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Title: Higher Education and Business Standards

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_Barbara Weinstock Lectures on The Morals of Trade_

HIGHER EDUCATION AND BUSINESS STANDARDS.
By WILLARD EUGENE HOTCHKISS.

CREATING CAPITAL: MONEY-MAKING AS AN AIM IN BUSINESS.
By FREDERICK L. LIPMAN.

IS CIVILIZATION A DISEASE?
By STANTON COIT.

SOCIAL JUSTICE WITHOUT SOCIALISM.
By JOHN BATES CLARK.

THE CONFLICT BETWEEN PRIVATE MONOPOLY AND GOOD CITIZENSHIP.
By JOHN GRAHAM BROOKS.

COMMERCIALISM AND JOURNALISM.
By HAMILTON HOLT.

THE BUSINESS CAREER IN ITS PUBLIC RELATIONS.
By ALBERT SHAW.




HIGHER EDUCATION
AND
BUSINESS STANDARDS



By

WILLARD EUGENE HOTCHKISS

DIRECTOR OF BUSINESS EDUCATION
AT THE UNIVERSITY OF MINNESOTA



BOSTON AND NEW YORK
HOUGHTON MIFFLIN COMPANY
_The Riverside Press Cambridge_
1918

COPYRIGHT, 1918, BY THE REGENTS OF
THE UNIVERSITY OF CALIFORNIA

ALL RIGHTS RESERVED

_Published March 1918_




BARBARA WEINSTOCK
LECTURES ON THE MORALS OF TRADE


This series will contain essays by representative scholars and men of
affairs dealing with the various phases of the moral law in its bearing
on business life under the new economic order, first delivered at the
University of California on the Weinstock foundation.




HIGHER EDUCATION AND BUSINESS STANDARDS


Last summer, when we reached California for a year's sojourn, we had
the good fortune to secure a house with a splendid garden. A few weeks
ago, after the early warm days of a California February had opened up
the first blossoms of the season, our little five-year-old discovered
that the garden furnished a fine outlet for her enterprise, and she
soon produced two gorgeous--I will not say beautiful--bouquets. Barring
a certain doubt about her mother's approval, she was well satisfied
with her achievement, she felt a sense of completeness in what she had
done--and well she might, for she had not left a visible bud.

There is a strong tendency to go at business the way Helen went at the
garden. She knew what to do with bouquets; raw material for making them
was within her reach; what more natural than to turn it, in the most
obvious and simple way, into the product for which it was designed.
From her standpoint such a procedure was entirely correct--she was
making bouquets for herself and her friends; every one in her circle
would share the benefit of her industry.

Whenever in the past business enterprise has proceeded from a similar
viewpoint, we have stood aside and let it proceed; it was not our
garden; we were quite willing to take the role of disinterested
spectators. Recently we have discovered that it is our garden; we have
learned that we are not disinterested; we now see that business plays a
large part in the life of every one of us. That being the case, we
assume the right to question its processes, its underlying policies,
and its results. We are gradually coming to think of business in terms
of an integrated and unified national life. We desire the national life
to be both wholesome and secure.

What the public really wants from business, then, is a contribution to
national welfare, and it has become convinced that, by taking thought,
it can make the contribution more certain and more uniform than it has
been in the past. Many business men share this view; with varying zeal
they are trying to work out standards of organization that will insure
the kind of regard for general welfare which the public has come to
demand.

This is the new idea in business; it has already taken deep root; but
it needs to be further developed. We have the difficult task of
reducing an idea to a practical working plan. How shall we go about it?
Fortunately the idea itself contains a hint for further procedure. A
new attitude in business must be coupled with a new attitude in public
policy.

When my enterprising child made an onslaught on the garden it would
have been easy enough to punish her; but it is doubtful if mere
punishment gets very far in a case of that sort. Unless we can teach
the child to enjoy the garden without destroying it, the restraining
influence of punishment will be no stronger than the memory of its pain
or the fear of its repetition. This memory of the past and fear of the
future usually wage a most unequal contest with the vivid and alluring
temptation of the present.

But should not the child be restrained? As far as necessary to protect
the garden, and perhaps also to make her conscious of an authority in
the world outside of her own will, yes--but that is not the main task.
The main task is to educate her, to develop an understanding of the
garden, to get her in the frame of mind in which she will derive her
greatest enjoyment when she cultivates it and sees it grow, and when
she restricts her picking to a reasonable share of what the garden
produces.

In the actual case before us, the child was after quick and easy
results, the only kind she could comprehend; she was unable to look
upon the garden as a living thing whose life and health must be
preserved to-day in order that it may yield returns to-morrow and next
week. Analyzed with adult understanding, her essential fault was a
failure to get beyond immediate results and to view the garden from a
long-time angle. We ought not to expect her to do this now, but we do
expect her to do it when she is grown up. We expect in time so to
educate her that she will be able to think of the garden in terms of
permanence and growth and to make an effective use of it from that
standpoint; and this same education in long-time effectiveness is what
we want in business.

Business standards must be discussed from the standpoint of efficiency,
but efficiency needs to be interpreted. We may as well admit at the
start that the efficiency ideal is not entirely in good repute at this
moment.[1] If I may import an expression from England, we have been
somewhat "fed up" with efficiency during the recent past and the ration
has been rather too much for our digestion.

      [1] At the time this was written, in the spring of 1916, it will
      be recalled, the German war machine for nearly two years had been
      demonstrating its efficiency; the Allies had not yet matched it,
      and we did not like the work that efficiency was doing.

Away back in the eighties, before the dominance of business in American
society had been questioned, efficiency, as the term was then
understood, had a place among the elect; it was the intimate associate
of business success. Then came the muck-raker, and with him came also
anti-trust cases and insurance investigations. We turned our attention
to labor outbreaks, to graft prosecutions, and to land steals. We
talked about "malefactors of great wealth." We even became interested
in Schedule K. And so, during the first decade of the new century a
whole train of revelations, incidents, and phrases tempered our regard
for business and brought many business practices under the ban of law
and hostile sentiment. Efficiency was in bad company and suffered in
reputation.

But efficiency was able to prove an alibi; we were told that the thing
which posed as efficiency was not efficiency, but special privilege,
and we were again persuaded of the great service a regenerate and
socialized efficiency could render. Just at this point came the
outbreak in Europe; efficiency was again caught in bad company, and we
began to hear such phrases as the "moral breakdown of efficiency,"
"efficiency, a false ideal," and others of similar import. In an
article bearing the title, "Moral Breakdown of Efficiency," published
in the "Century" for June, 1915, it was maintained that pursuit of
efficiency had led and was still leading civilization on a downward
path.

In addition to the reputation of keeping bad company, efficiency has to
bear the odium of many foolish and inefficient deeds performed by its
self-appointed prophets. The quest for efficiency has called forth in
business a new functionary known as the "efficiency expert." Many of
these men have done a vast amount of valuable work, but many others
have not. While the real expert has been raising the level of business
organization, the others have been piling up a large wastage of poor
work and lost confidence.

But these are side issues. The main fact stands out above them. We have
been steadily adding to the burdens on industrial and commercial
equipment; even more have we increased the stresses and the strains on
human life. A devastating war is now suddenly taking up the slack, and
the slow and painful task of making the world efficient must be
hastened in order that society may bear the load. In these
circumstances we need not apologize for making efficiency the main
support of business standards. Nor need we assume, as does the author
just cited, that the efficiency ideal in any way conflicts with the
ideal of moral responsibility and service.

Of course, if we reflect, the abstract and impersonal thing which
engineers define as the ratio between energy expended and result
obtained has no moral quality in itself. Whatever of morality or lack
of morality the word "efficiency" calls forth is given to it by the
manner in which the terms of the ratio are defined. It is for society
to make the definitions. Society may determine the forms and the
limitations under which it will have business energy expended, and it
may decide what are the social ends toward which it will have business
effort contribute. Guided by wise social policy, efficiency and service
go hand in hand.

Since business is subject to control by society, it follows that the
efficiency factors in a particular business, in a whole industry, or in
business generally, must adjust themselves to the decisions that
society has made, and they must also take account of decisions that it
may make in the future. And these decisions are not all recorded in the
law or even in the vague thing we call public opinion. Laws and
opinions of particular groups, group morality, individual morality,
even inertia, and a long list of more subtle and often capricious
reactions are channels through which social purpose finds expression.

It is worth our while to consider how these reactions may affect
practical administration. No reflection is needed to see that in
proportion as business men fail to take account of forces outside the
business, in that proportion they are likely to miscalculate the
results of business policies. Striking examples of such miscalculation
are found in the experience of Mr. George M. Pullman back in the
nineties, and of Mr. Patterson, of the National Cash Register Company,
a decade later. Each of these men, with apparent good faith, undertook
to surround his laborers with conditions of physical, mental, and moral
uplift, and each undertook to do it as an act of paternal bounty. Each
of them, as far as we can judge, expected appreciation, gratitude, and
increased efficiency. But they failed to take account of the group
consciousness of their laborers; they did not know what the laborers
were thinking; and because the laborers were thinking something
different from what the employers thought, policies intended to arouse
gratitude aroused instead resentment and a strike.

But there are many things besides too much paternalism that may result
in a strike. Another concern of international dimensions and one whose
officers, I can vouch, are men of high character and public spirit,
also found itself confronted with a strike in 1910. This was a highly
organized business. For years its sales department had tried to seek
out the highest grade of talent, and the result was a selling and
distributing organization that was the model and the envy of
competitors. But questions of employment seem to have gone by default,
the general policy being confined to a sincere but vague good-will
toward employees and acceptance of things as they were.

The issues of the strike were issues with which we are all familiar. On
the workers' side, grievances and no workable machinery for redress;
result: organization, concerted group action, force. On the other side,
there was a personal readiness to hear grievances, coupled with
insistence on the ancient right of the employer to conduct his own
business in his own way, without interference from employees or the
public.

After weeks of deadlock the strain of a distressing situation, losses
from the interruption of business, regard for public opinion and the
opinion of friends, combined with their own desire to do the right
thing, induced the employers, probably against their best judgment, to
recede from their position. An agreement was made providing for
increased wages, standardization of piece-work, a preferential shop,
and appointment by the firm of a person to hear grievances and to
cooperate with a representative of the union in securing redress.

The union in this case was fortunate in being represented by a
high-minded man who was a real statesman. The firm selected a trained
economist as labor expert, and he soon had an employment department in
operation. Together these men and their colleagues have kept peace in
the concern and have developed and expanded the machinery for settling
disputes into a model of industrial-relations organization.

Some four years after the strike the business head of the firm
testified in a public hearing that he should scarcely know how to
conduct his business without the organization which now obtains for
dealing collectively with labor. He also in the same hearing expressed
the view that a large employer is a trustee of the public, responsible
for the measure of public welfare in which his business results; and
this man, remember, is not a reformer or even a radical, but just a
successful business man.

In this bit of labor history there were, no doubt, many fortunate but
uncontrollable factors which, otherwise combined, would have brought a
less happy result. But two things stand out: first, the laborers
listened to wise counsel--they were well led; and second, the
employers, when they consented to make an agreement, gave the plan
adopted their genuine support. Combining good citizenship with business
sense they were able to understand the new social influences that make
the formulas of 1880 a poor gauge of efficiency factors in 1910. They
are now enjoying the benefits of their willingness to learn.

The effect of social forces is seen under different circumstances and
from an entirely different angle in the present halting policy of
American railroads.[2] Here, in addition to other social elements in
the question, is the fact of definite government control. This
circumstance has accustomed railway managers to look at both the
internal and the public factors in their success. A number of years
ago, before Mr. Justice Brandeis became a member of the Supreme Court,
he pointed out, as many others have since done, that the railroads were
looking too much to the government factor, and too little to the
economy and effectiveness of their own internal administration. Even
though we concede this point, it is still clear that the highest
efficiency of our railroads must wait upon a clarification of policy
with respect to the great social fact affecting railway operation--the
fact of government control. We may not approve the precise manner in
which the railroads respond to this fact, but obviously they cannot be
efficient and ignore it.

      [2] Referring to the situation early in 1916 when this sentence
      was written.

Examples, ranging all the way from accepted and enforceable legal
restrictions to the interplay of the most subtle group sentiments,
could be multiplied at will to bring out the presence of the social
factor in efficiency standards. Were it not that internal business
policies, on the one hand, and public policy toward business, on the
other, are so frequently vitiated by failure to reckon with the
probable reactions which a particular measure will call forth, I should
not retard the discussion to emphasize a point so obvious. But though
the presence of social factors is obvious, how to measure them is not
obvious. General principles that bear on a specific case are hard to
locate and difficult to apply. Even the broad lines of social and
business policy are not always clear, and the probable trend of future
policy is still less clear.

Just what are the principles that are being worked put in order to
determine the forms and the limitations under which business energy
shall be expended, and how do they differ from those followed a
generation ago? Take the other side of the efficiency ratio: toward
what results are we trying to have business energy directed? Again,
what are the instruments with which society is enforcing its purpose?
How effective are they, how effective are they likely to become?
Finally, what bearing will this social effectiveness or lack of
effectiveness have on standards of business efficiency for the
generation about to begin its work?

Even though we cannot answer these questions to-day, we have, to-day,
the task of educating the generation that must answer them. More than
this, the education we provide for the generation about to begin its
work will determine, in no small measure, the kind of answers the
future will give. It is, therefore, of great importance that in our
ideals and our policies for educating future business men we should try
to anticipate the social environment in which these men will do their
work.

We are in the habit of speaking of the present as a time of
transition--the end of the old and the beginning of the new. In a very
real sense every period is a period of transition. Society is always in
motion, but that motion at times is accelerated and at other times
retarded. Clearly we are living now in a period of acceleration--a
period which must be interpreted not so much in terms of where we are,
as of whence we came and whither we are going. This means that we
cannot hope to prepare an educational chart for the future without
understanding the past.

In our study of business we are always emphasizing the "long-time point
of view," and we fall back upon this convenient phrase to harmonize
many discrepancies between our so-called scientific principles and
present facts. On the whole, we are well justified in assuming these
long-time harmonies, but it will not do to overlook the fact that many
important and legitimate enterprises have to justify themselves from a
short-time viewpoint. Of more importance still is the fact that in this
country enterprises of the latter sort have predominated in the past.
This circumstance has a very marked bearing on the nature of our task,
when we try to approach business from the standpoint of education.

There are strong historical and temperamental reasons why
nineteenth-century Americans were inclined to take a short-time view of
business situations. Our fathers were pioneers, and the pioneer has
neither the time, the capital, the information, the social insight, nor
the need to build policies for a distant future. The pioneer must
support himself from the land; he must get quick results, and he must
get them with the material at hand.

Every one of our great industries--steel, oil, textiles, packing,
milling, and the rest--has its early story colored with pioneer
romance. The same romantic atmosphere gave a setting of lights and
shadows to merchandising and finance and most of all to transportation.
Whether we view these nineteenth-century activities from the standpoint
of private business or of public policy, they bear the same testimony
to the pioneer attitude of mind.

Considering our business life in its national aspects, our two greatest
enterprises in the nineteenth century were the settlement of the
continent and the building-up of a national industry. In both these
enterprises we gave the pioneer spirit wide range. With respect to the
latter, industrial policy before 1900 was summed up in three items:
protective tariff, free immigration, and essential immunity from legal
restraints. This is not the place to justify or condemn a policy of
_laissez-faire_, or to strike a balance of truth and error in the
intricate arguments for protection and free trade; nor need we here
trace the industrial or social results of immigration. We need only
point out that the policy in general outline illustrates the attitude
of the pioneer. The thing desired was obvious; obvious instruments were
at hand--immediate means used for immediate ends. From his viewpoint,
the question of best means or of ultimate ends did not need to be
considered.

In building our railways and settling our lands the pioneer spirit
operated still more directly, and in this connection it has produced at
the same time its best and its worst results. The problem of
transportation and settlement was not hard to analyze; its solution
seemed to present no occasion for difficult scientific study or for a
long look into the future. The nation had lands, it wanted settlers, it
wanted railroads. If half the land in a given strip of territory were
offered at a price which would attract settlers, the settlers would
insure business for a railroad. The other half of the land, turned over
to a railroad company, would give a basis for raising capital to build
the line. With a railroad in operation, land would increase in value,
the railroad could sell to settlers at an enhanced price and with one
stroke recover the cost of building and add new settlers to furnish
more business.

In its theory and its broad outline the land-grant policy is not hard
to defend. The difficulties came with execution. We know that in actual
operation the policy meant reckless speculation and dishonest finance.
We know that no distinction in favor of the public was made between
ordinary farm lands, forest lands, mineral lands, and power sites. We
know that the beneficiaries of land grants were permitted to exchange
ordinary lands for lands of exceptional value without any adequate
_quid pro quo_; and we know that there were no adequate safeguards
against theft.

Wholesale alienation of public property was intended to secure
railroads and settlers, but the government did not see to it that the
result was actually achieved. Speculation impeded the railways in doing
their part of the task, while individuals enriched themselves from the
proceeds of grants or withheld the grants from settlement to become the
basis of future speculative enterprises. All this seems to show that in
execution at least our policy from a national standpoint was
short-sighted. Careful analysis and a more painstaking effort to look
ahead might have brought more happy results.

And how about the railroads from the standpoint of private enterprise?
A railway financier once described a western railway as "a right of way
and a streak of rust." The phrase was applicable to many railways.
Deterioration and lack of repairs were, of course, responsible for part
of the condition it suggests, but much of the fault went back to
original construction. It was the wonder and the reproach of European
engineers that their so-called reputable American colleagues would risk
professional standing on such temporary and flimsy structures as the
original American lines. Poor road bed; poor construction; temporary
wooden trestles across dangerous spans--everything the opposite of what
sound engineering science seemed to demand. Why did not the owners of
the roads exercise business foresight to provide for reasonably solid
construction?

What seems like an obvious and easy answer to all these questions is
that both the Government and the road were controlled in many cases, as
the people of California well know, by the same men, and these men were
privately interested. As public servants or as officers of corporations
they were supposed to be promoting settlement and transportation; as
individuals they were promoting their own fortunes. This result was
secured by the appropriation of public lands and the conversion of
investments which the public lands supported. That this sort of thing
occurred on a large scale and that it involved the violation of both
public and private trusts is fairly clear.

Public sentiment has judged and condemned the men who in their own
interests thus perverted national policy; and we approve the verdict.
But it is not so easy to condemn the policy itself or to indict the
generation that adopted it. Looking at the matter from the standpoint
of the nation, it was precisely the inefficiency and the corruption in
government which augmented the theoretical distrust of government and
made it unthinkable to the people of the seventies, that the Government
should build and operate railways directly. The land-grant policy
entailed corruption and waste, of course; but what mattered a few
million acres of land! No one had heard of a conservation problem at
the close of the Civil War. Resources were limitless; without
enterprise, without labor and capital, without transportation they had
no value, they were free goods. The great public task of the nineteenth
century was to settle the continent and make these resources available
for mankind. This task it performed with nineteenth-century methods.
From our standpoint they may have been wasteful methods, but they did
get results. In its historical setting, the viewpoint from which the
task of settlement was approached was not so far wrong.

When we examine the counts against the railroads as private
enterprises, we find that the poor construction, which from our point
of vantage looks like dangerous, wasteful, hand-to-mouth policy, is
only in part explained by the fact of reckless and dishonest finance. I
am advised by an eminent and discriminating observer that the
distinguished Italian engineer to whom Argentina entrusted the building
of its railroad to Patagonia, produced a structure which in engineering
excellence is the equal of any in the United States to-day. But the
funds are exhausted and the Patagonia railroad is halted one hundred
and fifty miles short of its goal; there are no earnings to maintain
the investment.

The reaction of high interest rates on the practical sense of American
capitalists and engineers has made operation at the earliest possible
moment and with the smallest possible investment of capital the very
essence of American railway building in new territory. Actual earnings
are expected to furnish capital, or a basis for credit, with which to
make good early engineering defects. All this, of course, is but
another way of saying that the criterion of engineering efficiency is
not "perfection," but "good enough." This distinction has placed a
large measure of genuine efficiency to the credit of American
engineers, and it explains why Americans have done many things that
others were unwilling to undertake. It is a great thing to build a fine
railroad in Patagonia, but I am sure we all rejoice that the first
Pacific railroad did not have its terminus in the Nevada sagebrush. The
standard of technical perfection set by the Italian engineer did not
fit the facts. It is not the failure to attain his standard but the
failure to measure up to a well-considered standard of "good enough"
that stands as an indictment against American railway enterprise.

Viewed in historical perspective the business environment of the
pioneer appears to have been dominated by two outstanding facts: one,
seemingly inexhaustible resources; the other, a set of political and
economic doctrines which told him that these resources must be
developed by individual initiative and not by the State. The faster the
resources were developed the more rapidly the nation became
economically independent and economically great, and since they could
not be developed by the State it is not strange that private initiative
was stimulated by offering men great and immediate rewards. These
rewards have encouraged individuals and associations of individuals to
aspire to a quick achievement of great economic power, and their
aspirations have been realized. Such achievements have been a
dominating feature of our business life, and we have regarded them as
an index of national greatness.

Abundance of resources, if it did not make this the best way, at least
made it an obvious way, for the nineteenth century to solve its
business problems. From our vantage point we can see that serious
mistakes were made. When we set the foresight of our fathers against
our own informed and chastened hindsight their methods appear clumsy
and amateurish. But in the main they did solve their problems: they
gave us a settled continent; they gave us transportation and
diversified industry. We now have our garden and the tools with which
to work it. If the pioneer allowed the children to pick flowers and in
some cases to run away with the plants and the soil, he did not fail to
develop the estate.

Our inheritance from the pioneer is not only material but
psychological. The pioneer attitude of mind has made a real
contribution to our business standards. The very magnitude of our
enterprises, the fact that we have had to develop our methods as we
went, our success in approaching problems that way, have given us a
confidence in ourselves and a readiness to undertake big things without
counting the cost. This readiness is a large, perhaps a dominant,
factor in our contribution to world progress. It is not an accident
that the greatest problems of mountain railway building have been met
and solved by American engineers, or that they have carried a great
railroad under two rivers to the heart of our greatest city. These in a
private way, and the Panama Canal in a public way, are typical of
American engineering enterprise.

As with engineering, so with general business. Our pioneer managers did
not lack imagination; they were not afraid to undertake; they were not
constrained by worry lest they make mistakes. They made many mistakes.
Some were corrected, others ignored, but many more were concealed by an
abundant success. The pioneer could afford to do the next thing and let
the distant thing take care of itself, and in large measure he escaped
the penalties which normally follow a failure to look ahead.

Substantial forces have tended to keep the pioneer spirit alive. If
some resources have been depleted, other resources have been found to
take their place. Scientific discovery, invention, and the development
of technique have placed new forces at our command. Products have been
multiplied, but the demand for products has multiplied faster. We have
been able to continue offering men great and immediate rewards for the
development of new enterprises. As labor was needed, our neighbors have
continued to supply it. The result is that our business has continued
to go ahead without being too much concerned about the direction in
which it was going.

Business has eagerly appropriated the results of science without itself
becoming scientific. The difficult way of science makes slow progress
against the dazzling rewards of unbridled daring. So many strong but
untrained men have been enriched by seizing upon the immediate and
obvious circumstance--there has been so little necessity for sparing
materials or men and so little penalty for waste--that we have
developed a national impatience with the slow and tedious process of
finding out.

Along with our technical and business enterprise, with the courage and
imagination of which we are justly proud, a too easy success has given
us a tendency to drop into a comfortable and optimistic frame of mind.
Imagination, intuition, power to picture the future interplay of
forces, courage and capacity for quick action--all these qualities are
as essential to-day as they ever were to business success. The pioneer
environment reacting on our native temperament has given us these
qualities in full measure, but it has also given us a habit of doing
things in a hit-or-miss fashion. Our very imagination and courage
applied to wrong circumstances and in perverted form have often borne
the fruit of national defects.

There is a strong inclination to assume that the old approach to
problems will bring the same results that it did in the past, and to
forget that we are living in a new world. The problems confronting the
pioneer were not the problems we face to-day. It requires great ability
to draft a prospectus; in many of our greatest enterprises drafting the
prospectus has been the crucial task. But a prospectus is not a going
concern. There is a vast difference between promotion and administration.
In the promotional stage of our business life we were solving problems
made up of unknown quantities, problems for which the only angle of
approach was found in the formula _x_+_y_=_z_. We still have and shall
always have problems of the _x_+_y_=_z_ type, but if we apply that
formula to a problem in which 2+2=4 we are not likely to get the best
results.

Business may not yet be a science, but it is rapidly becoming
scientific. Scientific inquiry is all the while carrying new factors
from the category of the unknown to that of the known, and by so doing
it is setting a new standard of business efficiency. The more brilliant
qualities, like courage and imagination, must be coupled with capacity
for investigation and analysis, with endless patience in seeking out
the twos and the fours and eliminating them from the equation. When it
is possible by scientific research to distinguish a right way and a
wrong way to do a task, it is not an evidence of courage or imagination
but of folly to act on a faulty and imperfect reckoning with the facts.

The person who uses scientific method takes account of all his known
forces; he prepares his materials, controls his processes and isolates
his factors so as to reveal the bearing of every step in the process
upon an ultimate and often a far distant result. In other words, he
tries at every stage to build upon a sure foundation. His trained
imagination and judgment working on known facts set the limit on what
he may expect to find, and interpret what he does find, all along the
way.

In so far as particular business enterprises have rested on
engineering, chemistry, biology, and other sciences, a scientific
method of approach has long had large use in business; but the
scientist in business has usually been a salaried expert--a man apart
from the management--and it has been his results, and not necessarily
his methods, that have influenced business practice. We are now coming
to understand that scientific method is the only sure approach to all
problems; it is a thing of universal application, and far from being
confined to the technical departments of business, where the technical
scientists hold sway in their particular specialties, it may have its
widest application in working out the problems of management.

The way in which a man trained in scientific method may determine
business practice in a scientific manner finds illustration in a
multitude of practical business problems, ranging all the way from the
simplest office detail to the most far-reaching questions of policy. To
cite an example, of the simpler sort: if an item in an order sheet is
identical for eight out of ten orders is it better to have a clerk
typewrite the eight repetitions along with the two deviations or to use
a rubber stamp? Of course, there are not one or two, but many, items in
an order sheet and the repetitions and deviations are not the same for
all items. In practical application, the rubber-stamp method means a
rack of rubber stamps placed in the most advantageous position. It
requires also a decision as to the precise percentage of repetitions
which makes the stamp advantageous. Then arises the further question,
why not have the most numerous repetitions numbered and keyed and thus
avoid the necessity of transcribing them at all?

The rule-of-thumb approach to this kind of problem would proceed from
speculations concerning the effect of interrupting the process to use
the stamp, the result of such interruptions on the accuracy of work,
difficulties in the way of necessary physical adjustments, and many
other questions that would occur to the practical manager.

The scientific method of approach would first inquire whether there are
any principles derived from previous motion study or other
investigations, that apply to the case in hand. In accord with such
principles it would then proceed, as far as possible, to eliminate
neutral or disturbing third factors and to arrange a test. The results
of the test would lead, either to a continuance of the old practice, or
to the establishment of a new practice for a certain period, after
which, if serious difficulties were not revealed, the new practice
would be definitely installed.

It should be emphasized at this point, that there is a fundamental
difference between investigations or tests which contemplate an
immediate modification of practice and those investigations in which
research--that is, the discovery of new truths--is the sole object.
Tests which are carried on within the business must never lose sight of
the fact that a business is a going concern and that it is
impracticable and usually undesirable to transform a business into a
research laboratory. Scientific methods in business should not be
confused with the larger problem of scientific business research. This
larger task, if undertaken by the individual business concern, is the
work of a separate department. For business generally, it will have to
be conducted either by the Government, or by business-research
endowments. The point at which, in practical business, research should
give place to action is a question that wise counsel and the sound
sense of the trained executive must determine.

An example of the contrast between a scientific and a rule-of-thumb
approach, as applied to a question of major policy, is found in
discussions of the relative advantages of a catalogue and mail-order
policy over against a policy of distribution by traveling salesmen. A
few years ago the head of one of the largest wholesale organizations in
the United States, talking with an intimate friend, expressed fear that
his house, which employed salesmen, might be at a dangerous
disadvantage with its chief competitor, which did an exclusively
mail-order business. The friend comforted him with the assurance that
there are many buyers who prefer to be visited by salesmen and to have
goods displayed before them. This fact, he held, would always give an
adequate basis for the prosperity of a house that employed the salesman
method of distribution.

Neither the fear nor the assurance here expressed reveals a scientific
attitude of mind. Careful analysis shows, on the one hand, that the
mail-order policy is not the most effective means of cultivating
intensively a well populated territory. On the other hand, it shows
that the expense of sending salesmen to distant points in sparsely
populated areas more than absorbs the profits from their sales.
Individual concerns have arrived at these conclusions by experiment and
accurate cost-keeping and have succeeded in reaching a scientific
decision as to which territories should be cultivated by salesmen and
which ones should be covered exclusively through advertising and the
distribution of catalogues and other literature.

The difficulty that business men find in applying scientific method
consistently in the analysis of their problems is strikingly revealed
in the labor policy of the great majority of industrial concerns. While
many men of scientific training are dealing with problems of
employment, probably no concern has undertaken to make a scientific
analysis to determine what are the foundations of permanent efficiency
of the labor force which they employ. This is not surprising, when we
remember how complicated is the problem and how short the time during
which we have been emphasizing the human relations as distinguished
from the material or mechanistic aspect of business organization.

To state even a simple problem of management, like the one concerning
the order sheet, set forth above, is to reveal some of the difficulties
of analysis which characterize all subject-matter having to do with
human activity. This means that we should not expect results too
quickly nor should we be disappointed if the first results of efforts
at scientific analysis are not absolutely conclusive. As soon as we
recognize that business is primarily a matter of human relations, that
it has to do with groups and organizations of human beings, we see that
scientific analysis of it cannot proceed in exactly the same way as
with units of inanimate matter. The reaction of human relations to
changed influences, frequently cannot be predicted until the changes
occur. Business, in other words, is a social science and, like all
social sciences, must deal primarily with contingent rather than exact
data; likewise conclusions drawn from scientific analysis must in large
measure be contingent rather than exact.

Although we cannot always isolate our factors, control our processes,
and otherwise apply scientific method, with results as conclusive as
those obtained in laboratories of chemistry, physics, or biology, we
need not therefore reject scientific method in favor of a
rule-of-thumb. We should, however, be suspicious of too sweeping claims
based on any but the most careful and painstaking analysis of facts by
persons who are thoroughly trained in the kind of analysis they
undertake.

While a scientific approach will help in solving many problems of
business detail, the substitution of scientific method for a
rule-of-thumb approach will realize its object most completely in the
influences exerted upon fundamental long-time policy, influences which
cannot bear fruit in a day or a year. The circumstances of our history
have retarded the acceptance of a long-time scientific viewpoint in
business, but forces now at work are making powerfully for a scientific
approach to business management. First among these is a realization
that our resources are measured in finite terms. We have begun to take
account of what we have, and we are able in a rough way to figure the
loss from what we have squandered. The situation is not desperate, but
we can see that it may become so. To insure against possible disaster
in the future we need to exercise effective economy in turning
resources into finished goods, and we need to eliminate waste in the
distribution and the consumption of these goods. In private business
the need for such economy is reflected in rising prices for raw
materials. In its public aspect we have labeled the problem,
conservation.

A second force making for a scientific approach to business is found in
the beginnings of a social policy to which I have referred. This policy
is showing itself in limitations upon the way in which materials and
men may be utilized and in a sharper definition of the business man's
obligations to employees, to competitors and consumers. As long as
resources are to be had for the asking, while cheap labor can be
imported and utilized without restraint, and where no questions are
asked in marketing the product, there is not the right incentive to do
things in a scientific way. As business becomes more and more the
subject of legal definition, as the tendency grows of regarding it as a
definite service, performed under definite limitations, and for
definite social ends, margins will be narrowed and it will become
increasingly necessary to do things in the right way.

The scientific approach to business has made great progress during the
past decade. Out of the hostile criticism to which so-called big
business has been subjected have come several government investigations
and court records, in which policies of different concerns have been
explained, criticized, and compared. Besides, business men themselves
have become less jealous of trade secrets and have shown an increasing
inclination to compare results. A good illustration of this tendency is
seen in the growth of "open price associations" and in the spirit in
which credit men, sales managers' associations, and other business
groups exchange information. In the same spirit, business and trade
journals have given a large exposition of individual experience and
increasing attention to questions of fundamental importance.

More significant still has been the scientific management propaganda.
Mr. Brandeis's dramatic exposition of this movement in the railway rate
cases in 1911 at once made it a matter of public interest. Later
discussion may not have extended acceptance of scientific management,
but it has not caused interest in it to flag. The movement has become
essentially a cult. Its prophet, the late Frederick Taylor, by ignoring
trade-unionism and labor psychology in the exposition of his doctrines,
at once drew down upon them the hostility of organized labor; the
movement was branded as another speeding-up device. More serious than
the antagonism has been the spirit in which some of the scientific
management enthusiasts--not all--have met it. They seem to assume that
their science is absolute and inexorable, that it eliminates disturbing
factors and hence needs no adjustment to adapt it to the difficulties
met in its application. This air of omniscient dogmatism, together with
the disasters of false prophets, has somewhat compromised the movement
and has diminished its direct influence. However, business men have
been stirred up. They have become accustomed to using the words
"science" and "business" in the same sentence. They are in a receptive
attitude for ideas. The indirect influence has been great.

A final, and probably in the long-run the most permanent, influence
making for the extension of scientific method in business has been the
new viewpoint from which universities have been approaching the task of
educating men for business. Prior to 1900, university education for
business in the few universities that attempted anything of the sort
was confined to such branches of applied economics as money and
banking, transportation, corporation finance, commercial geography,
with accounting and business law to give it a professional flavor.
There were also general courses labeled commercial organization and
industrial organization, but these were almost entirely descriptive of
the general business fabric of the country, and had but the most remote
bearing on the internal problems of organization and management which
an individual business man has to face. The assumption was that a man
who was looking forward to business would probably do well to secure
some information about business, but there was little attempt at
definite professional training of the kind given to prospective
lawyers, physicians, or engineers.

Within the past few years universities have begun to undertake
seriously the development of professional training for business. The
result has been that through organized research and through
investigations by individual teachers and students, the universities
are gathering up the threads of different tendencies toward scientific
business and are themselves contributing important scientific results.
Out of all this there is emerging a body of principles and of tested
practice which constitutes an appropriate subject-matter for a
professional course of study, and points the way to still further
research.

One of the earliest results of an approach to business in an attitude
of scientific research, is the discovery that there are certain
fundamental principles which are alike for all lines of business,
however diverse the subject-matter to which analysis is applied.
Substituting the principle of likeness for diversity as the
starting-point of business analysis, has far-reaching consequences not
only for education and research but for management as well. First among
these consequences is the fact that search for elements of likeness
leads at once to replacing the trade or industry with the function as
the significant unit both of research and organization.

If we start our study of business by separating manufacturing,
railroading, merchandising, banking, and the rest, with a large number
of more or less logical subdivisions in each field, and then try to
work out a body of principles applicable to each subdivision, we soon
run into endless combinations and lose all sense of unity in business
as a whole. As soon, however, as we approach business from the
standpoint of accounting, sales management, employment, executive
control, and when we find that lessons in statistics, advertising,
moving materials, or executive management, learned in connection with a
factory, can be carried over with but slight adaptation to the
management of a store, we at once get a manageable body of material on
which to work.

Recognition of the principle of likeness and of its corollary, analysis
by function rather than by trade, marks perhaps the greatest single
step yet taken in the development of scientific business. The
principle, however, has its dangers. Analysis by function implies
functional specialization in research and a similar tendency in
business practice. Without specialization there can be no adequate
analysis of any large and complex body of facts. With too intense
specialization there is always danger that the assembling and digesting
of facts, and especially the conclusions drawn from them, will reflect
some peculiar slant of an individual or of a particular specialty.

The accountant does not always go after the same facts as the sales
manager, and even with the same facts the two are likely to draw quite
different conclusions as to their bearing on a general policy.
Specialization, too, may result in setting an intense analysis of one
group of facts over against a very superficial view of other facts--or
again, an intense analysis of the same facts from one viewpoint with
failure to consider them from another, and perhaps equally important,
viewpoint. Unless these weaknesses are corrected, the business will
lack balance; the work of departments will not harmonize; there will be
no fundamental policy; goods sold on a quality basis will be
manufactured on a price basis--all of which leads to disastrous
results.

Scientific method is the first article in the creed by which business
training must be guided. The growing necessity for critical and
searching analysis of business problems, justifies all the effort we
can put forth to develop plans for training into a structure of which
scientific method shall be the corner-stone. But analysis is not all.
Following analysis must come synthesis. Somewhere all the facts and
conclusions must be assembled and gathered up into a working plan. It
is this task of leveling up rough places in the combined work of
department specialists, that puts the training and insight of both the
executive and the director of research to the most severe test. It is a
mark of a well-trained executive that in performing his task he
instinctively follows principles instead of trusting alone to momentary
intuitions, however valuable and necessary these may be.

And here it is that the second article in the creed of business
training appears. The executive's task is primarily to adjust human
relations, and the nature of the principles by which these adjustments
are made, determines the relations of a concern to its laborers, to
competitors, to customers, and to the public. If the executive comes to
his task without a mind and spirit trained to an appreciation of human
relations, he is not likely so to synthesize the work of his
subordinates as to make for either maximum efficiency within the
business or its maximum contribution to the life of the State.

The term "executive" in large and highly organized concerns is likely
to mean the head of a department. A large proportion of the department
heads now in business are men of purely empirical training. Their
horizon is likely to be limited and to center too much in the
departmental viewpoint. They may perhaps be able to see the whole
business, but if they do, they will probably see it exclusively from
the inside. There is frequently nothing in their business experience
that has made them think of the great forces at work in society at
large. As the bulk of business has been organized in the past, there
has been no department in which, automatically and in the regular
course of business, a view looking outward is brought to bear. If it
came at all, it was reflected back from the larger relations and the
larger social contacts of the head of the business. Many general
executives have been promoted from the position of head of department
at a period in life when their habits of thought had become
crystallized, and it was not natural that they should entirely change
those habits with the change in their responsibilities.

Besides, the economics of competition and a strong group sentiment
among business men have tended to make them resist social influences
which might react upon the policies of their own business. Superficial
conclusions drawn from such experiments as those of Pullman and of
Patterson, to which reference has been made, have seemed to justify
such resistance and have fortified men in the belief that business and
response to social influence should be kept separate in water-tight
compartments.

More recently men have been coming to understand the fundamental
defects in the Pullman and the original Cash Register plans and have
come to realize that even a separate welfare department may be
successfully incorporated in a business, if only certain fundamental
policies are followed in its management. Still more significant is the
view looking-outward and the consequent harmonizing of social and
business motives, which is coming in the ordinary development of
business policies as a result of their more fundamental analysis.

Perhaps the greatest step toward a fuller consideration of facts on the
outside is taken, when a business creates a separate department of
employment. It is hard to see how the head of an employment department
can have the largest measure of success if he sees only the facts on
the inside. A comprehensive application of scientific method to
problems of employment leads a long way into analysis of the social
facts affecting the people who are employed.

From different angles the same thing is true in other departments of
business, notably so in the case of advertising and sales. One of the
most obvious outside facts which affect sales, is the location and
density of the population, and yet it is a fact which frequently is
neglected. Another outside fact, which ultimately advertisers will have
to consider, is the consuming power of population. They have been very
keen to study our psychological reactions, and in doing this they have
undertaken the entire charge of the evolution of our wants. But they
have not always gone at their work from the long-time point of view.
Sometime they will have to take account of the fact that unwise
consumption impairs efficiency and depletes the purchasing power from
which advertisers must be paid.

The next step in the scientific analysis of business is to provide for
more ample analysis of facts on the outside. Weakness at this point
explains the defects in many plans for the welfare of employees, it
explains the defects in scientific management, mentioned above, and it
explains many other shortcomings in projects for increasing the
effectiveness of business.

But men who approach business from the standpoint of university
research are not free from the same danger. In their effort to orient
themselves with the business facts, they get the business point of view
and run the risk of centering attention too much on materials and
material forces. Even psychological reactions of men and women may be
analyzed from the standpoint of their mechanics, without ever going
back to those impelling motives which have their roots in the human
instincts and complex social reactions of which the men and women are a
part.

Approached from the standpoint of scientific method, the field of
conflict between different interests in business and between so-called
"good business" and "good ethics" becomes measurably narrowed. I do not
mean to give science the sole credit for achievements along this line.
More frequently advance in moral standards has been forced on unwilling
victims through legislation, public opinion, or class struggle, and
then men have discovered, as a happy surprise after the event, that
"good ethics" was profitable. But science has done something, and might
have done still more, if our efforts at scientific analysis had not
been so often underweighted on the human side. These very discoveries
of harmony between wholesome practice and good business constitute a
part of the body of fact of which a truly scientific method must take
account. When a review of all the cases in which compulsion has changed
existing methods shows an almost invariable adaptation and a tendency
toward better results after the level of competition is raised, a man
of scientific training immediately asks the question, whether a
fundamental law is not at work.

A glance at social legislation during the last century reveals some
interesting uniformities. Every step in the development of the English
Factory Acts as they stood at the beginning of the present war,
starting with the first Child Labor Bill in 1802 and ending with the
Shop Regulation Act of 1912, had been taken against the protest of the
most vocal elements in the trades concerned. In nearly every case
investigation will show, either that the requirements of the measure
enacted fell considerably below the practice of the best concerns, or
that the whole industry was in need of some outside impulse to start it
in the way of more efficient organization. As long as it is permissible
to employ five women and five children to tend five machines, there is
not the right incentive to make adjustments by which all five of them
can be tended by one man.

In this country in our forty-nine jurisdictions we have been going
forty-nine times over the experience of England and other countries, in
connection with each effort to force up the competitive level. We have
seemed to be quite unable to apply the most obvious lessons of
experience either at home or abroad to new cases, and yet essentially
the same uniformity of adaptation has occurred here as abroad. Like our
employer, whom a strike impelled to adopt an advanced policy toward
labor, we find after the event that we should not know how to do
business under the standards in force before the law compelled a
change.

Enforcement of the Sherman Anti-Trust Law has been frequently cited as
an example of unwise government interference. With respect to many of
the incidents of enforcements, criticism has been well founded. But the
net result of that enforcement has been a much sounder body of law on
the important subject of fair and unfair competition. Besides, we now
have in the Federal Trade Commission the beginnings of an
administrative organization for dealing with the whole subject of
monopoly and restraint of trade. And more than all this, we have a
better prospect than ever before, of some sort of mutual respect
between government and business, and of honest cooperation in working
out their mutual problems. It is not likely that the Anti-Trust Law has
prevented honest men from earning legitimate profits from legitimate
business service to anything like the extent which would be indicated
by the vigor with which it has been opposed. But even if it has, we
have received something for the price paid.

And so the list might be lengthened, pure food and drugs, meat
inspection, public service regulation, industrial safety, and the
rest,--in nearly every case, from a purely business point of view,
opposition, in so far as it related to the main point of government
policy, has been a mistake. Refusal of the business men affected to
accept a policy of regulation has tended to shut them out of the
councils in making adjustments of detail. This fact has hindered the
government in performing a service which in most cases both the public
and the business needed to have done.

Even when we admit, as obviously we must, the persistence of conflict
between different interests with respect to a large mass of business
detail, the fact of group influences and social control still remains
an important consideration to which business analysis must give due
weight. There has been a large mass of business in this country, in
which the community has been unable to recognize any productive
service; it has been regarded only as a means of acquisition for those
who pursue it. Legislation, public opinion, and the evolution of
enforceable standards within particular business groups are tending all
the while to narrow the sphere of purely acquisitive business. With
respect to that great mass of business which has both an acquisitive
and a productive side, these forces are gradually bringing us to an
attitude of mind in which we regard gain as a by-product of service.

The public is also recognizing that the purpose of goods and services
is to promote individual and community welfare, and as fast as public
policy to that end can be worked out, it is carrying emphasis even
beyond specific products and services to the social ends for which
these products and services exist. In these ways society too is trying,
clumsily perhaps, to take a long-time view of its business and to
conserve the human values that make for progress.

Obviously it is but a partial and incomplete analysis of a business
situation that omits these human factors; a working policy that fails
to anticipate their force and then to reduce the zone of conflict to
its lowest limits is neglecting an important element in the definition
of long-time efficiency. And business men are beginning to see this.

A few weeks ago the manager of a large department store in San
Francisco was kind enough to show me his record of departmental profits
for a number of months. The fluctuation in relative profits of
different departments month by month was apparent, especially the fact
that after a certain month several departments which had previously
earned high profits became relatively much less profitable. I asked the
manager to explain, and he did in this way: At the time when the change
occurred a new policy had been inaugurated by which employment of help
had been centralized and standardized for the whole concern. As a
result, when certain departments which had been decidedly sub-standard
with respect to wages were brought up to standard, they were unable to
earn anything like the profits which they had previously shown.

Without going into the question of the connection between high wages
and profits, of which this incident in my opinion was an exception, it
was clear to the manager as to me that the increase in wages in these
particular departments had been accompanied by an immediate loss in
profits. Furthermore, the manager was unable to determine, from figures
available before and after the change, that this loss had been directly
compensated by gains in other departments. In order to get his
viewpoint concerning the change at issue, I asked him two questions:
(1) Why was he willing to make a change of such a fundamental character
without being able to ascertain in advance whether or not it would be
profitable? (2) In the absence of facts that could be incorporated in
the accounts, was it his belief that the change would in time be
profitable, and if so, how did he reach his conclusion?

His response to the first question revealed to me an intensely natural
but nevertheless complex motive. He said, substantially, that he was
confident that standardized employment was the only acceptable policy,
from the standpoint of the general manager. Given the necessity of
standardizing, it was necessary for the general reputation of the
business to standardize upward rather than downward. He wanted his
business to be regarded as one in which the best standards of
employments obtained. Furthermore, he added, "California will soon have
a minimum wage law, and I want this business to be well in advance of
any wage standards which may be imposed by law."

Answering the second question more specifically, the manager recognized
the advertising value of a reputation for having good conditions of
employment. He had discovered no tendency for general profits to
diminish or for the rate of increase to be retarded more than
temporarily. In the absence of definite facts to the contrary he
considered it safe to assume that as soon as the business should become
adjusted to the new standards, standardization of wages upward would be
profitable for the business as a whole. He wanted to make the change
voluntarily and to commence operating successfully on the new basis in
advance of competitors.

It is scarcely possible to discuss this sort of business situation with
a progressive manager, without feeling that he does not approach
business exclusively from the standpoint of gain; in other words, to
use the phrase of Adam Smith, he is not exclusively an "economic man."
The manager of a modern business, on the contrary, is a man very much
like the rest of us, and being such a man he is first of all desirous
of conforming to whatever standards are in way of acceptance by that
part of society in which he moves. Obviously, these standards are made
up of both selfishness and altruism, with selfishness tending all the
time to become more enlightened as society advances.

As we come to distinguish more clearly between reward for service and
mere one-sided gain, there occurs a parallel change in men's motives;
they become more sensitive to social disfavor and to social esteem and
less and less willing to devote their lives to activity by which no one
but themselves is benefited. In this reaction of altruism with
enlightened selfishness there emerges in men's minds a new concept of
their own interest and a better understanding of the kind of business
policy that in the long-run brings them the greatest reward. Of course,
this does not mean that enlightened selfish interest has ceased, or
that it will ever cease, to be a motive force in business. But there is
a vast difference between selfishness untempered with other motives and
selfishness eager for the esteem of one's fellows.

Clearly it is a task of higher education to help promote response to
the more enlightened motives. The difficulty which even men of advanced
university training have in taking full account of human factors
indicates something of the nature and importance of the task. The
so-called "scientifically trained" manager tends to undervalue the
human factor of his equation. His analysis is likely to be overweighted
on the material side. When the university starts--as it is starting and
should start--to train future executives, it needs to analyze its own
problem, and take full account of the dangers against which it has to
guard. Otherwise the training itself will be overweighted on the
material side and will perpetuate the weakness that it ought to
correct.

The greatest danger in this connection, as I see it, arises out of the
distinction between the so-called "cultural" and the "vocational" point
of view. This distinction comes to us with a large mass of traditional
authority, and we have classified subjects and erected barriers on the
assumption that the distinction is real. As far as the training of
business executives is concerned, I am confident that the distinction
is one which ought never to be made. It is a great misfortune, when
young men and women who are preparing for a serious career are
permitted to think of culture as a non-functioning ornament; equally
unfortunate is it for them to think of their prospective vocations as
activities devoid of cultural association.

A few days ago a student who had already selected his profession and
was anxious to be about it confided to me, as many others have done,
how distasteful he was finding the task of "working off his culture."
Does any one really suppose that the sophomore who is "working off his
culture" under faculty compulsion, in order to get his college degree,
is really absorbing from his study anything which, as the faculty
assumes, makes him a better man and yet, as he himself believes,
contributes nothing to effectiveness in his profession? Or take the
case of the man who devotes himself with professional earnestness to
his two, three, or four years of college work--will he find that he has
invested his time and his money on a purely ornamental luxury that has
no relation to his later work?

The first great element of training which the university can give to
future business men is a mastery of scientific method as a means of
analyzing problems and synthesizing results. Quite as fundamental as
this is the development of an intelligent and sympathetic approach to
questions of human relationship. Only the beginning steps in the
direction of business efficiency can be taken while attention is
confined to the material and mechanistic side of business organization.
No secure basis for permanent efficiency can be established until we
are prepared to go deeply into the question of human motives and to
understand something of the complex reactions that come from individual
and group associations. Without such a basis we cannot hope for a
nationally effective business organization.

Business is a form of cooperation through which men exercise control
over natural forces and thereby produce things with which to satisfy
human wants. Any subject well taught, which gives an insight into human
relations or into nature and man's control over it, will help prepare a
person to deal with the intricate problem of human relations in
business--that is, if the student has studied the subject in an
attitude of mind to see its bearing on what he is preparing to do.

The question is not so much one of too few or too many so-called
culture subjects, but rather of the attitude of mind in which all
subjects are undertaken. It is a question of getting such a survey of
the great facts of human experience and of so pointing their
significance as to enable men to approach a problem of human
relationship with sympathy and something of a long-time dynamic
viewpoint. When this is accompanied by a mastery of scientific method,
the foundations are reasonably secure. Without such foundations,
secured either in college or out, analysis of problems in a specialized
business field is almost sure to be one-sided and incomplete.

The kind of professional training that I would suggest for the future
business executive would be laid on the foundation of a college course
of two, three, or four years in which the viewpoint and the varied
methods of study in several diverse branches of knowledge had been
thoroughly instilled. When the student passed to the professional study
of business he would be expected to master the fundamentals of business
organization and management, including the basic elements of subjects
like accounting, finance, and other divisions of organization common to
all lines of business. All of these studies would be pursued with
constant reference to the fact that business is carried on in a
community in which certain public policies are enforced and in
recognition of the fact that business should conform to these policies
and help to make them effective in contributing to public welfare.

As the student advances, the course would proceed toward greater and
greater specialization, and would finally culminate in an intensive
study of some fairly narrow business problem, pursued until the student
has mastered it in principle and in detail. The result of his study
would be set forth in dignified readable English which an intelligent
layman could comprehend and which would make the article acceptable for
publication in a journal of standing.

Professional study of business, then, should give students a
comprehensive many-sided survey of business and a thorough grasp of
scientific method as used in analyzing business facts. It should
prepare the student to think complicated business problems through to
the end and to put the results of his thinking together into an
effective working plan. Finally, it should maintain an atmosphere in
which business problems are regarded in a large and public-spirited
way.

We are well under way with professional training for business; but if
students fail to get the general educational foundation for it, it will
not accomplish the best results. If the two, three, or four years of
college study is regarded as something purely ornamental and
irrelevant, while they are getting it, if it fails to arouse an
appreciation both of scientific method and of human values, or if these
values are thought of as something to forget when the student comes to
the analysis of practical problems, the university will not have done
what it might do for the promotion of high standards of efficiency in
business.

In all of the discussions I have tried to point out how emphasis in
business is gradually shifting from acquisition, to production and
service; how there are gradually evolving in business, professional
standards of fitness, of conduct, and of motive; and how more and more
these standards enter into the measuring of business success. Our
educational assumptions still rest too largely on the old dollar
standard of success with its well-known inferences about the
blood-and-iron equipment with which that success can be attained.

Psychologists tell us that we tend to get what we expect. If we fail to
create enthusiasm for the opportunity for service in business; if we
assume that young persons who enter business are going to measure their
returns in dollars alone; or if we continue to feature, as we have
done, the break between the so-called "cultural" and the professional
parts of the university course, there will be danger that we shall
continue to get the thing for which we plan.

There can be no doubt that many of our old assumptions about the
relative dignity and social distinction attaching to different kinds of
study, as well as the assumption of a purely mercenary motive in
business, have impeded a wholesome reaction between higher education
and business standards. These assumptions have created an
atmosphere--an objective and subjective attitude of mind, a set of
motives and desires, of appreciations and valuations, all of which
stand in the way of the most far-reaching educational results.

So far as these assumptions can be rationally explained, they rest on
ideas that are in part mistaken, in part exaggerated, and in part
obsolete. The application of scientific method to business has created
an entirely new relationship between business and education. Scientific
analysis and social policy are establishing a new connection between
the material and the human facts of business. In the new atmosphere the
business executive requires those fine qualities of mind and spirit,
and the ability to command these qualities for a given task, which
peculiarly it is the work of the university to cultivate.

In proportion as universities have vigorously undertaken this work, and
have applied scientific method to their own problem of articulating it
with higher education in general, the line of approach to professional
business training has become increasingly clear. Among the notable
developments of the past decade has been a shifting of emphasis from
the training of specialists to the training of business executives. As
preparation for executive work comes to be generally recognized as an
appropriate field for systematic professional study, the standards that
scientific method has already achieved will become fixed and better
standards of business efficiency and service will emerge.


_The Riverside Press_
CAMBRIDGE . MASSACHUSETTS
U . S . A






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