<h2>CHAPTER 29</h2>
<h3>BUSINESS ORGANIZATION AND THE ENTERPRISER'S FUNCTION</h3>
<h4>§ I. THE DIRECTION OF INDUSTRY</h4>
<div class="sidenote">Judgment and self-direction as elements in personal skill</div>
<p>1. <i>In the simplest kinds of individual production the value of the
results depends largely on intelligent choice.</i> Even for the solitary
worker the choice of the right time to do work is most important. The
first thing Robinson Crusoe did was to turn to the ship to save as much
as possible of the cargo before it was dashed in pieces by the waves. If
he had begun first to till the soil to provide a future supply of food
it would have shown one kind of foresight, but it would have shown very
poor judgment. Every moment of delay in recovering the cargo of the
wrecked vessel cost him many useful materials. The humblest farmer has a
great range of choice and a need of good judgment in fixing the time to
sow, to reap, to do each simple task. There is the same need to-day for
the small shopkeepers, for the blacksmiths, for the small producers of
all kinds to make wise choice of time in the use of their own labor.
There is also a wide range of choice in the distributing and combining
of labor, agents, and materials. A limited supply of agents can be used
to secure a variety of goods, more or less desirable. There are many
chances for mistake, but in the long run it is judgment, not chance,
that determines the success of one man as compared with another. There
is a choice in ways and methods by which a thing can be done. There are
many wrong ways, there is but one<span class="pagenum"><SPAN name="Page_266" id="Page_266">[Pg 266]</SPAN></span> best way, at any stage of industrial
progress. While most work is done in customary ways and little
independent judgment is required, yet in every business from time to
time new problems arise and call for an exercise of choice as to
methods. Moral qualities are continually called for, such as control of
impulse, and the giving up of the comfort of the moment. The wisdom of
our fathers is embodied in a multitude of proverbs that suggest the wise
course. Men must "make hay while the sun shines," not lie in the shade.
But virtue fails less often from lack of knowledge than from lack of
will. As men differ in judgment, character, and will-power, their
products differ, even in the simplest circumstances. The ability to
choose and to do wisely is an element in personal skill.</p>
<div class="sidenote">Direction of a group of workers</div>
<p>2. <i>When men work in an associated group, the direction of effort
becomes relatively more important.</i> The first and simplest advantage of
association is working in unison. Men unite their muscular efforts for a
single task, and accomplish what is impossible to them working singly.
But when many work in unison, the right selection of time and way is of
greater importance; a mistake will waste more materials and agents. If
association is to yield its advantages, there must be division of labor;
hence harmony of effort, hence agreement or direction. While the gain of
well-directed association is large, the waste of ill-directed effort is
greater, when specialization has taken place, than with isolated
workers. Most communal societies have failed because of the lack of a
good head. The few exceptional successes have been due to the presence
of a man of superior ability, such as George Rapp of the Harmonist
Community, who, had he lived in this day, could have become easily the
head of a great business corporation.</p>
<div class="sidenote">Direction of interrelated groups</div>
<p>3. <i>Where various industrial groups are associated, direction becomes
still more important.</i> In the single group it is an internal harmony
alone that is needed. The work of a dozen men must be so arranged that
each is in his fitting<span class="pagenum"><SPAN name="Page_267" id="Page_267">[Pg 267]</SPAN></span> place. But as this group comes into contact with
others, the relationship becomes two-fold, and there must be both
internal and external harmony. The more complex the economic
organization of society, the more the chance of mistake and the more
injurious are the mistakes to a wide range of interests. Large amounts
of capital and labor can be rapidly lost through lack of wise direction
of associated groups.</p>
<div class="sidenote">Greatest need now of capable direction of industry</div>
<p>4. <i>The increased efficiency of industry has been accompanied by the
specialization of control.</i> The crude, early methods of enforcing
harmony in industry were slavery and political subordination. Under
division of labor, with free workmen, industry is ruled by impersonal
economic forces that bring the less capable under the direction of the
more capable. This work is rudely done, no doubt, but the penalties of
bad direction of labor and capital are so great that blundering cannot
be permitted. The man who shovels dirt must do it at the right time and
place if, in this complex society, it counts for something and gives the
effort value. If he cannot choose well for himself, he comes under
direction. The average man cannot decide nearly as well here as he could
on a desert island where and when to put in his spade. There it would be
to raise food for the current year; here it may be to dig a canal or a
tunnel whose uses will not become actual for many years. The more
distant the end sought, the more difficult is the choice. To every
worker, according to his personal skill, is left some degree of choice
in the method of his work, but in a large part of industry the range of
choice is very narrow. The man with the shovel and the man with the hoe
come under direction.</p>
<h4>§ II. QUALITIES OF A BUSINESS ORGANIZER</h4>
<div class="sidenote">Technical knowledge and skill</div>
<p>1. <i>The organizer and director of industry must first have technical
knowledge of methods, processes, and materials.</i> The qualities required
in the direction of industry are implied<span class="pagenum"><SPAN name="Page_268" id="Page_268">[Pg 268]</SPAN></span> in the foregoing section, but
they may be more specifically enumerated. Knowledge of technical
processes is relatively more important in the direction of industry in
the earlier stage. In the single independent producer it is the quality
most desirable. He must know the quality of the materials with which he
works and the best modes of combining them. But, as industrial
organization becomes more complex, only a broad knowledge and ability to
judge of the results of different processes and to compare plans are
necessary in the organizer. He can hire the technical knowledge of
details required in the larger management of business. Draftsmen,
engineers, pattern-makers, men with far more education and capacity in
certain lines than the business manager, work under his direction.</p>
<div class="sidenote">Judgment of men</div>
<p>2. <i>The organizer requires ability to judge men and tact in relations
with them.</i> In the small group, ability to get on well in personal
contact with workmen is of great importance. Especially rare is the
genial manner that wins the confidence and even the affection of the
men. A sense of humor and the ability to turn a joke are said to have
obviated many a strike and thus to have prevented losses both to the
employer and to the men. In large affairs much of this managing tact can
be hired in good foremen; but the organizer must still have a knowledge
of men, ability to judge of human nature, to select his subordinates,
and to animate them with his own purposes and plans. Mr. Carnegie has
said that an appropriate epitaph for himself would be, "He was a man who
knew how to surround himself with men abler than he was himself." That
seems too modest; but in a sense it is not, because he claims for
himself, and justly, the highest of all industrial qualities. A great
administrator in political or industrial affairs can dispense with
everything else rather than with this, the supreme quality of the great
organizer.</p>
<div class="sidenote">Foresight in commercial affairs</div>
<p>3. <i>The organizer must have unusual foresight and the ability to form a
large commercial policy.</i> This proposition<span class="pagenum"><SPAN name="Page_269" id="Page_269">[Pg 269]</SPAN></span> is to be interpreted
relatively to the task before the organizer, and to the size of the
business. Modern industry anticipates demand far more than did primitive
industry. Large amounts of materials and energy are embarked in
directions from which they cannot be recalled. With the progress of
electrical engineering it soon may become possible to recall at any
moment a cargo embarked for a distant port. But no wireless telegraphy
is able to recall the great masses of capital that are embarked on
distant and definite journeys in modern business. The organizer
anticipates future demand, and prepares for it. The process has been
figuratively expressed somewhat as follows: the enterpriser throws into
the crucible great quantities of material; they melt, and an industrial
result is secured, but whether the deposit is greater in value than the
material is a question that cannot be answered for years. The need of
anticipating demand is greater to-day than ever before, and this
requires large investments months and even years in advance. The losses
are proportionally large if there is miscalculation of demand. A large
commercial policy is one that takes into account the more distant
factors, and anticipates the new conditions. The rare ability to do this
is rightly called statemanship in economic affairs.</p>
<div class="sidenote">Command of financial resources</div>
<p>4. <i>The organizer need not himself have great wealth, but he must have
ability to command financial resources.</i> Business to-day is done in many
cases with borrowed capital. Even a subscription to stock is frequently
as much in the nature of a loan, made in reliance on the reputation of
the organizer, as an investment for profits. There are many temporary
needs that require sudden loans. The confidence of investors, whether
banks, trust companies, individual shareholders or investors in bonds,
must be secured by the organizer. Good judgment of the money market
often is as vital as judgment of the market for the particular product.
In some of the largest corporate enterprises this quality becomes the
most essential.</p>
<p><span class="pagenum"><SPAN name="Page_270" id="Page_270">[Pg 270]</SPAN></span></p>
<div class="sidenote">Scarcity of great organizing ability</div>
<div class="sidenote">The industrial leaders</div>
<p>5. <i>Organizing ability of the highest order is rarely found.</i> This is
almost a superfluous statement after the foregoing. According to the
theory of chances, such a combination and balancing of qualities is
likely to occur in very few cases. Even where it exists, it may not be
discovered or developed. The man may not find his opportunity, nor the
task the man. There are many misfits in the world. On the occasion of
the visit of Prince Henry of Prussia to America, in 1902, he was
entertained at luncheon in New York with one hundred of the leaders in
invention, finance, and industry, wherein have been the most
characteristic achievements of America. In jocular reference to the
French Academy, whose members are the forty most noted literary men of
France, the newspapers called this the meeting of America's one hundred
immortals. There were J. P. Morgan, the great financier; Vanderbilt,
Hill, and Harriman, the railroad kings; Carnegie, the iron magnate;
Irving Scott, "the man who built the Oregon"—nearly all the company
deserving a place at the table mainly by reason of excellence as
business organizers. Such a gathering has a dramatic interest as
presenting the greatest leaders of industry, but about other tables
might be gathered thousands of other less notable figures worthy to be
accounted captains of industry in their several fields. One may well
ask, How did they come into the important places they occupy?</p>
<h4>§ III. THE SELECTION OF ABILITY</h4>
<div class="sidenote">Various roads to industrial leadership</div>
<p>1. <i>The men actually in control of industry have been selected in
manifold ways.</i> Skill develops a small industry into a large one. A
small factory owner gradually adds machine to machine, building to
building, till he finds himself at the head of a great industry. Or an
employee develops ability and becomes an employer. Who does not know of
some one who, as a small boy, went into a store to do chores, worked up
to a clerkship and, enlisting the confidence<span class="pagenum"><SPAN name="Page_271" id="Page_271">[Pg 271]</SPAN></span> of men of wealth, was
enabled to establish a business of his own and become an employer?
Others have won promotion from the ranks to the head of a large industry
in which they secured at last a controlling interest. Employees that
have proved their ability may be selected by the directors of a stock
company. Men that have worked their way up from the ranks may bequeath
their business positions to their sons and grandsons, as in the case of
the Vanderbilts and the Goulds. And finally, but rarely, there may be
selection by fellow-workmen in the case of coöperative business.</p>
<div class="sidenote">Success as the evidence of ability</div>
<p>2. <i>There is a constant selective process: dropping out the weak and
advancing the efficient organizer.</i> There is, to be sure, an element of
chance in this selection. The process in general is a rude one.
Accidents and unforeseen changes, industrial crises, failure of health
at a critical moment, fraud and crime, may defeat men of ability and
they may never regain their foothold. Lack of experience may lead to
disaster a naturally able but youthful heir, too suddenly burdened with
the responsibilities of a fortune. On the other hand, men of limited
ability may inherit fortunes and preserve them by caution, without
enterprise. It is not always true, even in America, that "It is but
three generations from shirt-sleeves to shirt-sleeves," although many
fortunes slip away from the sons of rich fathers. In general, success in
retaining the control of a business is an evidence of considerable
ability. By loss of fortune unwisely risked, through unforeseen changes
in methods, and after manifold blunders, the less capable drop out.
Thus, by the ceaseless working of competition, the higher places are
taken by those most capable of filling them, and the efficiency both of
the employers and of the workmen is increased.</p>
<div class="sidenote">Various modes of business organization</div>
<p>3. <i>In the various kinds of business organization the merits of men and
of methods are tested.</i> The independent producer working entirely alone,
directing his own industry, is analogous to the animal organism of a
single cell. More complex is the family partnership found often in early
stages<span class="pagenum"><SPAN name="Page_272" id="Page_272">[Pg 272]</SPAN></span> of industry but more rarely now, where the father directs the
work of his children and all share in common. The simplest form of the
wage system is the single employer with a few assistants. When the
employer is in danger of losing valuable assistants, he sometimes gives
them a share in the business. In the ordinary partnership, two or more
men divide the ownership and duties, agreeing as to the division of
control. Coöperation among workmen, though rare, gives an unusual
opportunity for the discovery of special talent. The dominant form of
organization to-day is that of the stock company, or corporation, the
ownership of which is divided among the holders of shares of stock, or
of certificates of membership.</p>
<div class="sidenote">Many chances to try ability</div>
<p>This variety of organization affords opportunity for a two-fold test:
that of the ability of men and of the merits, in varying circumstances,
of the different forms of organization. Methods of organization are
constantly tested by their results. Men having money to invest are
asking whether they would be better off to go into business by
themselves, or to join with a partner, or to buy stock in some large
corporation. Each of these forms of organization has its peculiar
advantages. A stock company can better enlist large amounts of capital,
while the individual employer is generally more free from dictation and
can adapt his business more quickly to changing conditions. At the same
time this variety of organization offers better opportunities for
managing ability to show its metal. On the watch towers of industry are
many observers sweeping the horizon for the appearance of men of
business talent. Some characters develop better under direction; others
prove that nowhere does native ability count for more, and mere
book-schooling for less, than in business administration. There is some
ground for the belief that a college education does not increase
executive capacity in business. Such ability often seems to be a freak
of nature and a product of practical experience, rather than the result
of college training.</p>
<hr class="chap" />
<p><span class="pagenum"><SPAN name="Page_273" id="Page_273">[Pg 273]</SPAN></span></p>
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