance to take charge of departments. About twenty per cent of the assistants may be developed into department heads. These two figures are not especially drawn from the experience of our company." TABLE XIX Systematic Rotation of Positions Method used Number Yes 8 IS 21 No No informatioii "While our executives before promotion often have held positions in different departments, this is with us entirely a matter of chance or the exigencies of the organization. We have no plan of systematic rotation such as you con- template." "Our college plan provides for the employing of univer- sity graduates upon a strictly educational basis. The TABLE XX Conferences Method used Number Departmental Yes 26 I 17 I 20 No No information Interdepartmental Yes No No information course is about six months in length. The men work a specified time in the various departments in order to secure a knowledge of this business. If they are of the proper THE TRAINING PROGRAM i6i caliber they are promoted at the end of their training period to executive work. If they are iinsuited for executive work they are not retained in the business." "We do not assign to various positions for brief periods unless a man is soon to take a position which requires special training in certain lines." "Our conferences are over actual work and not with a view to developing executives." "While we do hold both departmental and interdepart- mental conferences they are not a regular thing but subject to special call." "Conferences are good for securing team work but not for developing executives." TABLE XXI Clubs and Other Study Associations Method used Number Within organization Yes IS 3 26 22 3 19 No Outside organization Yes No No information . "We have in our plant two Alexander Hamilton Clubs and a Technical Society which promotes a number of pop- ular lectures per year on certain technical matters." "When our societies were first organized throughout the territory it was thought that educational and recreational activities could be intermixed on the basis of fifty-fifty, but experience has shown that if the interest is to be main- tained in society work the majority of its major activities will have to follow recreational lines, so the plan has been i62 THE BUSINESS EXECUTIVE changed to handle educational work as a supplemental feature rather than as one of the main features of regular society meetings." "It is our policy to be represented at conferences and conventions where matters of particular or allied interests are to be discussed. Such persons as are delegated to attend are required to write reports and these are routed through the organization to persons interested." "We have entered quite a few of our executives and salesmen in an organization called the Salesmanship Club. Have also had quite a number of our people join the Phil- adelphia Chamber of Commerce. Once a month we send from six to eight of our factory executives to attend an informal dinner and after dinner talks of an association known as the Philadelphia Society for the Discussion of Employment Problems. Once a year about fifteen of our ofl&ce people attend a dinner of the Hardware Merchants and Manufacturers Association, of Philadelphia, at which time there are in attendance some very prominent and instructive speakers. We are always very liberal in per- mitting our representatives to attend different trade con- ventions." "We are members of almost every organization that we can expect to derive any profit from along these lines and usually see that we are represented at their meetings by the people who can get the most good and bring it to us. For example, the Employment Managers Association of Boston is usually attended by anywhere from two to six of our people; the local Advertising Club is usually attended by four or five, and at such meetings as those of the Metal Trade Association, the Machine Tool Club, National Association of Manufacturers, Chamber of Conamerce of the United States, etc., we usually have one or two pres- ent." "We have a small office library containing a few technical THE TRAINING PROGRAM 163 TABLE XXn Books and Trade Papers Method used Number Yes 25 19 No No information books on subjects in our line and also a few inspirational books." "We circulate over 3,000 books and trade papers a year. We have a branch of the Public Library located in our plant. We also maintain a private library with books especially selected on the lines of efi&ciency and scientific management." "Any person reading a book twice, and writing a short essay showing a comprehensive knowledge of it, can secure this book at the expense of the company." "We keep the book cases here near the door so that all persons entering the educational department necessarily pass near them. This, plus the pushing the instructors do, seems to be developing quite a httle serious reading." "We supply technical journals to the reading rooms of the various factories." "We have a well-equipped business library and all the technical and business magazines." "We maintain a library which has all of the current trade literature and everything which is published which seems to bear at all directly on the work which we are trying to do." "Up to the present time the training of our executives has not been directly under the supervision of the school. Our general manager has done the most of the work himself. We have, however, established our Commercial Efficiency Course largely for the purpose of training executives, for i64 THE BUSINESS EXECUTIVE TABLE XXm The Corporation School Question Number Is it possible to offer any formal training for executives in your school? Yes 13 10 21 6 17 21 12 12 20 No Nn infnrmatinn Does your firm cooperate in any way with correspondence schools? Yes No No information Do you cultivate relations with university schools or com- merce and technical schools? Yes No No information we recognize that the executive of the future must be a broadly trained man, the product of either our own school or of some other institution and one who is able to pass cer- tain tests before appointment." "An experiment is now going on in our firm which is being watched with considerable interest. The president now well along in years has decided apparently that the very best way of perpetuating his ideas and policies is to train the jimior ofl&cers. So for the past year he has been meeting them regularly each week, for lectures and discus- sions. The young men say it is a great course, but I don't know much about what goes on since none of us higher officers are allowed to be present. I judge though that it consists of management, merchandising, and a liberal admixture of business ethics." "Having the training work going on makes it possible for us at times to accept material which seems to be pretty raw which under other conditions we might not be able to use and develop at all. Our business, however, is such that it is THE TRAINING PROGRAM 165 really necessary for us to do this work as we cannot expect any school, nor any of our competitors for that matter, to train people for us as we would like to have them trained." "We cooperate with the imiversity through its extension courses." (The reply of four companies.) "We work cordially with the Municipal University in a special cooperative course for engineers, and in the evening courses." "The performance of men turned out from these courses [nine months' course for college graduates in which various positions ate assigned systematically] during the past four or five years has been so satisfactory that this year we have thirty-five such men in training." TABLE XXIV Cost of Training Method used Money directiy expended for training by company No money directly expended by company . No information Number 14 7 23 "The company repays the tuition to those who finish a course and get a certificate." "We reimburse any of our employees with one-half the cost of tuition when they have completed any course in the Scranton Correspondence School." "In some cases we pay tuitions on completion of study courses — ^not in correspondence schools but in the local Mechanics' Institute and in the high schools of the city. We pay the membership dues of those whom we pick in our organization to become members of the local Chamber of Commerce, and sometimes pay the expenses of executives who attend the conventions of business and educational associations in various parts of the country." i66 THE BUSINESS EXECUTIVE "The company maintains memberships for individuals in a number of outside associations." "Five hundred dollars is our cost for the nine months course for college graduates." (These men receive a salary of sixty dollars per month.) "The matter of costs is rather an intangible question. I am not prepared to give you the figures along this line except to say that we are going to considerable lengths in the training and education of the executive for his position." "The cost of training these executives can not be deter- mined since this process is going on continuously. Each official must take an active part in the training of a com- petent successor." "We have no data as to the costs of training men ac- cording to these plans, nor do we know whether it is cheaper than the establishment of a regular training course; but we have always felt justified in the expenditure involved in view of the security of fortifying ourselves against possible vacancies in advanced positions." "We have found it possible to secure all necessary funds for the training of anyone to whom it seemed wise to give it." "We feel justified in going to some cost in the training, if a satisfactory way be found." "No cost is too high if it brings results in the right train- ing of future executives. The question remains, however, of the efifectiveness of the various methods proposed." "The Educational Department has a very great influence in the selection of men for executive positions and is fre- quently asked to select executives as well as give opinions regarding them. . . . On all men in direct training for executive positions, we have a card index which is a com- plete record of the training and progress made." "We depend more upon personal impressions than we do on examinations or any artificial checks." THE TRAINING PROGRAM 167 TABLE XXV iNPfDENCE OP Educational Department tjpon the Semction of Executives Degree of Influence Number Recommended by supervisor Supervisor consulted at time of selection. SUght None No information 2 2 I 17 "We do not have many checks upon the ability or prog- ress of the men being trained for executive positions. But we expect to see an improvement in work." "We have no definite records to show results." "There are no regular checks or records." "We have a personal record blank in which a man's record is entered every six months, or oftener in case some special occurrence or request is made. These records may be seen by an employee at any time if he calls to see me, but not otherwise, because I wish to talk over with him his record. In recommending our men for promotion, personal record counts a possible twenty points, school record fifteen points, attendance record twenty-five points, although if this latter is very bad it may go to as low as a minus twenty- five which will deduct from the plus points on the other records. The manager's estimate of the personal value of an employee in his position and of his potential value counts thirty-five points. Those receiving less than sixty per cent are placed upon a special list and improvement must be had or they are discharged. Upon soKcitation the manager may remove from this list any name of his department, but should this name appear a second time the manager's au- thority cannot be exercised and the person is discharged; that is, if his credits total sixty per cent or lower he is a marked man to whom a further chance is given at the request of his manager, but only one more chance." i68 THE BUSINESS EXECUTIVE "While we have practically nothing to say concerning the selection of executives in general we do exert a major influence in the case of those men who have completed our course for college graduates. This is due in the main to our complete knowledge of the man. We eixgaged him origmally at his university, have held both personal and committee conferences with him where his characteristics and aims were pretty fully entered into, and his complete record, based upon the reports of instructors and shop foremen, is filed in our ofiice. In addition to the general comments made by his instructors and foremen, this record calls for the ratings of 'very good,' 'average,' and 'imsatisfactory,' upon these personal characteristics: Physique Tact Thoroughness Personality Initiation System Knowledge Attitude Analysis Common Sense Originality Decision Reliability Industry English Open mindedness Enthusiasm Ability We may say that as the number of such graduates increases our influence upon the selection of executives similarly will expand, it being assumed, of course, that we shall be able to make good in this, something which we have been able to do in the past." "For our work we regard it more important to train the rank and file than to train men for executive positions. These positions usually take care of themselves, if the per- sonnel is right. The man is always coining along who is able to take larger responsibihties." "We have always rehed upon the executive to surround himself with capable subordinates, and have expected these to prepare themselves for advancement." "We do not maintain any clubs, associations, or schools for this purpose, feeUng that the best training an employee can get is in his everyday contact with the business, where, THE TRAINING PROGRAM TABLE XXVI 169 ExECxmvE Versus Rank and File Training as an Activity of the Educational Department Question Number What proportion of your effort is given to the rank and file, as compared to training men for executive positions? Entirely to rank and file 26 3 2 13 S 2 I 3 33 Practically all to rank and file Approximately the same to each More than 50% to executives No information Of what relative importance to your firm do you regard these two lines of training activity? Rank and file more important Executive more important Approximately equal in importance Cannot state No information of course, he has ample opportunity to become familiar with the problems which confront his superiors." "We have no basis on which to divide the expense or the time given to either one or the other. We regard either as important at all times and do whatever seems to be pos- sible along either line so long as it seems to be profitable." "The relative importance of the two is about the same. If there were any difference it would be in favor of the executive training, for with executives properly trained the problems of training men for the ranks is greatly simphfied." "Education is for the executive as for the workman and should be as definite and specialized. But the executive as a stronger individual requires closer individual study." "It seems to us that the training of executives, depart- ment heads, and so on, is of greater importance than the training of men for the ranks, because with a staff properly trained with a view to the spirit of the organization more can be accomplished than with a trained rank and file and a disorganized staff. This refers, however, to specific training and not to the training which gives spirit and unity I70 THE BUSINESS EXECUTIVE to an organization in which case we presume it is about equally important to extend the training of both classes of an organization." "We have no definite plan of operation and, much to our regret, what we do is somewhat on the 'hit and miss' plan." "We do not have any systematic plans for training executives. We feel that there is opportxmity for progress along the line of training executives in our office although we realize we have made practically no contributions to this subject." "We have no systematic method." (A reply practically duplicated by five others.) "Our company has not as yet taken any active steps toward the special training of its executives. I am pleased to say, however, that we contemplate some time in the near future a course for our operating foremen and when this is started we are going to make a strong feature of the ques- tion of management of men." The foregoing tables and comments as a symposium of the views held by officials of the more advanced corporations present excellently the status of the problem of training executives. We need not review in detail the various points, both positive and negative, which have been so well pre- sented, but may con£ne ourselves to certain more or less general conclusions. A matter of considerable interest is the very small in- fluence now being exercised upon the careers of executives by the directors of the respective corporation schools. So slight is this influence that it practically amounts to the policy of non-intervention on the part of the director in the selection, the advancement, the transfer, or the discharge of the company's officials. Yet this director is a specialist in matters of personnel. THE TRAINING PROGRAM 171 This appears due not to a lack of faith in the director's ability but to the fact that very little training of executives is being attempted by this official, his time being pretty completely engrossed, upon the whole, with caring for the rank and file. Moreover, owing to the recency of the in- auguration of this educational work with the rank and file not a great number of men whose activities have come under the direction of the educational departments have had time as yet to attain executive positions. When this occurs it will be a matter of concern to investigate the records made as students by men being considered for promotion. This assumes, however, that the records of the educational department are kept, and that the manner both of their origin and recording is such as to render them of value as comparable data. At the present time, needless to say, practically no data concerning the capacity shown during his period of training by any candidate under consideration for an executive position is to be had. It may be mentioned that the three cases, so far as was determined, in which the educational directors were found exerting the most influence upon the careers of their firm's executives were in connection with departments where adequate records were available. In short, these respective directors pos- sessed information well worth consideration; and it is to be safely assumed that other directors to a considerable number will attain to the same positive situation. In the consideration by corporation officials of this prob- lem of training executives one is impressed upon the whole with the recency of its conception. The minds of many have not yet grasped the policy per se, to say nothing of its significance; and the replies were in consequence often vague. It was not so unusual, to mention an example of this general tendency, for an officer upon being questioned concerning the training of executives to discuss in detail 172 THE BUSINESS EXECUTIVE the firm's apprenticeship plan or the course for its traveling salesmen. One official stated that the only training afforded the executives of his firm was through their outside affilia- tions, specifying certain technical societies; although he also had pointed out the assistantships, libraries and trade papers; and conferences both departmental and inter- departmental were being employed with good effect. He had not at first thought of these as possible agencies for training. This newness of the problem and its haziness in the minds of many officials, rather than any unwillingness to share information, accoxmts in large measure for the nimi- ber of cases of "no information" shown in the preceding tables. The foregoing, however, by no means Justifies any attitude of captiousness, a view which is apt to distort the conclu- sions of anyone who investigates superficially but at first hand the problems of business men. These officials may be somewhat deficient in matters of pedagogy and adverse to working over far-reaching but as yet to them imtested plans; they do possess an abimdance of common sense and the ability to hew their way forward with few costly errors and much practical result. A careful consideration of their ideas as above presented-r-interpreted in the light of the fact that the officers responsible for these views are con- nected with corporations operating imder a considerable variety of conditions — ^it seems, will serve to emphasize the essential soimdness of their procedure with respect to the training of executives. They have adopted the methods which, upon the whole, afford the most in the way of pos- itive results according to the expenditure made, and they exhibit more than a fair interest in determining the feasibil- ity of such newer measures as are conamended to them. In fact, it appears evident that considerable weU-tested progress has already been made in the training of executives, and that with the expected development of additional THE TRAINING PROGRAM 173 training methods in the precision of their operation a pro- gram highly effective for the traming of executives will be in due time evolved. It is in the lack of such a program that the present meth- ods of training are most defective. For the program repre- sents organized effort, in contrast to the hit-and-miss at- tempts which characterize the traim'ng often, it may be no overstatement to say, commonly, undertaken. The devel- opment of a program involves a rating of the various meth- ods available for use on the basis of the corporation's particular needs and the relative effectiveness with which each method is able to meet such needs. Several officials, as may be noted in the foregoing comments, mentioned as an item of considerable importance that as yet they were lacking organized plans, thus implying rightly their recogni- tion of the importance of organized effort in solving any problem of moment. The preparation of a program adequate for the purpose desired appears to be a task requiring a specialist, a well- equipped educational director, who will, of course, co- operate with the other officials of the corporation in evolving a comprehensive scheme of training in which provision for the training of executives is regarded very properly as the capstone of the company's educational activities. The scheme of training as thus enlarged and coordinated will demand for its proper execution an educational director evincing more capacity perhaps than now being shown by the average incumbent, but it is beheved that a considerable number of directors already possess the required capacity and are interested to push their efforts higher. Moreover, the program of training here implied does not call for the educational director to teach as a class the leading execu- tives of his company — ^which would perhaps prove un- workable in practice — but to organize such a program that all persons within the corporation are provided opportu- 174 THE BUSINESS EXECUTIVE nities for increasing their effectiveness, and to supervise the operation of such program. It may seem at first thought that in training executives the preparation of the teaching material itself forms a serious, if not insuperable, obstacle. The rank and file can be drilled in the methods prescribed as standards by higher officers, such standardized methods providing ex- cellent teaching material; but how prepare standardized material for those men who themselves are at the fore- front dealing with unusual problems and passing it along, properly systematized, to subordinates? Here we reach evidently the limits to effective training; its real content consists of general principles and in the case of executives these principles are in process rather then fully formulated. The difficulty is not so serious, however, as it may seem. There obtains in every large organization a considerable body of information whidi, when organized, provides material adequate for the preliminary training, at least, of its executives. This information in certain lines of business or in certain departments of an organization has already reached a stage of definiteness adequate to satisfy the de- mands of effective training, and, as has been pointed out in a preceding chapter, since the process of developing a science of business is under way satisfactorily it is only a question of time until such definiteness of data obtains in practically all departments and lines of business. Moreover, the more advanced training of an executive need not be delayed because the material so far organized has been imbibed by some Junior officer anxious to study further. He is, or at least should be so far as his department is concerned at any rate, in position to attack directly his firm's unsolved problems, and in the process of their solu- tion and the systematization desired for the rank and file secure his further training. The training process itself is not a mere taking in of material predigested, but at best always THE TRAINING PROGRAM 175 requires activity on the learner's part; he must acquire de- tails, weave these into generalizations, and in turn apply these general principles to new concretes. Under condi- tions of weU-organized materials and expert direction, these steps in the training process can be very considerably accelerated, yet the lack of these two need not require the cessation of training. What this lack does indicate, is that the executive under training conditions such as these is thrown more largely upon his own resources, and that from the various forms of training available such selection and adaptation is to be made as wiU best meet the needs. This means no more than what was stated above, that the train- ing program should in each case be adapted to the condi- tions of the particular corporation in question. The relation between training and selection may be pointed out in conclusion. It possibly appears that the institution of a training program adequate for its purpose reduces considerably the importance of selection, since, owing to its influence, applicants otherwise unpromising are to be developed later into persons of some capacity. Doubtless within every large organization persons can be pointed out who years since as applicants came perilously near rejection on account of certain inferior qualifica- tions but who, because of incessant application, have not merely remedied their early deficiencies but have attained high ofl&cial positions. The problem which we have here again is nature and nurture, and the answer must be the same as before: Nurture merely develops the quahties of capacity inherent in the individual, and while ordinary natural qualities fully developed may surpass excellent natural qualities undeveloped it does not follow that the corporation should give no heed to those inherent capacities of its candidates simply because it has a highly efl&dent training scheme. The more painstaking the training meth- ods the more desirable is native capacity at the beginning. 176 THE BUSINESS EXECUTIVE The training program in itself, furthermore, has an interesting bearing upon the problem of selection, as certain data recently compiled by the author indicates. The School of Commerce, Accounts and Finance of New York Univer- sity, through its bureau maintained for the purpose of bringing its alumni and students into touch with business firms desiring men trained in the science and art of business, secured from the alvmmi in 1916 the statements concerning annual earnings from which the graph shown on page 128 was prepared. The author then secured from the Record- er's Office the average grades secured by the respective students whose annual earnings had been submitted, the study including all the men in five different classes whose records of earnings were available. This average grade, it may be added, was the final average of all courses taken during the student's three years attendance. This school, furthermore, lays no particular stress upon high grades as such, the aim being rather the cultivation of business ability in the tenxire of positions outside. In each class, the students were divided into four groups on the basis of their average grades, the groups being termed quartiles. The first quartile in each case contains that fourth of the men whose grades were highest. The second, third and fourth quartiles represent groups of decreasing academic proficiency, according to the grades. Should the annual earnings be the same for all four quartiles, the in- dication would be that no relation exists between the grades secured in school and the salaries secured after graduation. The results are as follows. (See Table XXVII.) It appears in general, although with respect to certain groups the indications are to the contrary, that the average earnings vary in the same way the grades do. Taking as a basis of comparison the $2,453 earnings of the first quartile men, the earnings of those whose grades were lower equaled ninety per cent, eighty-one per cent, and eighty-nine per THE TRAINING PROGRAM TABLE XXVn New York University School op Commerce, Accounts and Grades and Annual Earnings 177 Finance Class and Year Cases Class of 1909 8 (S yrs. after graduation) Class of 1910 12 (S yrs. after graduation) Class of 1911 20 (S yrs. after graduation) Class of 1912 20 (3 jTTS. iter graduation) Class of 1913 32 (3 yrs. after graduation) Averages Percentages. . ., isi $1940 4S0O 2312 1880 2258 $2453 100% Average Salaries of the 2nd 3rd Quartile Quartile $1650 3086 2524 2140 1852 $2204 90% $2100 3666 1912 1520 1669 $1987 81% Quartile $3320' 2040 3128 1600 1740 $2168 89% cent respectively. This means a difference of over two hundred forty-five dollars a year in each case. These results confirm the findings of Dr. D. E. Rice in his study of the graduates of Pratt Institute. ^ The salary reports of these men were secured in 19 13, four to six years after graduation; and when compiled were as foUows. (See Table XXVIII.) In the data secured from its alumni by the School of Commerce, Accoimts and Finance the earnings were shown from the first year the respective students entered upon ■ It is to be noted that this group is composed of only two cases. A salary of $4,000 was reported by one of these men. In the compilation of these statistics it was observed that in several cases the student receiving high marks entered the teaching profession; although no record was made of these cases it is believed that the inclusion of only those entering business would render the results somewhat more favorable with respect to the high mark men than Table XXVII now indicates. * Cf. Hollingworth, Vocational Psychology, p. 198. 178 THE BUSINESS EXECUTIVE TABLE XXVin Peatt iNSTrnjTB Grades and Anndal Earnings Class and Year Cases 1st Quartile Average Salaries of the 2nd 3rd 4th Quartile Quartile Quartile Mechanical '07 35 $1,800 $1,675 $1,362 $1,387 Mechanical '08 41 1,45° i)Si2 1,512 1,27s Mechanical '09 39 1,375 i)262 1,313 1,137 Electrical '07 26 1,750 1,675 ' I1675 1,412 Electrical '08 36 2,147 ij437 1,262 1,262 Electrical '09 41 1,462 1,212 1,387 1,200 Averages $1,664 $1,462 $1,418 $1,279 Percentages 100% 87% 85% 76% their courses. Accordingly, it seemed worth while to note whether the students making better scholastic records had advanced more rapidly or less rapidly in their business earnings than those whose scholastic records were lower. The earnings of all the men in the first quartile group were averaged year by year during the three years these men were in the School of Commerce, Accounts and Finance and the three years following graduation. Similarly the grades of those ranking second, third and fourth with respect to grades were averaged. The final results are shown in Table XXIX. It appears that instead of neglecting their business in order to secure higher scholastic grades or vice versa, the first quartile men secured both higher salaries and higher grades. Their advancement was also more rapid from year to year. These studies are practically the only evidence available as yet upon the relation between the scholastic record and earnings in the business career, but they are confirmed in the main by investigations made of several more or less closely allied groups of students.^ While it does not seem ' Cf. the excellent summary by Professor Hollingworth in his Vocational Psychology, Chap. Vni. THE TRAINING PROGRAM 179 TABLE XXIX Increases in Salary as Related to Grades Received in New York University School op Commerce, Accounts and Finance Initial Increase in Salary Total Quartile Salary ^ zndyr. siyr. 4th yr. sthyr.6thyr. 7th yr. increase first $1,207 $160 fi6o —16 $588 $110 $443 $i,44s ^t'?'j ••■• ^'^4° S3 78 300 102 314 296 1,143 ^'^^^ 820 4^0 —190 IS3 328 164 281 i,t66 " ' 357 i,2os Fourti 858 198 526 —300 198 226 pertinent to describe the other investigations here, the evidence drawn from these various sources apparently justifies the conclusion that, while subject to exceptions, in general a direct relation does exist between the scholastic record and abihty in a business position. The attendance at an outside educational institution, however, constitutes but one phase of the training program described in the preceding chapter. In consequence, the discussion so far of academic records indicates. only mea- gerly the utilization for purposes of selection of the candi- date's record of performance during training, since what said candidate has done as an assistant, a conferee at meet- ings,^ a member of study clubs, a patronizer of the com- pany's library, or a student in the company's own school, to ' The initial salary refers to the first year these men were students, and the fourth year refers to the first year after graduation, the course being three years in length. The increase in each case refers to the increase over the preceding year, with the exception of the final column which refers to the total increase in salary between the student's average earnings during his first year in the school and his fourth year after graduation. 2 Says Samuel MUes Hastings, president of the Illinois Manufacturers' Association: "As a means for discovering the capabilities of executives, I have yet to find a method that excels the weekly office conference. I prac- tice calling meetings of department heads once a week or oftener to discuss the current problems of the business and to invite helpful suggestions. These meetings even up the opportunities for advancement of the men who are tactful pushers and the men whose habit it is to 'saw wood and say nothing.' Something wUl usually come up in the meetings that will draw out the fellow who 'just saws wood' and his true worth will be emphasized." System, September, 1917, p. 307. i8o THE BUSINESS EXECUTIVE mention t3^ical phases of the training program, can have been brought imder much more intimate and long con- tinued observation, with a consequent increase in accuracy when used as a means of selection. While as yet corpora- tions usually lack records of performance during training, those companies whose program for the training of execu- tives is more complete are at least proving how useful such records can be. CHAPTER XI Incentives for the Executive It has been assiimed in the foregoing discussion that the corporation afforded incentive sufficient to attract appK- cants of at least average grade, and to cause these men when once on the pay roll to be reasonably desirous of advanc- ing themselves through the utilization of the firm's train- ing. Were this not to be the case, no plan of selection and training, however wisely conceived, could attain the results expected of it. To the contrary, where sufficient incentive exists it has been f oimd that even seemingly mediocre selec- tion and training methods have sufficed for the attainment of excellent results with respect to the executive personnel. Such being the intimate connection between the two allied functions of selection and training and the incentives afforded by a corporation, it appears desirable to consider this latter factor as a necessary phase of our problem. Needless to say, the theme of incentives is so very broad that the discussion here is rather to be taken as a supple- ment to the preceding chapters than a consideration of the subject per se. In 191 2, when testifying before a congressional committee investigating the United States Steel Corporation, Andrew Carnegie thus pointed out what students of the corporation will agree in given instances may constitute a serious de- fect, the lack of personal incentive on the part of its officials: "I do not believe that corporations can manage a business like partners. When we were partners I felt we could run around corporations. Take thirty-five men, young men, 181 i82 THE BUSINESS EXECUTIVE each one will be interested in a department and will watch the spigots from which there might be leaks. . . . The best corporations that ever were formed wiU be beaten by such an organization as we had in the Carnegie Steel Com- pany. I would not say that the greater corporation would not equal the smaller corporation. What I wish to say is, that the corporation is not in it with the partners managing their own business." ^ The close application which a pro- prietor or a partner willingly bestows upon a business be- cause it is his and the results which accrue are to be his, is apt to disappear, as Mr. Carnegie indicates, when his particular establishment is absorbed into a great combina- tion and the erstwhile owner becomes merely a salaried officer. The ability to initiate projects, that deep-rooted pleasure in being a cause which supplies the motive force in so much of our endeavor, in the interests of what is felt to be the necessary degree of control in corporate affairs very commonly imdergoes considerable repression. In general it can be said that the corporation faces two related dangers, a cumbersome organization and indifferent exec- utives.^ ' Cited by C. W. Gerstenburg, Organization, (New York: The Alexander Hamilton Institute, 1917), p. 45. ' The methods in vogue at the Baldwin Locomotive Works were thus de- scribed by one of the partners, Mr. Alba B. Johnson: "We are all partners on an equality, and we handle the business in each department simply on the basis of an agreement that shall be the business organization. As a firm we hold meetings (according to our co-partnership articles every week, but ac- tually whenever we find it necessary to do so) at which all matters of estab- lishing new works, putting up new shops, or making large expenditures for tools. We agree upon such questions in firm meetings. We also agree on large pohcies in regard to making sales, rearrangements of expense, etc., but each of these four partners is absolute autocrat of the branch of the busi- ness he represents, because he knows all the time what the attitude of his partners is toward these matters. He does not have to consult them to de- cide whether it is necessary to make a contract or not. The thousand-and- one questions which are coming up daily in the administration of the busi- ness are settled instantly by the partner to whose province they belong, and if it is necessary to consult or get the opinion of one of the other partners, it can be done in an instant. That is a great contrast to the corporate form of organization, in which the Board of Directors is supreme; in which things INCENTIVES FOR THE EXECUTIVE 183 It is but natural that indifference associates itself with a less keen sense of individual responsibility, although at the same time, unfortunately, the corporate form of organiza- tion is particularly subject to abuse. The stockholders as a rule are widely separated and ignorant of the details of the company's activities, and the impersonal entity of the cor- poration itself furnishes the clock of secrecy and freedom from individual responsibihty under which exploitation may thrive. The forms which such exploitation takes are exceedingly numerous, although the most important per- haps may be thus iadicted.^ Appointments due to influence — the same practice so far as principle is concerned which in pohtical affairs is termed the "spoils" system. Exorbitant salaries — a. practice, somewhat related to the above, in which sums rightfully belonging to the stock- holders are diverted to an inner group under the guise of salary payments. Contracts that benefit ofl&cers — those responsible for placing contracts turn them to concerns in which they themselves are interested or from whom they receive val- uable considerations in return. Divergence of business or capital to other companies — these other companies in one form or another systematically "milk" the corporation, due to the connivance of its own officers. Misuse of inside information — ^information secured solely through their official connections is here used by officials have to be put before the Board of Directors by the President, and in which the Secretary, Treasurer, and General Manager each has his little province, and they are all apt to be more or less jealous of each other, because I do not know of any place where the jealousies are apt to be keener than they are in business corporations, where the intrigue for promotion is apt to be very great." J. Russell Smith, The Elements of Industrial Management (Phila- delphia and London: J. B. Lippincott Co., 1915), pp. 25-26. ^ Cf. W. H. Lough, Business Finance (New York: The Ronald Press Co., 1917), Chaps. XXni-XXIV. i84 THE BUSINESS EXECUTIVE and others on the "inside" for their personal benefit, com- monly in connection with stock market speculation. Juggling accounts — ^inasmuch as many accounting en- tries are matters of Judgment and good faith, the corpora- tion's records and statements are open to manipulation, the effects of the false or misleading statements supposedly accruing to special interests. It is true that these and similar forms of exploitation are, as a rule, engineered only by the directors and higher officials of the corporation. Yet their iU influence does not stop there. The organization whose leading officers are corrupt wiU very likely suffer as well from the petty abuses of subordinate officers, and from these on lower in the ranks until the entire organization, permeated with the virus of personal greed, shows in its acts scant respect for whatever belongs to "the Company." It is not by any means to be assumed that such condi- tions prevail invariably among corporations, since the stand- ards of integrity and loyal devotion to the firm's interests which are ruling in many prominent corporations are no doubt considerably higher than the average maintained by proprietorships or partnerships. Yet when these condi- tions do prevail — and such is not infrequent — the corpora- tion faces a more or less precarious situation: The incentives for its executives upon which it depends for efficient direc- tion have their influence lessened if not entirely overridden by these opposed incentives inherent in exploitation. The effect inevitably, whatever be the degree to which this diversion of interests takes place, is to lower the corpora- tion's standard of performance.' ' Says Lough: "The history of many of the krge industrials and of some of the large raih-oad combinations does not support the notion prevalent some years ago that combinations necessarily achieve economies and im- provements in management. On the contrary, the general impression which to-day prevails among conservative bankers and investors is that most combinations suffer from recklessness and inefficiency of management." Loc. cit., p. 289. INCENTIVES FOR THE EXECUTIVE 185 Viewed from the behavioristic standpoint nothing is more fimdamental to the executive than an abiding interest in his work. The average man only at rare intervals when under the required stimulus rises to his fuU capacity, from which, as a rule, he descends quickly to his usual level of accomplishment. Yet the heights of activity thus mo- mentarily attained are as an inspiring vista of what the self should be, and the attainment of the higher level per- manently constitutes a very practical problem which the business man may solve for himself.^ At any rate, exec- utives of the first rank, those captains of industry whose forcefulness is continuous, apparently are able to find in the day's work a never-ceasing inspiration.^ The explana- tion, it appears, is simply concentrated interest. Not a few, however, perhaps it would not be an exaggeration to say a majority of business men, are bored by their activ- ities; they are by no means exerting themselves to the ut- most, they have little concern over the opportunities avail- able for training themselves in order to increase their value to the company and they close their desks at night with a feeling of relief. It is a corporation's problem to rouse these men in some way, making sure at the same time that the 1 Cf. Gowin, The Executive and Bis Control of Men, Chaps. IV-V. * A correspondent thus relates an incident of his call upon J.Ogden Armour, President of Armour and Company: "Do you think I would work here nine hours a day and carry the burden of this business the other fifteen, for the sake of a few more dollars? Never! The money would not be worth it I There are other ways in which I could make it more easily, with less criti- cism. I do it because I have to do it. I do it because I love my men and because my job is the biggest thing I know." American Magazine, February, This attitude so well expressed by Mr. Armour's concluding phrase is commented upon by Mr. Schwab, of the Bethlehem Steel Corporation: "For thirty-six years I have been moving among workmen in what is now the biggest of American industries, the steel business. In that time it has been my good fortune to watch most of the present leaders rise from the ranks ascend step by step to places of power. These men, I am convinced, are not natural prodigies. They won out by using normal brains to think beyond their manifest daily duty." Ibid., Succeeding with What You Have. pp. s-6. i86 THE BUSINESS EXECUTIVE incentives employed will lead to activity favorable, rather than opposed, to the best interests of the organization. The present chapter is to consider certain of the methods available for this purpose. The incentive which naturally comes first to mind is salary or, more broadly considered, rewards of a pecuniary sort. The corporation because it has as a rule in comparison with other forms of ownership an immensely broadened base can rear places of managerial influence extended in scope and to those who occupy them quite stimulating in their eminence. In other words, the corporation as a large- scale enterprise makes possible a specialization in the man- agement, and to these specialized positions, because their influence is so extended, handsome remunerations may be attached. Hence we hear of chairmen of the boards or presidents receiving salaries of perhaps $so,