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E3 S \
. NAT
Y, \
MODERN MERCHANDISING
/ COMPLETE IN 10 WOLUMES
Volume I, ORGANIZATION
Volume II. BUYING
Volume III. MERCHANDISE (Part 1)
Volume IV. MERCHANDISE (Part 2)
Volume W. SELLING
Volume VI. CREDIT:Ś
Volume VII. ACCOUNTING
Volume VIII, ADVERTISING
Volume IX. BUSINESS LAW
Volume X. CYCLOPEDIA-INDEX
MOD E R N

MERCHANDISING
e Լ
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:
TEXT PREPARED BY OVER TWO HUNDRED OF THE FOREMOST
MERCHANTS, MANUFACTURERS, ACCOUNTANTS, ADVER-
TISERS, SALES MANAGERS, BUYERS, TECHNOLOGISTS,
CHEMISTS, STATISTICIANS, EDUCATORS, EDITORS,
AUTHORS, BANKERS, FINANCIERS, PROMOTERS,
LECTURERS, INSTRUCTORS, GOVERN-
MENT EXPERTS, ETC., ETC.
EDITOR-IN-CHIEF
WILLIAM MATTHEWS HANDY
Vice-President of the Herbert Kaufman and Handy Co., author of “Banking Systems of the World," Etc
ASSOCIATE EDITOR
CHARLES HIGGINS
Managing Editor Americanized Encyclopedia Britannica, The Making of America,
The World's History and its Makers, 20th Century American Encyclopedia, Etc.
COMPLETE IN TEN VOLUMES
VOLUME I
ORGANIZATION
DEBOWER-CHAPLINE AND COMPANY
CHICAGO, ILLINOIS
Copyright 1910 by
WILLIAMI M. HANDY.
CONTENTS
VOLUME I.
ORGANIZATION.
The Evolution of a Mercantile Business.
2 BY JOHN WANAMAKER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I
( (Of John Wanamaker & Co., New York and Philadelphia.)
Business Organization.
BY CHARLEs R. FLINT . . . . . . . . . . . . . is a e e s e e s a e s e º e º 'º e º e I3
(President United States Rubber Co., New York.)
Modern Business Methods.
BY L. G. MUELLER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(Founder and Vice-President National Salesmanagers’
Association and Secretary Columbian Bank Note Co.,
Chicago.}
Financing a Business.
BY JOHN FARSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
(President, Farson, Son & Co., Chicago.) -
The Corporation.
BY PETER S. GROSSCUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III
(United States Circuit Judge, Chicago.)
Individual Responsibility.
BY JOHN H. Moss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I28
(President, Merchants’ and Manufacturers’ Association of
Milwaukee.)
Factory Organization.
BY W. B. CONKEY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I
(Former President Manufacturers’ Association and President
W. B. Conkey Co.)
Organization in the Wholesale Business.
BY SAMUEL MEEKER FARGO . . . . . . . . . . . . . . . . . . . . . . . . . . . . I64
(President, Fargo, Keith & Co., Chicago.)
--Organization of the Department Store.
By J. J. STOKES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I90
(Advertising Manager, Marshall Field & Co., Chicago.)
The Merchandizer in the Department Store.
BY JOSEPH BASCH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
(Of Siegel, Cooper & Co., Chicago and New York.)
-- . . . . . * * * - -
1 : * : * ~ *; 3: …
• v. *- . :* * * * : * ~..… • *.*.*.*
". . * :: *... ... * *.*. i. **.
24 * .. : - .***~. * * ***
*.
CONTENTS.
Organization of the Retail Business.
BY I. K. FOREMAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217
(Of Foreman's Quality Shop, Chicago.) -
... Organization of the Mail Order House.
BY FRANK M. NEEDHAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
(Merchandise Manager Sears, Roebuck & Co., Chicago.)
The Organization of a Correspondence Department.
BY JAMES ROBINS HARRISON . . . . . . . . . . . . . . . . . . . . . . . . . . 26I
(Of Duntley Manufacturing Co., Chicago.) *
Growing Pains in a Big Business.
BY JOSEPH HELFMAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275
(Of Parke Davis & Co., Detroit.)
Expenses and Profits.
BY LANSING G. WETMORE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 282
(Of Scranton, Wetmore & Co., Rochester.)
Handling Employees.
BY JOHN A. HowLAND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 297
(Of the Editorial Staff Chicago Tribune.) ~
How to Select and Pay Employees.
BY JOSEPH HESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306
(Superintendent Sawyer Manufacturing Co., Chicago.)
Profit Sharing and Co-operation.
BY NICHOLAS PAINE GILMAN . . . . . . . . . . . . . . . . . • * * * * * * * * 3I9
(Professor of Sociology, Meadville Theological Seminary.)
The Employer and the Employed.
BY JOHN H. PATTERSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335
(President Of the National Cash Register Co., Dayton.)
Welfare Work.
BY JOHN BENSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 346
(Of Benson & Easton Advertising Agents, Chicago.)
Tools of Business.
BY R. B. JoHNSON . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356
(Secretary National Office Supply Co., Chicago.)
Office Systems.
BY JACK A. BENJAMIN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373
(Manager of Reliance Manufacturing Co., Chicago.)
Caring for Stock.
BY MAGNUS MYERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 382
(Of Herbert Kaufman & Handy Co., Chicago & New York.)
THE EVOLUTION OF A MERCANTILE BUSINESS.
BY JOHN WANAMAKER,
[Of John Wanamaker, New York and Philadelphia.]
Evolution is a series of steps through which anything
has passed in acquiring its present characteristics. The
term “mercantile” covers everything relating to trade and
COIOOIOleI’Ge.
Long since the slow movement of transportation by
Canal gave way to quick railroading. Naturally it was only
a question of time for the sailing ship and the slow freighter
to be superseded upon the ocean by the fast steamship to
expediate commercial transactions. The exigencies of
changing markets, the factors of time, fashions, seasons,
the value of capital locked up, compelled the initiation of
the Order of progressions still going on throughout the
mercantile World.
The first notable change in the conduct of commercial
affairs was the partial withdrawal of agencies, commission
houses and jobbing houses from Boston, New York and
Philadelphia, and the establishment of offices and ware-
houses in the western cities in the interest of lower freight
rates and the saving of time and expense to buyers coming
from the West to the East.
As late as fifty years ago, or before the war, the trans-
action of business producing and distributing merchandise
required many agencies; the manufacturer, importer,
commission men, bankers, jobbers, commercial travelers
and retailers.
Until thirty years ago trade rules limited the sales of
manufacturers to commission men, and those of commission
houses to jobbers, so that the only market door open to re-
tailers was the jobbers, whose goods were loaded, when they
1
2 JOHN WANAMAKER
reached the retailer, with three or four unavoidable profits
incident to passing the various fixed stages toward the
. GOI lSULIYl62]”.
The conditions governing the placing of goods in the
retailer’s hands were not only heavily weighted with ex-
pense, but, in the main, the retail merchant was badly
handicapped as a rule by
(a) Small capital, commonly borrowed by long credit
for merchandise.
(b) Necessity of selling upon credit.
(c) Necessity for larger percentage of profit.
(d) Impossibility of utilizing to advantage store and
people all seasons of the year.
(e) Non-accumulation of capital.
The consequence was, according to accepted statistics,
that but four out of every hundred merchants succeeded in
business. Getting a mere living fifty years ago was gen-
erally secured in part by the occupancy of a part of the store
premises as a residence. Naturally, an undercurrent of
discontent with these conditions manifested itself, protest-
ing against two or more prices for the same article, meager
assortment of goods, high prices and the custom that prob-
ably grew out of one rate to cash buyers and a different
rate to buyers on credit. -
The Centennial Exposition of 1876 was, in my judgment,
the moving cause of a departure toward general business by
single ownership. The rising tide of popular desire to as-
semble under one roof articles used in every home and with
freedom to purchase was a constant suggestion in 1867, not
alone because of its convenience, but because to some de-
gree it would form a permanent and useful exhibition. This
idea culminated in the formation of the Permanent Exhibi-
tion Company, which succeeded the Centennial. Being lo-
cated in Fairmount Park and not in a business center, and
EVOLUTION-MERCAINTILE BUSINESS 3
without skilled management, the scheme was abandoned
in a short time.
Up to 1877, so far as now known, no extensive, well-sys-
tematized mercantile retail establishment upon a large
scale existed in the United States. The nearest approach
was the A. T. Stewart store in New York, which limited
itself to dry goods of the higher class, until the death of
Mr. A. T. Stewart, and when it took on lower classes of
goods, and a wider, but still limited scope.
The Centennial Exhibition in 1876 at Philadelphia, the
principal manufacturing center of the country, the first
great exhibition in America, opened a new vision to the
people of the United States. It was the cornerstone upon
which manufacturers everywhere rebuilt their businesses
to new fabrics, new fashions and more courageous under-
takings by reason of the lessons taught them from the ex-
habits of the nations of the World. The continuing out
growth of that exhibition has revolutionized the methods
of almost every class of mercantile business in the United
States.
The tendency of the age toward simplification of busi-
ness systems and to remove unnecessary duplication of ex-
penses awakened throughout the United States a keen
study of means to bring about a closer alliance with the
producer and consumer. Almost simultaneously in a large
number of cities long-established stores gradually enlarged
and new stores sprang up to group at One point masses of
merchandise in more or less variety. The movement every-
where arrested attention and provoked discussion because
of the approval and practical Support of the people at
large.
Though there probably was never a time in any city that
there were no bankruptcies of merchants and vacant stores,
yet after the opening of the large stores it everywhere be-
came common with storekeepers and renters to charge all
4 JOHN WANAMAKER
the causes of disaster to the large stores, then and now
commonly called department stores, and an unsuccessful
effort was made to decry them as monopolies.
Eor the time being and even now, to some extent, prej-
udice and perhaps an unconscious selfishness blinds a part
of every community upon public questions. The inequality
of talents and the unequal application of individuals must
always carry some to the top and others to the lower places
in all pursuits of life. The highest statesmanship thus far
known has not been able anywhere in the world to main-
tain a permanent equilibrium for the slow, slovenly and
misplaced workers with the thrifty, well-trained and prop-
erly fitted toilers, and criticisms begin whenever and
wherever one man and his family gathers a business that
outgrows their own hands. -
Whoever conquers a higher place than his neighbor is
supposed to face a commanding position, that at least makes
his business way less difficult than with his fellow tradesmen.
Doubtless there must be some disadvantages arising from
large single businesses of every kind. The growth of our
splendid free libraries will to a certain extent curtail the
sale of books and affect other established libraries; the ever
enlarging facilities and inexpensiveness of universities and
colleges of learning will interfere to some degree with many
private academies and schools. The trust companies that
undertook insurance companies of real estate and titles and
conveyancing and who became banks of deposits interfered
with lawyers and bankers. The trolley affected the busi-
ness of the horse dealer. The large stores certainly affect
a certain part of the small stores. Neither well-dressed ig-
norance nor well-satisfied Storekeeping Ownership can
argue down that fact.
In olden times when the city was smaller the advent of
even one more small store affected every other store in the
block in which it located, mayhap in the entire city. The
FVOLUTION=MERCANTILE BUSINESS 5
thing to be considered, and considered fairly from every
point of view, is what the large single ownership business
contributes to the well-being of the public to counterbal-
ance any disadvantage arising from them.
First of all it must be remembered that society is not
constituted for the benefit of any one particular class of
the population. Economic questions cannot be voted on
by any 10 per cent of the people; the other 90 per cent must
have their say. Without sentiment or prejudice, the in-
terests of all must be justly weighed and the greatest good
of the greatest number must be gained.
I respectfully submit that the evolution in mercantile
business during the last quarter of a century has been
wrought not by combinations of capital, corporations or
trusts, but by the natural growth of individual mercantile
enterprises born of new conditions out of the experience,
mistakes and losses of old-time trading; that the underlying
basis of the new order of business and its principal claim
for favor is that it distributes to the consumer in substance
or cash compounded earnings hitherto wasted unneces-
sarily on middlemen; that thus far the enlarged retailing
has practically superseded agents, commission houses, im-
porters and large and small jobbers, thereby saving rentals,
salaries and various expenses of handling; that the estab-
lishment of direct relations with the mills and makers
proves to be not only desirable for the saving of such costs
as are dispensed with, but because less risks are incurred in
preparing products and finding quick markets, thereby
favoring lower prices; that the people must be taken into
the equation when considering the right of certain busi-
nesses to a title of life, as they are responsible for the new
conditions, highly value and heartily support them.
It is an old axiom that the water of a stream cannot rise
beyond its level. Neither can any business rise or thrive
except at the will of the people who are served by it.
6 JOHN WANAMIAI CER
I contend that the department store development would
not be here but for its service to society; that its organiza-
tion neither denies rights to others nor claims privileges of
State franchises, or favoritism of national tariff laws; that
if there is any suffering from it, it is by the pressure of
monopoly; that so long as competition is not suppressed by
law, monopolies cannot exist in storekeeping, and the one
quarter of the globe that cannot be captured by trusts is
most assuredly that of the mercantile trading world.
I hold that the evolution in trade was inevitable, be-
cause it was water-logged by old customs that overtaxed
purchasers; that there was at work for a long time a resist-
less force moving toward the highest good of humanity;
that the profit therefrom to individuals who have risked
their own capital, as any man may still do if he chooses, has
been insignificant compared to the people benefited both
by the cheapening of the comforts of life and by the im-
proved condition of persons employed.
Philadelphia is believed to be a buying center for 3,-
000,000. If each one of them in a year’s purchase of per-
Sonal needs and home necessities saves on an average of
10 cents a day, the saving is $10,095,000 in a year. Suppose
it be but half that amount, there is still $5,000,000 to the
good of the people to be put into their savings or their
pleasures.
I may be asked how such a statement can be certified to.
I reply, I am not offering this information as a statement
of fact, because no statement can be made upon accurate
statistics of the amount of merchandise purchased each
year for individual consumption. I submit this as a fair
estimate from an experience of thirty-five years and more
of careful study, because I desire to be a witness for the
truth, that it may be used for what it is worth in discuss-
ing economic and social questions.
I can, however, be more specific in pointing out the effect
of modern retailing upon prices:
EVOLUTION--MERCANTILE BUSINESS 7
First.—Prices realized by the producer. As he sells in
large lots to single firms, whose outlet he becomes familiar
with as to quantities and qualities, the producer is able to
count more surely upon steady employment of his work
people, and having but one risk instead of many and Smaller
expenses in handling goods, can without sacrifice of his
own profit, materially reduce the price of goods.
Second.—Prices paid by the consumer. The reductions
of the producer, plus the lessened costs of concentrated
distribution by the retailer, are turned over to the con-
Sumer. Further, the variety of goods upon sale by the large
retail house, unlike the exclusive merchant having only a
two-season business and sometimes only One at holidays,
does not require profits from two or three months’ sales
to bear the year's rent, insurance and clerical force. An all-
year-round business, bringing a steady current of buyers,
is the essential thing to use buildings and clerks to advant-
age and warrant Small profits.
It is an easily proven fact that the operation of the
American retail system has reduced the prices of many
classes of goods one-half in thirty years. But for the length
of this paper I would additems in books, bicycles, furniture,
woolen dress goods, clothing, house furnishing goods and
china. There are some other causes of reductions operating
in some instances, but a prominent cause is the bettered
condition of retailing. -
There are some who claim that the reduced cost of
quinine was the removal of the tariff, but the fact is that
a commission was appointed to learn the causes of its scar-
city, and who, to reduce its price, sought the proper soil for
the growing of abundance of trees, and thus increased the
supply and lowered the price.
The evolution in American trading has planted trees
that have borne good fruit for the people.
General Grant, in proposing the health of Sir William
8 JOHN WANAIMLAKER
Armstrong at a dinner, laid his hand upon a hundred-ton
gun and said the inventor of it had produced the most won-
derful peace-compelling implement the world had ever
SGCIOl.
I believe the new American system of storekeeping is
the most powerful factor yet discovered to compel minimum
prices. Perhaps some one will ask what relation reduced
prices of merchandise have upon labor. It is a noticeable
fact that lowered prices stimulate consumption and require
additional labor in producing, transporting and distribut-
ing. The care of such large stocks, amounting in One single
store upon an average at all times to between four and five
millions of dollars, and the preparation of and handling
from reserves to forward stocks, require large corps of men.
Under the old conditions of storekeeping a man and his
wife or daughter did all the work between daylight and
midnight. The new systems make shorter hours of duty
and thus the number of employes is increased, while many
new avenues of employment for women are opened, as type-
writers, stenographers, cashiers, check clerks, inspectors,
wrappers, mailing clerks and the like. The division of labor
creates many places for talented and high-priced men,
whose salaries range alongside of presidents of banks and
trust companies and similar important positions. It is uni-
versally admitted that the sanitary conditions that sur-
round the employes of the large stores are better than the
old-time smaller stores and that employes are considerably
better paid. -
Inventions and new processes do not destroy employ-
ment any more than the sewing machine or typewriter or
Mergenthaler typesetting machine has done so. I grant
that in these and many similar cases the lines of employ-
ment have changed, but the newspaper adds thousands to
its circulation by being ready hours sooner for mails to
carry it to distant points, and the sewing machine and type-
EVOLUTION MERCANTILE BUSINESS 9
Writer machine have, like the uses of electricity, telephone,
etc., created work and employment that did not previously
exist. #
Taking the number of employes in the old-time smaller
store at an average of five, it would require, when the full
complement of employes are on the pay-roll of a representa-
tive large store, as many as 1,200 stores to furnish such
employment, while the total payments of salaries would be
very much higher in the large store than under the smaller
store system. Some of the large stores are commercial uni-
versities, where the young people are in classes in the
evening under competent teachers, and engaged upon
practical work of the store during certain hours of the day.
In addition to the usual salaries fully up to and believed
to be above the level of salaries usually paid, one mercantile
firm is known to have paid to its employes by various
schemes of co-operation the sum of six hundred and ninety
seven thousand four hundred and twenty-eight dollars and
twenty-three cents ($697,428.23), nearly three-quarters of a
million of dollars, during a period of ten years.
Extensive retailing in this country is the product of
competition in buying and selling, for there does not exist
in retail business any known combination for the control
of unpatented and unpatentable merchandise, nor for the
fixing of prices in the interests of manufacturers. The en-
tire practical influence of the modern department store is
powerfully against monopoly in any branch of manufac-
turing or selling. Retail merchants, in common with the
public, may be at times for brief periods subject to combina-
tions of makers of goods to control prices and create profits,
but they are not, and never have been, parties to such meas-
ures, at least so far as is publicly known.
If all the storekeepers of any one city were to combine,
such a combination would not stand twelve months because
of the power of the manufacturers to become retailers, and
10 JOHN WANAMAKER
further, such a city of combination would be overwhelmed
with independent storekeepers from every other city, who
would very properly expect and command the support of
the people. Public service is the sole basic condition of
retail business growth. To give the best merchandise at the
least cost is the modern retailer’s ambition. He cannot con-
trol costs of production, but he can modify costs of distribu-
tion and his own profits. His principal is the minimum of
profit for the creation of the maximum of business. The
keen rivalry of retail trading is inimical to a combination
between different and competing firms and companies. Such
a combination would advance prices and diminish consump-
tion and increase cost of production. The vast varieties
of merchandise required by the modern retail store would
make combinations of the control of articles in process of,
and possible of manufacture in every part of the World,
practically impossible. It is possible for retail merchants
in several localities to combine purchases for the sake of
economy, but such co-operation differs widely from the or-
ganizations commonly known as trusts. Neither would it
affect retail prices save to reduce them. -
Any control of the retail trade attainable rests entirely
upon Superior service and lesser prices, and must always
be an unknown or at least a changing quantity. It can
never be vested permanently as a possession in any single
hand, nor in any group of organization. Popularity, found-
ed upon distinct actual worthiness, is its only power to
command. Success in some branches of mercantile life has
its intense individuality, and is a matter of intense per-
sonality, much the same as in the journalistic and other
learned professions. Only when personal ability and char-
acter can be translated into a franchise can a retail business
become a valuable entity. Until then merchandise, real
estate and plant, such items as have commercial value, are
its only assets. -
EvoluTION-MERGANTILE BUSINESS 11
The evolution in business which I have endeavored to
discuss has not sought nor has it the power to limit produc-
tion or stifle competition or raise prices. On the contrary,
its chief objectors are those who claim that it makes prices
too low. It affects articles of supply of every home and of
so many thousands of kinds and ever changing character
that no other restriction can obtain than the natural com-
mand. The fact that it deals with distribution and affords
intelligent and economic treatment of merchandise in-
creases employment.
It has demonstrated advantages to the public hitherto
not common, if at all possible, to former systems. In in-
creasing values of real estate, wherever large businesses
are located, smaller stores crowd around them, in some in-
stances changing the value of the entire neighborhood. Sta-
tistics prove that it does not anywhere crowd out com-
petent and useful merchants. It saves a multiplication of
agencies to the benefit of the consumer in reduced prices.
It introduces into mercantile business a measureably
good civil service and provides a systematic commercial
education for the beginners in pusiness in many business
places. It elevates the position of employes, the large num-
ber of persons required, affords self-respecting assistance
to employes in misfortune, and for the losses arising from
sickness and death. It offers opportunity to educated busi-
ness people of advancement and earning power not possible
otherwise.
Its system of prices, guarantees and return of goods for
refund, not as a favor but as a condition of the contract of
the sale, is a boon to the ignorant and hasty buyer and to
the public generally, not known until introduced by the
new order of business.
The alteration in business conditions in the last quarter
of the century has not only removed oppressive burdens
resting on the public and added to the safety of investments
12 JOHN WANAMAKER
in manufacturing, but it must surely reduce the number of
Wrecks along the shores of mercantile life.
It rests with the people to commend and command what
serves them best. It is only when the fuel ceases that the
fires of good government or good business methods burn
out. If the public chooses to permit unwarranted taxation
Or restrictions upon private business enterprise, large or
Small, that cheapens whatever enters into the daily wants
of every home, it only adds to the expense of living. What-
ever the fixed charges of business are, whether they come
from wastefulness or ignorance of merchant or legislator,
it is the consumer who in the last analysis foots the bill. The
keys of every public question are in the hands of the peo-
ple alone, who, by neglect and discouragement, slow up
and stop the wheels of progress. - -
BUSINESS ORGANIZATION.
BY CHARLES R. FLINT,
[President United States Rubber Company.]
Organization is the bringing together of interdependent
parts into a single organic whole, so that they work to-
gether with the least possible friction as a living organism,
which accomplishes the reason of its existence as perfectly
as it is possible of accomplishment—without waste and
without strain.
The most perfect illustration of organization is afforded
by the biologic life of man, where, through the simple law
of growth, the homogeneous and incoherent elements finally,
develop into a heterogeneous, but coherent, organism con-
trolled by the will. The result is the perfect animal, every
One of whose organs is dependent upon every other, each
one of which is quite distinct from the other, but no one of
which can act without relation or reference to the other.
This is only another form of stating Herbert Spencer’s
law of evolution, but it is as applicable to the mechanical
and business World as it is to the biological world.
Another illustration is this: Go into a machine shop in
which the engine of a great man-of-war is in course of con-
struction. The parts are made separately, but, in obedi-
ence to a single controlling idea, they are finally assembled,
fitted, perfectly finished and put into operation. This act of
assembling, fitting, finishing and finally putting into opera-
tion, is Organization. -
One of the first results of organization is to obtain the
largest measure of force, of strength, of perfection, in any
mechanism whatever, let it be that of a locomotive or that
of a great corporation, with the least possible consumption
of power, the least possible waste, reaching ultimately as
. 13
14 CHARLES R. FLINT
nearly as possible the purely automatic. We thus say that
that business is the best and most highly organized which in
the matter of details demands the least attention from its
head and leaves that head the largest leisure for the exer-
cise of its creative faculty—or which, as the average man
of the world says, comes nearest to “running itself.”
Another excellent way of getting a clear conception of
Organization is to think of its opposite—disorganization;
that is to say, of a machine or system in which the parts,
instead of working together, seem to be at war with each
other; where everything, instead of tending to ease, facil-
ity and simplicity, tends to conflict and to chaos. -
Organization and disorganization, therefore, comes to
stand, in homely parlance, for the same ideas that are ex-
pressed by the scientific terms “evolution” and “dissolu-
tion.”
The eye of the trained business man is able to detect
disorganization, underorganization or high Organization,
quite as readily as the eye of the mechanic distinguishes an
undeveloped, a partly developed or 'a perfectly developed
machine. To every engineer, Fulton's steamship today ap-
pears rudimentary in the last degree, fulfilling its object
only inefficiently and imperfectly, as it did. In the same
way the simpler forms of conducting business, which pre-
vailed one hundred years ago, appear to the modern mer-
chant, or the president of the nineteenth-century corpora-
tion, as equally rudimentary.
Let me give an illustration of economic organization as
applied to business: One hundred years ago the flour mer-
chant of Virginia owned or chartered his small sailing craft,
loaded them with flour and dispatched them to Brazil. He
took his chances on the condition of the market as predi-
cated on information which he had received by the last mail,
then perhaps three or four months behind the date of send-
ing, and three or four months more before his flour, being
BUSINESS ORGANIZATION 15
properly packed and shipped, can arrive at the market
South of the equator. He called his transaction “a ven-
ture.” It was such, purely and simply. If, happily, his
flour arrived in a good market, he sold to advantage. His
Captain was commissioned to load homeward with coffee.
A cargo of coffee was taken on and came to a market the
Conditions of which at the time of arrival were entirely un-
known to the shipper at the time of loading. This again
was a “venture.” If the market was glutted at either end,
the merchant Sustained a loss; if the market was bare at
either end, he made a profit.
Steam and electricity have changed all this by bringing
about the economic organization of the commercial world.
Today the flour merchant receives his cable from the South
Once, twice or three times a day, as he sees fit; makes his
calculations with the utmost nicety; sells his goods as of a
certain shipment or a certain delivery; the sale is closed
by cable on the same day on which it is made, and he sells
to a certain profit. The risk is nothing; the profit is small,
but it is sure. The transaction is no longer in the nature of
an adventure. The merchant is not obliged any longer to
ship in his own vessel or to charter for that purpose, be-
cause the differentiation in trade has become such that he is
enabled to arrange with the ship owner for cargo space out-
ward and has no homeward risk. He takes all this into con-
sideration when he makes his price cost, insurance and
freight, or “cif,” which has become an established word in
the English language of business, and which, slight a fact
as it is, exemplifies the high Organization of the business
world in our time. If the merchant sells “c. i. f.,” he makes
a price which includes the cost to him, the insurance and
freight on the cargo, to which he has added some commis-
sion or margin of profit. He has ceased to be the adventur-
er, the gambler, and has become a paid instrument of ex-
change. --
16 CHARLES R. FLINT
Let us take another illustration: the coal market of San
Francisco twenty years ago. The man who wished to
Speculate in coal would order it or send it from Cardiff.
Coal had not been discovered on the west coast, nor was it
shipped in large quantities from New South Wales. If the
coal arrived when there was a small supply, his return was
very handsome. If, on the other hand, it arrived simultane-
ously with two or three other cargoes ordered or shipped
by men who had acted upon the same information and had
thought they would find a good market, the chances of all
alike were practically ruined. There was no co-ordination
of supply and demand. In a word, it was economic disor-
ganization.
This is the way in which this business is done today,
now that it has been more highly organized: the merchant
in San Francisco will wire to New York for a bid on a cargo
of coal for delivery six months hence, and possibly giving
the New York merchant twenty-four hours in which to
make the bid; or the San Francisco merchant may make a
firm offer for the coal on similar conditions. The New York
merchant makes a comparison between the price of coal
from the Atlantic States, England and Australia, the rate
at which a vessel can be chartered to carry it, seeks his
insurance, and within the twenty-four hours wires his an-
swer accepting the offer or refusing it. If he has accepted
it, it has been at a figure sufficiently within the limit to
leave him that margin of profit which maintains his busi-
ness. It is not an unusual thing for coal to be bought in
Liverpool or Whales to be taken thence to California by a
vessel which, at the time, may be in Australia, the insur-
ance upon which may be covered in a New Zealand com-
pany—the entire transaction of which is done by means of
the wire within twenty-four hours.
The only man today who makes profits corresponding
to those of the “merchant prince” is the gambler in produce,
BUSINESS ORGANIZATION 17
who either goes “long” of the present market in expecta-
tion of a rise, or goes “short” of it in expectation of a fall.
In either case he is a disorganizer, and his profits or losses
are not normal, but abnormal, and so he is instinctively re-
garded by Society as the enemy of economic order.
This is all the result of what may be spoken of as the
universal organization of business, which has been wrought
out slowly but surely by improved methods of transporta-
tion and communication. All international business trans-
actions are now done with the aid of the lightning and not
of the shifting winds. The mail has come to serve only a
confirmatory purpose, and today the merchant’s letter per-
forms only a secondary function.
So much for organization in the larger and more cath-
olic sense. We find the same principle illustrated by every
one of those causes which have made an end of “the house
of the merchant prince.” Prior to the beginning of this
century there were in the United States probably not more
than a dozen or a score of corporations, other than religious
or educational. Practically the only business corporations
then known to the world were banking companies, and they
were rare. Today most large business the world over is
conducted by public or private corporations. In the earlier
time capitals were small, and the enterprises to be con-
ducted by capital were small as well. As enterprises grew
larger, as a result of the industrial revolution, the necessity
for larger capital grew imperative, and it became necessary
to find a means of putting small capitals together, making
them easily transferable, and providing means for division
of profits or division of losses without personal responsibil-
ity on the part of the contributors in excess of their contri-
bution.
Wherever a very large enterprise had to be undertaken
in the earlier days, it was necessary that it should be done
by the government, inasmuch as the government was the
18 CHARLES R, FLINT
Only corporate body which had the means of supplying large
amounts of capital. But where governments fail, private
corporations succeed, and for the simple reason that the
business of the government is not that of the corporation,
as the business of the corporation is not that of the govern-
ment. As governments grew less parental on the one hand
and business enterprises grew more gigantic on the other,
business corporations came to supply the means for aggre-
gating Small capitals into large ones. This is the highest
type of business organization. The bringing together of
these small capitals; the employment of large bodies of men
with highly differentiated duties; the control and direction
of these by boards of directors, and supremacy over all of
the officers of the corporation—its president and manager—
have resulted in making possible the performance by pri-
vate corporations of work which was impossible to have
been done even by the strongest government one hundred
and fifty years ago, such, for instance, as the building of
the railway system of the United States, or the building of
the Suez canal. There was no sufficient business organiza-
tion in the days of our fathers to permit or make possible
the accumulation of a mass of capital, say one hundred mil-
lions or two hundred millions of dollars, such as would be
necessary to build an isthmian canal, unless the work were
done by the Supreme government itself.
The unit in the old-fashioned partnership was the indi-
vidual. The partnership was a combination of the capital
and abilities of individuals, with a legal sharing of responsi-
bility as well as of profits or losses—in which, however,
the individual was never lost sight of, so that each indi-
vidual, as the legal unit, might become, and frequently did
become, responsible for the entire losses of the firm. In
time the copartnership gave way to the modern corpora-
tion, the latter, however, on a simple and modest scale.
This corporation almost immediately lost sight of the in-
BUSINESS ORGANIZATION 19
dividual. He ceased to be responsible except to the extent
of the possible loss of the capital invested by him. For
nearly One hundred years small corporations seemed to
suffice for the purpose of economic organization. The result
was the creation of many corporations for like purposes,
but in strong antagonism and with bitter competition be-
tween them. But this competition could only lower prices
slightly, unless it went so far as to ruin one or the other of
the competitors. The problem of low prices was to be
Solved by the economics of larger organization.
The further development of economic organization,
therefore, had to be sought in the consolidation of the cap-
ital and experience of the small corporations. Each cor-
poration was already a consolidation of small capitals, but
further consolidation became necessary, and then came into
existence the so-called “combination,” or more frequently
and quite improperly called “trusts,” or consolidation of
large corporate capitals. In that combination—which was
only the federation of corporations—the individual corpora-
tion became the unit from the economic point of view, and
the “combination” or “consolidation” became the whole.
The corporate combination, therefore, may be spoken of
as a confederation of corporate capitals, much in the same
sense as we speak of the federation of our States. Each of
the States had to undergo a process of politico-economical
organization, which resulted in its becoming Supreme over
the political and economical relations of its parts. But as
the States themselves became politically interdependent,
the necessities of this interdependence resulted in the fed-
eration, and finally, after the federation, in something even
stronger—that is, the nation. It is a curious fact that the
work of political organization has had to be completed in
every country before the work of economic Organization
could be fairly undertaken. That is not to say that there
was not a spontaneous economic life a century ago, any
20 CHARLES R. FLINT
more than it is to say that prior to Our national existence
there was no spontaneous political life. But such political
life as there was, and such economical life as there was,
was rudimentary—in other words, of a low and simple form,
which, while it performed its functions with a certain de-
gree of simplicity, nevertheless did so very inadequately,
very inefficiently and with great waste. The trouble with
the enemies of the higher economic organization is that
they live in the past and are sadly ignorant of the present.
There was a time when a great preacher like Malthus
thought that the world would ultimately be starved to death
because the growth of population exceeded the growth of
the means of subsistence. It is now known that the inade-
quate means of subsistence was due simply to the fact of the
insufficiency of the economic organization of the time.
When the latter had been realized, population no longer
Outran the means of subsistence, but the means of sub-
sistence outran the population, until today the cost of living
is much less than it has ever been before in the world's
history, although the population of the civilized world is in-
comparably larger than at the time when Mr. Malthus ex-
pressed his fears, and his phrase became one of the funda-
mental dogmas of Orthodox political economy, which today
has been practically abandoned. Plenty and low prices
were to come with the larger organization of industry and
capital, until today, thanks to this fact, more than to any
other, the workman gets more for his money and more
money for his work than ever before. And yet the yellow
journals tell him to rebel against an inevitable social and
economic Order, and thus to stand in the way of his own
advancement. The destruction or disintegration of large
corporate capitals would compel a return to the era of lower
wages and higher prices.
These are the larger aspects of the subject, and to the
student and thoughtful man, as well as to the general read-
BUSINESS ORGANIZATION 21
er, the more interesting. There is no successful business
man who has not at some time found it necessary to apply
the principles which underlie this larger illustration to his
particular business. The question which he puts to himself
is how to combine into a consistent working whole just the
right number of men—not too many, not too few—possessed
of just the right qualities and abilities, each devoting him-
Self to a specialized work, each becoming a departmental
head or a departmental subordinate, and all working in ac-
Cordance with a single controlling mind, without friction,
without waste, without conflict, without cross purposes of
any kind, until the whole works with the nice precision of a
machine. This is equally true of the business of a railway,
of a bank, of a merchant, as it is of the Organization of a
great factory. *
No man in a well organized factory today is called upon
to do more than one sort of work. Specialization has be-
come the universal rule, and not the exception.
So in the conduct of the administrative affairs of a busi-
ness, specialization becomes the rule. Subdivision of labor
is only the expression of an economic necessity. But the
complement of specialization is centralization, for special-
ized work must be co-ordinated by a central Organization
into a single and perfect whole.
Thus to describe organization is at the same time to
measure its value and to define its end. It is needless to go
further and talk of its benefits. These all go without saying.
To describe those is only to teach a moral lesson. To dwell
upon them is only a counsel of perfection. It is needless to
dwell long in talking with any sane man on the benefits of
health. What he wants to know is how health is to be ob-
tained and kept. So it is needless to dwell upon the re-
sults of organization. What is necessary to be known is
what organization is and how it is to be secured.
The organizing faculty or quality is one of extreme
22 CHARIES R, FLINT
rarity, but is nevertheless becoming more and more fre-
quent as the world grows older, because each special organi-
Zation in turn creates organizers, with the result that with
each necessity for new organization new organizers sooner
Or later come. Our modern economic life is therefore only
a great School for the education of organizers, and each or-
ganizer is a potent factor in the economic world. He is
the corps or division commander in the industrial army
and his capability is measurable by attained results, capa-
ble of statement in mathematical form; that is to say, capa-
ble of statement in balance sheets, in accounts of profit and
loss. The achievement of an organizer is therefore one
that is submitted to an invaluable final test, just as the qual-
ity of a mechanical engineer is susceptible of measurement
by the speed or capacity of his machine. We know that
the man who constructs the engines for the “Lusitania” is
competent by the result of his work. In the same way we
measure the organizing ability of a Thomson or a Rockefel-
ler by the result in profit and loss to the community and
the shareholder. º
In the creation of business corporations the varied con-
ditions arising are such that it is necessary to secure, in
addition to those capable of doing the mechanical work,
men of independent judgment and constructive ability; and
this requires on the part of the organizer, in addition to
the mechanical element, the political element. He must be
an organizer of men as well as of things, a Seer as well as a
doer. To sustain a large and complex Organization, it is
absolutely necessary to create a system whereby accounta-
bility is clearly and accurately defined. In the case of the
work of individuals or copartnerships, or even of corpora-
tions where there are a few stockholders, the element of per-
sonal interest is so great an incentive to industry that the
system of accountability, although desirable, does not be-
come an imperative necessity. In the larger organizations,
BUSINESS ORGANIZATION 23
in Order to keep up the standard of energy and efficiency, it
is absolutely necessary to have a system that holds every
member of the organization responsible for his part of the
Work necessary to make a complete and successful whole.
This is just as true of business corporations as it is of na-
tions. In an absolute monarchy a real system of accounta-
bility is and always has been practically unknown. But
for the success of a constitutional government it is impera-
tively necessary, and in this respect a corporation may be
described as a republic of capitals and abilities.
In Order to hold such an organization together, give it
the element of permanency and deal intelligently with the
varied conditions of its successful existence, it is necessary
that a sufficient number of men of the first order of ability
should have a substantial interest in the organization itself,
and in such an organization it is desirable that the heads of
departments should be interested in the profits of the par-
ticular departments which they are managing. Perfect
organization, therefore, involves the idea not only of co-
operation, but of profit-sharing as well. The highest devel-
opment of industrial organization on the largest scale ex-
ists only in the United States.
In order to secure the highest efficiency and the most
perfect organization, great centralizations have resulted,
but this is only because the whole law of economic progress
can be summed up in the simple phrase, differentiation and
centralization.
A great Roman, familiar with the methods of the state,
Once said that votes should not be counted, but weighed.
He certainly did not foresee the modern spirit, but quite as
certainly did realize the essential feature of success in the
organization of the business world. There votes are
weighed and not counted. Abilities and not numbers only
avail. And it is probably just because in the political
24 CHARLES R, FLINT
- world it has been necessary to adopt the one principle that
the state has so singularly failed as an instrument of busi-
ness, in spite of the fact that it has so signally succeeded as
the protector of our liberties.
MODERN BUSINESS METHODS.
BY L. G. MUELLER,
[Founder and Vice-President of the National Salesmanagers' Association
and Secretary of the Columbian Bank Note Company.]
Modern business holds its place of high respect because
of its mastery of elements difficult to control. No other
mastery today is comparable to this of business. It is the
most powerful and most far-reaching of modern forces. It
rules the camp, the court, the grove or whatever stands for
these things in the framework of present-day society. It
exercises “a far-reaching, coercive guidance” over all the
processes of life. The business man’s decisions determine
almost every important movement in state and nation. In
an earlier society there was some doubt about the reputa-
bility of his position. Today there is none, for he controls
society.
“Our commercial era” is a common and highly approved
designation of the present. But before present-day con-
ditions arrived, yet while every tendency pointed toward
the inundation of almost every interest by business, there
were numerous wailing prophets and denunciations of the
growth of the commercial spirit. Now the great sane body
of society is patriotically proud of our commercial accom-
plishments. We all rejoice in the wonders of modern busi-
ness control and manipulations, not only because they are
wonderful but because we all have our share in them. Busi-
ness has drawn into its ranks teeming thousands who would
formerly have stood aloof from its allurements.
There have been various sorts of control exercised over
people up through the ages. Every activity of a nation or
people has been subject to the will of king or emperor. The
church through centuries exercised the most dominating in-
25
26 L. G. MUELLER
fluence. It was the only well-organized and controlling
force in a vast society. Today we are wont to believe that
no form of control was ever so extensively and finely organ-
ized and worked out to perfection for the great tasks—pro-
digious accomplishments—as modern business control. If
business with its wide rule through great combinations of
industry should drop out of society there would be literally
nothing of a going sort left. Economists, historians, soci-
ologists, plain business men, all agree that business today
fills the whole horizon. -
Professor Thorstein B. Veblen begins his book, “The
Theory of Business Enterprise,” with the following words:
“The material framework of modern civilization is the in-
dustrial system, and the directing force which animates this
framework is business enterprise. To a greater extent than
any other known phase of culture, modern Christendom
takes its complexion from its economic organization.”
Business then is the dynamic, the motive power, of the
world today, and current history shows us that in no part
of the world are its activities so far-reaching as in the
United States. Whatever system of control has broadly
prevailed some region has excelled others in perfecting it.
In France feudalism was developed to its highest point,
while a more powerful central force than existed in that
country retarded its development in England. On the
industrial side Germany is probably ahead of the United
States today, and so, too, in world business, but Germany’s
governmental organization and great army still overtop the
business world at home.
Of the relation of business to government in the United
States Mr. Frank Vanderlip says: “In the United States
the business of government is the government of business.
Questions which come before Congress are nearly always
related to business affairs. Once the running of the ma-
chinery of government has been provided for, and the great
MODERN BUSINESS METHODS 27
appropriation bills passed, the further subjects of con-
gressional legislation are with rare exceptions directly con-
Cerned with commercial or industrial matters. Congress
is a board of directors of a vast business corporation; its
problems are business problems; its main work outside of
the government departments is the fostering of business
interests, on the one hand, and, on the other, the control
of business organizations. There is not a member of either
house of Congress who cannot with justice lay some claim
to familiarity with business matters. The chief interest of
all these members of Congress are business interests. The
great legislative mainspring is the well being of the nation’s
commercial and industrial life. In European politics, legis-
lative conditions and questions are widely different from
those in our own political life.”
This condition is not only comprehensive and wonderful
but new. It is only within a decade that we have begun to
realize how it all came about. Even today those on the out-
skirts but vaguely realize what the great force is at the
center. But they are being taught. A great wealth of liter-
ature, good, bad and indifferent, is being prepared for their
enlightenment. Business successes have been so notable
that nothing else seems quite as desirable as this sort of at-
tainment, therefore attempts are constantly being made
to analyze the conditions and causes that brought them
about. A few fundamental principles have been arrived at
and eagerly seized and adapted to individual opportunities.
The general business principles of today are the out-
growth of experience, new conditions and opportunities.
Vast improvements over old ways of doing things have
come from experience. New conditions producing new
needs have especially wrought improvements of the most
diverse sorts—inventions, new and wider forms of distribu-
tion to meet a vaster consumption, and infinitely more eco-
nomical forms of production. Nothing has more stimulated
28 --- -- L. G. MUELLER
activity than the great opportunities opened up by inven-
tion, increased population, and new needs.
The business man of today may confine his attention to
a neighborhood or he may exploit a continent. Business
has vastly widened its limits since the time when merchan-
dising, banking and shipping were the confines of its activi-
ties. Now a man may buy or sell some necessary staple, but
he is quite as likely to be engaged in buying railroads, fac-
tories, forests or mines. Our vocabulary has grown to meet
the new conditions and we speak of capitalists, captains of
industry, promoters, magnates, but the general term for
them all is business men. It is to business that they give
capital, business that they organize and control, businesses
that they combine and rule over.
The greater modern business man has to do with the or-
dering of life and industry to a remarkable degree. He
makes large formations. He reorganizes and puts new life
into old businesses. He brushes aside obstacles in the shape
of other men and their work and establishments, and he sets
to work for him thousands who in an earlier day would
have worked for themselves. It is necessary that he
be an expert Strategist, more expert than any general,
for he must deal with more diverse forces. He has over-
come distance, time and wind, and weather.
The business man once simply controlled the product of
men’s work. Now by the investment of his money he con-
trols and directs the making, the plants and the processes.
The old hand worker—manufacturer means hand worker,
though we apply the name manufactures to machine prod-
ucts—worked independently and alone. Merchants bought
his work, and not till then did it become a part of commerce.
But everything connected with manufacturing today is the
subject of commercial transactions, of business manipula-
tions. The business man now is “the only self-directing
factor.” Other men are working for him. He determines
MODERN BUSINESS METHODS 29
what they shall do, how they shall do it, and to what source
the product shall be sent. “As near as it may be said of any
human power in modern times, the large business man con-
trols the exigencies of life under which the community
lives.”
Almost everything in present-day life can be explained
from a business standpoint. The business man’s motives,
aims, methods and accomplishments are very much or whol-
ly the motives, aims and methods of present-day life. Busi-
ness has borrowed the best ways of doing things that have
existed in educational and professional life and in turn im-
posed its strong characteristics on every other form of
activity.
How it controls and dominates, how new accomplish-
ments are made possible almost daily by the discovery of
new and better ways of doing things, are subjects of never-
ending interest. Men are paid large salaries year after year
that they may in time discover methods that will revolu-
tionize the old. Foreign consuls observe and report facts
that will help to improve trade and manufacture, but best
of all, and probably most useful of all in the end, are the im-
provements that keen minds from the day’s experience are
working out. Affairs of today are on so large a scale that
the business of each day must be attended to or there will
be hopeless confusion. The perfection of methods to do
...his, to overcome man’s disposition to put off until tomor-
row what should be done today, amounts to a mechanism
that is as perfect in its workings as any clock.
The modern business mastery of the world is thoroughly
scientific. It comes through the exercise of qualities and
capacities thoroughly admirable though its results may
sometimes merit criticism. Modern business is truly doing
more to discipline men and perfect their natural abilities
than all the schools and all the other directive influences
of society combined. Its work in this direction is more pre-
30 * L. G. MUELLER
cise and calculable, more surely resultful. Its prodigious
advancement has been due not only to its enhancement of
man power by inventions, machines, steam and electric pro-
cesses, but by its devices for making human efficiency more
stable and more a thing to be depended upon. Plan, meth-
od, foresight, have been worked out to undreamed of per-
fection. Agencies, both human and mechanical, for doing
work have been perfected to a wonderful degree. The
most carefully predetermined method has taken the place
of haphazard or indefinite procedure. Organization has
been worked out so as to exercise the most complete and
minute control over every process and person. System has
supplied devices for supplementing and forwarding method
and Organization.
All business is for profit. Profit in a business is not only
determined by the way its affairs are conducted but also
by the way things are done by some one else in the same
business. Better ways of doing work are constantly being
sought so that profits may be greater. The cheapening of
means by the saving of time and labor are the chief methods
by which greater profits are secured.
Time is saved by specialization. In almost every sort of
work today there is a high degree of specialization. One
man does one thing only where one person once did many
things of unequal value and importance but all necessary
to some complete product. Time and expense are now saved
by having the less expensive work done by the less highly
trained person. Everything is done to forward his work
and to leave to him the tasks which only he can do.
To secure specialization there has been a minute divi-
sion of labor, and machines have been perfected to do work
once done laboriously by hand. Production in some cases
has been multiplied not only a thousand fold, but in some
cases even tens of thousands times. There is no progressive
factory or business that is not constantly perfecting the
mechanical devices which economize time and save money.
MODERN BUSINESS METHODS 31
To minimize costs, as well as to improve product, is consid-
ered worthy the attention of the most highly paid. Some-
times men are paid high salaries for years—this is true in
the great farm machine works—in order that they may
make inventions which shall perfect the product or lessen
the expense of its manufacture. Small businesses some-
times fail because they cannot adopt the economical ways
of some large competitor.
Time is saved by more fully utilizing it. By perfecting
system a shop or business may be so run that no machine,
tool or man is ever idle. Under old methods there were
many and expensive delays. New methods are especially
devised to prevent these.
Time has been lost by hesitation. Half the failures in
life are due to hesitation, says a close observer of business
conditions. “He who hesitates is lost” is more quickly evi-
dent in a business transaction, perhaps, than elsewhere.
Prompt decision is made vitally necessary today because
of the keenness of competition. If it is a matter of selling
one firm may get the order while another is making delib-
erate plans to secure it. If it is a matter of options the man
who acts most quickly will secure these. If it is a matter
of making an improvement one establishment may intro-
duce it and perhaps control it while another is considering
its advisability.
In no one thing have men advanced more in modern
business than in bringing themselves and their businesses
up to time. Strong wills have been developed by a strong
realization of the competitive conditions which enable
men to shake off feelings of indecision. A good third of the
business preaching of today takes up this subject of the
saving or utilizing of time, the acting promptly and the
sacrificing personal comfort and inclination in Order to take
advantage of an opportunity. Securing the advantage is
the aim, and everything else must often be put aside in
order to secure it.
32 L. G. MUELLER
It is remarkable how full ancient literature as well as
modern is of precepts about time. Today men hang these
mottoes in conspicuous places, act up to them, and try to
induce those who serve them to do the same. “Do it now”
has lost some of its popularity since it has been derided,
but some of the older exhortations will never grow stale,
perhaps. “Work today for you know not how much you
may be hindered tomorrow,” says Franklin. “Since you
are not sure of a minute, throw not away an hour. Employ
it well if thou meanest to gain leisure; one today is worth
two tomorrows.” This is old-fashioned but it is probably
helping some business men to answer the question “Won’t
tomorrow do just as well?”
Impatience and failure to take time may be quite as
disastrous as throwing time away. Mr. William Gamble
in his “Straight Talks on Business,” says:
“It is accounted a heinous crime in business to be wast-
ing time, and the old copy-book adage has it that ‘Time is
money.” True, but these two expressive words—‘wasting
time'—are too often used unthinkingly by individuals who
wish to be considered Smart business men, and whose impa-
tience is too great to be troubled with detail and explana-
tion. t
, “Business men are no doubt always busy, or ought to be,
and the most patient amongst us are apt to be irritable if a
caller seeks an interview at an awkward time; but the
amenities of business life call for Some Sacrifice. If a cus-
tomer keeps you from your lunch, or prevents you from
catching your proper train home, no matter; business de-
mands that you smile and bear the inconvenience. The
man who goes into business and means business puts his
nose to the grindstone, and must keep it there, if need be.
Businesses are not made to fit in with personal comfort;
and to querulously complain of Wasted time because once
in a while you have been deprived of some of the customary
MODERN BUSINESS METHODS 33
enjoyments of life is silly, unmanly, and even unbusiness-
like.
“Why, there are hundreds of men in business who
hardly ever know what comfort and enjoyment is, if by
these words are meant freedom from work, care and worry;
men who can hardly get the solace of the enjoyments of
home life because Business pursues them wherever they may
be. And yet these are the men who go through Business pa-
tiently and cheerfully, with a smile and a word for everyone
they meet, endeavoring to give a few minutes to every caller
who appears to have any claim whatever to an interview—
in a word, they carry out in their lives an old saying that
the busiest man always has time for everything. They
probably do a hundredfold more work than the man who
is always grumbling about his precious wasted time, and
yet they never show the stress of it. The fact is, they
have learnt that the secret of all real and permanent success
in business life is the economizing of time in the truest
sense. That is accomplished by doing everything at once,
and thereby ending the matter. Far more time is wasted
by evading the necessity of doing things than by attending
to them at once. It often costs more not to do a thing than
to do it. Promptitude in Business is a habit that incul-
cates regularity in other matters.”
In many factories, and in a sense all, time is what is
paid for, and the exact determination of it is considered of
the highest value. A thoroughly scientific method of “set-
ing up a job,” for instance, will result in a saving of from
thirty to fifty per cent in time. Therefore time is standard-
ized, or there is an exact determination of the time in which
a piece of work shall be dome. Records with date, number,
description and much other data are made and preserved
in filing cabinets, and a set time arrived at from a study
of them. That is, the time is found both by calculations
and by actual tests, tests as careful and expert as those in
34 L. G. MUELLER
a chemical laboratory of today. Such work is highly criti-
cal. The man who does it is usually made a “speed boss,”
and then it is often his duty to demonstrate to workmen
that a job can be done in the time set for it. Such a man
must have a high degree of ability and he must also possess
a goodly amount of tact. No one is in a better position
than an expert tester to show workmen how to accomplish
certain results. - ... • -
The existence of such an operator, or “boss,” in a fac-
tory or shop’ shows something of what modern Organization
supplies for the perfecting of business. Large economies
result from such close supervision. One of the aims of
organization is to perfect supervision. This is absolutely
necessary, since rapid production is of the utmost import-
ance, and because workmen left to themselves will often
“lay down on a job.” It is the business of modern organi-
zation to eliminate the results of human defects, to put
each worker into a position which may possibly be com-
pared to the old-fashioned treadmill. They have to keep
stepping. It is daily proved in every large establishment
that they will not always do this, and may even fail to do
so without being detected. Their failure is costly to the
concern. They are part of a comprehensive plan to insure
the cheapest possible method of production and like the
chain this is no stronger than its weakest link.
In a large factory there are many other forms of stand-
ardization besides that of time, but all aim at time saving.
The time it takes to handle the parts, the time that is needed
to “set up” a job, that to “machine the work,” and that to
remove it from the machine, are all standardized. There
is nothing indefinite about the way the different times are
determined. Stop watches are used in studying and test-
ing and every element, human and mechanical, is taken
into consideration. . . -
If work is handled without method and proper facilities
MODERN BUSINESS METHODS 35
an astonishingly large amount of time is lost. This is true
in both factory, warehouse and in merchandising establish-
ment. The heads of one of the greatest mail-order houses
have themselves invented a great number of devices which
facilitate both the handling of letters and of merchandise.
In Order that no time may be lost in handling in many
establishments there is standardization in the disposal of
stock. Each part or sort is set in an exact place. The pil-
ing or placing of parts in shop or factory must often be
standardized to meet the requirements of a machine, but
the same exact system results in great saving when work-
men are to handle these. - -
A great variety of stock in any sort of an up-to-date es-
tablishment is arranged in boxes or otherwise in as orderly
a manner as though it were filed away. Filing devices are,
in fact, a part of this handling. Moving or sliding shelves
which economize space and protect stock by enclosing it
are also used. Stock that might be injured in handling is
especially protected by every possible mechanical device.
Even the spot where things shall be kept and their posi-
tion—the direction of the screw point for instance—is
standardized, and time and work saved thereby. This is
necessary if a machine handles them, and the Workmen be-
coming accustomed to finding his stock in the same place
can work appreciably faster. -
The speed with which young girls in large mercantile
and printing establishments will assemble half a dozen
things, samples, leaflets, envelopes, booklets and form let-
ters from piles accurately placed, enclosing these in envel-
opes, is most amazing to the uninitiated. Put at anything
else they might be slow and stupid, but they seem to work
like lightning here, and are undoubtedly exhilarated by the
speed in which they do their work, at least up to a certain
point. In most cases the rapid cashier with a drawer of
compartments containing different coins is no more proud
of her facility in handling them, than are they in their skill.
36 L. G. MUELLER
In shop operations the standardizing of time is neces-
Sary to prevent waits as well as delays. There is often a
Surprising difference between the time ordinarily taken by
a workman to do a thing and the actual time needed.
Standardizing of time pulls up such a man or weeds him
out if he is inefficient. In semi-unskilled work a phenomen-
ally quick worker is often chosen to set the pace for the
others. There is much criticism of this method. When a
machine sets the pace workmen are always less likely to
grumble. In all small work this space is of paramount im-
portance for the handling must be of the quickest otherwise
prices could never be what they are.
Time standards are often used to force unprogressive or
recalcitrant managers into handling their work with the
same expeditiousness that others do. In all large estab-
lishments there are always some obstructionists. The
kindest thing we can say of them is that they belong to the
old school. They are untidy and slow in their methods,
and ultimately highly discontented with the treatment
they receive. They altogether fail to see the beam in their
own eye. Thus the standardizing of time may become a
way of handling those who have refused to move with the
procession—who have refused to accommodate themselves
to an age in which the electric motor sets the pace. In
some departments of great establishments orders are filled
in half the time that they are in others. Those who do the
work in such are ‘‘hustlers.” - *
Where human judgment and skill come in it is much
more difficult to standardize time, but even here attempts
are made to do it. Though it is difficult to introduce the
automatic into such operations judgment does become more
swift and sure with exercise. And to increase the rate of
production even in these lines is the constant endeavor of
the progressive. Close observation, classification, calcu-
lated analysis, comprehensive testing, Scientific attempts to
MoDERN BUSINESS METHODs 37
solve problems and appeals to human interest—increase of
Wages and promotional rewards—are resorted to to secure
this desideratum. -
Standardization is not really a new thing. Standard
weights and measures were long ago established because
of commercial need, and other things undoubtedly would
have been had the same conditions existed as exist today.
Social workers deprecate this movement. They think it
has been too sweeping. It is all right to make tools of
standard shapes and sizes and guages to fractions of milli-
meters, but it is cruel to standardize labor they believe.
Yet labor-saving goes on and quickness and efficiency in
production has become under modern methods most far-
reaching and marvellous. There have been enormous gains
in human efficiency from the industrial standpoint, but
what will be the final gain to society is yet to be seen. The
loss looms large in the eyes of humanitarians.
Tools and many sorts of materials and movements con-
form to a conventional standard or they are thrown out.
To use them requires too much thought and skill. They
are, therefore, not worth while where the most economical
and time-saving service must be had. Delay at any point
in the comprehensive processes of today means a stoppage
all along the line, “a tie up,” and incompetent workers
often cost more than they are worth for this reason.
People are having to swing into line and submit to
standardization. Everything is being made staple in kind,
style, grade or gauge. Human labor though it lends itself
less readily to standardization than any other form of
power is yet bought and sold by rate and submitted to
schedules of time, speed and intensity. Precise measure-
ment and uniformity are being secured where formerly
there was nothing but diversity and irregularity.
IBusiness has so imposed its methods on society that peo-
ple are satisfied with commodities that are wonderfully
38 T. G. MUELLER
uniform. The ready-made is not only in factories but in
households. There are great economies in making a great
number of things exactly alike, whether it be screws or
shirts. Time and money are both saved and part of the
Saving, at least, goes to the consumer. -
Standardization extends to nearly all means of commu-
nication. Everything is by schedule. The whole modern
system requires that man adopt his motions to the processes
of the modern methods of intercourse. There is economy
in knowing that even the play will begin at certain hour.
We fit ourselves into the scheme of things instead of mak-
ing a scheme for ourselves. This has become necessary as
the number of people to accommodate has increased.
All the economies in production and movement which
characterize the advances in commerce and industry are
due to three things—system, organization, method—and
the greatest of these, at any rate the most fundamental, is
method. There must be method in organization, method
or no possibility of system, method in method. To Organ-
ize or to build there must be a plan. There must be a choice
of method even when some old or ready-made plan is to be
followed, for thousands of ways and methods have been
worked out. System is secured by the introduction of
many mechanical devices, but so many different establish-
ments are manufacturing these today that the wise man
must pick and chose most carefully, and with method, in
order to get something exactly suited to his work, otherwise
he will have some cabinets that are idle and some that are
Overflowing, some idle office tool and some that are always
in service. -
Among up-to-date manufacturers and merchants there
is a constant attempt to find, and put in operation, better
methods of handling men, of securing a better output, or
doing each and everything better. Ideas from employees
are sought and rewarded. Discoveries originated from most
TiODE:º 3USINESS （VIETHODS 39
unexpected Sources. It may be that a firm discovers that
it could make its own packing boxes in its own plant, utiliz-
ing old material and effecting a great saving. Baskets for
handling goods, boxes for packing, and many other such
things are now made in the large mercantile houses. The
Standard Oil Company early effected great economies by
making its own barrels—pipe lines came later and then tank
cars, and now a great fleet of tank steamers and tows. It
gradually got control of nearly everything that had any-
thing to do with its handling of its products, and keen minds
were ever alert to eliminate expense farther. By such
economies it drove all competitors out of the field. Its
methods have aimed to secure two things: concentration by
a powerful central organization and elimination of costs.
Each business has its own peculiarities. It is therefore
necessary that each have its own special methods. Differ-
ent methods must be had for making or selling different
things. It requires no penetration to see that hardware
and cut glass must not only be made of different materials
and processes, but that they must be handled differently
after they are made. Yet some differences in method are
not so easy to see or to decide upon. The methods for mak-
ing a cheap and an expensive product, Out of the same grade
of raw material, are necessarily different but the indiscrimi-
nate will not be able to see these differences and, if a manu-
facturer, may fail for this reason. The method like the
remedy must fit the case. - - *
Different firms have different methods of building up
the working organization and of keeping in touch with
workmen. Rewards, premiums, promotions, welfare Work
among them—one or all of these things are in use in dif-
ferent establishments. What One makes much of another
neglects. The foreman of a great office force of women
necessarily handles his people differently for what he would
a gang of roustabouts. Everywhere method and a com-
40 T. G. MIUIELLER
prehension of the right method must be had to secure ade-
quate results. • *
Whatever the point of view of business there is always
Imore than One method that may be considered in connec-
tion with the thing to be done. Mr. William Gamble says
that there are two ways of doing business, by word of mouth
and by correspondence. “Each method has its partisans,
and each can, no doubt, argue very cogently on the respec-
tive advantages of the two methods. There is one class of
business men, shrewd and cautious to a degree, and of wide
experience of men and things, who will advise you that all
business should be done, wherever possible, by personal
interview, and never by committing yourself to writing.
The other class—who, it must be granted, are progressive,
Successful men, careful and methodical, and probably
equally as shrewd as the other—advise that all business
transactions should be in writing, personal interviews bein
always confirmed by letters.” ---
In this day and generation no business can go on with-
out a definite determination of method all along the line.
Method is the time saver. It digests the matters of indus-
try, management or what not, in connection with business.
It fixes the place of every man and keeps track of what he
is doing to an hour, often. It introduces all the machinery
of system, indexes, files, pigeon holes, maps, routine and
routing devices. It apportions both duties and time, trust-
ing nothing to mere memory or chance.
The ingenuity of many men has been tested and tried
for many years, in building what is called modern system.
The whole trend, all the endeavor has been to shorten the
distance and lessen the cost, to reduce the friction and
hasten the handling. The merchant and manufacturer who
keep awake are perforce compelled to adopt all the appli-
ances, the methods, the interpretations, and the intelligence
for which modern system is responsible. They have to
MoDERN BUSINESS METHODs 41
Shorten the path through which business moves lest their
rivals get ahead of them. Someone has said that modern
business is a primary school that is always in session. The
age is the Stern and relentless schoolmaster. No one ever
graduates. There are to be found those who think they
have or are about to, but instead of getting a diploma they
are getting drowsy. -
No manufacturing plant distributes its product more
broadly, few are organized on so colossal scale as the Ar-
mour Packing Company. Of the elements which have
made this great establishment so successful the younger
Mr. Armour says: “At the start it was the genius of the
builder. Success lay in individuality and foresight and
method. It lay in the ability to grasp opportunities as they
presented themselves; to build the foundation big enough to
keep pace with the demands of the ensuing years. As for
the balance, there must constantly be adherence to system.
Following this rule, the way to success then lies in doing
thoroughly what there is to be done, in taking care of each
day’s business promptly, and in being able to look around
three corners financially and have money when it is
needed.” -
In the packing industry is to be seen at work in the
widest way one of the most fundamental of modern princi-
ples in manufacturing, a principle that has been worked
out through system. It is through system that the elimina-
tion of waste in industry has proceeded so far as to make
the utilization of by-products one of the most prominent
characteristics of present-day manufacture. In some cases
this principle has so revolutionized work that certain things
are manufactured simply because of the valuable by-prod-
uct. The manufactures from these latter have become the
chief end for carrying on the work. If we could only shut
the door of waste, says someone, the well-being of the peo-
ple would surpass all previous human experience.
42 L. G. MUELLER
Even the slag from the steel mill is now utilized and no
longer encumbers the earth. And nothing is left of the
creature that enters the packing pens. Process after pro-
cess takes him and—but let “John Graham,” whom David
Graham Phillips makes a packer, tell the story. “But
when we get through with a hog nowadays, he’s scattered
through a hundred different cans and packages, and he's
all accounted for. What we used to throw away is our
profit. It takes doctors, lawyers, engineers, poets, and I
don’t know what, to run the business, and Ireckon improve-
ments which call for parsons will be creeping in next. Nat-
urally, a young man who expects to hold his own when he
is thrown in with a lot of men like these must be as clean
and sharp as a hound's tooth, or some other fellow is simply
going to eat him up.” - - -
The elimination of waste is called the very heart of the
principles of the Standard Oil Company. There has been
elimination of waste in material and its handling, in men,
and in the labor of men. Its long struggle has been for
economy. It eliminated the middleman and cut out com-
Imissions. It began to handle oil in bulk and to establish
great central stations for storage of oil in bulk instead of in
barrels. The first tank steamer went across the Atlantic in
1885. This experiment in handling oil is said to have rev-
olutionized the whole petroleum industry. The use of bar-
rels in such transport was lost for a year and the waste in
barrels was from two to three per cent. In tanks this is
less than one-fourth of one per cent. This waste was not
only obviated, but the cost in transportation was con-
stantly reduced. •
The method of this company has been the saving of
money. The old methods are reckless and extravagant;
the new are careful and scientific. The change has been
brought about by concentration of brains and the power of
men. Men Supreme in their fields are chosen for the work;
MODERN BUSINESS METHODS 43
they are paid in accordance with their ability; the equip-
ment is of the best.
Because of its economies but more especially because
of its strong central organization, this company has been
able to sell oil in all quarters of the globe. There are oil
Wells in Russia and labor there is cheap, but not until re-
cently has the industry there been organized so that it can
compete with the Standard.
Only through Organization on a wide scale can the great-
est economies in industry be effected. Professor Frank L.
McVey, in his “Modern Industrialism,” one of the books
in the Appleton Business series, says: “The principle noted
in the competition of individuals with each other in the
field of production is now to be seen in the conflict of na-
tions. That principle may be reduced to this—the elimina-
tion of the unnecessary and the acceptance of any improve-
ment likely to reduce cost. The movement from good to
better methods of production has been accompanied, in fact
accelerated, by Organization. Organization that began in
the factory has extended to the industry and in a certain
sense to the business of a nation. The factory began in the
time of competition. Organization of a plant gave an
owner an advantage over his competitor which lasted as
long as it made possible the cheapest product. * * * Ac-
cumulations of capital, the increased production of machin-
ery, better organization of the factory and greated division
of labor have produced the greatest competitions of nations
with each other in the world’s market. Such a competi-
tion, severe and excessive in character, could not take place
without a complete reorganization of industry. * * * *
Owners in order to eliminate duplication and excessive
cost of management, have constructed a minute Organiza-
tion which will make it possible to take advantage of every
division of labor and of every facility of production. As
the times and character of industry demanded, the partner-
44 L. G. MUELLER
ship, joint-stock company, corporation and trust have ap-
peared, in the Order named, as the dominating features of
industrial Organization.
“Accompanying the movement toward concentration
may be seen the growing dependency of trades upon one
another. Specialized industries have come to be the Order
of the day, until entire factories are given over to the pro-
duction of one kind and quality of goods. Thus the indus-
tries of the nations are more closely allied and grouped than
in the past.” -
Professor McVey sees the greatest economies effected
by Organization on a wide Scale and specialization. Of the
elimination of waste he says, “The most striking phase of
modern manufacturing is the utilization of former waste
products.” Mr. Carnegie emphasizes the fact that economy
has come through concentrating manufacturing and busi-
ness affairs in vast establishments. He says:
“The fallin the prices of manufactured articles has been
startling. Never were the prices of the principal articles
of consumption so low as they are today. This cheapening
process has been made possible only by concentration. We
find 1700 watches per day turned out by one company, and
watches are sold for a few dollars a piece. We have mills
making many thousands of yards of Calico per day, and
this necessary article is to be had for Only a few cents per
yard. Manufacturers of steel make 2500 tons per day, and
four pounds of finished steel are sold for five cents. And
so on through the entire range of industries. Divide the
huge factories into smaller establishments, and it will be
found impossible to manufacture some of the articles at all,
the success of the process being Often dependent upon its
being operated upon a large scale, while the cost of such
articles as could be produced in Small establishments would
be two or three times their present prices. There does not
appear to be any counteracting force to this law of concen-
MODERN BUSINESS METHODS 45
tration in the industrial world. On the contrary, the active
forces at work seem to demand greater and greater output
Or turnover, from each establishment, in order that the mini-
mum cost should be reached. Hence comes the rapid and
continuous increase of the capital of manufacturing and
Commercial concerns, five, ten, fifteen, and even twenty mil-
lions being massed in one corporation.”
Such organizations or corporations must needs be highly
Complex. Large scale production has introduced a com-
plexity into work and life that can only be mastered by the
most perfect plan of management. It is men, organization,
administrative machinery, that, after all is said and done,
makes a going concern. Such strong hands as it takes to
run Standard Oil make the most powerful of modern ma-
Chines. No modern skill is considered greater than that
which can make a machine like this—so compact, so sure, so
effective. Of the men in it is said that “few die and none
resign.” -
The passing generation of merchant and manufacturer
were men who carried every detail of their business at their
finger’s end. By the most tremendous will power and ca-
pacity for work they accomplished marvels of energy and
control. But they could not be the factors in business of
today that they were then. They could not carry the
weight of detail that is now connected with almost every
business of any importance. These are too many times
multiplied and the pressure comes in from too many sides.
Yet the greatest businesses of today are many of them evo-
lutions from those that were of one-man power. New and
large businesses do not develop; they are organized.
And yet the One man is as Omnipotent often today as he
was of old. This man is the manager, the organizer, the
captain. The general manager of a large manufacturing
concern says: “In every successful concern, whether it
be bank, School, factory, steamship company or railroad,
46 - L. G. MUELLER
the spirit of one man runs through and animates the entire
institution. The success or failure of the enterprise often
turns on the mental, moral and spiritual qualities of this
one man. And the worker who can imbue an army of
workers with fidelity to duty, an unswerving desire to do
the necessary thing, and to do it always with animation,
kindness and good cheer, is entitled to rank with the large
men of the earth.” *
“The Captain of Industry of the future must,” says a
great organizer and manager, “through his own personal-
ity, create a spirit of loyality, not to himself alone, but to
the vast organization of which he for the time being is the
head, and of which his lieutenants are all important parts.
When this has been done, we have the most powerful inven-
tion of this wonderful century. Well might Andrew Carne-
gie say: ‘Take away all our factories, our trade, our ave-
nues of transportation, our money, but leave our organiza-
tion and in four years I shall have re-established myself.”
* * * Mr. Carnegie's statement is perhaps stronger
than the facts would warrant, but the great truth holds
good that the efficient organization is the asset which counts
for commercial and industrial success more now than it
ever did before.”
It is quite a Supreme ability to get other people to do
work for you and do it well. Miles Standish with his “if
you wish a thing to be well done you should do it yourself,”
may have been a great captain but he would make a poor
business man today. Mr. John Wanamaker, who deserves
the notable position he has in the business world, has
had for one of his numerous characterizations by writers
on business, “the pioneer store owner, who delegates re-
sponsibility through organization.” “One of the char-
acteristics which stands out most prominently in Mr. Wan-
amaker’s business dealings is his faculty for unearthing.
and attracting to his service men of rare merchandising
#{}}ERN BījSINESS #ETHODS 47
abilities. He early learned that it pays to engage only the
best men in every line, and he never allowed the question
of Salary to stand in the way of getting a good salesman or
manager. That rare and success-bringing combination—
quality—delegating responsibility through an organization,
yet keeping close Supervision over details—is almost per-
fect in John Wanamaker.”
Mr. Greenhut, the New York merchant, who has in a
Comparatively recent period attained such a success in re-
tail business as to entitle him to rank among the great ones
in that business says: “I don’t do the work myself. I
merely find the right men to do it—and then see that they
do do it.” - -
It is said of the superintendent of the great Illinois Steel
Works at South Chicago, that “here is one business execu-
tive whose entire thought is not on the inanimate machin-
ery of the great plant, but on the human elements which
make such gigantic mechanisms the wonder of the age.”
He is the new sort of thinking man—not the man in the
library as in Emerson’s definition. As to the reason for a
thinking man heading such an organization he says: “It
is because of trouble that we men are employed in thinking
positions. If there were no trouble for us to solve, the
whole place would be run by automatons. I suppose what
I do is about like the fellow who, walking along the street
for the first time, sees a loose brick in his path, picks it up
and throws it out of his way. A hundred other people, ac-
customed to walk down that same street, might get into the
habit of stepping over the brick as though it were second
nature to them, while the man coming along with his eyes
open for new things would see the brick and take it out of
the way. Going out through the plant I am constantly find-
ing things which can be straightened out easily enough.
“Now, the reason someone else doesn’t do this is be-
cause the average man is so apt to think that his part in
48 L. G. MUELLER
the world is so small that if he does nothing, or relaxes his
efforts, his production will not be missed. No one ever
made a greater mistake than to regard himself in this light.
I would always rather see a man magnify his own import-
ance than underestimate it, for to entertain the part of in-
feriority is to invite defeat. A just and proper apprecia-
tion of one’s own powers and relative importance in affairs
is an essential part of every man’s equipment in his battle
for a living; and everyone was made to fill a niche some-
where.” *
Mr. Charles U. Carpenter in his book, “Profit Making
in Shop and Factory Management,” gives considerable
space to defects in organization. Of the designing and
drafting department he says that cheap production lies
first in its organization, whether it be two men or one hun-
dred; that it must be managed by methods that will develop
the possibilities in its working force both in general effi-
ciency and accuracy of details; * * * * that will bring
about intelligent and sympathetic co-operation of this de-
partment and the shop; that will result through co-opera-
tion on all sides in a constant striving for new and better
designs, a more thoroughly standardized product, and lines
of manufacture better suited to the needs of the market
and better fitted to outstrip the competitor.
Of the advantageous position of a well-Organized con-
cern he says: ‘‘We hear much today of the advantages
that one competitor secures over another through the ‘se-
cret rebate,’ special ‘shipping privileges,’ unfair “rate classi-
fications,’ ‘secret agreements,” etc. In a manufacturing
business these advantages count for little against a com-
pany with an effective organization of the working force,
stimulated by a desire to work not only for the good of self
but also for the good of the concern, aided by up-to-date
mechanical methods and modern tools especially adapted
to the quick, accurate, and economical manufacture of the
MODERN BUSINESS METHODS 49
parts to be produced; supported by comprehensive, though
simple, systems that enable the management to keep an ac-
curate check upon the cost of production, and also enable,
them to determine the proper course to pursue in order to
Secure greater economies—a system that enables the man-
agement to feel certain that the most economical methods
of production are being planned and pursued.”
Again he says: “A business must progress or slide
backward. It cannot stand still. The manufacturer can
always feel certain that if he is not progressing some one
of his competitors surely is. This he may learn to his sor-
row. * * * Once your competitor has built his tools
for economical production, improved his product, organized
his forces, and secured the proper start on the market, his
sales and profits multiply and yours decrease.
“There are still many manufacturers who are not satis-
fied to give their unqualified approval to modern methods in
shop and selling organization. The number is growing less
every day, but there are thousands to whom these remarks
yet apply. To these the very word ‘organization’ implies
something mysterious—something big, and certainly some-
thing expensive. The idea of ‘organization’ is not compati-
ble with their idea of economical management. To these the
idea of ‘system’ is indissolubly linked with ‘red tape.”
‘System’ to them means additions to their clerical force, and
additions to their clercial force means additional dollars.
spent upon ‘non-producers.’ They will refuse to admit the
advisibility of systems sufficient to care for their heavy
factory interests, and yet they have sufficient intelligence
to keep up their general accounting system. In brief, they
do not note the tremendous leaks in their factories because
they have not sufficient experience or data to enable them
to know, with any degree of exactness, whether or not they
are getting proper and economical results from either fore-
men, men, or machines.” * .
50 T. G. WiTJELLER
It is a great mistake to have a cheap man in a responsi-
ble position. He is “dear” at any price. Unintelligent
foremen who cannot handle men without friction are also
expensive luxuries. Supervision of the proper sort is of
the utmost importance, and great forces are often made dis-
contented and even strike because it is not what it should
be.
“Without organization and system,” says the Vice-
President and General Manager of the Sherwin-Williams
Company, Mr. W. H. Cottingham, “business would be done
On the Small scale of olden days and the business man would
Still be an insignificant trader or small individual manu-
facturer instead of the great captain of industry of today.
Organization, which is the greatest factor in developing
and building up a great enterprise, is nothing more than
the application of system in handling men and affairs. In
other words organizing is systematizing. Its object is to
bring men and work into harmonious relations, with a view
to reducing friction and cutting out waste and thorough co-
operation to increasing efficiency. There is practically no
limit to Organization. The power of organizing is exercised
by that greatest and rarest business qualification called
executive ability. Executive ability may be described as
aptness for system and capacity for action, through the
skillful and affable handling of men.”
One of the largest publishers in the country says: “The
administrative faculty is, in a considerable degree, a gift
which is not shared by all men. But it can be cultivated,
and something which will serve tolerably well in its place
may be acquired by close observation of those men who do
not possess it, and by applying the results of this observa-
tion with common sense. In a large house a vast deal of
administrative ability is required. While each department
is presided over by a head, there are still constant issues
involved by the work of each of these departments which
MODERN BUSINESS METHODS 51
must come for decision before the general head of the busi-
neSS. * * * * A knowledge of human nature is of the
first importance in arranging the personnel of an establish-
ment which to do its best must run as a fine piece of ma-
Chinery, every part of it doing its duty continuously, quietly
and without friction.” 2.
The figure of a machine is most frequently used by those
who wish to describe the battery of workers whose business
it is to turn out some great product, or effect some move-
ment in industry or trade. Yet many who use the figure
utter a warning. Results from a machine may be com-
puted with the utmost exactness, because all the parts work
in harmony, and the raw material used, time after time,
may be without variation. In the case of the machine which
is made up of human parts—ever-varying humanity—re-
Sults cannot always be readily forseen. The machine is
not so dependable and then there are some real objections
to human beings becoming mere automatons. - -
No matter who it is that describes the modern organiza
tion of business he is likely, directly or indirectly, to com-
pare it to a machine. Mr. Marcosson, who has written
popularly of many kinds of businesses, calls the organizer
who takes hold of a business and puts it in shape—a busi-
ness engineer. He says: “With the new science of business
came the business engineer. He was the concrete symbol of
an era of organization and system; a business doctor who
prescribed for a business that was ill and failing, who ap-
plied strenuous remedies. He laid out strenuous campaigns
as a civil engineer laid out the route of a railroad for a
syndicate.
This man tried to show how to conduct business better.
He “showed where waste was eating up profits; where
energy was going to naught; where concentration might
increase output; and how worry, that eternal menace of
prosperity and health, could be vanquished. Best of all he
52 T. G. MUELLER
did away with the old-time theory that a man had to wait
six months to find out how his affairs stood.” Under the
new Order a man may or does know how he stands at the
close of every day’s business. This has been made possi-
ble by the use of loose-leaf ledgers, card catalogues and
Other devices by means of which he can know at the day's
end just what are his profits and losses. This is system.
In installing this a business engineer does great work. He
Cannot so well set men in order. But his aim is to so sys-
tematize everything that the man at the center can see
everything. This man is the king pin, the capitol, the Su-
preme individual in a perfect organization.
It is because organization is so difficult, because it
requires such exceptional qualities in the organizer, and
the Overcoming of many of the weaknesses which human
flesh is heir to, that present-day accomplishments in this
line are counted such marvels. “The characteristic fea-
ture of industry today,” says the winner of one of the
annual money prizes offered by Hart, Shaffner and Marx,
for essays or monographs on business subjects, “is the de-
mand for ability to comprehend complex relations, to cor-
relate without friction the waste factors of industry, to
make any industrial organization a smoothly working ma-
Chine.” •
The field of organization is so new that men have not
been prepared for it except by luck and chance. Natural
talents have been depended upon, whereas trained ability
is more and more in demand. The president of the West-
ern Reserve University recently made a study of financial
institutions, sending out many letters to bankers, insurance
men, railroad presidents, etc., and he found that there were
several great financial combinations which were waiting
for capable organizers before they could be made.
Mr. Frank Vanderlip, who is not only an organizer but
one who has given a great deal of time, both at home and in
MODERN BUSINESS Iſiſ;THODS 53
Europe, to the study of the question of training men for
business, says that the mental equipment of a business man
of today needs to be greater than was ever before necessary.
He has investigated the schools of Germany, which at pres-
ent give the best commercial and technical education of any
in the World. He is, in consequence, a strong advocate of
this sort of training. He says: “Just as the sphere of
business men's actions has broadened with the advent of
rapid transportation, telegraph, cable, and telephones, so
have a need of a broad understanding of sound principles
increased. It was steam processes of transportation and
production that really made technical education necessary.
The electric dynamo created a demand for technically edu-
cated engineers. So the railroads, the fast steamship, the
electric current in the telephone and cable, and the great
economic fact of gigantic and far-reaching business combi-
nations, are making the science of business a different thing
from any conception of commerce which could have been
had when Girard was the most successful business man.
“The enlarged scope of business is demanding better
trained men—men who understand principles. New forces
have made possible large scale production, and we need
men who can comprehend the relation of that production to
the world’s markets. There has been introduced such a
complexity into modern business, and such a degree of
specialization, that the young man who begins without the
foundation of an exceptional training is in danger of re-
maining a mere clerk or bookkeeper. Commercial and in-
dustrial affairs are conducted on so large a scale that the
neophyte has little chance to learn broadly either by obser-
vation or experience. He is put at a single task. The more
expert he becomes at it, the more likely it is that he will be
kept at it unless early training has prepared him for some-
thing better.”
Not only training but personality is needed in modern
54 L. G. MUELLER
business. This perhaps cannot be overemphasized. It is
a fine product of character and has proved to be a wonder-
ful force. It wins good will which is capitalized. Many
businesses increase in size and importance when this is one
of its great working forces. The growth of the larger busi-
nesses in America today have had back of them one or more
great personalities, as have epochs distinguished by great
movements of a different nature—great wars, great Social
upheavals. A man’s or an establishment’s power through
personality may be multiplied many times faster than a
rapidly increasing fortune.
The great Field establishments, of Chicago and else-
where, were developed largely through personality not only
of their great head but that of almost a dozen other men.
“System, wealth, concentrated into towering piles that
mark the mercantile sites are not only tributes to Mr.
IField’s sagacity,” says Mr. Howard Irwin Cleveland, “but
to the will, the energy, the co-operative ambitions of those
men, known far less to the public that he, none the less
master builders about his hopes. I doubt if research would
reveal in any one commercial house of the World such a
binding together of incisive, powerful men as Field's has
possessed. Their career with Field's covers a period of
about forty years—1867 to 1897—all have retired with for-
tunes—except John G. Shedd. And he is the brains, the
focal center and dominant mind of the establishment to
this day, and the logical, chosen successor of Mr. Field
himself.” .
The business man of today choses his lieutenants with
the utmost care and fortunate are they who are so chosen if
they wish for fortune. Mr. Carnegie thinks there are a
greater number of opportunities for a man to make his for-
tune today than ever before, not by independent enter-
prises but by becoming a necessary part of great establish-
ments. “It is infinitely easier for a young practical man
MODERN BUSINESS METHODS 55
of ability to obtain an interest in existing firms than it has
ever been. The doors have not closed upon ability; on the
contrary they swing easier upon their hinges.”
Just a little before this he said that there is a lion in
the path which leads to independent commands or to part-
nership, and this lion is the huge establishment already
existing. But “the law which concentrates the leading in-
dustries and commercial, mercantile and financial affairs in
a few great factories or firms contains within itself another
law not less imperious. These vast concerns cannot be suc-
cessfully conducted by salaried employes. No great busi-
ness of any kind can score an unusually brilliant, and per-
manent success which is not in the hands of practical men
pecuniarily interested in its results. In the industrial
World the days of corporations seem likely to come to an
end. It has been necessary for me to watch closely most of
my life the operations of great establishments owned by
hundreds of absent capitalists, and conducted by salaried
officers. Contrasted with these I believe that the partner-
ship conducted by men vitally interested and owning the
works will make satisfactory dividends when the corpora-
tion is embarassed. * * * * The great dry goods houses
that interest their most capable men in the profits succeed,
where those fail that endeavor to work with salaried men
only. Even in the management of our great hotels, it is
found wise to take into partnership the principal men.
In every branch of business this law is at work, and con-
cerns are prosperous, generally speaking, just in propor-
tion as they succeed in interesting in the profits a larger
and larger proportion of their ablest workers. Co-opera-
tion in this form is fast coming in all great establishments.”
Many illustrations could be brought forward to show
that this last statement of Mr. Carnegie's is more and more
true. Not only the most capable but all workers according
to their diligence, interest and weekly pay, Share in the pro-
56 L. G. MUELLER
fits of many an establishment and such workers are the most
contented of any in the world. The annual dividend for
the more important is not infrequently given in stock, and
for the lesser the sum represents more than they could re-
ceive in any other way at one time.
The business man of today bulks large in our vision
but he is many times multiplied even in his own establish-
ment. These people who partake of his virtue by sharing
it are mostly fortunate. Mr. Charles A. Stevens, the Chi-
cago merchant, says: “There is an old saying that no man
ever made himself rich or famous by his own individual
efforts, but he does it by the manipulation of the efforts of
others. And it is a very fortunate thing for a man of either
ordinary or one-sided ability to be able to fit himself into the
Organization of one of these great generals. Many a man
has become a millionaire or achieved fame simply because
he has the ability to form a cog in one of the important
wheels of some great organizer’s machinery who never
could have done one-tenth as well otherwise.”
To the man at the head of a wonderful organization, who
makes the fortunes of others as well as multiplies his own
millions, is accounted a genius, our modern genius. He is
a monarch, the product of a wonderful age. Just now the
World almost reveres trade. Old prejudices concerning it
have even disappeared in the parts of the world where they
were most firmly entrenched. The days when small busi-
nesses bred small men are over and gone. Great businesses
breed great rulers of men. This modern ruler is enthroned
on method, rules through Organization, and conducts his
multitudious affairs by a system as regular as the recur-
ring Seasons.
FINANCING A BUSINESS.
BY JOHN FARSON,
[President of Farson Son, & Co., Chicago.]
Business enterprise has today swept into its catego-
ries everything which requires capital or money for its es-
tablishment and running, and promises profits as the wages
of money So used. An enterprise, from a business view
point, is anything into' which money can be put, with the
expectation that from it profits will be taken. Sometimes
expectations are the only gratifying things to be had from
money so expended. This is because an enterprise may be
nothing more than “a bee in the bonnet” of some enthu-
siast, though, on the other hand, it may be the soundest
of “going concerns” to be enlarged or changed from the
single ownership or partnership plan to a corporation.
The enterprise may be a proposition to buy, build, en-
large or even close out a factory, develop or buy a mine;
effect a combination of businesses; promote an invention;
establish anything whatsoever “for profit.” It is a prop-
osition made to those who have capital to invest, or it is
an undertaking to be financed. Its purpose is money-mak-
ing. It may be in the form of a factory, store, mine or bank.
An industrial, business or commercial co-operation may be
planned. A plant for making, refining or packing; a com-
pany for hauling money or insurance; a transportation cor-
poration for building a railroad, a steamship or a line of
steamships; an electric street railway or the establishment
of a telegraph or telephone system—all these and many
other things are now offered, with glowing inducements,
as opportunities, perhaps of a lifetime—to men who have
capital that is idle, when they would like to have it busy.
Men buy shares in an enterprise as they once bought
57
58 JOHN FARSON
bolts of cloth or bags of precious stones. The number and
kinds of things, bought and sold has, in fact, increased until
“goods” as intangible as hope, and as unseen as faith are
put on the market, and purchasers found for them; some-
times easily, sometimes with difficulty. Money is to be had
to promote the digging or boring holes in the ground with
the expectation that rich returns of gold, coal, salt, oil or
Some other natural resource, which has formed the basis of
vast fortunes, will be found. Money is to be had for build-
ing amusement parks which may never operate; for start-
ing publications that can run only until the sum paid in is
used up; for capturing the world’s supply of tadpoles,
building skunk farms, or taking gold out of the sea.
Just at present enterprise is much engaged in develop-
ing natural resources. Neglected water powers have taken
on new value in this electrical age. Geological surveys,
those of both state and nation, concern themselves with the
resources of soil, rock, and mineral that are waiting to be
utilized. Opportunities for investigating in this work are
numerous, valid reasons for doing, so are many, and yet
general warnings against putting money into such enter-
prises, without the fullest investigations, and even then
with great deliberation and only after the best council, are
Imany.
- Investors are constantly being warned, by financial
writers and those who have bought ‘‘gold bricks,” against
investing in what may seem a perfectly good thing. There
may, for instance, be a product for which there is a great
and constantly increasing demand, an industry that has
received government attention and endorsement, and yet
it may not be wise to invest in a new plant of this sort.
Though there may be a great demand the chances are that
greater preparations are being made to Supply it, than are
needed, and competition will be so great that the newest
comer will have too much to do to make his work a profit
producer. .
FINANCING A BUSINESS 59
The same reasons which should prevent an investor
from putting his money into such an enterprise should pre-
Vent the inexperienced organizer from undertaking to cap-
italize it. There is much more advice current for the bene-
fit of investors than for promoters, but the latter may pro-
fit by this in several ways. For one thing he may know how
much of mistrust and even of suspicion he will have to
Overcome in Order to secure endorsements and financial
backing for his enterprise—he will also have to overcome
the natural caution of some men. Harder yet he may have
to try to get money from a man who has lost heavily in
Some even more favorable appearing venture than this
which he offers.
So many thousands of enterprises fail, even when men
of judgment promote them and men of acumen put their
money into them, that floods of advice on investment have
appeared in current literature—all of which has the ten-
dency to make the man with capital to invest, cautious.
It looks easy to some men to get capital. They have
simply to say that they want it. Their position or judg-
ment is such that hardly more than a simple statement of
why and wherefore is necessary in order for them to secure
the money. But if they should go out of their known field,
into something where their judgment had not been tried,
even they might find some difficulty in securing financial
backing.
There are professional promoters who will take almost
any enterprise and, for a consideration, put it on the mar-
ket and secure the capital that is needed to make of it a go-
ing business. They will attend to everything that pertains
to the floating of the enterprise. “A promoter,” says Mr.
William Allen Wood, “in business practice, is one who
seeks fields for investment in new enterprises or in the
extension or diversification of established industries, and,
for a consideration, forms and Organizes a Corporation to
60 JOHN FARSON
e
develop the particular field he has chosen.” A promoter
is on the lookout for enterprises with prospects of good
returns for the money invested.
A promoter does not, as a less experienced man might
do, neglect any of the steps necessary to give an enterprise
the appearance and warrant of success that will attract in-
vestors. He is a thorough organizer. He employs techni-
cal experts to make the necessary investigations of the pro-
ject, the cost of establishing it as a business or going Con-
cern, and the prospective returns from operation. He
then has something very definite to show to those whom he
wishes to interest—they may know what to expect if they
invest. He secures options or leases, and legislation, if nec-
essary. He “assembles the proposition.” He is able to
answer all questions concerning its basis, title, proposed
product, and conditions under which the work will be car-
ried On. If a corporation is determined on, as it almost
invariably is, he has the articles of incorporation prepared,
secures the necessary subscribers to them, sees that they
are recorded and filed, and that the certificate of incorpora-
tion is issued. He pays the incorporation costs. He then
sells the stock to the people he has usually provided for tak-
ing them, before Organizing the corporation.
Mr. Francis Cooper goes so far as to say that the nature
of an enterprise is of minor importance, for its success,
judged from the fact that it gets the money it needs, is main-
ly a matter of preparation and presentation. If this were
not so, many projects which get little beyond the blue print
stage would never obtain the financial backing they do.
Men have been found to be just as ready to put their money
into some wildly impossible scheme as into the most stable
of industries, and swindling enterprises are constantly be-
ing accepted as genuine. Says Mr. Cooper: “A large pro-
portion of the enterprises brought forward are in the hands
of young Or inexperienced men, overly enthusiastic and
FINANCING A BUSINESS 61.
Sadly lacking in the judgment of inventors, often mentally
loose-jointed and wildly impractical; of unsuccessful busi-
neSS men warped by their reverses and snatching at straws;
of promoters, more or less unscrupulous and unreliable; of
adventurers without money or reputation and anxious to
surn a penny without regard to the means employed. *
* * * All this misrepresentation, chicanery and
extravagance of statement and demand reacts to the very
great injury and disadvantage of legitimate propositions.
It explains much of the difficulty of financing, and should
be very clearly understood by the man who has an enter-
prise to present. It also explains to some extent the Sus-
picions, exactions and often most unreasonable demands of
the men with money.”
A glowing proposition has hypnotized thousands of Sane
men into investing their money in both honest and dishon-
est schemes, which were flat failures. The inexperienced
possessors of a few hundreds or thousands of dollars are
every day being led by brilliant prospectuses to sink their
little hoards in enterprises which are bottomless pits.
Sometimes these enterprises might be perfectly good if
but in competent hands. Many men have the ability to
invent and even to secure the money for pushing an inven-
tion but they cannot push on from this point, or they have
no knowledge of how to compete with the forces arrayed
against them in the commercial world. It often happens
that promoters of perfect good enterprises do not take into
consideration the competition that must be met when the
product is put out. The right man may push a railroad into
an oasis in the desert, and make the stock yield dividends;
he may send umbrellas to the natives of Madagascar and
realize a profit of a thousand per cent; he may send mowing
machines into China and sell them there; or he may corner
the ocean coral builders, while a great many other
men with the idea that these would be good and profitable
things to do would fail if they tried to do any one of them.
62 - JOHN FARSON
The successful financing of an enterprise depends on
who presents it, how it is presented, and on what opposi-
tion it has to meet. In its earliest stages an enterprise is all
or largely theory, and not many men are likely to take stock
in theories—especially bona fide business men. It must be
taken considerably beyond this stage before it can go out in
search of capital with any prospect of success.
There used to be a famous puzzle with the legend, “It
looks easy, try it!” Some people watched others and knew
it was hard. Others plunged in and learned from expe-
rience that it was hard. Yet others took it into their hands
with perfect assurance because they had seen someone do
it easily. The man who starts out to raise money may have
any one of these experiences. There seems to be a great
deal of capital and why may not he secure it as well as
another? Much depends on his possession or lack of hyp-
notic powers. But if he has nothing but his assurance back
of him his enterprise is likely to be a failure in the end
whether he secures financial backing or not.
There is much capital in the world, and like labor it
seeks work. Like labor, it requires a return for its services,
but unlike labor, it is independent, and can make conditions.
The more the conditions are with which it surrounds itself
the more difficult it is for the one who would enjoy it, by
means of inducements, to get it to enter his service. He
has to make the most of these inducements. If he can make
big promises and show reliable prospects, investors from
the least to the greatest may listen to him. Men want to
get rich in a hurry, and not infrequently throw all caution
to the winds when they think the opportunity to do so has
arrived.
The promoter of a get-rich-quick scheme may not be a
dishonest man. He may simply be blinded with enthusiasm
for something for which the time is not yet ripe. Fifteen
years ago the inventors and promoters of machinery for ir-
#’īNANCING A. BUSINESS 63
rigating were extraordinarily enthusiastic. They secured
money for making something that people were just waking
up to a need for. In one case of this sort an inventor and
his friends Secured a considerable sum of money from small
investors and sunk it all. The inventor assumed the burden
Of this failure, although he was not obliged to do so, except
that he felt that he was morally responsible in that a num-
ber of poor men had lost their money in order to help him
On. He assumed this responsibility, and he did not lose
hope in the ultimate success of his invention. Today he is
likely to become independently wealthy from its wide use.
No honest man will undertake to promote an undertak-
ing that is not sound, but he may from ignorance, economy
Or lack of means to investigate not really know whether
it is sound or not. His own relation to his enterprise is a
risky One, in many cases, if he does not understand all the
conditions back of its development. But no matter what
the promoter or owner has done to find out everything
that may affect the accomplishment of his work, it is for
the investor to ascertain whether the promoter has done all
that he should to secure his efforts against future failure
which will involve all who put their money into the enter-
prise. If he has not, his proposition is not a thoroughly
safe one. Litigations may involve a new business in enough
trouble to cause its failure, just because titles somewhere
were defective, and this should have been known from the
very first, instead of after money and effort had been spent
in developing and building up a business.
An enterprise which has for its basis an unprotected
invention is sure to come to grief. Attempts to manufacture
an article in a small way, which must compete with the same
thing manufactured under the economics made possible by
large scale production, are rarely a success. Just at pres-
ent there are propositions connected with the production
of zinc that will probably find victims both among those
64 JOHN FARSON
who promote and those who supply the capital for promot-
Ing.
There are a great number of things which must be taken
into consideration before any enterprise can be safely for-
warded. Investors of intelligence will look into these
things, and the honest promoter will have prepared him-
Self to show that he has provided against all possible dis-
astrous contingencies. If he is proposing to develop a nat-
ural product he has had technological analysis made. He
has secured the title or an option on the property which will
be involved. If he has a special process he sees to it that
this is protected. If he is not thoroughly familiar with the
work he proposes to undertake he should make himself so
before he involves others in its expense.
If the case is one where it is proposed to open up a new
coal mine, experts should decide whether there is a deep
and continuous vein to be worked, or whether a mere out-
cropping has led to the building of false hopes. Money has
been Secured, a good manager employed, a plant and even
a village for workmen built in innumerable cases like this,
before it was discovered that some fact which should have
been known from the outset, had proper methods and care
been used, will make the whole thing abortive. Sometimes
lack of transportation facilities, or the cost of getting raw
materials to a place has caused to be left to desolation a
most promising prospect and a highly finished plant.
Investigations as to whether an enterprise warrants de-
velopment as a profit maker should be undertaken by an
owner or promoter first. Those whom he gets to furnish
capital for the enterprise may be willing to accept the re-
sults of his investigations, but, in most cases, they but have
themselves to blame if they do, and failure ensues. The
investigations that they might make might prove a check
on his, quite as valuable often to him as to them. The
owner, if honest, is no more willing to lose his time and trou-
FINANCING A BUSINESS 65
ble and his means, be they large or small, in developing
Something that will not pay a profit, than are the investors.
He is as interested in his enterprise being a safe thing as are
they. - .
Different investigations, conducted at different times,
and from different points of view, may yield different re-
Sults. Later investors in particuluar have different mat-
ters to ascertain than have those of an earlier time, before an
Organization has been formed, stocks issued and other work
done. -
And then, besides, every enterprise needs to be investi-
gated because of the fact that it has points peculiar to itself.
But even if this were not so, general investigations may be
instituted in order to find out certain fundamental things.
When these are not instituted the investment is more or
less of a gamble, even though confidence in the promoter
be great. -
What is the business risk in investing in any enterprise?
“Earth hath its bubbles as the water has,” but more espe-
cially as has the field of enterprise had. If a venture in
question has especially venturesome features, it is specu-
lation to invest in it. The whole field of invention has
offered opportunities for promoting both reliable, prom-
ising and wonderful machines or processes, but even into
those which have been ultimately successful in the largest
ways there has entered the element of chance in establish-
ing or setting them up. The cable was not laid at the first
trial. The way has been strewn with wrecks often over
which the final chariot of success traveled.
Whatever be the current interest, whether it is elec-
trical invention of some sort, flying machines, wireless te-
legraphy or what not, the clever imposter will trade on this
interest for promoting something that was never intended
to do anything but fill his pockets temporarily, though it
may very likely land him in the penitentiary. The “smart”
66 JoHN FARSON
rogue has found many unexcelled opportunities in promot-
ing presumably great inventions. The more promising
the type of invention he chooses to promote, the better able
is he to push his plans, for even the best of investigations
cannot hope to remove a certain element of uncertainty.
Those who are willing to help to finance such will-o'-the-
wisps are satisfied not to know whether they have any basis
at all, much less a substantial one. There is an enormous
amount of literature, beautifully printed, handsomely il-
lustrated and tastefully presented, about lands distant from
crowded cities and factories—fruit lands, vegetable tracts,
coffee and rubber plantations—and people buy them on the
representations of the agents of these enterprises, backed
by the pictures and print. They are, perhaps, fascinated by
the prospect of owning some square feet of earth. They
imagine, perhaps, that the particular place they are buying
into is being honestly promoted, as it may be. At any
rate, they are happy in this belief and have neither the
time, the money, nor the inclination to go and find out what
they are really buying. But the, chances are at least a
Hundred to one that they are buying the wrong thing, if
they are expecting to have the work done for them, their
business being only to draw the revenue. Mr. Carnegie
says the people do nearly always buy the wrong thing in
cases like this and similar to it. They should buy the man-
agement of these flourishing plantations, these revenue-
bringing fruit orchards, instead of the things themselves.
Any investment which has real estate back of it has
many “talking points” for the promoter. The wise in-
vestor, however, thoroughly investigates such propositions,
or gets some reliable person to do it for him. Sometimes
a group of men are impressed with the probable improve-
ments that will be made and the increase in value that will
ensue in a certain city or section of the country, and, as a
group, they send a representative to canvass the situation,
FINANCING A 3'ſ Silºšš 67
look up conditions and titles, perhaps, and investigate every
matter that may influence a future situation.
All proposed manufacturing enterprises should suggest
a great number of questions to an investor as to whether
there is need for the proposed product, whether the prepara-
tions to make it are adequate, whether the competition it
will have to meet will be slight or great, and a great many
Other queries as to facilities and accommodations of all
sorts. Will the output be a revenue bringer? If the de-
mand is not sufficient it cannot be. This should be found
out as nearly as possible before its making is attempted,
though it is not possible to determine in advance what the
demand, for instance, for a new chewing gum will be, since
so much in this case depends on the management of the
product after it is made. The unknown quantity in all .
manufacture, except in the case of a few staples, is the
degrand. e -
In some cases it is necessary to considet whether the
facilities piaºned will be equal to supplying the demand.
Sometimes coºi...acts are secured for certain products be-
fore any preparations are made to produce them, and these
form the basis of a projected enterprise. Under such cir-
circumstances it seems to be a very secure proposition, since
there is a certain definite work to be done with a sure mar-
ket, but if the plant built is not equal to its tasks the mar-
ket is more than likely to be lost. Competition is invited
and the market once so secure is likely or sure to seek
other sources of supply for itself. -
Restaurant keeping is risky business, as much of it is
managed, but as a small enterprise it is ever alluring. Yet
one of the things which causes the failure of many a man or
company, which plans to give superior food and service at
reasonable prices, is that the crowd cannot be adequately
accommodated. In large cities a place which offers good.
food is sure to be thronged, and it is only a rare management
68 JOHN FARSON
that is able to handle the crowd and keep everything up to
grade. A great patronage is as bewildering to many man-
agers as a Stinted One is discouraging. -
Often an enterprise is a proposition to produce some-
thing for which there is an undoubtedly great demand, ac-
cording to all signs and prospects. This may be some great
thing in industry or some small thing in trade, but if the
quality of the Supply is not what it should be, if the process
is not what it should be to make the quality right, then
the enterprise will be a failure. It may be nothing more
than a little bakery in a high-class neighborhood whose
goods are not adapted to the fastidious tastes of the custom
it might have, or it may be a great factory wishing to en-
gage in foreign trade, yet not fitting its product to the cus-
tom. The consular reports are full of instances where
American factories try to sell their goods in foreign coun-
tries, but are too conservative or wrong-headed to adapt
them to the needs of those countries.
The place for an industry is often determined by na-
ture, but much more frequently men will make arbitrary
plans which do not take into consideration some important
item of influence that situation has. When power was
stationary, like the falls in rivers, raw materials had to be
taken to it and the consumer had to pay the expense, but
when power became facile it was cheaper to take it and set
it up in proximity to the raw materials.
No matter what the natural advantages may be on one
side, there may be something to counteract it on the other,
and these two things must be weighed carefully with other
contingents in establishing any industry. Iron is still taken
to coal for its manufacture in America, but some of the
great manufacturing regions of the world have grown up
because these two things were in proximity.
All the primary supplies must be accessible, and to be
obtained at unprohibitive rates, or a factory cannot be run
FINANCING A BUSINESS 69
Successfully. Today good air is considered quite as essen-
tial as anything else. The health of employes is a business
asset, and must be protected and insured. A well-venti-
lated, well-lighted factory is the only kind consistent
With present-day progress, and no manufacturing enter-
prise which neglects, from economical or other reasons, to
provide such, can long exist. -
The labor question must be taken into consideration in
establishing most sorts of things. Are hands accessible and
Can labor be secured at reasonable rates? Invention has
done much to supplement the work of men, but skilled men
are needed everywhere, and a part of the provision to be
made in starting a new manufacturing plant, especially in
a thinly populated region, must be in reference to securing
them.
Quite as important as labor are markets, near and ac-
cessible. The greatest industry in the world, agriculture,
has suffered immeasurably because of a lack of accessible
markets. Invention has done wonders in supplying it with
labor-saving devices to take the place of men which were
not obtainable. But men have left well cultivated small
fields near good markets, with all needed buildings and
equipment and the comforts of civilization, to go into dis-
tant, larger and more productive fields, only to find that
their immense harvests were produced at a loss because of
prohibitive rates of transportation. Men of today who are
undertaking such enterprises are more likely to consider
the market first, if they have had any experience in the
world, and adapt other conditions to suit it. -
Local conditions often very much affect the circum-
stances under which a business is conducted. Pains must
be taken not to try to fit a round peg into a square hole.
A department store may be a great success in some smaller
towns, owing to the thickly settled environs, whereas it
70 - JOHN FARSON
might be an utter failure in another place of equal size but
much more isolated.
Some enterprises are subject to regulation by law, in
Some localities, and nothing but trouble is encountered if
plans are made to evade it. Hostile local conditions and
increasing competition affect enterprises to the point of
their annihilation. Free fields and no favor are not very
common today. All sorts of adaptations must be made,
and the enterprise which is not preparing to make these
is not likely to be a safe one to handle or invest in.
Both the promoter and the investor are saved much
trouble if the enterprise they are interested in is in no way
unique. The general conditions of many industries are,
for instance, well known as they are well within the estab-
lished lines. The need in such cases is to look very carefully
into the special features regarding the new proposed in-
dustry—its situation, its output, its title, ifuan old plant is
to be taken over, and the conditions under which it oper-
ates as regards raw material, labor, transportation, mar-
kets, etc. All uncertain qualities must be worked out or
the enterprise will remain of the semi-speculative nature
it was before these were eliminated by general investigation
and expert knowledge. Some situations may be so care-
fully worked out, so much may be absolutely known, that
only intention and chicanery can Wreck the enterprise.
It is easy to obtain the names and learn the status of
experts in almost any line through the trade or trade papers,
who can be employed to investigate possibilities and give
precise data as to conditions present and likely to present
themselves. An expert must be competent and unbribable.
The greater his reputation and standing, the better, al-
though his price in such cases is sometimes prohibitive. He
himself should be investigated unless his position and repu-
tation are of the most undoubted sort. Excellent references
are not always proof of these things, and the better the
FINANCING A BUSINESS 71
references in some cases the more likely they are to be
forged. Reliance is sometimes placed on these, because of
the weight of the name being enough to satisfy without
question. The services of an expert range in price from $10
a day upwards, with expenses.
Mr. Francis Cooper says: “The examination made by
an expert, unless restricted, usually extends to all the es-
sential features of the undertaking. His report, especially
if favorable in its tenor, and good both in manner and form,
is not only of immediate value but is also most useful in
any subsequent financing of the enterprise. If the expert
is thoroughly qualified his report will probably be in shape
to be used for this or any other proper purpose * * * *
In any investigation of great importance a single report is
hardly sufficient, even though the standing of the expert
be high. It is but seldom, if ever, that an expert of reputa-
tion can be “purchased,” but he may occasionally be swayed
by outside influences, and there is, of course, always a possi-
bility of error. Also it frequently happens that special
points require further investigation.”
Investors sometimes require that demonstrations be
made. But these do not always reveal all that they are Sup-
posed to. The materials may be “doctored” or some de-
ceit used in their manipulation. But if the promoter is
honest he may be the one to be surprised at such times.
Working models are often made for the sake of demon-
stration, but unless these are on full scale they are often
deceptive. -
There are situations and conditions which bear but
slight relation to known business conditions. In such the
unknown conditions must remain unknown until actual
trials in doing the work have removed them. If it were
not that enterprises of this sort generally offer large possi-
bilities of returns successful men would never go into them.
They are semi-speculative and the measure of risk is often
72 JOHN FARSON
great, even when the product promises to be of the highest
utility, as in the case of machines which are enormous time
Or labor savers. People who will have continued faith in
such are often rewarded by brilliant and striking as well
as profitable outcomes. The sewing machine, the type-
Writer, the typesetter, the telegraph and telephone were
Of that sort, and today there are electrical devices whose
utility is far from being proved, but which nevertheless
Inumerous Companies are preparing to manufacture. In
Imany cases all the difficulties connected with their running
Or serviceability are surmounted and uncertainties over-
come, before these are offered as investment enterprises.
After that their success depends largely on the good man-
agment of the enterprise. -
The two fields in which possibilities may not in many
cases be even approximated are mining and invention.
These, too, are the very fields in which the investors are
the sort that would not spend the time or money to investi-
gate, mainly because they do not understand the necessity
of doing so. Since these things are risky and investiga-
tions may be of no great value, investors are sought outside
financial Organizations and those possessed of financial ex-
perience. Shares are offered in sizes Small enough to ac-
commodate the pockets of the smallest investors. Since the
most remarkable profits are in a few exceptional cases
realized on these, any enterprise of this sort, properly pre-
sented, is likely to gain support. Poor teachers and preach-
ers were made rapidly rich by investing in Texas oil wells;
so other teachers and preachers are encouraged to maintain
their interest in things of this sort. ~.
Mr. C. M. Keys, in writing last year in The World’s
Work of “The Constant Crop of Promoters’ Victims,”
showed that these were country doctors and clergymen and
women. “The promoter of a new invention, or of a mine,
or of some wonderful process of making something out of
FINANCING A BUSINESS 73
nothing, knows perfectly well that he must reach the ‘little
people,’ the men and women with little in the world to
lose, but with hunger for money in their hearts. He must
Spread his net abroad, not set it in the sight of the wary and
Wise.” **
Science has entered in and made mining enterprises less
Speculative than of old. Industrial geology and mechanical
Contrivances for testing have reduced the whole business
to “the basis of a prosaic system.” But it is not so with in-
vention. The trained expert cannot be found in many cases
Outside the inventor himself, and it will take events to
prove he is that. Designs absolutely new, unparalleled, and
unanticipated by previous invention are frequent products
of the inventing brain. Comparison may be made with ex-
isting inventions as to service or product, but only guesses
can be made, and these will remain guesses until the thing
is tried out. *
Yet investigations may be made in this field, and should
be more rigid than in any other. The inventor will neces-
sarily be blind to many things because he believes in his
invention. He is on the constant lookout for favorable signs
of its perfection, not for adverse conditions; for things that
will build up his theories, not tear then down; and he there-
fore cannot be an unbiased judge. He is giving his time,
often all his means, and his energy, to perfecting his work.
When he sees an imperfection he tries to remove it, but
there are likely to be things that he will not see. Speaking
generally, says Mr. Cooper, “to venture money on the un-
supported anticipations of inventors is even more reckless
than ‘bucking the tiger,’ speculating in bucket shops or
cornering wheat.”
Mr. Keys emphasizes the fact that the floods of inven-
tion never cease; that the list of patents issued by the
TJnited States government in one week covered 820 inven-
tions, some of which were quite trivial and some quite im-
74 JOHN FARSON
pressive. He says: ‘‘Perhaps the worst mistake an in-
vestor can make is to become possessed of the idea that he
should back an invention. * * * * Thousands of
people in all the civilized countries of the world lost much
Imoney trying to realize fortunes from the much-heralded
field of wireless telegraphy. It would be quite impossible
to estimate the amount of money that has been thrown away
by usually Sane and sensible people during the past ten
years in an effort to make a substitute for the cable and
the telegraph and the telephone.”
And again he says: “Every invention, no matter how
brilliant its future may be painted by its promoters, should
be tested in many ways before a man should venture his
money in it. When he is satisfied that the invention is good,
that it cannot be choked to death by some great corporation
or other interest, that it has a market by itself and is actual-
ly sought in some great wide field, then he has half finished
the proper investigations that he should make preliminary
to an investment. The other half, the harder half, remains.
He must find out who is in with him, The name of the in-
ventor means nothing. Mr. Marconi was in no wise respon-
sibles for the swindles that were perpetrated in the wireless
telegraphy field during the past five years. One must find
out the names of the men who are selling stocks or bonds;
who they are; what other companies they have formed; how
men fared in these; how much personal risk they have in
this venture; how their statements are regarded in financial
and trade circles.”
Seeing such a prescription as this it is not wonderful
that men leave uninvestigated things that should receive
their most careful attention. Men inexperienced in such
matters are not likely to do so much work as this or to be
willing to pay for having it done. It seems too much of a
burden to assume and they would rather run the risk than
undertake the labor. This is perhaps more likely to be
1FINANCING A BUSINESS 75
the reason why many investments are unguarded than be-
Cause men are actually ignorant of the risks they take.
People are credulous but they are also lazy, mentally inert.
But it nearly always happens that some prospective in-
Vestor Willinvestigate, and unfortunate are they who should
have done so before risking their money on an uncertain
issue. His investigations may lead to the death of the whole
undertaking.
There is no excuse for anyone who omits ordinary pre-
Cautions. In the case of an invention the first step after a
machine has been thoroughly tested is to apply for a patent.
Patent lawyers are the people to attend to this matter quick-
est. If the application has been filed, and there are conflicts,
all construction work should be suspended until this matter
is settled. Sometimes application for a patent is not made
because of fear of exposing an idea and being cheated out
of it.
The whole basis of an enterprise is changed from a
speculative to a more or less simple matter of business when
it has been shown that a machine can do all that is claimed
for it, and patents have been secured protecting it. But
there are reasons enough why it is not easy to bring it to the
point where all that is necessary is the promoting of the
enterprise. Mr. Cooper says: “The proper investigation
of mechanical patents and patentable devices, and the de-
termination of their values, as nearly as may be, is fre-
quently a matter of much difficulty. Many uncertain ele-
ments are usually involved, depending to Some extent upon
the point which the inventor has attained before the investi-
gation is begun. -
“Sometimes and not infrequently an invention of this
kind will exist only in the brain of the inventor or in his
draftings of its principles. Sometimes he will have con-
structed a small working model of the device or of its essen-
tial features. Sometimes his patents will have been Se-
76 JOHN FARSON
cured. Occasionally he will have gone still further and have
constructed a working machine on a commercial scale. The
method of investigation will be governed largely by the
Conditions which exist.”
The inquiries as to the patentability of an invention Mr.
Cooper suggests should be as follows: “(1) Is there a de-
mand for the device or its output? (2) Will the device do
the work? (3) Will it do it better or cheaper than other
existing devices? (4) Can it be sufficiently protected? (5)
Are the values determined by the preceding enquiries suf-
ficient to justify the undertaking?”
When the proposition is that of producing a standard
product the first question is practically answered, but new
Ones concerning its superiority or inferiority arise. In
reference to the efficiency of a machine, there are puzzling
questions. It is bound to do its work differently from oth-
ers already in use, but perhaps no better. If it does not do
it as well the demand for the product has to be very great
to justify its being put on the market.
But that even an inferior product will sell is proved by
the fact that companies are not infrequently formed to put
a machine on the market the patent on which has expired,
although the originators have greatly improved on the orig-
inal and have patented the improvements. The old form is
essentially inferior and yet it will sell because it is usually
offered at a much lower price. When the first patents ex-
pired on the earliest reapers, the McCormick and others, the
government refused to extend them and scores of reaper
companies sprang up, making machines according to the
old model. A new machine which is to enter a great com-
petitive field should have very special things to recommend
it, a reduced price being one of the greatest, unless its ex-
cellencies are especially marked.
When all determinations have been reached which in-
vestigation has settled, the investigators being either those
FINANCING A BUSINESS 77
who are interested in promoting the enterprise or those con-
sidering an investment in it, or both, then it is really ready
to be put legitimately on the market.
Of all the types of modern selling perhaps that of selling
an enterprise has contained some of the most picturesque
features. For twenty years or more the most extraordinary
propositions have been “put up” to men, accepted by them
to the extent of thousands and hundreds of thousands of
dollars, and carried through as highly legitimate businesses
Or to spectacular failures. To the uninitiated the scale of
Some of these operations has been so vast, the daring dis-
played so consummate, the accomplishment so prodigious,
that they have called the promoters wizards. -
The most extraordinary of these have been operations
with railroads, but syndicates whose head has sometimes
never appeared back of the individual agent, presumably re-
sponsible for everything that happens, have manipulated .
properties, developed industries, and controlled products
like veritable Goliaths of their kind. Commercial organ-
izations were ready until panic times to back almost any
man of proved ability in his enterprises. It has been de-
termined over a lunch table to launch an enterprise, incor-
porate it, secure stockholders and set up an institution
whose business would stretch around the world. Mr. Hill
“tied the tropics to the Arctic Circle,” and then Mr. Harri-
man ‘‘darted from obscurity into the broad glare of national
finance,” and did even more wonderful things.
When such things can be done by some men, other men
have bounded their enterprises Only by their imaginations.
Such an enterprise as the creation of Gary, Indiana, and
the great steel plant there, is enough to fire the imagination
of promoters everywhere. But Gary was not by any means
the first to grow so rapidly, though as an industrial situa-
tion it probably had a stronger backing and a more sys-
tematic development than any that has ever been pro-
jected.
78 - JOHN FARSON
Western towns have come into being through the dis-
covery of great mineral wealth and the enterprising have
taken advantage of the situation and built houses, office
buildings, theaters—all as enterprises. Will Irwin thus
describes one of these:
“Leadville had grown like an exhalation; anywhere and
at any time the sudden upspringing of a city of forty thou-
sand people, with all residences, business houses, amuse-
ment places and great and expensive tools of industry, is a
miracle of building. Here, now, within eighteen months,
appeared such a city, a hundred miles from a railway and to
be reached only by mountain wagon-roads which skirted
precipices and dipped over dangerous passes—roads that
were ice-paths for six months of the year and mud sloughs
for two.”
Whenever some great new industry or town springs into
life there are always those clever enough outside of the
promoters to see some advantage for themselves. It may
be nothing else than raising vegetables for the inhabitants,
but it not infrequently happens that something of this sort
proves a veritable mine of gold to the one who thinks of it
first, and carries out his idea with financial help from others,
or alone.
It is from phenomenal business growths or successes
that promoters get their imaginations fired. Then they
see with a wonderfully clear vision some future perfected
growth for which as yet no stone has been turned, no actual
labor expended, and no money secured. With such surety
of sight and thought it is not wonderful that they are able
to convince investors that the opportunity before them will
never be equalled. .
Presentations of enterprises by such men are hysterical
but they win. How to present an enterprise is one of the
greatest and most important of questions, with the average
owner, and often it is something that he is little capable of
doing. -
FINANCING A BUSINESS 79
Plain, honest, straightforward propositions ought to be
the Ones to win, but strangely enough they do not do so
generally, because capital is fearful and even stolid. It
needs to be warmed up, to be energized before it will lend it-
self to action. The merits of an enterprise must be “talked
up”—its strength magnified and its weaknesses minimized.
All its possibilities must be dwelt upon, even glorified. A
man is sooner convinced by the presentation of an accumu-
lation of evidence than he is by a brief Summary of all evi-
dence, no matter how sufficient it is.
On the other hand, the owner or promoter must not be
too much carried away by his enthusiasm. He must seem to
have considered everything with judicial calmness, even
while he is warmly advocating his cause. If it is his inten-
tion to deceive he is really outside the bounds of considera-
tion as a business factor. No man is on safe ground who
makes dishonest statements, even though he have the in-
tention of practicing but a momentary deceit on the prin-
ciple that the means justifies the end. He is then just
about as safe as the cashier who borrows from the bank’s
funds intending to replace his borrowings at an early date.
And if he preverts or distorts the truth, so as to lead men
to false conclusions, he may very soon find himself walking
on quicksands. If he represents things as accomplished
which have not yet been undertaken, he may not only have
committed a moral offense but have made himself legally li-
able.
The matter of character has enormous weight even in
ordinary business transactions, but in those which are in a
sense simply 'pon honor, character is the very Summum
bonurm—the very highest good. One deviation from honor-
able methods may be a boomerang coming back to the one
who set it in motion, not once but a score of times. A man
who has been known to have been tricky and concerned in
shady dealings will make small progress promoting even a
80 JOHN FARSON
legitimate enterprise if he works among honest and expe-
rienced men.
It may, be legitimate, as a preliminary, to put things a
little stronger than the law would allow, but when it comes
to the actual settling of the matter then nothing but cold,
hard, clear and complete statements are in good order. No
openings should be left for future misunderstandings. “The
height of artistic presentation is to take the facts just as
they are, and, without Suppression, material evasion or sub-
terfuge of any kind, state them so clearly and strongly and
in such connection with the possibilities and beliefs of the
promoter—stated as possibilities and beliefs—as to carry
conviction to the investing mind not only that the enterprise
is a good one but that it is in capable hands as well.”
Money is to be obtained. Men do not give up their mon-
ey without reason. If they have business ability they can
be interested by statements that show common sense and
business judgment. But they are not usually above secur-
ing a bargain. If a proposition has this feature in it, that
is, that it is some very good thing to be obtained on excep-
tionally reasonable terms, they are very likely to be the
easier influenced to accept it. -
Sometimes the presentation of an enterprise is very ma-
terially influenced by those who have already furnished
funds for its forwarding. In such cases diverse views may
have to be harmonized, those coming in perhaps shaping
the views of those in. Some concessions have to be made.
How far these will go will depend on the independence of
the owners, both financially and mentally. Too often the
realinventor gets into the hands of the shearers because his
immediate needs are great or because he does not know how
to hold his own. The man of great dominance Or persist-
ence will go alone until he can bring men of capital to rea-
sonable terms, but even so they are usually Warier than he
and have longer arms. -
FINANCING A BUSINESS 81
When an appeal is made to small investors the owner
of an enterprise can usually manage things as he will, with-
out dictation from any one. These people seldom unite to
express their views of how things should be managed, and
they may be easily reached by the attractions of being in a
promising thing from the start, with consequently higher
and more promising percentages of return. But even with
Such investors it is rarely that the financing of an enterprise
is an inflexible proposition. Changes will be made as emer-
gencies arise and adaptations will be made which will at
least be the equivalent of concessions.
Sometimes the owner may be in great doubt as to how
to present his proposition. He may then make a trial propo-
sition, present it to some capitalist who will express him-
Self freely as to its character. In the light of experience
thus gained necessary changes can be made to fit it for a bet-
ter presentation.
There are many things which may affect a proposition
besides the primary facts concerning it. The amount in
Salaries to be paid those who promote it, owners and others,
to be paid in money or stock; royalties, in some cases, are to
be paid and should be secured by adequate provisions and
Specific dates of payment; minority interests must be pro-
tected; the maintenance for a specified management of con-
trol must be arranged for—all such things affect a proposi-
tion and should appear in it. Peculiar conditions are intro-
duced from the properties or the options on properties
which may form the basis of the enterprise. The manipula-
tions of these, or the transactions concerning them, may
be legitimate or the law may easily be broken in an attempt
to secure and conceal certain profits made by the promoters.
The complications that ensue are not generally under-
stood. Thomas Conyngton in his “Corporate Organiza-
tion” says that the promoter is commonly one who finances
and organizes a corporation with the view of realizing spe-
82 JOHN FARSON
cial profits, that he has brought about the organization with
the express purpose of securing these and that there is no
iniquity or injustice in his doing it. “The only question is
as to the propriety and legality of his arrangements for
their collection.” His relation to the organization is one of
trust. He is guiding its affairs and should safeguard its
interests as though they were his own.
But says Mr. Conyngton, “The usual mistake of the pro-
moter is in dealing with the corporation as he would with a
Stranger. Unreasonable or even large profits are difficult
of attainment if the party from whom they are to be drawn
is informed as to the facts, and for this reason the promoter
wishing to sell property to the corporation usually conceals,
Or worse still, misrepresents its real cost. If the property
were actually owned by the promoter and had been so owned
before the organization of the corporation was undertaken,
the status would be different. Then, under proper condi-
tions, there would be no compulsion upon him to reveal the
cost of the profit and he might sell it to the corporation at
any agreed price, and, in the absence of misrepresentation,
without fear of legal consequences.
“Usually, however, the promoter does not own the prop-
erty taken over by the corporation, but either holds it under
option or is acting in the interests of the real owner, who
pays him a percentage of the price secured, or allows him
to offer it to the corporation at an advanced price, protect-
ing the promoter in all excess over the real price to the
owner. When the promoter occupies this position, unless
with the full knowledge of his associates and the corpora-
tion, he is in conflict with the law, for it has been laid down
clearly and unmistakably that a promoter must not make
any Secret profit Out of his corporation, or out of those asso-
ciated with himself in the formation of the corporation.
# * * * Any special profits made by the pro-
moter are illegal unless made with the full knowledge of all
FINANCING A BUSINESS 83
the others interested or with the consent of an independent
and fully informed board of directors, or with the disclos-
ure of conditions to intending stockholders. Suit for re-
dress might be brought at any subsequent time by the cor-
poration, Or, under Such circumstances, by the stockhold-
ers who have immediately contributed to the promoter's
improper profits by the purchase of stock on its first issue,
or of treasury stock thereafter.” -
Morawetz on “Private Corporations” says: “There is
no rule of law prohibiting a person from forming a corpora-
tion for the purpose of selling property to it and making a
profit from the sale. The law merely requires that such a
transaction be entirely open and free from deception upon
the company and upon those who become members.”
There are numerous plans by which the ownership to
property is concealed, some of which are more risky than
others but the promoter who wishes to be free from any
prospect of trouble does not use them. In presenting a
proposition he mentions all of the things that will affect it.
The form for presenting an enterprise is rarely given
proper consideration—the presentation is not well pre-
pared. Sometimes ignorance, sometimes parsimony, some-
times lack of means are the explanations for such over-
sights—serious oversights that cause delay and failure. In-
ventors seldom do the work that is necessary for a success-
ful presentation. They do not realize that patent papers
may be called for, that they must present a crystal clear
statement of what their invention will do and do better
than anything else can. They are sometimes utterly ignor-
ant of its relation to the general state of business, and there-
fore unequal to answering questions along this line. Very
likely there are a dozen things which they ought to have
thought of or studied out or done which they have neglected.
The man who would sell his mine must have something
besides his samples of Ore to show. He must have assays,
84 JOHN FARSON
the report of experts, maps, title papers and other necessary
things before he can interest sound business. He not sel-
dom loses the interest of those who might buy when there is
a delay in securing these things. For him in particular the
financing of his enterprise is a very particular matter. Not
the first people he approaches on the subject, and very like-
ly not the second, will be interested, but whether his search
for investors be long or short, he should have his proposi-
tion perfectly in hand for presentation.
Any business or enterprise must be got into the best
possible condition before any attempt to finance it should be
made. The nearer to a “going concern” it is the better, for
greater interest and favor can be secured, and better terms
for it, than for any sort of enterprise if it approximates or is
in this condition. Conservative investors in particular
favor the thing that is actually established. The enter-
prise which has been brought nearest to its final condition
by those most interested stands the best chance of securing
those who will finance it further. The further forward it
has been carried the better, unless, to a place where funds
are instantly imperative for advancement or to prevent dis-
aster. Under the latter condition, if the thing is worth
while, capital will require too great concessions.
A presentation should be systematic in every way. Ev-
ery item connected with it should be fresh and attractive,
whether it be the inventor’s model or a mill in operation.
This principle has been perfectly understood by the sharp-
er, whether he wished to sell a horse or a steamboat, but
often the honest man is not so painstaking about these mat-
ters. Yet it is seldom quite honest to put a property or fac-
tory or what not into Superlatively fine condition simply
for inspection and probable sale. This is like cleaning up
a slovenly managed place only when visitors are expected.
The honest truth in such matters is best. Reasonable pains
may be taken to have a thing look well, but work that is
FINANCING A BUSINESS 85
done with the intention of deceiving may have anything
but a satisfactory effect. It is easy to underestimate the in-
telligence of others when self-interest prompts, but over-
reaching seldom deceives anyone. Preparations carried to
an extreme may not result in flat failure, but too many
times the final cost is more than it all came to.
Presentation may be public or private but the great ma-
jority of presentations are private. Public presentation is
usually conducted by means of advertising and the sending
Out of printed matter of various sorts. A private presenta-
tion is usually a matter of a personal appeal, reinforced by
various documents, the leading one of which is the pros-
pectus. This is the most important of all papers and its
preparation has become almost a matter of science. The
good prospectus, says an authority on the subject, is per-
haps the most valuable of aids in financing an enterprise,
while a poor prospectus is worse than none at all.
It is impossible to make a strong presentation with a
weak prospectus. “On the other hand, a strong and artistic
prospectus is a better covering than even the mantle of
charity for any minor sin of presentation.” Enterprises
are sometimes financed without this document, a simple
verbal statement with a demonstration of material features
being accepted in its stead. -
A prospectus is sometimes conveniently omitted by
those who do business according to certain shaky financial
methods. Sometimes such people rely upon Superior, One
might almost say, excessive social gifts, which gifts legiti-
mately used are not to be despised by those seeking to
finance an enterprise. By means of these, with considerable
“front,” men of position and means are often the most
easily reached. A good impression, in these days when
psychological impulse often counts for so much, may have
quite an incalculable influence. But schemes artistically
presented, in rich settings, while very often successful in
86 JOHN FARSON
Securing financial backing, are quite as likely to be baseless
even as the fabric of a dream, as are some others. The busi-
ness ability of some promoters is mainly that of putting a
very fine face on a very shaky proposition.
Whatever the manner of presentation the prospectus is
of Service. It may be used to introduce the proposition, to
reinforce verbal statements, to follow up or to do the whole
work. It is almost sure to be required somewhere. Since
its aim is to attract and get money its make-up and appear-
ance deserve careful attention. Very few business men are
able unaided to get up a good prospectus. Professional
writers are usually employed for this work. The highest
skill in preparing these usually pays in the end, though the
price for it may be high. The best professional writers get
good prices for their work.
It is needless to say that the prospectus must be inter-
esting, as well as effective in manner and material. In some
cases it is an advantage to have it printed, but usually this
is not necessary. Professional writers and the printers are
the ones to advise about all matters pertaining to its gen-
eral appearance, the paper used, the print and other mat-
ters connected with this sort of work. And all these mat-
ters vary according to the purpose for which it is used.
The prospectus should take up' every vital point in con-
nection with the enterprise, and should generally furnish
answers to all the questions that an investor would be likely
to ask in reference to its nature. The plan of organization;
the present condition as to property, operation and finance;
as to what is the management, plan of Operation and what
is to be done with the money asked for. There are also
Questions which may be asked as to the general proposi-
tion that should be covered, questions pertaining to prices
of stocks and what sort are offered, besides some general
facts pertaining to the history of the enterprise. All infor-
mation that the investor is legitimately entitled to should
be included in the prospectus.
FINANCING A BUSINESS 87
Mr. J. J. Butler, in “How to Write a Prospectus,” says:
“While I advise telling nothing but the truth, there are al-
ways some things it would be better to leave unsaid.
Scarcely any business could exist if all its weak points and
unfavorable aspects were advertised. The public always
exaggerates the bad and underestimates the good. One
of the very important things about a prospectus is to know
What to leave out. As a well-known advertising man once
Said to me, “The Writer of a prospectus ought to be paid as
much for what he leaves out as for what he puts in.’” -
It is best, then, to tell the truth, but not the whole truth.
One may have his reticences about his enterprise as he has
about his personal affairs, the publication of which would
do no good, and would very likely be very detrimental.
The most difficult feature of a prospectus is its conclu-
Sion. The prospectus is a sales instrument. Its business is
to clinch a sale, so it is necessary not only that its whole
argument be convincing, but that the final words shall
strongly appeal. It is not so difficult to arouse interest, and
even a strong interest, but it requires “a strong, effective
and well closed presentation” to accomplish more than that.
Pictures and diagrams may be of help in a printed pros-
pectus, and if they give real information they are not out of
place, but florid documents are likely to have too many and
those which have no real value.
There are very often good reasons why the financial
proposition should be presented in a separate document.
Circumstances may arise which make it advisable to revise
this. If this information is given out separately there will
be a chance to sell on a different basis, at different times,
and there will also remain open an Opportunity to make spe-
cial plans to meet special needs—sometimes a special of
fering of stock to meet some emergency condition. Some
sacrifice may be necessary for the moment, but if this is
necessary it is better not to have it known. Afterwards
88 JOHN FARSON
because of the help received the owners may be in a position
to advance their selling price by a large per cent.
The sale of stock may be referred to in a general way
in a prospectus, together with a statement concerning the
capitalization of the company, its organization, purposes,
and so forth. The statement may tell that the stock is to
be sold to secure working capital or money for development,
for purchasing purposes or for whatever necessary—the
statement “for the purposes of the company” will furnish
a convenient cover for the work to be done.
The financial statement itself is usually short. It tells
What moneys are needed and for what. It also repeats
whatever of general financial detail has appeared in the
prospectus. - -
Besides these two documents there are also preliminary
statements or forerunners. These are usually brief and de-
signed to attract the attention and arouse the interest of the
busy man so that he may give the prospectus atten-
tion when it appears. This preliminary document is a
digest Or summary, and gives all the principal features of
an enterprise. -
There are other reports according to the nature of the
enterprise, and what features of it need support or substan-
tiation—analyses, assays, reports, certificates, etc. Certi-
fied papers of various sorts are prepared, giving facts about
property, Options, franchises or leases—anything concern-
ing which there might be doubt. In the case of an invention
the original patent papers, with verified copies and state-
ments concerning all that was involved in securing the pat-
ent are among the documents of the enterprise.
The strongest feature of a presentation of a thing that is
already under way is a statement showing what a desirable
condition it is in. This will show its actual commercial
value and what may be expected with an increase of funds
and under good management. The more cumulative such
FENANCING A BUSINESS 89
facts can be made the more influence the presentation will
have, and it should be made in such a careful way as to have
all the influence possible. - *
The public presentation of an enterprise has its special
advantages and these of such a sort as make it the best
suited for speculative enterprises in which the risks are
great and the profits or returns proportionately so. The
sellers can get better terms and have greater freedom in
managing their enterprise than in the case of a private
presentation. There is, however, the disadvantage of a
complex system of bookkeeping connected with this plan.
The stockholders are many and their holdings small. There
is a more or less frequent transfer of stock certificates in-
volving clerical work and care. All notifications of every
sort have also to be sent out in large numbers. The original
work of interesting each subscriber is expensive and very
extensive work has to be done in order to secure the total
amount of capital. Yet all these expenses, including adver-
tising, printing and office cost, are overbalanced by the spe-
cial advantages of this mode of presentation for certain
sorts of enterprises. There are seldom likely to be trou-
blesome investigations because the stockholders are so
scattered and have so comparatively little at stake. *
If a man knows that he is himself absolutely incapable of
promoting his own enterprise, then he must find some one to
do it for him. Mr. Francis Cooper says: “As a rule re-
liable promoters are only to be found by indirect means.
Sometimes, but rarely, they are found by advertising. Such
men do not, as a rule, read the “business opportunities’ col-
umns in which such advertisements would usually appear.
A good card in the financial columns of the better papers
of New York may sometimes be seen by them. Usually
however, they must be found by personal effort. Perhaps
a friend or acquaintance will direct the man with an enter-
prise to the party who can promote it for him, or perhaps
90 JoHN FARson
the owner and the promoter will be brought together in
other business matters, or perhaps the party with the en-
terprise will decide from his general knowledge of it and
of the situation who ought to be able to promote the enter-
prise and get introductions to the selected parties.
“These reliable promoters are not confined to any one
class of business. Bankers occupy an enviable position for
promoting. Some few—as the firm of J. P. Morgan & Co.—
make a specialty of high-class financing. As a rule, how-
ever, bankers will not appear openly in ordinary promotion
work for fear of injuring their standing as safe and ultra-
Conservative business men. Brokers, whether stock, bond
Or investment, also occupy an excellent position for promot-
ing, and not being troubled with the scruples that keep
bankers out of the field, frequently undertake the financing
of enterprises. When they do, they usually make first-class
promoters.
“Here the problem is to find the proper broker. There
are probably more than a thousand brokers in New York
City alone engaged in dealing in securities and investments
of one kind and another. Most of them are responsible and
reliable. Not a few of them are much the reverse. They
are of all shades of business reputation and calling within
the limits of the craft. Some of them will ‘promote” on occa-
sion and some will not. To find, then, the individual or the
concern to which a particular enterprise will appeal, if it
appeals to any, is frequently a matter of great difficulty.
* º: º: * º: 3: * * º: #.
“Doctors also on occasion make good promoters, partic-
ularly for enterprises that come within their province. Min-
isters occasionally do surprising feats of promoting, but
generally and properly will have nothing to do with the
work. The legal profession provides a large number of
first-class promoters. Lawyers are necessarily and inti-
mately acquainted with the affairs of their clients. They
|FINANCING A BUSINESS 91
are usually pretty good business men themselves. They
are usually open to an opportunity to make money, and if a
good enterprise comes their way that appeals to them or
may appeal to any of their clients, they are not likely to
let it pass by. In fact, at times lawyers are instructed by
their clients to watch for suitable enterprises. This is par-
ticularly true in the case of patent lawyers, though no
member of the guild would openly admit the fact. More
incipient enterprises pass through the hands of patent at-
torneys than through the hands of any other class of men,
and, trained as they are to see the good and bad points of
inventions and familiar with the industrial field, they are
in a peculiarly favorable position for promotion. Usually
they are on the watch out for inventions which are particu-
larly desirable. Even when the patent attorney will not
act directly in the matter, he will frequently be able to direct
the owner of a patent to the proper sources to obtain the
money he needs, particularly if his invention is a good One
appealing to special industries.”
Some firms of patent lawyers try to protect their clients
by warning them of the snares “that are more thickly
spread in the path of the inventor that is the case in almost
any other line of financing.” The following is a part of the
printed advice sent out by one of these firms: “Inventors,
as soon as they receive their patents, or a very short time
after, will be beset, importuned and harassed by Offers,
propositions, requests and solicitations of all kinds and de-
scriptions, coming from firms, persons and companies, not
only in this country, but also in foreign countries. * *
* * These propositions will be very attractively and
temptingly prepared, and will vary with the ingenuity of
their authors. Some will pretend to want to purchase in-
ventions outright, others to place them on royalty, and
still others to sell on commission, enclosing contracts drawn
up in animpressive way. All of these propositions, although
92 - JOHN FARSON
apparently different, will have one point in common: they
require the payment of a cash fee in advance. One will
Say that it is necessary to have money to advertise the pat-
ent, another the cost of having circulars printed, and an-
other the cost of securing copies of the patent for distribu-
tion, and so on. There is no end to these pretexts.
“We are often asked by inventors if these parties who
so plausibly claim to be able to sell patents are reliable,
and whether they ever affect sales. We regret to be obliged
to Say that, in many instances, they are unreliable, and we
are unable to learn of their making any sales. Our advice
is to ignore these offers entirely, as agents of this class have
no facilities for selling patents, and aim only to collect
money for which they can give no return.”
The promoter is one of the most picturesque of modern
figures. He is in some cases a woman. One or two women
have done some rather startling work in this business of
promoting on a large scale. This large scale promoting or
financing has not only furnished some of the most extra-
Ordinary of news stories but it has furnished plots for doz-
ens and dozens of very clever stories. The modern soldier
of fortune is usually concerned with some financing venture.
A recent magazine story shows that these gentlemen go
far and wide and are not at all uniformly successful in their
schemes. In this case the man, then quite down on his luck,
seems to have had a good idea but did not have it well
worked up. - * -
He is in San Francisco and this is what he says about his
failure as a promoter: -
“I’d been down in Callao with the idea of building a trol-
ley line from there up to Lima. That’s all I had, the idea.
Such being the case, the Callaoans wouldn’t give me carte
blanche and 51 per cent of the stock to go ahead and build
the projected—by me projected—trolley line from Callao to
Lima, so I came away from there back to San Francisco.
FINANCING A BUSINESS 93
The trolley line between Callao and Lima is now in profit-
able Operation, and has been for a long time; but I didn’t
build it.” -
Mr. William Allen Wood, of the Indianapolis bar, and
author, says: “A promoter, in business practice, is one
who seeks fields for investment in new enterprises or in the
extension or diversification of established industries, and,
for a consideration, forms and organizes a corporation to
develop the particular field he has chosen. The promoter
commonly attends to everything connected with the float-
ing of an enterprise.” -
It is this “consideration” that is so likely to turn the
promoter into an unscrupulous gentleman. He is given the
Credit Oi making over industries that may as well have
been left alone, and of reorganizing railroads for profit only,
Shutting out stockholders sometimes without any scruples
either by paying them some small sum whether they wished
to take it or not or paying them nothing at all. All sorts of
railroads have a great number of people on their lists with
Small holdings and such operations have brought them
great sorrow and hardship.
Mr. Thomas Nelson Page, lawyer and novelist, in his
latest book pictures just such a situation. Greed, un-
scrupulousness and actual criminality are common among
promoters who reap thousands in such cases which legiti-
mately belongs to the poor. But such men are finding it
harder every year to hold the position in business that their
great command of forces once gave them.
The mail-order method is used in selling enterprises as
in selling almost everything else. There are those who
make a business of furnishing lists of names for this sort of
presentation of an enterprise, commonly called the “cir-
cularizing” method. Mr. C. M. Keys in a late number of
the World’s Work says that this is the fertile soil in which
the ignoble plant of promotion has found its greatest
94 JOHN FARSON
growth, and that there are perfect floods of this pseudo-
investment literature. “Any man who has lived in touch
with the business world for a very few years knows
that lists of names are prepared daily for all sorts of
purposes. If a man needs a list of 10,000 men who have
lost an arm, he can get it. In the cities nearly everyone is
“listed” for something or other. Regular lists of promis-
ing investors are daily sold to brokers in New York to pro-
moters and to common stock swindlers without the least
regard to the interests of the people whose names are so re-
tailed.
“The promoter of any company, good, bad or indiffer-
ent, may go to any one of a dozen of concerns in New York
and buy a list of names and addresses of people who might
happen to be interested in his proposition. These lists pass
constantly from hand to hand. If you have ever bough
stock from such sellers you are a marked man. * * *
These firms claim to keep their lists fresh and to abandon
an old one within a few months or a year. A booklet issued
by one of these firms says: “We buy and sell investor's
lists. As we are constantly purchasing fresh lists, and
charge a fair price for those we sell, the names do not get
‘pounded’ too much, although, as a matter of fact, we our-
selves think it a decided advantage to approach a man who
has received financial literature constantly. It educates
him. To such an extent do we believe this that we have
advised brokers to take certain lists and institute a thorough
investment campaign with the people whose names appear
thereon, keeping after them year after year. A man is a
long time sometimes thinking of an investment or specula-
tion, and every letter or booklet received on the subject is a
jog to his memory and an incentive to him to act. We have
seen a heavily “worked’ list produce much better results
than one that was almost fresh.”
The class of stocks that are sold after this method are
FINANÇING A BUSINESS 95
not of the sort that often reach the dividend paying stage.
Mr. Keys says that 90 per cent of the new industrial com-
panies and 99 per cent of the mining prospects never get
this far. Mr. Keys tells of an exceptionally honest pro-
moter who has promoted and sold the stocks of twenty-two
mining corporations, only two of which were of any value
at that time, and yet he claimed that he could find 20,000
men and women within six months who would buy the stock
of a cobalt prospect from him. “By his own record they
would have one chance in eleven to get back a cent of the
money they put in. The usual ratio is about one chance in
two hundred.” -
Enterprises are often presented by means of newspapers
and magazine advertising. The method is expensive and
the enterprise is usually of a speculative nature with a high
capitalization and low price for stocks. Honest men may
take this method and have, but it, too, is not in very high
repute, at least at times.
- The intangible something which an enterprise has to sell
has to have some form. This is the stock and is obtained by
means of following out a procedure governed by law. A
charter is secured and the firm, company or Corporation is
formed under it. -
The primitive or natural way of building up a business
was by the personal development method. One man put
what capital or money he had, and his labor, into building
up a business or industry. There was little or no risk in
such a method, but it was slow. If he saw possibilities in
his business greater than he felt he could manage alone, or
take advantage of with his limited capital, he took in a
partner who contributed capital, shared all expenses, and
so forth. Or perhaps he borrowed money.
The one man or partner ownership is still not uncommon
but the typical modern business form, adapted to the larger
operations of modern times is the corporation. This pos-
96 JOHN FARSON
sesses great advantages over the old form. It is business
under an organization—“a mechanism for the conduct of
business”—and, as some one has said, “when properly
used is as superior to the partnership form as is a modern
locomotive to a locomotive of fifty years ago.”
The colossal transactions of today, the tieing up of cap-
ital in extensive equipment and in greatinitial expense with
possibly a long wait before a process was complete, would
be impossible but for this later form. It is very widely
used as a system of business organization and is adapted to
the use of promoters. The best plan for financing an enter-
prise is by the sale of stock in an incorporated concern. The
flexibility of the corporate form is one of its great ad-
vantages. Almost any sort of a business arrangement can
be made under it. Almost anything of value can be handed
over to the corporation and shares of stock received in re-
turn—an invention, properties, and other stocks or money.
The old partnership was easily formed, easily dissolved,
“informal, uncertain in action, and entirely unsafe.” A
clever partner could manage things as he chose and not in-
frequently gained the position where he could sever the re-
lation to his great advantage. Today, though a man gets
another to help him push his enterprise, the first thing the
two do is to apply for a charter of incorporation and take in
a third person, it may be the wife of one of them, in order to
comply with the law that there must be at least three di-
rectors and not more than thirteen. This corporation with
a merely nominal capital may then develop an industry or
set up in working Order an invention. Then if they need
more money to push the work they will seek it through in-
creasing the capital stock and selling shares in the corpora-
tion.
The corporation is an artificial individual for carrying
on business, and as an individual is subject to all the laws
of the land and some beside—there are special laws made
FINANCING A BUSINESS 97
for its regulation. It can obtain credit, make contracts, sue
or be sued, but it must conform strictly to the provisions of
its charter. Each State enacts laws to regulate corpora-
tions, and the members of a corporation—the stockholders
—make by-laws to govern it. The government or manage-
ment is vested in a board of directors who choose the actual
Working officers. The board of directors are elected by the
stockholders, and they are controlled by the provisions of
the charter and the by-laws. They act in duly assembled
meetings and their resolutions or decisions are handed
down as instructions to be carried out by the officers elected
by them. -
The corporation is entirely distinct from the individuals
composing it. They cannot be involved in anything that
may happen to it beyond the loss of their investment, and
they may retire or die or transfer their stock and the cor-
poration goes on. These stockholders have their vote or
votes and they have their profits from the corporate busi-
ness in the shape of dividends in proportion to their hold-
ings. The directors decide what the dividends shall be,
and, unless otherwise provided, all the stock is on an equal-
ity, or is common stock, and shares alike in the profits. Each
share of stock carries one vote in the meeting of the stock-
holders and shares in the profits on the same basis as every
other share.
It is possible under such provision as is prescribed by
the State to create stock preferences. In this way certain
stock is given some advantage over other stock, and is
called preferred while the other is common stock. This
stock usually has the right of being paid dividends at a fixed
per cent before anything is paid to the common stock; and
provisions are usually made that upon the dissolution of a
company the preferred stock shall be paid up in full before
the common stock receives anything. After dividends have
been paid to the holders of preferred stock then the common
stoek takes the next dividends up to the same per cent.
98 - JOHN FARSON
Unless it is otherwise provided any further dividends for
the year are shared equally. In some cases, however, the
preferred stock gets only its stipulated per cent, no matter
how much more profits there may be to be divided. But,
unless in whole or in part denied, preferred stock has in
addition to its special rights every right that common stock
has. It is not infrequently, however, limited to its preferred
dividend, and debarred from voting. w
If the preferred stock is non-cumulative it may lose
its share of the profits of a year if these profits do not justify
paying it the dividend agreed upon. But when they are
cumulative, though the divident may not be paid in One
year, when sufficient profits do exist they must receive not
only the preferred dividend for the year, but all arrear-
ages as well, before the common stock is paid anything.
The charter fixes arbitrarily the amount of capital stock,
which the incorporators have previously decided upon. It
also fixes the name of the corporation, its purposes and lo-
cation and its duration, but more than one kind of business
can be carried on under a single charter.
It is very necessary in financing an enterprise to know
just what the capitalization should be, so that enough mon-
ey may be secured by sale of stock to give the corporation
financial stability. The capital stock of a corporation, or
the amount of stock which it is authorized to issue, for a
conservative company at the time of organization will rep-
resent precisely the amount of property put into the com-
pany. The capitalization of a speculative company is usual-
ly fixed far in excess of the present value of the property
owned. In the first place the capital stock must remain the
same, unless the charter is amended, though the value of the
property will vary according to the prosperous or unpros-
perous state of the business. In the other case if the enter-
prise is very successful the assets of the company may at-
tain or go far beyond the original capitalization.
FINANCING A BUSINESS 99
The equal parts or shares into which the capital stock is
divided may have any desired face or par value, though
$100 is the value commonly placed upon them. Corpora-
tions for financing highly speculative enterprises fix the par
value of a share at almost any low figure—ten dollars, one
dollar, or even under this amount, in order to promote
Sales. Those to whom shares are issued must, according to
the law of most States, give in return either money or prop-
erty or something else of value to the company. If a hun-
dred-dollar share is given and but fifty dollars received the
purchaser may be compelled by a creditor of the company
to pay the other fifty dollars at the demand of the corpora-
tion, regardless of any previous agreement between him and
the corporation. Any man who does not pay par value for
issued stock is liable at any time for the difference between
what he does pay and the par value. -
Stock issued in exchange for an invention, a business or
other property, if these are at all adequate, is made full-paid
and non-assessable. Any future holder of such is not held
responsible for any further contribution. Such stock is
issued when a corporation takes over an enterprise in ex-
change for the property which forms the basis of the enter-
prise. This stock is full-paid and can be turned back into
the treasury for the purposes of the company. What is not
so turned back is divided in accordance with the equities
of the case. -
Mr. A. L. Ringo in his book on the “Management of
Corporations” says in the section on “Changing a Private
Business to a Corporation:” “Many of our manufactur-
ing and business corporations are Organized for the purpose
of succeeding to a business which has heretofore been car-
ried on by individuals. In such cases most if not all the
stock is issued in exchange for the property and good will of
the business. It is therefore important that those interested
in such corporations should clearly understand the legal
100 JOHN FARSON
rules governing the issue of corporate stock in exchange for
property.
“The early decisions uniformly held that the contract
of a subscriber to stock could only be fulfilled by payment
in money. In later cases this doctrine has been relaxed,
and stock issued and paid up in work and labor, or in the
purchase of property which the corporation is authorized to
hold has been held to have been legally issued. Statutes
have also been passed, in some States, authorizing corpora-
tions to purchase property needed for their business, and
to issue stock in payment for it, or to accept such property
in payment for subscriptions to the capital stock. In such
cases, however, transactions under such powers have been
upheld only where the contract for the rendition of services
or the purchase of property payable in stock has been made
in good faith, and the property taken in payment of stock
has been put in at a bona fide valuation, and the courts have
inflexibly enforced the rule that payment of stock subscrip-
tions will be held good as against creditors only where pay-
ment has been made in money or in what may fairly be con-
sidered the money’s worth.”
Corporations release or give back a portion of the issued
stock that it may be sold again to secure money for oper-
ating or other purposes. In such cases the stock is full-paid,
and the corporation may sell it for what it can get for it
while the purchasers will have no further obligations, after
they have paid the sum agreed, although they may have
bought it at a quarter of its face value. Such stock is called
“treasury stock.” It can come into the treasury by gift,
purchase or other ways.
These other ways, some of them, have not been able to
pass before the law. Mr. Ringo on this subject of treasury
stock says: “Many corporations under various State laws
have been organized with a certain amount of treasury
stock (so called) in the treasury of the company, which is
FINANCING A BUSINESS 101
being sold or given away on the supposition that the pur-
chasing parties are buying valuable property upon which
no further responsibility will ever attach. That this is a
mistake the Supreme Court of the State of Illinois, in the
Case of Alling vs. Ward, decided May 14, 1890. This was
a proceeding on behalf of the creditors of an insolvent cor-
poration, called the Papillon Manufacturing Company,
against the Stockholders to subject their unpaid subscrip-
tions for stocks to the payments of the debts of the com-
pany and to wind up its affairs. Under the laws of Illinois
the assignor of the stock is liable for all indebtedness jointly
With the assignee until the stock shall have been fully paid.
It appeared in the case that before the issue of stock part of
the capital stock was transferred upon the books of the com-
pany to the corporation itself, under the apparent belief that
the corporation thereby became the legal holder and the
owner thereof, and that it could thereafter be put upon the
market at less than par value as treasury stock. On this
theory the corporation sold a great portion of its stock to
subscribers at prices ranging from 5 to 20 per cent of its
par value, and this was done according to the resolution
of a board of directors. It also appeared that the stock was
labeled on its face as “paid-up stock.” However the com-
pany might have been estopped in view of this fact it is
different with its creditors. Each of the parties in securing
stock from the corporation knew that the corporation was
not receiving par value therefor. The purchase of the stock
at less than its face value reduced the capital stock of the
company to one-fifth of its authorized capital, upon the
faith of which the public was authorized to deal with it. The
court declared it to be a device to evade the law and to de-
feat its useful and wholesome provisions. The courts have
over and over again declared that the capital stock of a cor-
portation is a trust fund which the directors cannot give
away or misappropriate to the prejudice of those who may
102 JOHN FARSON
deal with the corporation, and that any device by which
members of a corporation seek to avoid the liability imposed
upon them by law is void as to creditors, whether binding
or not as between themselves or between them and the
Corporation. Nor is it in the power of the shareholders by
private agreement with the corporation to make the shares
Of the stock non-assessable so as to excuse payment of Such
stock at its par value when creditors are interested. The
liability of the stockholders is for his unpaid stock, and to
the extent of the debts and obligations of the corporation.
When the liability is once discharged by payment to the
corporation a subsequent assignee or purchaser will take
the stock relieved from the burden imposed by the law.”
The certificate which a subscriber receives as evidence of
ownership when he subscribes for stock he may assign to
Some one else who will purchase it from him. Upon appli-
cation to the company this purchaser may have a new cer-
tificate issued in his name.
A corporation may ordinarily borrow money on a note
as an individual would, but when a large amount is required
a corporate loan is effected by an issue of bonds, a series of
corporate notes secured by mortgage on some or all of the
property according to the terms arranged. These bonds,
like others, have coupons which are detached and presented
at a bank or trust company when the interest is due.
Corporations are needful agencies in cheapening and
enlarging production. Efficient production in highly spe-
cialized ways can hardly go on under any other form.
The one serious disadvantage of the corporate form is that
the smaller holdings may not receive all that is due them.
This is because the majority interest may so control things
that the small holders will receive no profits and will have
difficulty in exercising their rights. The legal regulations,
however, are sufficient to enable them to make an investiga-
tion of any abuses in control. If provision has been made
FINANCING A BUSINESS 108
for their representatoin on the board of directors they may
be able to reasonably assure themselves that the company’s
affairs will be managed in a capable and fair way.
The corporate form has been the subject of many at-
tacks but now the tide has turned. Its policy of large vol-
ume and Small profits is regarded as the chief asset of the
thrift and prosperity of the people. Under no other form
of doing business are small profits profitable. All the argu-
Iments against them are being successfully confuted. Even
the claim that they are wiping out the individual has been
disproved, for instead of crippling him they are encouraging
him to great achievements by “offering the mightiest op-
portunities since the world began.”
Chancellor Day, of Syracuse University, in his book,
“The Raid on Prosperity,” most vigorously defends the
corporation, as representative of the genius and power that
is the peculiar property of the times, of a time vital with
activity and of an unquenchable spirit. He believes that we
have not kept pace intellectually with these business forces.
He says: “It is the corporation business that has devel-
oped the resources of our country and for which further de-
velopment waits. It is the corporation that is manufactur-
ing the mighty machinery and applying the power that is
giving this age its tremendous commercial proportions.”
Blsewhere he says: “How could we have brought the
iron from the mountains of Pennsylvania, wrought into the
steel of a thousand utilities, or the oil from our valleys, or
harvested the wheat and corn from Western prairies, or put
a tracery of railways across the continent in every direc-
tion, or launched upon the Seas steamships, One of which
costs millions of dollars, if men of mighty executive ability
had not combined their genius and their fortunes in
tremendous co-operative endeavor. * * * * It is
the corporation that has assembled the material, furnished
the capital in great banks, financial trusts, and projected
104 JOHN FARSON
enterprises that make the thrift of the country and give em-
ployment which individuals or small companies could not
have done.” -
In his chapter on “New Proportions” he says: “Busi-
ness used to do its work by longhand. It now does it by
shorthand. A typewriter is indispensable to a business
office. The average price is $100. A trust has made it cost
that. If an individual made it, it would cost $5,000, so it is
said by those who have computed the cost. The transat-
lantic liner is one of the products of modern corporation.
Such massing of wealth, such combined skill, such di-
plomacy of Statesmanship in business are the new propor-
tions of the age.” -
In one of his chapters on the corporation he says: “The
entire movements of the age are toward the corporations.
Three-fourths of the business of our country is done by
them. They are to be seen in the way we hold our churches,
Our universities, and manage our hospitals and other char-
itable institutions conducted by personal beneficence. In
no form can the business of men be cast that is so secure,
that is so little disturbed by death, and that is so safe to
widows and orphans suddenly bereft. The corporation is
the result of man’s highest wisdom in commerce.”
The law requires that every corporation have a specified
capital stock. The incorporators must choose such a cap-
italization as they believe will be requisite to the purposes
of the undertaking and one on which they think they can
pay dividends. In a few States there are laws affecting
the amount of capitalization. There are not, however, many
such—New York and New Jersey have a minimum limit,
the former five hundred dollars and the latter two thousand
—although there are many which have numerous indirect
provisions. In some States a proportion of the capital stock
must be paid in before a charter of incorporation can be se-
cured, or within Some limited time before or after the com-
\ §s
FINANCING A BUSINESS 105
pany begins business. The tendency of this is to limit cap-
italization. In the District of Columbia the charter may not
even be filed until the whole capital stock is subscribed for
in good faith and 10 per cent of the amount paid in. This
is a recent law to prevent such wild excesses in capitaliza-
tion as formerly prevailed there. This law provides for
conservative procedure in the future. The law never hin-
ders capitalization below the real value of an undertaking.
Another law which tends to limit capitalization is that
by which a tax or fee must be paid in proportion to this
amount, and which levies an annual franchise tax there-
after. Excessive capitalization is also put under restraint
when the law insists that full payment, dollar for dollar,
shall be made for all issued stock. These laws may or may
not be enforced and in practice are not very serious ob-
stacles. If they are enforced in one State and the corpora-
tion fees and franchise taxes are excessive they are avoided
by the owners or promoters of an enterprise by incorporat-
ing in some other State.
There are two distinct and important things which cap-
italization does: It furnishes an easy means of dividing
up or “apportioning” the interests of an incorporated en-
terprise and it measures its value. But the latter function
may be subordinated to some other interest as when an en-
terprise is capitalized below its real value. Even in this
case, however, capitalization furnishes a convenient means
of apportioning interests, and this is a very important func-
tion. It saves a very complicated and troublesome kind of
bookkeeping which prevails when the fractional basis is
used for dividing interests, and it is often fixed solely for
the purpose of apportioning interests without regard to
values. When conditions change it may change so as to be
a measure of value as well. In some cases capitalization
cannot be based upon value, because the value of an enter-
prise cannot be ascertained. An invention, the worth or
106 JOHN FARSON
Worthlessness of which a man’s friends may unite with cap-
ital to help him prove, may have no value at all, or it may
prove so successful as to be worth hundreds of thousands.
In cases like this capitalization may be fixed at any fig-
ure, the lower the better usually, so as to avoid the expenses
and fees of incorporation, taxation, etc. It is understood
that the arrangement is a temporary one. The capitaliza-
tion after the value of the invention has been proved must
be increased, the corporation reorganized with a capitaliza-
tion on a liberal basis. The amount now becomes of great
importance and the idea of value comes in.
The relation of the new corporation to the old can per-
haps be seen in Mr. Ringo's description of a fraudulent re-
Organization. He says: “When a corporation whose busi-
ness is not prosperous, and whose creditors are pressing, is
controlled by men who are not burdened either with honesty
Or legal knowledge, they are apt in many cases to attempt to
get the better of their creditors by organizing a new cor-
poration and conveying all the property of the old corpora-
tion to the new one in the belief that judgments against the
old corporation cannot be enforced against the new one.
This is a very specious plan, and one that seems to have
occurred to many different corporations. But when these
acts are subjected to the scrutiny of a court they have al-
ways proved insufficient. The new corporation inherits the
old corporation’s debts as well as its property, and the debts
and the property will go together.”
Mr. Ringo also gives very specifically what should be
done in changing a partnership to a corporation.
“First.—Select the old firm name if advisable on ac-
count of good will, business prestige, etc., or Select a new
name more adaptable to the business. Secure a charter
from the Secretary of State—with a fixed capital stock.
“Second.—Make an inventory of all partnership prop-
erty, book accounts, receivable real estate, bills receivable,
FINANCING A BUSINESS 107
and cash on hand at a fair cost value. This forms the as-
sets.
“Third.—Make an inventory of all liabilities, bills pay-
able, book accounts payable and mortgages payable at their
actual value. This forms the liabilities.
“Fourth.-From the amount of assets deduct the amount
of the liabilities. This gives the net value or worth of the
partnership. . *
“Fifth.-Formally agree among the members of the
partnership as to the amount or net value of each partner's
share. This shows their individual interests.
“Sixth-Formally transfer to the newly formed cor-
poration all the assets of the old partnership as per inven-
tory.
“Seventh.-Formally transfer to the newly-furnished
corporation all the liabilities of the old partnership as per
inventory. - -
“Eighth.-The new corporation will now issue to the
individual members of the old partnership full paid-up
certificates of stock for their several individual interests
as shown by their formal agreement. -
“Ninth.-Entries are then made on the corporation.”
Mr. Ringo proceeds to show what those entries should be
by giving an illustration of first and second accounts. These
show what is each stockholder's actual holdings in the new
corporation. He then gives three more points:
“Tenth.-Now open on the general books of the new
corporation accounts with each of the several headings mak-
ing up the inventory of the assets.
“Eleventh.-Now also open on the general books of the
new corporation accounts with each of the several headings,
making up the inventory of liabilities. .
“Twelfth-The new corporation now has actual control
and possession of the old partnership business, and all busi-
108 - JOHN FARSON
ness will be conducted in its name, by and through its prop-
er Officers.”
The law insists more or less effectively—usually less—
that capitalization shall have Some relation to value. This
is partly because shares are expressed in terms which give
them a definite value rather than counted as a certain frac-
tional part of an enterprise. If the only claim made for
them was that they represented some definite part of the
whole, some of the troubles about values would not arise.
Capitalization is fixed but the value of an enterprise rises
and falls with success or failure. The difference between
the value of an enterprise and its capitalization is usually
reflected with more or less accuracy by the market quota-
tions on its stock.
Mr. Francis Cooper says that from the standpoint of
value as a basis of capitalization enterprises may be rough-
ly divided into the following four classes:
“(1) Those in which the capitalization is not based
on value and its amount is therefore a matter of but little
importance or of absolute indifference.
“(2) Those in which the capitalization is based upon
the present value of the enterprise. -
“(3) Those in which the capitalization is based upon
future values either probable or possible.
“(4) Those in which the value of the enterprise can
only be determined by development and in which the
amount of capitalization is therefore fixed by more or less
intelligent estimates and guesses.
“This classification can only be a rough grouping and
many enterprises will be found that cannot satisfactorily
be assigned to any One of the given headings, occupying
either Some intermediate position or partaking of the na-
ture of two or more of them.”
- While value is the obvious basis, it may, when certain
conditions prevail, have little weight in deciding those who
FINANCING A BUSINESS 109
select the amount of capitalization. The indeterminate con-
dition of an enterprise, the need of a preliminary Organiza-
tion or a temporary “holding” company to which options,
Contracts and properties may be assigned; the condition of
a close corporation which makes it unnecessary to pay
fees and taxes—these corporations are often the old part-
nerships incorporated, the business being incorporated to
Secure permanence; the importance of keeping dividends
down to a proper figure—here excessive capitalization is
resorted to; and in pure matters of expediency, capitaliza-
tions not based on value are frequent.
The practice of excessive capitalization to hide ex-
cessive dividends has aroused widespread legislation and
attention. It is generally believed that all very prosper-
ous institutions are given to this practice of “watering”
stock. Excessive profits are desired but excessive dividends
are not. Cupidity, as well as antagonism, and unfavor-
able legislation results from these latter, so real values are
abandoned and a capitalization “fixed on a dividend-con-
cealing basis.” -
Mrs. Francis Cooper says: “In the capitalization of
most of these large combinations, such as the United States
Steel Corporation, the problem is complicated by capitaliza-
tion of not only the existing good-will, but to a certain ex-
tent at least of the anticipated good-will. That is the ex-
pectation of increased profits is represented in the capitali-
zation. This practice is justified mainly on the basis of
econorgies and resulting greater profits incident to the com-
bination. If such economies will really be effected and the
resulting profits are eapitalized conservatively, the pro-
ceeding is proper. Frequently, however, as is shown by the
existing conditions of many of the larger capitalizations,
the practice is carried far beyond the bounds of conservat-
ism, and the result is the reckless over-capitalization which
has characterized the last decade.
110 - JOHN FARSON
“At times the capitalization of the large combinations
is carried so far as to partake very largely of the nature
of a steal. If we are to believe the allegations of the re-
ceiver of the collapsed asphalt trust which occupied the
popular attention a few years since, that concern was a
capitalization of this nature. Here the properties com-
bined were secured by the promoters of the enterprise
under option or contract and were in many cases turned
into the trust at two, three and even greater increases over
the prices at which they were secured by the promoters.
The fraud in this case was upon the public, to whom the
highly watered stock and unsecured bonds of the combina-
tion were sold under the general statement and understand-
ing that the enterprise was capitalized on a conservative
and legitimate basis. The disastrous failure that resulted
showed that it was not.”
It is difficult to secure money to finance an enterprise
which is out of the established lines of business. It is easy
to get money on an awarded contract. No definite rules are
laid down as to how to make offers to secure money. An
excellent device may be so abused as to be forever after-
ward discredited. Both the character of the enterprise
and the methods used, and also the character of the times
affect the question of getting money. There are enter-
prises that are so difficult to finance that only the most
undaunted will attempt to push them. Financing an en-
terprise has many possibilities but much depends upon the
hands it fall into. A man without financial influence will
fare hardly in such a work.
THE CORPORATION.
By PETER S. GROSSCUP,
[United States Circuit Judge.]
The constitution of the nation, and the constitution of
the several states, besides being the forms through which
the people of the nation, and the people of the states have
decided to govern themselves, are limitations laid by the
people themselves, upon their own exercise of self-govern-
ing power, beyond which they will not go until after such
deliberate, careful, sober second thought, as is involved
in the formalities of constitutional amendments. Charac-
ter in the individual may be defined to be a fixed conception
of life from which the individual will not depart on mere
impulse or temptation. And what character is to the in-
dividual, the constitution of the nation, and the constitu-
tion of the several states are to the people of the nation and
the people of the states. It is no light thing, therefore, to
dispose of a question of constitutional power when such
question is fairly raised. Questions of constitutional power
can not be disposed of by the mere assertion of a wish; and
in that spirit I intend to present to you, in its constitu-
tional setting, what I regard as our most pressing public
question; laying much more emphasis, however, upon the
economic and human side of the question, than upon its
mere constitutional side.
We are now well into the twenty-first year since the
passage of the Sherman Anti-Trust Act. Thus, so far as
enactments make law, there has been a prohibitory law
against the so-called trusts or big corporations for over
five times the length of time it took to fight out the Civil
War; and so far as a sincere and vigorous purpose to en-
force law results in actual enforcement, the battle line
111
1.1% PETER. S. GROSSCUP
against the so-called trusts or big corporations has been
in action for nearly twice as long as it took to fight out the
Civil War.
In its means of enforcement, as well as in its purpose,
the Sherman Act was as comprehensive as language could
make it. It withheld no power, civil or criminal, that the
law-makers thought would contribute to the complete eradi-
cation of the supposed evil. It has been preceded in Texas,
Iºansas, Michigan and Maine by state laws directed to the
same end, and was quickly followed by like laws in one-half
of the other states, including New York, Ohio, Indiana, Illi-
nois, Wisconsin, Iowa and the West generally.
IHave the so-called trusts or big corporations been exter-
minated? Have they been even diminished? Has the
Sherman Act brought about any decrease in the cost of liv-
ing, or any increase in wages? Has the process of combin-
ing ceased? Has any specific, practical purpose of the
Sherman Act, not present in the law as it has existed
for centuries, been fulfilled?. On the contrary, were I to
call the roll of the so-called trusts or big corporations, or-
ganized since the Sherman law went into effect, I would be
naming the largest ones in America today; an inspection
made for me of a list of one hundred and twelve of the
leading so-called trusts or big corporations showing that
all but thirteen have been Organized since the passage of
that act. And if it be said that this is because the Sherman
Act, until the past nine years, was treated as a dead
statute, I ask, how many of the so-called trusts or big cor-
porations have been exterminated, or even diminished—
what increase has there been in wages, or decrease in the
cost of living—by what is admitted on all hands to have
been a sincere and vigorous attempt to enforce the law dur-
ing the administration of Ex-President Roosevelt? Injunc-
tions have been issued against the several packing houses
that make up the meat industry; against certain concerns
THE CORPORATION 113
in the drug business; and against certain other so-called
trusts throughout the country; but in no case have these
So-called trusts or big corporations been exterminated; in
no case have wages or prices been effected; in no case, ex-
cept in minor detail, has anything been done that could not
have been done as effectually under the common law that
Was in existence before the Sherman Act went into effect—
that could not be done against individuals as well as against
Corporations; and though, in this respect, perhaps, the case
of the Northern Securities Company is an exception, even
in that case the several railroads that made up the Securi-
ties Company are managed now almost precisely as they
were before the order of the dissolution was entered.
If, then, the enactment of the Sherman Anti-Trust Act
was intended to exterminate the so-called trusts or big cor-
porations, or to affect wages or prices, manifestly the Sher-
man Act has failed. The organization of industry into
corporate form does not cease. Neither wages nor prices
arbitrarily change. That much at least has been proven.
And the reason that the organization of industry in corpo-
rate form is not ceasing, is because, as an effective, indus-
trial agency to wield the energies of mankind, the corporate
form, beyond any other form, is the most effective yet dis-
covered. What government is to mankind politically or-
ganized, the corporation is to modern industry organized.
It is on that account that the corporation is here at all; and
it is on that account that it is here to stay. And not until
men, in their general relations to each other, can safely dis-
pense with government, will come a time when men, in their
industrial relations, can safely dispense with industrial
Organization.
But though what I am saying means, perhaps, that the
aim of the American public thus far, in its treatment of in-
corporated industry, is not directed toward the right mark,
it does not mean, that in the great new industrial life that
114 PETER. S. GROSSCUP
this generation of men is living, so largely an incorporated
life, there is nothing that is wrong. Somewhere in that life,
Something is wrong; for while in the midst of material pros-
perity, the country was without contentment; and there
must be something wrong in a prosperity that does not
bring contentment—something, that in the nature of things,
in some way pinches and wounds some deep-seated human
instincts. x-
What, then, is the wrong that lies at the bottom of the
popular disquiet, and what is the work yet to be done? I
can best answer that question perhaps, in the statement of
three facts. The first of these is, that not only is the cor-
poration to modern industry organized, what government is
to mankind politically organized, but, that as it is through
effective free government alone that political power is dif-
fused among the people, it is through the corporation alone
that the ownership of the industries of the country can ever
be widely diffused among the people; for outside the field
of agricultural properties, property is not now held, each
individual piece by some individual man; between the man
who seeks to own, and the thing to be owned, there is,
throughout the industrial field, the state created interme-
diary called the corporation.
The second fact is, that though the industrial property
of the country is not widely diffused among the people, the
people have the financial means to bring about such diffu-
sion—that it is on their individual wealth, poured through
the financial stream into Wall Street, that all the great
corporations now chiefly rest. -
In the annual report of the Comptroller of the Currency
it is stated that there are in operation in the United States
twenty-one thousand three hundred and ninety-six banks
and banking institutions, with total deposits of over twelve
billion six hundred million dollars. This does not include
redeposits by one banking institution in another; nor does
THE CORPORATION 115
it include the large sums held by life insurance companies,
in trust for their policy-holders; nor is it the sum total, as
Some conclude, of the many deposits of a given period, thus
duplicating themselves many times, in any active times; but
is the sum the banks and banking institutions owe at the
close of business of some designated day, on account of the
deposits. What this huge total of nearly thirteen billion
dollars does represent, is the individual wealth of the
American public, that uninvested in the property of the
Country by the depositors directly, is put in the financial
institutions of the country, from which it is, of course, even-
tually taken out for investment, chiefly by those who bor-
row it for that purpose. -
To some extent these deposits represent what we call
the working capital of the country—the particular amounts
that the merchant, the manufacturer, the railway company,
and other individual depositors always keep on hand in
bank, to meet their current needs; and to some extent these
deposits are kept in the bank vaults as reserve. But com-
pared with the whole, neither this reserve nor this working
capital is considerable. Inquiry of one of the greatest of the
railroads, whose securities at present market values are
between three and four hundred million dollars, disclosed
that that road carries an average bank account of about one
million, or less than one dollar for every three hundred of
its market value. Inquiry of a leading merchant shows
that his average bank balance is proportionately larger than
this, but considerably less than one dollar in One hundred
of the value of his establishment. Assuming that the en-
terprises of the country that require distinctive working
capital are of the value of fifty billion dollars—nearly one-
half of the country’s entire wealth—the bank deposits rep-
resenting such working capital must exceed one billion of
the nearly thirteen billion dollars that constitute the total
of the deposits—an estimate unaffected, too, by the fact
116 PETER. S. GROSSCUP
whether such working capital is first borrowed from the
bank and then redeposited, as is often the case, or is in the
first instance deposited out of the depositor’s own ready
means. The truth is, that the great bulk of the thirteen
billion dollars—a deposit without example anywhere else
in the World, and without example in any previous period
of the World; a deposit that has grown more than 500 per
cent since 1880—is either utilized by the banks themselves,
in their business of buying bonds in large quantities and
selling them out at retail, or is loaned by the banks to those
who are doing the actual business of the country, and carry-
ing the corporate securities of the country. Or, stated in
another way, the American people have today in bank, a
Sum of money unemployed for investment directly by them-
Selves, but employed by a comparatively small borrowing
Class, that nearly equals, at their present market prices, the
value of all the railroads of the country put together, stocks,
bonds, and all; and that increased by what the people of the
country individually hold, in the way of bonds, stocks and
other corporate securities, constitutes almost the entire
wealth of which the corporate business of the country act-
ually rests. So must, then, for this great fact—the fact (to
state it in still another way) that were all the banks and
saving societies to liquidate at once, paying back to the de-
positors at their present market prices, the corporate se-
curities into which, through the small borrowing class, a
great part of these deposits have gone, there would imme-
diately turn up throughout every quarter of the country,
and in direct possession and ownership of those of our peo-
ple who have saved anything at all, in addition to the
corporate bonds and stocks already held by them, so large
a part of the remaining corporate securities, that it could
be truthfully said that the owners of the property of Amer-
ica were the people of America—the property that is in-
corporated as well as the property that is unincorporated.
THE CORPORATION 117
The third fact is, that the people's lack of ownership in
the incorporated property of the country is not because the
men and women who have saved something have no wish
to set these savings at work for something more; nor that
the workmen and employee have no wish to have some pro-
prietary part in the enterprise to which they are attached,
but chiefly because, as the corporation is now organized
and managed, there is no reasonable, secure way to set such
savings at work, or to acquire such part. Toward the gen-
eral diffusion among the people, of incorporated property,
both the national government and the states, thus far,
have been entirely indifferent. They have acted as if,
having invited settlers into some fertile, new region, the
hand of the states and nation were at once withdrawn—
leaving the land without law. It is indeed, a thousand times
worse than that; for such a region would be small and re-
mote, while the region covered by the corporations of the
country is bounded only by the nation’s boundaries, and
lies close at every man’s door. At every turn of the year,
we see some part of this region of incorporated property
ravaged; but we stand still, never thinking perhaps that it
is on account of just such ravages, and of the indifference
of our national and state government, that the country’s
richest property field is effectively withdrawn from popular
occupation—that the whole institution of private property
is suffering shocks that may eventually wreck it.
There is still another fact that must not be overlooked,
and that is that competition will never be effectually re-
stored until the capital of the country, springing as it does
from every quarter of the country, and from the energy
and frugality of all her people, is at the call, not of those
who would suppress competition, but of those who would
encourage it; and that this will never be the case until the
corporation, the only medium through which capital can ef-
fectively be wielded, becomes in the eyes of the people a
118 PETER. S. GROSSCUP
trustworthy medium for the wielding of the people's wealth
and energy.
What, then, is the work that confronts us? Should we,
for the sake of election tactics, be content to merely de- .
nounce or hawk at this industrial institution? Should we
follow those so-called leaders who think that what it took
the human race all its lifetime to build up, can be taken
down in a day without a jar? They have had the center of
the stage for a good while back, and nothing practical has
yet been accomplished. -
Should we, on the other hand, go over to those who
would leave the whole problem to time to work out—who
would do nothing for fear that conditions might be dis-
turbed? It is out of the do-nothing policy—this unre-
stricted license that has prevailed—that the problem has
risen. But for that license the corporation scandals that
confront us would not have been; had the corporations been
known trustworthy institutions, the wealth of the country,
instead of being poured into Wall Street—“the great reser-
voirs,” as Mr. Schiff puts it, speaking of the rich men of
New York, “into which the little mountain streams pour”—
would have been expended elsewhere in the development of
the country’s industries—each community depending much
more largely upon itself for the means of working out its
own development.
The real cause that lies at the bottom of this industrial
disturbance, is the same cause that has laid throughout all
our years of prosperity at the bottom of the people’s unrest
in the midst of prosperity—the tremendous shift that has
taken place in this country, away from individual participa-
tion by the people of the country in direct ownership of the
industries of the country; the fact, that though our great
industrial structures, railroads, manufacturing concerns,
commercial enterprises, are built in large part upon the
wealth of the ninety and nine deposited in the banks, their
N
THE CORPORATION 119
immediate financial foundations are the capacity to borrow
of the One, who borrows these deposits from the banks.
And the real cause of this shift away from direct individual
investment—this shift of our industrial structure from the
solid basis of a stable, paid-in invested capital, to the sands
of capital fluctuating with the money market, is the inher-
end ineffectiveness of the present day corporation as a
medium of ownership—the corporate untrustworthiness
that prevents the people in the ordinary walks of life from
making any direct individual investment in corporate en-
terprise. But for this, much of the thirteen billions now
On deposit, would be in the direct ownership, by the people
at large, of Our great corporate properties. But for this,
the capital that carries our great corporations, would be a
stable capital, unexposed to these waves of uncertainty that
periodically sweep over a people whose possessions are
largely in the keeping of others. But for this, the banker
himself, would be saved the temptations under which some
of them have fallen. But for this, the money centers of
the country—the places where individual accumulations
are transmuted into property investments—would be, not
in Wall Street wholly, but in the neighborhoods largely in
which the accumulations arise.
No. No. The work to be done is not to tear down, nor
yet again to let alone. The work to be done is to reform, if
need be to rebuild this intermediary between the country’s
wealth and the country’s industries—to readjust it to the
American instinct for fair play, and for every man having
a fair part in the affairs of life. In a word, the work to be
done is to bring about such transformation of the ownership
of corporate industry, that the business of the country will
not be carried by the one, on the wealth of the ninety and
nine—that the ninety and nine will be sharers in proprietor-
ship, as well as contributors to the capital on which the
proprietorship actually rests.
120 PETER S. GROSSCUP
The detailed form that the work of corporate recon-
struction should take, would be best performed perhaps, by
a national commission; and Such a commission would have
for precedent the work done by Germany thirty years ago—
a corporate reform that has almost disarmed German social-
ism except as an agitation against the unjust land laws of
that country. At the present time, both in Germany and in
France, every individual who has a little savings to his
credit, goes to a bank in his own town and exchanges it for
a certificate, not of bonds, but of proprietorship in the in-
dustry to which he wishes to attach himself; and in nearly
every case the workmen and employees of the large indus-
trial enterprises of those countries hold, and hold safely,
a very considerable part of the proprietorship of the in-
dustry to which they are attached. But I shall not go into
details now, but will confine myself to those fundamental
principles that in their nature must lie at the foundation
of the new corporate structure.
In this country the corporation is a creature of the ex-
ecutive department of the several states, and issues out of
each department almost as a matter of course. Neither the
object for which the corporation is formed, nor the amount
of its capitalization, nor the character of the securities
issued, commands any preliminary attention other than
such as is merely perfunctory. Put your nickle in the slot
and take out a charter, is the invitation that the states ex-
tend; and in line before the slot machine, entitled to an
equal place in the line, are the corporate projects conceived
to defraud, as well as those that have an honest purpose.
Neither is detained by so much as an inquiry. For indiffer-
ence such as that, I would substitute, at the very threshold
of the corporation’s application for existence, an honest,
careful inquiry by some tribunal of government—a tribu-
nal that will act only after it has heard—a hearing in which
the public is represented by a district attorney on whom
THE CORPORATION 121
is thus devolved the duty, not merely of pursuing the horse
after it is stolen, but of seeing to it that the door is locked
before the horse is stolen. And what honest project, I ask,
can object to such an inquiry?
The corporation as at present organized by the states,
has license to issue all the securities it chooses—securities
Whose place in the corporate geologic stratification no or-
dinary mind can locate; and out of this have come the many
instances of capitalizations that serve no purpose other than
to exploit with one hand the consuming public, while bait-
ing with the other that portion of the public, that with hard
earned Savings, is looking for some opportunity to help it-
self along in the race of life. No honest project needs
license like that. Let the initial securities issued be re-
lated in a fair business way to the actual values put in.
Incorporated enterprise, just as private enterprise,
should be given room to grow. A dollar turned into two,
ten, twenty, if turned honestly, wrongs no one. Go forth,
increase and multiply, is a command without which econo-
mic progress would not be. But in all this there is no need
that the corporation should initially capitalize a projected
success that if it exists at all, exists only in the future. Let
the securities issued on account of expected success be
issued only when success is established; and let them be
fairly related, as the enterprise grows, to the increased
value of the actual earning power developed. And I can
see no reason why in any honest enterprise, the question
whether additional securities shall be issued, should not be
made the subject of judicial inquiry. -
Dut the restriction of capitalization to figures that are
fair, will accomplish little, if the declaring and paying of
unearned dividends be left to those who are in control of
the corporations; for it is not on the par value of securities,
but upon the size and regularity or dividend payments, that
the public makes up its judgment as to values; and it is not
122 PETER. S. GROSSCUP
on mere capitalization that the schemer in corporate securi-
ties counts, but upon his ability to make the public believe
that the capitalization has an earning power. Take the well
known case of some of the Chicago traction companies.
Without dividends, the securities issued would have re-
mained near zero, and that too, irrespective of how small
the issue was; but with high dividends, paid year after year,
until they are no longer questioned, the securities rose in
the stock market to par, to double par, and beyond that,
irrespective of how large the issue was. It was not the
capitalization, but the high dividends regularly paid for
a long period that did the trick; not real dividends in
any honest application of that word to earnings, but
trick dividends—dividends that stripped the enterprise
of its power to keep up with its public duty; that let the
enterprise gradually but surely run down; and that bor-
rowed millions for dividends on the top of the depletion.
Indeed, the whole transaction was a moral crime—a crime
that robbed honest men and women of the accumulations
of a lifetime—a crime that is not fully expiated either by
arraigning before the bar of public opinion the men who got
away with the plunder. I arraign as accessory before the
fact, the people of the great state who, scrupulously honest
in their individual dealings, issued to the projectors of this
crime the ready-made corporate weapon, without which the
crime could not have been committed.
One thing more in the line of structural principles. The
first duty of every enterprise, incorporated or private, is to
secure to the capital invested its eventual safe return, while
paying On it from time to time, after payment of operating
expenses, such fair returns for its use as the nature of the
venture suggests. That is what capital always has the
right to ask. But this having been accomplished, there are
some enterprises now that take labor and management into
partnership in the further disposition of the fruits of suc-
THE CORPORATION 123
cess. That kind of partnership is not compulsory, and is
not usual. I would not make it compulsory; but I would
try to infuse into the corporation of the future an incentive
and a spirit that would make it more usual—that would give
to the workman, the clerk, the employee of every kind, an
opportunity to share individually in the growth of the en-
terprise to which he is attached. This is not a mere philan-
thropic dream. The spirit will come when the employee
feels that what he gets, he gets as a matter of contract, not
as a matter of gift, and is as secure therein as in the cor-
responding interest of the employer; and when the em-
ployer wakes up to the truth that as it is not by bread alone
that men live, it is not for bread alone that men put forth
their best work. And the incentive may be supplied by the
application of those well-known powers of taxation, that in-
stead of being wholly directed toward transfering to the
government a part of the success of the successful, could be
employed to bring about a wider diffusion of the perma-
nent fruits of success among these who by their labor had
contributed to the success. This is not socialism. It may
have the philanthropic spirit of socialism, but in its end and
aim it is the antidote of socialism—in any long look ahead
the only antidote on which individualism can securely rely.
That the nation can constitutionally enter upon a na-
tional policy for corporations engaged chiefly in commerce
between the states, I have no doubt. There is no doubt,
to begin with, that the power of incorporation is in the fed-
eral government. The national charters to national banks
are examples of that power. Likewise the national char-
ters to the transcontinental railways. The question is not
as to the power of the federal government to incorporate,
but the power of the federal government over the subject-
matter with which federal corporations will have to deal;
and in this connection I see no occasion to encumber the
question with discussions of the extension of federal power
124 PETER. S. GROSSCUP
Over local matters, such as schools, and the like. Sugges-
tions to that end are indeed wholly irrelevant and uncalled
for—in some instances the creatures of loose thinking, and
in more instances, artificial bugbears, deliberately set up to
frighten the unthinking. Nor do I see any occasion to look
for the power sought for under the sofas, or in the out of
Way corners of the constitution, such as in the clause to
establish and regulate post roads; for upon the subject of
federal incorporation all the power that is needed, stands
plainly forth in the commerce clause of the constitution.
True it is that until the past few years, the commerce
clause has not been invoked in support of such power. But
that is not because the grant was not there, but because
commerce did not yet need the grant. It is not the com-
merce clause of the constitution that has been growing—it
is commerce that has been growing. Nationally incorporat-
ed railroads, as instruments of interstate transportation,
have repeatedly been recognized by the Supreme Court as
instruments of interstate commerce. And a careful reading
of the beef trust injunction cases will disclose that the Su-
preme Court has already recognized that where in any in-
dustry the raw material chiefly originates in one set of
states, to be manufactured in another, to be transported
and sold in still others, the commerce thus resulting is com-
merce under the commerce clause of the federal constitu-
tion. So much then, for the constitutional side of this sub-
ject. Let me return to its human side. -
Do not misunderstand me—there is no way known be-
fore men or under heaven to legislate men into the posses-
Sion of anything. All we can do by legislation is to open
the door—to hold out the opportunity. But that done hon-
estly, effectively done—Irely on the instincts of the Ameri-
can to do the rest. -
I stood Once on a battleship, marvelling at what the
lightnings did. They lifted and lowered the anchor; they
THE CORPORATION 125
ran messages from the pilot house to the engine room; they
lifted the ammunition from the magazine to the guns; they
loaded the guns; leveled them to the mark aimed at; fired
them; they lighted the ship when in friendly waters, and
darkened her when in the waters of the enemy; they swept
the-Seas with their Marconi equipment for a thousand miles
around in Search of whatever tidings the search of a thou-
Sand miles might bring; and through it all the lightning
remained as free as the lightnings that play in the summer
clouds. The genius of man has not harnessed the light-
nings—they work out his task only because the genius of
rman has given them the material agency, the open door,
through which to work out their own inherent instincts.
What government is to mankind politically organized I
have already said, the corporation, as an intermediary, is
to industry organized. It is the pride of free institutions
that they have diffused among the people the political
power of the mass, But that is not the secret of successful,
free government. The secret of the success of free govern-
ment is, that by opening to the people the door to power,
there has been awakened a universal instinct among men,
and created the capacity successfully to exercise that in-
stinct; so much so that it can be safely said that the success-
ful government of the people, by the people, for the people,
is not the product so much of the institution itself, as of the
opportunity that the institution opens up. And what can
be done with the political instincts of mankind, can be done
with any instinct deeply imbedded in human nature.
It is for the reconstructed corporation then, as an effec-
tive, trustworthy medium through which to work out one of
the deepest and most insistent of human instincts, that I
plead. I hold it up, it is true, as the ultimate fundamental
solution of the merely economical problem of competition.
I hold it up as the final antidote of the kind of industrial
disturbance in which we now are. Political power pyra-
126 PETER. S. GROSSCUP
mided, until a class from among the masses wielded it all,
was never free from deep disturbance; nor will property
holding power pyramided, until a class among the masses
wields it all, ever be free from deep disturbance. But it is
not the economic cause that I plead, nor the industrial cause.
It is the human cause that I chiefly plead.
“The State, it is I,” said Louis XIV of France. “In the
will of the King is merged the will of the people,” repeated
|BOSSuet, Louis’s great preacher. And around this idea was
built up the commercial and industrial policy, as well as the
political power, of Louis’ time. -
“The State, it is the People,” replied John Somers and
his English associates in the English Declaration of Rights,
twenty-two years later. “The State, it is the People,” was
repeated in the constitutions of every English colony
Springing up on this side of the Atlantic. And around this
idea, until within our own times, has been built up the com-
mercial and industrial policy, as well as the political power
of these United States.
But when within our own times there came the new
great era of incorporated industry and commerce—an era
that uncovered to mankind a world as new and as fertile in
opportunity as the new world discovered by Columbus—
there insidiously began to creep back into this new world
some of the old ideas of the times of Louis—an oligarchy in
corporate proprietorship as prejudical to true commerce
and true industry, and as unrepublican, as the political
oligarchies from which the Anglo Saxon long since emanci-
pated himself.
A new Declaration of Rights is due—the firm grasping
by the people of one of those great formative principles of
popular right that mark every great turn in the road to
progress. The day has gone by, I believe, when the instinct
of the nation, to have part and parcel in the great new life
that has come to it, is to be satisfied by bread alone.
THE CORPORATION 127
It is not by bread alone that men live. The day has gone
by, I hope, when the nation will be satisfied with a mere
show of interest in the unsuccessful that is not real, and of
indignation against the successful that is not merited. As
Lincoln once said, all of the people are not to be fooled all
the time. A new Declaration of Rights, I repeat, is due—
the firm grasping by the people, both those who have been
successful and those who have been less successful, of the
great fact, that only through an intelligent reconstruction
of the corporation can we become again, not only a nation
governed by its people, but a nation owned by its people.
And when that day comes, behind organized industry, as
behind organized government, will be the full strength of
every individual; and behind every individual, the full
strength of government and of industry.
INDIVIDUAL RESPONSIBILITY.
BY JOHN H. MOSS,
[President of the Merchants’ and Manufacturers’ Association of Milwaukee.]
“Individual Responsibility” is my theme. Is it large
Or is it Small? Oftentimes our individual lives may seem
as unimportant as a single leaf in the forest, a solitary blade
of grass in the meadow, or a tiny grain of sand upon the sea-
shore, but just as each of these play their important part
in the Ordered harmony of the universe so our separate
careers mean much in their wide-reaching relations to so-
ciety. Nothing good or bad was ever promulgated but the
Original thought from which it developed, germinated in the
mind of some individual. Every influence launched for the
uplift and betterment of prevailing conditions has been
conceived in the mind of some individual. Every move-
ment which has resulted in lowering the standard of life,
and every industrial disturbance carrying with it untold
economic waste, has been the work of but a few, or even
a single individual. Consequently the problem of individ-
ual responsibility as related to our social and economic wel-
fare assumes an aspect of grave concern, Individual no-
bility or degradation has a distinctive influence upon the
social fabric. The wrong-doer thrusts a dart into the heart
of society, which, were it not for the healing influence of
noble characters would succumb to these poisoned arrows,
Fortunately for humanity, the good in the world predomi-
mates over the evil and naught but good deeds escape the
oblivion of the years. The majestic sovereignty of lofty
thoughts has never been questioned. The desire for intelli-
gence has always been, and always will be, the motive power
for our well-being.
In an essential and well-nigh vital sense each individual
128
INDIVIDUAL RESPONSIBILITY 129
is a pivot around which the nation’s welfare revolves. In
a republic Such as Ours this fact is almost tragically true.
The caprice of fortune may summon even the lowliest into
governmental control. The administrators of our govern-
ment agencies, being selected by the people from among
their own number, the rail-splitter as well as the statesman
Imay be chosen to preside over the affairs of state. Do you
then dare to tell me that there is not a responsibility rest-
ing upon every individual which must not and can not be
disregarded. Every individual owes an obligation, not
only to himself but to his country, to fortify himself with
every advantage possible for any call that may be made
upon him. Every opportunity for betterment carries with
it a corresponding obligation. Only by accepting it as such
can we justify ourselves before our own conscience.
This obligation to equip one’s self for the duties of life
pertains with equal force to the citizen who may never be
called upon to administer the affairs of state. Each one has
a voice in the selection of those who occupy elective gov-
ernmental positions and the citizen who permits an incom-
petent to obtain office either by a failure to vote or by cast-
ing his vote for an inefficient is directly responsible for sub-
sequent misfeasance or malfeasance. National prosperity
is so intertwined with individual responsibility that the two
can not be differentiated. Although our individual actions
may seem unimportant and non-essential, yet they all blend
with the forces which determine our national well-being.
It is a logical law which reflects in a nation the dominant
characteristics of its individual citizens. When the domi-
nant characteristics of the individual citizens are elevating
and ennobling the nation is lifted into peace and prosperity.
When the dominant characteristics of the individual citi-
zens are degrading and demoralizing, the nation sinks into
decrepitude. The all-prevading individual personality is
the supreme influence. - -
130 JOHN H. MOSS
Thus it is easy to discern that the foundation of our
prosperity is in our intelligence; that education is the capi-
tal of our future; that individual integrity is the bulwark
of the nation.
The ignorant are a constant challenge to the educated.
The educated must accept the challenge and conquer the
ignorant. And in this connection I want to attract your
attention to the fact that every one of you is an educator,
teaching every day by every word and every act, whether
you will it or not. Your pupils are those with whom you
come in contact. Your individual responsibility is to teach
those things which will elevate the standard of life about
you.
The intellect and the will are the dominating factors of
our being. The intellect dictates and the will executes.
The intellect makes impress upon the will and the will in
turn determines the intellect. The kindly dictates of our
hearts acting in unison with the lofty reasoning of our
minds should move toward completion in character just as
the various instruments in an orchestra move toward a full
symphony. Our thoughts and our desires should be ca-
denced into the sweet tones of life which make for a desir-
able character. These thoughts are crowded out of too
many lives. Selfish business and pleasure usurp the
thrones of too many minds. Too many of us are absorbed
with the intricacies of commercialism or devoted to selfish
pastimes.
The people of the twentieth century have demanded so
mueh recreation that indulgence has been made easily acces-
sible by the constantly increasing means of amusements
and frivolities. Immense potentialities of time, thought
and energy are wasted and all too often character itself is
weakened. The passing moment is the all-important one.
So much of our time is necessarily devoted to preparation,
to routine and retrospection that the pith of each man's
INDIVIDUAL RESPONSIBILITY 131
genius contracts itself into a very few hours. This fact
must ever be prominently in our minds—like a desk fur-
nishing always before us and not as a reference filed away
and forgotten. Then we will come to the realization that
every success is a height from which new prospects invite
us and new achievements await us. The performance of
today’s obligation equips one with strength and knowledge
for tomorrow’s responsibility.
Perhaps the reason so many people fail to enrich their
characters by daily endeavors is by reason of the fact that
the results of their negligence are delayed. In commercial
life the results of wrong methods quickly reveal themselves.
The balance sheet soon shows if poor business methods are
being employed, but in the domain of character building
the results of wrong efforts are usually delayed. Wrong
mental habits may not cause material harm until long after
a situation is met which can not be handled. Youthful sel-
fishness or dissipation may not reveal their degrading ef-
fects until the maturity of manhood. We frequently see
men of evil-life enjoy health and comfort for years and we
sometimes question if harm will come at all.
The school-boy who shirks his lessons does not appre-
ciate the fact that he foredooms himself to a life of ineffi-
ciency. The laborer who slights his duties does not realize
that he chances his fortune in later years. The business
pirate catches at present success unmindful that he invites
a precarious future. The malicious meddler sees only the
opportunity for wreaking spite or vengeance, expecting to
dodge the recoil of his own wickedness. All deceive them-
selves into the belief that they may eseape the results of
their mis-doing. But life is so marvelously ordained as to
measure out exact compensation as the reward for our
endeavors, good or bad. Paying the price is the law of life.
Evil thoughts and habits weaken a man’s character until he
is like a tree, rotten at the heart and sure to fall when some
streng foree beats against it.
132 JoHN H. MOSS
What is character? Character is that indefinable some--
thing that gives grace to life just as genius is that indefina-
ble something which gives touch of real greatness to a
painting, to a statue or to literature. It is the product of
all the factors of experience. It is a constructive product.
More than the threads of the tapestry weaver the forces of
life are at our command. We are given the black threads
of misfortune, the scarlet threads of sorrow, the silver
threads of hope and the golden threads of happiness, but it
is the individual who weaves them. Day by day he weaves
these into character. *
Or permit me to state it in a different manner. Possi-
bility is the germ. Intelligence and aspiration are the de-
velopers, by means of which individual efforts blossom into
the perfected human character.
Out of the mass of qualities, both good and bad, which
form our characters let us cast away the ignoble emotions
and reveal and intensify the wholesome sentiments within,
just as -
“The sculptor but chisels away the useless marble
And reveals to us the figure long concealed within the
'block.”
All development is individual; society is bettered only
as its component parts are improved—only so far as the
individual devotes his energies to the attainment of higher
standards, only so far as the individual becomes a manly
man or womanly woman.
The four corners of a good character are industry, integ-
rity, justice and love. Think of the dormant potentialities
in these qualities; a love for learning, an ambitious energy
for all that is helpful to one’s self and one’s fellowmen, a
desire for social and civic betterment. Think of the possi-
bilities of the individual, noble in reason and infinite in
faculties.
Character can not be forced upon an individual or upon
INDIVIDUAL RESPONSIBILITY 133
a nation. It may be propagated by moral Suasion but not
physical. If we desire the betterment of society, we must
show it the simplicity, the grandeur and the freedom of its
uplift. We must recommend it to the intelligence by its
elevated enlightenment, its purity, its justice and the pro-
tection it affords. And if in this respect we be faithful to
our duties, we shall do more to elevate our fellowmen and
emancipate them than could be accomplished by all the
armies of the world. This moral power is what tyrants
have most to dread. It appeals to the thoughts and judg-
ments of men. No physical force can thwart its progress.
Its approaches are unseen, but its consequences are deeply
felt. It enters the most strongly fortified garrisons of ig-
norance and illiteracy, and operates in the palaces of kings
and queens. We should cherish this power, as essential to
the preservation and progress of a nation as is the most
efficient commercial genius.
Let us remember that the mind has an affinity for the
good, the true, the perfect, the healthful and the prosperous.
Let us remember that the world is full of beauty, truth and
wisdom. Let us remember that we absorb these only in
the proportion in which our minds and hearts are receptive
to good influences. Let us remember that only by so much
as we cultivate truth, and honor, and sturdiness, and gen-
tleness, do we promote our well-being. Let us remember
that these are characteristics which every one may culti-
wate, chords to which every life may be harmonized. Tiet us
remember that a surrender to the baser elements of human
nature throw the high-born into the gutter with the the
child of the slums. Let us remember that only through
daily consistency can come the momentum of a lofty charac-
ter. Let us remember that good government is based upon
good manhood and good womanhood, and that the best so-
ciety is where good people gather together. Let us bring
our lives into harmony with right-living, always remember-
184 JOHN H. MOSS
ing that healthy thoughts make a healthy body. We drive
life at top speed along commercial lines—let us also do SO
along the lines of character building.
The two great notes in the chords of our careers are the
love of God and the fellowship of man and in the order
given are in the relation of cause and effect. When these
two notes sound true a rightly ordered society follows as a
matter of course. The discords of life can be obliterated
only by the preservation of harmony in individual character
and experience.
Our duty, then, is to encourage character building, to
disseminate intelligence, to promote genius, to develop
mental energy. The forces that develop good character are
more valuable to a community than the forces that develop
steam and electricity. -
Our obligation to ourselves is to cease accumulating
moral debts before we become spiritually bankrupt. Our
obligation to our country is to rise to a larger measure of
civic consciousness. There must be an enlightened under-
standing of our individual responsibility and an increased
response to the duties of citizenship. The problem is to ele-
vate the reality as nearly as possible to the level of the
ideal. Each advancement in art, in science, in government,
in society, in citizenship, in all the affairs of life, has been
by struggle to obtain that which hope and ideals have pic-
tured. If the memory of errors saddens our hearts we
should make of our past stepping-stones to better things.
All the vicissitudes of experience are incidents in the devel-
opment, and point the way to better character and improved
conditions. Although we may be wounded on the sharp
corners of life’s experience there is in every man an ability
to rise above these things and hold sovereignty over himself
and his misfortunes.
Our nation today stands only upon the threshold of its
possibilities. We, as citizens, must have the strength of
INDIVIDUAL RESPONSIBILITY 185
mind—the mental capacity—to grasp and assimilate the
stupendous problems, social and industrial, economic and
educational, which confront our country at the present time.
The activities of the thoughtful portion of our population
must be more largely concentrated upon these problems.
A correct solution must be based upon a correct under-
standing. There must be a campaign of education centered
upon such problems as our national currency needs, our
immigration injustices, our tariff inequalities, our recipro-
cal international treaties to encourage and enlarge Our ex-
port trade, the elevation of the ignorant foreign element in
our midst to a better understanding of individual responsi-
bility, the extension of industrial education, the subject of
equitable taxation and the elimination of greed and graft
from our civic affairs.
These are but a few of the many subjects awaiting solu-
tion. Their settlement means not only a determination to
grapple with them but a determination that they must be
grappled with, and an inexhaustible energy of endeavor
until they are settled and settled right for nothing is ever
settled until it is settled right. We must intensify our un-
derstanding of the importance of this work until we will tol-
erate no compromise with partial adjustments. We must
also possess the strength of character which will resist the
retarding influences of human frailties. We must encourage
that loftiness and nobility of character which will combat
such concessions as may mean a lowering of standards or as
may retard advancement.
These three qualities, then, must be developed—strength
of mind, strength of conviction and strength of character.
As a people we must fill our thoughts with great ideas, with
great facts, with great problems and with great trusts.
We must ascend to mountain heights and Secure a compre-
hensive mental perspective of relative values. To insure
and develope our opportunities to their true greatness and
136 JOHN H, MOSS
service we must have a mighty revival of sober and earnest
life, of study of the noble conceptions underlying our civic
exictence, and of whole hearted devotion to them. This is
comprehended in our tutelage for proper citizenship.
B'or better citizenship we must have better men and bet-
ter women. We must engender a better thought, we must
encourage a view of life which will conceive in our minds
a desire for nobility, a purpose strong for true and helpful
manhood. The agencies for cultivating these influences
are in our possession. Never was the knowledge of the
true value and use of life, of the qualities of good charac-
ter, of desirable culture, better understood than today.
Despite this fact we require every obtainable assistance in
the contest with moral and intellectual anarchy. The field
of contest for advancement along all lines is in the human
heart. The heart, in turn, is reached through the mind,
through the understanding. This is the rendezvous at
which advancing intelligence must attack the enemies of
greed and graft, and passion and cruelty and tyranny. As
sowers we can not foresee the harvest. The secrets of ger-
mination and development are hidden from us. The perils
of the growing season must be watched with careful atten-
tion. Yet experience justifies our anticipation of harvest,
and when our daily labor of culture is faithfully and credit-
ably performed we may rest assured in the faith that good
will eventuate.
Efforts of this sort will beget in the individual an in-
creasing and wholesome desire to do the correct and consid-
erate thing in life at all times and under all conditions re-
gardless of results. Therein repose the peace, the happi-
ness and the security of men. In that current our national
prosperity will have a safe passage through all the varied
problems of individual career and civic life.
The present development of our natural resources, the
existing condition of our social and civic life are the prod-
INDIVIDUAL RESPONSIBILITY 137
uct of Our past endeavors. Gaze upon these achievements
with a critical eye and see if you can contemplate them
with complacency and satisfaction. If you can not, then
energize your capacities toward still better results. Stop
being dumb, inanimate finger-posts at the cross-roads eter-
nally pointing a way you can not travel. Become active,
earnest guides and leaders. Let me inquire—which is bet-
ter, an insipid life of inactivity, or a stimulating life of en-
deavor? If you think the latter then arouse your latent
energies and give expression to them in the honor and help-
fulness of your conduct. Become possessed with a proper
respect for the sanctities of life; a sense of responsibility
which will beget a reliable character; an intelligent dili-
gence in the use of your faculties. Then, if these purposes
be not false or superficial, but genuine and deep-seated, your
capabilities will render you more efficient and reliable in all
the relations into which you arrive.
Impress this fact upon the unthinking young who termi-
nate a shiftless day with an evening’s careless pleasure;
bring it home to the dissolute and dissipated, whose oppor-
tunities are wrecked upon the rocks of crime and intemper-
ance; exploit it as a challenge to the schemers and dema-
gogues who are factors in disturbing our peace and prosper-
ity; sound it upon the ear drums of the lazy and careless
until it compels them, one and all, to better the conditions of
life.
Consider if you yourself add to the value of your com-
munity by an unselfish devotion of your talents to serve
their best purposes—or do you merely exist to subtract
from it for your own gain? It is wise sometimes to sum-
mon yourself before the tribunal of your own conscience
and ask yourself this question: “What sort of a community
would this be were everyone in it just like me?” Remem-
ber that better manhood and better womanhood will bring
better conditions. Remember that unless people are bet-
138 JOHN H. MOSS
tered in heart and in mind the benefits of improved condi-
tions are transient and not permanent.
The charm of a noble character rests in its responsive-
ness to the good in humanity. In the proportion in which
we banish the bitterness, the enmities, the pettiness, the sel-
fishness and the vulgarities of life is our nobility of charac-
ter and our happiness secured. If we live up to lofty ideals,
the hopes of life will come softly stealing to the waiting
senses like the rustling of angels’ wings and we may rest
assured in the faith that our lives will lead us in paths of
peace and our souls will ultimately come to ordered con-
tentment and serenity. Doing what is right assures us of
happiness in this world and opens the gates of Heaven in
the next.
FACTORY ORGANIZATION.
BY W. B. CONKEY,
[Former President Illinois Manufacturers’ Association; President W. B.
Conkey Company, Hammond.]
The factory system possibly is the most important of any
of the business systems in modern industrial life. Its rapid
development has had a far reaching effect upon every
branch of business. It has not only made possible the pro-
duction of various commodities, but it also has introduced
a type of business Organization capable of great specializa-
tion. Its development along logical lines has brought about
many changes in methods of business administration, and
the merchant who knows all about the business of manu-
facturing is the merchant who is able to handle his own
business with the greatest amount of intelligence. He
knows what manufactured goods ought to cost and he
knows the relations of the cost of the raw material to the
manufactured article. The factory system comprises, first,
mechanical devices necessary to the manufacture of the
raw material. Secondly, the labor required to operate the
mechanical devices. Thirdly, supervision of this labor,
and fourthly, the handling and storage of the raw material
itself. The first principle in factory arrangement is to have
the raw material in as close proximity as possible to the
machines to which it is to be fed. Therefore the machine
rooms and so forth should be located close to the store-
rooms. The department should be so arranged that the raw
material could pass from one to another in the regular steps
of its progress. It should be passed right along from One
room to another in such a way that the men handling it will
not have to retrace their steps any oftener than is absolutely
necessary by the limitations of space.
There are three factory systems, the handicraft system
139
140 W. B. CONIKEY
being probably the simplest form. It is based largely upon
individual effort and little machinery is employed. It is
discovered where manufacturing is in its first stages and
never develops into a well organized unit. The household
system of manufacturing ranks next. In this system the
family is the unit of organization, and certain seasons of the
year and times of the day are devoted to the manufacture of
Some product in connection with the farm, the shop and the
home. The third system is the factory organization, and
this form is the only one of the three that has any right to
consideration in a study of operating methods or of business
systems.
The purpose of organization in the factory is to di-
vide and combine the administrative and labor forces and
the machinery into separate units of organization. Under
this system the individual workman becomes merely a part
of the great machine. He loses his identity to such an ex-
tent that he has no control over himself except that he re-
tains the right to terminate his connection with his employ-
er at any time. He is relieved of practically all the responsi-
bility. He has but to obey orders and ply his trade, whether
He be a machinist, a molder, a finisher or an artisan.
IHis responsibility is thus narrowed down to a minimum.
He practically is compelled to become a specialist. He has
only his part of the work to do. He is not like the workman
of centuries ago who carried the product of the factory from
its beginning to its completion. Recognizing the differ-
ence in the place the workman occupies in the factory sys-
tem of today, let us consider the more important problems
associated with the Organization of a manufacturing busi-
IléSS.
As has been said, perhaps the most important of these
problems is the location of the factory. In the solution of
this problem many things are involved. Its location has a
Vital bearing upon the successful management and the pros-
FACTORY ORGANIZATION 141
perity of a manufacturing plant. In the first place, it must
be located where power is available. In the second place,
it must be located conveniently to relation to the rail and
water carrying or transportation systems. The use of elec-
tricity has enabled factories to group themselves around
certain places where the water power is great and has tak-
en away large and valuable interests from those sections of
the country where the proximity of coal fields made manu-
facturing economical. When science has discovered a way
to harness the power in the lake or ocean waves, another
big impetus will be given to the manufacturing business,
and another law will be laid down to govern the selection
of an appropriate site. When the wind was used to give
power to the little factories of long ago the choice of site
was governed by the proximity to the markets, but as the
manufacturing business grew and water power came into
use, the factories gathered themselves around the little
water falls in New England. When steam took the place
of the water wheel the factories sought the coal fields, and
Pittsburg, as an illustration, became a manufacturing cen-
ter. Then came the harnessing of Niagara, and electrically
operated plants gathered themselves around the great falls.
Now that a way has been found to harness the power of .
river currents, factories are springing up all along the
Chicago drainage canal. No one is able to predict what the
next step will be, but it is certain that the wise manufac-
turer in the beginning will make no mistake in the selec-
tion of a site for his factory. He may easily double his
profits by the exercise of good judgment in locating his
plant.
The development of the modern transportation systems
has made them a controlling consideration in the location
of the factory, and the greatest water fall in the world could
not draw a single factory to its banks if the railroads re-
fused to build their tracks in that direction. The question of
142 W. B. CONIKEY
freight rates is another all-important consideration. The
calculating man will make a study of freight rates before
he builds his factory. Another thing to be thought of is the
availability of raw material. Raw materials often are bulky
and weighty, and the cost of their transportation over long
distances to a far removed factory would entail great cost.
Therefore steel and iron mills are advantageously located
close to the place where the iron is taken out of the ground.
The forests of Michigan made Grand Rapids a center for the
manufacture of furniture. The location of paper and lum-
ber mills on streams near the raw materials furnishes an-
other illustration of how the weight and bulk of raw ma-
terials often govern the location of the factory site. On the
other hand where the value of raw materials is low com-
pared with the relative value of the finished article, the lo-
cation of power rather than the location of the raw materials
is the paramount consideration in the selection of a site.
The great watch factory at Elgin is far removed from the
gold mines from which are transported the materials used
in the manufacture of the cases. The immense shoe fac-
tories of Massachusetts are a long way from the cattle herds
of the West, and the cutlery manufactories of Sheffield are
not near the places where the raw material is secured, but
the recent location of so many great cotton mills in the
South testifies to the force of the argument that it is some-
times better to take the factories to the raw materials than
to take the raw materials to the factories. \
In many lines of manufacturing closeriess to the market
is the consideration of prime importance. This is invariably
the case with the very small factories. The small factory
cannot successfully engage in competition with the large
ones unless it is located near the rmarket center. The reason
is obvious: The small factory cannot secure the same ad-
vantageous rates of transportation, owing to the fact that
the shipments are not great enough. The location of the
FACTORY ORGANIZATION 143
factory, furthermore, has a wide influence on the character
of its purchasing and sales departments. For example,
the manufacturer who is located at a great distance from his
markets will find it advisable either to establish his sales
rooms in the market, far remote from the factory, or he will
sell his products through the jobber. The volume of busi-
ness not only is necessary to the securing of good rates of
transportation, but also in sustaining the costly selling Or-
ganization which a factory not located near the market is
compelled to maintain.
Nearness to the consumer is of vastly greater import-
ance than nearness to the raw material, when staple Com-
modities are being manufactured in a small factory, be-
cause the manufacturer is able to keep in touch with those
upon whom he depends for his business, and he is better
able to make a study of the demands of his market. When
the small manufacturer is located at a long distance from
his market he is compelled to rely at all times upon the good
faith and judgment of his jobber. Sometimes the jobber
does not interest himself in the output of the Small factory
so much as in the product of the large factory, because the
jobber's interest is proportioned by the volume of business
given him by the various factories. If the manufacturer is
carrying on a large business he may then easily afford to
maintain his own sales departments in the various market
centers, and in this event the proximity of the factory to the
consumer is of little or no importance. Many of the great
manufacturing plants of the country are located in the small
towns remote from the distributing centers for the reason
that the employe can live cheaper and better in the small
town than in the city, because the temptations are not so
great, and because the employer gets more work out of his
men at less wages. It has been shown by a number of manu-
facturers that the location of large plants in small towns
results in a great increase in the profits, the only drawback
144 W. B. CONREY
being the lack of transportation facilities, and this often is
Overcome by keeping the market well supplied in advance
of the demand. Take, for example, the National Cash Reg-
ister plant in Dayton, Ohio. The location there of this great
manufacturing enterprise not only gives to the employes
all the advantages of community life, but it gives to the em-
ployer all the advantages which accrue to him through the
ability of his employe to live happily on his moderate wage.
The National Cash Register Company maintains salesrooms
in all the big cities, and therefore its location away from the
market is no handicap to the carrying on of a successful
business. The same situation is found in thousands of the
greater manufacturing plants in the country. The location
of the packing houses in Chicago was due to a great extent
to the unequaled transportation facilities, combined with
the proximity of Chicago to the live stock belt of the West.
The later tendency, however, has been to establish new
packing plants nearer to the cattle belt itself, in Kansas
City, Omaha, Topeka, and other points. It was discovered
recently by the packers that it is cheaper to transport the
output of the packing houses long distances than the live
stock.
The increasing tendency on the part of the manufac-
turer of certain kinds of products to get nearer to the con-
Sumer is clearly demonstrated in the recent movement of
the agricultural implement manufactories westward. For
a great many years the farmer was obliged to send to Chi-
cago and to other central points for his farm implements,
but today he has only to send his order to the nearest sizable
town. The farm implement manufacturer has been obliged
to bend his knee to the transportation companies. He has
found it easier and more economical to locate nearer the
consumer than to pay the high rates of transportation. The
importance of transportation in determining the location
of a factory is too well recognized to be a matter of dispute.
FACTORY ORGANIZATION 145
Without a doubt the most important element entering
into the success of a manufacturing business and the ef-
ficiency of the plant itself is the labor market. The manu-
facturer must never overlook the the positive necessity of
locating near the labor supply. The factory must be able at
all times to demand the services not only of skilled labor
but of efficient administrative help. For this reason there
is a decided advantage in many cases in locating in or near
a large city, although some manufacturers maintain that
this advantage is entirely offset by the increased cost of
living and that labor can be attracted to the small town by
the force of the argument that the comparatively small cost
of maintaining the home doubles the value of the employe's
Wage.
Large manufactories, as a general rule, are organized as
corporations, and the operating heads of such corporations
usually are the same, without regard for the kind of busi-
ness or industry engaged in. As a matter of course, there-
fore, these factories are conducted by a president, secretary,
treasurer and board of directors. When the business grows
to such dimensions, however, that it requires additional
authorities to voice the policies of the stockholders, and
particularly those of the directors, meetings of the various
heads are held and such appointments or elections made
as will serve the best interest of the growing business. Ex-
ecutive committees sometimes are created, but with con-
cerns large enough to warrant it other supervising commit-
tees are created, such as advisory committees which repre-
sent the executive, and the supervision of special details of
the factory business, as, for instance, those of finance, pur-
chasing and sales departments. A.
The duties of the advisory committee, the general man-
ager, and the auditor are closely related to those of the
executive committee, although they naturally are subordi-
nate. In all cases the president of large corporations rep-
146 W. B. CONKEY
resents the board of directors, which in turn acts with the
committees that have been appointed by the board. The
president, however, frequently acts in the dual capacity
of president and general manager, and, as a general thing,
the president is the general manager. This is especially
true in the direction of the larger corporations, though not
infrequently such duties are performed by subordinate in-
dividuals acting under the direction of the president.
The commercial aspects and general technique of the
business always should be at the command of the general
manager. His usefulness to a corporation generally is to be
determined by his general qualifications. He must be re-
sourceful and disciplinary. To be a successful organizer he
must of necessity be a capable general manager. He can
not be one and not the other. Upon his shoulders falls the
duty of supervising the policies of the various departments
of the office in addition to those of the factory. He at all
times is the entering wedge between the board of directors
and the subordinate heads of the various departments. His
policies are approved by the directors and their committees,
and those policies are brought to a consummation by the
department managers.
The small details are not for the general manager. It
is only with the vital problems of the administration of the
factory or corporation that he has to deal. This being true,
the importance of his discernment in choosing men of abil-
ity to represent each department cannot be underestimated.
1He is the axle around which the factory wheel revolves. NHe
determines the policies of the firm, though his authority is
limited. He works under the immediate direction of the ex-
ecutive committees or advisory board, and his expenditures
are often limited. Over the essential matters pertaining to
the thoroughly organized and well balanced corporation,
such as contract, sales, wages, office and factory routine, in-
surance and banking facilities, he has almost supreme juris-
diction. -*. *
FACTORY ORGANIZATION 147
The principles of organization in a factory permit of ex-
pansion and minute detail. The volume of business done by
a manufacturing corporation is an important factor in de-
termining the size of the building in which the details of the
Organization can be systematically worked out. The divi-
sion of space is one of the most important points of detail in
that it determines the facility with which work can be ac-
complished. Every product or separate part thereof should
have its own individual allotment of space. The factory
should be so arranged that the raw material, once started in
One department, will be passed on to the next department
without a hitch or a jar, thence to the third department, and
so on, until it finally lands in the warehouse or shipping
room without a second having been spent in its production
that was not necessary—that is to say, with the lowest possi-
ble expenditure of time and power, which is the essence of
all factory success. To obtain the highest degree of efficien-
cy, system must predominate in the arrangement of floors
and the placing of departments in such a position that the
best light, economic handling of individual pieces of mer-
chandise, and sanitary conveniences are available.
The number of departments and the division of such de-
partments is largely responsible for the expeditious han-
dling of the corporation’s products. Each process in the
manufacture of the product requires its own department.
As the business extends it often becomes necessary to sub-
divide some departments into Smaller sections, thus afford-
ing greater facilities and rapidity with which the unfinished
product forges its way to completion. Each process re-
quires special machinery and individual workmen under
special supervision. In this way each definite process
comes under the immediate Supervision of its own skilled
workmen, machinery and Supervision, and this system is
absolutely fundamental to economy.
To classify the different departments of a factory would
148 W. B. CONKEY
entail unlimited space, but the more potent departments
may be said to be those in which are located the superin-
tendent’s office, experimental and model, foundry, assem-
bling and erecting, engineering, patterns, tool rooms, and
receiving rooms. Thus, in time, the specialization of ma-
Chinery and skilled labor make necessary subdivision of
various departments. -
The factory organization is under the direction of the
Superintendent, who is responsible for the proper conduct of
each department manager and subordinate employe. Next
to the general manager he is all-powerful. Through him all
Orders for work are issued to the foremen or managers of
the several departments. He should have a thorough tech-
nical knowledge of the factory's business and understand
the men with whom he has association in the factory. He
should understand what conditions prevail in each depart-
ment and should be able to report to the general manager
at a moment’s notice just what each department is earning
and how far it is running behind. If it is losing he is sup-
posed to unearth the leak and remedy the condition. On
him is placed the duty of tracing the output of the factory
from the time it begins formation at the initial point until
it is in a finished state and ready for the purchaser. He
must have the qualifications of judging materials and direct
the filling of orders as they are received. In order to do this
he must have under him men on whom he can place the
greatest reliance, foremen who are alert and up to the min-
ute. These foremen report prevailing conditions in the in-
dividual departments they represent, and if the report is
not satisfactory, it is the duty of the Superintendent to cor-
rect such discrepancies as may exist. The faithful per-
formance of a contract is a duty that irrevocably depends
upon him. He must know just when to start on a contract
and the exact time it will be finished. He must be able to
figure out in minute detail the time necessarily consumed
PACTORY ORGANIZATION 149
in the fulfillment of each clause of a contract. He must keep
his machinery in good running order at all times, have suf-
ficient materials on hand to meet any emergency (or be able
to get such materials on a moment’s notice), and he must
send in requisitions for supplies and incidentals in time to
have them on hand when needed. In fact, time is of the
essence of his contract, and it is his duty to be constantly OL
the watchout in order that the cancellation of a contract
will not follow dilatory methods and procedure.
The position that is next in importance to that of the
superintendent of a large factory is that of the foreman.
Each department has its foreman, and in some instances
groups of departments come under the jurisdiction and ad-
ministration of an assistant superintendent. Each foreman
is a power in himself. He is responsible for all that goes on
in the department over which he has control, and not-the
least of his duties is that of keeping the superintendent
advised of the progress or lack of progress in his depart-
ment. The chief duty of the foreman, however, is the ju-
dicious selection of skilled labor, supervising their modes
of procedure, and exercising over his force a discipline strict
though courteous. The superintendent looks to the foreman
to advise him of conditions, as the general manager in turn
looks to the superintendent to keep him in touch with what
is going on in the factory.
To protect secret processes of manufacture, many fac-
tories exclude the general public from an inspection of their
plants. Not infrequently, also, factories bar their doors
against the admission of sightseers for the simple reason
that such persons often impede the progress of the laborers
by asking questions and constantly getting in the way. One
factory which recently closed its doors to the public gave
out the statement that the time of the employes which was
consumed by visitors had amounted in the preceding fiscal
year to thousands of dollars, and it therefore became es-
150 W. B. CONKEY
Sential to the welfare of the business to exclude all persons
Other than those who had immediate business in some de-
partment of the factory.
Special policemen and doortenders are employed by
most of the large factories. The employment of such men,
it is urged, guards the factory against fire, and these men
have the responsibility of keeping time on the employes.
He is considered the watchdog of the workmen, and he may
be seen in almost any factory of any dimensions, stationed
at certain points at certain hours of the day to record the in-
gress and egress of the various employes. Devices of vari-
ous kinds have been installed in factories to facilitate in
this checking system. Every factory has either a time clock
or a trusted timekeeper to keep close watch on the men,
for it is an essential feature of the factory’s organization
that each employe be at his place at a given time in the
morning and leave only when the whistle or bell announces
the hour of quitting. This system is a big factor in deter-
mining the amount of money the cashier should enclose in
the individual envelopes on pay day, and when a workman's
record shows that he has reported for duty a few minutes
ahead of the alloted time and departed after the bell or whis-
tle has told its story, it eventually comes to the attention
of the foreman, who in turn reports to the Superintendent
and the superintendent finally brings the matter before the
general manager. Everybody concerned is pleased to note
such a faithful attention to duty, and it ultimately works to
the advantage of the workman himself, because the man
who constantly has been on time and did not watch the clock
and who paid strict fidelity to the interest of his employer
is the man who is first considered for promotion when there
is a vacancy as foreman or some higher position.
The importance of the raw material department cannot
be underestimated. The relations sustained by the man-
ager of the raw material department, the factory superin-
tendent and the purchasing agent are extremely relative.
FACTORY ORGANIZATION 151
The manager of this department must be alert and active
at all times for he is looked to to always have on hand a
stock sufficient to meet any exigency. In some cases he
is a purchasing agent, but in most instances he works joint-
ly with the purchasing agent and reports his needs to that
person. A good manager of a raw material department
never is behind orders, but delivers all raw material that
may be requisitioned within a short time after it has been
ordered.
The general manager, upon receiving orders for certain
merchandise, immediately forwards a requisition to the
storeroom clerk for such material as may be necessary to
fill the order. When orders are received for designs, such
designs are supplied by the drafting department. In such
cases the superintendent of the shop gives the necessary
orders to the foreman of each department for such parts
as his branch of the factory manufactures. These in turn
are passed from one department to another until they finally
reach the assembling room, and thence to the finishing room.
After the product is finished it is at the disposal of the ship-
ping department, and the clerk of the finishing room is re-
quired to keep close record of all material that is ready for
shipment. In this way the general manager is enabled to
tell at a glance whether the factory is working full time or
whether he will be behind with his Orders.
The shipping clerk, or the head of the shipping depart-
ment, must be very familiar with transportation rates,
routes, and other conditions which prevail.
There are in every well organized factory both pro-
ductive and non-productive departments. The former are
obliged to take the raw material and put it in Salable condi-
tion for the purchaser. The drafting department, shipping
and store rooms, and purchasing department are non-pro-
ductive, their work coming under the administrative classi-
fication.
152 W. B. CONKEY
Administration Department of Factory.
The executive offices of a large factory are situate either
in the factory proper or in a separate building adjacent to
it. These offices are subdivided into as many branch of
fices as are necessary for the proper conducting of the busi-
ness. Private offices are requisite for the proper execu-
tion of the commercial aspect of the factory, and such
officers as the president, purchasing agent, treasurer, gen-
eral manager, auditor and others require a seclusion from
other branches which put them in departments entirely sep-
arate from others. The number of such departments is de-
termined, of course, by the output of the factory and the
extent of the business in general.
Consolidation in all manufacturing business today makes
it necessary, in many cases, to establish a central office or
offices at some center of business activity of recognized im-
portance, such, for instance, as Chicago or New York City,
and from these central offices the executive work of run-
ning the factory is carried on. At the same time it is neces-
sary, for the proper carrying on of the business, to main-
tain at each factory and branch factory a subsidiary man-
agement for the purpose of caring for the local affairs of
the establishment.
Commercial organization and factory organization are
altogether different in their scope. Mechanical processes
govern largely the organization of the factory manufactur-
ing while the process of Organization employed in the com-
mercial department deals more with the human aspect of
the business. The elasticity of the commercial end of a man-
ufacturing business far Supersedes that of the factory.
An important principle involving the office organization
of a large manufacturing concern is the proper distribu-
tion of labor. The duties increase in proportion to the
FACTORY ORGANIZATION 153
growth of the business, and where the increase in business
demands it new departments under new heads are created.
This condition not only augments the administrative econ-
omy of the factory, but it also is largely instrumental in en-
forcing responsibility and maintaining proper discipline.
The proper conduct of the business demands the classifica-
tion of duties and places responsibility where it belongs,
and thus the organization of the executive or administrative
departments into numerous subdivisions or working forces
is necessary. This gradation of responsibility starts with
the board of directors and redounds to the general manager,
from him to the clerks, and from the clerks to the workmen
and skilled laborers. The existence of these various depart-
ments shows the division of the many branches of the gen-
eral offices. Each department is a natural subdivision of the
main office, and is the result of the grouping together of
duties which have a common duty to perform. To illustrate
this in almost all general offices an accounting or auditing
department is to be found. Grouped in this department are
the employes whose duty it is to keep the accounts of
the establishment. The publicity end of the cencern is
handled by the advertising, department, and in this de-
partment will be grouped the clerks and officials upon
whom the duty rests of seeing that the firm is properly
advertised and its wares kept constantly before the public.
A manager who is the personal representative of the
general manager or assistant manager, is placed at the head
of each department to supervise the work that comes under
the jurisdiction of that particular department. Details of
a business cannot be supervised by the general manager ex-
cept in a general way. His own duties are so exacting and
multifarious that minor details must of necessity be left
to the administration of a subservient employe. Conse-
quently the man who is known as the manager of a depart-
ment must be a man upon whom the greatest reliance can be
154 W. B. CONIKEY
placed. It is his business to see that the department under
his management is conducted to the best interests of
the firm that employs him, and the employment of
clerks to do the routine work of his department falls upon
him. He must make reports to the “powers that be,” and
he must at all times be ready for a personal consultation
with the general manager and be able to give, in the minut-
est detail, figures and reports which have to do with the
affairs of the department under his administration.
The treasury department of a large establishment is per-
haps the most important division of the executive offices.
The treasurer is a trusted employe, for through his hands
passes the funds of the business. He is entrusted with the
work of keeping the bank accounts of the business, paying
vouchers, making up pay rolls and almost everything else
that has to do with the expenditure of money. The proper
development of bookkeeping systems and short cuts are
left entirely to him. To him also is left the duty of
discovering any mistakes that may be made or any leaks
or losses that may exist. These he must correct and rec-
tify. -
All firms have need for legal counsel. Legal advice is
extremely important in the conduct of any well organized
business, and especially is this true in the case of large
manufacturing concerns. Some smaller firms have com-
bined the legal force with that of the collection, but the
larger firms’ law departments are, as a rule, separate and
apart from any and all other departments. The necessity
for the employment of counsel must be apparent, for the
firm’s legal rights and interests cannot be administered by
any one not familiar with the laws of the State in which the
firm is incorporated and those of other States. The laws
of the State in which a firm exists and transacts its busi-
ness are oftentimes vastly different in other States. There-
fore, to conduct business in a State outside the One in which
FACTORY ORGANIZATION 155
it is incorporated, a business firm must be advised as to the
laws of such State. The proper drawing up of legal con-
tracts and other papers is an indispensable part of the busi-
neSS proper. The courts are frequently resorted to for the
collection of bad and delinquent debts. The presentation in
Court of Such cases is a duty which can be performed by no
one except the practitioner. This person may, as often is
the case, have complete charge and jurisdiction over the col-
lection and credit department. -
As far as possible, every manufacturing concern endeav-
OrS to make its own collections and settle indebtedness in
the best possible way without resorting to the courts. These
accounts usually are settled through the main or central
office, and if, after a certain length of time, a debtor fails to
liquidate an outstanding indebtedness, the account then is
turned over to the counsel employed by the firm.
In every manufacturing concern of any dimensions a
large amount of correspondence of a special and general
nature has to be transacted. The general manager usually
carries on the correspondence of special import, and the
various department heads likewise have much special cor-
respondence to dispose of. A general correspondence de-
partment is essential to all large houses and firms and this
department carries on all correspondence of a routine na-
ture which does not require special dictation or disposition
by the general manager or heads of the departments. Often
a large corps of Stenographers and typewriters is necessary
to keep abreast of this work, and Over these employes is a
stenographer who is known as the head stenographer. The
duty of the head stenographer is to see that the employes
under his or her supervision are kept busy and do their
work properly and with dispatch.
The purchasing department of a factory is one of the
most important of the office organization, as the quality
and cost of the raw materials, determines to a large extent
156 W. B. CONIKEY
the character and cost of the output of the factory. The
work of this department is critical in the extreme because
it must be able to buy within a specified time such quan-
tities of raw materials as are necessary to fill the orders of
the firm’s customers. This work is greatly facilitated, how-
ever, by the fact that the sales departments of such firms
as handle and deal in raw materials are usually con-
versant with the requirements of the purchasing agents
of the firms with which they do business. Consequently
he is ever on the alert to dispose of such products or
factory supplies as he has where there is a market for them.
Each purchasing department usually is a part of the gen-
eral organization. Especially is this true in the case where
several factories are operated under a central administra-
tion. In this event each factory makes requisition on the
purchasing department for its supplies, and it therefore is
necessary for the purchasing agent to keep constantly in
touch with the sources from which he can purchase his sup-
plies at the best quotations and in the shortest possible time.
The purchasing agent must at all times be advised as to the
factory output in order that he may buy judiciously and in-
telligently. He must also be able to buy advantageously on
contract large quantities of raw materials in order that any
emergency or rush order can be filled without loss of time.
To do this he must keep posted on the market conditions,
and this he does through the medium of price lists and cat-
alogues furnished by the firms who have control over the
output of the raw materials. Such contracts, as a general
rule, are made after the various competitors have bid for
the order, the contract being awarded to the lowest com-
petitive bidder who has raw materials of the quality de-
manded by the purchasing agent. The purchasing agent
also must keep his storerooms amply stocked and have on
hand sufficient parts, supplies, machinery and raw ma-
terials to meet any emergency. However, he must be able to:
FACTORY ORGANIZATION 157
go into the open market and compete with other firms in the
buying of such materials as he may need.
Even of greater importance to a factory than the pur-
chasing department is the sales department, for this depart-
ment is burdened with the duty of disposing of the factory’s
output. Business must be created and a market must be
found. Whatever policy may be pursued by the factory—
selling direct or through a jobber—the sales department is
inevitable. The business of the sales department may be
conducted through one department, or it may be developed
into a series of branch sales departments, one for each im-
portant city. It may also be the policy of the factory to
branch out and do both a wholesale and a retail business.
In this event it is almost essential that branch sales depart-
ments be established in the principal cities of the United
States, and quite frequently of the World. The sales de-
partment, in order to properly dispose of the factory’s out-
put; may find it expedient to put traveling salesmen on the
road who will create business and discover new customers.
If this is not done it may be the policy of the sales depart-
ment to do its retail business exclusively through jobbers
and its wholesale business direct. Naturally, the expense
of operating branch sales departments in the principal cities
is extremely large, and the manager of the sales department
of the factory must be sure of his market before he estab-
lishes such branch departments. In other words, the vol-
ume of business done by the factory must be large enough
and extensive enough to warrant the expense necessary to
conduct the branch offices. Sometimes, however, the
amount saved in the elimination of the jobber or middleman
is sufficient to enable the sales department to oper-
ate branches at a profit to the factory. The head of the
sales department must necessarily be in touch with the mar-
ket and have a thorough inside knowledge of conditions in
the factory. The rating of a new customer largely de-
158 W. B. CONKEY
termines his action in selling such a customer a bill of goods,
and to this extent he is entirely at the mercy of the credit
department.
The estimating department is closely related with the
purchasing and sales departments. Factories operating
On a large scale find it necessary to employ persons who are
competent to prepare estimates of the output of the factory
and the prices prevalent for raw materials. These esti-
mators must work from data furnished by a department
which has the duty of preparing the cost of the materials.
From this data they determine the margin of profit at which
the factory’s output can be sold.
In order to keep constantly before the buying public
the advantages derived from the purchase of its goods,
each factory must maintain an advertising department,
which department has complete jurisdiction over the pub-
licity given the factory’s output. Such a department may
act in an independent capacity or may assign a part of its
publicity to agencies which make a specialty of writing
advertisements which attract the attention of dealers. The
board of directors, as a general rule, fixes a certain amount
of money which shall be at the disposal of the advertising
manager. It therefore is essential that the advertising
manager place his “ads” to the best advantage, and to do
this he must constantly keep in touch with advertising
rates and such periodicals and advertising mediums as will
bring the best results. He must have some idea of the cir-
culation of the various trades publications in which he ad-
vertises, and if he finds he is spending money in advertis-
ing in a publication that does not bring business equivalent
to the amount expended for such publicity, he must curtail
that expense by withdrawing his advertisement and in-
serting it in some better paying periodical or paying the
money out in other ways which will bring the results he
thinks adequate,
EACTORY ORGANIZATION - 159
IReports Their Necessity and Their Uses.
“Knowing so well its tremendous benefits in the devel-
opment and management of large industrial enterprises,”
says Charles W. Carpenter, “I consider the committee sys-
tem of management the best, and, in fact, the only founda–
tion upon which to build a thorough plan for reviving a run-
down concern, or for developing even a well organized busi-
ness to its fullest power and possibilities of profit.”
The work of the committees will, however, be immense-
ly expedited if material for their deliberations is ready in
written form—if there is “something before the court” at
once upon its assembly. The result of their consultation
also should often be permanently recorded. And the data
of progress throughout the factory must come in concise
expression to the manager’s desk. The necessity for com-
prehensive reports of varied character is, therefore, obvious,
The exact character of these reports and the ground that
should be covered therein is not always so obvious. In
fact, seldom is there found a system of reports that is really
comprehensive and logical. -
Any attempt to define a system of this character must be
at first general in character because of the differing condi-
tions in each business. Mr. Carpenter says he has applied
the fundamental ideas explained below to a number of lines,
and has never yet failed to make a practical application of
their meritorious features, although their form was greatly
changed.
In developing such a line of reports, let us begin by
considering what we need in the way of methods to increase
the working efficiency of the concern, and what will enable
us to oversee and check up thoroughly both production and
sales conditions. First, then, we want methods for deter-
mining what must be accomplished in the production divi-
sion—in the character, regularity and volume of output, in
160 W. B. CONIKEY
the cost of production, in the development of new ideas or
inventions to conquer competition, in the steady develop-
ment or greater efficiency and reduction of costs. Second,
we want methods for determining what volume of business
must be secured, and what profits must be obtained, on each
and every class of goods manufactured in each selling ter-
ritory; what expense can be allowed to pile up while the
goods are being placed upon the market. Next, we need
methods by which the selling organization can be forced to
meet these requirements and bring the necessary results.
In short, we must have plans and methods by which the
manufacturer can first get a clear conception of what should
be accomplished in each division of his business; and next,
means by which he can get a firm grasp upon the details of
his business so as to force the accomplishing of these longed-
for results. -
In general outline the reports must be:—the “Monthly
Analyzed Profit and Loss Sheet,” the “Sales Reports,” the
“Factory Reports” and the “Cost Reports.” -
The Monthly Analyzed Profit and Loss Sheet.—This re-
port should show:—
a. Delivered sales, with proper divisions for each class
of goods produced, and receipts of other character.
b. The factory cost of the goods in each division.
c. The cost of delivery, including freight and cartages
properly classified.
d. The receipts and disbursements on all work of a
character auxiliary to the main lines of production, such
as repair departments, moving departments, etc.
e. The selling expense, divided into proper classifica-
tions for analysis.
f. The office and general expenses that can properly be
charged against each selling branch or territory.
g. The division of general or executive expense of such
nature that it cannot be charged directly against a branch.
FACTORY ORGANIZATION 161
The importance of this report will be immediately rec-
ognized. It provides an analysis that enables any manager
to locate immediately the points of profit and the points of
loss, provided the distribution of credits and debits is cor-
rectly made. It is the primary report upon which the bal-
ance of the reports are founded. While it may appear com-
plicated the business man knows that it is necessary; and
the one who fears its complication can be assured that it can
be developed very easily by ordinary methods of account-
ing and the inauguration of comparatively simple systems
in the factory. - &
The Sales reports.-Coupled with the preceding report
should be, first, a comprehensive memorandum outlining in
a simple manner the necessary work of the selling depart-
ment, no matter how the goods are distributed upon the
market. This report should show what goods must be sold,
at what profit they must be sold, and under what expense
they must be sold, in order to secure the desired profit on
the balance sheet at the end of the year. It is not a difficult
matter for an intelligent man to take such a report as the
outlined “Analyzed Profit and Loss” report, consider what
profit his business would show, and calculate from this the
profit he should expect from each branch of it in order to
secure this profit, and under what expense it is possible to
run in order that his gross profit from his sales may not be
eaten up by selling and general expenses. A simple enough
method of procedure, but one seldom taken. And often
where this sensible calculation is made, little real scientific
effort is made to “hew to the line,’’ to insist upon reasonable
profits, to hold down expenses and to conduct the business
along the lines which such an analysis shows are absolutely
necessary.
The next report on sales needed is naturally the one
showing the actual results, territory by territory; showing
volume and profit secured and expense of getting the busi-
162 - W. B. ConREY
ness. It is immediately apparent that a weekly (or in some
concerns a daily) comparison of the actual sales results
with the data showing the results that must be secured or—
as I term it the “must data”—will prove invaluable. -
There are naturally a number of sales reports of a differ-
ent character from these two just outlined that should be
secured from the selling end of the business, but they are
amplifications of the main reports and will be touched upon
later under the sales division. *—, ,
The Factory Reports.-Factory reports should, however,
naturally give the first importance to exhibiting progress
upon contract, special and stock work, weekly, showing
clearly the location of this work in the shop and the steps
taken to get it out on time. The manufacturer who is con-
stantly harassed by tardy deliveries and hampered by the
lack of such data can hardly realize the effective use that
can be made of such weekly reports. The knowledge of ex-
act conditions, coupled with the devising of ways and means
to overcome threatened delays, and constant pressure upon
the factory, bring excellent results.
The Cost Reports.-Their extent will be determined by
the character of the business. But, in general, fully ana-
lyzed cost figures sent to the chief executives for their
scrutiny, comparison and criticism bring admirable returns.
Let One of the higher officers bring into a committee meet-
ing, or a general foremen’s meeting, a set of fully analyzed
cost returns upon some particular line of the product, and
begin to inquire of the different foremen present why their
share of the expense amounts to “so large an amount,” and
there will usually follow a red-hot discussion that will throw
many a valuable side light upon costs of production.
Again, with accurate cost and stock data it is not dif-
ficult to secure monthly stock inventories at least approxi-
mately correct. Of course, a perpetual book inventory
which enters into the general accounting of the company
FACTORY ORGANIZATION 163
can be devised. Not one manufacturer in ten is willing to
spend the necessary money for this. However, he will re-
joice over a monthly inventory, secured without shutting
the shop down, which, coupled with his profit and loss state-
ment and the data contained in his general books, would
enable him practically to secure a balance sheet of the com-
pany’s operations monthly.
Other important reports are upon output, departmental
expenses and results, production methods, tool-room re-
sults, etc. Keep in mind, however, that these reports are
so effective because of the committee system. They should
wherever possible be made up by the committee handling
the different branches of the product. And you may be
sure that your committee, composed of enthusiastic men
whose reputations are at Stäke, are going to see that prog-
ress reports, cost reports, output and production reports,
represent the very best that they and the shop can accom-
plish, when they know that these will be closely scrutinized
by the heads of the company.
ORGANIZATION IN THE WHOLESALE BUSINESS.
BY SAMUEL MEEKER FARGO,
[President Fargo, Keith & Co., Chicago.T
Movements destructive and constructive have, within a
generation, or even a decade, stirred the wholesale trade
to its foundations. With this business as a whole it has
not been a question so much of organization as of reorgani-
zation—a much more difficult thing to accomplish. Broad
business policies have in many cases been forced upon the
trade rather than promptly adopted or developed by it. The
greatest wholesale houses have, without question, made
constant, current and even great contributions to modern
business methods, but others have been so conservative, so
firmly entrenched in old ways of doing things, that the
forces attained great momentum before they gave them due
and necessary consideration.
The real import of the coming into the selling field of
mercantile factors which almost from the first passed the
jobber by, going straight to the factory or foreign source
of supply, was not grasped by much of the wholesale trade
until it became a question of Wake up or give up. It then
became necessary to justify its existence, and it has pro-
duced arguments of sufficient weight and power both to
convince itself, the retailer and the factory that it has a real
function to perform, though the factory still has the most
diverse relations to present selling forces.
The new mercantile factors in question were the depart-
ment store, the mail order house, the five and ten cent stores,
and the chain stores. These have gradually eliminated the
wholesaler from their consideration. They buy direct and
make low prices as the result of such buying the basis of
most of their publicity methods and activities. The fac-
164
ORGANIZATION.—WHOLESALE BUSINESS 165
tories have not only sold to these establishments but through
perfected selling organizations have sold to all retail trade
alike, rejecting the middleman. He, however, has had an
ally in the Small retailer in fighting one thing. The larger
buyer having got the better price from the factory could
Offer the single item at a lower price than the retail store.
The wholesaler and small dealer have in the case of pack-
age and Some other goods forced the factory to set a retail
price by which all must abide—to standardize it in other
words. •º -
The factory relations of the present day are most com-
plex. Some factories are controlled by mail order houses,
Some by department stores, some by wholesale, and yet
others by retail establishments. Others are independent
and try to sell to wholesaler and large retailer alike, with an
inclination to favor the largest buyer even though the total
amount taken by him be but ten per cent or so of the total
product. This has brought, in many cases, effective remon-
strance from the wholesaler.
The modern publicity methods of manufacturers made
necessary an organization that is really a selling instrument,
and hence it has been used for this purpose. Many fac-
tories turning out a specialty sell direct to retailers every-
where. Some of the great mail order clothing establish-
ments, both for men and women, are nothing less than fac-
tories selling to individuals. -
The wholesaler in the smaller cities has his own special
problems to meet in addition to those that are general to
the trade, and strangely enough these come from one of the
protective and progressive movements—one of the greatest
of modern times—inaugurated by wholesaler and manufac-
turer—the central market. These central markets in the
great cities offer most alluring inducements, financial, edu-
cational, and social, and the wholesaler outside the metro-
politan galaxy must work hard to discover ways of present-
166 SAMUEL. M. FARGO
ing the advantages he can offer to his trade, but he has them
in the shape of lesser freight rates and conveniences due
to his proximity to it. By patronizing him a local dealer can
do business on a smaller capital, and profit in many ways
by the accessibility of his source of supplies.
The central market, with national associations holding
their meetings in it to discuss conditions, promote progress
and Organize campaigns offensive and defensive, is one of
the latest developments in wholesale selling. The whole-
Salers of these markets have amplified their stock, they have
combined manufacturing with jobbing in order to control
and reach out for more trade, they have increased their
Capital and business capacity by developing their manage-
ment to the highest degree. They have specialized, added
new departments, subdivided the old, increased supervision
and precise control over every minute detail of the buying,
Selling and handling processes. All this complexity has de-
manded the most exact and thorough systematization.
Both the central market and the meetings of national
associations which it has fostered have social and other fea-
tures which have never hitherto been applied to trade con-
cerns. Men have by comparing notes found that they had
much more to gain than to lose by being friendly with a
man in the same sort of business as himself. They have
also gained the spirit of progressiveness by associating with
the progressive.
The wholesale house that has adapted itself to changed
conditions has today no cause for complaint. Sometimes it
has worked out its Salvation in natural course by being a
safeguard to a retail business under the same ownership.
Sometimes it has established such relations with thousands
of customers that its outlet is as sure as the movement of the
waters of the Mississippi to the Gulf. Some jobbers have
reinforced themselves by factories, controlling the output
of certain highly desirable things.
ORGANIZATION-WHOLESALE BUSINESS 167
but some wholesalers thinking that their old ways of
doing things were good enough and could serve as well for
the present as they had for the past, failed to safeguard
themselves against the forces which eventually grew beyond
the safeguarding point. Perhaps they controlled a large
number of retail stores and failed to notice that methods of .
retail selling were being revolutionized, that new systems
were succeeding old, that quicker ways were succeeding
slower, that narrower margins made more frequent move-
ment absolutely essential.
Wholesalers who allowed a decade or so to pass before
they realized that new things were happening are awake
now. The lethargy they allowed to grow upon them and
the scorn they felt for department store and mail order
house was in time electrified and changed into a fighting
spirit. In the furniture trade for instance, there has been
a remarkable renaissance. The lesson af ages has been
taken to heart. All internal unfriendliness has been for-
gotten in the presence of an outside foe, and in this case
there was not only a foe but foes. Pennywise and pound
foolish policies have been abandoned. Money is now spent
to gain the most diverse information about conditions. Com-
petition is so strenuous that trade is a perfect weathercock
in the ease with which it seems to turn this way and that.
Very few traders are so situated that they can say today,
“Buy of me or go without.” They have to keep aware of
every new inducement offered by others, of every advan-
tage possessed by competitors and offer better inducements
and secure greater advantages for itself. Just as far
ahead as the weather maps of today, with their information
about high pressure and low pressure regions, storm cen-
ters and wind directions, from the old almanacs and its
prognostications, so far ahead are the actual maps of trade
in the great business houses of today of the old plans which
men carried in their heads. -
168 SAMUET, M. FARGO
As the telegraph and telephone have daily put into the
hands of the men who make the weather maps hundreds of
Statements about actual weather conditions in localities
Over the whole country, so the great houses have agents
and informants everywhere who send them similar sorts of
information about trade conditions. This is handled by
system and ultimately turned into the channels where it
will be of greatest service. It is all a matter of record. No
One man could block the whole system as in the case of the
Salesman of a certain house whom the proprietor did not
dare discharge because he carried the whole trade of a cer-
tain state in his pocket. Now everything a salesman does
is known of before he does it and he must make report im-
mediately after of his success or failure. Actual maps with
buttons of various colors representing a salesman are now a
part of the equipment of an up-to-date office. On these
his territory is outlined, prospective territory marked out
and a whole complex situation about the work done and to
be done can be seen at a glance.
Through a powerful organization of all its foreign agents
and representatives, resident buyers in Europe and else-
where, buyers who are sent abroad at different seasons,
designers, etc., the wholesale house of Marshall Field re-
ceives the most diverse reports. Everything that bears on
the market is studied and reported—processes of manufac-
ture, production of raw materials, fashions, patterns and
market conditions. This information is classified, tabu-
lated, filed, arranged, and distributed to departments—to
the men in those departments who settle policies. The resi-
dent agents report twice a week. “The Feld information
of service is an unequaled example of the organized study
of business conditions.”
It is said that Mr. Field gained some valuable points
from Mr. Armour in this work of preparing for concentra-
tion by first gaining information on the market, classifying
it and paralleling it with conditions in his own business.
ORGANIZATION-WHOLESALE BUSINESS 169
When Mr. Armour had in mind a coup in wheat or provi-
Sions he did not use the methods of gaining information
Open to all. He sent private agents into the whole wheat
and provisions producing era. He telegraphed to all his
agents in selling centers. All the information gained was
classified and then compared with the accumulated informa-
tion of years.
Under such a system the Field house has grown to be
the greatest purchasing power in the world of its kind.
It not only knows about but in many regions it controls con-
ditions. In New England and old England, in India and
China, and in the great manufacturing centers on continen-
tal Europe it owns and controls mill connections or the prod-
ucts of hand and loom turned out in these regions.
Mr. Harold Irwin Cleveland, in his life of Marshall Field
says: “Mr. Field found himself in 1898 in a position to
buy more raw cotton, raw wool and raw silk at one time
than ony other world’s merchant; and having also his manu-
facturing connections to depend upon, he could with the
resources he had accumulated sell on a margin of profit cer-
tain to ruin any rival attempting to imitate him. The de-
velopment of the wholesale to its broader functions required
no less than did the retail, an organization which could
carry out big plans without the hand of the chief execu-
tive showing in every detail. Delegation of authority to
tried lieutenants was tried here as well as in the retail in the
early days of the business.” *
The organization of this business is so perfect and was
made so perfect by Mr. Field that his partners and the de-
partment heads attended to the actual execution of the de-
tails of all the work. At the time of his death the present
head of the retail house, Mr. Shedd, said of Mr. Field: “For
probably twenty-five years before his death I do not believe
that Mr. Field had personally selected a single item of mer-
chandise; and yet his personality so entered into the whole
170 SAMUEL M. FARGO
course of the business that only two summers ago, when he
was abroad, a prominent statesman and financier told me
he supposed Mr. Field was in Europe buying for the winter
trade. He had not grasped the idea that buying in the great
establishment meant organization of a high order, and the
trained minds of a hundred buyers.” -
Mr. Cleveland thus describes the organization: “Sub-
ordinate to the authority of the chosen associates in the
wholesale were department heads occupying the same rela-
tive position as owners in an ordinary business. Yet the
Organization and functions of the wholesale do not exact
as minute subdivisions as those of the retail, and where the
latter has some two hundred sections, the former is divided
into forty-five departments. Each of these departments has
a complete organization—executive, buying, selling, Stock-
keeping and accounting—so that it exercises all the func-
tions of an independent mercantile house specialized to the
extreme. This gives the heads of departments wide execu-
tive power. They must direct their buyers in the matter of
replenishing the stock; they must govern the selling meth-
ods of their salesmen; they must exercise general supervi-
sion over the policies of the department. And all these
departments are bound together and harmonized by the
executive control of the officers of the company, carrying
out the Field ideas of merchandising. But above all they
must at all times act on the offensive—never on the defen-
sive—and never to allow themselves to be beaten by compe-
tition.”
Houses with a less highly organized intelligence at the
head have held themselves on the defensive. Some of the
national organizations had this aim in forming but soon the
better wisdom prevailed in these. The advice of the leaders
has been to drop this attitude or forget it. The energy
spent in combating their competitors has in many cases gone
chiefly to advertising them. Now men are trying to keep
ORGANIZATION.—WHOLESALE BUSINESS 171
their own businesses so thoroughly organized and every
part of it so alert that they consequently have little time
to complain of those that for a time they thought it neces-
Sary to fight. In this sort of race, as in many other kinds,
the man who looks behind him or to right or left of him to
See What his antagonist is doing is more than likely to lose.
It is the man braced hard against what is ahead of him—
oblivious of others—wholly absorbed in his own herculean
efforts who wins. - -
Of the farther organization of the Field house Mr. Cleve-
land writes: “Another influence working toward unity in
the departments is the main selling organization of the
house. In addition to the “department salesmen,” whose
efforts are confined to a particular stock, there is, directly
subordinate to the sales manager, a corps of ‘general sales-
men’ whose interests are territorial. Instead of selling silk
or calicoes, they sell to the trade of Nebraska or Texas.
They are the personal bond between the local merchant,
whose individual prejudices must be studied and humored,
and the big, impersonal house. Coming from a distance,
perhaps from a country town, to buy his stock, the mer-
chant is not sent to hunt up his various lines with a be-
wildering mass of directions involving many rooms and
floors and aisles. He is taken at once to the general sales-
man of the state, whom he knows already if he has so much
as exchanged letters with the house, and whom he has very
probably met in the periodical trips which the salesman
makes through his territory. Thus the merchant is ‘taken
care of personally.” He is introduced to salesmen in each
department where he wishes to buy. All of his orders are
sent at once to the general salesman, who sees that they are
shipped on time and continues the correspondence until
another visit. c .
“In this way the general salesman represents both the
house and the merchant. In the house during the busy
172 SAMUET, M. FARGO
Season of spring and fall, or travelling through their terri-
tory at other times, they have intimate acquaintance with
all their customers in that district and are held responsible
for the development of trade in their state or section.
Where Field's should sellin a locality and do not, they must
find means to interest the merchants of that locality. There
are ‘general line salesmen,” also who are constantly upon the
road, Selling goods for every department of the house.”
It has always been the policy of Field's to encourage
their customers to make regular trips to Chicago. Here
they have a wider range of choice than from samples, and
can examine stocks at first hand. The visitors’ register
which is laid on the sales manager’s desk will often show
for two hours of the day forty or fifty names of merchants
from all corners of the country. Two-thirds of its selling
is to this wide-spread trade. The other third of the mer-
chandise goes through the retail house. The visiting mer-
chants are encouraged to buy often rather than extensively
that they may make frequent turnovers of their stock.
“This is one of Mr. Field’s contributions to wholesale
merchandising, in the opinion of the present officers of the
company. It permits the house to demand sixty-day pay-
ments and to set the pace in this respect for every wholesale
house in the country, among which credit was formerly ex-
tended for four and six month periods. It strengthens the
merchant’s financial standing by reducing his indebted-
ness, and so fortifies him against a sudden reversal. It sup-
plies Field's with ready cash to discount all their bills, en-
abling them to fix lower prices on their goods.”
The work of the credit department of this house has a
national and perhaps an international fame. It has its
strong voice in the campaigns of the selling department.
The quality of the goods sold is always unquestionable. The
wonderful organization has secured this as well as built up
a field and held it against all comers. Other houses have
oRGANIZATION.—whoLESALE BUSINESS 178.
built their territory and held what has come into their
grasp by more or less haphazard methods. The service of
this house has been strengthened and extended by fore-
thought and skill. The following statement shows how it
has grown and what it can do: Beginning with the time
When the Salesman bought a team and wagon, loaded up his
trunks at the railway terminus and started off through the
Black Hills and across the prairies, ahead of railroad and
even stage coach, Field's have come to the time when they
can furnish the merchant of any town west of the Allegha-
nies with any goods he wishes, from any mills in the world.
The general reputation of the Field house is world-wide.
Its methods are as nearly model perhaps as those of any
business in the same line in the World. While its selling
Organization has a most complete grasp of its particular
territory through perfected management, its buying Organi-
Zation controls in the same way World conditions. Its
policy is “never to sell anything for which the house has
not had previous definite promise of early delivery.” Its
control of both hand and mill manufacturers, from blankets
and carpets and rugs and fabrics of every sort to the finest
of laces and linens and embroideries, reaches literally
around the world, as the legends and pictures on its envel-
opes for small goods sometimes tell us so picturesquely.
Its jobbing interests in the great textile manufacturing
districts of the globe have been long established by means
of main and branch offices, with control over the textlie
markets of the world.
The history of this movement, or activity, is thus told
by Mr. Cleveland: “The first venture in the foreign field
which distinguished the house from other buyers of im-
ported goods was the establishment of financial headquar-
ters in Manchester, England, in 1870, followed soon by the
founding of a branch in Paris. Here was established the
headquarters of buyers who remained abroad—the former
174 SAMUEL M, FARGO
in the center of the British mill district; the latter to cover
the products of the continent. As business grew, and
specialization increased, other branches rapidly followed at
the seat of production of the wares carried by Field's; silks,
laces, linens, cotton and woolen goods. Now there are
branches in England and throughout the continent and far
East. Wherever dependable merchandise is manufactured,
there you will find Field credit is established with cash.
These branches took on a new significance with the broad-
ening of the wholesaler’s ideals twenty-five years ago. Buy-
ers who were specialists were sent everywhere. Theirs
was a larger function than merely to chose between the
varieties of goods offered them by manufacturers. They
directed—not followed— the manufacturer of their lines.
They entered the European market with well-defined ideas
of what they needed—what the merchants and consumers
Of the West wanted.” -
The man or men at the head of a wholesale business may
easily be among the greatest powers in the commercial
world today. These men are in certain localities doing
more to mass business, so as to attain the advantages of
aggregation, and with higher social and patriotic motives
probably, than any other set of men among those engaged
in financial, commercial, industrial or mercantile pursuits.
They are giving their time and their money to general trade
and civic betterment. They are able to do this, and not at .
the same time be neglecting their business, because they
have delegated all the details of its management to others.
Mr. Franklin McVeagh, wholesale grocer, and now in the
|United States Cabinet as Secretary of the Treasury, always
has taken time or acquired the leisure to give to civic and
literary pursuits. The following is the explanation in his
own words of how he could do this and yet succeed in his
business: “The mercantile business is like a clock. If you
Once get it well organized, if you make every wheel and
ORGANIZATION.—WHOLESALE BUSINESS 175
Cog true so that they all work in together, oil the whole,
set it going, and give it its regular attentive winding, you
can leave it and it will run automatically. Translated into
business language, this means that if you thoroughly or-
ganize and systematize a business establishment, if you
instill into it that co-operation and harmony which is the
oil of the human machine, and if you give it periodic atten-
tion to see that it is running evenly and up to normal effici-
ency—the business organization will run automatically.
There is no one department of the wholesale business
more important than the other. Your buying, office, sell-
ing, credits, shipping, warehousing, accounts are all vital.
All deserve a painstaking organization. All can be put
upon a safe-running basis so far as the details of the routine
are concerned. If all these departments are rightly organ-
ized, a business need not require the personal Supervision
and entire time of the chief executive. This business is so
conducted that my presence in the office on any particular
day is not imperative. The organization handles the busi-
ness.”
With the right sort of man at the head of any business
things fall into position naturally, as iron filings
gather around a magnet. With the wrong man all the
system and method in the world but leads to the tieing up
in red tape things that ought to move without restric-
tion. Too much system or too frequent changes in Sys-
tem are often quite as bad for business as too little. A
man with many theories is likely to put too much emphasis
on ways of doing and too little on doing. He may also
spend too much time watching to see how people are doing
their work, rather than in considering what they are ac-
complishing. With increasing fussiness there is increasing
fuming. - .
Yet everything in the wholesale business must be at-
tended to with the utmost care. Transactions sometimes
176 SAMUEL M. FARGO
turn on ten per cent margins and only the most careful figur-
ing of Carload shipments makes profit possible at all. The
Ordinary commission is from twenty-five to forty per cent
off from the selling price, and this must cover operating
expenses, agents’ commission and a fair net profit based on
the volume of the business. “The basis for wholesale car-
culations,” says a recent writer on the subject, “is found
in the manufacturer’s invoice. Goods costing him $15 and
priced to sell at $20 afford him a profit on sale of twenty-
five per cent, but which, aside from cash discounts is thirty-
three and a third per cent on the money invested.”
The accounting methods in the wholesale business has
gone through great changes during the last ten years.
Loose tickets, memorandum books and similar methods are
no longer in vogue by the man who is keeping his shop in
order that it may keep him. Every part or every member
of the organization has records of some sort which he must
keep. Sometimes it is the card index telling more in a
Small space and telling it a thousand times quicker, than
any of the old books did in hundreds of pages. As the doc-
tor on a single card keeps a great number of facts about a
patient, number of times he calls, his various symtoms each
time, what was prescribed, etc., and has but to look at this
to send a bill or send medicine, so each and every com-
mander from greatest to least in the business world today,
has his accessible little box of information.
Take the working force of a wholesale grocery, which is
as follows for the office part: Buyer, salesmanager, credit
man, bookkeeper, cashier, billing clerk, and stenographer
each multiplied and assisted according to the size of the
business. For the warehouse, there must be the receiving
clerk or clerks, the shipping clerk, the stockkeeper, porters,
and draymen. For the road, the salesmen to whom more
attention has of late been given than to all the other parts
of the business, possibly, in order to make them the efficient
agents that are now required.
ORGANIZATION_WHOLESALE BUSINESS 177
The buyer has his card index outfit which gives him all
the details concerning a purchase. This is compared with
the invoice received, and is so arranged that any mistake
is quickly noted. A further check on goods purchased
comes through the work of the receiving clerk. He does
not check off the goods with invoice in hand as of old, and
then mislay it as likely as not. He does not know what the
invoice calls for but he must check the goods correctly, on
particular forms for the purpose, with original and dupli-
cate copies usually punched to fit post binders. Separate
slips are used for each shipment and give an accurate ac-
count of all goods received. If he makes a mistake, or if
the goods are not sent per invoice, this is immediately seen
when his receiving slip is compared with the invoice.
Such a method as this, besides furnishing an adequate
check, also preserves the privacy of prices, and saves all the
trouble that comes from mislaid invoices. After the goods
are checked up they are turned over to the stockkeeper, ar-
ranged and classified in the warehouse according to some
system that will best facilitate their handling. For small
things alphabetical arrangements for the shelves—perhaps
the rolling shelves which furnish protection as well as place.
The stockkeeper has a stock-report sheet by means of which
he keeps the buyer informed concerning goods that are get-
ting low or need to be ordered.
The invoice goes to the salesmanager and one of the
many parts of his work is to note the cost and selling price
according to some card or book system. It is his duty to
keep the salesman posted as to prices as well as to many
other things. Salesmen are provided with pads or Order
sheets according to some approved form. These sheets are
sent into the house each day and the total sales of each
man are made up from these once a week. Even the ex-
pense account is now handled by a system and O. K.'d by
the salesmanager.
178 - SAMUEL M. FARGO
The Order sheet sent in by a salesman goes first to the
Salesmanager, for his O. K. The credit man next passes
upon it. When he does not know about the standing of the
One buying he goes to the reports of mercantile agencies, or
makes out a form which he sends to other jobbing houses,
who may be able to give him the necessary information
about the new customer's financial competency. System
next takes the order to the bookkeeping department where
it is numbered and sent to the shipping department, but is
returned to be checked off on an order register so that it
may be impossible to ship goods without proper charges
having been made. -
In the shipping department there are checkings and re-
checkings by shipping clerk and packer. If there is some
part of the order that cannot be filled from stock this is
marked out but a record of the fact is made and filed. There
are shipping tickets, freight bills and bills of lading to be
made out all in duplicate or triplicate by means of carbon
sheets. After all this when the items are ready and on the
dray there is rechecking, and then tickets from drayman
to shipping clerk or from shipping clerk to drayman. And
finally the order sheet goes to the billing clerk’s desk. The
invoice is made on a typewriter, is rechecked, and mailed
with the bill of lading and whatever else this particular
house sends out with its invoices. It may be a letter of
thanks or an order sheet or both.
The Selling Organization.
Many of the people who attend to the details enumerated
above have no other duties than these. But there is one
man whose responsibilities are greater in a sense than all
these factors put together, save only the credit man.
This is the Sales manager. The sales manager is an evolu-
tion. In some establishments the bookkeeper did some of
ORGANIZATION.—WHOLESALE BUSINESS 179
the things he has to do now. The proprietor did others,
and a great deal that he does now was not done at all. When
the need for having these things done became great, he ap-
peared as a most important link, a very king pin in the Or-
ganization of a selling concern. The more the concern has
to sell, and the greater the competition it has to meet, the
greater are the duties of the sales manager.
What the sales manager is and what he does and thinks
it takes books to describe. He plans courses for the educa-
tion of salesmen. He presides over their instruction and
Over the meetings he calls once a week or Once a month
according to the size of the territory covered. He gives
“ginger talks.” He is always devising new methods of
selling and keeping in touch with customers. He stimu-
lates this salesman and restrains that. The selling force
is really his creation.
The most elementary of the sales manager's task is the
assigning of men to their fields and mapping out their routes
in it. He can do this by the simple application of mathe-
matical rules though problems may arise, and those of a
trying nature, when he wishes to divide a field, yet for much
of the work the makers of appliances have furnished him
with excellent devices.
Of the many things that have been said and written
about the sales manager, someone has said that he is the
salesman for the whole house, and that just as the individual
salesman knows his customers, the condition of their busi-
ness, and the things that influence their buying capacity,
so the sales manager must know the same facts about all the
customers, and he must know them much more thoroughly.
It is his business to get all the business he can, avoid all the
losses he can, keep in perfect touch with his men, and be
On the friendliest terms with customers. -
The day when each salesman was a law unto himself,
planned his own selling campaigns, was the only one that
180 SAMUET, M. FARGO
knew his customers, and, as it were, held the whip hand
Over his employer, has passed. Now there is team work
and the sales manager holds every rein. He could never
do this without the marvellous conveniences of modern sys-
tem. There are still small businesses in which the head is
his own manager but he, too, uses modern system, knows
where his men are every day and to whom they are selling,
and even whom they are missing and ought to sell to.
Today office records are made so complete that they
form the most valuable collection of data by the study of
which men plan future courses of action. The sales mana-
ger by his system can keep accurately in touch with all who
are buying, and one of the first steps in the system is this
of knowing what they are buying, whether their orders are
smaller than was expected or whether they are becoming
larger buyers. The sales manager goes over the sales sheets
at certain periods, and over the customer’s ledgers and the
reports of salesmen, to find out just what has been pur-
chased and gauges future business somewhat by past, that
is, he considers past purchases a guide for future. He has
his card index showing these facts by months or weeks, and
also those showing present sales. By comparing the two
and by studying them, he learns how trade is running.
These cards become more and more valuable as the years
paSS. &
If a sales manager finds that orders are running behind
it is for him to find out why and also find a remedy for
the condition. If a customer is not coming up to expecta-
tions in his trade he must investigate. In all this work
while he may have many things in his head the sales
manager must not trust to his memory. Even in learning to
handle customers he is helped at every point by his records,
and this information must be systematically and persist-
ently kept.
It is the sales manager who is doing what was once con-
ORGANIZATION_WHOLESALE BUSINESS 181
sidered an impossible task—he is making salesmen. He
is the man, more than all others, who is investigating sell-
ing principles and organizing them or reducing them to
practice. These principles are applied to the selling of
different classes of goods, but in large part they concern
that intensely human quality that comes in to complicate
the process of Selling with every new customer approached.
So notable have been the changes in the character and meth-
Ods of the Salesman that these are considered as marking
One of the phenomenal advances of modern business.
The “World’s Work” in discussing some of the modern
selling problems remarks: “Once the salesman was self-
taught, crafty, and glib. Now he is often a trained logician,
and an expert in evidence. The untrained man calls a
dozen times while the purchaser is deliberating and hesitat-
ing. The trained man calls Once, makes certain points
Strikingly clear, and closes the sale at a higher price than
others ask. He covers more territory, gives his house an
advantage over competitors, and earns a larger salary.”
Lut the trained logician, even, is not left to himself.
Methods to find out where to sell—highly organized meth-
ods—are devised to help him, and “selling points” are
thoroughly canvassed in meetings of all the salesman be-
fore he starts out. It is probably from the factory that the
most highly trained salesmen of today go out, and yet it is
said that in the improvement of selling methods the ground
has hardly yet been broken. Selling is spoken of as a third of
the factory work, and the part that at present needs the
most improvement. One or two factories have today the
most complete organization for training and sending out
salesmen, probably, of any of the existing selling establish-
ments, although all businesses conducted through agents
have in the last few years held meetings or institutes for
their training. * - - - *
The embryo salesman listens to lectures on selling. He
182 SAMUET, M. FARGO
learns a manual by heart. He listens to an experienced
Salesman “sell” before an assembled body of salesmen, and
when his turn comes he has to try it himself before this
audience. By the time he is ready to go out he has been
tried out and he is capable of presenting the goods properly.
It has been said that when you want to make a thing
no one will stand in your way, but when you try to sell it
there seems to be a conspiracy against you. The personal
elements in selling are what makes it difficult, and every
psychological principle is now being adopted by those who
train Salesmen, and applied in teaching them how to deal
With customers. “The work of the salesman,” says Mr.
Walter Moody in his book, “Men Who Sell Things,” “dif-
fers little in character from that of the lawyer, the preacher,
the Orator, or the statesman. In each of these professions
success depends on the power to draw and persuade peo-
ple.”
“The prime business of the salesman,” says W. H. Grif-
fin, “is to make others think as he does by a system of telep-
athy, in which he far excels the advertisement, catalogue,
novelty or other method of presentation, through the power
and exercise of all his senses, bringing to bear upon his
hearer the very best products of his experience, training
and judgment through speech.”
There are so many markets to which the customer can
go, that it is highly necessary to impress him with the fact
that the house represented is the best. The attempts to
organize and to put into print the best methods for doing
this are now becoming common but not as yet highly Scienti-
fic, the science is too new. Psychology has until within a
decade or so been left to the schools, now it has been taken-
over by business and applied to all the selling processes.
The behavior of a salesman has been so systematized
that he knows how to open a conversation under different
psychological conditions. He is advised when and where
ORGANIZATION_WHOLESALE BUSINESS 183
not to laugh. Tact, politeriess and the rules for using each,
are a part of the things inculcated by the modern Schools
for salesmanship.
What the salesmanager should know and do in chos-
ing men has been almost reduced to a formula. He must
know human nature. He must know a gentleman when he
sees one either in embryo or fully developed. He must
choose men of great social qualities if they are to be had,
and he must train and develop these in men who have not
done so far themselves. He must notice everything about
a man that may count in his work—his voice, his education
and his health. -
So fine are the distinctions made in the choosing of men
that the greatest care is used to get men who are optimistic,
to give them nothing but positive training, never the nega-
tive “Do nots,” and to keep them from falling into bad
habits when they are once on the road.
In salesmanship as in almost everything else, this is
the age of the specialist, of concentration, of maximum re-
sults and minimum wastes. The salesman must Organize
his ability, plan his work, study his territory systematically,
carry out his plans thoroughly and keep his mind. On his
business just as firmly as does the head of the Organization
in which he is employed. - • -
One of the recently current causes of discontent among
unprogressive salesmen has been that territories have been
made smaller and the work specialized. Mr. MOOOdy tells
of a man traveling in a field distant from his house whose
annual sales were one hundred and forty thousand dollars.
His sales manager thought there was more business here
and wanted him to make two trips a year instead of One.
He objected to being disturbed in his routine, and when the
matter was urged upon him went to the president and re-
signed in a tragic manner. His resignation, probably to
his surprise, was accepted, his territory rehabilitated, di-
184 SAMUEL. M. FARGO
vided into three sections and each given to young men
“brimming with enthusiasm” and anxious to be put on the
road, also “with ideas instilled into them from headquar-
ters.” At the end of the first year the aggregated sales
amounted to two hundred and fifty thousand dollars, and
each of the three sections had growing prospects.
Of this confining of effort to a narrower territory and
Specializing in it Mr. Moody says:
“One of the most important things to the average sales-
man in specializing his efforts is to confine his work to as
limited a territory as possible, insuring profitable returns
for energy expended. Seven out of ten salesmen traveling
with trunks and representing wholesale concerns, cover
from thirty-three and one-third to fifty per cent more terri-
tory than is necessary to produce the best results to be ob-
tained. Few, apparently, recognize the fact that concen-
tration of energy on a limited number of accounts produces
in the end much more satisfactory business than the same
reaped from a broader field. A little soil well tilled is
infinitely better than a large acreage half raked over.
Your territory is an asset of your house just as much
as its surplus capital, stock, or book accounts. The worth
of your territory as an asset is gauged entirely by the man-
ner in which it is gone over. This does not apply to all
lines in the manufacturing world, but it is invariably the
case with jobbing houses or wholesalers in any line. -
The too infrequent calling upon customers leaves a
loophole for your trade to escape and scatter its accounts
among a large number of houses; but this escape could not
be possible if you would visit your customers oftener.
Every time you give your competitors a chance to wean
away your customers’ accounts and likewise their confi-
dence, you render your trade of an uncertain quantity as
well as quality.”
Very elaborate forms, showing an extensive amount of
ORGANIZATION.—WHOLESALE BUSINESS 185
information, are now in service in many houses for the
keeping track of sales costs. Modern system and organiza-
tion have reduced these matters to more exact bookkeeping
than has before existed but there is yet much chance for
improvement, according to the writer of the World’s Work
mentioned above. He says that selling expense is the most
troublesome item in business. He is speaking with espe-
cial reference to factory selling, but after goods are once
manufactured the processes of distribution follow much the
same laws no matter who does the selling. He says: “To
regulate selling expense is one of the most difficult problems
in hundreds of industries. It is in most kinds of merchan-
dise, except absolute staples, the largest individual charge
in conducting a business. It is out of all proportion to
manufacturing costs or profits.” *
He tells why machinery made in Ohio can be bought
cheaper in South America than in New York. It is shipped
for two-thirds the retail price in a clean and simple trans-
action. But “if these same goods went to his New York
salesroom there would be the item of selling expense to
deal with. Broadway rents are high. He carries all the
year around between ten thousand and twenty thousand
dollars’ worth of stock, representing capital, interest, taxes,
insurance, depreciation, etc. Salesmen are paid twenty-
five hundred to six thousand dollars a year to put the goods
into customers’ hands. Time is needed to make sales,
There are delivery charges, exchanges, and returns. Pay-
ments are often arranged on the installment plan.
“As a rule, one-third the price that a customer pays for
an article (other than staples) represents the manufactur-
ing cost; another third, profits and accounting, and the
remaining one-third the expense of selling. That is,
roughly, the basis upon which millions of dollars in trade
are handled every year. Manufacturing cost is made up
of items that have been wonderfully systematized and
trimmed down to the closest margins in modern production,
186 SAMUEL. M. FARGO
But the third that stands for selling expense has yet to
be systematized. Money put into raw materials or labor
goes for something definite and calculable. But money put
into selling expense goes in an odd number of ways. It is
spent for psychological impulse, such as advertising. It
goes for railroad fares and unfruitful calls of salesmen. It
is spent in ‘missionary’ work to stimulate everybody, from
wholesale to merchant’s clerks, making the outlet to the
consumer wider and easier. It goes for ‘demonstrations,’
is sown broadcast in printed matter, is chopped up into Sam-
ples. It must pay for the year's hesitation of the man who
needed an office machine, and pay for his two months’ in-
vestigation—and even pay somewhere for the Sales Com-
petitors did not make.
Selling expense is, in the average business, a most elu-
sive and unsystematic item of outgo, a most human item,
and the item that now offers the largest margin of econo-
mies.”
Much more clerical work is now done in connection with
selling than has ever been done before. The work of sales-
men is supplemented by correspondence. Fields are pre-
pared for them in this way, kept open and reopened. At-
tentions from a large house sometimes seem more personal,
and less of the ax-to-grand variety, than the calls of a sales-
man. Friendly reminders from the house both of apprecia-
tion and regret; letters of thanks for orders received; and
special invitations to attend a fall or spring showing of
goods do much to help business in houses selling certain
kinds of merchandise. Such a correspondence is carried out
with the most perfect system. Every customer must be
taken care of. -
Selling by catalogue is coming to be more and more
adopted by wholesalers even by those who have been long
established. The catalogue of a wholesale hardware store
in Chicago has been compared to an unabridged dictionary.
ORGANIZATION.—who ESALE BUSINESS 1st
It is taken out by the salesman, and weighs thirty pounds. .
The Statement that this particular jobbing house is the
largest commercial institution of its kind in the whole world
goes unchallenged. In order to protect its trade, insure
quality, and maintain its vast supplies, as well as reduce
prices, this house operates its own factories, as many other
jobbing houses are now doing in order to strengthen them-
selves with their trade and to reach out for more and bet-
ter business. *
Wholesale hardware, clothing, millinery and other
houses not only have their great annual and semi-annual
catalogues but issue monthly editions by tens of thousands.
The printing and mailing expense when this work is exten-
sive is enormous.
The largest and most successful of the wholesale mail
order houses is one of the most perfectly organized of mod-
ern selling institutions. This house started in Boston but
now has its headquarters in Chicago with great branch
houses in other large cities. Perhaps no business could be
more perfectly systematized than this one is. It sells by
catalogue but it also has its “visitors,” or salesmen. The
large catalogue goes out twice a year, and separate parts of
it go out every month, or sometimes even oftener when
there are special sales.
The making of this catalogue illustrates perfectly how
system may be carried into work that is notoriously un-
systematized—that of printing. In this case there is not
one editor but many, the work being perfectly Subdivided
and under minute inspection. Then from the time the copy
leaves the hands of the editors until the plates have been
corrected and the books bound, a system of checks and re-
checks is so perfect that any mistake may be traced back to
its source with the most surprising directness.
All of the printing is done in Chicago which has its own
plant. The galley paper for different cities has different
188 SAMUEL M. FARGO
colored edges. The proofreaders also have certain marks
—many marks—to show not only what city but to what
place in the system each gallery belongs. There are also
stamps like “final” to show further just what the galley is.
Right beside the proofreaders are girls with books contain-
ing copies of each item which the editors have cut out of old
Catalogues and used. Some galleys are simply pick ups
from old catalogues and yet these are handled like first
proofs and are checked as the first proofs are by the girls
who have these books. Pencils of various colors and spe-
cial marks are used when it comes to handling the pages.
A comparison of this work as done in this establishment
and similar work done elsewhere, shows plainly why the
house can Once a year give all its employees a share of the
earnings, a good per cent on the salary they have been re-
ceiving.
Perhaps the house in question was one of the first to
realize the advantage of a position with the best transporta-
tion facilities. Trains of cars can run into the basement of
its great warehouses which are also so situated as to have
all the advantages of water transportation. Many large
merchandising houses of various sorts have constructed
warehouses and shipping rooms with both rail and water
facilities for the rapid and economical handling of goods.
Everything that management can do, and system can devise
is now done to save the small expenses that determine in
the end whether good profits or small profits shall be made.
Single kinds of wholesaling, in a city like Chicago
now do a business of many millions a year. Fifteen million
dollars’ worth of hats, for instance, are soldin Chicago every
year. The immense stores which do this business are
almost too complex and vast to be described. It is believed
by them, at least, that no other business is more highly
systematized. These houses have many departments, each
of itself a business, with expert at the head, foreign buy-
ORGANIZATION_WHOLESALE BUSINESS 189
ers, vast Stock to supply all demands, travelling salesmen,
Catalogues and work rooms. The business is of the sort
that requires the highest ingenuity and shrewdness and
even these things are systematized and organized. By sys-
tem a Paris style may be by them placed on the market four
weeks from the time it originated.
Wholesaling is an old, old business but today it is in
many ways very new. The marvels of the age are in the
way big things are done, as well as in the fact that they
are done. Wholesaling must do things on a large scale. It
must adopt the newest and best methods of doing things.
Of the new things it has adopted perhaps nothing is more
wonderful than modern organization.
ORGANIZATION OF THE DEPARTMENT STORE.
BY J. J. STOKES,
[Advertising Manager Marshall Field & Co., Chicago.]
The department store is modern. Any strictly modern
business has both extent and breadth. It has also wheels
within wheels. It reaches out and around, up and down
and across. It plans to do much and get much. It is
Swift to turn its plans into action. It doesn’t plant grass
seed to grow under its feet but lays cement or even mosaic
walks, adorning all its paths and ways. And it makes them
very smooth for business.
The department store was not a welcome child in the
retail family. As it was inclined to do its own jobbing
the wholesale people could not congratulate their patrons
upon this addition to the flock. The infant was too colossal.
It crowded some of the family to the wall. The hedge spar-
row had hatched a cuckoo's egg and was mortally afraid
that the foundling would not only eat up its young but it-
self. It fluttered and scolded—is fluttering and scolding
yet—but the intruder didn’t mind. Like Mr. Finney’s tur-
nip it grew and grew, and its advocates say it did no harm,
that rather it stimulated trade and that the benefits of this
stimulation have been shared by the Small and special
stores. -
“If the counters in Chicago's largest store of this kind,”
says Mr. Higinbotham in his “The Making of a Merchant,”
“were placed end to end they would make a causeway six
miles long, Were the delivery wagons and teams of this
institution drawn up in marching order they would com-
pletely surround an entire city square. A careful estimate
of the number of persons entering this place during its
banner day of trade is 225,000. This means, roughly speak-
190
DEPARTMENT STORE ORGANIZATION 191
ing, that the crowd which passes under this roof on a single
day’s traffice more than equals the entire population of
Louisville, Minneapolis or Jersey City. The average force
of employees maintained by an institution of this size is
about 3,300, but this brigade is increased to 4,000 to meet
the demands of a prosperous holiday trade. * * * The
business transacted by the largest department store of the
West would equal all the retail traffic done by a city of
about 80,000 inhabitants.
“Another way of bringing the bigness of the depart-
ment store within the realization of the reader is by refer-
ence to the size of its purchases. One store in Chicago
bought in one bill a stock of granite kitchen ware which
filled seventeen cars that were made up into a special train.
* * * One Chicago department store in the past year
(1909) made over four million deliveries. The number of
packages of merchandise thus handled would probably tri-
ple this figure, as comparatively few patrons purchase sin-
gle articles at one time, while many a suburban delivery
wagon leaves a score of parcels at a house at the same time.”
At the present day the department store is among the
inevitable things. It would probably have been much bet-
ter for the Small stores if they had recognized its staying
qualities long ago. The system which it represents now ex-
tends throughout the country, and this system is one of the
modern triumphs in the way of management. It sells the
largest things and the smallest things. There is no limit
to the variety of the merchandise it offers. It concentrates
a great number of lines of goods within a comparatively
small space, and no business that is conducted under one
roof equals the department store in the magnitude of details
handled. The profits are mostly from the sale of small
things and these must be handled with an infinite care for
Betails. System must be approximately perfect.
The department store has come to stay because it really
192 J. J. STOKES
confers great benefits upon the buying public, some of
which are manifested and some of which are not. These
are all trade measures, and yet there is a belief in honest
dealing, and some gratification that is not measured in dol-
lars and cents, by the owners of these stores in that they
can provide so greatly for the convenience, pleasure and
comfort of patrons. There is no relaxing of effort to teach
people to buy more than they formerly did, but their having
learned to do so has helped many lines of business besides
the store which has done the teaching. The great and
splendid displays suggest needs, and the presence of the
goods suggests that they be gratified.
One reason recently given for the increase of department
store business in the last few years has been that the doc-
trine of cleanliness has spread so rapidly. People of the
same proportional income spend much more than formerly
for clothes in order to be clean. The department store car-
ries an enormous quantity and a great variety of ready-
made clothing for men, women and children and the im-
provement in organization and machinery which it has in-
troduced in many cases has made these cheaper. The large
stores do their own manufacturing. But the benefit from
larger buying by people who wish to be clean is not monopo-
lized by them.
The management of great businesses is often compared
to the running of affairs in a Small government and to an
absolute monarchy at that. There seems to be no limit to
the scope of these undertakings for each new establishment
has new and greater features and the old are constantly
adding. It is because of the tremendous outlay in different
directions—single departments may spend as much as two
millions a year and departments number anywhere from
fifty to a hundred—that a strong, central controlling power
is needed and the lines which it holds taut in its hands
must extend to every minutest point of the business. With-
|
DEPARTMENT STORE ORGANIZATION 193
Out Such control and a carefully planned system of duties
and responsibilities, everything would be in hopeless con-
fusion.
The general manager at the head of one of these greatest
of selling organizations must be a great man. It is his
genius that builds up the business, or at any rate that keeps
it up to date and efficiency. Perhaps the most essential
part of this genius is his ability to supplement himself, with
other strong men. He must know how to chose, use, and
develop men. He must know how to bring them into com-
binations as nearly frictionless as ever a company of men
can be made. He must know how to use every quality,
energy and ambition to the best advantage. He must sur-
round himself with men of great ability in order that he
devote himself mainly to the merchandising end of the busi-
Iſle SS.
Henry Alexander Harwood in the Saturday Evening
Post for April 10, 1909, begins his article thus: “Wanted—
A man for the position of general manager of a Big De-
partment Store. Must be the very best. Salary, $50,000
to begin with; $100,000 a year after making good. Apply—
any one of the country’s great department stores.”
What follows is, we may believe, not thoroughly well
substantiated, although it may be true, as Mr. Harwood
claims, that there are at least five such positions waiting in
the department-store profession, and that there are dozens
of positions ranging from $5,000 to $25,000 waiting the
right man to claim them, and that this cannot be said of any
other profession not even excepting steel. He claims that
there is a dearth of good material, a famine in the market,
that inferior men are holding $5,000 and $10,000 jobs while
there are dozens of proprietors who would gladly pay twice
and a half this larger sum if they could get the right man.
But this is the reason for this famine, according to Mr.
Harwood. The dry-goods salesman has been under fire
194 J. J. STOKES -- - - -
“like the mother-in-law and the old maid “ ”.” Men have
been frightened out of this work by the gibes of friends and
comic papers. It hasn’t mattered that the joker has been
earning but twelve dollars a week or less his gibes have had
their effect and now the joke is on “some fifty thousand
bright young men who were frightened out of the richest
pastures of business life.”
Such an explanation may agree with the experience of
different proprietors in different cities and yet there are
undoubtedly some men who are growing old waiting to
Step into the shoes of the man above them.
The general manager may be the proprietor or pro-
prietors of the store. Next come the superintendent, who
usually has an assistant. He employs a larger part of the
help, though in Some stores each manager chooses his own
employes. The department managers or buyers come next,
and these are the men that are hard to get. On their skill
and shrewdness in buying depends the success of their de-
partment. They always have their understudy, in the
way of an assistant, in the largest stores, but these men
may not be equal to the great responsibility when advance-
ment comes. No matter how well they may fill the second-
ary positions they may fail in the more important one.
These head men are frequently lured away by other stores
Or businesses Or they go into business for themselves.
The place of these men next the great merchandising
leader or leaders is a highly honorable one. It is a crown
of qualities, a spur to effort. It is ability, enthusiasm, de-
votion to business which has brought them to it. These
heads of departments come very close to the policy of the
great going concern. It is left to them to work out the
minutiae of system. Under them are section heads or heads
of stock and salespeople, and all the smaller helpers in stock
and elsewhere. They are really great merchants in and of
themselves. Each department is a little or big store, much
DEPARTMENT STORE ORGANIZATION 195
as the head determines. He can buy a great bill of goods
as though for his own store, plan his own Sales campaign,
and, if he shows enough ability to run the whole store, he is
very likely to be doing it shortly or be given an oppor-
tunity to run some other of equal size and importance.
A business of any larger sort is made or marred by the
amount of attention that is bestowed upon its departments.
And this attention should not come in any large measure
from the head of the establishment. The buyer or man-
ager must make his daily report to his chief but he is re-
sponsible for the buying and arrangement of goods, for the
floorwalkers and clerks under him and for the smooth run-
ning for his part of the store. There are usually regular
monthly councils of department heads.
The rank of the floorwalker, though a degree or two
below the manager, has the appearance of being high. The
air of importancee he wears, his politeness to shoppers, even
the exceptional way in which he wears his clothes, and the
way he walks down the aisle, have their place in the busi-
ness. He is a picturesque and a necessary figure in trade.
His especial duties are to keep a watchful eye upon the
salesmen and saleswomen and to see that no customers are
neglected. His O. K. is necessary for several sorts of trans-
actions, and his permission is needed before any clerk leaves
the department.
The clerks in a department store, though their position
is less responsible than some others, are yet divided into
grades with different responsibilities. But whatever their
grade their position is a most important One, since they come
next to customers and so have a great effect on the popular-
ity of the store. The way they are managed has much to do
with the willingness and cheerfulness with which they do
their work, especially such duties as the arrangement of
stock at night which in rush seasons like the holidays in-
volves many hours of work. The good manager then tries
196 J. J. STOKES
to have them work in relays so that the burden may not be
too heavy for any one. Special arrangements are also made
about the hours of coming and going. A part may come
early and go earlier than the others, and alternate in this.
Every little advantage helps towards making a contented
force. -
The department store is a collection of small stores. Its
head is a proprietor or stockholders. But besides the de-
partments that are stores, there are certain others, the ad-
Vertising, the accounting, etc., the expense of whose running
as well as the rent and expenses of lighting, heating, clean-
ing, etc., must be shared by all. But these things being
done on so large a scale are proportionately less expensive
than they would be were each store by itself. The saving in
expense in this way enables the department store often to
Sell its goods cheaper than can the single line store.
The assigning of space to each department, the general
determination of their activities, is usually settled by those
in authority in cabinet meeting with the heads. It is in such
settlement and determinations that wise heads show their
supreme ability in handling their business. There are bound
to be those who think they might sell better if they had a
better position in the store, more space, more attention
from the advertising department, etc. This is one reason
why every detail must be within the grasp of the manager.
Otherwise he could not weigh complaints justly and make
reforms judiciously. He is the court of final appeal in all
the matters pertaining to the management and conduct of
the store. The heads of some departments may be over
sanguine, of others too conservative. He may have to re-
strain the one and spur the other, but the wisest manager
makes each head or buyer a financial integer. He then can
bear the whole blame for failure and get the whole credit
for success. If he understocks he may have to pay for the
error by some restriction of his power or loss of space. If
DEPARTMENT STORE ORGANIZATION 197
he has overstocked he has made a blunder which the adver-
tising man may help him to rectify.
The perfect combination for any department is a far-
seeing, shrewd buyer and a courteous, hard-working “aisle
manager”—as the floorwalker sometimes prefers to be
called—with a knack of managing people, with putting the
army of salespeople through their daily drill, himself the
captain. With such a combination any department will
make its due profits and be able to pay its share of the ex-
penses of the establishment. The checks which have been
invented for finding out whether it is doing so are now SO
perfect as to show the personal and financial temperature
in every department, every day and even every hour of
the day. -
The cash department, the pool into which all the rivulets
of sales empty, is the One where accuracy is the most essen-
tial and where this work is the most trying. In the great
store hundreds of thousands of dollars are handled daily and
there is the greatest chance for mistakes and errors. Each
day’s business must be balanced and the totals must agree
with the cash tickets.
This whole system of making out cash slips, of putting
them through correctly, of giving the right slip to the cus-
tomer is one of the first things taught in the schools which
many of these stores have inaugurated. The Wanamaker
school has been in existence for many years, has text-
books and most competent teachers, as competent as those
who drill the great army of salesmen in the most up-to-date
of manufacturing establishments.
These schools are as definite and essential a part of the
organization of Some stores as any departments in them.
Mr. Higinbotham says: “In a vast establishment employ-
ing thousands of workers who are necessarily governed by
a rigid and exacting system there would seem to be little
opportunity for the display of the humanities of life, and
198 J. J. STOKES
yet in this particular the stranger is likely to meet a pleas-
ant surprise. Comparatively few persons would expect to
find a well-conducted schoolroom in the heart of one of these
great commercial hives, yet if there is a large department
store in this country which does not regularly maintain,
at its own expense, a school for the instruction of its younger
employes, it is certainly behind its competitors, for the prac-
tice is general. The scope of these schools, and the lines
upon which they are conducted, are somewhat varied, but
all give instruction in the elementary branches taught in
the common Schools. * * * *
“There is no attempt on the part of the management of
department stores to give the impression that these schools
are philanthropic enterprises. On the other hand, it is
frankly confessed that they are maintained for the selfish
purpose of increasing the service value of their employes
and that they undeniably yield a profit to the establish-
ments by which they are supported. A cardinal duty of the
school teacher is to obtain a fair knowledge of the mental
capacity and personal traits of each pupil and to make
these observations a matter of record. In fact, the school-
mistress is regarded as one of the chief aids of the super-
intendent, who relies upon her for an intimate knowledge
of the younger employes, from among whom he must event-
ually select those to be promoted to more responsible po-
sitions.” -
The system for handling cash has gone through several
evolutions. The more work done by mechanical means, the
less expense, that is, if the machines did not get out of order
too often, but a psychological principle has led to an aban-
donment of these in the larger stores. The newest method
and the most expensive is to have a cashier for each counter
or section, and a place to wrap bundles there. Then the cus-
tomer never loses sight of the operation of securing the
goods.
D#PARTMENT STORE ORGANIZATION 199
The accounting department in great stores has received
due attention. Confusion here would soon mean suspension
of business unless phenomenally favorable conditions exist-
ed elsewhere. This department necessarily deals with an
enormous number of details. In the best systems each de-
ment is treated as a separate enterprise and has its own
profit and loss account. The accessories connected with
this work, the blanks of every sort, records—shippers, pack-
ers, workroom, etc.—tickets and summaries, cards, balance
sheets, charges, monthly and other statements, pay rolls,
present the most hopelessly labyrinthine face to an out-
sider. Besides the sets of books for each department there
are those for the cashier’s and auditor’s departments,
where disbursements for merchandise and labor are made.
The larger houses have two separate branches of bookkeep-
ing, the One dealing with purchases, the other with sales.
The elaboration of accounting systems has been coincident
with the growth of the department store, and of late years
comprehensive text books have been prepared to teach peo-
ple Such accounting. - • -
One of the busiest and most important places in a de-
partment store is the delivery room. Into this go every
one of the items of millions of dollars’ worth of sales except
thse that are taken away by customers at the time of pur-
chase. It resembles an express office and employs a good
many hundred men to do the work—when it does not em-
ploy women. There is at least one store where the head of
this department and a large part of the workers are women.
It has been said that over the delivery department in every
store presides a genius. “How it happens that there are
enough geniuses to go around is a mystery; but Surely that
is none too exalted a term for a man who keeps a whole city
mapped out in his brain, and can tell you at once the nature
of any locality you may mention.” …-
A writer in Scribner's magazine wrote of the depart-
200 J. J. STOKES
ment store and gave in detail the persons, in order, that han-
dled the goods from their entrance to exit from the store.
They are as follows:
The receiving-room man who unpacks them.
The head of the stock, who, with his assistants, disposes
of them in the stock room.
The buyers’ assistants, who mark them with a price.
The transfer or stock people, who carry them to the
sales room.
The head of the counter, who receives them.
The head clerk and assistants, who place them on the
counter or shelf where they belong.
The salesman or saleswoman who sells the goods.
The inspector, who examines each thing after the sale.
The collector, who takes it or starts it on its way to the
delivery room.
Once in the delivery room there are yet many hands
that these packages must go through before they finally
reach the door of the customer. There are checkers and
markers. There are sorters who work at long tables and
distribute the bundles in bins which represent different
parts of the city. The dexterity acquired by some of these
people is nothing short of marvelous.
All the great stores have stables in different sections
of the city. Goods to be delivered are taken from the store
at night and brought to these on great trucks. They are
then distributed to the smaller wagons for morning deliv-
ery. The organization here must be of the best. The
horses and wagons are given great care, and everything is
run on the most systematic plan. The delivery boy, the last
of the chain, is not an unimportant personage. There have
been those who have extolled his virtues and Sung his praise
as a business official of the lowest rank but of high impor-
tance. He is subject to starters and other quickeners of
DEPARTMENT STORE ORGANIZATION 201
service but he bears a good deal of responsibility on his own
shoulders.
The following is a system of delivery used in some
stores: Any article sold and not carried away by the pur-
chaser is handed by the sales person to a boy, who carries
it to an inspector’s desk, where it is examined, checked off
with the Sales schedule attached and wrapped, after which
it is thrown down a chute to the basement. Here the pack-
ages are collected from the various chutes by carriers, who
take them to a long table. On the table the paid, the charge
and the C. O. D. parcels are separated and marked O. K. by
the separator. From the separator’s table the packages
are passed to a row of girls, who compare the markings on
the packages with the schedule of the sale, and, if they
tally, a coupon slip is pasted on and the package is then
turned over to the dispatcher. His work consists in reading
the address and writing the number of the route in blue
pencil on each package, each route being designated by a
number only. From the dispatcher the packages are taken
by boys who distribute them to writers. Each route has a
writer, and it is his duty to enter each package up and send
a slip to the driver. The packages are then carried to bins
corresponding in number to the route marked on the pack-
age. From the bins they are collected by the drivers, who
check each off with the slip. They are then loaded on
trucks and taken to the street to the wagons.
Such a system is better adapted to a small store than a
large. The greater the number of packages the more per-
fect must be the system and the more complete the elimina-
tion of handling. The checks of various sorts must be sure,
but time must be economized everywhere. Probably no
two stores have exactly the same system, although alike
in essentials. The space for the work necessarily varies.
Some great departments have their own shipping rooms
from which the packages are taken directly to the wagons.
This is sometimes the case with the grocery department.
202 J. J. STOKES
The receiving and delivery rooms, the stock rooms, the
Work and repair rooms, the accounting rooms, the offices
of executives and buyers, the cash spaces are all reckoned
as dead weight which the earning parts of the store must
Carry along as “dead space.” In some cases they compli-
Cate the problem of dividing space, always a difficult one,
for no plan would probably suit all concerned. There is
bound to be rivalry of departments.
The rooms for customers are in a slightly different cate-
gory and the most far-seeing proprietors believe that these
more than earn their share of space rent. To the expense
of space is added that of furnishing these in the most at-
tractive and comfortable way. In addition to rest and
comfort rooms, the Wanamaker store has an auditorium
With a great Organ and musical programmes and lectures
are given here. This is dead space, but all of the best stores
set such apart without hesitation and it has lately been
called one of the battlegrounds of business. The store
which provides the greatest comforts is the most attractive,
is consequently the most frequented, and therefore does the
largest business. .
The splendid main aisles in some of these stores are al-
most as much the resorts of customers as the rooms dedi-
cated to them. The departments who have space here are
the most advantageously placed for selling and certain
goods fall naturally here, though at holiday or special Sales
times any sort of goods may give way to others. Nothing
requiring a great amount of space will be placed here. It
will be placed where space is of less value. The relative
earning power of goods and space is a matter for grave
council. -
The organization of sales in a department store where
some kind of a sale is going on during every month of the
year involves great labor and thought. A great deal of the
work of the advertising department is done in this connec-
DEPARTMENT STORE ORGANIZATION 203
tion and department heads are planning sometimes weeks
and months ahead for these. They buy for them, and are
Often fully ready for them as far as executive work is con-
Cerned long before they are announced.
The goods for a sale may be bankrupt stocks bought up
for this purpose. Since the department store has taken
Over Such stocks to sell them ovér the counter the trade of
the auctioneer has suffered or almost entirely declined.
Some stores make a specialty of getting such stocks and be-
come distinguished for this sort of sale. They have a reg-
ular system by means of which they secure these. They
also buy the broken lines and odds and ends of stock from
Small and exclusive stores, which do not care to have the
trouble and confusion of an end of the season sale.
The bargain counter is considered by some to be the
very life of the department store to which as an attraction
the convenience of shopping under one roof is as nothing.
To supply this counter it has virtually created industries.
Through its devices to keep trade alive during all the year
it has planned special selling events like the August furni-
ture sale inaugurated by Mr. Wanamaker. There is much
buying for this sale.
The rug and other industries have been built up for the
express purpose of supplying bargain counters. The bar-
gain sale is so necessary a part of department store selling
that neither bankrupt stocks, lines of goods which factories
are closing out, nor its own surplus stock are altogether
sufficient to meet the requirements of a large establishment,
so these industries were created.
The pre-inventory and the after inventory sales are held,
however, for the express purpose of disposing of broken
lines and surpluses. The general clearance is a real event
which thousands of housewives take advantage of. In
many cases they know from previous buying how great a
reduction is being made on very desirable goods.
204 J. J. STOKES
The announcement of such a sale shows how thorough
is the work undertaken. One of the biggest stores in Buf-
falo, New York, thus announced this sale recently: “Every
six months the store is cleared out—beginning with the
basement, where housefurnishings, crockery, china, enam-
eled ware, silverware and cut glass are; passing on to the
main floor with its dress goods, hosiery, underwear, white
goods, laces, linens, cottons and a score of other stocks to
the second floor with its millinery, muslin wear, shirt waists,
wash suits, corsets; thence to the third floor where carpets,
rugs and draperies are displayed, winding up with the
fourth floor furniture sales room, we plan and carry out at
the time of our half-yearly inventory a great and general
clearance, a radical price-cutting, a forcing out of Season-
able goods—a sale wherein cost and profit are secondary
considerations. 3: º: º: 3& 7 7
Another store announces its before-inventory sale as
follows: “The good storekeeper, like the good housekeep-
er, believes in a general housecleaning at certain periods of
the year. Being good storekeepers we go about the matter
in a thorough, businesslike and systematic manner. The
semi-inventory of stock comes shortly. In preparing for it
we have loosened up the regular or standard prices for
first-class merchandise, sacrifices that must not be here
when listing day comes. This clearance, while to a certain
extent general, does not affect everything; that would be
untrue, ruinous and not good business, for legitimate profits
must be made on some lines to keep the wheels of trade re-
volving smoothly, but it does not concern merchandise of
many kinds, the odds and ends of lines, parts of lines, the
lines that must be made smaller, and the assortment and
varieties that need pruning.” -
The bargain sale is a trade-getting device, and is today
one of the most highly developed of all such devices. The
head of the advertising department must keep in the closest
DEPARTMENT STORE ORGANIZATION 205
touch with the merchandise departments. The volume of
Sales depends in great measure on his efforts. If the most
absolute method and system does not prevail in his work,
as well as in that of the department heads, in reference to
the bargain propositions, the Monday and Friday bargain
days would become things of the past. As for the great
Sales periods, both these men must organize their forces
and make the most explicit and comprehensive plans. Vis-
its to departments, conferences, lists of goods, blank forms
ready to hold the most complex details for the use of the
advertising page, and the later accounts of its expense and
returns, are only a few of the activities and instruments in
this system. A great number of people besides the leaders,
clerks and salespeople are kept busy. There are artists
and sign writers, window dressers, carpenters and fixture
makers, all engaged in this work of preparing bargain
Sales.
Small stores have organized in opposition to depart-
ment stores to do collective purchasing, to buy bankrupt
Stocks, and so to compete in this most conspicuous particu-
lar with the large stores, but the bargain in the small store,
while appreciated, cannot be offered so frequently nor so
generously, and the department store has never yet lost its
prestige in this connection, nor is it likely to do so.
From the very beginning the department store aimed to
do something which the small store cannot do—save the
time of the customer who wants a variety of things. Every-
thing has been done, as time has gone on, to facilitate shop-
ping and add conveniences for the shopper. Free services
of many sorts have been introduced as a part of the selling
plan, and every possible courtesy and consideration is
shown to customers as though they were guests, “paying
guests,” who receive much gratis. These things are in
themselves bargains, and wise management has increased
their number until there is hardly any kind of general serv-
206 J. J. STOKEs
ice that cannot be had here. The very reason for the exist-
ence of the department store is that it can give the larger
and the better service—time and money saving service—to
the public than the stores devoted to individual lines.
Every aim of the progressive store is to perfect its service
through a more perfect organization.
The first reason given for its ability to give better ser-
Vice is that the expense of management for each of these
individual stores or departments is lessened, because it is
shared. There is a great saving in the items of lighting,
heating, care-taking, etc., which is proportionately very
much less than the single small store pays. Another advan-
tage is that the head of each department is, as often as such
a One can be obtained, a master in his particular line. He
must particularly be a master buyer. He must know all
there is to be known about his line and keep abreast of the
trade. A third reason for its wider and better service is
that such an aggregation of business has a large control of
the world’s markets. It can reach around the world, and
that, often, through its own stations of communication.
And finally it can do all its work well. Here is ability fo–
cused. * -
The principle which has brought together this vast col-
lection of retail establishments or stores, and united them
in one, “the biggest store,” is one of the most modern in
the business category of today, namely, concentration. The
department store is “a complex modern enterprise” on this
principle, which is to be seen in other complex and far-
reaching enterprises. A Harriman gets control of and con-
centrates the interests of one-third of all the railway mile-
age in the United States. A Rockefeller gathers all the
oil wells of the country under one management. Steel
magnates control their industry. And so it is throughout
industrial and commercial life. -
These giant combinations are non persona grata, or
DEPARTÉ'ſ ENT STORE ORGANIZATION 207
have been. They require great personalities at the top, and
these men have become the target of much hostile criticism.
Legislation has been invoked to check their activities and
restrict their gains. But they have ruled legislation as they
have ruled domains. - • -
The department store is not the newest departure in
retail merchandising—the chain store at present holds this
position—but no establishment for distributing goods to
the people is readier for new departments than the depart-
ment store. It is always on the lookout for new methods
of publicity and selling. g -
The first and most radical departure made is credited
to Mr. Wanamaker, although Mr. A. T. Stewart, the first
millionaire retail merchant in America, and a man who saw
great possibilities in the young merchant from Philadel-
phia, was really the originator of the idea which Mr. Wana-
Imaker introduced into his clothing store for men, where it
was indeed a novelty, and later took it with him into de-
partment store selling. This was the one-price policy or
System. It is fifty years ago since he adopted this and
thirty years since he “revolutionized storekeeping in Amer-
ica” by his policy of liberal dealing—satisfaction or your
money back—and the continuance of one-price selling, but
On a vastly wider scale. “The one-price system,” says a
modern Oracle, after he has extolled it as the great sign that
the business of selling is of a newer, higher and more noble
SOrt, “has come as a necessity, since it reduces the frictions
of life and protects the child or simple person in the selec-
tion of things needed, just the same as if the buyer were an
expert in values and a person who could strike back if im-
posed upon. Safety, peace and decency demanded the one-
price system.” -
Eor thousands of years the motto of all but a few of the
selling fraternity was “caveat emptor”, let the buyer be-
ware, let the buyer take care of himself. The seller not
203 J. J. STOKES
Only charged what the traffic would bear but he traded on
the weaknesses and ignorance of humanity. The shrewd
customer haggled and generally got his article for less than
the price charged. But he, too, was often “sold,” for the
Seller in anticipation of the encounter placed his price ac-
COrdingly, so that his customer might go away with the
comfortable feeling that he had secured a bargain. Those
were great days for dishonest hucksters. Honesty as an
asset in retail selling was not unknown but its prevalence
was very restricted. The very word “sell” came for this
reason to mean to trick, to betray, to deceive, to make a
fool of.
It is men in the greater selling institutions that have
brought back to the merchant the honor and esteem he held
in the old days when a trade was able to buy the freedom
of cities or helped them to grow so strong that they could
Wrest their freedom from Overlords. The merchant of to-
day ranks with professional men. He has both ideas and
ideals. He is creative and patriotic. He believes that he
Serves business and that business serves humanity.
THE MERCHANDIZER IN THE DEPART=
MENT STORE.
BY JOSEPH BASCH,
[Of Siegel, Cooper & Co., Chicago, New York and Boston.]
To the uninitiated the operations of a great department
Store are a constant Source of wonderment and perplexity.
One of the questions that I have been asked is:
“How do you know what goods to buy? How do you
know what quantities to buy, and having bought them, how
do you know that you can sell them? You must have some
System for knowing these things, but what is the system?”
My questioner was right in his surmise. We do have a
System; we do know what to buy, how much to buy, and
What we can sell. If the managers of the great modern
department store did not know these things their business
Would be in a state of chaos, and that would eventually
mean ruin. As it is, however, the great modern department
store is like a ponderous piece of machinery. The cogs of
one wheel fit exactly into the cogs of another wheel and the
great machine revolves smoothly and noiselessly. If it
didn’t have steam, however, it would stand still. It is the
steam, therefore, that gives it life.
The steam in the great department store is the Mer-
Chandiser, and the wheels are the buyers and sales people.
With the detail work of the store, such as the employment
of help, maintenance of discipline, etc., he has nothing to
do. Neither does the Merchandiser buy any of the goods
that are sold. Each buyer in his or her department buys
what the department needs and as much as it needs. Only
in exceptional cases is it necessary for them to refer to the
Merchandiser. Yet they are in constant consultation with
the latter, and he knows whether they are keeping their
209
210 Joseph BASCH
Stocks up to date with fresh, attractive, salable goods; that
they are buying at proper values and are selling at a fair
profit. The buyer is responsible for his department, but
the Merchandiser is responsible for all departments. He
not only infuses vim and ginger into his buying force, but
he sees that the buyers infuse the same qualities into the
sales force. -
A person has to learn to swim; the art is acquired, not a
natural one. Just so with a buyer—he has to learn to buy,
and he also has to learn what his clientele will buy. We
watch our young men and women closely, and when we find
them interested in their work, reliable in their habits, cour-
teous to the customers and eager to make Sales, we pro-
Imote them. The young man is made assistant buyer in his
department and in that capacity he attends with the buyer
at the conferences with the commercial travelers. This
gives him a chance to enlarge the knowledge he already
has about goods and their values. Say he is in the silk de-
partment. He sees the new shades and weaves, and, being
bright and energetic, the buyer counsels with him as to the
expediency of placing this or that kind of goods in the
stock. The young man’s advice is of importance, because
he comes in daily contact with the customers, whereas the
buyer only does so occasionally. If the latter is making
his department a success he will be kept busy buying
goods. He may be here today, and the next day in New
York, or Philadelphia, or Boston. The good buyer—and
by that I mean the buyer who is making his department a
money making one—is buying every day, not every other
day or once a week.
Presently the opening comes, and the young man with
ginger in him is made buyer for his department. Now he
has an opportunity to demonstrate the stuff that is in him.
He not only has to buy the silks, but, of as great or even
greater importance, has to sell them. To do so he has to
e-
MERCHANDIZER—DEPARTMENT STORE 211
have the hearty co-operation of the sales force under him.
He must infuse the energy and ginger that he possesses
into them also. He has been to New York and has bought
SOme new and striking shades and weaves. He is all en-
thusiasm over them, and when the goods arrive and are de-
livered to his department he calls up his force and expa-
tiates On the beauty of the goods before the day’s business
has begun. “Did you ever see such magnificent shades?”
he will Say. “Tans are going to be all the rage this season;
they are crazy for them in New York, and we’ve got the
finest line there is made.” He arouses the enthusiasm for
his force, and they exert themselves to sell those goods, and
When you get a good sales force interested and working
heartily and loyally with you nothing can stop you from
being successful. - -
• These are the things the Merchandiser is watching all
the time. He notes the energy and good judgment of the
buyer; he also notes the faculty the latter has of inspiring
his sales people. If he doesn’t do so, the Merchandiser will
advise with him, and tell him where the weak spot is in his
department. And there is another thing the Merchandiser
will do. He will study the natural bent of his sales people.
Perhaps there may be a faithful salesman in the household
department, but his heart is not in his work, although he is
conscientious in its performance. If he doesn’t take an in-
terest in pots and pans, there must be some other line of
goods that he does take an interest in. What is it? The
Merchandiser finds out that the young man is greatly in-
terested in clothing or gents’ furnishings, and he has that
young man removed from the pots and pans and put where
his heart is. The young man can talk neckties and gloves
and collars and shirts, and he makes a conspicuous success
as a salesman in that department, which he never would
have done in the house furnishings. To sell goods you
have to be interested in them.
212 JOSEPH BASCH
Assuming that the silk department then is well organ-
ized both in buying and selling capacity, the buyer will go
ahead and buy whatever he chooses to do and in such quan-
tities as he wants. He will do so without consultation with
anyone. It is only when he feels doubtful that he goes to
the Merchandiser. Say that some silk mill finds that it is
piling up stock, has $50,000 worth on hand, and has to real-
ize the money. Their representative will come in and offer
the stock in a block to the buyer at a most advantageous
price. Then the advice of the Merchandiser is sought, be-
cause the transaction is a large one. The latter will deter-
mine the expediency of the purchase and the possibility of
its sale. This is one of the rare occasions where he inter-
feres with his buyers.
The Merchandiser must also see to it that the public is
kept well informed of what his store has to sell. He will
regulate the space that each department gets in the adver-
tisements; he will regulate the amount of advertising each
day; he will see that goods are exploited in their proper
seasons; he will also determine the papers the advertise-
ments are to appear in, and the amount of space allotted to
each paper. He doesn’t write the advertisements himself,
but he will watch the manner in which his advertising de-
partment prepares the “ads,” and see that its work is
equally as good as that of competitors. The advertise-
ments must not be deceptive; they must not misrepresent
qualities or prices; they must be absolutely honest, so that
when the public reads that shirt waists, or dress goods,
or rugs, or cigars of such and such a grade and quality are
on sale at such and such prices, it will not flock to the store
and find inferior goods on sale. You cannot succeed by de-
ception. You cannot hold a clientele by selling it inferior
goods. If a man comes in to buy a pair of shoes he forms
his judgment of them by their wearing qualities. If in a
few weeks they have lost their shape and are running down
MERCHANTDIZER—DEPARTMENT STORE 213
at the heels that man knows that he has not received the
goods that he should have for his money, and will never
again buy shoes or anything else of you. If, however, you
have given him the value for his money he will have faith
in your representations, and he will come again and advise
his friends to do likewise. The public cannot be fooled
When it comes to buying goods.
Having Secured the confidence of the public and
brought it to the store, the Merchandiser must see that it
is treated with every courtesy and consideration, and here
the sales force must co-operate with him. No matter how
large Or how Small the purchase is, the same courteous at-
tention must be paid. Politeness is a great factor in selling
goods and must be exercised by the entire force. Say that
Our advertisement has mentioned that we are putting on
Sale today a certain brand of cigars at a lower price than
they have ever been sold. A man four or five miles away
reads that “ad.” in his morning paper, knows the brand
and likes it. He doesn’t care to come down town, but he
does want some of those cigars, so he steps to the telephone
and calls up the store.
“Hello! Is that Siegel’s?” he asks.
A gruff voice responds: “Yes. What do you want?”
The man did want to order some of those cigars sent
to his house, but do you suppose he will after getting such
a response? No. He will shut up as tight as a clam and
jam his telephone receiver on the hook. But if he gets
a pleasant response: “Yes, this is Siegel's; what can we
do for you?” he will place his order and will be thanked
for it before he is rung off. So you see that politeness is
not an attribute to be exercised only in personal contact
with the people, but must be exercised at all times and un-
der all circumstances. That man ordered the cigars be-
cause he had faith in the reliability of the house, and that
again illustrates the necessity of perfect truthfulness in
the advertising. t - -
214 JOSEPH BASCH
In the modern department store a person can buy any-
thing they want, and of any quality. The Merchandiser
must see that the buyers of each department are keeping
their stock complete and diversified in all grades of goods.
Take the household goods department as an illustration.
A young couple comes in to buy the goods for a small house
or flat. They want the best that can be obtained for a lim-
ited amount of money. The department must be prepared
to furnish a complete outfit according to the means of the
young couple. And the department must furnish it all. It
must be so excellently stocked that the young couple will
not be obliged to go to some other store for any portion of
its outfit, but will place its entire order, from window
shades to parlor, bedroom, dining room and kitchen furni-
ture. --
Once in a while a buyer will make a mistake and he will
buy a lot of goods that drag on his hands. The buyer notes
this and again he comes to the Merchandiser. The latter
then decides the amount of loss that will be taken in getting.
rid of those goods. They must be sold, because the store
will not accumulate old and out-of-date stock. It must be
turning its stock over constantly, and be buying every
novelty that appears in the markets. Therefore the Mer-
chandiser will make a slash in the price of the article, what-
ever it may be, and the loss will be charged to the buyer's
department. The fact that he has made a mistake does not
necessarily discredit the buyer, however. He will not be
discharged or disciplined in any way. The fact that he has
made a loss for his department is a discipline in itself, be-
cause it is by the profits that are made that the work of a
department’s head is estimated. If a buyer should keep
on making such mistakes, however, he would either be dis-
missed or he would be placed at work in some other ca-
pacity. • -
By adhering to the methods I have outlined above,
MERCHANDIZER—DEPARTMENT STORE 215
avoiding misrepresentation of goods and giving full value
to customers for the money they spend, the department
store in a great city will soon build up a steady clientele—
people who will prefer to do all their trading with it be-
cause they have faith in its reliability. Then there is al-
ways the great transient trade that comes to a city like
Chicago, and the amount of money that is spent by such
people during the course of a year amounts to an enormous
Sum. A man comes from Denver, or Omaha, or St. Louis,
to attend Some trade meeting or physicians’ convention,
and he brings his family along for a little outing. When
he gets here he finds that there is a couple of weeks of
Opera, and his wife and daughters must hear it. That
means some new clothing, opera cloaks, gloves, etc. He is
liberal with his tips to the waiters and bellboys at the hotel,
and before he goes back home he has spent three or four
hundred dollars. He has been so liberal with his tips that
the waiter and bellboy find they have enough money to go
out and buy a suit of clothes, or enough to buy the wife a
new dress or hat.
It is only in the great cities, such as Chicago, that there
is a field for the Merchandiser. The merchant in the small
town has no necessity for one. In a town where there are
10,000 wage earners, say, averaging $1,000 a year, there is
a definite limit to their spending capacity, and that cannot
be exceeded. But in a city like Chicago there is absolutely
no limit. The trade of two million or two and a half million
of people is in itself a tremendous volume, even if it was
not added to from outside. But the trade of Chicago takes
in naturally the country surrounding it for a radius of 500
miles. Its papers have that as a natural field for their
circulation, and their advertisements are scanned as care-
fully all through that field as they are in the city. It is
nothing for people in Milwaukee, or Joliet, or Blooming-
ton, or Rock Island, to run into Chicago for a shopping ex-
216 JOSEPH BASCH
cursion, and on many of the lines of railroad reaching the
city there are at regular intervals special trains at low
rates of fare that come in crowded with shoppers. Those
that cannot come in themselves, write for what they see
in the advertisements, and this has resulted in building up
an enormous business by mail.
ORGANIZATION OF THE RETAL BUSINESS.
BY I. K. FOREMAN,
[Of Foreman’s Quality Shop, Chicago.]
The man whose capital admits of his commencing busi-
ness in a small way only, need not despair of success. Many
of the largest concerns in the world had a very humble be-
ginning. Shortness of capital, although sometimes pro-
ductive of worry, enables a man to acquire financial quali-
ties which, when applied to business on a large scale,
mean a great deal. No one can develop strength and agil-
ity without hard exercise, so the business man acquires
financial skill and resource through continually being com-
pelled to make the most of a small capital.
Commercial organization and factory organization are
altogether different in their scope. Mechanical processes
govern largely the organization of the factory manufac-
turing, while the process of organization employed in the
commercial department deals with the more human aspect
of the business. The elasticity of the commercial end of a
manufacturing business far supersedes that of the factory.
An important step in the organization of a retail store
is the selecting of a desirable locality in which to establish
the store. Business men of the present day realize that
location means a great deal to the success of their business.
It is an accepted fact that it is more advantageous to be
located near competitors than it is to be isolated from
them. Retail buyers especially acquire the habit of going
to a certain part of the town or city to do their shopping
and they will buy from the stores in this district. As a
rule it will be found that shoppers like to do all their buy-
ing at once, even though it takes them to half a dozen dif-
217
218 I. K. FOREMIAN
ferent stores, and for this reason it is natural that they
should buy from the stores that are the nearest together.
Every retail store should take advantage of its neigh-
bor's customers. The dealer knows that in going to stores
in a certain locality, the buying public will have to pass
other stores. If he will keep this fact in mind when he is
Selecting a location for his business he will find later, when
he is Well established, that it has meant additional sales to
him. -
The purchasing department of a retail establishment
is one of the most important, as the cost of the goods de-
termines to a large extent the selling output of the busi-
ness. The work of this department is critical in the ex-
treme, because it must be able to buy in a limited time
Such quantities of stock as are necessary to fill the orders
of the firm’s customers.
Of course, the purchasing department is not compelled
to work entirely alone. It is aided to no small extent by
the sales department, which keeps itself well informed of
Such stock that is on hand to be disposed of, and in making
a special effort to dispose of this, it paves the way for
further investment on the part of the purchasing depart-
ment.
To buy intelligently and judiciously is the duty of the
purchasing department. To be too conservative or too
venturesome is dangerous for the business, and either case
will lead to evils hard to overcome. No retail establish-
ment can progress if constantly hampered by a limited
stock, but if the purchasing department is inclined to take
too many “fliers,” it soon will be over-stocked, and this is
an evil that almost every dealer has had to overcome at
some time or other, and therefore knows how difficult it is.
Never to risk means never to progress beyond a certain
slow degree, but the head of the purchasing department,
if he is a man of foresight and keen sensibilities, can
RETAIT, ORGANIZATION 219
usually strike a “happy medium” between too conserva-
tive and too reckless buying. The buying head of any re-
tail establishment, whether large or small, must know his
demand. To know what will sell and what will not, and to
be able to tell the proportion of their popularity, is neces-
sary. To be able to judge and know these things correctly,
he must not only study the customers of the store, but he
must know the agricultural as well as financial conditions
existing in the entire country as well as in his own locality.
He must also know the best sources of supply, where
certain things may be bought the most satisfactorily, both
as to price and quality, and where to look for certain
other things. To keep well informed of new goods as well
as those whose popularity is waning is one of the buyer's
most important duties. Where to buy, what to buy and
how much to pay are the three facts most necessary to the
purchasing department, and, to a certain measure, the Suc-
cess of the business depends upon how well they are
known.
Of even greater importance than the purchasing de-
partment is the selling department. The sales depart-
ment’s province is disposing of the stock. Business must
be created and customers must be found.
In almost every retail business there are several de-
partments, even in the very smallest of stores. In the
small retail shoe store, there are the men's, women’s and
children’s departments, that are quite distinct from each
other, and even in the small dry goods store there are
various departments. The grocery store is divided into
several departments, and in fact, there are but few stores,
such as a butcher or bakery shop, that have not at least
two departments. True, one or two clerks may be all that
are employed to carry on the business of the store, but
each department is there, nevertheless, and as the business
progresses, will arise the need for a more distinct separa-
tion of the various departments.
220 I. :... FOREMIAN
Every retail merchant has a silent selling partner in
the wholesale house from which he buys. It is through
the retailer that the wholesale merchants must sell their
goods, and it is a cold business motive and not a friendly
impulse that prompts them to help him to the extent they
do. Any increase in his business means an increase of
theirs, and recognizing this fact, they aid him in every pos-
sible way to increase his sales.
Like the doctor, who talks to his patient only of the
cure and never mentions the medicine, the shrewd pro-
ducer talks of his customers, not about the goods and Or-
ders, but also sales, customers and profits. The unpleasant
features—the orders and goods that mean money to the
retailer—are never mentioned; they are the unpleasant
but necessary features, and the dealer does not relish
them. The producer is well aware of this fact, and he
“steers clear” of the subject, talking about Sales, plans
ways to get customers and clever methods for making
goods move at a profit. These things he knows are the
things the dealer is most interested in, and the producer
describes them in their most attractive light. In order to
obtain these most desirable results, the dealer must buy
the goods, and he knows this as well as the wholesaler, but
after his interest and enthusiasm have been aroused, these
necessary evils do not seem nearly so hard to accept. The
producer is not the only one to benefit by this plan, how-
ever, for it is of real value to the retailer, for it actually
does help him to sell goods to the consumer.
The majority of small retail dealers are rather conserva-
tive buyers, and they will not restock their shelves until
what is already on them has been disposed of. In order
to move these goods the retailer must know how to sell
them, and the manufacturer feels that the best plan for him
to pursue, if he wants to be sure his goods will reach the
consumer, is to teach the retailer how to sell them.
##’ī'A'iſ. {}}{{#Añºſ?,ATION 221
There are any number of different plans that the whole-
Sale dealers employ to help the dealer and thereby them-
Selves, but all these plans are variations of two general
plans which are training the dealer in the principles of
Salesmanship and aiding him to sell goods by providing
him with proper tools and definite plans.
A current magazine says in speaking of this plan:
“One of the manufacturers of a staple product, a house
Which has built up a remarkably loyal and efficient force
of dealers, begins by teaching the dealer the product itself.
The salesman pumps the dealer full of general informa-
tion regarding the line of goods—the raw materials that
enter into it, its process of manufacture, the part each in-
gredient plays for One purpose or another, and the uses to
which it can be put and its necessary variation for differ-
ent uses. “You’ve got to know all about these goods’, the
Salesman explains to the dealer, “because it’s up to you
to place them with the consumer, and you can’t sell the
biggest volume and build up a permament, staying trade
unless you have this knowledge. And furthermore, to sell
them in opposition to the dealer across the street who car-
ries a rival line, you’ve got to know why the particular
line you carry, our line, is the best—why it pays to use
these goods above all others.’”
The magazine, in describing the plan of this house,
says that it does not rely entirely upon the salesmen’s per-
sonal talks with the dealer to teach him the goods. It
goes a step further and sends to each of its customers a
complete list of its line, printed in attractive booklet form.
Every article in the line of goods manufactured or carried
is carefully described in detail, and all its advantages ar
pointed out. It says that the booklet is very attractive and
pleasing, and with constant prodding from the house, the
dealers are persuaded to give it careful study. The usual
features of this particular booklet are the advertising talks
222 I. K. FOREMAN
On Salesmanship, inspiring editorials, information about
new brands of goods, and educational talks on manufac-
turer’s products.
This is not the only house that issues these little text
books, however. In fact, there are a great many manufac-
turers who get them up for the benefit of their dealers.
The different text books of the different houses differ in
details, but their general contents and make-up are neces-
Sarily somewhat the same. The manufacturers all strive
to make them as attractive as possible and interesting
enough so that the dealers will enjoy reading them and
will not have to be prodded constantly. To further this
end, many of the little books contain interesting little facts
and editorials about the trade, and dealers are given news
of each other through this medium.
Others of the manufacturers, in addition to this, con-
duct a school which the dealers may attend when they are
in town, and which will prove of great benefit. The inter-
esting and educational talks are given by the best sales-
men of the house and are highly instructive. That the
dealers appreciate this is shown by the regularity with
which they attend when they are in town. Many dealers
send their clerks for a course at the school, and frequently
if they have a son whom they wish to teach their business,
they send him to the school to receive his first training in
salesmanship and his preparatory course in business
training. -
The three R’s used to be regarded as the primary
qualities necessary for the lad entering upon a business
career, but on a detailed analysis the Three I’s will be
added—intelligence, industry, and integrity, and, to go
still further, the Three E's—energy, enterprise, and en-
lightenment.
It may be remarked here that indefatigable observa-
tion, and reflection with a purpose, are of much more
RETAIL, ORGANIZATION 223
value to the business man than indiscriminate reading.
Original ideas and novel methods of administration are
much more likely to occur to the man who is continually
thinking of economics and advancement, than to him who
possesses a great fund of knowledge, but who does not
cultivate reflection and deduction. The latter individual is
apt to become the slave of tradition, which bars his way
to improvement and progress. Thus it is that wonderment
is often caused at the success of a man who, in the academic
sense, is quite uneducated, but who is gifted with a clear
brain, keen observation, great mental activity and common
sense. Advanced scholastic education is a valuable aux-
iliary to the business man, but can never be more, and in
some cases may prove an actual handicap to its possessor,
if his individuality is not strong enough to prevent tradi-
tion from strangling originality. A striking proof of the
necessity for bringing a mind untrammelled by the fetters
of usage is the fact that, in very many cases in connection
with the most technical manufactures, valuable patents
have been projected by individuals not engaged in the par-
ticular industry whose methods they improved.
There is a great step between the retail store of the
Small town and the immense department or dry goods
Store of the large cities, but the small store enjoys many
advantages that the larger store cannot have, just as the
larger store has those which the small store cannot have
unless it progresses. Of the great buying public, there
are just as many people who have but a few cents to spend
as there are those with many dollars at their disposal. The
woman (and the majority of retail buyers are the women
of the family), who has but a dollar or two, or even less,
to spend, feels no hesitancy about entering the small re-
tail store. She knows before entering that here she will
not be tempted and confronted by an expensive array of
goods that are far beyond her means and that she could
234 H. f. FOREMIAN
never hope to buy. In the small store every customer is
made to feel welcome, no matter what her standing may
be. In the larger store, the woman feels timid about
spending her modest little sum, and is afraid that she will
be classed as “cheap,” but in the smaller store she feels
that as much respect will be paid her fifteen-cent pur-
chase as would be paid to a dollar and a half purchase in
a larger store.
If the customer wishes to buy a paper of pins, Some
darning cotton and a handkerchief, she knows that in the
Small dry goods store she can get these articles in a few
minutes’ time and by merely walking a few steps, but in
the larger store she would probably have to go from One
end of the store to the other, and perhaps to another floor,
to make her three purchases. This fact probably explains
the immense popularity of the five and ten-cent stores that
are located in almost every town of any size at all in the
country. - -
These stores are all arranged so as to make selling and
buying easy. “Make buying easy and convenient,” is said
to be their motto. At any rate, the counters are so placed
as to save the customer as many steps and as much time as
is possible. The goods are displayed in such a way that
the customer can inspect them without having to wait for
the clerk, and can even make her choice and hand the arti-
cle with the correct change to the clerk, and in a moment
receive her package back from the clerk. The goods are
plainly marked with price tags, and show cards also tell
the price in bold black figures. To avoid any possibilities
of mistakes, the majority of five and ten-cent stores are
so arranged that all the five-cent articles are on One side,
and the ten-cent articles on the other. Everything is ar-
ranged with an idea for the greatest economy of time, both
of the customer’s and of the clerk’s. The selling methods
of the store, while ingenious and effective, are simple. The
RETAIL ORGANIZATION 225
clerks are unfailingly courteous and obliging, and are
taught to give due consideration to each and every cus-
tomer. ' *
Harder than systematizing and organizing a small, or
even a large store, is organizing a business which has a
number of branch stores. In this case it is not hard to
properly Organize the individual stores, but how to organ-
ize the main business under the many different conditions
existing is a difficult matter. Of course, no hard and fast
rules can be laid down to govern all the different stores
Controlled by the main business, for conditions differ
greatly in different localities, but the same general rules
Can be applied to them all. In the majority of cases, where
a large business has a number of branch stores, the buying
for all the stores is done through the main business. Even
when the branch stores are located in different cities, this
will be found to be the case.
IFrequently the same general rules for the treatment
and consideration of customers is observed, and many
times the same class of trade is catered to. However, each
store has a manager of its own, and is organized and sys-
tematized according to the existing local conditions, but
they all strive to live up to the standard set by the original
business. * -
Another condition under which it is hard to organize
a business is the business which has grown from a Small
concern to a thriving business. In this case it will usually
be found that the business is unwieldly and hard to man-
age, like the over-grown boy. The old-time methods under
which the business was conducted have been continued
and have proven ineffectual, and still new methods have
not been adopted. The methods of doing business will fre-
quently not have kept pace with the growth of the business,
and its further growth is constantly being hampered by
the ineffectual methods in use. -
226 I. K. FoEEMAN
As an instance of this, there is described a business
that in but two generations had grown from a small pri-
vate concern to a thriving business, doing millions of dol-
lars of business annually and employing almost a thou-
sand people. This business had outstripped itself, and in
its marvelous growth had gotten far ahead of the methods
used in conducting the business. The head of the business
could see that they were losing money through not being
able to get their orders out promptly. The accounting de-
partment never seemed able to catch up, and the business
did not run Smoothly and easily as it should. It was decided
to have a professional systematizer reorganize the business,
and accordingly one of the best was called in to do the
work. The price that he named for the work ran well into
the thousands, but it was considered well worth the money.
The systematizer spent a few hours every day for a month
Or so in investigating the methods used and in becoming
acquainted with the business. He kept a stenographer
with him to take such notes as he would wish to use in
completing his formula. He studied the inter-department
methods, and started by tracing the journey of an order
from the time it was received until the shipment was made.
Eſe talked with each department head, and learned from
them many valuable hints as to the peculiarities of the
various departments. -
He did not stop with his investigations until he had a
good idea of the business. Among other things, he found
that the old-time system of flat filing was still in use. The
walls of the offices were lined with pigeon holes, contain-
ing great stacks of correspondence and other business
documents. This necessitated a great number of office
boys, and even the higher priced help, such as clerks and
stenographers had to waste valuable time climbing step-
ladders to look for necessary papers. This was entirely
done away with and the vertical system of filing was in-
RETAII, ORGANIZATION 227
stalled in its place. This department was put in the charge
of competent clerks, who kept it running perfectly. The
Correspondence was handled rapidly and carefully, and the
general routine of the business was improved wonderfully.
An automatic perpetual inventory was installed, and
thus the stock was kept in perfect condition. This made
it possible to fill Orders rapidly, and revolutionized this
part of the business. The installation of the new files and
the Stock record made the offices lighter and more healthy
from a sanitary point of view, for the old flat files were dust
and dirt catchers and were impossible to keep clean.
The methods of the accounting department of this busi-
ness were completely reorganized. The old heavy ledgers,
weighing pounds, were thrown away, and the loose leaf
System of accounting, with all its time and labor-saving
improvements, was substituted. Another matter that was
given especial attention, and that many might think was
unimportant, was the arrangement of the floor space. An
expert draughtsman was put to work on it, and he re-ar-
ranged it on geometric lines to effect the greatest economy
of space. The different departments were given space in
proportion to their importance, but all were arranged so
as to necessitate as little travel as possible.
There are many men who might question the economy
of this plan, and while it actually did take a good sum of
money to effect all the changes and to pay the systematizer,
who was responsible for the beneficial change, this was
more than paid in the increased amount of business that
could be handled and in the time and labor saved. To re-
organize a business in this manner does not necessarily
mean that it will save money in the methods of running
the business, in fact, its intention is merely to balance
things. If the business is being run too extravagantly,
systematizing it will mean that money will be saved, but
on the other hand, if the business is being run without the
228 I. K. ForeMAN
proper tools, and is constantly being hampered by ineffec-
tual methods, the result of systematizing it will be that
more money will be required to run it, but in this case the
money will be saved elsewhere.
It would not do, however, for any man to employ a
systematizer who would come and apply a stereotype sys-
tem of his own to the business. Even businesses that are
alike in most things differ greatly in details, and as no
business is like another, what would do for one might easily
prove very disastrous for another. Sometimes, too, the
systematizer will merely study the business, and because
the concern does not wish to pay the money to have him
apply it, will work out the proper system and leave its
application to the general manager. This is not a very
successful plan, because even the best managers will sel-
dom prove equal to the task, for the reason that it is all
strange to him, while the old methods are so familiar as to
be almost second nature. Consequently, without any in-
tention on the part of the manager, he will gradually drift
back into the old ways and methods.
"Without originality, business success in the Western
world is almost impossible. The man who can think mat-
ters out on his own lines in a new direction, particularly
if he specialize, will make himself formidable in any sphere
of life. The faculty, if we may call it so, of specializing
cannot be over-estimated in considering the qualities of
successful men. It is hardly too much to say that to suc-
ceed in a large way a man must specialize, and devote every
moment of his business life and every faculty he possesses
in developing to the utmost every possibility attaching to
the specialty, through the instrumentality of which he
means to achieve success. -
When capital and experience have been combined—
that is, if the debutant does not possess both himself and
has found a suitable partner, the next step is to select the
RETAIL organization 229
particular field in which to work. The resolution must be
taken to specialize, as it is obviously clear that where a
man gives his undivided energy to one line of business he
is bound to gain more effective results than his rival who
has several pursuits in hand; in fact, it cannot be repeated
too often that to succeed one must specialize.
The importance of quick service in securing the good
Opinions of customers cannot be too strongly emphasized.
If a man can fill business orders on the same day as he
receives them, then his opponent, who takes a day longer,
is soon left behind. The young business man should deter-
mine, in all cases, he will arrange his business so that no
Competitor can surpass him in this particular.
As an example of this is described the case of a young
printer, who decided to go into business for himself.
There were an abundance of printers in the city in which
he lived, but this fact did not influence the young man in
his decision, for he was confident that a business run ac-
cording to his ideas would be a success. Accordingly, he
rented a store on the ground floor of a building, and in the
rear of it he installed his printing presses. The front he
partitioned off and fitted up for a show room that greatly
resembled the display rooms fitted up by commercial trav-
elers for showing their goods. He then set out to take or-
ders, and did succeed in taking a few. The men who had
given him the orders were impressed by his business-like
manner and by the original suggestions which he made re-
garding the circulars or other matter that they were hav-
ing printed. Among these first few orders that he took
were two rush orders, which he promised to have com-
pleted in an almost unbelievably short time. When he
made the promise to one of the men, that man Smiled and
asked, “Printer’s promise?” and when assured that the
promise would be kept, he smiled skeptically. True to his
promise, the printer delivered his goods on time, and in
230 w I. R. FOREIMAN
return, the customer promised, out of appreciation, to give
him all his work in the future. : -
The young printer had set a high standard for himself,
but he lived up to it, and soon his reputation as a printer
who did first-class work, and who kept his promises, be-
came well established. His business increased more rap-
idly than even he had expected, and he soon had to employ
two clerks to receive customers in the show room and
take orders. His own time he divided between the com-
posing room and the show room, and in this way was able
to keep informed of what was going on in both places.
When a rush order was promised by one of his clerks, he
knew it, and could push the matter with his printers. He
also employed good proof-readers, in order that all work
turned out might be perfect. Of course, these things all
made his expenses greater, but he figured that he could af-
ford it, and never once did he waver from the standard
that he adopted. 4
On entering the store, the customer was not greeted
with the sight of a grimy printer consulting with the
dealer, for the two departments, although located in the
same building and on the same floor, were distinctly sep-
arated. There was no smell of printer’s ink in the show
room, which was kept free from dust and grime. These
facts, combined with the neatness and dispatch of the
work, the courteous treatment of customers, and the
promptness of deliveries, are the reasons which the printer
gives for his tremendous success.
One must be careful not to dismiss an idea because it
is one’s own. It is of more importance to keep looking
within for original gleams of thought that flash across the
mind, than to search through a library of ponderous vol-
umes for ideas, which, though possibly of inestimable value
in themselves, are, for the present, up-to-date, business
purpose, second-hand material only. In the business world
RETAIL, ORGANIZATION 231
book-learning is a very good walking-stick, but a very poor
Crutch. Every man has valuable ideas if he will only seize
them as they leap into his brain, and index them for future
exploitation. At the same time, a deluginous sea of ideas
is of no commercial utility if their projector does not pos-
SeSS the ability to select and utilize what suits his purpose.
Ideas ought to be jotted down and placed in labeled boxes
Or on index cards. When a particular subject is under con-
sideration, the boxes or cards are consulted, and the psy-
chological moment arrives for the idea to play its part. At
any time or place the alert business man will jot down a
passing suggestion as it comes to him, and he will be per-
petually observant so that, after a time, valuable ideas con-
tinually present themselves before him. If these are not
secured by pencil and note-book, and he trusts to memory
alone, it is almost certain that they are lost forever. It
may seem a hard thing to be always on the alert in this
manner, but, after one has thoroughly acquired the habit,
it becomes a sort of pleasure rather than otherwise, and
the benefits accruing are little short of marvelous. Con-
sider the case of one man possessing this faculty in a high
degree, and another engaged in the same business without
it, and it is easy to perceive that the latter is at an enor-
mous disadvantage.
After a time the man who has started business will find
out, among the firms from whom he buys, some that invari-
ably treat him fairly and honestly, and, with a reasonable
margin for considering the merits of new firms, he ought
to confine his purchases to these. Drawing an inference
from this experience, he should rigidly adopt towards his
own business friends a policy of uprightness to a degree,
as no man is clever enough to make people think for an in-
definite period that he is honest if he is not; and as soon
as his customers discover that he is not dealing fairly, they
will transfer their business to some other firm.
232 I. K. FOREMAN
Despite continual talk about the profusion of cheap
articles in the market, there is still a demand for first-class
goods, and it will be in the interest of a new business to con-
sider this. There is not the vast turnover to be done in
better-class articles that there is in cheap goods, but there
is more profit, and, to the fastidious, more pleasure. But
the articles must be intrinsically good, and a high-class
Standard maintained. Also, the introduction of novelty
must be pursued here as elsewhere, if business is to be done
On a considerable scale. The critical faculty of the buying
public is continually advancing, and this means that the
market for the best article must necessarily increase. If
a business man’s qualities are such that he is more suited
to judging and handling quality rather than dealing with
quantity, this class of business is what he should select.
In Organizing or re-organizing his business, the mer-
chant should not lose sight of the importance of the cus-
tomers’ point of view. The method of handling customers
is as important every bit as the method of handling the cor-
respondence or accounts of the business. The success of
every retail business depends upon the customers, and
realizing this, the merchant should strive to adopt a stan-
dard that will keep his regular customers and bring him
more. The merchant should strive to impress upon his
salesmanager and all his Salespeople the vast importance
of keeping the customer when once his trade has been had.
The little retail store that has only a few hundred cus-
tomers appreciates their value and constantly is striving
to keep their good will, but when this same little store has
grown to be many times its original size, the dealer, in
most cases, will begin to lose sight of the value of each in-
dividual customer.
In this case the loss of one customer at a time is over-
looked unless his account happens to be a trifle larger than
the average. To lose a customer and not try to regain him
RETAII, ORGANIZATION 233
is a dangerous mistake, and one that no retail store can
afford to repeat many times. The feeling that there are
plenty of regular customers left, and enough new ones be-
ing made to make up for the loss of one or two, or even
more, old customers, has been the downfall of many a mer-
chant.
One of the most vital elements in any business is a
friendly and sympathetic relationship between the cus-
tomer and the dealer. The quality of goods and the fair-
ness of prices are by no means the most important factors
in getting and keeping customers for the house. The hu-
man element that enters into all transactions is the factor
that makes friends of customers and keeps them loyal to
the business. No customer's liking for the house is in-
creased upon being treated like a machine by clerks and
Salespeople that are little more than machines. -
It is the dealer himself and his salespeople who will
have to supply the human element. If the methods em-
ployed in dealing with the customers interferes in any way
with their interests or desires, or if the services fall short
of being satisfactory, the dealer may know that the “hu-
man element” is not all that it should be.
As a store increases in size and business, it gradually
becomes impossible for the owner to give everything con-
nected with it his personal attention, as he could when it
was smaller, and when this time comes, it becomes neces-
sary for him to substitute system for his personal author-
ity. It is at just this point that the business is in greatest
danger of making enemies instead of friends by its method
of treatment. If the dealer is wise enough to see the im-
portance of the customers’ point of view and study it, the
chances are that he will safely cross the danger line.
No matter how much a store may change, or how much
it may be necessary to substitute system for the personal
element, the dealer must still remember that the customer
234 I. K. ForeMAN
never changes. Seventy-five per cent. of the retailer's
Customers are Women, and the majority of them are ignor-
...ºt of business methods and of the machinery of trade.
ºre impatient of delays and often unreasonable in
... ... demands; their complaints of service and goods fre-
quently are unjust, and it seems almost impossible to make
a satisfactory settlement to their demands. They deliber-
ately disregard the rules of the house, such as returning
the Sales slip with each purchase that they wish to bring
back, and expect that exceptions should be made in their
Ca,S6.
Studying the matter from the customer's standpoint
will help the dealer in determining what policy to pursue
in dealing with them, and the knowledge that every cus-
tomer lost means not only a loss of potential profits, but a
loss of his good will, should make the dealer put up with
a great deal from them. Every customer that is lost
through a misunderstanding with the house, or through an
unsatisfactorily adjusted grievance, means a loss greater
than either of these—it means negative advertising for the
house. t w -
To organize his business so that it will prove a success
the business man must be interested in his work, for if
a man performs his business labor as a task, he cannot pos-
sibly get the best out of himself and compete on an equal
footing with the man who makes his business his hobby,
whose heart goes with his brain, and who never, through
inertness or staleness, throws away a chance. The former
is depressed when he hears of a dexterous move on the
part of an opponent, but the latter rises promptly when
difficulties confront him to put forth greater efforts than
before. Opposition affects him like a tonic; for in the bat-
tle of life, fought in the world’s business arena, much the
same qualities are necessary to insure Success as are re-
quired by the boxer in his microcosm of twenty-four feet
Square—skill, determination, courage, and generalship.
RRTAIL, ORGANIZATION 285)
At the same time, a man may not possess all these quali-
ties and yet command success, for Nature is compensating
in her endowments, and where she does not give dash and
activity along with other gifts, she may bestow assiduity
and persistence; and no quality is so distressing to an op-
ponent as that which enables a man to face his adversaries
again and again, under discouraging conditions, where a
less determined fighter would have capitulated long before.
In comparing various successful business men from an
intellectual point of view, it will be better to divide them
into two groups—those having merely clever brains, and
those possessing intuition or genius in a greater or less de-
gree. The clever man can do a great many things well,
though nothing to an extraordinary degree of perfection,
but he may possess so much versatility that he is certain
to succeed in almost any vocation. On the other hand, the
man of genius, though perhaps capable of working in One
channel only, invariably leaves ample evidence of the
transcendental character of his craftsmanship. And We
must also remember that as a rule a man’s brain is either
of the kind that continually develops and becomes of more
value to him as long as he possesses physical health, or it
is of the opposite type, which shows abnormal brilliance
in its possessor’s younger days, and then seems to come to
a stop on the plane of development. If a business man have
the gift of intuition for his special occupation, and his
brain belong to the former class, and he possesses a fair
amount of common-sense and the faculty of continuity, he
is certain to become the king of his own business Com-
munity. As, however, genius, even in a minor degree, is
rarely accompanied by the qualifications necessary for its
proper exploitation, it usually befalls that Outstanding
business men are, in the analytical sense, clever men only.
|But they are clever to an extraordinary degree, and have
the type of brain which is continually acquiring fresh
236 I. K. FOREMAN
vigor and brilliance. Of course, between the purely typi-
cal examples of these extremes there are numbers of men
who possess, to Some extent, the two qualities, which over-
lap and partake somewhat of the nature of both; but, gen-
erally speaking, a successful person may without difficulty
be included in One group or another.
The quality which impels the successful business man
forward is an essential trait in his character. It may be
called vanity, though, if we substitute Love of Approba-
tion, it sounds less repellent, and, if we add, the approba-
tion of the best and honest part of mankind, it becomes a
positive virtue and a very desirable quality indeed. Al-
most all great and successful men possess it in a high de-
gree. It is the motive power which forces them on to
greatness. Ambition is its synonym, and the young man
who is ambitious has already stepped upon the first rung
of the ladder of success.
ORGANIZATION OF THE WAAFL ORDER HOUSE.
BY FRANK M. NEEDHAM,
[Merchandise Department Manager Sears, Roebuck & Co., Chicago.]
The first mail order selling instrument was not an or-
ganization—it was a personality. In some cases it was a
family, all working together, writing letters, filling, orders,
packing goods and doing errands. Today it is an Organ-
ization of surpassing completeness. It has to be. It grew
so fast that it was not within the bounds of human possi-
bility for one man to know how many million dollars’
worth of goods were being bought each year, and how
many postage stamps were being used, with all the inter-
mediary and accessory processes between in the scattering
of these supplies to the four quarters of the globe. The
foreign selling department of the oldest of these houses
does a far larger business than did the original house for
several years after its origin.
The growth of the largest of these houses, which is now
but thirteen years old, outrivals Jack's beanstalk. The
system, by means of which it sells $53,000,000 worth of
goods a year, many of them Small and inexpensive, if it
could be fixed like the pyramids, would rival those won-
ders in interest. Its marvel is in the fact that it is not
fixed, but so fluid and frictionless that over one hundred
thousand Orders may go through this enormous establish-
ment in a day, with meteoric rapidity. From the time the
letter containing the Order is opened in the great depart-
ment devoted to this one process, until the goods in a bas-
ket or box goes traveling down story after story on a
gravity chute, and is shot out onto the floor of the shipping
room, the order has received, perhaps, the attention of a
score of persons. And it is not through its course yet. It
237
238 FRANK M. NEEDHAM
will be checked and re-checked. Packers will take it and
then the labeler will paste upon it the label written in the
routing department, which was taken from the head of the
Order made in the entry department. The freight or mail
or express handlers take it next and from them it goes
out into the world of transportation influences to fare as
it will. If the order had been personally conducted from its
start to its finish, through the hundreds of feet of distance
it actually goes before its exit, its handling could not have
been accomplished probably in one-twentieth the time.
Mere human effort is economized and concentrated in a
thousand ways, possibly only through perfection of system
and Organization. Tireless mechanisms, which never lag,
Convey letters, cards, papers and packages large and Small
from the more remote to the more central stations. Desk
telephones, each with its own switchboard, facilitate inter-
course and forward activities sometimes a hundred per
cent. Marvellous systems of all sorts, and up-to-the-min-
ute inventions, forward all work quite unbelievably. The
minutes, the hours, and the human energy saved by these
in a week would be quite sufficient to run many small busi-
nesses for a decade. To assemble these things, to set them
up, to man them and then to keep the human element keen-
ly human and even genial in so vast an establishment,
where the automatic would be expected, is one of the mar-
vels of all marvels.
IFigures will alone tell the story, and these are so large
as to make us almost insensible to their real meaning. There
have been many stupendous growths within the generation
but none, except in an industry or two, that equals this;
and this has gathered to itself all the advantages gained in
the most progressive of the industries.
The mail order or supply house has a greater number of
kinds of perfectly organized service within its walls than
any other business. Not only does it have the ordinary
MAIL, ORDER ORGANIZATION 239
branches needed in the carrying on of any considerable
business but mail, express and freight service are all organ-
ized within the house, with lieutenants and sub-lieutenants
and a great force of privates. It has Special arrangements
for the handling and conveyance of its mail in bulk, freight
trains come into its great warehouses, and boats unload at
its door.
The amount of money represented by the plants of this
business is enough to run the biggest kind of a bank, and
the sum is probably duplicated by the amount it takes for
running expenses. The largest house has on hand all the
time six million dollars’ worth of merchandise.
The oldest of these houses is a close corporation. Others
have a large number of stockholders and sell their stock
in the Open market. In the former case each of the own-
el's has an active part in the management. One is general
manager, One is treasurer, one has charge of the branches
and all offices, one is secretry and advertising head and
another has general charge of the buying and supplies. As
this arrangement is all in the family, as it were, there are
undoubtedly many things which are done more or less in-
formally, each man having greater jurisdiction perhaps
than his office would presuppose.
The largest house with its many stockholders has as
executive Officers, a president, a vice-president, a secretary
and a treasurer. The latter two have each an assistant.
The next officers under these are a general superintendent
and a merchandise manager. Under the general superin-
tendent are the heads of sixty-five merchandise depart-
ments, and the department of employment.
In addition to the head officers, the administration
building, a fine fireproof structure four hundred and fifty
feet long, one hundred and forty feet wide and three stories
high, houses a clerical force twenty-five hundred strong.
Here are handled ninety thousand pieces of first-class mail
240 FRANK IMI, NEEDHAM
every day. Here is an entry department of five hundred
girls who enter customer’s orders on the store’s records,
Write order tickets for the merchandise departments and
a card for the index department. Here are the routing ex-
perts, a large force of men who make a constant study of
the quickest, surest and cheapest ways of getting custo-
Imers’ goods to them. Here is also the index department
where are kept the records of transactions with customers.
The mail opening and the mail auditing departments are
also here. It takes one hundred and twenty people to open
and read the first class mail received every day. The
bookkeeping, the auditing, the general correspondence de-
partment where letters are dictated to graphophones, the
stenographic department where stenographers and type-
writers transcribe letters, and the bank, are also in this
building.
Elsewhere is the traffic department, which like all these
mentioned has its head ranking with those of the merchan-
dise departments. The traffic department has its several
divisions as do some of the others each with its head. The
total number of heads of departments and of assistant
heads is over two hundred. These people are paid by
check at the end of the month and no deduction in their
pay is made if they are absent. In most mail order houses
everything is done to make the work of the head of a de-
partment a gratifying one, and these men are almost always
as loyal to their work as though they were the owners and
proprietors.
In businesses which grow so rapidly as this has, one of
the main problems has been and is to secure first-class men
for the responsible positions. There are always more
places of the higher sort open than there are available men
to fill them. In each department the head usually has one
or more understudies or assistants who may give promise
of being able to take the important step forward should
MAIL, ORDER ORGANIZATION 241
their head resign or leave. These men are usually remark-
ably young, in Some cases too young to take so great a re-
Sponsibility should the chance be open early in their under-
Study period. In such cases an understudy from some
Other department, who is older and has shown marked
ability may be called to the place. One of the remarkable
features of many in these establishments is the rapidity
with which capable people are promoted.
The “personal files” of the employment department of
the largest of these houses—a department that is unique
in its way and in its management, and at least not dupli-
cated by the oldest house—are of high interest. They fill
three sides of a large space and require the constant atten-
tion of several people. In these is to be found something of
a personal record of every person employed in the house.
In some cases there is a record of their intelligence, of their
powers of concentration, and of various other sorts of abil-
ity. Not only is there a record of everyone that is with the
house but of everyone that has been employed by it. In
every case the record tells the reason for the dismissal or
leaving, with some annotation as to whether it would be
wise to reinstate. A scholar would make or draw some very
interesting psychological conclusions from these, and a
humanitarian would learn that a corporation, no matter
how large, may have a soul. It is a rather notable fact that
the most of them have found within the last ten years that
it was a sound business advantage to exercise the func-
tions that go with that possession.
Every transfer of an employee from one department to
another is made through this department, and every fact
concerning this move is recorded, with a statement of the
pay that the employee is receiving and whatever advance,
if any, was made. The head of this department has many
duties of more or less miscellaneous sort connected with
the handling of employees. There are often questions con-
243 FRANK M. NEEDHAM
cerning the use of the extensive playgrounds, the baseball
diamonds, the nine tennis courts, etc. The benevolent
work done comes also somewhat or wholly under his juris-
diction. This company is now caring for over forty vic-
tims of tuberculosis. Not a small task in connection with
this record work is that of answering letters from all sorts
of firms asking for the record of an employee who has given
the name of this company as a reference.
The mail order establishments are frequently called
Catalogue houses. The catalogue is their salesman. The
making of it as well as the book itself is one of the distinc-
tive features of the business. The economies through
Organization and system, which have been brought about
in connection with this work, count much as one of the
many elements to which the wonderful financial success
of the greatest of these houses is due.
These catalogues usually have from a thousand to
twelve hundred pages, with from four to six columns of
rather fine print to a page, with numerous cuts. Most
houses now send out two large books a year, the Summer
and the winter catalogues. The latter is the larger of the
two. They go out either by mail or express, and most
houses give them without charge.
The process of making the catalogue begins in the de-
partments. Each head prepares his own copy and decides
upon what he will have represented by cuts. Any part of
his copy which he does not wish to write, and the introduc-
tions to the many different sections of the catalogue are
usually written by men in the advertising section, with
whom the heads of departments confer. These writers
prepare all the special literature, booklets, and SO forth
which the house sends out.
After the copy is ready it goes into the hands of the
advertising manager and his assistants and then to the
printers. The printing plant in the largest and latest built
MAIL, ORDER ORGANIZATION 243
of these establishments is the largest private printing plant
in America. It can truly be called the heart of this busi-
ness enterprise since business is wholly gained through
the Soliciting by advertising matter. -
The building which houses this plant is four stories high,
two hundred and fifty feet long and ninety feet wide. It
is entirely devoted to the printing and handling of cata
logues and seventy-five or more special catalogues, fifteen
Sample books and millions of blanks, circulars and price
lists required in the daily course of business. There is
Constant revision of all this matter made necessary because
of changes in the stock of merchandise and in prices.
Presses are kept working day and night to keep this
printed matter the most effective of its kind. This house
probably uses a larger quantity of printed matter in the
forwarding of its business than any other mercantile insti-
tution in existence. -
Twenty of the most modern automatic printing presses
are run day and night to supply sufficient catalogues to
meet the demand. They receive the paper from the roll
and print, fold and deliver five thousand sixty-four page
sections of the great catalogue every hour. These sections
are taken to the bindery and electric machines covering a
great deal of floor space assemble them into books, seven-
teen times faster than the quickest hand worker can do.
An automatic continuous catalogue trimmer trims the
edges of five catalogues at one operation and thenty thou-
sand pass through it every day. The capacity of the twenty
presses is so enormous that thirty-five thousand copies of
the twelve hundred page catalogue can be produced in a
day and between four and five million a year.
Vast quantities of printed matter are consumed
throughout the house in a day, and a great Saving is effected
—in the end this means lower prices on merchandise—by
the house having its own printing plant for this work. Be-
244 FRANK M. NEEDHAM
sides the great presses there are nine small ones used for
printing Small quantities of stationery and office blanks,
and Seven automatic presses—marvels of ingenuity—pro-
duce enormous quantities of office blanks in one or two
Colors of ink. They are self-feeding and produce from five
to seven thousand thousand printed sheets per hour. Be-
sides the work done by linotype and monotype machines
One hundred and fifty skilled printers are employed to set
type. To add to the perfection of equipment there is an en-
graving plant where all the illustrations for the catalogue
are made and a department devoted to rubber stamp mak-
Ing.
In addition to the several departments mentioned as
housed in this building is a clerical force of one hundred
and fifty women and a half as many men who address the
wrappers, enclose, stamp and mail the millions of cata-
logues, pamphlets and price lists that are sent out every
year. All the workers in this building as in all the build-
ings of the establishment have the best possible light to
work by and every modern advantage of hygienic sort.
It costs twenty-two cents to carry a general catalogue
to a customer. The monthly postage on these alone is more
than one hundred thousand dollars. Precancelled stamps
are used in sending out all printed matter, thus effecting a
saving of time and avoiding the possibility of theft. The
total bill for postage averages in excess of five thousand
dollars a day in this largest institution, and is probably
the largest paid by any kind of an establishment in the
|United States. As a branch of the main postoffice is main-
tained, with government supervision, the mail does not pass
through the city office but, after being sorted and routed by
states by experienced postal clerks and placed in Sacks, it
goes straight to the different railway stations, thus greatly
facilitating delivery to distant customers. Seventeen hun-
dred mail sacks of catalogues and forty baskets of Or
|MAIL, ORDER ORGANIZATION 245
seventy-five thousand letters are delivered to the mail
Carrying companies each day.
The mail receiving department is peculiarly interesting.
The following description of it has been prepared for those
interested in its workings:
The government sends out mail by special wagon four
times daily, and as rapidly as the sacks are received in the
mail Opening department the letters and postals are passed
through a machine which stamps the date and hour of arri-
val in the house on each and every piece, this work being
performed automatically at the rate of eight hundred per
minute. The postals are then separated from the letters
and the edges of the envelopes opened by machinery. An
expert operator on the mail opening machine will handle
from ten thousand to twelve thousand letters per hour. The
opened letters are passed to careful clerks who remove
the contents from the envelope and separate those letters
containing orders from those relative to miscellaneous mat-
ters. All orders are passed directly to the mail auditing
department while the miscellaneous correspondence goes
to experienced mail readers who are familiar with every
branch of activity in our house and who direct each piece of
correspondence to its proper department.
In the mail auditing department, the Orders sent us by
our customers are read carefully to see that they are regu-
lar in every respect, that is, that the catalogue numbers,
sizes and all other necessary information has been given
by the customer, so that we may intelligently handle his
Order. These readers also decide whether or not the order
will be profitable to the customer from the standpoint of
transportation charges. As we advise our customers, we
are desirous of making every transaction profitable to them,
and when a customer sends us an order for an article which
will cost more to deliver to him than the article is worth,
it is our practice to refund the money and advise him either
246 FRANK IMI, NEED HAM
to hold his Order for that particular article until he has
need for and Orders other goods which we may supply, or
that he secure the needed article at home, even though the
price at home be slightly higher than the price we quote.
These readers also adjust any complaint which a customer
may have made with reference to a previous order.
After the orders have been carefully scrutinized, they
are delivered to what we call the cash crediting division.
Here the cash creditors verify all moneys and papers re-
ceived and ascertain whether remittances are in regular
form.
In a single day's mail, customers orders accompanied
by postoffice money orders, express money orders, checks,
drafts and currency come to a total of three hundred and
fifty-three thousand dollars.
Sometimes money orders are incomplete, a check may
be unsigned and any number of defects are discovered
every day in remittances received from customers, which
makes it impossible for us to collect funds sent us by them,
and the principal labor of the cash credit division is to see
that all remittances are good before the order is accepted.
The amount of money included with an order is then indi-
cated on the face of the original order. The remittance
is detached and a record made. The orders are then passed
to another division where a second record of the Order is
written, this being our permanent record of the transac-
tion, which indicates the invoice number, the state in which
the customer lives and the amount of money received.
After this handling in the mail auditing department, the
orders are sent to the entry department.
The entry department in any of these houses looks
like a great and as busy as a school room, where the pupils
are always working with manuscripts rather than books.
In the house which is here described and where conditions
are as nearly model as possible, the work is divided into
MAIL, ORDER ORGANIZATION 247
eight divisions, to conform to the system designed to facili-
tate the handling of customers’ orders. The receiving, the
signing Out, the collecting and the other divisions of this
department are but auxiliary to the entry division, which
Writes all the order tickets for the merchandise depart-
ments. These tickets average in excess of sixty thousand
daily. In the busy season of the year one hundred and five
thousand tickets a day are handled in this room. The
Work of transcribing customers’ orders to merchandise
Order tickets is performed on Fisher Billing Machines, four
hundred of these typewriters being in use at the present
time. This gives the order fillers in the Merchandise Build-
ing typewritten instructions, thus minimizing the possibil-
ity of error and facilitating the filling of orders.
It would be almost impossible to imagine a busier place
than our entry department. Every young woman is in-
tent upon the work at hand. The roar of four hundred
typewriters, hurrying messengers delivering new orders
and collecting finished orders, the intense application of
every employe in this department conveys to our visitors a
most adequate idea of the immense volume of business
transacted in this great merchandising institution every
twenty-four hours, and while the number of people engaged
exclusively in the writing of customers’ Orders is enormous.
Modern methods for conducting the correspondence of a
large business concern are perhaps as highly perfected as
any one thing in the work of carrying on the business. The
greater the volume of correspondence the less possible is it
that slipshod ways should prevail. In some mail order
houses all letters are answered in the departments. From
here they are taken to letter inspectors who read and re-
turn them, if necessary, to be rewritten. Some depart-
ments like the adjustment bureau have a whole corps of
correspondents. In a large foreign department there will
have to be correspondents who can translate and answer
letters. Such a department does its own inspecting.
248 FRANK M. NEEDHAMI
But more modern than this, and more competent to turn
out a great volume of work is the general correspondence
department. Here a great number of people dictate letters
into graphophones. This department handles all inquiries
and all correspondence that may be necessary concerning
shipments. Sometimes an omission has been made, or
there has been a delay in transportation or the goods have
been damaged in transit. As an annex to this department
is the adjustment inspection department where all such
things are given attention and everything done to insure
the customer fair treatment.
The cylinders are taken from this department to the
stenographic department and the letters here transcribed
by typists. To this department also return the steno-
graphers who have taken dictation from officers and heads
to transcribe their letters, though many heads have their
own stenographer or Secretary who does not leave their of
fice.
The following description shows how systematically this
work is handled:
Over ten thousand letters are written in this department
each day, and as these are handled upon Schedule time, no
letter can remain in the department longer than two hours.
A large force of collectors, distributors and mail dispatch-
ers is required, and the system is so perfect that not a paper
may be mislaid or lost. An interesting feature of this de-
partment is the record which is kept of the work of each
individual operator. The lines in every letter are counted
and the operator given credit therefor, while the depart-
ment for which is was written is charged. Any mistakes
which are made are charged against the responsible party,
and the records thus obtained are extremely valuable in
determining the standard of the personnel of the depart-
ment.
MAIL, ORDER ORGANIZATION 249
Another interesting fact is the quantity of stationery
used. On an average ten thousand letter heads and twenty
thousand second sheets used in making carbon copies for
Our records are consumed in this department daily, while
the actual value of all the office supplies is of such large
proportions as to be almost unbelievable.
The life of the mail order business is dependent on an
elaborate system of files and indexes with the name, ad-
dress and purchases of customers revised to date. Enor-
mous improvements in method have been made in this work
during the last decade. The following description has been
prepared to show how this work is conducted:
One hundred and fifty-three employes are required to
keep these records and this room contains the names of
Imore than six million customers and a full and complete
record of every transaction with each of them. When an
Order is received from a customer, an index card is prepared
from that order in the department where all orders are
entered, and this index card comes to this index department,
where it is sorted in the sorting division according to state
and town, then passed to young women in charge of the
index cabinet devoted to that particular state or part of a
State and filed alphabetically according to state and town.
This elaborate method of keeping our records, while seem-
ingly complex, is indeed very simple and enables us to im-
mediately obtain the full record with reference to any sin-
gle transaction with any customer anywhere in the United
States. If a customer sends us a letter with reference to a
shipment, we can immediately refer to the record, provid-
ing he gives us the postoffice that the goods were ordered
from or the shipping point to which the goods were shipped,
should it be different from his postoffice, and we quickly
ascertain the exact amount of cash received by us and the
merchandise ordered by him, so that the correspondent may
obtain all the records in the transaction and handke the mat-
250 FRANK M. NEED HAM
ter to the satisfaction of our customer. From these index
Cards We also obtain the names of those to whom we wish
to Send Special advertising matter.
To keep this index up to date, a division is devoted to
Correcting the cards of our customers who notify us of any
change in their postoffice addresses. Our records include
all postOffices, all shipping points, R. F. D. numbers, sub-
Stations, Summer postoffices and discontinued postoffices,
and we dare say that the government itself has no more
complete record of all these matters than exists in this index
department. The character of our business is such that we
are dependent upon system in handling it, and in this de-
partment centers the complex systematizing necessary to
the preservation of our valuable and indispensable records.
Manufacturers have learned many things about the
packing and handling of merchandise from the mail order
houses. The great number of shipments made every day
pass through the hands of almost every railroad and ex-
press company in the United States. Methods of packing
that will insure a low classification and rate are given con-
stant study and every improvement in transportation is
taken advantage of. Each order first passes, after it has
been entered, through the hands of the men and women of
the routing department. These people indicate to the ship-
ping department what is the shortest, fastest and cheapest
route possible. -
In the routing department are written all bills of lading
and the address labels for all sorts of packages and boxes.
All the clerical work of the shipping system is here handled
in such a way that it is absolutely certain that all Orders,
except those containing articles which must be made to
order, will be filled in the merchandise department and On
their way to their destination within forty-eight hours after
the Order has been received.
In the traffic department are taken up all questions of
MAIL, ORDER ORGANIZATION 251
delays or damage shipments. All these matters are vigor-
Ously and promptly traced and the customer given satisfac-
tion at the earliest moment. The traffic and routing depart-
ments of the largest of these houses are so thoroughly
Organized that appeals from transportation companies are
daily received asking for information about routes, con-
nections and so forth. The information in these depart-
ments on all subjects dealing with the transportation of
merchandise is kept constantly complete and up-to-date.
Inter-department communications, except those by tele-
phone and by a few messengers, are made almost entirely
through the pneumatic tube system, the greatest time saver,
in all probability, in the whole institution. This system
is very elaborate. There are dozens of these tubes and their
total length is over fifteen miles. They do the work of a
whole army of messenger boys. This is by means of a cart-
ridge or hollow cylinder into which letters, orders or papers
are inserted. The carriers are dropped into the tube and
great air pressure forces them at a very high rate of speed
to their destination. Each tube will carry twenty carriers
per minute. After an order has been handled in the rout-
ing department it goes through these tubes to the several
merchandise departments, and this department often
handles and dispatches one hundred and five shipping tick-
ets a day.
Berhaps the problems of organization are nowhere
greater and more wonderfully met, than in the building and
equipping of the greatest new plants which have been going
on during the past five years. In the particular plant we
have been describing, in which work has been going on for
nearly four years now, the largest building is the merchan-
dise building. This is called the “works.” The largest num-
ber of the seven thousand employees of the establishment
are here manufacturing, filling Orders, packing and so forth.
It is undoubtedly the largest building ever erected for the
252 FRANK IMI, NEEDHAM
handling of merchandise. It is nine stories high besides
the basement. It is almost a quarter of a mile or eleven
hundred feet long, and a block, or three hundred and forty
feet wide. City streets had to be closed in order that it
might have such proportions.
This building is equal to three hundred and eight mer-
chandise buildings two stories high, forty feet wide and
eighty feet deep. It is, except for the tower, of mill con-
struction with floors six inches thick. Fire walls of brick ex-
tend from the basement to the top story and subdivide the
entire building into sections twelve hundred feet square.
Double steel shutters are used to close the openings between
the several departments. The stairway, elevators, heating
and ventilating ducts, chutes and electric fire shafts are all
surrounded by brick walls with steel doors, closing all open-
IngS. -
Many unusual problems were solved in building this
structure which is well lighted, perfectly ventilated, syste-
matically arranged and thoroughly heated. The problem
of proper foundations was a perplexing one. It was solved
by the use of fifteen hundred and six concrete caissons, four
feet or more in diameter and twenty-six to sixty feet deep.
The tower is fifty feet square and two hundred and forty
feet high and is built entirely of fireproof materials and, in
addition to offices, contains, just under the roof, enormous
tanks holding two hundred thousand gallons of water for
fire protection. From these tanks pipes lead to the tunnels
which honeycomb the ground underneath all the buildings
of this enormous plant and through an overhead sprinkler
system the water passes to every nook and corner of the
buildings. If fire should break out, these sprinklers are
automatically and instantly set in motion.
This building houses a stock of merchandise whose value
is in excess of six million dollars. Though this stock is so
large and diversified and complete, not all the merchandise
offered for sale is carried within the walls of this building.
MAIL, ORDER ORGANIZATION 253
All the largest mail Order houses own or control numerous
factories and mills throughout the country, and merchan-
dise is in many cases shipped from these direct. This is in
accord with the fundamental principle upon which this busi-
ness is founded, the elimination of jobber and wholesaler
as well as the travelling salesman, the general and special
agents, and “all those cumbersome and expensive adjuncts
to busines which make it necessary for the consumer to pay,
in most cases, double the first cost of the merchandise he
uses.”
The problems of conveying merchandise to the several
departments, and those connected with getting the different
items of a customer’s order to the shipping room, in a build-
ing so vast as this, were very great and involved difficul-
ties which had never before been met. Yet records were
broken in building this as well as the other four buildings.
These problems were so successfully solved that the mer-
chandise is distributed in such a way as to make the han-
dling of it as easy as possible. All the heavier stock is stored
in the basement, in the annexes, or on the second or third
floors, very convenient to the shipping room. The four-
track train shed with its glass roof and capacity for two
hundred cars per day, forty at one time, is on a level with
the second floor. Outside are extensive railroad yards. All
merchandise ordered from departments above the second
floor is collected in baskets, which are immediately taken
to spiral chutes located conveniently to all the departments,
and which lead from the top of the building to the shipping
room. These spiral chutes are of steel, about eight feet in
diameter, containing three spiral planes with doors opening
to each one; one for mail shipments, Orie for express ship-
ments and one for freight shipments. The baskets contain-
ing the goods are put in one of these openings and imme-
diately begin a gravity descent to the shippng room. This
process is very rapid and goods are disposed of about as
254 FRANK MI, NEEDHAM
rapidly as if they were thrown out of the window. The cen-
trifugal force of the chute causes friction, however, which
regulates the speed of heavy and light baskets in their des–
cent to the shipping room, so that even glassware will go
down the entire nine stories without breakage. When the
baskets arrive at the bottom of the chutes they slide Out On
horizontal traveling conveyers or endless belts which run
around the four sides of the shipping rooms and large train
shed in the center of the building. The heavier goods such
as furniture, groceries and washing machines are carried up
to the shipping room by means of inclined travelling con-
veyors and delivered automatically.
The power plant which furnishes light and heat for the
group of buildings is gigantic. It covers thirty thousand
square feet of space. The engine room is ornamentally fin-
ished. The boilers have an ultimate capacity of twelve
thousand horse power. Coal is taken direct from cars at
the side of the building and carried by automatic machinery
to an overhead coal bunker of fifteen-hundred-ton capacity
from which it falls by chutes to the boilers below.
The coal carrying machinery in the boiler room has a
capacity of one hundred tons per hour. The refuse and
ashes are automatically conveyed to an ash bunker and
deposited in the cars ready to be taken away. All these
facilities have lessened the amount of hand labor usual in
plants of this character and the workmen employed in the
boiler room are able to maintain the steam pressure without
the arduous toil so common to most furnace rooms.
The entire power plant is designed and laid out to per-
mit of the greatest economy in its mechanical operation.
There are installed Corliss compound condensing engines
directly connected with their respective electric current
generators and the enormous electrical power developed is
controlled current of the largest electrical switchboards
ever constructed, especially designed for this plant and
MAIL ORDER ORGANIZATION 255
Carrying all the necessary instruments and appliances to in-
sure reliable service to every portion of the buildings both
day and night. Within this power house are innumerable
air compressors, house and elevator pumps, fire pumps, arti-
ficial ice making plant, heaters and other varied and special
machinery supplying all the power, heating and lighting
necessities of the general buildings. In this room is devel-
oped an electrical current sufficient to maintain eighty
thousand incandescent lamps, and six thousand arc lamps,
an electric current which would light three hundred towns
of fifteen hundred population each. The power-developed
operates two hundred and twenty-five electric motors, forty
elevators, thirty pumps, and compressed air apparatus
Operating fifteen miles of pneumatic tubes. The engine
room is equipped with an especially designed crane capable
of handling the heaviest piece of apparatus in the plant
with readiness and dispatch. All the heavy machines in-
stalled were handled by this crane, which has a lifting
capacity of twenty-five tons. -
Beginning at the power plant is a very complete system
of underground tunnels, constructed of concrete and extend-
ing under the entire general plant, and connecting all the
various buildings with each other. It is possible, by means
of these tunnels, to reach every building in the forty-acre
plant, and the enormous expense called for by the construc-
tion of this system of tunnels was assumed in Order to facili-
tate the prompt movement of merchandise and to afford
every possible advantage in the expenditious handling of
the vast quantities of mail received and forwarded daily.
These tunnels, almost a mile in length, were also designed
to receive the electric conduits, heating pipes, water mains,
steam pipes, etc., which are required in the various build-
lingS.
The heating and ventilating apparatus installed in the
various buildings operating from this central power plant
256 FRANK iſi. NEED HAMI
is very elaborate and complete. The blast system employed
in heating the buildings is so equipped that in winter time
a uniform temperature is maintained, while in Summer time
ventilation is furnished every part of the buildings by means
of a supply of cool filtered fresh air. In conjunction with
this blast system are a number of steam radiators, placed
around the more exposed portions of the rooms.
In the power plant are located the pumps which main-
tain the required volume of water in the reservoirs and
tanks in the tower. They also fill the auxiliary reservoir
to the east end of the power house with two hundred and
fifty thousand cubic feet of water. The fire pumps installed
are each capable of discharging one thousand gallons of
water per minute. They draw their supply from the com-
pany’s own artesian well which is seventeen hundred feet
deep. - -
The fire protection system of this plant is organized as
perfectly as human invention and ingenuity can go. There
is a supervisory system, a sprinkler system, stand pipes, a
local fire alarm system and a private fire brigade in addi-
tion to the regular city fire department hydrants. The
supervisory system indicates at any time of day or night
the condition of all the fire protection appliances. Such a
complete fire organization was made necessary because of
the immense proportion of the buildings, their arrangement
and number which called for a perfect and complete fire-
fighting Organization.
The provision that has been made for the future is one
of the highly interesting things about this great Organiza-
tion. Most generous plans have been made for future
growth and if this should be comparable with what has been
in the thirteen short years of the existence of the house
these would hardly be ample. The company purchased
forty acres of ground in one tract in a growing resident dis-
trict of the city. Then it met the problems of laying Out
IWAIL, ORT}}}R, ORGANIZATION 257
these grounds for this enormous commercial establishment,
of designing the buildings for their several purposes and
equipping the plant with every modern convenience for
the welfare of employees, the economical handling of orders
and the prompt shipment of merchandise throughout the
country. Expert engineers and builders were called in to
solve the various problems, and the whole story of the rise
of these structures and of the many thousands of men em-
ployed to rush them to completion, and, most astounding of
all, the mountains of material that went into them is a story
of what perfected organization can do.
Ostensibly all this company does for its employees it
does from purely business motives. A doctor and several
nurses are in attendance at the hospital. There is a mutual
bank where five per cent interest is paid on savings which
are compounded quarterly. As Small a sum as twenty-five
cents is received on deposit. Immense restaurant and lunch
rooms occupy the basements of both the administration and
merchandise buildings. Here employees may get three
meals a day at cost price, thirty-five cents for the three.
Every appliance and convenience known to modern meth-
ods are here used in the preparation of food. The equip-
ment includes an artificial ice plant and more than a ton
of ice is used in the refrigerators and dining rooms every
day. The water for the ice making and for drinking and
cooking purposes is from the artesian well, and is filtered
before it is used. This service is variously divided. There
is a main dining room where anyone may be waited upon,
lunch counters, a woman’s and a men's cafeteria and
another cafeteria where those who carry their own lunches
can eat them, silver and napkins being free.
Nine thousand employees may enjoy the grounds about
these buildings, which are of themselves architecturally
pleasing. Large sums have been devoted to landscape gar-
dening in order to beautify the Spaces which are not yet oc-
258 FRANK Mi, NEE}}}IAMI
cupied by buildings. A large amount of space is given to
play or athletic grounds and across the street from the ad-
ministration building is a sunken garden laid out in the form
of a rectangle made beautiful by a profusion of almost every
variety of ornamental shrub and tree and flower. In the
center of the garden is an artificial lake. Back of the gar-
den is a Grecian pergola, a classic structure constructed of
cement and covered with creeping vines. Against the cen-
ter of this is an ornamental fountain. The company be-
lieves it is good business thus to beautify the grounds in
order that employees may be attracted out of doors during
the noon recess; that a change of environment and attrac-
tive surroundings will send them back to work again greatly
refreshed and forgetful of any little annoyances of the morn-
ling.
Economy, system, advantages of the smallest sorts are
taken into account by the managers of this great concern
which is both a selling and an industrial establishment.
There are great manufacturing Operations going on within
these walls. One of the greatest industries is that of manu-
facturing men's and boys’ clothing. The plant for doing
this is without doubt the finest, the largest, the cleanest and
the most sanitary of any in the world. Its great tables
are flooded with daylight from both windows and skylights.
It has every modern improvement in its equipment. An
expert force of draftsmen, cutters, trimmers and tailors
work here amid the most congenial and healthful surround-
ings. Thirty-five hundred requests per day are received
from customers who wish for the sample books of men's
ready-made clothing, men's made-to-Order clothing and
boys’ clothing. These sample books with the big catalogue
bring from four to six thousand clothing orders a day.
There are seventy-five to one hundred people pasting cloth
in the books which are mailed to customers. A large part
of these samples are cut from clippings left over from cut-
MAIL, ORDER, ORGANIZATION 259
ting Out garments but in addition over sixty thousand yards
of cloth fifty-four inches wide is used for this purpose. Up-
Ward of a million sample books are prepared in this depart-
ment every year. --
There is constantly kept on hand here seven hundred and
fifty yards of cloth. This is constantly passing through
the examining, shrinking and cutting departments and as
constantly being replaced by shipments from the mills. In
this way there is made up from one and a half to two mil-
lions of yards of cloth every year with a proportionate
quantity of linings and trimmings. All of these fabrics are
bought direct from the mills at mill prices, the company
either taking the entire output or controlling a number of
mills. In this way all jobber's profits are saved and the
benefit goes to the customer. Every yard of cloth is ex-
amined and if defective goes back to the mills. The whole
process from beginning to garment is governed by the most
absolute system. It is no exaggeration to say that custom-
ers get their clothes at manufacturers’ prices.
These mail order houses also have departments where
women’s clothing is made to Order, where drugs and chemi-
cals are manufactured, where jewelry is made and repaired
as well as musical instruments put in order. In fact one may
find guns being made, boxes for packing or baskets for han-
dling. Anything that makes for economy and saves han-
dling, is likely to be undertaken, and some of these opera-
tions but show what are the immense future possibilities.
Laboratories are established with the most expert men at
work in them not only engaged in transforming pure crude
drugs into medicines but also in making flavoring extracts
and baking powders for the grocery department.
The stock of merchandise in these establishments is kept
so systematically as to multiply by two the work of the
order filler. In grocery departments automatic weighing
and other machines are used to hasten operations. Every-
260 FRANK M. NEEDHAM
thing which fosters accuracy and expedition is used and
these things are sought unremittingly by the use of alpha-
betical arrangements, conspicuous price marks, uniformity
of every sort. Stock keepers sometimes have as many as
three hundred catalogue numbers to care for and will do
this work so accurately that the order fillers may work with
the utmost speed. Where these two kinds of work are com-
bined one may usually find delays.
Responsibility divided and subdivided and lived up to,
is one of the great sources of economy in the mail order
houses. The delegation of authority so that the doing of
every task, no matter how small, is provided has made for
the phenomenal and unparalleled success of these great
commercial establishments.
THE ORGANIZATION OF A CORRESPONDENCE
DEPARTMENT.
BY JAMES ROBINS HARRISON,
IOf the Duntley Manufacturing Co., Chicago.]
With the marvellous extensions of trade has come the
most marked extension of the work of correspondence. The
field of the old-fashioned merchant and manufacturer was
largely local and there was little need of conducting busi-
ness by correspondence. But today the great merchandis-
ing houses and factories often reach out to the very ends of
the earth, and they do it by letter or by printed communica-
tions. *
Telegraph and cable and telephone aid in this work but
the letter is a record as well as a communication and as
Such has a value or values which are turned to various ac-
counts in present day transactions. The letter may do the
whole business or it may supplement the work of persons.
It is economical and expeditious. Its importance has be-
come so generally acknowledged and its use so extended,
that every year brings some invention or device which will
have a permanent effect in increasing its production. The
typewriter and duplicating methods, dictation to the graph-
ophones, and forms which increase the speed of turning
out letters are some of these.
Not only is the inditing of the letter hastened, but every-
thing that pertains to its mailing and its speedy course to
its destination is facilitated by modern invention, and the
most wonderfully devised improvements. The letter is
the most common of mediums but its possibilities in great
ways has become the study of and of the greatest interest
to certain businesses of today.
261
262 JAlſº:S R. H.A.R.R.HŠON
One of the most characteristic of modern colossal enter-
prises has made the letter the very impulse of its existence.
The letter may be a solicitor, a salesman and a customer as
well. Volumes of business are transacted by letters alone,
money collected, contracts made and every sort of thing
bought or sold. So important in its influence is the letter
that even imitations of it reflect some of its strength, and
he circular or form letter is extensively used in business
day. If form letter follows form letter, the effect is often
Hot TInlike that of the frequent calls of the persistent sales-
Iłłęl Fl. -
The postoffice department of the United States has been
tilled the greatest business machine in the world. Its busi-
Hess function now exceeds all others by many hundred per
cent. It has added such departments as the money order
and the free delivery chiefly for the forwarding of business.
Business men have sought for and secured these improve-
ments. By no other instrument can business be conducted
so cheaply nor so safely and certainly. It is a great busi-
ness enterprise from which every citizen may draw divi-
dends in the way of service.
It was a keen and a long-headed man who first compre-
bended fully the motive power of the postage stamp, and
the great economy of it as a carrier. Now there is scarcely
a business of any considerable size that does not seek its
service to run some part, often a very large part, of its
operations. And it is one of the Wonders of management
that around the letter have centered organizations as pre-
cise and well-ordered as a perfectly trained army. Gen-
eral and lieutenants and captains and privates each have a
function in the line of battle which the modern busineSS
letter forments. -
As great economies through concentration have been
introduced, where letters are to be multiplied, as have been
introduced in any other form of production through maSS-
CORRESPONDENCE ORGANIZATION 263
ing and elimination. People who do nothing else but some
part—not even the whole of the production—gain in speed
and facility and have such a place in the system as to multi-
ply its efficiency many fold. Even the elbow motion used
in Opening a letter is economized through constant repeti-
tion. The more often it is performed the faster and less
awkwardly it goes up to a certain limit and this has been
raised quite incredibly in many of the operations that go
On in a large correspondence department.
Every business office has its own peculiar methods and
Organization. Many businesses are devoting themselves to
providing the mechanical appliances for systematizing and
handling correspondence. These appliances and the pur-
pose of all who organize such work is to gain exactness in
doing the work and dispatch in sending it forward. All
systems and all arrangements are alike in these two particu-
lars but vary widely as to results secured. -
In all correspondence departments of any size there is
a chief. He or she may be called the head stenographer,
the clerk or the superintendent or any other name that
covers his or her duties. Unless the work is on an enor-
mous scale and each operation has its head and its corps
of workers the chief may be the incoming mail clerk. From
his desk or office lines may reach out in various directions.
One may be to a regular corps of correspondents who answer
all routine letters. Another may go to the main office of the
company where there is a stenographer to write the letters
which are dictated to her by the manager or heads of the
business. If the business is large more than One Such per-
son is required and Secretaries may attend to some of the
letters. Another line will reach out to the department
heads. There will be letters which either they or some one
working with them must attend to. And there may be yet
another line which reaches out to the highest official of all,
the president, or highest executive official. Letters here
will be unopened.
264 JARIES R. HARRISON
The chief aim for organizing a correspondence depart-
ment is to secure the easiest and simplest possible method
for handling all matters of correspondence and of keeping
a record of them. Everything must be planned to secure
the dispatch of business. Over elaborate methods are likely
to be slow and those which are not planned with exactness
are likely to have loose ends. Everything must be done
Imethodically, economically and with the most absolute ex-
actness, from Sorting and opening to the final process of
filing.
All correspondence starts with the incoming mail. This
must be sorted and divided and systematically distributed.
All general correspondence is opened by the incoming clerk
or clerks. These mail opening people in large establish-
ments may number up to a hundred or more. In such a
case the mail opening in a department has its head and
such divisions as will forward the work. Some workers
merely slit open the envelopes, others read and decide on the
destination of a letter as the head clerk does—sending
routine letters to general correspondents and those which
require individual attention to heads of departments.
Others may handle the money contained in these and make
the necessary records.
Those who read the mail have to have good judgment
and powers of discrimination in order that heads of de-
partments may be saved much time and bother in attending
to unimportant matters that pertain to their work. When
all these letters can be handled by a head clerk he will
know the business So well that he can tell in a moment
just what kind of attention each letter should receive.
Great System has been attained where a general corre-
spondence department which has no other business but the
answering of letters has been Organized. In some cases
this is a separate thing from the stenographic department
where all letters are transcribed. Here all letters are dic-
CORRESPONTENCE ORGANIZATIGN 265
tated either to a stenographer or a graphophone and they
are transcribed in a stenographic department which has a
head whose business is largely that of preventing the waste
of time among the stenographic force. Forms or call slips
to be filled out are given each when they are sent for an
assignment, and others are filled out to show how much
work is done in transcribing. Such records are made the
basis of promotion or of a raise of Salary and great economy
throughout is promoted. Every stenographer can thus be
kept busy all the time as they cannot always be when they
are widely distributed in departments or Small groups as
an annex to a department. Even under this arrangement,
however, certain officials have their private stenographers
and such places are worked for by those who are ambitious
among the general workers. In a large establishment pro-
motions of this sort are not infrequent.
The head of a stenographic force will not only try to pre-
vent the waste of time but the waste of supplies. She will
have charge of the distribution of these—paper, envelopes,
carbons, books, pencils, follow-up sheets and so on. The
Second sheet without the printed heading makes for econ-
Omy. This department usually does all form work and
card writing so the number and variety of supplies is so
great that much could easily be wasted. All sorts of rec-
ords are returned to this head which show not only what
is used but what is being done.
The letter inspectors or readers may be a very important
body of highly paid workers whose responsibility is great.
They have many things to determine besides such small
matters as neatness, correct spelling, proper margins and
spacing. Is the letter business-like, tactful and to the
point? Will it forward trade? A thousand questions
come up to be answered and a good letter inspector in a
large house is a man of fine judgment and much informa-
tion. -
266 JAMES R. HARRISON
In some kinds of business where each letter is of the
utmost importance although the number may not be over
two or three hundred a day a plan has been worked out by
which mail is answered as some one has said in describing
the method, by wholesale. The plan was suggested by the
fact that certain words, phrases and facts are used over and
Over again in some kinds of correspondence.
Mr. David Lay described such a method in the System
Magazine not long ago, but he evidently did not know that
in-certain kinds of work the plan was invented some years
since. A Woman was using it at least half a dozen years
ago in correspondence teaching on a large scale. There was
a great advantage in it for her because her stenographers
were young and not very good at reading their notes, and
because she did not employ many teachers.
Mr. Lay tells of a business man who realized the extreme
importance of keeping his correspondence up to a high
standard and spent from four to six hours every day answer-
ing letters himself. Some days he noticed that what he
said was much more forceful and clear than what he said
On the same subject on other days. When he happened to
dictate an especially effective paragraph he had the stenog-
rapher copy it and keep it. And then it came to him that
this paragraph might be used frequently and that he might
Secure others of the same sort. So he had his stenographer
make an extra carbon copy of all the letters he dictated for
three months. These were filed, at the end of that time
they were cut into separate paragraphs and all relating to
the same subject were put together and then studied.
Mr. Lay says:
“In any business the correspondence must narrow down
to Such points as specifications, data, descriptions, concern-
ing the goods made or handled; the prices, the terms, the
methods of shipment; the policy of the house; the argu-
ments necessary to induce an order from the prospective
CORRESPONDENCE ORGANIZATION 267
customer, the persuation used in getting delinquents to pay
up old accounts and so on. In fact, these are, with the open-
ing and closing paragraphs, the units of all business corre-
spondence. The difficulty lies in the fact that each letter
Written requires a different arrangement of them, and has
seemed therefore to require individual composition. It is
in the continual arranging and rearranging of these units
that letters lose smoothness and force and effectiveness.”
The result of the study mentioned was the arrangement
of these paragraphs in scrap books with sheets indexed at
the edge. On the first page were the best opening para-
graphs or “starts.” And then each subject was handled
in this same way and indexed, until the “closers” were
reached. There were eighty indexes or subjects with two
Or three pages to each. -
The plan followed in the using of these was for some
member of the firm to take all incoming letters and mark
On it the paragraphs that were to be used in its answer.
|Bach subject was given a number and each paragraph under
a number so that the marks might read: 1–40; 75—2,
etc. The system showed surprising results. On the first
Monday morning there were one hundred and sixty letters,
and one hundred and fifty-one of them were completely ans-
wered by the use of these paragraphs. Before two weeks
had passed it was not necessary to dictate more than ten or
fifteen a week, and all the others were written in the phrase-
ology of the manager at his best. Stenographers after six
months could answer the letters without having them
marked. -
In the case of the Woman’s work referred to above no
week passed that she did not work out new and, what
seemed for the time at least, stronger paragraphs.
The filing and distributing of correspondence is a most
vital part of the system which promotes the smooth running
of business. There are four methods of filing employed in
268 - JAMES R. HiARRISON
up-to-date business houses: The alphabetical, which is the
most natural and the best for a small business; the geo-
graphical, which is best adapted for a larger business since
there is no limit to its expansion. This is the best for
wholesale or manufacturing concerns with many agents.
It keeps the correspondence of a locality by itself. The
other two methods are the numerical and subject. The nu-
merical is used when the geographical is outgrown and is
suited to a large business with mail from regular corre-
spondents. The subject catalogue is similar to the alphabet-
ical and is suited to firms doing a technical business—con-
tractors and some manufacturers. -
In correspondence filing the fundamental idea is to bring
together, in one folder, all letters to and from each corre-
spondent or referring to any given subject.
To do this, detached sheet copies are taken of out-going
mail by the Library Bureau copier or by carbon process.
Each copy is placed with the letter it answers in the same
folder. Folders are filed vertically in the cabinet drawer
so that any folder may be taken out and put back without
disturbing the others.
Numeric filing is for most lines of business the most
practical and scientific, and is most widely used. It sim-
plifies the most complicated correspondence, and insures
absolute accuracy and quickest reference.
Tough manila folders of uniform size are numbered
from 1 upward and filed consecutively. In each folder all
the letters to and from One correspondent or concerning one
Subject are placed in order of date, those of latest date
in front.
Every letter received and copy of every answer sent are
marked with the number of that correspondent’s folder,
and the clerk who files goes simply by the number. There
is no chance for guesswork or error.
The card index is a part of this system. One card is
CORRESPONDENCE OR&ANIZATION 269
made Out for each correspondent or subject, bearing name
and address, and number of that correspondent’s or sub-
ject’s folder. This card is filed in an index tray, alphabeti-
cally. To find number of folder containing any desired cor-
respondence, refer to index card. The index card, once
made Out, indexes a correspondent or subject forever.
The index has an additional value as a complete list of
addresses of all persons or firms with whom business is
transacted, and memoranda made On the card gives con-
densed information concerning persons or concerns it rep-
resents.
|Frequently a subject referred to in correspondence is of
greater importance than the name of the writer. For ex-
ample, Some important contract or particular line of busi-
ness which it is desired to keep track of.
In such a case a numbered index card is filled out with
the name of the subject. All letters or papers relating to
it, irrespective of the individuals by or to whom written,
are marked with the same number and filed together in the
same folder. Subject indexing is especially useful where a
concern with a number of branch offices or salesmen wishes
to keep together their communications on a given subject.
Alphabetic filing, by name of correspondent or subject,
without a card index, is best Suited to some business houses.
A folder is assigned to each correspondent or subject,
whose name is written on the projecting back edge of the
folder or on the tab of the tab folder. The folders are filed
alphabetically with alphabetic guides. Detached sheet
copies of outgoing letters are taken and filed in order of
date in each folder with letters received.
If a given correspondence is of little importance the
most satisfactory method is to file it, not in a separate
folder, but in a miscellaneous folder which is placed at the
back of each alphabetic subdivision and has that alphabetic
subdivision printed on it.
270 JAMEs R. HARRISON
Into this miscellaneous folder all unimportant letters
are filed. When a sufficient number of letters are accumu-
lated with a given firm, or under a given subject, that cor-
respondence is removed from the miscellaneous folder and
placed in a separate folder bearing the name of firm or sub-
ject and inserted in its proper alphabetic place in the file.
Do not let the miscellaneous folder grow too full. The
best alphabetic filing system is the one in which the miscel-
laneous folder contains the least matter. *
If the correspondence with any one concern becomes
very voluminous it may be subdivided by subject, one folder
being devoted to each subject and filed behind that con-
cern’s original folder, or it may be subdivided by months.
When correspondence is filed by subject, it may be divided
by name of concern, one folder being devoted to each con-
CeI’IO.
Guides are the great essential of a successful filing sys-
tem. They must be simple and correct. They must be in-
serted at sufficient intervals to guide eye and hand instantly
to the folder wanted. They must stand the hardest usage
and remain legible.
In lines of business where territorial conditions are of
leading importance, correspondence may be filed on a geo-
graphic basis.
The plan is exactly the same as alphabetic filing except
that the file is divided by guides for the states and sub-
divided by guides for towns, folders being filed alphabeti-
cally behind each guide. . -
Correspondence which is out of date is removed from
the folders at convenient intervals and filed in numeric or
alphabetic Order in a transfer file or in transfer boxes.
When the numeric method is used, each firm, individual or
subject always retains the number Originally assigned to it.
Current matter will be in the current vertical file, older
coRRESPONDENCE ORGANIZATION 271
matter in the transfer file or transfer boxes, under the same
number.
Many a concern that keeps its current correspondence
file in perfect working order wholly overlooks the import-
ance of correct transferring. Yet a simple, definite method
of transferring filed correspondence is almost as essential
to a frictionless filing system as correct filing. A very little
attention given to the subject will pay for itself many times
over in convenience, accuracy and saving of time.
The most common, because it is the most obvious
method, is to transfer the entire contents of the correspond-
ence files at stated periods. As a method of transfer this
is the easiest and quickest because no record of transfers
is necessary, the complete correspondence of each period
being by itself; and the labor involved is simply that of
moving the correspondence from the files to the transfer
boxes. But its advantages are more than Offset, except in
unusual conditions where correspondence is rarely referred
to, by the inconvenience and waste of time in reference.
Necessarily for a considerable time after the transfer is
made all reference to filed correspondence must be made to
the transfer boxes instead of to the instantly accessible
vertical file. r
A second method is to have a series of cabinets large ,
enough to hold the correspondence of two years, one-half of
the file being used for the first year's correspondence.
At the end of the first year this matter is allowed to
stand and the other half of the file is used for the second
year's matter. At the end of the second year the corre-
spondence in the first year's cabinet is transferred to boxes,
and the space thus vacated is used for the ensuing or third
year’s correspondence. At the end of the third year the
second year's correspondence is transferred to boxes and
the fourth year's correspondence occupies its place, and
this process is indefinitely repeated.
272 JAMES R. HARRISON
By this method the past year’s correspondence and the
current year’s correspondence are both filed in a vertical
file, with all its advantages of speed and ease of reference.
The additional cost of cabinets is little, if any, more than
for transfer boxes and shelving of equal capacity.
Where business is naturally divided by spring and fall
seasons, the file need be large enough for but one year's cor-
respondence, and is divided by seasons instead of years.
It should be noted that by this method the transfer
boxes are kept together by periods, usually years or sea-
sons. The classification of transferred matter is always the
same as in the current file, and no record other than the
labels on the transfer boxes is necessary. For instance, the
correspondence for 1909 should all be together on the
shelves, arranged in the same order as in the current file;
that is, from one up if the system is numeric, from A to Z.
if the system is alphabetic, or from Alabama to Wyoming if
geographic, each box being labelled to show the sections
covered by its contents, and the years or dates covered by
the transfer. This method keeps the more recently trans-
ferred matter in the most convenient location each suc-
ceeding year. It also aids in determining when the older
matter can finally be stored or destroyed. Another method
is to let the current file run for a fixed period, say eighteen
months, then go through the folders and transfer all matter
bearing a date of more than a year back. Place this
transferred correspondence in folders in transfer boxes
labelling each box with the number or letter of the first
folder it contains; for instance, 190- or Ag.
This leaves one year's correspondence in the current
file.
At the end of another six months, or year, repeat the
operation, combining the correspondence from each folder
transferred with the correspondence from the folder which
has previously been transferred. This method repeated on
CORRESPONDENCE ORGANIZATION 278
every transfer collects the papers on any subject, or to and
from any correspondent, in one place in the transfer box,
making it as easy to refer back five years as One, and after
dates of individual letters have been forgotten. The im-
portance of this point cannot be too strongly emphasized.
There is always only one place in the transfer file to look
for given transferred correspondence.
This method is flexible and absolutely expansive without
limit. Should a transfer box become too crowded after sev-
eral transfers are made to it, another box may be put on the
shelf next to it and the folders in the first box distributed
in the two boxes.
For instance, suppose a transfer box contains ten
folders, beginning with folder 190; the box is labelled 190,
being the number of the first folder it contains. When this
box becomes crowded take out five of the folders and put
them in another box, which is inserted next to the first box.
This second box is numbered 195, being the number of the
first folder it contains. It should be noted that by labelling
each transfer box only with the number of the first folder it
contains, the label need never be changed.
Note also that the transferred correspondence with its
possibility of indefinite expansion takes only the space
necessary for its present size. -
It is not necessary that the work of transferring be done
all at once. File clerks can transfer gradually at odd times.
Either of these last two methods reduces reference to
the transferred files to a minimum, since current matter
for a reasonable time back remains in the current file. And
the entire correspondence covering the period of the file,
with a given firm or on a given subject, is found in the cur-
rent and back files. There are but two places to look.
The most admirable methods of various sorts for con-
ducting correspondences, ranging from fifty to fifty or a
hundred thousand letters a day, have been worked out.
274 JAMES R. HARRISON
Some of these houses file away these letters for a life-
time, while in others the files are cleared once in every six
months. Many of these contain rich material for the coming
students of industrial and mercantile problems, and those
that are retained are so kept that the term of the past,
“dusty files,” is today a misnomer. The establishment
which does not keep these files, which does not adopt sys-
tem, cannot compete successfully with those that do. All
these excellent systems contribute their share of power in
the competitive struggle. -
GROWING PAINS IN A BIG BUSINESS.
BY JOSEPH HELFMAN,
[Of Parke, Davis & Company, Detroit.]
IFive years ago I saw a favorite theory subjected to
searching, practical test. It so happened that two years
before the young head of a large house, having Surrounded
himself with a staff of men exhibiting a good average of
efficiency, had decided to put them in the way of gaining an
interest in the business. Seventy-five of the employees were
selected. Blocks of stock ranging from ten to one hundred
shares were sold them at actual book value, which was then
much below the market price. Most of the buyers had no
means, but by a generous arrangement the purchase money
was borrowed for five years from a local trust company, the
stock was pledged as collateral, and the employees’ notes
were endorsed by the house. Two years later the manager
of the house died. For a long period the business had no
head; it was a captain’s fight. Each man ran his own de-
partment. In emergencies the heads of departments held
voluntary conferences. Then the benefits of a liberal act
were strikingly exhibited in the continued prosperity of
the business. The successor, finally taking the reins, found
ready to his hand a strong, loyal Organization, and needed
no arguments to prove that in the interval between the
old and the new administrations the house had been repaid
not less than tenfold for its gift to the employees. The gen-
eral benefits of the stock allotment are still observed almost
every day—observed in that more enthusiastic devotion to
the company’s interests which springs from the sense of
personal ownership; in heightened loyalty to the employer;
in the fact that, while formerly valuable men would leave
275
276 - JOSEPH HELF MAN
and cast in their lot with competition, not a single instance
of the sort can be cited in five years.
The favorite theory mentioned in the first sentence is
simple enough. While profit-sharing is of the utmost wis-
dom and value in a small business, it is indispensable in a
large one. The head or owner of a small concern commonly
does all the thinking and most of the superintendence. In
a large business responsibility must be shared; authority
must be delegated. Men must be hired not only to work
with their hands but to think, to plan, to construct. The
company’s money must be spent by scores of subordinates.
IEven the superintendence must be delegated. As the enter-
prise grows the organization must be perfected, strength-
ened, and the parts knit closer together, lest the huge thing
break of its own bulk. And what is organization? It is
essentially the process of putting the right man in the right
place. Point to any good business organization, and it will
present the spectacle of a body of able, well directed men.
But good Organization in turn implies two principles—one
mental, the other moral. There must be brains, to be sure,
but brains alone do not render any organization cohesive
and strong. You must have devotion; and the larger the
force, the greater the number of men working far from
the eye of the chief, the more vital becomes the need of
that sentiment which makes paramount the welfare of the
organization and fills the individual worker with the faith
that his own advance can be assured only by the success
of the enterprise. How is devotion to be engendered and
preserved? Sympathy, kindness, affection will do much
when they are real and genuine, but the richest well-spring
of devotion in business is self-interest. In business we get
what we pay for. When you make your employee your
partner—without, of course, relinquishing your control,
which would be equally absurd and improbable—you have
every human guaranty that his powers will be taxed and
strained in your service.
GROWING PAINS-BIG BUSINESS 277
I can well imagine the snort of contempt with which the
average employer would greet the suggestion that he give
away something which neither law nor necessity wrings
from his tenacious clutch. But opinions, like votes, should
be weighed as well as numbered. In business an exagger-
ated selfishness makes men narrow, blind to their own in-
terest—and narrowness makes them selfish. From the dis-
sent of the short-sighted mass I appeal to the enlightened
few who from the day of Stephen Girard and A. T. Stewart
to our own age of Carnegie and Marshall Field and the huge
steel trust, have perceived that the greater the enterprise
the greater the need of a cohesive principle—the more im-
perative the necessity for that loyalty, that devotion, that
passionate industry which only self-interest or copartner-
ship can beget. And if the profit-sharing principle be essen-
tial to preserve great houses, why not to create them? Is
the success of those who scornfully reject profit-sharing as
the fond project of the dreamer and the visionary in busi-
ness—is that any warrant for its discredit? No, indeed. In
business we see only the achievements of successful men.
We rarely perceive their failures or the defects of their
qualities and the penalties which those defects inexorably
exact. We rarely catch glimpses of the greater successes
which might have been attained but were not, of the oppor-
tunities which were missed, of the losses which were sus-
tained. Destiny, says Goldwin Smith, rarely shows the
backs of her cards, meaning, thereby that you can never tell
what might have come to pass had conditions and begin-
nings been different. So who can say how much the suc-
cess of able business men is impaired and stunted by
failure to enlist the full powers of the employed? To dis-
credit the doctrine positive evidence is needed—proof that
it has failed under fair and intelligent test; and such proof
it will be difficult to produce. The testimony of the profit-
sharers is nearly all in the other strain and supports the
doctrine.
278 g JosłPH HELFMAN
It is the baldest platitude that in business men work
most and work best—for No. 1. But since the stimulus of
sole ownership is usually out of the question, divided owner-
ship, profit-sharing, is the next best thing, and everyday
experience in employing men on commission bears out the
theory. The only business of which I profess to know
much unfortunately prohibits by its very nature the pay-
ment of salesmen or others by commission. Would that it
were otherwise! Would that a department of four hundred
salesmen, now constituting the heaviest expense of the
business and requiring an elaborate machinery for direc-
tion, surveillance and superintendence, could be based on
the simple, automatic, self-regulating principle of commis-
sion. What trouble, what waste could be avoided! And
what a powerful impetus would be imparted to the work of
the sales department! Despite the immense improvement
which the last twenty-five years have brought about in the
character, intelligence and efficiency of traveling salesmen
—though today the brains of many houses are on the road,
the fact remains—mind you, I am now quoting the testi-
mony and almost the very language of an accomplished
merchant—thé fact remains that you must watch your
travelers incessantly; the majority are not ambitious; their
One aim is to do as little work and have as much fun as is
compatible with retention of the place and bare escape from
dismissal; and when you See a man start early in the morn-
ing, keep going all day, canvaSS One town, get out and go
on to another, he is nearly always working on commission.
Is such a man tempted to loaf? The time he wastes is his
own. Is he a spendthrift? The money squandered is his
money. We can all cite cases of foredoomed failures in
which compensation based wholly on sales made or work
performed has been a veritable salvation and has actually
transformed the character. - -
A subject of much practical importance in all large
GROWING PAINs—BIG BUSINESS 279
houses is old age pensions. Take any big enterprise enter-
ing on its second generation. It is bound to have in im-
portant executive positions men who have seen their best
days and cease to grow. In their time these men may have
done good honest work. They have helped bravely in build-
ing the business. Their health becomes impaired or condi-
tions change and lessen their usefulness. Or in one of those
reorganizations and readjustments which are necessary
every five or ten years in a growing enterprise, they become
superfluous. Or maybe the whole machinery of the busi-
ness has to be revolutionized in response to profound
changes in the times or in the market. Woe then to those
who not know how to change with the times. How they are
treated by the average employer, whether individual, firm
or corporation, we know too well. But the heartless proced-
ure of kicking them out is not always judicious, and it
sometimes misses its well-meant purpose of encouraging the
others. Now, I may have my opinion of the average, but
not every employer is a brute; and under the cross-fire of
conflicting duties his position becomes most embarrassing.
On the other hand it is his supreme duty to maintain the
efficiency of his organization and the success of his busi-
ness, thereby assuring the greatest good to the greatest
number—a fact which the sentimentalists always overlook.
On the other hand, lies the danger of harshness and cruelty
to deserving men, the danger of disaffecting the staff by
spreading the damaging notion that the management has no
soul or heart and that in case of sickness or accident or old
age the employee will be thrown out like a piece of rotten
wood. . In such situations men who have ceased to grow, or
who do not measure up to the full requirements of a respon-
sible berth, are apt to hang on and on; they are suffered to
stay; and the business declines or misses the whole success
it might have won. What you see in the universities is par-
alleled in nearly every large business; inferior men are tol-
280 JosFPH HELFMAN
erated when the efficiency of the organization clamors for
their removal — tolerated because dismissal will plunge
them into dire poverty. Here the pension system steps in.
It facilitates the elimination of the unfit. It provides a
decent, gentle means of meeting the moral claim of the em-
ployee, and, best of all, it aids powerfully in improving the
service. Why did Carnegie establish his pension fund for
college professors? Not by any means for the exclusive
profit of the beneficiaries. No, the shrewd Scotchman was
gunning for bigger game, which was nothing less than the
improvement of the teaching force through elimination of
the incompetent, with consequent inestimable benefit and
advantage to the entire student-corps.
May I at this point throw in a parenthesis? I spoke of
men who have ceased to grow. In business we sometimes
see two young men evenly matched or nearly so in brains,
ambition and industry. One gives you the impression that
he will continue to grow—that his future will bear watch-
ing. The other doesn’t. Why the difference? Having been
brought much in contact with younger men, I venture this
answer: One of the pair does his best all the time; the other
doesn’t. In business beware of the man who does always
his best. He is as dangerous as that other man who has
gotten his education out of one book, Shakespeare or the
Bible. Some day you may find yourself wearing his livery,
and you may learn from personal experience what it means
to change your posture from the patronizing to the defer-
ential. At times such a man may make himself ridiculous
by excess of Zeal or bad judgment, or he may waste his
powers on minor issues. His whole life, indeed, may be
One long stumble, but he will stumble upward. The men
who don’t grow in business are the men who don’t work.
Toil is the price of growth. It may be that some pay the
price and pay it in vain, but I never met one. Need I ex-
plain that when I speak of growth and toil I mean, of course,
GROWING PAINS-BIG BUSINESS 281
toil of the brain—close, hard, prolonged thinking? I am
not now speaking of those imbeciles sometimes observed in
large houses and in responsible position who plume them-
selves on their industry because they busy themselves with
tasks more fittingly delegated to a porter or a clerk.
The best worker is the hard thinker. The commonest
spectacle in business is the routinist who loves to do the
Same old thing in the same old way, is averse to change,
detests innovations, goes to seed mentally and doesn’t know
it. Why? Because, though he may be physically active, he
is intellectually lazy, because he finds routine easy and com-
fortable, because the incessant grapple with new and fresh
problems in business, though rich in growth and highly edu-
Cative, is wearing and exhausting. Given a responsible po-
sition in which the work is perpetually new, in which there
is no routine, the ambitious incumbent will fairly feel him-
Self grow, he will grow between meals, but he may be dead-
in ten years unless he watch his health. -
Whatever broadens and enriches the mind, widens the
sympathies, eradicates prejudice and suspicion, strengthens
the character, is a valuable preparation for business, since
it is the broad man, not the sharp one, who wins in the long
run. Though brains are essential in business, a thousand
things besides pure mental power are apt to count. Moral
qualities, temperamental qualities, good nature, an en-
gaging address, Sympathy, tact, patience, robust health,
that high and defiant spirit which only rises with disaster,
Or, in plain Americanese, the spirit of the cheerful loser and
the game sport, but above and beyond all the supreme power
to inspire confidence and make people trust you—all these
things are far more important in the varied, many-sided
work of the business man than in that of the physician or
the lawyer, although no Occupation is purely intellectual.
EXPENSES AND PROFITS,
BY LANSING G. WETMORE,
[Of Scranton, Wetmore & Co., Rochester, N. Y.]
The rapidly advancing cost of the necessaries of life and
the baneful influence of this luxurious age have brought the
payroll up enormously. From the errand boy to the head
Salesman, the demand is for higher pay, while keen compe-
tition demands all the latest business appliances and im-
provements, and they all-cost money. This means better
profits either through increased volume of business, or an
increased percentage on the sales, or going to the wall. The
importance of making a study of these conditions is there-
fore fully justified.
I can hardly hope to present anything new, but simply
to give you some thoughts from the Book of Experience of
a moderately successful business career of forty years. I
Want to say at the outset that I propose to discuss this sub-
ject so far as the stationery business is concerned from a
buying and selling experience in the latter. General prin-
ciple, however, will apply to both.
System.—First and foremost in establishing or reorgan-
izing a business it is important to recognize the desirability,
yes, the necessity, if it is to be a successful venture, of
having a system that will enable the manager to see at a
glance, at least monthly, exactly what the business is doing.
It is money well expended to secure an expert and to
install such a system along the most up-to-date and modern
methods. Even the merchant doing only a moderate busi-
ness should not be obliged to wait until annual inventory
time to know where he stands. The manager should know
the average gross profit his business is producing which is
easily obtainable at inventory time. He should be able to
282
EXPENSES AND PROFITS 283
See at a glance at short and regular intervals during the
year the amount of his purchases, cash and credit Sales, and
a detailed statement of expenses. He should be able to
make a very close estimate of stock on hand for insurance
purposes, and he should not only be able to see this exhibit,
but to look the statement squarely in the face and give it
careful consideration, and take prompt action to correct
any unfavorable conditions that the statement may reveal.
Causes of failure are numerous and make an interesting
study. Doubtless many are caused from lack of knowledge
of their condition until too late for corrective action. - These
facts emphasize the importance of every business man
knowing “Where he is at” all the time, and too much stress
cannot be laid on having a system that will give him the
necessary information correctly.
Cost of Doing Business:–A lot of investigating has been
done by inquiring minds, notably by Mr. Ward, of Boston,
as to the cost of doing business in the stationery line. He
found out several things and among them that some did not
know what their percentage was, which, of course, was not
to their credit. They kept no records that would give them
the information. Investigations also developed a wide dif-
ference in the percentage which we can readily see might
result from varying conditions, such as volume of business,
high or low rents, and good, bad and indifferent manage-
ment, etc. I have made no effort to secure any data and will
simply give the result of my experience and some observa-
tions of value to Some of you. A list of expense items of the
average businessman runs about as follows:
Sales force.
Office force and other help.
Advertising.
Insurance.
Interest account.
Delivery.
284 L. G. WETMORE
IFreight.
Stock depreciation.
Discount on fixtures.
Bad accounts.
Salaries of firm or officers.
General expense, including such items as postage, tele-
phone, janitor, heat, light, wrapping paper, twine, etc.
Rent. •
Having the expense account in detail before us our first
duty is to study it closely and trim it down to the lowest
notch, but don’t make the mistake to economize in the Wrong
spots. Let us discuss some of the items where it would
seem good policy to make liberal appropriations.
In the matter of rent, I believe it pays to have a good
location, and this means, of course, high rent. Buyers will
not go out of their way very far to purchase small items,
hence a central location is desirable and brings in trade over
the counter which it pays to cultivate rather than to depend
too much on outside men.
We have found this policy desirable, and 75 per cent of
our business comes over the counter. I should say 3 per
cent a fair rate for rent of a good store in a good location on
retail business of $50 to $100,000. It might be more in some
of the larger cities.
The right kind of help and plenty of it is good business.
Business men like to be waited on promptly and in a busi-
nesslike way, so that it pays to have intelligent, alert, and
courteous clerks, and this of course means a liberal pay roll.
A competent sales force of this character is a business-build-
ing asset that cannot be overestimated. This item of ex-
pense ought not to be more than 8 to 10 per cent of the
grOSS sales.
Delivery service is a large item in the expense account,
but, in my judgment, is a poor place to economize. Prompt
deliveries give a house a reputation that is well worth an
EXPENS #3 ANI) iº"ITS 285
effort to secure. We find it desirable to supplement Our
regular delivery with boy service for delivery of Small pack-
ages to nearby points. -
No doubt all of you have discovered that the expense
item of lighting your store is a big one, unless you are fortu-
nate enough to have plenty of daylight. The average Store,
I believe, has not. It has been our policy to use electricity
very freely giving us a brilliantly lighted store which is a
drawing card in a business way. Our experience in electric
lighting may be of interest to some. During the past year
We have equipped our store with new fixtures at a large
expense and are using the new Tungsten lights. The result
is a saving of about 25 per cent in our lighting bills and an
increased efficiency of at least 25 per cent.
There is no easier way of sinking money than by judic-
ious advertising. How much to spend and how to spend it
is the question that is probably puzzling many of us. There
is no doubt that the right kind of advertising is as neces-
sary to the success of a business as any other elements that
enter into it. We have found it good policy to employ ex-
pert talent to assist us in this department. We use the
newspapers freely, issue a house Organ bi-monthly and send
Out circular letters to special lists of professional and busi-
ness men. Two per cent of the gross sales is, in my judg-
ment, a liberal allowance.
Window dressing is another item that falls naturally
under advertising classification. Its value cannot be too
highly estimated. Some prosperous concerns that I know
depend entirely on it for publicity, not spending a dollar in
the newspapers, but the best location and high rent are
necessary to the success of this plan, and it is questionable
policy even under these conditions. It is false economy to
limit expenditures too much for window dressing. The
most modern fixtures should be supplied, brilliant lighting
provided, and every facility given the window dresser to
help him in his work.
286 I. G. WETMORE
If the business does not warrant a professional, the ex-
pense of a correspondence course in the art, or some other
special training with a subscription to some good journals
on the subject for the clerk assigned to this work is money
well expended.
‘An important point also in connection with window ad-
vertising is a proper inside counter display of the goods
shown in the windows, ticketed with prices to correspond.
This is especially desirable when some single line of goods
is being featured. Window demonstrations as well as store
demonstrations of Office Devices is a method of advertising
that we have found desirable and which never fails to at-
tract interest observers and results in immediate as well
as future sales. Don’t economize in your window adver-
tising. -
Careful attention should also be given to the store front.
Clean glass, immaculate signs, a fresh awning if necessary
every year, all help to impress the public favorably, and
help the sales department accordingly.
Another item of expense which in a business of consid-
erable volume amounts to hundreds of dollars and which
perhaps may seem trivial to mention in this paper is the
Bundle Department. It pays for a concern to gain the repu-
tation of sending out neat and strongly wrapped bundles,
and a manager will make no mistake in furnishing the best
of material and keeping a watchful eye on the bundle de-
partment, or the clerks if they are the ones doing this work.
Don’t economize too closely here.
Thus far we have considered expense items on which it
would seem short-sighted policy to economize to closely.
Let us now look at the expense account as affected by the
purchasing department.
Here is a danger spot that should be watched closely.
The rock on which many a good ship has been wrecked,
overstock and deadstock. Many of us know how easy it
ExPENSES AND PROFITs 287 -
is to make mistakes in buying, to be tempted by an extra
5 or 10 per cent to buy a quantity in excess of our needs or
ability to dispose of in a reasonable time. It is a simple
example in mathematics to figure out the result of such an
error. Suppose we are carrying $10,000 in excess of Our
needs, that money is worth at simple interest $600 a year,
and perhaps more if we have to borrow it at the bank. The
same amount in the office to discount bills instead of over-
stock on the shelves realizes at least 1 per cent per month
or 12 per cent per annum; $1,200, so there you have it, an
addition to your expense account of $1,800, or an addition
to the right side of your profit and loss account of the same
amount, quite a handsome little sum.
Hundreds of merchants are struggling along under such
a handicap and this condition is accountable for a large
proportion of the failures that occur annually. The buyer
then is an important factor in the success of every business
venture. To avoid these mistakes, a good system should be
inaugurated, and I know of none better than the carefully
kept loose leaf stock book with numerous vertical columns,
and every article in the stock listed under its proper classi-
fication, together with the cost price and selling price—the
annual inventory of each article in the first column and an
entry of every invoice as it is received from time to time.
This tells the story at a glance, gives you the information
you need in your buying and helps you to avoid the danger
of overstock. -
These sheets also serve another useful purpose. At in-
ventory time divide them up among the clerks who have
charge of the various stocks. The entry of stock on hand
is quickly made in the proper column without the necessity
of itemizing a single article. Your inventory is quickly and
accurately taken in a quarter the time required by the old-
fashioned methods. We have had this system in operation
for several years and can recommend it highly as a great
288 I, G. WłºńiORE
time saver for inventory purposes, a valuable guide for the
buyer as well as a complete list of cost and selling prices.
It may be you all have it, or something just as good—I hope
SO. Depreciation on stock and a proper percentage de-
ducted from fixture account annually should not be for-
gotten as expense items. -
A credit system seems to be a necessity in modern
business and creates another big expense item which must
be reckoned with. An expensive office force, office appli-
ances, a heavy postage account, etc., add considerably to
total expenses. The item of bad debts is a serious one, but
One which may be with wise management favorably con-
trolled. Two conditions are necessary to reduce this item
to a minimum: good judgment in granting credits, and a
wide awake Collection Department. This is a big subject
which can only be touched upon here. Short time credits
should be the rule and collections promptly made. Slow
pay customers should be cut off promptly. They only make
work and worry for the office, and are unprofitable in every
way. r -
As heretofore stated, investigation reveals wide differ-
ence in cost of doing business, and while it is interesting
and helpful perhaps to know what it costs the other fellow,
the important thing is for every man to know what his own
expenses are, to watch the expense account with an eagle
eye, cutting out every unnecessary expenditure.
Perhaps 25 per cent to 30 per cent is a fair average of
expense in the retail stationery business, if you include
salaries of members of the firm or officers of the corporation,
interest on capital invested and freight. The latter item is
thought by some to belong in the merchandise account.
Having then your expense account before you, the question
is, what gross profits you should have, and what you can
hope to get. This brings us up facing another problem and
a big One.
EXPENSES AND PROFITS 289
I approach now that part of the topie on “Expense and
Profits,” the making of prices. My discussion of the mak-
ing of prices will be very brief.
Eirst—The danger if we mark goods at too large a profit
of gaining the reputation of a high priced house. This, of
course, is disastrous. While such a policy may be all right
in some lines and by houses that cater to an exclusive
trade, it will not do in such a staple article as business sta-
tionery and leads to sure disaster if persisted in.
Secondly—The attempt to build a business on the mis-
taken idea of underselling our neighbor. This inevitably
leads to retaliatory action with the resulting loss of profits
and perhaps failure. The true policy is to look the ex-
pense account squarely in the face, not forgetting to in-
clude all the items. If the business is just being established,
take the experience of others as the guide—it is safe to
say it will be at least 25 per cent on the sales. No hard and
fast rule can be made as to the percentage of profit to add
to the cost, conditions differ so materially in different local-
ities. One important element in the price problem is to
find out as accurately as possible how much of our busi-
ness we are doing at a Small profit, that is, sales to rail-
roads and large corporations, which, if we get at all, must
be taken on a close margin. We need this information to
guide us in marking our goods for sale over the counter,
and for the great rank and file of business houses who buy
their supplies in moderate quantities and from hand to
mouth and who are the mainstay of our business. ---
What percentage of net profit are we justified in aiming
for and that we can reasonably hope to reach? I thing 10
per cent on gross sales is only a fair return, and if the busi-
ness does not show this something is radically wrong, and
we should get busy and find out what the trouble is and
work like beavers individually and collectively to correct
our own mistakes and to abolish unfavorable trade condi-
290 L. G. WETMORE
tions and abuses. This is about all I shall say On the price
making question, but I want to discuss a few things in Con-
nection with the selling problem that I believe favorably or
unfavorably affects the profit and loss account, as the case
Imay be. •
First and Most Important, a One Price System—I know
it’s a winner, for I have had practical experience of it in
my own business. You perhaps may ask, “Is it possible to
maintain it?” I answer emphatically, yes, excepting, of
course, the business heretofore mentioned with large corpo-
rations, which is another class. -
As we are well aware, this is one of the great cardinal
principles of the great department stores of the country in
which great fortunes have been made. That it can be car-
ried out in the stationery business I firmly believe.
If goods are well bought and marked at a reasonable
profit, we can well afford to stand by our prices, even if a
customer once in awhile goes out of the store. Such a policy
begets confidence. -
I happened to know a few years ago of a large concern
in One of our leading cities whose manager adopted a dif-
ferent policy and with demoralizing effect. The salesmen
were instructed to maintain prices, but the manager took
the liberty of making special prices and discounts to some
of his friends and large buyers This, as a matter of course,
came to the notice of other customers with the inevitable
result. It is to be hoped this manager has seen the folly
of his ways. - -
The One price policy Once adopted, the salesman must be
backed up by the manager of the department and by the
proprietors or demoralization follows, and the value of the
sales force and their Self-respect is greatly reduced. An
instance in Our Own Store occurred within a month which
demonstrates the value of the one-price policy. An out of
town inquiry was received asking for quotations on a gross
EXPENSES AND PROFITS 291
of certain kind of box file. We quoted our regular gross
price and received a reply by return mail that we were too
high. We replied to this by quoting on another and cheaper
style, but held firmly to our former quotation. In a few
days a letter came saying they had been mistaken in their
former statement as to our price and instructing us to ship
the goods. -
Iventure to say this incident secured to us the increased
confidence and respect of that customer and confirmed us
in our judgment that the one price system is the best. A
practice in this connection that, in my opinion, is a dan-
gerous One is the policy of granting a discount to buyers On ,
monthly settlements. It may be all right to give a small
cash discount, say 2 per cent, to customers who pay their
bills very promptly the first of the each month, but this
should be avoided, if possible.
I grant that it is difficult to refuse this in many cases
without danger of offending. The cash discount habit is
So firmly established in the policy of our best houses that
they feel justified in being insistent on its being granted,
but the habit of granting a trade discount of, say 10 per
cent, on monthly settlements, as is practiced by some
houses, I believe to be a mistaken policy and one which
should be combatted. We instruct our salesmen if they
come up against it to induce the customer to take advan-
tage of our quantity prices, which in the long run will equal
in Saving if not exceed the 10 per cent proposition.
The danger in the discount proposition is that if it is
given to one who may possibly be entitled to it on account
of the volume of their purchases, others who may not be,
hear of it and demand it and, as can be readily seen, it
cannot be refused without giving offense, so that before we
are aware of it many customers are “On the list” and aver-
age profits seriously reduced. I have known cases, too,
where stationers have been tempted to inflate prices to pro-
292 L. G. WETMORE
vide for this 10 per cent habit, and this fact being discov-
ered by their competitors has resulted in embarrassment
and loss of customers to the dishonest house. I firmly
believe the discount system to be a bad one and the One
price system to be a winner.
Another factor that favorably affects profits and helps
to make permanent customers is pushing the sale of goods
Of high quality. It may be necessary to carry some of the
cheap and medium priced goods in certain lines, but sales-
men should be instructed and urged to induce buyers to
form the habit of using the best, which not only increases
the volume of sales and the profits, but is really a kindness
to the customer, for he will be better satisfied and be sure
to come back for more of the same sort, so both seller and
buyer are benefited.
The question of imprint goods and special brands, I
know, is a disputed one. I believe, however, that to a modi-
fied extent it is good business, the one important condition
being that the firm name should appear on high quality
goods only. That imprint goods insure good profits and
bring records is, I believe, the experience of many sta-
tioners, as it has been ours.
There is no business-building and profit-getting asset
like attention and courtesy in the sales force. This has
been emphasized over and over again, and the importance
of it is realized by every one of us, but it can’t be impressed
On Our mind too often emphatically. A Salesman may know
his business thoroughly and be able to talk stationery in-
telligently from a steel pen to a loose leaf outfit, but if he
is lacking in that all important quality, courtesy, he is a
failure. Give me a painstaking, alert and courteous sales.
force with prices that will afford a living profit, and I will
win out against the price cutting establishment with a
Sales force of the opposite kind. A manager will do well to
cultivate and encourage this spirit of courtesy in his sales
EXPENSES AND PROFITS 293
force by every means in his power. His own example will
count for much. Meetings held at regular intervals to talk
Over this and other matters of importance are a necessity
in every well ordered establishment.
Constant effort and watchfulness is needed. All com-
plaints of customers should be promptly and carefully in-
vestigated, and well founded explanations and apologies of
fered and the incident used as a text at the following
meeting.
The importance of these matters of business manage-
ment and policy that I have mentioned, and Ścores of others
that might be added to the building up of a profitable busi-
ness, and as a factor to help counteract price cutting
methods and unfair competition will be admitted by every
thoughtful man, and the concern that gives them the atten-
tion they deserve is a long way on the road to success.
Cash discounts is another factor in the profit problem
that ought not to be omitted from this discussion, for it is
One of the vital questions. A concern that does not cash its
bills in this day and age is certainly behind the times.
It is said that some of the large establishments of the
country look to the office entirely for the where withal to
declare their annual dividend. Whether this is so or not
we may not know, but we can be sure that it is poor busi-
ness On our part not to take advantage of this opportunity
for increasing our profits.
An efficient collection department is one of the factors
here. If accounts are not collected promptly, the bank ac-
count suffers. Perhaps we have not sufficient capital to
cash our bills. This is a condition as we know that exists
with many—they borrow the money for it is good business
to pay 6 per cent if you can use it to make 12 or more, and
furthermore, a house that is known to cash its bills has
better purchasing power than one which lets them run to
maturity or longer. It’s the only way to do business, and
294 T. G. WETMORE
a concern that is not doing it better take itself in hand and
find out “what’s the trouble.” -
Now in closing, a few words regarding trade conditions
and abuses that we are all familiar with and that so se–
riously affect our profits. These may be classified under
the following heads:
Manufacturers selling the consumer.
Competition from mail order houses.
Competition from jobbers.
Local price cutting.
It is not in my province to discuss these conditions at
any length. We know they exist. The condition is, “How
can they be improved? -
I have found a readiness on the part of manufacturers to
co-operate with the dealer in the effort to correct abuses,
and I believe much can be accomplished by individual deal-
ers taking up in a friendly way specific cases that come to
their notice from time to time. The manufacturers as a rule
desire to protect the dealer. It is for his interest to do so,
but he has his troubles and problems to solve in competing
with other manufacturers, some of whom perhaps are out to
sell consumers only, and hence have no consideration for
dealers, so in treating with them it is proper to look at mat-
ters from their standpoint as well as our own.
Competition from jobbers and mail order houses are the
most difficult to deal with. Jobbers especially are in a po-
sition with their catalogues and close prices to injure the re-
tail trade greatly, and some of them do not hesitate to send
them out to consumers in localities where they think they
can safely do so. As it is impossible for most stationers to
meet their prices and make a living profit, this creates a seri-
ous situation. How extensive this evil it, I confess, I am not
fully informed, but if it is as prevalent in other localities
as in the section I am familiar with, it might be advisable
to have a special committee to study the situation and de-
EXPENSES AND PROFITS 295
vise some plan to correct it. Mail order houses I am not so
familiar with. We have little or no trouble from them in
our locality. .
One phase of this competition, however, I hear is prac-
ticed to some extent in other localities, namely a stationer
who is doing a legitimate business in his own home city and
territory having an ambition to increase the volume of his
business sends out a cut price catalogue to distant points,
and in this way demoralizes the business of his brother
stationer where his cut price list reaches. This, of course,
is an unfair thing to do, and any stationer indulging in such
a practice should be labored with and made to see, if pos-
sible, the error of his ways. - -
This article I fear may be criticized by some as dealing
too much with “common places” and too much preaching,
but after all is not success or failure in business putting
into practice Or failing to do so, commonplace things—
things we all know and yet that perhaps we are slow to
adopt?
To sum up in a sentence, success in business depends not
so much in keeping expense down to the lowest notch re-
gardless of efficiency, but in spending the money judici-
ously and adopting business methods that will help secure
an adequate profit.
We stationers are to be congratulated on the business
of our choice. Dealing in merchandise that is in universal
demand in the business world, it is capable of almost un-
limited expansion and it is almost the one business which
the modern department store has not made a success of
principally for the reason that as a rule men do not take
kindly to the “red tape” of department store methods, and
the lack of expert service. Let us be thankful for this.
Now this discussion would be to my mind incomplete
without a word regarding the value of the Trade Journal
as an aid in business building and profit getting. Not only
296 L. G. WETMORE
do they bring to our notice enterprising manufacturers and
their wares, but discussions on business methods, Salesman-
ship, etc., from bright minds who are alert to secure every-
thing that will be of value to the trade. The danger is,
however, that in the rush of business the superficial glance
may be substituted for careful scrutiny and study.
HANDLING ENAPLOYEES.
BY JOHN A. HOWLAND,
[Of the Editorial Staff, Chicago Tribune.]
Can men be managed by a card index? Not wholly yet
records, personal files, cards and forms of various sorts are
doing more to secure certain kinds of efficiency in a work-
ing force than the most eagle-eyed supervision has even
done. There is a justice and a squareness about action
based upon facts that are down in black and white, many
of which an employee has himself set down, that appeals to
the reason of a great body of workers. -
The records begin with the filling out of the application
blank for a position. If the employees of an institution
are graded by points, as they are in Some places, this paper
receives a mark like others. After this there follows va-
rious sorts of tests and initiations, preparatory to stepping
into a position. This is the order of procedure in almost
all indoor work, especially where the employees are many
of them very young.
A stenographer or typist will not only be tested and
graded as to Speed and accuracy on the machine, but also
as to powers of attention and concentration. Many a
bright girl can pay attention, but cannot concentrate. A
young filing clerk will be put through the tests of her de-
partment. In some houses of the largest sort, all em-
ployees are taken through the whole establishment and
made acquainted with every operation. This may not only
make them more interested and loyal to their work, if they
have the right temperament, but it gives them a stock of in-
formation that may save its turn.
The school for preparing employees for their duties,
seems to rise and fall, as an institution. Four or five years
297
298 JOHN A. HOWLAND
ago it was considered quite indispensable in many houses
which have since abandoned the plan, and Organized an em-
ployment department with many benevolent and advisory
functions, besides a great volume of routine work. The
school was conducted at considerable expense. In cases
where actual work was done in it this had to be taken from
the department organized to do it with speed and efficiency,
and a record made of the transaction, with no gain and
often a loss.
Today when employees are given time, and paid for it,
there is usually more of an appearance of free gift about
it than when they spent certain hours in the company’s
school. The school, however, has not been abandoned and
in some kinds of institutions it has steadily grown in power
and strength, because it has steadily taken on thorough or-
ganization. .
Bfforts, movements, activities rise and fall accordingly
as they are organized or unorganized. The better the or-
ganization the more stable the situation. A realization of
this is more and more pervading all business plans and
revolutionizing them. Any part of a business that is not
well organized is a weak part and must soon take on a new
form which, too, will yield to further change if it has not
organic structure. -
Trouble, incredible loss, and strife have been the re-
sults of incapable handling of labor. Today it is believed
that such waste is highly unnecessary. All wasteful pro-
cesses are being abandoned, and the human waste has been
the greatest of all. Owners have taken good care of their
horses, perfected all arrangements for making them com-
fortable and fit; they are now taking care of their men, or
rather they are beginning to do so. Though business men
are much more given to sentiment than they are given the
credit for, it is not sentiment but regard for efficiency that
is leading them to do what they are now doing for their
employees.
HANDLING EMPLOYEES 299
The employment head of a great establishment employ-
ing between seven and nine thousand people, says that there
is a complete turnover of the working force every year.
Not but that many stick, but that this is the average, since
only among forty per cent is there any noticable stability,
while the other sixty per cent change twice a year. Yet
so perfect is the house's organization of its people, whether
they are coming, or going, or staying, that this situation
does not seem to interfere with its phenomenal business
SUlCCéSS. . ---
Quite in contrast with this is the situation in another
house of similar sort. Its system of handling employees
is loose and scattered. There are no personal files. There
is no central bureau, as in the other case. An employee
might come and go rush season after rush season, and un-
less he had made himself conspicuous or notorious, he
would be taken back again. In the other house reference
in all cases is had to the files. Here will be a complete rec-
ord of his ability, his work, his reason for leaving or the
fact that he simply dropped out, if that was the case. If
at that time it was considered unwise to reinstate him that
fact was put on record, and no matter what the emergency
might be he would not be taken back.
In the second house, supervision is very irregular; it
is in some departments all that could be desired, in others
unsympathetic and such as to cause frequent changes. The
employees of one department may be loyal, of long term
and efficiency. Its head will never appear to rule, but his
gentle sarcasm or his vigorous way of doing all he does,
or some personal quality, will hold his people to him.
This personal quality may be lacking in the head of a
department of the first house, but it is supplied in large
measure by the personal way in which all employees are
treated by the head of the employment department and his
assistants. He stands between them, as it were, and any
300 JOHN A, HOWLAND
head, friendly to both, and ready to make any readjust-
ments necessary to promote satisfaction and efficiency.
The great sociologists are finding that the nurseries of
today are mainly the results of maladjustments. This em-
ployment head is doing for his world, what social workers
are trying to do in general for the whole world, and he is
much more effectively placed for accomplishing his object
than are they. He has a more practical interest to serve,
and he is supported in serving it. He is really a more
thorough student of men than any social worker since he
comes in contact with them, and “closes with them,” in a
more vital way. He sees that they get what they are worth
as laborers, and that they are put where they can make
themselves of the most value. They confer with him
about their personal affairs, and if they are sick they are
cared for. -
. The other house wishes to do as much for its people
but is not so fortunate in its methods. It encourages social
Occasions, gives vacations, provides a nurse and doctor, may
Send flowers and carriages if an employee dies—perhaps in
that “way” can be found the reason for the irregular
loyalty that prevails in its body of employees. It may
give a pension to an old employee, it will give it if he was
the head of a department, but the giving of other pensions
will depend on more or less fitful elements.
This house often loses very efficient help because of a
rather peculiar policy it has which, however, is much modi-
fied by the heads of departments. An efficient correspond-
ent of one department will be receiving but twelve dollars
a week, while the girl in the next may be receiving fifteen.
In this second case a dominant and successful head said he
must keep her, even if more had to be paid; the second sub-
mitted to the decision of his superiors and accepted two
inexperienced girls at six dollars a piece each, to take the
place of his one efficient person. This policy is quite com-
HANDLING EMPLOYEES 301
monly carried on throughout the house, and the conse-
quence is that the working force of its successful rivals is
constantly augmented by desertions from its ranks.
This irregular handling of employees and spasmodic at-
tempts to keep in touch with them, cultivates a fawning
spirit among those who are looking out for their own par-
ticular selves most assiduously, and alienates those whom
such a situation would offend. The house mentioned has had
the gravest troubles at times with its employees, and often
has been threatened by hostile conditions, though promo-
tions are frequent and it has a core of loyal, long-term em-
ployees.
With the best of intentions employers or managers may
get out of touch with those who work for them. It requires
peculiar qualities to be a good “boss,’’ and those which for
the most part which defy analysis. His relation to those
under him may be compared to that of a good teacher to
his or her pupils. There must be respect on their side, and
commanding qualities on his. A teacher who cannot con-
trol his pupils is constantly befuddled. They must know
that he is the master. -
It is very essential that a teacher know his business. It
is quite as essential that a foreman, Superintendent or man-
ager know not only his own work but that of those who are
under him. Unless he does he will have neither sympathy
nor respect. And above all he must be fair and square.
The finding of heads and subheads who can control men is
one of the greatest problems of today. It is a part of that
greater problem of great Organizations, of how to restore
the personal relations that existed when master and man
worked side by side. -
A man newly promoted to a position of command has
to find out at Once how to be the master. Among rough
outdoor workers he sometimes has to show his physical
prowess. The raw material he has to work with may be
302 JOHN A, HOWLAND
very diverse. Perhaps his predecessor was a tyrant and
unjust working conditions prevailed which have brought
matters to the verge of war. The new commander has to
take the bull by the horns at once, or he will be gored. Tact
and diplomacy may do much, but born powers of command
do more.
A recent periodical writer commenting on the need of a
man or woman first solving the problem of being master
said: “Introduce a new head or subhead into any working
force, from a half-dozen bindery girls to a railroad division,
and that force instinctively braces itself for a trial of
strength with the newcomer. Then follows a shock, and
One or the other wins. There can be no compromise. The
new superintendent may display ability by instantly sin-
gling out a group of malcontents for discharge. He may
isolate a little nasty group of grievances and abolish them.”
It is old human nature rising and being suppressed. In
pioneer times this spirit was seen in the winter term of the
country schools, when the big boys were in attendance.
They threw the teacher out or he threw them out. It was
a question of who should be master and the boys sometimes
WOI).
It is estimated that at least three-fourths of the great
industrial executors of today owe their success to their
ability to handle men. So great has been the magnetic
power of Mr. Schwab over men, that it is said that the
output of his factory is increased on the day of his visits
while it decreases upon Mr. Corey’s visits. If a man has
the gift of managing men, and it is discovered, he has a
highly marketable product, and he will discover the same
gifts in other men and put them forward. Mr. John Wana-
maker’s success, he himself credits in part to his ability to
discover this gift in men, and to put it to work in his ser-
vice. Mr. Carnegie had the same gift.
Men who have not had great magnetic power or person-
HANDLING, EMPLOYEES 303
ality have devised ways of letting men help them in their
own management. Boards of arbitration made up of work-
ers, and committees chosen by workers themselves, have
settled many troublesome questions and lightened a respon-
sibility that threatened to be very heavy. In this case it
was divided and yet was not weakened—rather was there
great gain.
One of the ways of solving the problem of getting work
done most satisfactorily, has been solved by those handling
men, through attention to their personal financial problems.
The attempt to solve the problem this way is not new within
this present decade, but it is only within a few years that
widespread efforts have been made on what promises to be
permanent bases. Many great organizations have profit-
sharing scheiºcs. Others give bonuses, after an employee
has served a term of years, these being distributed with
eclat at a dinner or annual banquet. Mutual benefit asso-
ciations, banks paying a higher rate of interest than others,
the opportunity to buy stock at a low rate and on the in-
stallment plan—all of these things have made for efficiency,
content and loyalty.
In some houses every employee, from least to greatest,
receives once a year a certain per cent of his or her total
salary for the year—a sum which makes the heart glad and
the eyes to shine. This is accompanied by a personal in
terview with a director of the corporation sometimes, es-
pecially if the employee has an excellent record for prompt-
ness and devotion to work.
The records of the time clock, the files of the foreman
and foreworman, and maybe the reports of the employee him-
self are made the basis of the decision as to what the per
cent received shall be. These also determine what shall be
the advance if any in salary.
Perhaps there is no better method of “infusing spirit”
into an organization than this, and this spirit is the great
304 JOHN A. HOWLAND
desideratum, which is today sought by those who strive for
the greater efficiency. The old attitude of “all I want of
you is to do your work” did not get the volume of work
that was desirable. The new idea is “I want you to do
your work, be happy in doing it and to know that your ef-
forts to do it well will be appreciated.” -
There must be attention to routine, and office work in
the handling of men. The yard man at the entrance gate
of a big mill may hire substitute workers every day, never
know their name or care whether they ever come a second
day or not. Labor conditions have made this possible.
But in finer organization such indifference Would be pro-
ductive of the worst results.
In high efficiency organizations there are the most deli-
cate adjustments between routine and human nature.
Exact system is sought for, but not at the expense of per-
sonal initiative. The head must multiply himself through
subordinates, and no link in the chain be missing, but it
must never be lost sight of that it is a human chain and that
it connects the man high up with a man low down. All the
way up and down there must be “the fitting of the man to
the job, and the job to the man, and the men to one another.”
The organization may be mathematically exact, every-
thing on a precise basis and built to run, and yet it may be
run down the moment the One who set it up, who assembled
its parts, leaves it. It is not then the work of the trium-
phant Organizer. He can and does build up something
that will run without him. It is because he wishes to be
relieved that he builds it and he establishes automatic
regulators, as it were, which shall supply his presence if he
wishes to be away.
Men have builded so perfectly in this way that they
have seemed to be putting secondary factors in the smooth-
ly running machine. There has been the pleasure of crea-
tion in such work. Organization has been worked out so
HANDLING, EMPLOYEES 305
perfectly that men have taken their cues for action from an
authority chart, made their reports in due order and taken
other cues for further action. But back of it all was the
man. He had infused his personality, his ideas into his
Organization until it was like his multiplied self.
HOW TO SELECT AND PAY EMPLOYEES.
BY JOSEPH HESS,
[Superintendent Sawyer Manufacturing Company.]
The success of every business depends largely upon its
employees and their ability to perform their work success-
fully. It is practically impossible for a business to run
Smoothly and easily if inefficient, incompetent people are
employed. -
There are but few men who give this part of their busi-
ness the proper amount of personal attention. The aver-
age business man in interviewing an applicant for a posi-
tion allows himself to be influenced too much by first im-
pressions. It is strange that the great majority of men in
a position to interview and hire men, pride themselves
upon their ability to judge character from faces, and to
honestly think they have the gift almost of second sight
in this direction. The man in this position who has not
been known to boast “I am rarely mistaken in my judg-
ment of a man’s character from his face,” is not often
found.
It is true that first impressions influence almost every-
one, but no business man can allow his personal likes and
dislikes to stand in his way when he has the opportunity
of employing a man who will mean a distinct gain to his
business. There is always a possibility that the man who
is applying for the position is worth something to the busi-
ness and to refuse him consideration because his personal
appearance does not appeal, is to hinder the possible prog-
ress of the business.
The man who is willing to judge an applicant from a
perfectly impersonal and impartial standpoint is likely to
be the man who will have able and competent men in his
306
SELECTING—PAYING, EMPLOYEES 307
employ. To be able to meet every man, who is seeking a
position, in an unprejudiced spirit and to attempt honestly
to judge just how much he will be worth to the business
is what every man employing others should strive to do.
Generally speaking, for places of importance, the same
faculties are wanted as are possessed by the successful
business man himself. But in speciallizing very often it
is indispensable that an employee should have par-
ticular qualities for certain kinds of work. The
success of the business will depend on such posi-
tions being filled by men having the desired quali-
ties in a maximum degree. In connection with a
large business it is obvious that the presence of
such men is indispensable. The successful business man
continually, in a casual and almost unconscious fashion,
considers the merits and qualities of the various men he
meets, and, when an important vacancy occurs in his es-
tablishment, he has no difficulty in at once calling to mind
some one who can step into the breach. *
A point which cannot be underestimated in connection
with business, is that it is always good policy to engage a
man though his merits are, for the time being, greater than
seem necessary for the work to be undertaken. He will, if
in the employment of a progressive firm which is receptive
of good ideas, find full scope for his abilities, and the busi-
ness will accordingly gain. If, on the other hand, an em-
ployer look for no higher qualities than are simply neces-
sary for the work on hand all initiative is thrown on him-
self, and progression without the help of able lieutenants
is, to say the least, exceedingly difficult.
In considering the qualities necessary in assistants, the
commercial man must not forget that the possession of Will-
power is of paramount importance. It is exemplified in
every walk of life that this quality can accomplish almost
anything. The most brilliant faculties, unsupported by
308 JOSEPH HESS
firmness, give way before ordinary brain-power which is
supplemented by unshakable resolution. The man of
nervo-sanguine temperment, who possesses assiduity and
resolution, is the desideratum of the employer who controls
a large concern—not forgetting, of course, the particular
qualities required for particular duties. He who mistakes
difficulties for impossibilities is of little assistance to the
employer who has resolved to forge ahead.
The man who is interviewing an applicant for a position
will do well to remember that there are comparatively few
men who will apply for a position if they possess none of
the qualifications specified in the advertisement which they
have answered, or necessary for the position for which they
are applying. To judge a man with the same acumen with
which a piece of cloth or leather is judged is usually to
judge him with the greatest accuracy. *.
However, there are some first impressions that are true
and these can be considered as final. The Smell of liquor On
a man should place him on the impossible list at Once.
Drinking during business hours is a thing not tolerated
now-a-days, and every business man knows that no man
can do his best if he has this habit.
Shabbiness in a man's attire may reasonably give the
impression that he has been incapable of successfully man-
aging his own affairs which might well make the employer
think him incapable of managing any one's else. This
does not always follow, however, for many really capable
men are careless in their dress to the degree of shabbiness.
Men cannot always be judged according to the style of their
dress for there are many men of the quietest tastes and
inclinations who dress almost flashily, through ignorance
of the appropriatenes of things or because they give no
thought to the selection of their garments, accepting the
first thing offered them. On the other hand, men whose
inclinations and characteristics are not of the best often
SELEC’iºn G–PAYING, ºi,G^{{##3 309
dress quietly and modestly, purposely to allay Suspicion as
to their true nature. -
There are not many business men who would consider
talking over a business proposition of importance when
they were feeling unfit either mentally or physically be-
cause they would feel that they could not do themselves or
their business justice when in that condition. This would
not be allowed to interfere with their interviewing appli-
cants for high-class positions. They do not consider
their own ill-temper, worry or physical condition in this
case and deliberately allow these things to influence them
against candidates for the position, several of whom may
be really capable men. It is easily seen then that the entire
difficulty in the employment question is not the lack of good
men any more than it is the fault of employers who fail to
meet the men who are applying to them in a fair and Square
Spirit.
The man who is in a position to employ people for his
firm should keep in mind the fact that it is just as neces-
Sary for him to make a good impression as it is for the ap-
plicant to strive to please. In this age of strenuous com-
petition high-priced employees can afford to be a trifle in-
dependent and to lose a man who would be of benefit to the
business, through careless and indifferent treatment. is a
Serious matter.
To judge a man most successfully and to gain the clear-
est insight as to his character means that he must first be
made to feel at ease. If the employer’s manner is dignified
without being too formal, and cordial without being too
effusive, the applicant will be natural, but to be stiff and
frigid means that the man will “crawl into his shell” fig-
uratively, and this will, Of course, make it harder to judge
his character.
There is a successful Chicago man who is in a position
now and then to employ high-priced men and he follows a
310 JOSEPH HESS
little different course from the average employer. When
a vacancy occurs in his business, he inserts a straight-for-
ward advertisement in the leading newspapers, if he has
no one in mind for the position. The advertisement gives
some idea as to the position to be filled and mentions the
most important of the necessary qualifications.
Each applicant answering the advertisement is court-
eously interviewed, the employer giving as much time to
each one as is necessary. He selects the likeliest one of
all and invites him to luncheon either for the same day or
some day in the near future, and promises the rest that they
shall hear from him. He says that he finds it a great deal
easier to become acquainted with the true character of the
man over a friendly lunch than at a formal interview at
the Office.
If the applicant is found satisfactory he is engaged with-
out further skirmishing and the other applicants receive
courteous letters telling them that the vacancy has been
filled.
Not infrequently the employer will desire certain in-
formation which he does not care to ask for, and in this
case the best method of securing the knowledge is by means
of indirect questions. If, for example, the employer wishes
to know whether the applicant is interested in gambling
or racing, he skillfully introduces the subject and then by
means of clever indirect questions he can often get the de-
sired information. If the employer wishes to learn the can-
didate's attitude toward a certain subject and feels that the
man is too ready to agree with him, he should take the wrong
side of the argument. The success of this course was shown
by the case of a distributing firm which had a vacancy to be
filled. The applicant called and was interviewed by the
president of the concern who was very favorably impressed,
in fact there was only one point on which he was dubious.
He could not determine whether the young man had the
SELECTING—PAYING EMPLOYEEs 811
courage of his own convictions, so to test him he asked the
man if he did not consider a certain firm the best manu-
facturers of a staple article. The firm he mentioned was
well known for its deficiency in this line but the employer
spoke of it in the warmest tones. The appliant rose to
the Occasion, however, and disagreed decidedly, giving the
reasons for his opinion in a clear and concise manner. Need-
less to say he was engaged then and there.
There is another successful New York business man
who says in regard to engaging employes, “I give that part
of my business just as much time as any other as I con-
sider it just as important. It seems very strange to me
that more men do not consider it important enough to give
it their personal time and attention, for to me the success
or failure of a business bears a direct relationship to its
force of employes.” Inasmuch as this man has built up a
remarkably efficient and loyal band of employes, it would
seem that he had successfully solved the problem. -
Not only does he personally employ his high-priced men
but he also employs all the clerks, Stenographers and office
boys. An amusing instance is told of one of the firm’s
most promising men. He entered the firm when a mere
boy, applying for the position of office boy. He was inter-
viewed by this same “great man” and seemed so self-as-
sured and so confident that he could fill the position, that
the employer asked suddenly, “What makes you think
you’ll suit?” -
“Our motto is the same,” the boy quickly answered.
“Why, what is your motto—and mine?” he was asked.
“Push! It's on your door,” was the unexpected reply.
That the boy lived up to his motto is shown by the fact
that he advanced steadily until he now is one of the most
trusted employes of the house.
It is not long since the man who got the position when
there was a vacancy in an establishment was the man with
312 Joseph HESS
the “pull.” Even the office boys and minor help were rela-
tives or friends of those high up in the business. Times
have changed, however, and the man who gets the job now-
adays is the man with “push” and not “pull.”
Modesty has no place in the business world. The man
who gets there is the man who appreciates his own Worth.
On the other hand, the boastful and overconfident appli-
cant is but little better. He is usually so self-satisfied that
he does not put forth his best efforts to win.
The man who simply but decidedly states what his best
qualities are is usually a man who neither under-estimates
or over-estimates his own ability. The man who can judge
his own ability and quality as impersonally as he could
judge another man’s, has the great advantage over others,
in that he can “see himself as others see him” and act ac-
cordingly.
The employer who has resolved to hold his own amid
keen competition must exercise the greatest discrimination
and care in selecting and retaining his assistants. It is
generally found that advertising is not the best medium
through which the likely man is discovered. The giving of
testimonials by insincere employers who wish to part on
friendly terms with men who do not suit them, throws the
advertiser back on his own judgment, and it is often impos-
sible to have a long interview with a considerable number
of applicants. Besides, it is difficult to sum up a man’s
character after one or two meetings.
Employers finding it necessary to secure additional help
may save themselves trouble by specifying that the adver-
tisement is to be answered by letter. From the letters re-
ceived, the employer can judge which are the most likely
applicants. Those letters which are neatest in appearance
should have the first consideration. The most business-like
letters are those which are short, concise and to the point,
and those that contain the age, nationality, education and
SELECTING—PAYING EMPLOYEES 313
former experience show that the writers are familiar with
business customs. The employer should be favorably im-
pressed also by those letters which state the salary ex-
pected. Applicants who ignore this subject show that there
are several prices which they will consider. The employer
should be careful about considering the letter which con-
tains too many testimonials, for too many are worse than
too few. It usually means that the applicant has held a
great number of positions, none of which he has remained in
for any length of time.
Character can be judged to a large extent from letters
and if the employer selects the best of the letters he may
be pretty certain that he has picked out the most favorable
applicants and may arrange for interviews. The employer
who engages an employe knowing nothing about him is
taking a big risk. A recommendation from some source or
other he should consider absolutely necessary. In hir-
ing young office boys, clerks and stenographers, some em-
ployers make it a point to ask for references from the gram-
mar, high school or business college in which the applicant’s
education was received, as from this source they may be
reasonably sure of an honest description of character.
There are some establishments, such as factories and
machine shops, employing thousands of workers that have
a regular employment department. The department is usu-
ally under the direction of one man, with several clerks to
assist him. If the foreman or head of one of the departments
of the factory finds himself in need of men, he fills out an
Order to send to the employment department, stating the
number of men needed and the occupation for which they
are required. He also is privileged to name any men whom
he may consider suitable and if the head of the employment
department finds them satisfactory they are engaged. The
request is then recorded in a desk memorandum and as soon
as a man is employed to fill the position, his name and rate
314 JOSEPH HESS
are recorded. This indicates that the vacancy has been
filled. *
On starting to work each new employe is required to
sign a record of employment which is forwarded by the
foreman of the department to the employment department.
The new employee is also furnished a card on which is
written all necessary information such as the name of the
foreman of his department and information concerning
himself and the wages he is to receive.
The employment department takes particular care to
be sure that all information regarding the new employe
and his past record of employment is correct, especially as
to whether he has ever worked for the company or not.
Untruthfulness on this question is considered sufficient
cause to discharge an employe.
A record is also made of the discharge or voluntary
leaving of an employe and the reasons for his discharge or
his leaving. All the records kept by the company contain
full information of the employe and the records even of
those no longer in the employ of the company are carefully
filed away. Most of the records are made on cards and
these are carefully filed away, according to alphabetical ar-
rangement, and under different subjects, such as “Active,”
which contains the slips of all those in the employ of the
concern and various other similar subjects which cover the
various transactions of the employment department from
beginning to end. *
The class of workers found in an establishment are indic-
ative of the firm’s policy. Inability to secure competent
and efficient labor is frequently the fault of the man at its
head. If the employer finds it difficult to keep able men
around him he may be sure that at least part of the fault is
his. If he will endeavor to take the employe's point of
view for a time he will soon find out wherein the diffi-
culty lies.
SELECTING—PAYING EMPLOYEEs 315
There is in Chicago an establishment that finds it im-
possible to keep their employes any length of time. Almost
invariably it is found that after employes have reached a
certain point they will leave, only to find employment in a
rival concern. This house complains bitterly of this “un-
loyal” spirit and say that after they have taught their em-
ployes all that it is necessary for them to know in their par-
ticular department they leave. They claim, and honestly,
too, that no house is more considerate of their employes
than they are and in spite of all this the employes con-
tinue to 1eave. The reason of it is that after the employes
reach a certain salary and position they find it impossible
to go farther. No matter how hard they may work or how
much they increase their efforts they never can go farther
or receive a “raise.” When the employer's attention is
drawn to this fact he will invariably say that he is sorry
but that the same salary has always been paid for that po-
sition and he cannot see his way clear to raise it. The result
is that the employe leaves for some less desirable position
probably, but in which he will have some chance for ad-
vancement and where he will be paid according to his work.
The business man, after once engaging employes, should
not let his interest in them wane.
Having competent assistants in his employ, he must
next consider how to secure their services. Now, primarily,
it will be admitted that work which is interesting does not
tire so much as that which is dull and monotonous, and the
first consideration of the employer should be, as far as pos-
sible, to make all work interesting. And, though work may
be even enthralling under certain conditions—for instance,
to the scientific devotee—it is generally undertaken only as
a means to an end, and the end is pecuniary remuneration,
and the pleasure which is attached to using successfully our
various faculties. “Oh! that is a sordid view to take of
labor,” someone exclaims; but, nevertheless, it cannot be
316 JOSEPH, HESS
denied that, the whole world over, in a broad sense, work is
undertaken in order to gain money or its equivalent. And it
is quite clear that when a man gains more by Working hard
than he does by working at his ease, he will put his best foot
foremost, the increased remuneration being continually in
his mind’s eye. It is also indisputable that by working
under such conditions—that is, the award being according
to the amount of Work executed, he finishes his day’s labor
less exhausted than he would if working for a fixed wage;
for, if the mind is interested while labor or exercise is
undertaken, the body to some extent becomes insensible to
fatigue. An old man will walk eight miles playing golf with
a genial companion and finish comparatively fresh, whereas
if he had walked the same distance alone, along an unin-
teresting road, he would have been completely exhausted.
In the same way, the worker who is paid by results is for-
ever bent on “breaking his own record,” and the stopping-
hour arrives and finds him still keen and active. In the case
of men in responsible positions the result goes even further,
for they are continually on the alert and devising new
methods of economical production which, while increasing
their own remuneration, also swell the profits of the em-
ployer. -
The far-seeing and Sagacious business man obviously
uses the method of paying by results, and it has been
adopted to a much larger extent than is generally known.
It is hardly an exaggeration to say that in all great com-
mercial establishments it exists in One form or another.
There are various means of applying this method of pay-
ment, and though in Some peculiar business it may seem
difficult on preliminary consideration, there is really noth-
ing to prevent its adoption under any condition whatever.
Eirst of all, with the rank and file the piece-work system
should be adopted, or bonuses be paid for prompt execution
of work on hand. In the case of work on a large scale, such
SELECTING—IPAYING, EMPLOYEES 317
as Shipbuilding and engineering, the bonus system can be
applied without difficulty and with absolute satisfaction to
masters and men. But one point must not be overlooked,
namely, that Once the arrangement has been made it must
be rigidly adhered to. Cost of present production, state of
the markets, etc., should be carefully considered, and when,
On this basis, a rate has been fixed which is satisfactory to
both parties, it must not be altered, unless very serious
changes take place in the labor market. This system has
Often been tried by short-sighted employers, and when,
through the stimulus induced by the arrangement, much
larger wages were earned, greed intervened and rates were
lowered or bonuses curtailed, and finally the men rejected
the system in toto and refused to work unless the old
methods of payment were re-adopted. One cannot con-
demn too much the foolishness of an employer who cannot
See that so long as he is sharing in the benefits accruing
from mutual arrangement, it matters nothing though his
wage-bill be doubled; for he will be getting more than twice
the amount of work executed, to do which, under the former
conditions, twice the extent of premises were required.
Thus extra rent is saved, and the number of overseers can
be largely reduced when men are paid by results, as the
workman needs no one to keep him to his task, if he himself
is interested in its completion. -
As regards managers and others in charge of depart-
ments, remuneration ought to be according to the firm’s
business increase. A minimum can be fixed, and for all
business done in excess of it a proportionate bonus can be
paid. By this means each departmental head is practically
carrying on a business of his own, and will devote all his
energies to its extension and economic working, for on the
year’s results depends the extent of his own monetary gain.
It is very common for firms to pay travelers a salary and
commission, with results which prove the wisdom of the
318 JOSEPH HESS
course adopted; and even in the office of a business house
some system can be devised whereby a spur is given to the
energies of the staff at the desks. A healthy tone pervades
the employes of a firm which works on this “sharing of
profit” system, and its output is great, its methods are up-
to-date, and it fears not the strongest rivals. Clever men
in the employment of a firm which continually gains ground
in the keenly contested commercial race are of more value
each succeeding year, and an equitable system whereby
they receive an increasing renumeration, as the business
becomes greater and more completely equipped, is the only
means whereby they receive the true value for services.
Doubtless the time is quickly coming when all successful
firms must adopt this principle of paying employees, or, as
the penalty, fall behind more far-seeing rivals, and in the
end pass into bankruptcy.
PROFIT-SHARING AND CO-OPERATION.
BY NICHOLAS PAINE GILMAN,
[Professor of Sociology, Meadville Theological Seminary.]
If a man is working for himself, he will turn out the
largest product, under existing human nature. There is no
means for extracting industry, thrift, skill, and all the vir-
tues of work, from the most unpromising character, to be
compared for a moment with the magic of private property,
as all the economists have noted. The peasant proprietor in
Italy, France, or Germany, for instance, or the independent
farmer of New England or Dakota, sets the highest stand-
ard of achievement. Self-interest, whatever we may say of
its excesses, is the most potent motive to exertion with the
Ordinary man. Working his own few acres, the small farmer
will rise early and go to bed late. He will economize time,
tools, and materials. He will perform prodigies of work in
the hard contest with the powers of nature if he is sure
from the beginning that the whole result of his labor will
be his own. We are not speaking of pure selfishness; his
own includes that larger self, that most natural and per-
sistent of all associations, the family of which he is the
head. Not all men, of course, take the sturdy and heroic
view of work on their own property; but when a man has
thus before him every reason for exertion, and prefers idle-
ness and dissipation, the labor problem is purely a moral
and personal question of the individual.
Let us suppose that Our Small farmer has so far pros-
pered that he has outgrown his few acres and can not even
Superintend satisfactorily the numerous workers whom he
is obliged to hire for his several farms.
He has not had to look far before finding other men
who are not independent proprietors, and who, for this
319
320 NICHOLAS P. GILMAN
reason, are seeking work from such as he, which will give
them daily bread. As long as his hired men were few in
number and he could work with them, the result was fairly
satisfactory. But suppose that he inquires how he shall de-
rive the most income from one of his farms which he is no
longer able to superintend in person. He need know but
little of human nature to be sure that if he leaves this farm
to be worked by hired men without superintendence the
product will be small. The complaint of all employers of
labor is perpetual, and to a considerable degree well
founded, that the laborer is not worthy of his hire, if to be
worthy of hire means to display as much zeal and interest
as the proprietor himself. This expectation, however, is
irrational. The owner of the farm can not in reason expect
that his hired workers shall manifest that extreme zeal and
that persistent interest in making a large product which he
himself displays, if energetic and capable. They are not
working for their own interest in any such degree as him-
self; although if they work side by side with him his ex-
ample will be to some degree contagious. The hired worker
has, of course, the stimulus of need to keep him up to an
average standard of work, but this standard is much lower
than that of the independent proprietor. One need not
dilate before people who have ever had occasion to hire an-
other person to do work which they themselves understand
and are capable of doing, upon the shortcomings, the neg-
lects, the waste of time and material of the hired worker,
as compared with the employer. -
Eor our farmer there is an alternative. He may agree
with one of these workers, whom he has found to be the
Imost industrious and competent, to take a farm on shares
and pay not a fixed money Tent, but half of the net product
as rent. The System of product sharing, which has had a
wide prevalence in numerous countries, practically as-
Sures the Owner as large a rent as the renter can earn.
PROFIT-SHARING — CO-OPERATION 321
Though the worker has not before him the force of the mo-
tives to industry and economy which would be his were he
the full owner of the place, his half share of the product
will augment with his own zeal and skill. With his eyes
fixed, perhaps, on the ownership before long of this very
place, he will not be slow to make this half share as large as
possible, and may even rival, under the spur of this ambi-
tion, the energy of the actual proprietor.
The system of product sharing is naturally restricted
to such vocations as agriculture, the fisheries, and mining.
It is not easily applied to the great variety of manufac-
turers. But that which can be said of the excellence of the
system in the fields where it has been so largely practiced
can also be said, in considerable degree, of the system which
is logically its successor. I refer to the modification of the
wages system known as profit sharing, in which the em-
ployer adds to fixed wages a bonus to labor, varying ac-
cording to the prosperity of the business. No one will
pretend that the employe in a large manufactory, working
on the ordinary wages system, has every possible motive to
exertion held out to him. As a matter of course, his usual
exertion will be far below the standard of the man who car-
ries on a small business at which he works by himself or
side by side with his few workmen. As the manufactories
increase in size they become more and more unwieldly, and
there is even more need than in the earlier days of the fac-
tory system for improvements in the labor contract prac-
ticed in them. There is much more demand in a large con-
cern where no one person can effectively superintend the
whole business, than in a small one under the view of a
single eye, for enlisting every motive Óf self-interest on the
part of the employe. The same tendencies which have built
up the great manufacturing concerns of Our day will prob-
ably long continue. They illustrate very forcibly the aristo-
cratic principle which calls to the front the natural leaders
!
*...
322 NICHOLAS P. GILMAN
of industries and commence, and they forcibly exemplify
the well known scriptural doctrine that “to him that hath
it shall be given.” Great changes may take place through
the application of electricity to industry, rendering pos-
sible some return to small factories, and even to house pro-
duction. For the present we must make up our minds to
the continuance of such methods as we see practiced so ex-
tensively. We have bidden a long farewell to the familiar
association of the employer with a small body of work-
men; we must accept as inevitable the massing of workers
in great buildings, often far removed from the commercial
department of the industry. The practical problem is, first,
how to counteract the natural tendency of the wages system
to an inferior grade of accomplishment. The system which
gives the largest product to be divided is the best.
We must accept just as much the natural and inevitable
organization of workers among themselves for the purpose
of raising wages and otherwise improving their condition.
However much we may lament the loss of personal touch,
and however much we may deplore the almost warlike array
of workmen drawn up on One side against the smaller but
more compact body of employers on the other, we must
accept the situation as it is, and consider every method of
feasible evolution before we, for a moment even, talk of rev-
olution. The violent introduction of socialism as a fully de-
veloped scheme of collective capital and state production is
quite out of the question; nor is the more peaceful revo-
lution of pure co-operative production near at hand. The
tendencies of modern industry are almost as hostile to pure
co-operative production as they are to rumerous small con-
CeIſIAS.
The deficiencies and disadvantages of the wages system
are obvious to clear-sighted observers. One plain reason
for this is that it is the system under which the work of
civilization is actually being conducted. In this respect the
PROFIT-SHARING – CO-OPERATION 323
system has, of course, great inferiority to fanciful Schemes
which have never been tried. Putting aside these imagi-
nary constructions, we may say that the choice in the Solu-
tion of the specific labor problem lies between the contin-
uance of the unmodified wages system, the system of CO-
operative production, and such, an intermediate measure as
profit sharing, shading off into forms of co-operative pro-
duction. It is necessary to draw some lines of distinction
here which do not everywhere exist in the same clearness,
for there are various modifications of the wages system—
such as piecework, premiums, and progressive wages—
which tend toward profit sharing and answer Some of the
objections made to the method of simple day wages. Thus
the wages system runs into some method of profit sharing,
and profit sharing naturally tends to some form of co-opera-
tive production. Mr. David F. Schloss, in his work on
“Methods of Industrial Remuneration,” has well described
the different modifications of pure wages in vogue in Eng-
land. He has done a special service in this work, as the in-
formation which he gives could not be found anywhere else
in such a convenient form.
The advocates of co-operative production usually con-
trast with this plan the unmodified wages system, under
which no special inducement is held out to the workman to
do his best. The prevailing tendencies are to make him sat-
isfied with an average amount of work, corresponding to
the ability of the mediocre, unsatisfied, uninterested worker.
The objection which the advocate of co-operative produc-
tion and the Socialist also makes against the wages system,
that it is entirely unjust, I prefer to pass over, for the pres-
ent at least, for the reason that the application of abstract
ideas of justice to complicated questions like this is gener-
ally very unfruitful. The employer has one idea of justice
and the workman has another idea. The more fruitful
method asks which system, the wages system or co-opera-
324 NICHOLAS P. GILMAN
tive production, succeeds best in actual experience. The
success of the co-operative productive enterprise is to be
determined by the amount of product and its quality, actu-
ally realized, and the resulting income to the Workman, year
in and year out.
Pºveryone who desires the progressive elevation of man-
kind must heartily sympathize with the system of co-opera-
tive production as laid down so admirably by such writers
as Judge Thomas Hughes and the late Mr. Vansittart Neale.
The system is evidently near to the ideal, since it promises
to all the workers a just division of the entire profits of the
business. But it cannot be said that the actual record is
very inspiring. There are, to be sure, in England at the
present time some eighty productive societies more or less
connected with the co-operative movement. Although
some few of these are important and well established, the
great majority are small, or yet in the trial stage. In Amer-
ica the imitation of societies like these has been almost as
slight and intermittent as the reproduction of the English
co-operative stores here, of which we have so few. The
difficulties in the way of co-operative production are very
great. The financial obstacle increases rather than de-
creases with time. Manufacturing in these days is carried
on in such large establishments, demanding such elaborate
machinery, that the capital needed to compete successfully
with existing enterprises is almost entirely lacking to or-
dinary working men.
If the necessary capital for a comparatively modest un-
dertaking in co-operative production is at hand, if a con-
siderable number of workingmen of unusual character and
ability put together their hard earned savings, the moral
difficulties are still before them. One of the first of these
is an entire willingness on the part of these workingmen to
Submit to the Orders of One of their own number, placed at
the head of the business of manufacturing and buying and
PROFIT-SHARING – CO-OPERATION 325
selling, with that readiness which is indispensable for com-
petition with other establishments. A man may very well
be a workman in one cotton factory, as in Oldham, England,
and a stockholder in another; but when he is at Once a
worker in a mill and a part owner of it, he will not obey
orders from a superintendent whom his own vote has helped
to put in Office, and whom his vote can also help to depose,
as readily as he will conform to the discipline of a mill in
which he has no financial stake. The ordinary corporation,
which is, in one sense, a plain instance of co-operation,
seems to be the nearest approach to co-operative produc-
tion now feasible under most circumstances. In large cor-
porations the great majority of the stockholders own so few
shares that the conduct of the enterprise is practically in
the hands of a few persons, whose financial interests teach
them to combine, rather than to fight each other. When
One considers how difficult it is to get a number of people
usually regarded as above the average in intelligence and
character to co-operate in schemes demanding but a limited
amount of money from each, and but a small part of his
time, it will be seen how severe a demand the developed
scheme of co-operative production makes upon the work-
man, for he is expected to put in all his available capital,
to give all of his working time to the enterprise, and to sur-
render the management to one of his associates. This asso-
ciate must be a man of great ability and high character to
carry on the business successfully. He must be willing to
receive, for the most part, a much smaller compensation for
his uncommon business talent than he would receive under
the wages system as foreman or superintendent. The op-
portunities for suspicion and distrust are very many, and
the first financial reverse may be sufficient to bring down a
very promising attempt at co-operative production.
But, however discouraging the record of the system
may be thus far, there is an undeniable fascination in the
326 NIGHoLas P. GILMAN
idea itself that the capital requisite for carrying on a busi-
ness should be furnished by those who are to do the work,
and that they should divide equitably among themselves
the entire profits of the enterprise. This surely would seem
to be the application to industry of obvious notions of jus-
tice, right and equity. But the workmen must furnish
from their own body not only the manual labor but the fac-
ulty for superintendence and commercial management; be-
sides this, they have to reach a higher level of character,
leading to a much greater mutual confidence, than we find
in the ordinary world. The place of that constraint and
discipline which the present wages system enforces, and
which sentimentalists call a system of slavery, must be
taken under co-operative production by a high moral de-
velopment, which shall justify complete confidence by the
workmen in each other. This confidence they must have
not only in those who work with them at the bench or the
loom, but most of all in the men of unusual ability, belong-
ing to their own condition in life, whom they select as re-
sponsible managers of the enterprise. -
Such considerations as these of the tendencies of the ex-
isting wages system on the one hand, and of the immeasur-
able discontent which workingmen penetrated by the dem-
ocratic spirit naturally feel; of the actual weakness of the
system of co-operative production, owing to the large de-
mands, intellectually and morally, it makes upon working
people—lead one to inquire if there may not be methods
which may lead up by easy transition from the pure wages
system to the more ideal system of co-operative production.
The system of industrial partnership, for which term profit
sharing is an inadequate designation, has at least this much
to recommend it: It has, in several very important in-
stances, bridged over the gap between the wages system and
a system of co-operative production entitled to that name
by its actual results, although not corresponding in every
PROFIT-SHARING – Co-opBRATION 327
respect to the usual ideal of the workingman. Such houses
as the Maison Leclaire and the Bon Marche of Paris, and
the Co-Operative Paper mills of Angouleme, France, for in-
stance, show how profit sharing may be induced upon the
wages system and developed into a substantial system of
co-operative production. The process in these three in-
stances has been long and slow, but such is the nature of all
Sound and durable education. The numerous years occu-
pied by the transition sufficed to educate the employer and
the employed alike; they justified the employer in gradually
divesting himself of his powers and responsibilities; they
taught the workmen very gradually the virtues and the fac-
ulties demanded by the employer’s position, and they ren-
dered easy the gradual supersession of the original proprie-
tor by men from the ranks of his own establishment. In
these cases regulations have been made for the continuous
application of a system of promotion, so that a body like the
Mutual Benefit Society of the Maison Leclaire can furnish
out of its membership at any time of need the partner or
partners, as they are called, to direct the working of the
entire business. These partners, or managers, however,
when they assume their new position, find a moral condition
about them such as no co-operative productive enterprise
starting out de novo could furnish. The new manager,
fresh from the ranks of the workers, finds the whole body
of his former fellows ready and accustomed to obey orders
from the heads of the establishment, and to give them as full
powers as partners enjoy in establishments conducted on
the Ordinary wage system. The new partners have been
chosen by a sensible body of workingmen because of their
approved character and their tested ability. They have
been shown by time to belong to the natural aristocracy of
ability and character, and their fellow workmen take pleas-
ure in promoting them, and a rational pride in co-operating
with them, not henceforth as complete equals, but as mem-
*
328 NICHOLAS P, GILMAN
bers, each in his own place, of an establishment proud of its
history and determined to maintain its high standard in the
years to come.
Such instances as the Maison Leclaire and others of a
similar nature lead me to believe that we shall obtain in
time, in a large number of cases at least, the substantial
benefits of co-operative production through the process of
education by means of profit sharing. The details of the
systems thus worked out many not be in all respects those
laid down even by the wisest heads for a scheme of co-opera-
tive production ideally just. Deference to the democratic
principle may easily lead even such thinkers astray, while
the experience of such firms as I have mentioned supplies
the needed corrective, in paying the due tribute to the aris-
tocratic principle, just as natural as the democratic.
I am decidedly of the opinion that the labor problem,
eonsidered as substantially the problem of the best kind of
contract relations between the employer and the employed,
is to be solved in the gradual development of the existing
wages system, through profit sharing, into some system of
co-operative production. I do not wish to undertake the
office of prophet, and I quite decline to predict even how
soon there will be so modest a number as one hundred such
co-operative establishments as the Maison Leclaire in the
whole civilized world. With confidence, however, I declare
my conviction that such a development itself does more jus-
tice to all the factors in production than any other measure
which I know. Profit sharing is thoroughly entitled to the
full credit of being an evolutionary method. The one great
and crying defect of the wages system is that under it an
immense amount of work is not done which could be done,
to the great benefit of mankind, if the whole body of workers
were thoroughly interested in producing just as much and
just as good work as possible. This being so, we should
be quick to make modest attempts toward a system which
PROFIT-SHARING – CO-OPERATION 329
brings into play a great reserve force. Under the wages
system this reserve of unusual power lies largely among the
workingmen; but one need only stop and think a moment
to realize how the extreme friction of the existing system
diminishes the actual working power of the employers.
Under a system which secured to them the hearty co-opera-
tion of their men, their own force would undoubtedly be
largely increased. We want to increase it.
Looking at the system of co-operative production, as
usually practiced today, in comparison with such an evolu-
tionary system as I speak of, it is a striking fact that its
advocates virtually leave out of sight the immense working
power of the present captains of industry. It is not to be
supposed that we can immediately convert any consider-
able number of the great manufacturers and masters of
transportation, for instance, so that they will be willing
to put all their ability at the service of the workmen for
modest salaries. Imagine, then, if you can, the effect if to-
morrow morning the skill and ability of all business men
above the grade of common hand labor were withdrawn.
Imagine the city of Brooklyn, for instance, left tomorrow to
be run, so far as private business is concerned, by the work-
ingmen alone, with nearly all the brain capital of the pres-
ent system reduced to temporary idleness. It would re-
quire but a few hours of such a regime to convince even the
most determined advocate of the democratic principle in
industry of the fallacy of his theories of manual labor as
the source of all value and of the equality of all heads in
business. Any system which, like the most plans of co-
Operative production, makes little account of the men who
are really leading the business of modern civilization and
furnishing employment and bread for the great army of
hand workers, neglects one of the vital factors in the situa-
tion. In point of fact, we need every particle of ability and
of working force in head and hand to do even the larger part
330 NICHOLAS P. GILMAN
of the work that must be done. The captains of industry
of whom Ispeak are not yet sufficiently moralized to be will-
ing to accept the very modest position which the system of
co-operative production would assign to them. This is no
reproach to them; the level of morality among them is at
least as high as that among workingmen or any other large
class of people. They need, however, education into Some
larger ideal and up to some nobler standard, like all the rest
of us, and it is to some gradual process of taking their work-
men into partnership in the profits of industry, managed
on substantially the present lines, that we are to look for
the educating agency needed. Both the employer and the
employed under present conditions need to evolve new ca-
pacities and new virtues to give co-operative production
a fair field in which to develop.
The question just how large a share of the profits the
employed shall receive is not important at the outset. The
fact that a regular dividend paid to labor out of the profits
of the year has been shown to be good business policy in a
large number of cases, resulting in at least as large net pro-
fits to the employer himself as before and in the generalim-
provement of the industrial situation in the establishment—
recognition of this fact is the main matter at the beginning.
If the workman is guaranteed by his employer a modest
dividend of five or ten per cent on his wages, varying ac-
cording to the returns of the year, he is taken into a kind
of partnership such as he did not before know. He will in
time, if he belongs to ordinary humanity, begin to have the
feelings and the ambitions of the partner. The increase in
the amount of product and the improvement in its quality,
and other gains from economy of material and care of ma-
chinery, and from the absence of labor difficulties, which
have usually resulted, are arguments of great weight for
Such a limited partnership. Into the details of the very
considerable body of experience furnished in the last sev-
PROFIT-SHARING – CO-OPERATION 331
enty years by the numerous firms which have tried the sys-
tem, beginning with the Maison Leclaire in 1842 and coming
down to the more than three hundred firms which now prac-
tice profit sharing in Europe and America, I can not here
enter. My chief claim for profit sharing, as compared with
the wages system now in force and with that system of co-
operative production which is desired by so many, is that it
does more complete justice to all the factors in the situa-
tion that either of these two systems—that which is now a
fact and that which is now largely a hope. The objection
commonly made to profit sharing—that it does not include
the sharing of losses by the employed—rests upon a grOSS
misconception of the scheme. It is a limited method to be
distinguished carefully from the more developed system
of co-operative production under which loss sharing is
plainly inevitable. -
The progress which has been made in the last few years
by the system of industrial partnership is encouraging to
all believers who have never allowed themselves to put it
forward as the one solution of the labor problem or as a
panacea for social difficulties. If I may speak for the great
body of advocates of the system, we see in it one excellent
method of improving the relations between the workman
and his employer, which it is highly desirable should be ap-
plied and tested in a great many directions in order to as-
certain the fields in which it will prove itself a better system
than any yet practiced. If in one direction a system of pre-
miums for economy in the use of material, or in another di-
rection a system of increasing the wages according to the
amount of good production, is found to bring a larger return
to the workman and a better result for the employer than
profit sharing, we are entirely ready to acknowledge the
fact. There are directions in which profit sharing is likely
to justify itself at once, as in trades where a large amount of
skilled labor is employed; in others, owing to the great use
332 NICHOLAS P. GILMAN
of machinery, there is less room for wise economy on the
part of the employee. A large part of the business of the
world, of course, is done on a no-profit basis. There are
numerous fields, from such matters as common domestic
service to the work of the teacher in the public School and
the professor in the college, from which the whole notion of
profits is absent, and to which consequently such a system
as profit sharing has no application. In these fields, if Ser-
vice is defective and unsatisfactory, means of improving it
must be sought in other ways than by resort to such a sys-
tem. -
If we look forward in a general way to consider the parts
which the three systems—of wages, profit sharing, and co-
operative production—are likely to play in the compara-
tively near future, it is only rational to suppose that they
will for a long time continue side by side. As the world
grows older, Wiser, and more humane, and as the demo-
Cratic principle asserts itself more and more vigorously,
the wages system, which is now virtually monopolizing the
field, will gradually suffer modifications. Profit sharing
or industrial partnership, under the various forms which
as a guiding principle it readily admits, will steadily make
converts, encroaching upon the wages system to an indefi-
nite extent. The wages system, however, will persist in
some quarters because no other system is so well adapted
to the demands of the situation; and in other quarters it
will yield place but very slowly to more democratic methods.
The wages system, however, will probably be much more
influenced by the advance of profit sharing for a consider-
able time to come than profit sharing will be by the spread
of co-operative production growing out of it.
A steady and permanent increase in the number of true
co-operative productive establishments, in the light of all
the experience which profit sharing can give, we must all
heartily desire. No industrial future, however, is likely to
IPROFIT-SHARING — CO-OPERATION 333
be less complex than that which we behold in wonderful
variety round about us today, and he would be a rash pro-
phet who should predict the day when any one system of the
three under consideration will have driven out the other
two. He would be much less wise who should protest that no
system which the human mind is capable of imagining will
ever supersede co-operative production. In all these mat-
ters we do well to keep ourselves free from the conceit of in-
errancy and infallibility. We have no call to legislate for
an indefinite future or to lay down an industrial or economic
creed for all our descendants. It is our one imperative
duty to consider the existing situation, not as capitalists,
not as employers, not as workingmen, not as members of
a particular profession, but scientifically and philosophic-
ally. It is our business to see facts as they are and to con-
sider them calmly, with a view to that improvement which
a progressive civilization demands. We cannot escape the
application of the notion of evolution to these matters, and
such an application at Once forbids our declaiming against
the wages system as a system of slavery or exalting co-
operative production as a sacred ideal to which the future
must conform, or preaching profit sharing as the one pan-
acea for all our industrial woes. &
The labor problem, I began by saying, is a problem of
finding work and finding the just reward for it. More spe-
cifically, it is the problem of the best relation between the
man who has more work than he can do himself and the
man who must find work. The interests of these two par-
ties are not directly and obviously identical; but society in-
cludes both the employer and the employed, and a good
many other persons not to be ranked under either of these
heads. The interest of entire society unmistakably is that
as much work and as good work as possible shall be done
without overworking any human being; that every worker
shall receive a fair return for his toil; that the whole prod-
334 NICHOLAS P. GILMAN
uct of all the workers shall be so increased by such mate-
rial agents as improved machinery, and such moral agents
as greater interest in the work on the part of all, and a
closer union and harmony, that the share of every worker
may be augmented.
THE EMPLOYER AND THE EMPLOYED.
BY JOHN H. PATTERSON,
[President of the National Cash Register Company, Dayton, Ohio.]
Lincoln in his first message to Congress, said: “Capi-
tal is but the fruit of labor, and never could have existed if
labor had not first existed.”
This is true, and all will admit that the question is not
whether earnings should belong exclusively to labor or to
capital, but what proportion should be given to each. We
must take into account that while labor is not a commodity
the various kinds have a certain market value in proportion
to their scarcity or abundance. We must remember also,
that capital is forced to bear all losses and risks, which are
So great in the manufacturing line that manufacturers de-
mand twice the return from such investments that other
capitalists require. Justice to both classes demands that
capital should be reimbursed for its outlay and receive a
profit proportioned to its investment, while labor should
receive that portion of the net earnings which are due to it.
It is upon this question of division of earnings that so
much dissatisfaction is felt. The discontented note the ten-
dency to centralization of capital which has been both the
means and the result of progress.
This centralization of capital makes the benefits of civi-
lization accessible to all. One man's capital might be suffi-
cient to build a railroad from one village to another, but it
is the combined capital of many which is required to connect
the Atlantic and the Pacific and make the whole land kin.
When our earth is yielding up oil in such vast quantities
that all nations can be supplied from the product of one oil
field, no one man can assume the immense outlay attendant
335
336 AſOHN H. PATTERSON
upon refining and supplying it for the commerce of the
WOrld. -
There is a centralization, also, of brain-power. A pre-
mium is put upon brains and there is a demand for experts
in all departments of trade. Technical education is the
rule and no one has any use for the “jack of all trades.”
Some cry out that a few men are growing richer every
day, and that the working classes are growing steadily poor-
er. There is nothing upon which to found this statement,
for wages have increased all over the country. When I was
a boy, doing all kinds of work on a farm, workers were paid
$8 per month and board, while they are now paid $19.
Again, there are certain influences which prevent the con-
tinuance of wealth in any one class or family. We have
no laws of entail to lock up fortunes, and at the death of
the millionaire his fortune is widely distributed among
those who spend it lavishly, not having earned it. There
is a saying that there are but two generations from shirt
sleeves to shirt sleeves.
Senator Sherman said: “I apprehend no party of the
rich against the poor and believe that human wants and the
natural tendencies of the human race will equalize us more
and more as time goes on.”
Students of economies recognize, as an existing fact,
that communities where one or more capitalists live are
more prosperous than those where no large fortunes are
found. It seems to be one of the immutable laws of our
existence that we cannot accumulate anything which en-
riches ourselves without paying a toll which benefits others
in Some proportion.
- Andrew Carnegie says: “Under our conditions, the
millionaire who toils on is the cheapest article that the com-
munity secures at the price it pays for him, namely, his shel-
ter, clothing and food.” -
Any surplus which the millionaire may have after being
EMPLOYER AND EMPLOYED 337
supplied with the necessities of life is valueless to him un-
less it is used. If he employs it to extend his business or in-
vests it in any other enterprise, he immediately furnishes
employment to others; if he puts it into the bank it is loaned
to others to use in carrying on their enterprises. Through
whatever channels his money flows, large numbers are en-
riched besides the capitalists. - -
I am better fitted to discuss the subject as it applies to
the factory, and especially to our own factory, and I will
therefore state conditions and results as they have come
within my own observation.
I divide the manufacturing business into three classes—
namely, the making, selling and recording departments.
The making department, under our old system, received
the least attention, though combining the greatest elements
of risk from the failure on the part of the management to
Secure the maximum amount of work from men and ma-
chines. The selling and recording divisions were arranged
according to carefully devised principles. Under our new
system, we apply the same methods to the making divi-
sion as to the selling and recording divisions, employing
factory clerks and all modern aids which would have been
called “red tape” under the old system.
We had in our old factory many successful men who,
through shrewdness, were able to select and train good men,
and these in turn secured competent workmen, our busi-
ness prospering for a term of years, in spite of the lack of
system in the making department, because of the thorough
organization of the selling and recording forces.
I think that we have, in a measure, solved the problem
of the best methods for our own factory, but these methods
may not prove applicable to other factories except in a modi-
fied form. We do not claim entire originality of ideas, but
simply originality of the fact that we have combined the
theories of the best known thinkers and writers in the coun-
338 JOHN H. PATTERSON
try who are familiar with these questions. We are indebted
to such concerns as the Standard Oil Company, the Pennsyl-
vania Railroad Company, the Singer Sewing Machine Com-
pany, the Westinghouse Company, the Rothchilds, also the
thoughts expressed in sermons, novels, magazines and
tradepaper articles. We have paid men as much as $100
per day to aid us in developing our system, for no school
teaches the organization and management of men. It will
be seen that we did not begin with a factory, but that we
have evolved one. - -
As all employes desire the largest possible wages, and
the employer desires the largest returns for the wages paid,
the difficulty is to co-operate without antagonism. It is
certain that nearly all workmen will increase their daily
output provided they are assured of a larger return, and
I have found by experience that employers can afford to
pay high wages, provided each man turns out proportion-
ately more work. I also believe that workmen should re-
ceive this increase whenever possible, not when, but before
they ask for it.
We believe in securing the best men for any position,
and prefer to choose for positions of greater responsibility
those who have served the company in lower capacities; in
other words, we promote from the ranks.
In many cases we pay by the day and prevent this
method from becoming levelling by holding out the hopes
of promotion. In fixing our rates we consider in each case
a man’s integrity, habits, ability, industry, health, knowl-
edge of the business, condition of his bench or work room,
and, if he is a foreman, the kind of men under him—in
short, everything that will enable us to fix a just rate for
each man. -
We-pay a great many by the piece work system, and in
fixing rates we seek to eliminate all guess work by timing
each operation in accordance with statistics. In order that
EMPLOYER AND EMPLOYED 339
our men may not fear to increase their output, we guaran-
tee that no reduction will take place within a certain time.
During the last few years in which we had the system in
operation we have had no labor troubles. This is the more
remarkable, as strikes are more common in large factories
than in Small ones. - -
Our old idea of increasing profits was to cut down the
pay roll. This was a shortsighted plan for the small
amount saved in this way diminished by just so much our
ability to supply those wants of our prospective customers
which would net us a far larger return. It is well known
that white sheep eat more than black sheep, for there are
more of them. We can make more by taking from our
large number of customers than from a small number of
employes. -
Our present plan of paying dividends, as it were, is to
increase the pay roll. We pay twenty of the officers, in
addition to their salaries, monthly dividends in proportion
to monthly shipments. In return for this our employes
have concentrated their entire effort upon the work of
convincing and supplying One million prospective custom-
ers. We thus get a sufficient return to clearly demonstrate
that our methods do not spring from philanthropy alone.
We have been rewarded by the faithful, friendly ser-
vices of our people, who have become a home-loving, home-
owning community, and have found that whatever benefits
them benefits us, while loss to them, in a way, means a cor-
responding loss to us. - …
Another method which we employ, both as an act of
justice and to promote a friendly feeling among all em-
ployes, is to award prizes of money and diplomas to work-
men for the best suggestions for improvements in the manu-
facturing department. This encourages our men to read,
observe and think, which makes them more efficient. Our
business is peculiar and, as it is a factory and not a school,
340 JOHN H. PATTERSON
we employ only skilled workmen. We make an exception
in the case of our salesmen who are, of necessity, obliged to
prepare themselves in the agent’s training school. This
instruction is given to them at the company’s expense, in a
school established by us. -
By paying premiums for hard work and intelligent co-
operation, we maintain a high quality of production, a high
quality of work, with a steadily diminishing cost. Self-
respect among our workmen is constantly on the increase;
a large proportion of them attend church, and a general
air of intelligence is taking the place of the tread-mill meth-
ods from which we suffered in our old factory. :
Organization is our watchword. With perfect organ-
ization, one of the greatest examples of which is seen in the
Catholic church, whose chief strength lies in its organiza-
tion, we have not the ideas of a few, but all the ideas of all
our men, in every capacity. We accomplish this result with-
out a superintendent, by a series of committees which in-
crease in importance as they reach the highest committee.
This representation by committees prevents favoritism and
gives each man a voice. As a further means of preventing
favoritism, no foreman is allowed to employ his relatives
under him. --
We endeavor to make our system automatic in order
that we may be dependent upon no one man. The necessity
is impressed upon each of performing the most important
things first and of delegating to those under him all the
work possible. All of our men are supposed to be special-
ists in their own department, and the different foremen are
encouraged to solve their own problems. This enables the
officers to throw off the details of the business, and keep
their attention on the weakest point as long as it may be
necessary.
We have never objected to Trades Unions among our
people, but have found that our best men do not care to
EMPLOYER AND BIMPLOYED 341
join them, for our practice of rewarding any increased abil-
ity satisfies their sense of justice.
The employers of large numbers of men are apt to grow
apart from their workmen. Under our new system they
grow together, and instead of strikes we have conferences.
Such men as Carnegie, Armour and Pratt have found
it expedient to establish libraries, workmen's clubs and
manual training schools, and to soften the harsh relations
so often existing between the two classes. Few manufac-
turers can afford to establish large charities, but all may
and should perform these small acts which are necessary
to the health of their employes, such as providing proper
lavatories and well-ventilated workrooms, made clean and
cheerful by whitewash and paint. The increased capacity
for work which the occupants will gain will prove a suffi-
cient return.
We find that it pays to give our people even a small
library, occasional lectures and a sixteen-page Semi-
monthly called the “N. C. R.,” which is devoted to the inter-
ests of all our people. We have established an Advance
Club of two hundred members, which meets weekly in the
company’s time, to consider the thirty most important
things pertaining to our enterprise. At this club meeting
we ask for co-operation, as One man asks another, and We
never fail to get a hearty response. Those who visit our
factory declare that the enthusiasm shown by all connected
with it is one of the most striking things which comes to
their notice. A gentleman once said that he was frightened
out of our line of business because one of our agents said
“we” instead of “the company.” This enthusiasm is sim-
ply the result of the confidence which all feel in our policy
and a belief that their hearty co-operation will meet with
due recognition. -
We have found that our men are affected by their sur-
roundings, and when they see that the best workers receive
342 JOHN H. PATTERSON
the best rates and that they move quickly and work harder,
the rest soon get into the same spirit and the whole shop
takes on a more rapid pace.
We have found that to accomplish the largest amount
of work possible our men must be healthy. We therefore
endeavor to teach them how to take care of their health, in
frequent talks and through the columns of the N. C. R.
The whole office force is given systematic calisthenic exer-
cises in the middle of each morning and afternoon. When
Our new building is completed there will be baths, where
each employe may bathe once a week, in the company’s
time. As a further aid to health we have given each wo-
man in the company’s employ a membership in the cooking
Class in this city. To those who do not see the connection
between the question of health and the matter of conducting
a paying business we would say that a healthy operative
turns out more work than a dyspeptic.
Many writers have said that factory work had a bad
effect upon the health of a woman and girls. We have suc-
ceeded in refuting this statement so far as it applies to our
factory.
The Women begin work later than the men and leave
earlier; we give them fifteen minutes’ recess, with cal-
isthenics, in the middle of each morning and afternoon,
a half holiday every Saturday and a whole day's holiday
each month. They all receive six full day’s pay often hours
each, and earn about a dollar per day. They work in clean,
airy rooms, separate from the men, under forewomen of
high character. Each department has a colored janitress,
and we serve gratis each day, from three kitchens, hot cof-
fee, tea and soup, or some other nutritious food, such as
baked beans, potatoes, meat and rice.
We find the average cost of these lunches to be three
cents each and that by reason of them each woman does
one-twentieth more work each day. This amounts to five
cents apiece, making the gain of two cents or 66% per cent.
EMPLOYER AND EMPLOYED 343
We noticed an instant improvement in the general health
of the women; there was less delay from sickness, fewer
absences and an ability to work harder and more enthu-
siastically than when they ate cold food. In fact, I do not
know of any privilege given to them which has proved of
greater benefit to them and to the company. We give them
rest-rooms provided with cots, a limited membership in the
Women's Gymnasium, clean aprons and sleeves, and in
every way consult our own interest by improving their
health and increasing their capacity for work.
We have found that when hours of labor are shortened
and safeguards to health adopted, persons of education and
superior mental caliber are immediately attracted to the
work, and it is easier to retain them after they have be-
come skilled. It is safe to estimate that three skilled wo-
men remain with us every year who would have left our
employe to seek positions in offices if we had not adopted
this new policy. We estimate that each skilled worker who
remains with us each year because she has no inducement
to seek a better position elsewhere, nets us a return of at
least 2% per cent upon the time and money expended.
We hold three conventions each year which are attended
by our agents and about two hundred of the people in our
factory. At these meetings, which continue for a week, we
generate more enthusiasm than could be obtained from any
other single method, and the more conventions we have,
the more our business grows.
In addition to the Advance Club which I have already
alluded to, we have an Officer’s Club of twenty-two mem-
bers. This is a daily convention at which social and busi-
ness questions are brought up for exchange of ideas. It
often has for its guests representative commercial men and
others.
A Social Club of the employes living near the factory
is held in the library three times a week and on Sunday af-
344 JOHN H. PATTERSON
ternoons. Here the literary and social side of our employes
is cultivated. We supply them with magazines and other
periodicals and the daily papers, while cigars are furnished
at cost. Business men, ministers and others are invited to
address them. This infusion of life produces growth, en-
thusiasm, and the most friendly relations between employes
and the officers of the company.
Our system is the new factory system and is as great an
improvement over the old as the new high school is over the
old high school. Under the old system, too much merit in
an employe was side-tracked before it came to the notice
of the officers; the workmen were nearly all eye servants
who did their best only when a foreman was watching, and
those who were slow and dull did not get much aid. In
the new factory, dull ones are awakened to effort by the
example of others who were formerly almost as dull as
themselves. Our new factory life is an educator which
trains workmen to regard the factory as a fine piece of me-
chanism in which each individual is an important part.
The intelligent co-operation required of each person is a
powerful aid to good citizenship.
A Dayton manufacturer said to me: “You are making
a pace for us which we cannot follow.” I replied: “It
won’t cost you anything to put a respectable woman over
the twenty-five girls in your factory and give them clean,
airy, suitable work-rooms.”
We were long ago impressed with the idea that many
changes should be made in our system, but were timid in
taking any new steps. Many prejudices had to be over-
come before the strong desire to deal justly with our em-
ployes took effect. When we saw, not only that it was
just, but to our own interest to adopt a system of mutual-
ity, we gradually made the change. We learned that in
order to gain unusual ends one must adopt unusual methods.
We now aim for co-operation and the strength that there
EMPLOYER AND Eiſſip],0YED 845
is in union, and the more we strive for this, the more Suc-
cess we meet. It seems to us, after trying both the old and
the new factory system, that in the latter lies the closest
realization of the words of Abram Hewitt, who said:
“Beyond all dreams of the Golden Age will be the splen-
dor, majesty and happiness of the free people when, ful-
filling the promise of the ages and the hopes of humanity,
they shall learn to make equitable distribution among them-
selves of the fruit of their common labor.”
WELFARE WORK.
BY JOHN BENSON,
[of Benson & Easton, Advertising Agents, Chicago.]
The growing intelligence about human force or forces
is bringing about various and wonderful results, but none
of these affects so large a number of persons as does the
so-called “welfare work.” It is one form of the social bet-
terment work that is being so largely undertaken every-
where in cities and manufacturing districts. This particu-
lar branch of the work is among the employees of the va-
rious industries, commercial houses and the railroads. Agi-
tations for better conditions, solely from a humanitarian
standpoint, went on year after year through church and so-
cieties, but comparatively little was accomplished, in ameli-
orating the conditions of workers, until modern science
stepped in and said: Better air, more work done; cleaner
conditions, more and better product; comforts, conve-
niences and recreation, greater interest in work and life.
What neither appeal nor law could bring about self-inter-
est accomplished. It has become a “cold business proposi-
tion,” to have sanitary, well-lighted work rooms, lunch
rooms with well-cooked food, rest rooms, a doctor and a
nurse in all establishments where many people are em-
ployed.
There are several general factors in America that are
striving to bring about better conditions of life in city, town
and village, especially among working people, and a large
number of factories have anticipated them in this work,
which in many cases has extended to communities. Some
of the new towns on the shores of Lake Superior owe every-
thing in the way of public advantages and comforts, to the
346
WELFARE WORK * 347
industrial institution which founded them, built the houses,
public buildings, and made the laws governing everything.
The National Civic Federation has a department of bet-
terment and calls this “welfare work.” Not very long
ago it sent a woman to Panama to investigate the conditions
under which the diggers of the canal lived, and it has done
many other things. The Carnegie Institution has taken an
interest in this work and under its auspices has recently
appeared a book called “Social engineering, a record of
things done by American industrialists employing upwards
of One and one-half million of people.” Its author is Wil-
liam H. Tolman, Ph. D., social engineer; director of the
American Museum of Safety; Secretary American Section,
International Congress of Improved Dwellings, etc.
Mr. Tolman has been a student of social and industrial
problems for fifteen years, and at the beginning of this time
he says there was no name for this sort of work. He is not
in favor of the name “welfare work,” and finds that work-
ers in some places object to the name. Some industrial
plants employing a “social secretary” give her or him some
nominal task other than this for which he is really em-
ployed. Mr. Tolman finds the term “industrial better-
ment” more comprehensive, “inasmuch as it concerns the
efficiency promotion of the worker as well as the plant.”
This is the idea, the cold business proposition, back of
all this work—efficiency. Well-cooked, appetizing food,
served in pleasant Surroundings, is found to have a direct
bearing on efficiency. Sanitary toilet rooms with individ-
ual bowls for Washing, and even with individual towels,
promote efficiency. And classes, schools, choral societies
are more evident means of doing the same thing.
Mr. Tolman has investigated conditions in a great num-
ber of places, but his book is not exhaustive. He has not
mentioned the highly perfected conditions in a great es-
tablishment in Buffalo, New York, nor of what is being
348 JOHN BENSON
done in a great number of large business houses in Chicago,
although he has cited, a good many times over, some of the
things that are being done in this latter city.
|His first chapter deals with “Efficiency Promotion,”
and here are a few of the statements he makes: “In recent
years it has been slowly dawning upon the mind of the em-
ployer that his human machine—his hands as he sometimes
calls them—needs attention, needs rest, needs the best en-
vironment for the production of the best results. * * *
Here and there employers are beginning to realize that in-
vestment in manhood pays; that improved men for im-
proved machines have economic value, because a more vig-
orous man can do more work, a more intelligent man can do
more intelligent work, and a more conscientious man will do
more conscientious work. * * * Employers are sufficiently
far-sighted to recognize that whatever makes the worker
more human, more contented, more skilled, is a positive in-
dustrial asset in the business and is a large factor in indus-
trial stability.”
Employers are sometimes willing, but do not know how,
to go about helping their employees. If anything perfunc-
tory is undertaken it is quite sure to be ultimately aban-
doned as a failure. The conditions between employer and
laborer have sometimes been so strained that there has been
suspicion when the former has come “bringing gifts.”
Dut example is having its influence with a large number of
houses, manufacturing and mercantile, and the pioneers
are continuing their work with pride and unabated effort.
Mr. Tolman, after having gathered so much data as to
fill over three hundred and fifty large pages on this subject,
may be taken as good authority when he says: “Not from
the churches, not from the universities and colleges, not
from the common schools, but from the hands of the great
captains of industry who are recognizing and providing for
an all-round development, the character of the plain people
WELFARE WORK 349
is being moulded and shaped along lines of civic and Social
usefulness. Never before in the history of the world has
the employer had such colossal opportunities for guiding
and uplifting the thousands of men and women, who spend
at least a third of each working day in his employ. If em-
ployers realized that they hold within their grasp the pos-
sibilities of industrial contentment, social stability and
communal welfare, they would plan and scheme how to im-
prove the conditions of their employees with the same Zeal
they now devote to promoting the efficiency of their busi-
ness, extending its operations and reaching out for the ac-
quisition of new commercial territory.”
“Money is spent lavishly, if need be, on the improve-
ment and perfection of inanimate machinery, and its hous-
ing, and employers are beginning to realize that it will pay
them to improve and perfect their animate machines. * *
* * Setting aside any consideration of altruism or phi-
lanthropy, it is good business to provide the best light, pure
air and water, the essentials of health for factory and work-
shop. That there is a response is evident when the in-
creased production is shown at the end of the month. At-
tention to hygiene and sanitation is a large element in effi-
ciency. -
Welfare work does two things: It improves the condi-
tions of work and it gives individuals a chance to improve
their own condition. This latter idea is now taking on
many forms of dévelopment, and probably nothing that em-
ployers do gives them so much satisfaction as this of see-
ing the ambition, the interest, and the actual attainment
that results from provisions of this sort. -
Improving the physical conditions of workers should
invariably come first. He is then in a better condition to
take advantage of the Social and intellectual opportuni-
ties offered him. The work begins with the building of the
factory. New forms of construction made it possible to
350 JoHN BENSON
have more space for light than formerly. Rooms are
flooded with sunshine, the great microbe killer. Ventila-
ting systems which are amoung the wonders of modern in-
vention supply fresh air and change it many times an hour,
cooling it in summer and warming it in Winter. Many an
occupation which was formerly shunned because of its dire
results on the health is now made safe by improved meth-
ods of ventilation, opportunities for baths, and a supply of
pure drinking water.
An old factory is rarely to be found which makes ade-
quate toilet provisions for its employees. Nor did these old
buildings, factory or store, have any place for hanging
wraps and outside garments. Now lockers are provided for
wraps and toilets, lavatories, and baths as up-to-date as
those in the finest public buildings. “The provision of the
most improved sanitary and hygienic conditions is the very
A B C of industrial betterment; it is not charity or welfare
work; it is good business, because it enables the worker to
labor under such conditions as will allow him to fulfill to the
utmost his part of the wage contract.” .
The testimonies which Mr. Tolman has brought together
from different firms and manufacturing establishments,
as to the appreciation of these improved conditions by em-
ployees, are very convincing proofs of their value. He does
not mention anywhere what has been done by one of the
greatest mercantile plants of its kind in the world which
now covers many acres, and is surrounded by houses built
for its workers, has a hall for all sorts of lectures and diver-
sions, a park, a roof garden, Welfare workers and every-
thing that modern times has suggested of this sort.
The work of the house in question is notable because the
concern is among the very most alert of modern business
establishments. Its great new plant is not yet half a dozen
years old. In its old quarters there was hardly a conve-
nience or comfort for its employees, no lunch room, no de-
WELFARE WORK 351
cent toilet rooms, no rest rooms with nurse and a doctor
within call. It did, however, have a preparatory room or a
sort of schoolroom, and it engaged, for frequent meetings of
workers which were addressed by a very bright manager,
a room in the central part of the city. Even under the old
and primitive conditions it held the loyalty of its employees,
and now under the new it is a world by itself, and a most
self-sufficient and satisfied one.
Other firms which cannot build a community to order,
see to matters of transportation for employees who must
live at a distance, and the establishment of lunch rooms in
many cases has been to enable those who would otherwise
eat a cold and inadequate lunch to have something warm
and Satisfying.
The physician and nurse fill most important places in
these modern establishments. Slight physical ills if taken
in time yield easily to treatment. Sometimes an hour’s
rest will save an employee from losing a whole day, with
loss to himself perhaps and always to the employer. First
aid is provided for every sort of injury, and hospital accom-
modations are often within the control of establishments
where a man may be taken under more favorable conditions
than he would be if no one were interested. The railways
support great hospitals with the finest buildings and equip-
ment. g
Though the railroads have long had these hospitals and
are now providing reading rooms and beautiful recreation
houses, especially in remote districts, where numbers of
men Congregate, and are now giving pensions, yet their
work in those ways has not attracted the attention such
efforts have secured when in connection with large manu-
facturing establishments. In the latter case there has
sometimes been a definite consciousness of the advertis-
ing value of such work. -
Mr. John H. Patterson, president of the National Cash
352 JOHN BENSON
Register Company, is given the credit for being the origina-
tor of welfare work, and his company as being its leading
exponent. In his factories there is undoubtedly carried on
as many or perhaps more kinds of betterment work than is
carried on elsewhere, and it is here considered not only one
of the most modern but one of the most effective means of
developing good will.
Among the establishments which are doing much for
employees through schools, John Wanamaker’s Philadel-
phia store ranks high or highest. Not only are there
classes which prospective sales people must attend, but
an evening school where all the branches in the courses of
schools of the highest grade are taught. This evening
school is for older boys who stay two evenings in a week,
have a free supper in the store and report at the school
room where they receive instruction from twenty-two effi-
cient teachers. A literary club, an orchestra, a military
band, a bugle and drum Corps, a minstrel troupe, a uni-
formed cadet battalion of 210 members are a part of the
activities connected with this school. When the New York
store was opened a great company of these boys from Phila-
delphia furnished music.
All of the pupils in the Wanamaker schools are taught
singing, and reports of the work of all sorts done is sent to
parents. Educational and social work are combined in the
summer camp at Island Heights, New Jersey. Here the
boys camp for two weeks in Summer. In connection with
this are five acres of ground and a headquarters house which
is used by men and women of the establishment during the
rest of the summer.
|Nearly all large department stores now have schools,
provided free of expense to employees. Modern conditions
have made these almost a necessity. Personal supervision is
of a different sort from that of an older time, and it is more
necessary that workers be given some definite preparation
WELFARE WORK 353
for their work and some impetus to improve it. Some of
these schools are so complete as to have courses leading to
graduation. The Broadway Department Store of Los An-
geles, California has such. Mr. Letts of this store is quoted
as saying: “These boys and girls have demonstrated beyond
Question that, owing to the training and discipline they
have received through the school’s instructions, they are
equipped far in advance of the average department store
employe. This feature of the success of our school is plainly
shown in the fact that our competitors in business use every
known artifice to deplete the ranks of our graduates by en-
deavoring to secure their services for their own aggrandize-
ment. The school's expense is wholly met by the establish-
ment, and I manifest a zealous interest in everything per-
taining to the welfare and advancement of every pupil.
There is no limit to my pride in the promotion of these
young people, who in turn appreciate the advantages of
fered by rendering faithful service.” -
By the request of the wholesale and retail houses of Bos-
ton the Board of Education of that city opened, in 1905,
evening classes for sales people, both men and women.
These classes were held under the direction of a school prin-
cipal and were addressed to the heads of the leading firms
and their heads of departments of all the principal sell-
ing houses of the city. These volunteer teachers were
enthusiastic and competent to speak on the qualifica-
tions of the ideal salesman or saleswoman. Besides the lec-
tures, demonstrations were given of how to deal with cus-
tomers in different departments. -
Perhaps nothing that employers are doing brings more
of real and immediate satisfaction than the distribution of
bonuses or the sharing of profits. All the “mutuality”
work done yields large returns in the way of greater in-
terest taken in working faithfully and in being loyal to the
institution. There is the feeling in most cases that the em-
/
354 JOHN BENSON
ployer did not have to do these things, and he is therefore
given greater credit. A certain per cent of the year’s Salary
is often given. To those whose pay is small this often means
more than it does to those with more—it is a larger Sum
than they ever receive in any other way. *.
The organizations of employes in benefit associations,
encouraged by the house and often by contributions to the
treasury afford a security against enforced leisure and sick-
ness that is of high worth in securing esprit de corps in an
establishment. The activities in connection with the man-
agement of these often show employers where there is
latent managerial ability. The large publishing companies
usually have such associations worked out to a high degree
of efficiency. The Mutual Benefit Society of the Curtis
Publishing Company has its membership divided into four
classes, with separate conditions of membership and ben-
efits. -
The subject of pensions has now become one of national
interest. A very great number of firms of many different
natures give these. A large number of regulations as to
age, period of service, etc., has been worked out in conned-
tion with these. It would seem as though at no distant day
no trade or profession would be without its “Old Age Pen-
sions.” Mr. Carnegie has provided more than one fund,
both for pension and relief. In 1901 he gave four million
dollars to the Carnegie Company, the income from which
was to be applied for the benefit of employees in the eleven
companies under this one.
In presenting this he wrote a letter which said that it
was to be applied:
“1. To provide for employees of the Carnegie Com-
pany, in all its works, mines, railways, shops, etc., injured
in its service, and for those dependent upon such employees
as are killed.
2. To provide Small pensions or aids to such employees
WELFARE WORK 355
as after long and creditable service, through exceptional
circumstances, need such help in their old age, and who
make a good use of it.
3. This fund is not intended to be used as a substitute
for what the company has been in the habit of doing in Such
cases—far from it—it is intended to go still further and
give to the injured or their families, or to employes who
are needy in old age, through no fault of their own, Some
provision against Want as long as needed, or until young
children can become self-supporting.”
A great number of financial and other institutions now
try to encourage thrift by allowing employes to buy stock
under certain conditions. Usually this cannot be sold to
any outsider and in some cases there is always an option of
return on it. But different firms manage this matter in dif-
ferent ways. The mass of evidence goes to show that it
does encourage saving and the securing of a competence.
In 1898 the American Institute of Social Service was
organized in New York, with Dr. Josiah Strong as presi-
dent and Mr. W. H. Tolman as director. “In the promo-
tion of its object it became a clearing house of practical ef-
fort for the great variety of methods of improving condi-
tions, giving to this new form of socio-industrial effort the
new term, “Industrial Betterment,’ by which are meant the
various phases of improvement in the promotion of better
relations between employer and employee; arbitration,
trades unions, employers’ associations, trusts, wages, hours
of labor, housing, education and recreation and other move-
ments.” -
The making of men and women is an expensive process.
The product is worthy of greater care than it has in times
past received. And the employer is not only anxious to
exercise this care over the men and Women who work for
him, the city and state and even the nation are stepping in
and saying he must do it. - -
TOOLS OF BUSINESS.
BY R. B. JOHNSON,
[Secretary National Office Supply Company, Chicago.]
Time works wonderful changes in business methods.
Business used to be conducted on a slow, easy-going plan.
Now everything moves with accurate and systematic ra-
pidity. Old time business methods were like the old clock
that slowly ticked, “Ever-forever, ever-forever,” while the
modern clock ticks busily, “Get there-get there-get there,”
which is the motto of the business man of today.
Time was when a man could rent a bare, shabbily deco-
rated room, put in an old desk and several chairs and be
ready for business, but now a man starting out in business
rents a suite of rooms and furnishes them with elegant fur-
niture and rugs and feels that the money spent is well in-
vested. -
It is just as important if not more so that a man be as
particular about the appearance of his office as he is about
his own appearance. There is a common saying that only
the rich man can afford to dress shabbily, and this applies
to the office as well. It is only the king of finance who can
allow his office to take care of itself, although this is never
the case, for the magnate has no need to pay attention to
trifling details.
Aside from the appearance of the office from an artistic
point of view, there is a beneficial effect to be gained from
the mere presence of the up-to-date mechanical devices for
saving time and labor. -
There is something in the click of the adding machine
that gives the impression that the establishment is run with
mathematical accuracy, and the Sound of the typewriter,
even though it may be coming through closed doors, inspires
356
TOOLS OF BUSINESS - 357
confidence in the way business is done. The loose leaf sys-
tem of bookkeeping in the same office points to a row of
books and very plainly says, “Only live accounts are kept
here; all dead ones have been taken out.” The presence of
a few loose leaves on the table shows the patron that his
account is available for his inspection at any time, and that
he can take his time in looking it over, because he is not
delaying any one else’s account.
Aside from the absence of dust in the modern office there
are sanitary desks, that are easily moved, envelope sealing
and stamping machines, clear sparkling water in the
coolers, and good ventilators in the windows to impress One
with the knowledge that all the furnishings of the office are
clean and sanitary.
In place of the heavy old-fashioned desks with drawers
that extend to the floor on each side and which was so
heavy to move, there are desks that stand on sturdy legs
and that are easy to move, because of the ball bearing
castors, and with drawers that extend to within a foot or
two of the floor. It is open for a foot or more of the floor
and the air circulates freely. These desks are so easily
moved for purposes of sweeping that there is no excuse for
dust collecting under them.
In many offices table desks are used a great deal, because
they are open at the back as well as sides. For certain uses
they are more comfortable than the roll top desks. Where
the material used during the day is such that it can easily
be put away each night, these desks are very practical, as
their top surface is large and there is no back to keep out
the light. Of course, where there are a great number of
papers and letters that it is necessary to keep in the desk,
the roll top desk with its convenient drawers and pigeon
holes is the best. - -
The modern typewriter desk can be used as a writing
desk as well. The desk is so arranged that the typewriter
358 R. B. JOHNSON
may be lowered into the interior of the desk when not in
use. The machine remains on a level while it is being low-
ered by the operator and still remains on a level after the
desk is closed. The desk then has a flat surface and is
ready for use as a writing table. When open, the type-
writer stands on the top of the desk in a comfortable posi-
tion for the operator, and maintains a firm and steady posi-
tion while being operated.
The chairs for the typewriter are scientifically built so
as to give the greatest possible support to the back and to
afford as much comfort as possible to the other muscles of
the body. These chairs may be raised or lowered according
to inclination and the back is also adjustable in some of
them.
The successful business man takes advantage of every
modern business appliance. There are other men, not so
successful, who give as their excuse for not having them
that they are not able to afford them because business is
dull. They do not seem to realize that perhaps the reason
that business is not as good as it might be, is because they
lack the proper tools for doing business. Money spent on
time and labor Saving devices is money well invested, al-
though many business men do not realize this. If machines
are bought to do the detail work, the business man can give
most of his time to doing “big things,” but without them he
will have but little time for the more important things, be-
cause he has his own detail work to do.
When a business man finds it necessary to send a tele-
gram, he dictates it to his stenographer, who typewrites
the message on a telegraph blank and calls a boy from the
telegraph office by means of a tiny instrument fastened on
the wall of the office, which rings a signal in the telegraph
office. In no more time than it takes to cover the distance
between the offices the boy will be there.
Other large establishments have telegraph stations of
t
Tools of BUSINESS 359
their own installed, where messages may be sent and re-
ceived direct. This is, however, in only those businesses
that transact the greater part of their operations by tele-
graph, and that find it necessary to be in direct communi-
cation with many cities at all times.
There is no business that can be run successfully with-
out the use of the telephone. Even the shoe shining store,
in a corner of a great building, and the little news stand has
a telephone for the convenience of its customers. Without
the telephone immediate connection with the outside world
is impossible, and without this communication no business
can keep abreast of its competitors.
When there are a number of telephones installed in the
factory, store, bank or any business house there arises the
necessity for a private switchboard where the operator can
connect the different departments called for in a minutes’
time, and thus avoid confusion. Needless to say, this saves
much valuable time and effort. -
The switchboards are installed by the telephone compa-
nies and are made ready for immediate use. There are
- many little devices, however, that add to the convenience
of the telephone which are not supplied by the telephone
companies. Telephone supports and brackets are very use-
ful where it is necessary to have the telephone on the desks
within reach. These various supports or extenders may be
attached to the side of the desk, table or on the wall and
while within reach they are out of the way. They may be
swung into position when required for use and then pushed
back again. The majority of these devices are made on the
same plan somewhat and are equally satisfactory in results.
The interior telephone system does for the business man
what the long distance telephone does for the world at
large. It is a great convenience and even a necessity in
many cases. In the large residence, country home, factory,
360 R. B., JOHNSON
bank, department store, business office and in large clubs
and many other places will it be found of great value.
In a large business, containing many departments, it is
necessary that the various departments have Some means
of direct communication with each other and this is Sup-
plied by the interior telephone system. In the majority of
systems each telephone is provided with a miniature Switch-
board, enabling each department to call any other without
the aid of a “central” or operator. No one knows the value
of time of a business house as well as do the heads of that
business, and they are the best judges of the various
methods that should be adopted to save time.
The many other electrical appliances that are in use in
factory, store and office are too vast in number to be de-
Scribed. Electricity as a power is constantly coming into
greater use and increasing the rapidity of modern business
progress. And with this increase comes the added demand
for skilled mechanical labor. But a few years ago any ap-
pliance that was labor-saving was frowned on by the work-
ing class, who feared it would oust them from their posi-
tions. Instead, it has given them better positions with
better pay.
A dozen years ago the average office employe or clerk
applying for a position was expected to know how to add a
column of figures, enter records from the day book to jour-
nal and post to ledger, possibly make out bills and produce
clear and passable clean press copies of letters. Today the
office employee, whether a boy or girl, is expected to know
how to operate from One to a dozen different kinds of busi-
neSS appliances and in the majority of offices to know how
to operate a typewriter.
The phonograph is used by many large business estab-
lishments in place of Stenographers. The busy man dictates
his letters into the phonograph and the records are then
placed on other phonographs and the typist writes the let-
TOOLS OF BUSINESS 361
ters as he hears them from his phonograph. These letters
say what the man really said, not, as was the case formerly,
what his stenographer thought her notes said. But while
in many cases the phonograph is used exclusively, there are
other cases where it would be impossible to use it as a Sub-
stitute for a Stenographer. In a great many businesses,
long technical letters are absolutely necessary and the man
dictating them must of a necessity give them thought and
time and frequently he has to tell his stenographer to make
changes here and there in her notes.
A letter of this kind it would be practically impossible
to dictate into a phonograph so that it could be understood.
It would be impossible for the typist to interpret the jumble
of the mixed-up words.
In smaller offices also the stenographer could not be
spared. Here the number of letters is not so great and the
Stenographer's duties are other than the mere “taking” and
writing of letters and her duties are often those that a
typist could not do. In this case, the phonograph would be
an expensive luxury and not a money saving necessity, as
it is in the larger business.
The typewriter has become firmly established as a busi-
ness necessity. It is not so very many years ago that busi-
ness houses sent out all their mail written in long hand but
now even the smallest business must send out typewritten
literature if it hopes ever to enlarge. Any house whose let-
ters are in long hand is judged to be unprogressive and be-
hind the times. Not only are letters written by a typewriter
neater in appearance, but they are easier to read and more
accurate than those written in long hand, and aside from
the original copy it is possible to obtain three and even four
carbon copies.
There are many kinds of billing machines, and among
the modern special machines there is a typewriter with an
automatic device which has made a strong appeal to the
362 R. B. JOHNSON
telephone companies and the retail department stores. This
machine is fitted with a tally strip of paper on a roll, similar
in some respects to the tally roll on cash registers or adding
machines. While the entries are being made on bills or
statements, the tally roll, situated at the right end of the
cylinder is not used, but when the writer enters the total
amount on the extreme right of the bill, it also registers On
the tally paper. When the bill is taken out, the tally roll
automatically moves to the next writing line.
When the operator is through billing all the total
amounts are neatly and absolutely accurately collected on
the tally slip, thus making a complete check upon bills
each day.
The tally slip device, like all other devices used on a
special machine, is entirely original and very clever. The
multiple feeding device has also proved very useful. The
increasing need in modern accounting, resulting from the
growing use of what is called the compound or unit system
of loose leaf accounting for numerous copies of an account,
resulted in its invention. By using the multiple feeding de-
vice as many as twelve or twenty copies can be made. On
an ordinary typewriter the sheets slip out of alignment and
the writing does not come out in the same places on all the
sheets. The feeding device overcomes this difficulty. The
sheets of paper and the carbon are inserted in the ordi-
nary way and are held by a gripping device which is fitted
to the cylinder.
There are different kinds of billing machines for dif-
ferent uses. There are billing and charge machines that
have proved helpful to the retail store, and there is a car
record type for the use of railway accountants. There is
also a special machine for writing checks and vouchers with.
The railroad way billing typewriter, the insurance
policy machine and the special cardwriting typewriter are
among the Special late typewriters now used in business
systems.
TOOLS OF BUSINESS 363
One of the most marvelous machines ever invented to
lighten the labor of an office or store is the adding ma-
chine. It was intended originally for use in banks prin-
cipally, the inventors never dreaming that they would be-
come so firmly established in the majority of businesses.
In recent years, the inventions of calculating machines
have been enormous, but the majority of these are of the
freak class and have faults that make them practically im-
possible as rapid and accurate aids. But the calculating
machines of reliable make are deserving of merit. That
these machines are time and labor-saving has been So thor-
oughly proven during the past few years that it is safe to
say that in a very few years there will be few business enter-
prises that can afford to do their work in figures in any
other way than by using some form of mechanical calcu-
lating machine. The machines are practically the only ones
that are intended to do brain work and, in addition, to save
time and labor.
One of the many instances where the adding machine
has been the means of Saving thousands of dollars annually
is in the railway mail service. Mr. Carle C. Hungerford is
responsible for the adoption of the adding machine in con-
nection with the railway mail system. The government
pays the railways for carrying the mail on the basis of a
four year contract, and once every four years men are put
on the mail cars whose special duty it is to weigh all mail
put off and taken on at each station. The results of the
weighing are used as a basis for the new contract.
Mr. Hungerford, who is chief clerk of the sixth division,
railway mail service, discovered a way to save time, labor
and money in tabulating and compiling the reports of the
weighing officials by means of the adding machine.
“The weighing of the mails for the purpose of award-
ing the contract is not a new departure,” said Mr. Hunger-
ford. “That was part of the old system. The mail weighers
364 R, B, JOHNSON
have cards on which they record the weight of the mail
taken on at each station and also the weight put off. An-
other card records the weight on the return trip between
the same points. This process of daily weighing is kept up
for ninety days, and the totals must be footed at the end
of each week and at the end of the whole period. Formerly
each day’s report was entered by the clerks on a large tabu-
lating sheet three feet long and two feet wide, and figures
had to be totaled vertically and horizontally. The size of
the job can be seen when I tell you that the report of just
two trains on a long run for the period of ninety days took
up thirteen of those large sheets. The work kept twenty-
five men busy in the Chicago headquarters during the time
of weighing and for three months afterwards. Then there
was a liability of error in the footings.
“I began to look for some way of avoiding this chance
for mistakes and cutting down the amount of work. A
man in Texas first used the commercial adding machine to
get the footing of the columns, but that did not save the
work of entering all the figures on the tally by hand. So we
developed the plan of doing away with the tabulating sheet
altogether. We use the adding machine and make its record
strip the permanent record of the weights. Instead of first
entering the figures on a large sheet and then transferring
them to the machine, One man reads the amounts from the
weighing report and another operates the machine. The fig-
ures for a week are kept together, and totals taken for each
town. At the end totals are taken for the whole route. The
cipher in the middle of the column marks the dividing line
between the Columns for mail put off the train and mail
taken on.
“The name of the town is entered on the strip opposite
the figures, and the whole strip is filed with the daily report
cards. At the end of the weighing period, the totals for the
various Weeks are footed on the machine. This process
Tools OF BUSINESS 365
Reeps all the figures as surely as would a large sheet; the
records are much easier to file; and the saving in stationery
is a large sum when the amount required for the entire
country is considered.
“At the same time we can do the work with half the
clerks that were formerly needed. It takes three months
to finish the report after the weighing closes. Heretofore
we had to keep twenty-five men at work tabulating and add-
ing; now half the number can do the work. The plan was
developed because there was a need for it. Tabor-saving
devices which were used in business could be adapted to
the work of the postal department, and we just worked out
the way to do it, not inventing any new machinery. but
using to good advantage the office helps already on the
Imarket.”
Some machines of the present day are not only adapted
to addition, but can perform multiplication, division and
subtraction as well.
Bookkeeping is done by the use of the adding machine
largely, and the Operation is a simple one. When the mail
for a firm comes in, all letters containing remittances are
sent to the cashier who marks on each letter, in blue pencil,
the amount of remittance contained. If no letter accompa-
nies the remittance he tears open the envelope and marks
the amount in blue pencil on it, and in cases of cash received
in other ways a memorandum of the amount is marked in
similarly on a slip used for a voucher. After arranging the
letters and vouchers according to his ledger divisions the
cashier lists and adds on the adding machine the various
amounts recorded. All the slips and letters are there sent
to the bookkeeper who rearranges them according to his
ledgers and then he opens the ledgers to the first account,
and figures the discount. If the customer has made the
proper deduction the amount added is the blue pencil figure
made by the cashier and this total is posted to the credit of
the customer's account.
366 T. B. JūjāNSON
The adding machine is not complex and any person of
ordinary intelligence can operate One, and in very little
time become a rapid operator. They are very durable and
will not be injured by an inexperienced person handling
them. There are special stands made for them, although it
is not necessary to use one of these.
Not only are old time and present day methods of ac-
counting separated from each other by the adding machine,
but the loose leaf system of ledgers and binders has made
such a wonderful change in the methods of yesterday as to
make it seem not even remotely connected with modern
accounting methods.
The Chinese and Japanese are very clever business
people and they were first to adopt the loose leaf ledgers
for use, but we Americans were first to realize their mar-
velous usefulness and the great improvement they would
mean to the business methods then existing. There is, at
the present day, no branch of the accounting departments
to which the loose leaf idea has not been successfully ap-
plied.
It took some time for the loose leaf idea to become firmly
established, as many of the more conservative of business
men were loath to depart from the ancient bound records
which had been used satisfactorily for so long. Every
imaginable objection was raised to them but it was only a
question of time to overcome these objections and to prove
the true value of the loose leafledgers.
Not only has the loose leaf system been applied to
modern commercial accounting, but it has been applied to
other methods as well. Loose leaf binders are practically
the only kind used in modern business, and the line of va-
rious loose leaf books carried by most firms includes filing
books and typewriter records. The typewriter record
books are designed to keep memoranda or stock com-
pany records on loose leaves which are written on by a
TOOLS OF BUSINESS 367
typewriter and are then inserted in the book. The loose
leaf device and card index system are used exclusively for
filing and recording purposes, so that the literature as well
as the accounts of a business is kept up-to-date and ar-
ranged in the most systematic manner possible.
Another machine that has proved very popular in the
retail store and which has helped make it an up-to-date
business is the cash register. These machines have proved
a great improvement over the old till or drawer wherein
the cash was kept loose, for by the cash register an accurate
record of all money paid in or taken out is kept.
The latest models of cash registers show more than this.
They record the lot, size and stock number of the article
Sold, the cost and selling price and they also show which
clerk made the transaction and how many customers each
clerk waited on, the total number of customers waited on
and the total receipts at any time of the day. Each clerk
has a separate drawer of his own in which he deposits the
money he has received. This, of course, keeps each clerk’s
money apart from the rest and at the end of the day the
amount of money in each drawer may be compared with
the total of the amount registered by each clerk.
The cash register also prints automatically a receipt
which goes to each customer. The cash register is used in
many stores in place of a cashier and as a matter of fact it
is adopted in many cases where a cashier has always been
employed. The modern cash registers are not especially ex-
pensive and soon earn their cost in the salary saved.
It also lessens the possibility of dishonesty among the
clerks, for the employer can tell from the lot and stock
number which it records exactly what should have been
paid for a thing and can compare it with the selling price
recorded by the register.
Another machine that has been adopted almost univer-
Sally is the time clock. In any office, store or business
368 r R. B. JOHNSON
where a number of persons are employed the time clock has
been adopted and has proved highly successful. Every
establishment allows in its “profits and losses” for time
lost by the tardiness of employees and in former times when
employees were not required to turn in a report for their
time for reporting and leaving the building, the loss was
not at all small.
If the hours of business were from half past eight to half
past five, with an hour for lunch, the employes would be
Straggling in until nine o’clock and would begin to prepare
for departure before five o’clock. The time clock, however,
shows the time of arrival and departure of every employe
as he goes in and out of the building. The record shows
which employees are absent or irregular and there is no way
by which the employe can falsify the record. The records
are always legible and may be made either daily or weekly
and from them the pay rolls may be quickly made and with
little trouble. +
Another time and labor-saving machine, invented in
Tecent years and One that is constantly becoming more pop-
ular is the addressing machine. These machines are of
especial value to businesses that have a large mailing list
Or correspondence. They can be operated by any ordinary
person and can turn out a surprisingly large number of im-
pressions in an hour. -
It is necessary that the most improved filing and in-
dexing devices be used by most businesses, for the reason
that to them are intrusted the most valuable documents of
any business house. These devices are always being im-
proved on and now there is but little more to be desired.
There are so many different styles of filing devices that the
largest establishment as well as the smallest retail store
can be supplied satisfactorily.
Filing cabinets are made in all sizes and shapes and are
fitted for many uses. Many of the filing cabinets consist of
TOOLS OF BUSINESS 369
vertical and sectional as well as letter file indexes, transfer
cases, check file supplies, document file guides, card index
systems, mercantile report guides, catalogue cabinets and
other filing equipment. The methods of filing in the dif- .
ferent devices are the same. They are all arranged for
alphabetical or geographical filing. -
This is also one of the advantages of the card index
system which is now being used universally by business
and professional people. The many advantages of this sys-
tem are well known, the greatest of which being the in-
stantaneous reference which is possible. The unlimited ex-
pansion of the card index system makes it easy to add or
remove records at any time. The records contained by the
card index system are always kept up-to-date, as dead and
useless cards may be eliminated. The records contained
therein are permanent as long as they are alive, for they
need never be rewritten.
A device that is used satisfactorily by many establish-
ments and that is decidedly valuable to certain businesses
is the copying or duplicate device. As with almost all other
business devices, there are many different kinds made and
it is entirely a matter of individual preference which one
is used. One design which is considered very satisfactory
by many of its users is a stencil process. Almost an unlim-
ited number of copies can be produced on this machine
from an original produced with a stylus in connection with
a writing plate for hand writing, or in connection with a
typewriter for typewritten matter.
The stencil having the original is easily placed on a cyl-
inder. A cloth pad is adjusted to the Outside of the cylin-
der and the ink is applied to the inside with a brush. The
stencil is placed on top of the inking pad. The paper is
fed with the left hand and a crank is turned with the right
hand. This crank revolves the cylinder, prints the copy
and discharges the sheet automatically. A counter shows
370 R. B. JOHNSON
the number of copies that have been made. This machine
is especially adapted to printing circular letters, price lists,
changes in prices, quotations, descriptions, notices, Sched-
ules, statements, forms, music, drawing and in fact any-
thing hand-written or typewritten, where either Small or
large quantities are desired. -
The time stamp is also a specialty that has proven
very convenient and valuable in certain lines of business
wherein it is needed. These stamps are used principally
for stamping the exact time that letters, telegrams and
other mail has been received or sent out and for keeping a
record of the time on other documents. The majority of
businesses find that the date is all that is necessary on their
literature, but others find it essential to keep an exact
record, and these are the ones who find the time stamp a
necessity. The most improved time stamps are very ac-
curate and reliable and in almost all cases can be relied on
to make a true record. -
The time stamp records on letters, telegrams, orders or
other documents the exact time of their receipt or dispatch.
By its use all disputes as to the time of receipt of any order
may be settled and by its use in the shipping room prompt-
ness in filling Orders is promoted, as a direct check is given
on all work done by the employees of that department. They
record the time, date, firm name, and some even record on
certain documents the nature of the transaction with such
words as “received, answered, ordered and shipped.”
The stamps are absolutely automatic and require no ad-
justing other than the winding of the clock each day or
week, according to its make. Time stamps are frequently
used by businessmen for stamping the beginning and finish-
ing time on cost tickets in factories.
A self-feeding devices which soon after its invention
Sprang rapidly into popularity is the fountain marking
brush for shipping clerks. The ink is contained in a res-
Tools of BUSINESS 371
voir and it flows smoothly out from the brush. This brush
has been found to be a great improvement upon the old
brush which had to be dipped in the ink as many as half a
dozen times in writing one or two words. It not only saves
the time of the writer, but it is easier for him to use as well.
The brush is easily filled and easily kept clean. It is not ex-
pensive and it soon pays for itself in the time and ink which
it saves over the former method.
The self-feeding brush is made on the same plan as the
fountain pen and pen pencil, which are used almost exclus-
ively by business men. The improved models of fountain
pens are self-filling, being provided with an automatic de-
vice which draws the ink up into the reservoir when the
pen is dipped into it. The construction of the pen prevents
leakage and is neater and easier to use than former models.
The flow of ink is easy and regular and the pen writes with
a clear, fine line. The pen pencil is also a great favorite
with business men because of its size and convenience. It
is not as large as the fountain pen, but it holds practically
the same supply of ink and Writes in the same clear and
distinct line. The pen pencil is thought by many people
to be less likely to leak than the fountain pen, but this is a
Question that personal experience must decide.
A desk accessory that is decidedly handy is the envelope
and stamp moistener. The best of these devices is so con-
structed that the only time moisture can escape is when the
envelope or stamp is being moistened. This means that the
desk is not in danger of being marred. -
The moisteners are as a whole hygienic in every re-
spect, as they entirely eliminate the necessity of moistening
the gummed surface with the tongue which is distasteful to
any person of refinement.
Some of the moisteners are run by electricity, and with
these a large number of envelopes can be sealed in a short
time, but for the average office the moistener which is oper-
372 R. B. JOHNSON
ated by hand is speedy enough. In fact, many of the de-
vices are especially adapted for pocket use and can be used
at any time and at any place.
Most of the moisteners are also equipped with a felt
roller for sealing the envelope and making the stamp firm.
They are exceedingly handy and are undoubtedly a great
improvement on the old-fashioned method of using the
tongue.
There are now being used large quantities of the wal-
lets, document envelopes, folders and file pockets of various
shapes that are made of a paper preparation which the man-
ufacturers claim will outlast leather. Certain it is that
they are decidedly convenient articles to have. They are
made in all sizes and shapes and for this reason can be
used for many things. They are much less expensive than
leather, and are far better wearing and servicable than the
envelopes made of heavy paper. Being a happy medium
between the expensive leather wallets and the very cheap
paper Ones, they fill a long felt want.
OFFICE SYSTEMS.
BY JACK A. BENJAMIN,
[Manager Reliance Manufacturing Company.]
Necessity is the mother of invention and the spur to
adaptation. In modern business, competition has been the
necessity that has forced the invention and development
of a vast machinery for its transaction, and the quick adap-
tation of available devices from other fields, that have for-
warded invention and intelligence. The array of mechani-
cal devices, beginning with the little tablet on the business
manager’s desk—containing six, eight, ten or a dozen but-
tons—through all the intellectual devices of file cabinets
up to the exit of a piece of business, which may be re-
corded on a cash register, is one of the Imarvels of the age.
Someone said recently that if the invention of office
machinery increased as rapidly during the next ten years
as it has increased during the past decade, that the time
would soon come “when an up-to-date office will consist
of merely the boss and an array of mechanical devices for
doing his work by the pressure of buttons.”
Economy through organization is sought in every line
of business endeavor, in fact, organization, both factory
and store, is thought to be the most obvious feature of manu-
facturing and merchandising during the past few years.
Highly ordered management and systematizing have been
the steps successward. The keeping tab or checking sys-
tems have been perfected, as the mechanism of a watch was
perfected long ago, and the first Savings planned are always
in time.
The great business systematizers of today are card
indexes, letter files, checking files, document files, and no
end of other files, according to the kind and manner of busi-
373
374 J. A. BENJAMIN
ness, all in attractive little cabinets of their own. These
are constructed according to the “unit system” but may be
so combined as to present the appearance of one large
cabinet, after the manner of the most popular type of book-
case now in use. And all of these are warranted to give
the quickest and most efficient service.
In the every-day business of an establishment the first
duty in the morning is the opening of the mail and distribut-
ing it to the proper departments. In an office or estab-
lishment of average size, the incoming mail is opened by
One of the stenographers or by one of the other employes
Of the house whose especial duty this is. In large busi-
nesses, clerks are employed whose only duty is the care of
the mail. Money and drafts are taken out, usually, before
the letters are passed on, and the envelope must be retained.
Its loss may involve a law suit. -
The one who handles the mail first stamps it with a
“time received stamp,” which forms a tracing or reference
record. The stamp is automatic and makes an authorita-
tive record both for office and as legal evidence if that is
needed. The time stamp is not only used on incoming mail
but on copies of outgoing telegrams and for similar pur-
poses. It is used for checking a teamster's deliveries and
by storage warehouse men in timing length of storage, and
in making a record of any matter pertaining to gas, electric
ity, leaks, etc, that pertain to the business.
The stamp records the date, hour and minute and many
of the stamps also print the firm’s name. After the mail
has been stamped and opened it is sorted according to the
different departments, and on each letter is marked the
number of the department to which it should go and if any
of the correspondence needs the attention of more than one
department both numbers are marked on it. In many es-
tablishments, the person answering the letter stamps on it
the date of the reply and their initials. By the use of the
OFFICE SYSTEMS 375
stamp any person into whose hands the letter may come can
tell which department or department head should attend
to it. - -
To handle mail successfully and properly is to handle
it as rapidly as possible. In handling out-going mail it is
of vast importance to get it out of the office in the proper
shape and in the best time to catch the outgoing mails.
It is a rule of the majority of business houses that each
stenographer must sign her initial or number, which she
has had assigned to her, to every letter she writes, together
with the initials of the person who dictated the letter,
Thus when answers are received and the original letters are
taken from the file it is but a matter of a moment to deter-
mine to which department and which person the letters are
to go.
In the matter of correspondence alone a large firm or
factory not only has a great number of stenograhpers to
answer letters, but people and devices for caring for the
letters answered so that almost instantaneous reference
may be had to them, especially if they are letters which
contain orders. These are put in vertical files, for the most
part, although small businesses still use the less expensive
flat file. All the correspondence of a customer is kept to-
gether, and a card giving all necessary information about
him, when letters were received, when orders were sent out
and so forth, is kept in a card index. If the correspondence
is very large, as in a mail Order house, the cards are filed
according to the geographical System of states and coun-
tries. - -
This geographical system of filing is used in all sorts of
business where the consumers or buyers are scattered over
a wide territory. This system is also used where a concern
has a large number of salesmen covering a large field.
As in a library catalogue, cards of different colors are
used for guide cards, which are arranged according to
376 J. A, BENJAMIN
States, cities and towns. The name of the state is on the
front of the card drawer, and in front of the town guide
cards are placed alphabetical indexes, subdivided accord-
ing to the probable amount of correspondence from a place.
Like all vertical filing systems this is highly flexible,
and new arrangements and distributions are easy to make.
Large cities are provided with a large number of alpha-
betical subdivisions, and more can be easily inserted for
a town, should business in that particular locality increase
rapidly. There are 120,000 small, relatively unimportant
towns or small postoffices in the United States, and when
provision is made for having a card or a whole alphabetical
list of correspondents from any one of these, as well as
from Europe, Asia, Africa and the islands of the seas, it is
easy to see that the cabinets containing such files would
require a large room to hold them. In large firms a score or
two of girls are kept busy attending to this business alone.
Although the filing system in one of its branches is used
in practically all businesses, nearly every firm has some
system of its own, but card experts and business systemati-
Zers have long labored to produce a system, ready-made as
it were, for any and all lines of business. Nearly every sys-
tem devised has involved a great amount of clerical work
and expense, in order to have for its working as comprehen-
sive a guide as possible. The filing clerk has to be a well-
trained person to understand all its ins and outs, and to use
its aids with the utmost dispatch. Folders are used to con-
tain the correspondence which must be attended to on a
certain date. Later this is sorted and classified according
to the method in use for all correspondence. Every minut-
est matter such as laying the letters face down or vice versa
when taken out, or when in the folder, and other such seem-
ing trifles, forward business to a degree that could not be
comprehended by the unsystematic. - .
The filing of invoices, instead of pasting them into a
OFFICE SYSTEMS 377
book, no matter how carefully that book be indexed, and
for SOme reason the indexing is rarely up-to-date, has
brought about a great saving of time and temper. Such
a book is considered but a relic of the past by all up-to-date
firms.
The filing of commercial reports and credit informa-
tion has many practical benefits, and special devices have
been invented for these particular records, with a particu-
lar sort of classification. Catalogue and price-list filing has
received attention from the standpoint of space saving, as
well as from time saving. It is easier to file catalogues
On a shelf, it would seem, but things too accessible are eas-
ily lost track of. Files on any large scale always have a
guardian or guardians who realize their responsibilities
and do not let things go out except by systematic plan.
The efficiency of the filing method in the case of all larger
pieces of information depends upon the correctness of the
card index record. For catalogues and price-lists it should
be arranged both according to the name of the firm issu-
ing the same and by article or subject.
The system in favor for accounts payable, is chrono-
logical, and the same system is used for filing paid invoices.
For all such filings guides are devised that enable the
worker to accomplish the maximum amount of labor in
the shortest time.
For larger firms with many branches the most care-
ful systems have been worked out to facilitate inter-house
business. The conditions in this business are often com-
plex, there was always a possibility of shifting responsi-
bility. Under old methods, and before business had as-
sumed its present colossal proportions, many vexatious de-
lays and costly errors occurred. Business between houses
was side-tracked and forgotten and letters mislaid. Such
slack business methods begat, fostered and perpetuated
continual mistake and loss. Now, according to the best
378 J. A. BENJAMIN
ways of doing things, inter-house letters are handled and
filed with as much care as those from outside; and written
verifications and acknowledgments are made to safeguard
transactions by long distance telephone, telegrams and
word of mouth business so that there may be no error or
misunderstanding.
In order to expedite some parts of this inter-house
business the stationery, the order blanks and even the cat-
alogue paper of different branches of the same house are
of different colors, or have some distinctive mark so that
it will be a quick aid to the filing clerks. When any of
these things pass through the hands of several persons
each one has to put on a number, or initial. In case one
is a revise of something, the figures or letters have to show
both from whom and to whom.
In this inter-house business a matter which greatly
facilitates the care of papers or letters is in having them
deal with but one subject or matter of business. This in-
sures the carrying out of every detail of an instruction or
order. Outside orders are often short just because the let-
ter or blank giving them called for attention from many
sources. When a house has many factories or warehouses
its business with these is of the utmost importance in the
conduct of the whole going concern, and improvements in
methods here have enabled the firm to be a sharp competi-
tor in the markets of the world.
The vertical filing system has recently been very suc-
cessfully applied by many establishments to the keeping of
telephone records. The telephone for all its convenience
has proved an annoyance to business men in at least one
source. Important messages received over the telephone
either were not delivered at all or were else delivered in-
correctly. Business transacted over the telephone was
forgotten after a certain length of time, resulting in con-
fusion and annoyance to both persons, and Orders received
OFFICE SYSTEMS 379
over the telephone were forgotten with the result often
that a customer was lost. Now, however, a record is kept
of all telephone messages and these records are filed alpha-
betically.
To each telephone there is fastened a pad of printed slips
and each person talking over the telephone writes on the
slip the name of the person to whom they were talking and a
brief sentence explaining the nature of the conversation.
The date is also recorded on the slips, which are treated
exactly like correspondence, being filed under the name of
the outside firm. -
The firms which have adopted this system find that the
telephone has been changed from a source of annoyance
and complaint to the thoroughly convenient and handy in-
strument it was meant to be.
Although complaints are not pleasant things to hear
they very frequently give the business man a hint as to
where and how his business or methods of business might
be improved. -
A successful man who has risen high in the ranks but
who is not above giving his personal attention to the details
of his business now and then employs this system for han-
dling his complaints.
Every employe makes a record of any complaint that
reaches his ears and turns it into a certain one of the Stenog-
raphers. On a small card which is easily filed the stenog-
rapher records the date, the name of the complainant, his
address and the nature of the complaint. It is the aim of
the house to adjust the matter as quickly as possible. The
cards are filed either alphabetically or according to the
date and in either case are ready for almost instant inspec-
tion. No matter what the nature of the complaint may be,
whether it is a fault in the system of delivery or in the con-
duct of any employe or representative of the house, the
380 J. A. BENJAMIN
complaint is given due consideration and an effort is made
to make the decision just.
In this firm, each employe knows of the rule existing
and is required to observe it. This progressive business
man makes it a rule of his own always to keep his employes
informed of the “house policy.”
The filing system has been the cause of the invention of
other labor-saving and business-getting systems. One of
these systems which could not have developed to its present
point of efficiency without it is what is commonly known as
the “follow-up” system. The “follow-up” system is now
employed by almost every business. To the mail-order
business is given the credit for the development of this sys-
tem, but many other sorts of business find it indispensable
in one or another adapted form. Its first purpose was to fol-
low up possible customers who had become interested
through advertisements, Or had sent to the firm an inquiry
concerning prices or asked for other information. The
problem was to turn these possible customers into those
sending orders.
The follow-up systems have required much work on the
part of filers and indexers, for frequent reference has to be
made to each successive letter and every letter must be
attended to with the utmost promptness; genuine orders
even have sometimes been made to give way before the
prospect of orders; a slight reverse of the idea that a bird
in the hand is worth two in the bush.
IBut the follow-up system is not used exclusively for
turning prospective Orders into orders. It is often a part
of a campaign to get more business from a regular customer
or one who has been lured away to other pastures. Firms
giving credit use it to follow up slow accounts that require
“backing up.” The idea of the system as a system in prac-
tice is that everything must be so systematized that prev-
ious correspondence may be referred to without a moment's
OFFICE SYSTEMIS 381
delay and this of course depends upon the efficiency of the
filing system. -
Economies within the house, and in each branch of it,
often mean the difference between success and failure.
Many a profit dribbles away through the careless and fre-
Quent waste of supplies. Stationery and erasers, pencils
and pens, are recklessly thrown away because new ones
are easy to obtain. -
One firm has for a long time had a way of showing its
employees the waste or carlessness that was going on—
it was by photographs. Pencils not a quarter used, erasers
still very good and capable of much good service, were
picked out of Waste baskets and pictures made of them.
This firm has a head and assistants for its supply depart-
ment, and nothing is given out without a suitable requisi-
tion. If new erasers are wanted the remains of old ones
must be presented, and so with pencils. The firm has in-
Sisted on the use of the metal top thereby increasing the life -
of a pencil three of four times its former age. -
The time of employees is even more valuable than petty
supplies and is often more recklessly wasted. The waste
or advantageous use of this time counts up fast in money
saved or lost. The mere covering up of an ink well when
the desk—if uncovered—is left at night means not only
economy in ink but in time. In one business house, the
employees were in the habit of leaving them uncovered,
and the dust raised by the sweepers settled in them, mak-
ing the ink muddy and unusable. The result was that each
morning—before the order came to cover them—these had
to be cleaned and refilled, with a loss of time greater than
the loss of ink.
CARING FOR STOCK.
BY MAGNUS MYERS,
[Of the Herbert Kaufman & Handy Company, Chicago and New York]
Great successes are more often than not the result of
carefulness in details. Failure may result from under-
estimating the importance of giving them the proper
thought and care.
To the uninitiated, taking care of the stock might seem
a lowly and unimportant item in the progress of a business,
but it is of more importance than they or even the initiated
think. Taking care of stock is not a very difficult task,
but it requires persistent and unceasing efforts to keep it
in the proper condition, once this condition has been
reached.
The first essential in caring for stock is keeping it low.
All merchants agree that the essence of good merchandis-
ing is to keep the stock in this condition although all do not
succeed in this direction, by any means. The reason for
this is not their failure to believe that stocks should be
Rept low, but it is from an apparent impossibility to keep
them in that ideal condition. k
In some businesses it is much easier to keep stocks low
than in others because the goods are in more frequent de-
mand. In the case of a grocery store, for example, there
is less possibility of the stocks proving difficult to keep
down than in a dry goods or shoe store. There are but few
articles in a grocery store but what are in daily demand,
while there are few lines of goods in a dry goods store that
are. Then many of the articles in a grocery stock are per-
ishable and have to be disposed of quickly in order that they
may not prove a total loss to the grocer, while there are no
lines in a shoe or dry goods stores that are perishable in
382
CARING FOR STOCK 383
this sense. This fact urges the grocer to a more strenuous
effort to dispose of his stock while other merchants grow
Careless because there is no immediate danger of the stock
proving too much for them.
The object of keeping stocks low is not merely the desire
to have always fresh presentable merchandise on the
shelves and to keep abreast of the times. It is more the
necessity of keeping the capital of the business always in
motion; for no business, no matter how large its capital, can
Continue to be prosperous with the bulk of the capital tied
up in immovable stock. The ultimate success of the busi-
ness depends upon the rapidity with which the stocks can
be turned. -
Merchants are realizing this more and more every year
and are constantly endeavoring to devise ways and means
by which they can keep their stocks low and in a condition
to be easily turned.
By keeping stock low is not meant keeping so few
articles of each line on hand that “we are just out of that”
will become a by-word of the store. It is to be wondered
which One finds this the most annoying, the merchant who is
Compelled to say it or the customer who hears it. This condi-
tion will eventually spell “failure” just as surely as will the
Other. It is the merchant who must decide which lines
should be kept the lowest and which he can allow himself
more freedom in buying. The lines for which he has the
most demand are naturally the Ones that he will keep stock-
ed up. He has little cause for concern about them for they
will practically turn themselves. It is the lines for which he
has the least call but which he must keep in stock, that he
must be careful of. *
In stocking up he will buy each line in proportion to
the demand he has for it. At times when there is a large
demand for a certain popular article, the merchant is more
liable to overstock than at any other time. He may over-
384 MAGNUS MYERS
estimate the buying capacity of his trade, or else, frightened
by the assertion of the jobber or manufacture’s agent that
there will not be enough goods to supply the public, he buys
indiscriminately and sooner or later, when the demand de-
creases, finds himself with a quantity of unsalable stock on
his shelves. The Salesman whom be bought from had prob-
ably foreseen the coming “slump” and in saving himself,
he overloaded the merchant. -
Merchants who have not realized the importance of
keeping their stocks low, by reference to their invoice
books, find that some of the goods were bought one, two and
even three years before, showing that errors have been
made somewhere, either in the quantity of the goods that
were bought, the price they were bought at, or else in non-
attention to pushing the goods which only sell occasionally.
Just as the gardener, who does not watch his garden,
raises more weeds than flowers, so will the merchant who
does not watch his stock soon find that his shelves contain
more dead and immovable stock than they do fresh and sale-
able goods.
The merchant, to keep his stock up-to-date, must weed
it out persistently, just as the gardener weeds out his gar-
den. Dead stock is practically unknown in a department
store where the weeding out is perpetual, and goods are con-
stantly being converted into cash. By dead stock is meant
merely that which does not sell, not including any which
has altered in any way. -
In a department store goods are sold at a sacrifice of
profit, if they show a tendency to lag, rather than to let
them take up valuable space and to keep the capital im-
prisoned. The advisability of this can readily be under-
stood for by selling the goods at a sacrifice before they be-
come dead stock, the price named can be a little more than
the cost price and thus nothing be lost, but if they are
allowed to lie on the shelves in the vain hope that the de-
CARING FOR STOCK 385
mand for them will increase they will soon be dead stock
and will have to be sold at a greater reduction, thereby
causing the merchant no little loss. Each day added to
the life of the stock lessens its value and the merchant who
fails to appreciate this fact will be forced to realize it sooner
or later and at his cost.
When a man fails in business it generally is found that
a large amount of his stock is dead, and that it represents
to a considerable extent the assets of the business. These
goods have to be sold at a great deal less than was paid
for them in order to dispose of them at all, and the goods
will usually be found to be in such condition, and of such
unmarketable quality that such a sacrifice is not to be won-
dered at.
The disposal of such stock is a difficult operation, a
great deal more difficult than preventing it from accumulat-
ing. In many cases it is because of the merchant’s dislike
of the task that he increases and aggravates his trouble,
making his future task increasingly great for the sake of
present comfort. The systematic treatment of stock is to
keep it constantly in rotation. No item should be allowed
too long a period of idleness, and to keep it constantly mov-
ing it must be carefully and unceasingly watched.
With the cash that has been obtained from the sale of
the dead stock, other and safer ventures can be made in the
buying of new stock, that might not otherwise have been
had, thus increasing the opportunity of keeping all the stock
in constant motion.
In the reduction of the dead stock, certain things should
be taken into consideration and one of these is the jobber
or house from which the goods were bought. Jobbers, be-
cause they have business intercourses with such a great
number of merchants are regular clearing houses for stock
having a local sale.
Other lines of the dead stock which cannot be disposed
386 MAGNUs MYERS
of in this way should be labeled with tags which contain the
regular price mark and the lowest price at which they can
be sold, without a loss to the merchant, and then placed on
sale at this price. These tags will be of great value to the
merchant and his assistants in disposing of the stock.
Once or twice a year the merchant should go through
His stock thoroughly and sort out all the slow selling stock
and with each line of goods he should ask himself, “Is this
staple or not, or is it dead.”
In preventing or relieving the dead stock evil the stock
card index will prove a valuable aid, since the items that
are in infrequent demand may be readily found when called
for, instead of being allowed to remain unnoticed on the
shelves. It will also serve as a complete list of all the items
in stock and may be refered to more easily than the actual
stock can.
The book should at all times contain a complete record
of the condition of the dead stock evil as existing in the
stock and also the best remedy appliable. The merchant or
manager of the store should take note of the information
every month or so and return the goods in the first list, that
show a tendency toward habitual idleness, after a sufficient
trial—that is, he should send them back to the jobber or
house from which he bought them. The dead stock he
should keep at persistently until none of it remains. This
will take time, patience and increasing effort but once he
is rid of it, the merchant will have additional capital to
invest in new stock.
The amount of money earned on a single article may be
very Small but in many stores the amount of idle stock
consists of a large portion of the items carried, and there-
fore economy practiced throughout the entire list will net
a considerable sum. In any case, there comes a time in the
life of almost every store when the dead stock evil must
receive treatment, consequently it is foolish to allow the
CARING FOR STOCK 387
goods to accumulate for this is only putting off the evil
moment, as the loss will only be greater for the delay. The
oftener the day for remedying the evil is postponed, the
harder the task will be and the harder the goods will be
to dispose of.
It is vastly more difficult to get rid of dead stock than
it is merely to keep dead stock from gathering. For this
reason, every merchant should employ strenuous measures
to keep his stock in a live and salable condition.
To prevent the accumulation of dead, unnecessary or
undesirable stock, every merchant should consider well be-
fore laying in a stock of any new item. In the majority of
cases, slow moving stock is that which has been laid in be-
fore there was any local demand for it. The small dealer
should send to the jobber or manufacturer for the first few
orders for articles “on call,” and he should require a de-
posit from the customer as an evidence of good faith. When
the profit on past sales of such an item is greater than the
cost of the smallest quantity than can be ordered from the
jobber, that quantity can safely be ordered for stock, for
even if it is never sold the dealer will have suffered no loss
whatever.
Indiscriminate buying is probably the most common
cause of the accumulation of dead stock and the second
cause is neglect on the part of the merchant to watch the
new stock on his shelves. After a certain line of goods
has gained the dignity of a place on the shelves, it should
be most carefully watched and if, after a certain reason-
able time, no sale has been made, it should be disposed of
by lowering the price. .
|Buying just the right amount, no more or no less, is
rather a difficult performance, for the merchant is con-
fronted on one side with being unable to supply the demand
and thus losing money and customers, and on the other hand
the equally evil condition of having his shelves loaded with
388 MAGNUS MYERS
dead stock. There are many things that affect the trade,
that the task of avoiding pitfalls and at the same time of
keeping up stock is decidedly a difficult one. Keeping up
stock might be almost called a science.
“The unusual demand incident to prosperous times
creates a scarcity that forces prices up to an unnatural
level, which stimulates over-production and hastens the
exhaustion of the buying capacity of the public; then the
Imarket becomes over-loaded and prices drop.”
The merchant is then confronted with the problem of
disposing of his stock at a figure which will not be less
than what he paid for it, but which will be as low as his
competitor’s price, and also be one at which the public will
buy. -
The merchant must make ventures if he ever expects to
gain, and must buy goods in order to do business and
still must not be caught with his shelves and storehouses
crowded when trade falls off and prices shrink.
Other essential points in caring for stock, that the mer-
chant should heed, are location, neatness and system in ar-
rangement, and cleanliness. -
No matter how the goods are to be kept, whether it be
in boxes, cases or loose upon the shelves, and whether they
are to be kept in drawers or on shelves, their arrangement
must be systematic and Orderly. A certain system must be
adopted or devised, which will make it easy for the sales-
persons to learn the exact location and position of each
article kept in stock.
Different articles of merchandise require to be kept in
different ways as, for example, jewelry and shoes. Jewelry
is kept in trays or shallow drawers, velvet lined, so as to
prevent scratching, while shoes are kept in card-board
boxes and arranged according to their style and size num-
ber. Books are arranged in sections usually and dry goods,
for the most part, on shelves or in very large drawers. It
CARING FOR STOCK 389
is absolutely necessary that every salesman should know
the location of everything in stock, otherwise many sales
and customers may be lost, as is shown in this instance:
A business man sent his office boy to a certain book store
to buy a book which he had been looking at in the same
store, several days previous. The salesman, when told the
name of the book, curtly replied “Haven’t got it.” The
boy returned and the merchant, at quite a little incon-
venience, went himself to buy the book and watched another
salesman select a copy of the book from fifty or so copies of
the same book, which were located right before his eyes.
If the man had not been a regular and usually satisfied cus-
tomer of the house, his trade from then on would surely
have been lost.
In regard to keeping stock neat, William A. Corbion,
originally instructor in Salesmanship, Service and Conduct
in the John Wanamaker store and later in others, says in
his book entitled “The Principles of Salesmanship, De-
partment and System:” “During the progress of business,
the stock necessarily becomes disarranged. This condition
must not be permitted to become chronic. Good storekeep-
ing requires all superfluous stock to be returned imme-
diately to its original box or shelf. A striking illustra-
tion of the value of an attractively arranged Stock may be
seen in the following case: For two days a counter was
piled high with a various colored, heterogeneous mass of
upholstery remnants. Some one aptly termed it, “a beauti-
ful bunch of rags.” The eye saw, but was not attracted.
On the third day, a salesman, who had been a custom tailor,
stepped up to the counter and, “to kill time,’ as he ex-
pressed it, began to set up the remnants into conical shaped
forms.
“The effect was striking. In an hour another salesman
was called to help wait on the trade. The display was kept
up, and instead of taking the counter “off” that day, as
390 MAGNUs MYERS
had been previously contemplated, it ran for the week to
“big” business.”
He says farther, that “a stock, once arranged and in
Order, requires little effort to keep it so; when permitted to
get beyond proper care, stock-keeping and cleaning become
a task that should be clearly brought to the attention of
those whose neglect has caused the disorder.” -
A neatly arranged stock is pleasing to the eye and gives
a customer the feeling that an article asked for could be
found without delay while the contrary is the case with a
Stock whose untidiness and lack of order is apparent.
Merchants will find that nothing annoys a customer
more than to stand and wait while the salesman feverishly
ransacks pile after pile of goods for something which “I
know we have, if you’il just wait until I locate it.” -
Some lines of merchandise are harder to arrange and
keep neat than others because of their bulkiness and other
peculiar characteristics. Hardware, for instance, is hard
to arrange neatly and systematically because of its extreme
bulkiness, and leather goods, also, such as trunks, cases and
valises are rather difficult to dispose of. Certain items in
a hardware store are kept piled up on the shelves as sys-
tematically as possible in their original boxes, others are
kept in bins or kegs and some are disposed of in the manner
best suited to their size and shape. Wash boilers, wash-
ing machines, pails and other bulky articles are kept to-
gether as systematically as possible and are arranged so as
not to occupy any more space than is necessary. Nails,
tacks, screws and various other items sold in bulk are kept
in their original kegs or in bins made to hold them. Some
articles, such as all kinds of knives and tools are kept in
their original cardboard boxes and arranged on the shelves.
Taking care of the stock in a hardware store is no easy
matter for the stock is hard to keep clean and free from
dust, and many lines of the stock are made of a rustable
CARING FOR STOCK 391
material. These must be kept clean and shining or they
will look dull and useless. º
Matters are different in a shoe store. Here all the goods
are kept in their original boxes, which are for the most part
the same size and there they are piled, one on top of the
Other and in rows along side of each other on shelves which
extend around the walls, from the floor to the ceiling. Once
the stock in a shoe store is arranged it is a very easy matter
to keep it so, if each pair of shoes that a salesman uses is
put back in their original box after he has finished with
them. It is not a very easy thing for the boxes to become
dirty or dusty for they fit so close together that the dust
has not much opportunity to settle on them. This does not
mean, however, that they should never be dusted, for with
no care they, as well as the shoes, will soon become dusty.
Leather is very susceptible to the ravages of time, and
shoes that are left on the shelves from one month to an-
other will become grey and old looking unless they are kept
properly dusted and are given a coat of dressing frequently.
Gloves are usually carefully folded in white tissue paper
and carefully kept in drawers that admit little or no dust.
They require to be carefully handled and put away or their
delicate color will be soiled so that to sell them would be
impossible. The drawers should fit their cases as well as
possible so that practically no dust can sift through and
the merchant should insist that the gloves be kept in the
drawers and not allowed to lie on the counters unprotected.
A visit to any of the large department stores will prove
of great benefit to the merchant who is not sure that he
knows the best way in which to care for his stock. Here
he can see at any and all times, stock being Cared for
in the most thorough and systematic manner. Stock boys
and salesmen are constantly arranging and replacing dis-
ordered stock and dusting it carefully whether it is dusty
or not. Garments that are not in use are being refolded
392 MAGNUS MYERS
carefully and placed in their boxes and drawers. Under-
wear that is piled high on tables for display purposes is
being refolded and each garment put in its proper pile and
nothing is ever allowed to be out of place for any length
of time. In this way, the stock never gets at such a point
that an entire clearing up is necessary.
Bart of the underwear, consisting of women's and chil-
dren's lingerie, is kept in deep drawers that are practically
dust proof. The underwear is folded and neatly placed in
piles in the drawers and after showing the garments to a
customer the saleswoman folds them neatly and places them
back in the drawer in which they belong.
Men's and women’s woolen underwear is kept in the
original boxes which are arranged somewhat similar to the
manner in which shoes are. They are arranged on shelves,
one box on top of another and according to style and size.
In this way the salesperson can know just where each gar-
ment is located. -
Stockings, men's, women’s and children’s, are arranged
in exactly the same way and as in the case of shoes and
underwear need no attention beyond being kept in their
proper order and thoroughly dusted.
Even though the goods inside the box may be perfectly
clean and fresh, no customer likes to be served from a dust
covered box and sales may be frequently lost from care-
lessness in this direction. 4.
There are stock boys or girls in the suits and coats de-
partment whose sole duty it is to pick up the suits that the
saleswomen have been showing to customers, and hang
them carefully on hangers and place them in their proper
closet so that the next salesperson who wishes to show the
garment has but to go to its closet where she will find it in
its place.
No saleswoman in this department ever has to put away
the garments she has been using, she can devote her entire
CARING FOR STOCK 393
time to her customers. The suits are kept brushed and
free from dust by the stock boys who are taught to handle
and hang them carefully so that they cannot become Soiled
Or creased.
Waists are kept in boxes sometimes though they are
usually kept in large drawers as underwear is. They re-
ceive the same care, also, being neatly folded and placed
in their rightful places as soon as they become disarranged.
All stock, no matter what its nature or arrangement,
should be kept thoroughly dusted. An excellent descrip-
tion of the methods employed in keeping stock clean and
orderly and also of the duties of a stock boy is given by
Walter B. Moody in “Men Who Sell Things.” He says:
“The covers removed from the piles of goods, the dusting
finished, which took about an hour, for it had to be done
thoroughly, bringing down the reserve stock was the next
in Order. The tables rearranged we set about repairing
broken covers of boxes, or we re-wrapped goods which had
been in stock a long time. Everything had to be spotless
and in apple-pie Order, so when this result was gained we
started in to dust all over again, even polishing the edges
of the tables and counters with a cloth. There was keen
rivalry among the boys to see whose stock should be made
to look the best. By the middle of the forenoon work be-
gan to look pretty scarce, but there was no getting away
from it, for if one of us began to take an idle stroll into the
next boy’s stock the floor manager would appear around the
corner of an aisle to make his usual morning inspection.
It used to bother us to know how he figured out to spot us
right to the dot, which he did with unerring accuracy.
“Having satisfied himself that there was really nothing
more of importance to do he would order an entire table of
goods to be rearranged. We hated him for it, but it was
good exercise and kept us out of mischief, the twin brother
of idleness, besides teaching us a lesson of “everlasting keep-
394 3. IV: AGNUS iſ YERS
ing at it,” which was then, as it is now, one of the cardinal
principles of success.” --
This is the ideal manner of caring for stock of any kind
or description and every merchant should endeavor in a like
manner to care for his stock. The merchant should not rest
until he has discovered the best method for caring for stock,
that can be applied to his business.
The merchant conducting a millinery store will find that
his stock will be the better for being kept in large drawers.
Millinery is perishable to a large extent and when kept in
large cardboard boxes as it is in some stores, an accident to
the box is apt to prove fatal to the hat or to at least a por-
tion of it. Boxes are not nearly as dust proof as are draw-
ers and dust will soon ruin even the plainest of hats. The
hats should be kept in the drawers except when on display
and should be carefully covered with tissue paper. They
must be frequently dusted with a soft brush until not a
sign of dust remains and then should be carefully replaced
in their respective drawers.
Jewelery is also kept in drawers, but they are of a very
different description. Instead of being large in every way
they are shallow, only being several inches thick and often
less. They are padded and lined with velvet or chamois
skin so that not the slightest scratch may occur. The
drawers or trays, as they might be called, are set one above
the other in their cases. They are kept perfectly free from
dust by frequent brushings and the stock itself is cared for
by the jeweler. - -
Quite different from any of the methods described is the
arrangement of stock in a dry goods or grocery store. In
both of these stores, the greater part of the stock is kept on
the shelves or on counters and to keep it clean and in good
order requires no little effort. The goods are constantly
exposed to the dust and require daily dusting and arrange-
ment.
CARING FOR STOCK * 395
|Bolts of cloth or goods of any kind should be piled in a
systematic and attractive manner on the shelves and each
morning when the covers have been removed from them,
they should be carefully dusted. When the goods are
shaken out for the customer’s inspection, the act will, unless
the goods have been dusted, envelope both the customer and
clerk in a cloud of dust. This will not aid, it is needless to
Say, in making a Sale.
The goods that are kept in boxes should also be kept
spotless. Dust can very easily sift through boxes if they
are not properly dusted, and thus injure the goods. Deli-
cate laces, embroideries and dress trimmings may be very
nearly ruined by dust and careless handling. These goods
usually come rolled on pieces in very stiff cardboard and it
is important that they be neatly rerolled on the cards and
put back in the box after each time they are used.
Goods of any description when offered to the customer
in a dusty, Smutty box will be lessened in value. No matter
how fresh and presentable the stock inside the boxes may
be, the customer gets the impression that shop worn goods
are being offered her. The customer would be justified in
her opinion even though it was a false one and she could
not be accused of “fussiness” if she left the counter without
even looking at the contents of the box.
While the buying public is particular as to the cleanli-
ness of articles of wearing apparel and similar lines of mer-
chandise, they are more fastidious about the things they
eat than anything else. Fewer dirty grocery and butcher
shops could exist if more housewives did their own market-
ing personally rather than over the telephone. These
grocers would not be able to sell their goods if their cus-
tomers knew of the conditions existing.
The ice box which looks so clean and spotless from the
outside may be slimy and dirty inside, and the bins in which
the potatoes and other vegetables are kept may be damp
396 MAGNUS MYERS
and filthy. Beans, peas and other dried vegetables may be
put in uncovered bins and left there to be covered with
each day’s layer of dust. * º -
Probably the tub in which the butter is kept is seldom
covered and the entire store may be filled with flies. Such
conditions are unsanitary and did the average housewife
know they existed she would immediately take steps to put
a stop to them.
The ideal and successful grocery store is the one in
which everything is so clean and spotless that the correct
impression is given, that everything is pure and clean
enough to eat. The reason that package goods is so popular
is because of the public’s confidence in their cleanliness. No
matter how contaminating and filthy the surroundings may
be the Wrapper will keep the contents sweet, clean and free
from dirt.
However, this knowledge should not influence the gro-
cer in caring for his stock, for while the contents may not
be affected it is anything but good policy to send or deliver
to a customer a package on which there is the dust of a week.
Staple groceries are to be had in packages, everywhere,
but there are certain fresh foods that would be impossible
to put up in sealed packages, but these should be kept as
free from dust as possible. If it is not practical or possible
to keep these articles in glass covered cases, they should
at least be protected from flies by the use of a screen and
all things in the store should be covered while the floor is
being swept. The shelves and their contents should be
dusted regularly and the show cases and counters should
be kept as clean and spotless as possible.
Butcher shops also should be kept scrupulously neat and
clean The ice boxes and houses should be kept thoroughly
washed and aired, and the flies will not bother because of the
temperature of the ice chests. The tables should be
Scrubbed regularly and the knives and saws for cutting
CARING FOR STOCK 397
should be perfectly clean. The meat should never be left
lying on the tables but after it has been used it should be
returned to the ice chest.
Drug, candy, bakery and every other store should be
kept as neat and clean as is possible, and it is possible to
keep them clean and with not such a great deal of bother or
expense. An instance is told of an attractive and exclusive
tobacco store that carried a high grade of goods and that
catered to the class of men who could afford expensive
cigars and tobacco. The interior of the store was artistic
and pleasant and the window was very effectively dressed.
A well dressed man, evidently a commercial traveler, en-
tered the store in question and after inspecting some ex-
pensive cigars that lay in an open box on the show case,
chose an inferior brand from a box in the case. As price
evidently had no consideration, he was asked what in-
fluenced his choice and said, in reply, “Yesterday I came
into this store and that box of cigars was lying on the
counter. There were a number of men Smoking in here
and the room was filled with smoke. Occasionally one of
them would spit on the floor. Examine those cigars, please.
The room has evidently been swept since then and without
covering them up. See, they are covered with dust and
still they expect decent, clean men to smoke them.” What
he said was true. Unless the cigars were closely examined,
the dust might not have been noticed but it would have
been there just the same.
Such things drive away trade, no matter how satisfac-
tory the store may be in other ways. And how many stores
there are in which just such things occur! Soiled goods,
dusty counters and an otherwise unclean store is as offen-
sive to the ordinary person as anything that might be men-
tioned. Constant attention to the stock as well as the
store is needed, if it is to be kept up-to-date and in a con-
dition to compete with its rivals.
398 *. MAGNUS MYERS
Aside from caring for the regular stock and the store
in general, the Sample stock, show cases and window dis-
play should receive special care. The care of these special
features is an essential part in the art of selling.
Attractive samples attract customers, but if they are
not properly cared for they can not remain attractive long,
for they receive especially hard usage. In many cases, the
sample stock room is a trunk and even the most careful and
orderly salesman finds that his samples soon become worn
and unattractive from packing and unpacking them every
day and the careless, Slovenly salesman finds that his sam-
ples are almost ruined in as short a period as ten days, and
just through careless handling. A thorough study of the
sample stock should be made and then the best manner of
packing them should be decided upon. They should be
handled as carefully as possible to keep them in a good
condition.
The term “baggage Smasher” may be successfully ap-
plied to the average baggage man and as the trunks receive
such rough handling on their journeys, it is essential that
they are properly packed in Order to avoid as much damage
as possible. Samples such as clothes or any other line of
textiles may be packed more easily than can many other
lines of merchandise. The essential thing in the care of
them is to keep them free from dust and creases. A dusty
and wrinkled piece of goods of any kind or description will
frequently be the cause of a lost Order. If the goods are
carefully brushed and folded they can be kept looking at-
tractive.
Płats, shoes and other articles of wearing apparel are
harder to keep looking nice and to succeed in this effort
the salesman should thoroughly investigate, how to obtain
the best results. Special cases are often made for carrying
certain lines of goods and the Salesman should always be
equipped with these, • • ‘
*
CARING FOR STOCK 399
Other lines of merchandise such as jewelry books,
staple groceries and hardware should be cared for and
packed according to the manner deemed best by the person
who should perform these tasks. -
If the sample stocks are shown in a small room, as is
often the case, it will not be so difficult to keep them look-
ing attractive, and in good condition, for they are not
subjected to hard usage. They must, however, be kept
thoroughly clean and dusted, and the shelves, cases or
tables on which they are kept must be absolutely spotless.
The sample stock is usually composed of the choicest lines
of merchandise the house carries and it cannot be shown
off to good advantage if it is even slightly dusty.
The choicest lines are also used in decorating the win-
dows of a store and this display, above all others, should be
shown to the best possible advantage. To do this the win-
dow displays will have to be given daily care. If the sun
strikes the window during a part or the whole of a day, it
is very important that goods which will not fade be put in
the window. Faded goods are not at all attractive to look
at. Such a sight drives away sales and gives a very poor
impression of the house. The goods and window should
also be perfectly free from dust and the window cards or
price tags, if there are any, should be clean and free from
fly specks. The windows should be spotless and shining and
everything connected with the display must be clean and
well cared for.
The time and labor spent in caring for the stock—not
only in the window display, show cases and sample room,
but the regular stock included will be time and labor spent
or a good cause. A well cared for stock means an increase
in business and no merchant can afford to ignore anything
that will increase his business capital.
The task is such an easy one and when systematically
arranged, takes so little time that no merchant has a legiti-
400 MAGNUs MYERS
mate reason for neglecting it. The arranging and locating
of the stock he should superintend himself but when once
it is properly arranged and the clerks have learned the lo-
cation they can properly care for it with a frequent inspec-
tion from him. The dusting of the stock requires but a
short time each morning, if each salesperson does his share,
and this is the time when there are but few customers in
the store. Needless to say, the customers should never be
neglected so that a clerk may leisurely finish his task. He
should, instead, immediately wait upon his customer and
then resume his interrupted work.
The ideally cared for stock is arranged according to size,
grade and price and is kept in its original arrangement and
never allowed to become untidy. It is also as clean and
fresh after several months as when first put on the shelves
and under no circumstances is it allowed to become smutty
and soiled. To keep it in this ideal condition requires time
and little work, but no merchant should begrudge this for it
means beneficial results for him.
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