■■r\.-t
 
 THE LIBRARY 
 
 OF 
 
 THE UNIVERSITY 
 
 OF CALIFORNIA 
 
 LOS ANGELES
 
 Library 
 
 Graduate School of Business Administration 
 
 University of California 
 
 Los Angeles 24, California
 
 ORGANIZING FOR 
 WORK 
 
 BY 
 H. L. GANTT 
 
 NEW YORK 
 HARCOURT, BRACE AND HOWE 
 
 1919
 
 Copyright, 1919 
 
 BY 
 
 HARCOURT, BRACE AND HOWE, Inc. 
 
 BOOK MANUFACTURERS 
 RAHWAY Ne'.W JERSEY
 
 Library 
 
 HD 
 
 PEEFACE 
 
 The two greatest forces in any community are 
 the economic force and the political force backed 
 by military power. To develop the greatest 
 amount of strength for the benefit of the com- 
 munity, they must work together, hence must 
 be under one direction. 
 
 Germany had already accomplished this union 
 before entering the war by having her political 
 system practically take over the industrial, and 
 the Allies rapidly followed suit after the war 
 began. 
 
 We also found soon after entering the war 
 that our political system alone was not ade- 
 quate to the task before it, and supplemented 
 it by a food administrator, a coal administrator, 
 a war labor board, a war industries board, a 
 shipping board, and others, which were intended 
 to be industrial, and as far as possible removed 
 from political influences. There is no question 
 that they handled their problems much more 
 effectively than was possible under strictly 
 political control. 
 
 The Soviet system is an attempt to make the 
 iU 
 
 925868
 
 iv PREFACE 
 
 business and industrial system serve the com- 
 munity as a whole, and in doing so to take over 
 the functions of and entirely supplant the po- 
 litical system. Whether it can be made to work 
 or not remains to be seen. Up to date it has 
 failed, possibly because the control has fallen 
 into the hands of people of such extreme radical 
 tendencies that they would probably wreck any 
 system. 
 
 The attempt which extreme radicals all over 
 the world are making to get control of both 
 the political and business systems on the theory 
 that they would make the industrial and busi- 
 ness system serve the community, is a real 
 danger so long as our present system does not 
 accomplish that end; and this danger is real 
 irrespective of the fact that they have as yet 
 nowhere proved their case. 
 
 Is it possible to make our present system 
 accomplish this end? If so, there is no excuse 
 for such a change as they advocate, for the 
 great industrial and business system on which 
 our modern civilization depends is essentially 
 sound at bottom, having grown up because of 
 the service it rendered. Not until it realized 
 the enormous power it had acquired through 
 making itself indispensable to the community 
 did it go astray by making the community serve 
 it. It then ceased to render service demo-
 
 PREFACE V 
 
 cratically, but demanded autocratically that its 
 will be done. *^It made tools and weapons of 
 cities, states, and empires." Then came the 
 great catastrophe. 
 
 In order to resume our advance toward the 
 development of an unconquerable democratic 
 civilization, we must purge our economic sys- 
 tem of all autocratic practices of w^hatever kind, 
 and return to the democratic principle of ren- 
 dering service, which was the basis of its won- 
 derful growth. 
 
 Unless witJiin a short time we can accomplish 
 this result, there is apparently nothing to pre- 
 vent our following Europe into the economic 
 confusion and welter which seem to threaten 
 the very existence of its civilization.
 
 CONTENTS 
 
 PAGE 
 
 I The Parting of the Ways .... 3 
 
 II The Engineer as the Industrial Leader . 16 
 
 III Efficiency and Idleness .... 23 
 
 IV Production and Costs 28 
 
 y Value of an Industrial Property De- 
 pends on its Productive Capacity . 41 
 
 VI An Extension of the Credit System to 
 
 make It Democratic .... 52 
 
 VII Economics of Democracy .... 60 
 
 VIII Democracy in Production ... 74 
 
 IX Democracy iu the Shop .... 84 
 
 X Democracy in IVIanagemeut ... 92 
 
 XI '* The Religion of Democracy " . . 98
 
 THE PARTING OF THE WAYS 
 
 Modern civilization is dependent for its ex- 
 istence absolutely upon the proper functioning 
 of the industrial and business system. If the 
 industrial and business system fails to function 
 properly in any important particular, such, for 
 instance, as transportation, or the mining of 
 coal, the large cities will in a short time run 
 short of food, and industry throughout the 
 country will be brought to a standstill for lack 
 of power. 
 
 It is thus clearly seen that the maintenance 
 of our modern civilization is dependent abso- 
 lutely upon the service it gets from the in- 
 dustrial and business system. 
 . This system as developed throughout the 
 world had its origin in the service it could and 
 did render the community in which it originated. 
 With the rise of a better technology it was 
 found that larger industrial aggregations could 
 render better and more effective service than 
 the original smaller ones, hence the smaller 
 ones gradually disappeared leaving the field to 
 those that could give the better service.
 
 4 ORGANIZING FOR WORK 
 
 Such was tlie normal and natural growth of 
 business and industry which obtained its profits 
 because of its superior service. Toward the 
 latter part of the nineteenth century it was 
 discovered that a relatively small number of 
 factories, or industrial units, had replaced the 
 numerous mechanics with their little shops, such 
 as the village shoemaker and the village wheel- 
 wright, who made shoes and wagons for the 
 community, and that the community at large 
 was dependent upon the relatively smaller 
 number of larger establishments in each in- 
 dustry. 
 
 Under these conditions it was but natural 
 that a new class of business man should arise 
 who realized that if all the plants in any in- 
 dustry were combined under one control, the 
 community would have to accept such service 
 as it was willing to offer, and pay the price 
 which it demanded. In other words, it was 
 clearly realized that if such combinations could 
 be made to cover a large enough field, they 
 would no longer need to serve the community 
 but could force the community to do their bid- 
 ding. The Sherman Anti-Trust Law was the 
 first attempt to curb this tendency. It was, 
 however, successful only to a very limited ex- 
 lent, for the idea that the profits of a business 
 were justified only on account of the service
 
 THE PARTING OF THE WAYS 5 
 
 it rendered was rapidly giving way to one in 
 wliich profits took the first place and service 
 the second. This idea has grown so rapidly 
 and has become so firmly imbedded in the mind 
 of the business man of today, that it is incon- 
 ceivable to many leaders of big business that it 
 is possible to operate a business system on the 
 fines along which our present system grew up; 
 namely, that its first aim should be to render 
 ser\dce. 
 
 It is this conflict of ideals which is the source 
 of the confusion into which the world now seems 
 to be driving headlong. The community needs 
 service first, regardless of who gets the profits, 
 because its life depends upon the service it 
 gets. The business man says profits are more 
 important to him than the service he renders; 
 that the wheels of business shall not turn, 
 whether the community needs the service or 
 not, unless he can have his measure of profit. 
 He has forgotten that his business system had 
 its foundation in service, and as far as the 
 community is concerned has no reason for ex- 
 istence except the service it can render. A 
 clash between these two ideals will ultimately 
 bring a deadlock between the business system 
 and the community. The ^^laissez faire" 
 process in which we all seem to have so much 
 faith, does not promise any other result, for
 
 6 ORGANIZING FOR WORK 
 
 there is no doubt that industrial and social 
 unrest is distinctly on the increase throughout 
 the country. 
 
 I say, therefore, we have come to the Parting 
 of the Wai/s, for we must not drift on indefi- 
 nitely toward an economic catastrophe such as 
 Europe exhibits to us. We probably have 
 abundant time to revise our methods and stave 
 off such a catastrophe if those in control of 
 industry will recognize the seriousness of the 
 situation and promptly present a positive pro- 
 gram which definitely recognizes the responsi- 
 bility of the industrial and business system to 
 render such service as the community needs. 
 The extreme radicals have always had a clear 
 vision of the desirability of accomplishing this 
 end, but they have always fallen short in the 
 production of a mechanism that would enable 
 them to materialize their vision. 
 
 American workmen will prefer to follow a 
 definite mechanism, which they comprehend, 
 rather than to take the chance of accomplish- 
 ing the same end by the methods advocated by 
 extremists. In Russia and throughout eastern 
 Europe, the community through the Soviet form 
 of government is attempting to take over the 
 business system in its effort to secure the 
 service it needs. Their methods seem to us 
 crude, and to violate our ideas of justice; but
 
 THE PARTING OF THE WAYS 7 
 
 in Russia they replaced a business system which 
 was rotten beyond anything we can imagine. 
 It would not require a very perfect system to 
 be better than what they had, for the dealings 
 of our manufacturers with the Russian business 
 agents during the war indicated that graft was 
 almost the controlling factor in all deals. The 
 Soviet government is not necessarily Bolshe- 
 vistic nor Socialistic, nor is it political in the 
 ordinary sense, but industrial. It is the first 
 attempt to found a government on industrial- 
 ism. Whether it will be ultimately successful 
 or not, remains to be seen. While the move- 
 ment is going through its initial stages, how- 
 ever, it is unquestionably working great hard- 
 ships, which are enormously aggravated by the 
 fact that it has fallen under the control of the 
 extreme radicals. Would it not be better for 
 our business men to return to the ideals upon 
 which their system was founded and upon which 
 it grew to such strength; namely, that reward 
 should be dependent solely upon the service 
 rendered, rather than to risk any such attempt 
 on the part of the workmen in this country, even 
 if we could keep it clear of extreme radicals, 
 which is not likely? We all realize that any 
 reward or profit that business arbitrarily takes, 
 over and above that to which it is justly entitled 
 for service rendered, is just as much the exer-
 
 8 ORGANIZING FOR WORK 
 
 else of autocratic power and a menace to the in- 
 dustrial peace of the world, as the autocratic 
 military poiver of the Kaiser ivas a menace to 
 international peace. This applies to Bolshe- 
 vists as ivell as to Bankers. 
 
 I am not suggesting anything new, when I 
 say reward must be based on service rendered, 
 but am simply proposing that we go back to 
 the first principles, which still exist in many 
 rural communities where the newer idea of 
 big business has not yet penetrated. Unques- 
 tionably many leading business men recognize 
 this general principle and successfully operate 
 their business accordingly. Many others would 
 like to go back to it, if they saw how such a 
 move could be accomplished. 
 
 Under stress of war, when it was clearly seen 
 that a business and "industrial system run 
 primarily for profits could not produce the war 
 gear needed, we promptly adopted a method of 
 finance which was new to us. The Federal Gov- 
 ernment took over the financing of such corpora- 
 tions as were needed to furnish the munitions 
 of war. The financing power did not expect 
 any profit from these organizations, but at- 
 tempted to run them in such a manner as to 
 deliver the greatest possible amount of goods. 
 
 The best known of these is the Emergency 
 Fleet Corporation. It is not surprising that
 
 THE PARTING OF THE WAYS 9 
 
 such a large corporation developed in such 
 great haste should have been inefficient in its 
 operating methods, but there are reasons to 
 believe that it will, in the long run, prove to 
 have handled its business better than similar 
 undertakings that were handled directly- 
 through the Washington bureaus. It gave us 
 a concrete example of how to build a Public 
 Service corporation, the fundamental fact con- 
 cerning which is that it must be financed hy 
 public money. That it has not been more suc- 
 cessful is due, not to the methods of its financ- 
 ing, but to the method of its operation. The 
 sole object of the Fleet Corporation was to 
 produce ships, but there has never been among 
 the higher officers of the Corporation a single 
 person, who, during the past twenty years, has 
 made a record in production. They have all 
 without exception been men of the ''business*' 
 type of mind who have made their success 
 through financiering, buying, selling, etc. If 
 the higher officers of the Fleet Corporation had 
 been men who understood modem production 
 methods, and had in the past been successful in 
 getting results through their use, it is probable 
 that the Corporation would have been highly 
 successful, and would have given us a good 
 example of how to build an effective Public 
 Service corporation.
 
 10 ORGANIZING FOR WORK 
 
 Mr. William B. Colver, Chairman of the Fed- 
 eral Trade Commission, in the summer of 1917, 
 explained how we might have a Public Service 
 corporation for the distribution of coal. In 
 such a corporation as Mr. Colver outlined, there 
 would be good pay for all who rendered good 
 service, but no "profit.^' Of course, all those 
 who are now making profits over and above the 
 proper reward for service rendered in the dis- 
 tribution of coal, opposed Mr. Colver 's plan, 
 which was that a corporation, financed by the 
 Federal Government, should buy at the mouth 
 of each mine such coal as it needed, at a fair 
 price based on the cost of operating that mine ; 
 that this corporation should distribute to the 
 community the coal at an average price, in- 
 cluding the cost of distribution. We see no 
 reason why such a corporation should not have 
 solved the coal problem, and furnished us with 
 an example of how to solve other similar 
 problems. We need such information badly, 
 for we are rapidly coming to a point where we 
 realize that disagreements between employer 
 and employee as to hoiv the profits shall he 
 shared can no longer he allowed to work hard- 
 ship to the community. 
 
 The chaotic condition into which Europe is 
 rapidly drifting by the failure of the present 
 industrial and financial system, emphasizes the
 
 THE PARTING OF THE WAYS 11" 
 
 fact that in a civilization like ours the problems 
 of peace may be quite as serious as the prob- 
 lems of war, and the emergencies created by 
 them therefore justify the same kind of action 
 on the part of the government as was justified 
 by war. 
 
 Before proper action can be taken in this 
 matter it must be clearly recognized that today 
 economic conditions have far more power for 
 good or for evil than political theories. This is 
 becoming so evident in Europe that it is im- 
 possible to fail much longer to recognize it here. 
 The revolutions which have occurred in Europe 
 and the agitation which seems about to create 
 other revolutions, are far more economic than 
 political, and hence can be offset only by eco- 
 nomic methods. 
 
 The Labor Unions of Great Britain, and the 
 Soviet System of Russia, both aim, by different 
 methods, to render service to the community, 
 but whether they will do it effectively or not is 
 uncertain, for they are revolutionary, and a 
 revolution is a dangerous experiment, the result 
 of which cannot be foreseen. The desired result 
 can be obtained without a revolution and by 
 methods with which we are already familiar, 
 if we will only establish real public service 
 corporations to handle problems which are of 
 most importance to the community, and realize
 
 12 ORGANIZING FOR WORK 
 
 that capital like labor is entitled only to the 
 reward it earns. 
 
 Inasmuch as the profits in any corporation 
 go to those who finance that corporation, the 
 only guarantee that a corporation is a real 
 public service corporation is that it is financed 
 by public money. If it is so financed all the 
 profits go to the community, and if service is 
 more important than profits, it is always pos- 
 sible to get a maximum service by eliminating 
 profits. 
 
 This is the basis of the Emergency Fleet 
 Oorporation, and numerous other war corpora- 
 tions, which rendered such public service as 
 it was impossible to get from any private corpo- 
 rations. Eealizing that on the return of peace 
 many private corporations feel that they have 
 no longer such social responsibilities as they 
 cheerfully accepted during the war, it would 
 seem that real public service corporations would 
 be of the greatest possible advantage in the 
 industrial and business reorganization that is 
 before us. 
 
 We have in this country a little time to think, 
 because economic conditions here are not as 
 acute as they are in Europe, and because of the 
 greater prosperity of our country. But we 
 must recognize the fact that our great compli- 
 cated system of modern civilization, whose very
 
 THE PARTING OF THE WAYS 13 
 
 life depends upon the proper functioning of the 
 business and industrial system, cannot be sup- 
 ported very much longer unless the business 
 and industrial system devotes its energies as a 
 primary object to rendering the service neces- 
 sary to support it. We have no hesitation in 
 saying that the workmen cannot continue to get 
 high wages unless they do a big day^s work. Is 
 it not an equally self-evident fact that the busi- 
 ness man cannot continue to get big rewards 
 unless he renders a corresponding amount of 
 service? Apparently the similarity of these 
 two propositions has not clearly da^\^led upon 
 the man with the financial type of mind, for the 
 reason, perhaps, that he has never compared 
 them. 
 
 Such a change would produce hardships only 
 for those who are getting the rewards they are 
 not earning. It would greatly benefit those who 
 are actually doing the work. 
 
 In order that we may get a clear conception 
 of what such a condition would mean, let us 
 imagine two nations as nearly identical as we 
 can picture them, one of which had a business 
 system which was based upon and supported 
 by the service it rendered to the community. 
 Let us imagine that the other nation, having the 
 same degree of civilization, had a business 
 system run primarily to give profits to those
 
 14 ORGANIZING FOR WORK 
 
 who controlled that system, which rendered 
 service when such service increased its profits, 
 but failed to render service when such service 
 did not make for profits. To make the com- 
 parison more exact, let us further imagine a 
 large portion of the most capable men of the 
 latter community engaged continually in a pull 
 and haul, one against the other, to secure the 
 largest possible profits. Then let us ask our- 
 selves in what relative state of economic de- 
 velopment these two nations would find them- 
 selves at the end of ten years? It is not neces- 
 sary to answer this question. 
 
 I say again, then, we have come to the Parting 
 of the Ways, for a nation whose business system 
 is based on service will in a short time show 
 such advancement over one whose business sys- 
 tem is operated primarily with the object of 
 securing the greatest possible profits for the 
 investing class, that the latter nation will not 
 be long in the running. 
 
 America holds a unique place in the world 
 and by its traditions is the logical nation to con- 
 tinue to develop its business system on the 
 line of service. What is happening in Europe 
 should hasten our decision to take this step, for 
 the business system of this country is identical 
 with the business system of Europe, which, if 
 we are to believe the reports, is so endangered
 
 THE PARTING OF THE WAYS 15 
 
 by the crude efforts of the So\^et to make busi- 
 ness serve the community. 
 
 The lesson is this: the hicsiness system must 
 accept its social responsihilify and devote itself 
 primarily to service, or the community ivill ulti- 
 mately make the attempt to take it over in 
 order to operate it in its own interest. 
 
 The spectacle of the attempt to accomplish 
 this result in ea^ern Europe is certainly not so 
 attractive as to make us desire to try the same 
 experiment here. Hence, we should act, and 
 act quickly, on the former proposition.
 
 II 
 
 THE ENGINEER AS THE INDUSTRIAL 
 LEADER 
 
 The principles explained in the preceding 
 chapter may seem to be sufficiently clear and 
 simple to appeal to almost any enlightened 
 person, and give him the desire to carry them 
 out. The desire to put them in operation, how- 
 ever, is not enough. He must have at least 
 some inkling of the methods by which their 
 application can be made. He must understand 
 the forces with which he will have to contend 
 in introducing the newer methods; the argu- 
 ments that will be brought up against them, and 
 the obstacles that will be put in his way by 
 those who are perfectly well satisfied to go on 
 as they are, in spite of the fact that a change is 
 seen to be absolutely necessary in the long run. 
 In the following chapters we shall try to give 
 a picture of how business and industry are con- 
 ducted, and some explanation of the forces con- 
 trolling each. Most of our business and in- 
 dustrial troubles arise from the fact that the 
 controlling factors are not apparent to the 
 public in general and can be disclosed only by a 
 
 16
 
 INDUSTRIAL ENGINEER 17 
 
 thorough and exhaustive study of what is taking 
 place. 
 
 Following this general exposition of the sub- 
 ject, we shall show a system of progress charts 
 which bear the same relation to the statistical 
 reports which are so common that a mo\dng 
 picture film bears to a photograph. This chart 
 system has been in use only a few years, but 
 it is so simple that it is readily understood by 
 the workman and employer, and so comprehen- 
 sive that one intelligent workman made the 
 remark, ''If we chart everything we are doing 
 that way, anybody can run the shop.'' While 
 we are hardly prepared to agree with this 
 opinion, we are entirely satisfied that if the 
 facts about a business can be presented in a 
 compact and comprehensive manner, it will be 
 found possible to run any business much more 
 effectively than has been the custom in the past. 
 
 We wish to emphasize the practicality of our 
 methods, because we have been accused of 
 preaching altruism in business, which our 
 critics say will not work. We know altruism 
 \vill not work and absolutely repudiate the idea 
 that our methods are altruistic; as a matter of 
 fact, we believe we should get full reward for 
 service rendered. Moreover, we believe that 
 if everybody got full reward for service ren- 
 dered there would not be so many ''profits''
 
 18 ORGANIZING FOR WORK 
 
 for the employer and employee to quarrel over, 
 so often to the detriment of the public. 
 
 With this introduction, we shall try to make 
 clear what has been happening in the industrial 
 and business world, and draw our conclusions 
 as we go along. 
 
 When the war broke out, many of our leading 
 business men who had accumulated wealth 
 through the accepted business methods, which 
 had to do primarily with buying, selling, financ- 
 ing, etc., went to Washington and offered their 
 services at a dollar a year. They did this with 
 the best intentions, believing that the business 
 methods which had brought them success in the 
 past were the ones needed in time of war. They 
 soon found that the government had taken over 
 all financial operations ; that there was no sell- 
 ing to be done, and that the problem quickly 
 reduced itself to one of production, in which 
 many of them had had no experience. There 
 were, of course, many marked exceptions, for 
 some grasped the problem at once and did 
 wonderful work. As a general rule, however, 
 this was not the case, for- it takes a very capable 
 man to grasp quickly the essentials of a big 
 problem that is entirely new to him. Hence, as 
 a rule, they adhered strictly to the methods they 
 had been accustomed to, and called to assist 
 them great numbers of accountants and stat-
 
 INDUSTRIAL ENGINEER 19 
 
 isticians (all static), both groups thoroughly 
 convinced that record-keeping was the main aim 
 of business ; and while the army was calling for 
 ships and shells, trucks and tanks, these men 
 busied themselves \\ith figures, piling up statis- 
 tics, apparently quite satisfied that they were 
 doing their part. In many cases these statis- 
 ticians did not differentiate between that w^hich 
 is interesting and that which is important. In 
 but few cases did they realize that from the 
 standpoint of production, yesterday's record is 
 valuable only as a guide for tomorrow. They 
 did not understand that it is only the man who 
 knows what to do and how to do it that can 
 direct the accumulation of the facts he needs 
 for his guidance. In too many cases, such men 
 had been left behind to run the factories, while 
 their superiors, who had had no experience in 
 production, undertook for the government 
 the most important job of production we 
 have ever had, depending almost entirely 
 upon accountants and statisticians for guid- 
 ance. The results of their labors are now 
 history, a knowledge of w^hich will soon be the 
 common property of all. In spite of this handi- 
 cap, we did much good work. 
 
 There is no question that both our army and 
 navy have made good to a degree which none 
 of our allies anticipated, but it is also true that
 
 20 ORGANIZING FOR WORK 
 
 if we had not had economic assistance from our 
 allies, the results they hav,e obtained would have 
 been impossible. As a matter of fact, it is well 
 known that our industrial system has not 
 measured up as we had expected. To substanti- 
 ate this w^e have only to mention airplanes, 
 ships, field guns, and shells. The reason for its 
 falling short is undoubtedly that the men direct- 
 ing it had been trained in a business system 
 operated for profits, and did not understand one 
 operated solely for production. This is no criti- 
 cism of the men as individuals; they simply 
 did not know the job, and, what is w^orse, they 
 did not know they did not know it. 
 
 Inasmuch as our economic strength in the 
 future will be based on production, we must 
 modify our system as rapidly as possible, with 
 the end in view of putting producers in charge. 
 To do this, opinions must give place to facts, 
 and words to deeds, and the engineer, who is 
 a man of few opinions and many facts, few 
 words and many deeds, should be accorded the 
 leadership which is his proper place in our 
 economic system. 
 
 It must be remembered, however, that the en- 
 gineer has two distinct functions. One is to 
 design and build his machinery; the second is 
 to operate it. In the past he has given more 
 attention to the former function than to the
 
 INDUSTRIAL ENGINEER 21 
 
 latter. At first this was but a natural and 
 necessar^^ condition, for the various engineer- 
 ing structures were comparatively few and were 
 operated in a measure simply and independ- 
 ently. Now, however, with the multiplicity of 
 machines of all kinds, the operation of one is 
 many times intimately dependent upon the 
 operation of another, even in one factory. In 
 addition to this the operation of one factory is 
 always dependent upon the successful operation 
 of a number of others. Because this inter- 
 operation is necessary to render service or pro- 
 duce results, the complexity of the operating 
 problem has greatly increased, for the operation 
 of a large number of factories in harmony 
 presents much the same problem as the har- 
 monious operation of the machines in one fac- 
 tory. It is only, however, where the factories 
 have been combined under one management that 
 any direct attempt at this kind of control has 
 been made. To be sure, the relation between 
 the demand for and supply of the product, sup- 
 plemented by a desire to get the greatest pos- 
 sible profit, has resulted in a sort of control, 
 which has usually been based more on opinion 
 than facts, and generally exercised to secure the 
 greatest possible profits rather than to render 
 the greatest service. 
 Emphasizing again the self-evident fact that
 
 22 ORGANIZING FOR WORK 
 
 great reward can only be continuously got by 
 corresponding service, and that the maximum 
 service can be rendered only when actions are 
 based on knowledge, we realize that the logical 
 director for such work is the engineer, who not 
 only has a basic knowledge of the work, but 
 whose training and experience lead him to rely 
 only upon facts. So far, however, there is not 
 in general use any mechanism which will en- 
 able the engineer to visualize at once the large 
 number of facts that must be comprehended in 
 order that he may handle effectively the mana- 
 gerial problems that our modern industrial sys- 
 tem is constantly presenting. It is one object 
 of this book to lay before the public the progress 
 we have made in visualizing the problems and 
 the available information needed for their 
 solution.
 
 ni 
 
 EFFICIENCY AND IDLENESS 
 
 What we accomplished in our preparation for 
 war and in getting men to the front surprised 
 ourselves, and apparently satisfied our allies. 
 It was accomplished by the splendid energy and 
 tremendous resources of the American people, 
 but nobody pretends that we showed any high 
 degree of efficiency in doing the work. Our 
 expenses were enormous, and we have recon- 
 ciled ourselves to their magnitude by saying 
 over and over again that nothing counted ex- 
 cept winning the war, which in the last analysis 
 is true ; but it is also true that excessive expense 
 not only did not help us to win the war, but 
 rather hindered us in accomplishing this result. 
 Our fumbling in war preparation seems to 
 indicate that the great campaign for efficiency, 
 which has been waged so assiduously in this 
 country for the past twenty years, has not ac- 
 complished for us all we had led ourselves to 
 believe. That we have increased individual ef- 
 ficiency and profit-making efficiency, and per- 
 haps other kinds of efficiency, is not to be denied. 
 That we have attained a high degree of national 
 
 23
 
 24 ORGANIZING FOR WORK 
 
 efficiency or a high degree of efficiency in the 
 production of goods, is nowhere indicated. It 
 took the shock of a great war to arouse us to 
 the realization that our great prosperity was 
 due to something other than our productive ef- 
 ficiency. 
 
 Yet surely the long campaign for efficiency 
 has been honestly and seriously waged. Why, 
 then, have our results been so meager? The 
 answer is simple enough and plain. The aim 
 of our efficiency has not been to produce goods, 
 but to harvest dollars. If we could harvest 
 more dollars by producing fewer goods, we 
 produced the fewer goods. If it happened that 
 we could harvest more dollars by producing 
 more goods, we made an attempt to produce 
 more goods: but the production of goods was 
 always secondary to the securing of dollars. 
 
 In the great emergency created by the war, 
 our need was not for dollars but for goods, and 
 people who had been trained for the seeking 
 of dollars were in most cases not at all fitted 
 for the producing of goods. Those who had 
 been most successful in acquiring dollars were, 
 however, the ones best known as business men, 
 and when it was thought we needed a business 
 administration, such people, with the best in- 
 tentions in the world, offered their services to 
 the Federal Government, many at a great sacri-
 
 EFFICIENCY AND IDLENESS 25 
 
 fice of their own interests. They found, how- 
 ever, that for w^ar w^e needed goods, and that 
 dollars w^ere only the means to that end. Then 
 they found that unless people knew how to 
 produce the goods, dollars w^re ineffective. 
 
 Another phase of the efficiency movement w^ith 
 which we are all so familiar, w^as the attempt 
 to increase the efficiency of the w^orker, and to 
 ignore entirely the idler, because the system of 
 cost-keeping generally in vogue made that seem 
 the most profitable thing to do. The case was 
 worse than this, for not only did the system 
 ignore the idler, but it eliminated the inefficient, 
 absolutely ignoring the fact that both the in- 
 efficient and the idle w^ere going to continue to 
 live and be supported, directly or indirectly, by 
 the w^orkers. 
 
 The war waked us up to the fact that the 
 world was running short of the necessities of 
 life, and that the product of even the most 
 inefficient was some help. The scheme for the 
 selection of the efficient, of w^hich much had 
 been made, w^as now found to need supplement- 
 irig by one for forcing the idler to work and 
 training the inefficient. 
 
 The great difficulty of installing such a sys- 
 tem w-as that the cost-keeping methods in gen- 
 eral vogue indicated that training methods were 
 not profitable, for trainers were classed as non-
 
 26 ORGANIZING FOR WORK 
 
 producers. In spite of this fact, however, the 
 war emergency forced us to adopt them, and 
 the results were beneficial. The inevitable de- 
 duction is that the cost-keeping methods in 
 general vogue are fundamentally wrong, and 
 that we shall continue to suffer from ineJBficiency 
 until they are corrected. The great error in 
 them is the fact that they absolutely ignore the 
 expense of idleness. As a matter of fact, it 
 costs almost as much to be idle as it does to 
 work. This is true whether we consider men 
 or machines, or, in other words, labor or capital. 
 
 This leads us at once to two natural ques- 
 tions : 
 
 What is our expense for idle labor? 
 
 What is our expense for idle capital? 
 
 Manufacturing concerns pretty generally 
 eliminate idle labor as completely as they can 
 (many times by discharging workmen who could 
 be profitably used if work were planned for 
 them). 
 
 They cannot get rid of idle capital so easily, 
 for it is tied up in machines that cannot be sold. 
 The only possible way to eliminate idle capital, 
 then, is to put it to work. The first step toward 
 putting it to work is to find out why it is idle. 
 As soon as this is done, means for putting it to 
 work begin to suggest themselves. Our cost- 
 keeping system, to meet the present and future
 
 EFFICIENCY AND IDLENESS 27 
 
 emergency, must not content itself with charg- 
 ing to the product all expenses, but must charge 
 to the product only that expense that helped to 
 produce it, and must show the expenses that did 
 not produce anything, and their causes. If this 
 fundamental change is made in our cost-keeping 
 methods, our viewpoint on the subject of pro- 
 duction changes, with the result that we devote 
 our attention first to the elimination of idleness, 
 both of capital and labor.
 
 IV 
 PRODUCTION AND COSTS 
 
 Manufacturers in general recognize the vital 
 importance of a knowledge of the cost of their 
 product, yet but few of them have a cost system 
 on which they are willing to rely under all con- 
 ditions. 
 
 Wliile it is possible to get quite accurately the 
 amount of material and labor used directly in 
 the production of an article, and several systems 
 have been devised which accomplish this result, 
 there does not yet seem to be in general use 
 any system of distributing that portion of the 
 expense known variously as indirect expense, 
 burden, or overhead, in such a manner as to 
 make us have any real confidence that it has 
 been done properly. 
 
 There are in common use several methods 
 of distributing this expense. One is to dis- 
 tribute to the product the total indirect ex- 
 pense, including interest, taxes, insurance, etc., 
 according to the direct labor. Another is to 
 distribute a portion of this expense according 
 to direct labor, and a portion to machine hours.
 
 PRODUCTION AND COSTS 29 
 
 Other methods distribute a certain amount of 
 this expense on the material used, etc. Most of 
 these methods contemplate the distribution of 
 all of the indirect expense of the manufacturing 
 plant, however much it may be, on the output 
 produced, no matter how small it is. 
 
 If the factory is running at its full, or normal, 
 capacity, this item of indirect expense per unit 
 of product is usually small. If the factory is 
 running at only a fraction of its capacity, say 
 one-half, and turning out only one-half of its 
 normal product, there is but little change in the 
 total amount of this indirect expense, all of 
 which must now be distributed over half as 
 much product as previously, each unit of 
 product thereby being obliged to bear ap- 
 proximately twice as much expense as pre- 
 viously. 
 
 When times are good, and there is plenty of 
 business, this method of accounting indicates 
 that our costs are low; but when times become 
 bad and business is slack, it indicates high costs 
 due to the increased proportion of burden each 
 unit has to bear. During good times, when there 
 is a demand for all the product we can make, 
 it is usually sold at a high price and the element 
 of cost is not such an important factor. Wlien 
 business is dull, however, we cannot get such 
 a high price for our product, and the question
 
 30 ORGANIZING FOR WORK 
 
 of at how low a price we can afford to sell the 
 product is of vital importance. Our cost sys- 
 tems, as generally operated at present, show 
 under such conditions that our costs are high 
 and, if business is very bad, they usually show 
 us a cost far greater than the amount we can 
 get for the goods. In other words, our present 
 systems of cost accounting go to pieces when 
 they are most needed. This being the case, 
 many have felt for a long time that there was 
 something radically wrong with the present 
 theories on the subject. 
 
 As an illustration, I may cite a case which 
 recently came to my attention. A man found 
 that his cost on a certain article was thirty 
 cents. When he found that he could buy it for 
 twenty-six cents, he gave orders to stop manu- 
 facturing and to buy it, saying he did not under- 
 stand how his competitor could sell at that 
 price. He seemed to realize that there was a 
 flaw somewhere, but he could not locate it. I 
 asked him of what his expense consisted. His 
 reply was, labor ten cents, material eight cents, 
 and overhead twelve cents. I then asked if he 
 was running his factory at full capacity, and 
 got the reply that he was running it at less than 
 half its capacity, possibly at one-third. The 
 next question was : What would be the overhead 
 on this article if the factory were running full?
 
 PRODUCTION AND COSTS 31 
 
 The reply was that it would be about five cents. 
 I suggested that in such a case the cost would 
 be only twenty-three cents. The possibility 
 that his competitor was running his factory 
 full suggested itself at once as an explana- 
 tion. 
 
 The next question that suggested itself was 
 how the twelve cents overhead, which was 
 charged to this article, would be paid if the 
 article was bought. The obvious answer was 
 that it would have to be distributed over the 
 product still being made, and w^ould thereby 
 increase its cost. In such a case it would prob- 
 ably be found that some other article w^as cost- 
 ing more than it could be bought for; and, if 
 the same policy were pursued, the second article 
 should be bought, which would cause the re- 
 maining product to bear a still higher expense 
 rate. If this policy were carried to its logical 
 conclusion, the manufacturer would be buying 
 everything before long, and be obliged to give 
 up manufacturing entirely. 
 
 The illustration w^hich I have cited is not an 
 isolated case, but is representative of the prob- 
 lems before a large class of manufacturers, who 
 believe that all of the expense, however large, 
 must be carried by the output produced, how- 
 ever small. This theory of expense distribu- 
 tion indicates a policy which in dull times would,
 
 32 ORGANIZING FOR WORK 
 
 if followed logically, put many manufacturers 
 out of business. In 1897 the plant of which I 
 was superintendent was put out of business by 
 just this kind of logic. It never started up 
 again. 
 
 Fortunately for the country, American 
 people as a whole will finally discard theories 
 which conflict with common sense; and, when 
 their cost figures indicate an absurd conclusion, 
 most of them will repudiate the figures. A cost 
 system, however, which fails us when we need 
 it most, is of but little value and it is impera- 
 tive for us to devise a theory of costs that will 
 not fail us. 
 
 Most of the cost systems in use, and the 
 theories on which they are based, have been 
 devised by accountants for the benefit of finan- 
 ciers, whose aim has been to criticize the fac- 
 tory and to make it responsible for all the short- 
 comings of the business. In this they have suc- 
 ceeded admirably, largely because the methods 
 used are not so devised as to enable the superin- 
 tendent to present his side of the case. 
 
 One of the prime functions of cost-keeping 
 is to enable the superintendent to know whether 
 or not he is doing the work he is responsible 
 for as economically as possible, a function which 
 is ignored in the majority of cost systems now 
 in general use. Many accountants who make
 
 PRODUCTION AND COSTS 33 
 
 an attempt to show it, are so long in getting 
 their figures in shape that they are practically 
 worthless for the purpose intended, the pos- 
 sibility of using them having passed. 
 
 In order to get a correct view of the subject 
 we must look at the matter from a different and 
 broader standpoint. The following illustration 
 may put the subject in its true light: 
 
 Let us suppose that a manufacturer owms 
 three identical plants, of an economical operat- 
 ing size, manufacturing the same article, — one 
 located in Albany, one in Buffalo, and one in 
 Chicago — and that they are all running at their 
 normal capacity and are managed equally well. 
 The amount of indirect expense per unit of 
 product would be substantially the same in each 
 of these factories, as would be the total cost. 
 Now suppose business suddenly falls off to one- 
 third of its pre\dous amount and the manu- 
 facturer shuts do^^^l the plants in Albany and 
 Buffalo, and continues to run the one in Chicago 
 exactly as it has been run before. The product 
 from the Chicago plant would have the same 
 cost that it pre\^ously had, but the expense of 
 carrying two idle factories might be so great 
 as to take all the profits out of the business ; in 
 other words, the profit made from the Chicago 
 plant might be offset entirely by the loss made 
 by the Albany and Buffalo plants.
 
 34 ORGANIZING FOR WORK 
 
 If these plants, instead of being in different 
 cities, were located in the same city, a similar 
 condition might also exist in which the expense 
 of the two idle plants would be such a drain on 
 the business that they would offset the profit 
 made in the going plant. 
 
 Instead of considering these three factories 
 to be in different parts of one city, they might 
 be considered as being within the same yard, 
 which would not change the conditions. Finally, 
 we might consider that the walls between these 
 factories were taken down and that the three 
 factories were turned into one plant, the out- 
 put of which had been reduced to one-third of 
 its normal volume. In such case it would be 
 manifestly proper to charge to this product 
 only one-third of the indirect expense charged 
 when the factory was running full. 
 
 If the above argument is correct, we may 
 state the following general principle: The in- 
 direct EXPENSE CHAEGEABLE TO THE OUTPUT OF 
 A FACTORY SHOULD BEAR THE SAME RATIO TO THE 
 INDIRECT EXPENSE NECESSARY TO RUN THE FACTORY 
 AT NORMAL CAPACITY, AS THE OUTPUT IN QUESTION 
 BEARS TO THE NORMAL OUTPUT OF THE FAC- 
 TORY. 
 
 This theory of expense distribution, which 
 was forced upon us by the abrupt change in 
 conditions brought on by the war, explains
 
 PRODUCTION AND COSTS 35 
 
 many things which were inexplicable under the 
 older theory, and gives the manufacturer uni- 
 form, or at least comparable, costs as long as 
 the methods of manufacture do not change. 
 
 Under this method of distributing expense 
 there will be a certain amount of undistributed 
 expense remaining whenever the factory runs 
 below its normal capacity. A careful considera- 
 tion of this item will show that it is not charge- 
 able to the product made, but is a business ex- 
 pense incurred on account of maintaining a cer- 
 tain portion of the factory idle, and chargeable 
 to profit and loss. Many manufacturers have 
 made money in a small plant, then built a large 
 plant and lost money for years afterward, 
 \\dthout quite understanding how it happened. 
 This method of figuring affords an explana- 
 tion and warns the manufacturer to do every- 
 thing possible to increase the efficiency of 
 the plant he has, rather than to increase its 
 size. 
 
 This theory explains why some of our large 
 combinations of manufacturing plants have not 
 been as successful as was anticipated, and why 
 the small plant is able to compete successfully 
 and make money, while the combinations are 
 only just holding their own. 
 
 The idea so prevalent a few years ago, that 
 in the industrial world money is the most power-
 
 36 ORGANIZING FOR WORK 
 
 ful factor, and that if we only had enough 
 money, nothing else would matter very much, 
 is beginning to lose its force, for it is becom- 
 ing clear that the size of a business is not so 
 important as the policy by which it is directed. 
 If we base our policy on the idea that the cost 
 of an article can only legitimately include the 
 expense necessarily incurred either directly or 
 indirectly in producing it, w^e shall find that 
 our costs are much lower than we thought, and 
 that we can do many things which under the 
 old method of figuring appeared suicidal. 
 
 The view of costs so largely held, namely, that 
 the product of a factory, however small, must 
 bear the total expense, how^ever large, is re- 
 sponsible for much of the confusion about costs 
 and hence leads to unsound business poli- 
 cies. 
 
 If we accept the view that the article produced 
 shall bear only that portion of the indirect ex- 
 pense needed to produce it, our costs will not 
 only become lower, but relatively far more con- 
 stant, for the most variable factor in the cost 
 of an article under the usual system of account- 
 ing has been the '^overhead," which has varied 
 almost inversely as the amount of the product. 
 This item becomes substantially constant if the 
 *' overhead'' is figured on the normal capacity 
 of the plant.
 
 PRODUCTION AND COSTS 37 
 
 Of course a method of cost-keeping does not 
 diminish the expense, but it may show where the 
 expense properly belongs, and give a more cor- 
 rect understanding of the business. 
 
 In our illustration of the three factories, the 
 cost in the Chicago factory remained constant, 
 but the expense of supporting the Buffalo and 
 Albany factories in idleness was a charge 
 against the business, and properly chargeable 
 to profit and loss. If we had loaded this ex- 
 pense on the product of the Chicago factory, the 
 cost of the product would probably have been 
 so great as to have prevented our selling it, 
 and the total loss would have been greater still. 
 
 When the factories are distinctly separate, 
 few people make such a mistake, but where a 
 single factory is three times as large as is 
 needed for the output, the error is frequently 
 made, with results that are just as misleading. 
 
 As a matter of fact it seems that the attempt 
 to make a product bear the expense of plant not 
 needed for its production is one of the most 
 serious defects in our industrial system today, 
 and farther reaching than the differences be- 
 tween employers and employees, for if it were 
 removed, most of the difficulties would vanish. 
 
 The problem that faces us is first to find just 
 what plant or part of a plant, is needed to pro- 
 duce a given output, and then to determine the
 
 38 ORGANIZING FOR WORK 
 
 *^ overhead'' expense needed to operate that 
 plant or portion of that plant. This is primarily 
 the work of the manufacturer, or engineer, and 
 only secondarily that of the accountant, who 
 must, as far as costs are concerned, be the 
 servant of the superintendent. 
 
 In the past, in almost all cost systems the 
 amount of *' overhead" to be charged to the 
 product, when it did not include all the ** over- 
 head,'' was more or less a matter of judgment. 
 According to the theory now presented, it is 
 not a matter of judgment, but can be determined 
 with an accuracy depending upon the knowledge 
 the manufacturer has of the business. Follow- 
 ing this line of thought it should be possible for 
 a manufacturer to calculate just what plant and 
 equipment he ought to have, and what the staff 
 of officers and workmen should be to turn out a 
 given product. If this can be correctly done, 
 the exact cost of a product can be predicted. 
 Such a problem cannot be solved by a cost ac- 
 countant mthout shop knowledge, but is pri- 
 marily a problem for an engineer whose knowl- 
 edge of materials and processes is essential for 
 its solution. 
 
 In any attempt to solve a problem of this 
 type, one of the most important functions we 
 need a cost system to perform is to keep the 
 superintendent continually advised as to how
 
 PRODUCTION AND COSTS 39 
 
 nearly he is realizing the ideal set, and to point 
 out where the shortcomings are. 
 
 Many of us are accustomed to this viewpoint 
 when w^e are treating operations singly, but 
 few have as yet made an attempt to consider 
 that this idea might be applied to a plant as a 
 whole, except w^hen the processes of manufac- 
 ture are simple and the products few in number. 
 When, however, the processes become numerous 
 or complicated, the necessity for such a che^ 
 becomes more urgent, and the cost-keeper w^ho 
 performs this function becomes an integral part 
 of the manufacturing system, and acts for the 
 superintendent, as an inspector, who keeps him 
 advised at all times of the quality of his own 
 work. 
 
 This conception of the duties of a cost-keeper 
 does not at all interfere with his supplying the 
 financier w^th the information he needs, but 
 insures that the information shall be correct, 
 for the cost-keeper is continually making a com- 
 parison for the benefit of the superintendent, 
 of what has been done with what should have 
 been done. Costs are valuable only as com- 
 parisons, and comparisons are of little value 
 unless we have a standard, w^hich it is the func- 
 tion of the engineer to set. 
 
 Lack of reliable cost methods has, in the past, 
 been responsible for much of the uncertainty so
 
 40 ORGANIZING FOR WORK 
 
 prevalent in our industrial policies; but with 
 a definite and reliable cost method, which en- 
 ables us to differentiate between what is lost 
 in manufacturing and what is lost in business, 
 it will usually become easy to define clearly the 
 proper business policy.
 
 VALUE OF AN INDUSTRIAL PROPERTY 
 DEPENDS ON ITS PRODUC- 
 TIVE CAPACITY 
 
 In the summer of 1916 a professor of political 
 economy in one of our most conservative uni- 
 versities admitted to me that the economists 
 had been obliged to modify many of their views 
 since the outbreak of the European war. My 
 comment was, that the professors of political 
 economy were not the only people who had been 
 obliged to modify their economic and industrial 
 views. 
 
 The war taught everybody something. Mili- 
 tary methods have undergone radical changes, 
 but industrial methods are undergoing changes 
 which promise to be even more radical than the 
 military developments have been. 
 
 If there is any one thing which has been made 
 clear by the war it is, that the most important 
 asset which either a man or nation can have is 
 the ABILITY TO DO THINGS. Our industrial and 
 economic developments have in the past been 
 largely based on the theory that the most im- 
 
 41
 
 42 ORGANIZING FOR WORK 
 
 portant quality a man can possess is his ability 
 to buy things ; but the war has distinctly sho^\^l 
 that this quality is secondary to the ability to 
 do things. The recognition of this fact is hav- 
 ing a most far-reaching effect, for it makes 
 clear that the real assets of a nation are 
 properly equipped industries and men trained 
 to operate them efficiently. The money which 
 has been spent on an industrial property, 
 whether it has been spent wisely or unwisely, 
 and the amount of money needed to reproduce 
 it are both secondary in importance to the 
 ability of that plant to accomplish the object 
 for which it was constructed, and hence cannot 
 be given the first place in determining the value 
 of the property. 
 
 Inasmuch as every industrial plant is built 
 to produce some article of commerce at a cost 
 which will enable it to compete with other pro- 
 ducers, the value of a plant as a producing unit 
 must depend upon its ability to accomplish the 
 object for which it was created. 
 
 To determine the value of an industrial 
 property, therefore, we must be able to know 
 with accuracy the cost at which it can produce 
 its product, and the amount it can produce. To 
 compare two factories on this basis, their cost 
 systems must be alike ; for, if there is a lack of 
 agreement as to methods of cost accounting,
 
 VALUE OF INDUSTRIAL PROPERTY 43 
 
 there will necessarily be a lack of agreement as 
 to the estimated value of the properties. There 
 are many methods of cost accounting; but there 
 are only two leading theories as to what cost 
 consists of. They are: 
 
 First, that the cost of an article must include 
 all the expense incurred in producing it, whether 
 such expense actually contributed to the de- 
 sired end or not. 
 
 Second, that the cost of an article should in- 
 clude only those expenses actually needed for 
 its production, and any other expenses incurred 
 by the producers for any reason whatever must 
 be charged to some other account. 
 
 The first theory would charge the expense 
 of maintaining in idleness that portion of a 
 plant which was not in use to the cost of the 
 product made in that portion of the plant which 
 was in operation ; while the second theory would 
 demand that such an expense be a deduction 
 from profits, or at least be charged to some 
 other account. When plants are operated at 
 their full capacity, both theories give the same 
 cost. If, however, they are operated at less 
 than their full capacity, the expense of carrying 
 the idle machinery is, under the first theory, in- 
 cluded in the cost of the product, making the 
 cost greater; while under the second theory, 
 this expense of idle machinery is carried in a
 
 44 ORGANIZING FOR WORK 
 
 separate account and should be deducted from 
 the profits, leaving the cost constant. It is 
 most interesting to note that, when costs are 
 figured on the second basis, great activity im- 
 mediately ensues to determine why machinery 
 is idle, and to see what can be done to put it 
 in operation. It is realized at once that this 
 machinery had better be operated, even if 
 no profits are obtained from its operation 
 and only the expense, or even part of the 
 expense, of owning and maintaining it is 
 earned. 
 
 Fig. 1 illustrates this subject most clearly, 
 and is an indication of the efficiency of the 
 management as contrasted with that of the 
 workmen, about which we hear so much. It is 
 interesting to note that charts of this nature, 
 which are being made monthly in several large 
 plants, have already had a very educational 
 influence on the managers of those plants. They 
 show" that idle machinery w^hich cannot be used 
 should be disposed of, and the money received, 
 and the space occupied, put to some useful 
 purpose. 
 
 A little consideration of the method of get- 
 ting the data on this chart will make its value 
 more apparent. It is a logical outgrowth of the 
 pre^aous chapter on Production and Costs, and 
 is based on the fact that simple ownership of a
 
 
 
 
 
 
 
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 VALUE OF INDUSTRIAL PROPERTY 47 
 
 machine costs money, inasmuch as it takes away 
 from available assets. For instance, if we buy 
 a machine for $1,000 we lose the interest on that 
 $1,000, say at tive per cent per year, then we 
 have taxes on the machine at two per cent, and 
 insurance of one per cent. Further, the machine 
 probably depreciates at a rate of twenty per 
 cent per year, and we must pay $50 or more 
 per year for the rent of the space it occupies. 
 All these expenses, together $330, go on whether 
 we use the machine or not. Thus, the simple 
 fact of our having bought this machine and kept 
 it takes from our available assets approximately 
 o;ie dollar per day. 
 
 If now the cause for idleness is ascertained 
 each day we can find the expense of each cause 
 of idleness as sho^\^l on the chart. That part 
 which is due to lack of orders points out that 
 our selling policy is w^rong, or that the plant 
 is larger than it should be — in other words, 
 that somebody in building the plant has over- 
 estimated the demand. It is clear, however, 
 that no conclusion should be based on the figures 
 for one month, but on the results for a series 
 of months during which the problem has been 
 carefully studied. If a mistake has been made 
 in building too large a plant, an effort should 
 be made to determine the proper disposal, or 
 utilization, of the excess, in order that the ex-
 
 48 ORGANIZING FOR WORK 
 
 pense of idleness may be taken care of, even if 
 no profit can be made. 
 
 The next column shows the expense due to a 
 lack of help, which means that we must in- 
 vestigate the labor policy. 
 
 The next column, showing the expense due to 
 lack of, or poor, material, is an indication of 
 the efficiency of the purchasing policy and store- 
 keeping system. The next column reflects the 
 repair and maintenance department. 
 
 If in any case the expense of idleness is 
 greater than can be attributed to all of these 
 causes together, it must go in the last column 
 as poor planning. 
 
 We can hardly claim that such a chart gives 
 "US a measure of the efficiency with which the 
 above functions are performed, but it certainly 
 does give us an indication of that efficiency. In 
 several cases, the first of such charts gotten 
 out resulted in the scrapping of machinery 
 wiiich had been idle for years. The space thus 
 saved was used for a purpose for which the 
 superintendent had felt he needed a new build- 
 ing. In another case it resulted in the renting 
 of temporarily idle machinery at a rate which 
 went far toward covering the expense of carry- 
 ing that machinery. 
 
 Under the first system of cost-keeping the 
 facts brought out by this method are not avail-
 
 VALUE OF INDUSTRIAL PROPERTY 49 
 
 able and the increased cost that a reduced out- 
 put must bear is a great source of confusion 
 to the salesman. The newer system with its 
 constant cost shows that non-producing ma- 
 chinery is a handicap to the industry of a 
 company, just as workmen who do not serve 
 some useful purpose in a plant, or industry, are 
 a handicap to that plant or industry. Similarly, 
 plants or people, therefore, who do not serve 
 some useful purpose to a conmiunity are a 
 handicap to that community, for idle plants 
 represent idle capital, and idle people are not 
 producers but consumers only. The warring 
 nations recognized these facts, and put both 
 idle plants and idle people to work wherever 
 possible. 
 
 The statements so far made concern princi- 
 pally the operation of industrial plants and the 
 production of articles of commerce; but they 
 are none the less true concerning the construc- 
 tion of industrial plants. We may ask the same 
 question about construction that we ask about 
 operation; for instance, should the *^cost" of a 
 railroad include all the money spent by the 
 people engaged in building it, or should it in- 
 clude only such money as contributed to the 
 building of the road? As an illustration, is the 
 cost of a piece of road which was built and 
 then abandoned for a superior route before
 
 50 ORGANIZING FOR WORK 
 
 being used a part of the cost of the railroad 
 built, or is it an expense due to improper judg- 
 ment on the part of the builders? 
 
 I am not discussing the question as to whether 
 the public should be called upon to pay interest 
 on the money uselessly spent through improper 
 judgment, but I do think that in all construc- 
 tion it should be possible to separate those ex- 
 penses which contributed to the desired result 
 from those which did not so contribute. A com- 
 parison of these amounts will give a measure 
 of the efficiency of the builders. On this knowl- 
 edge, proper action can ultimately be taken. 
 
 Still another factor enters into the value of 
 a ^ Agoing plant.'' We all have known cases 
 where the same plant operated under one 
 manager was a failure, and under another a 
 very decided success. The value of a going 
 plant, therefore, consists of two elements; 
 namely, the value of the physical real estate and 
 equipment, and the value of the organization 
 operating it. In considering the value of an 
 organization we should realize that it lies not 
 so much in the personality of the managers or 
 leaders (who may die or go elsewhere) as in 
 the permanent results of their training and 
 methods, which should go on with the business, 
 and are therefore an asset and not an accident. 
 
 We have the authority of no less a person
 
 VALUE OP INDUSTRIAL PROPERTY 51 
 
 than Andrew Carnegie, for the statement that 
 his organizations were of more value to him 
 than his plants. Before we can determine ex- 
 actly the value of a going plant, therefore, we 
 must find some means of measuring the value of 
 the organization which operates it, for this is 
 an integral factor in the valuation of an in- 
 dustrial property, which is just as real as the 
 more tangible brick and mortar of which build- 
 ings are composed. 
 
 Our charts showing the expense of idleness 
 give us at least a rough indication of this 
 value, for they show the expense of inefficient 
 management.
 
 VI 
 
 AN EXTENSION OF THE CREDIT SYS- 
 TEM TO MAKE IT DEMOCRATIC 
 
 Looking backward over the great war, we have 
 the opportunity better to understand and evalu- 
 ate the different phenomena which were de- 
 veloped by it. Many incidents which seemed 
 natural and in a measure unimportant when 
 they took place, had a profound effect upon the 
 outcome of the war, and promise to affect still 
 more profoundly the period to follow. 
 
 Perhaps no one incident was more significant 
 and fraught with greater consequences to the 
 civilization of the w^orld than the transfer, soon 
 after we entered the war, of the credit center 
 from Wall Street to Washington. This trans- 
 fer took place without creating any stir, vnth- 
 out any special opposition, and with the general 
 approval of the community at large. We had 
 just got the Federal Reserve Banking System 
 into operation, and it had enormously increased 
 our power as a nation to dispense credit, yet 
 notwithstanding the most advantageous position 
 in which we had thus been placed, the expert 
 
 52
 
 THE CREDIT SYSTEM 53 
 
 financiers of Wall Street submitted without 
 remonstrance to the transfer of the whole credit 
 center to Washington, w^here it was adminis- 
 tered by men who, compared with the "giants'* 
 of Wall Street, were mere amateurs. 
 
 ^Yhy was it necessary for this transfer to be 
 made, and why did Wall Street consent to it? 
 Surely if it had been within the possibilities of 
 Wall Street to finance the war, a serious re- 
 monstrance at least would have been raised 
 to this transfer of the credit center. The New 
 York bankers not only did not remonstrate, but 
 in a most patriotic manner offered their ser\^ces 
 to help the comparatively inexperienced men in 
 Washington handle their great undertaking. 
 
 If it had been possible for Wall Street to 
 finance the war, it is inconceivable that the 
 bankers of New York should have allowed the 
 work to be taken over by other hands. Wliy, 
 then, was it possible for Washington to do w^hat 
 was impossible for Wall Street? The answer 
 to this question is not only very simple, but is 
 indicative of the flaw in our whole business 
 system. The financial methods of Wall Street 
 were designed to operate only when we con- 
 ducted "business as usual;" hence their 
 mechanism could give credit only to those who 
 had tangible securities. They had no mecha- 
 nism for extending credit to men who, although
 
 54 ORGANIZING FOR WORK 
 
 they had few or no tangible assets, might have 
 tremendous productive capacity. 
 
 Because the war demanded that the nations 
 as a whole produce goods to the utmost, we 
 were obliged to invent a new kind of finance, in 
 which the production of goods would be the 
 first object. There was no tradition among the 
 bankers of this country for financing any propo- 
 sition except on the basis of tangible assets, 
 and for the sole purpose of making profits. 
 In many cases men who knew how to build 
 ships or to make guns did not have tangible 
 assets in sufficient quantity to satisfy the usual 
 banking system. It was therefore necessary for 
 the Federal Government to initiate a finance 
 which was new, at least in this country: namely, 
 that of extending credit to a man according to 
 his productive capacity. There was no estab- 
 lished mechanism for doing this, but it had to 
 be done, and we did it, in a rather haphazard 
 and ineffective manner. Nevertheless, the re- 
 sults have justified the venture, and the possi- 
 bilities of a new credit system of vastly greater 
 potentiality are opening themselves to us as 
 soon as the mechanism for its operation shall 
 have been developed. 
 
 A few of the great leaders of industry have 
 understood in a general way this kind of finance. 
 Among them may be mentioned Mr. Andrew
 
 THE CREDIT SYSTEM 55 
 
 Carnegie, who said he valued his organization 
 more than his plants; and Mr. Henry Ford. 
 Mr. Carnegie, through an understanding of 
 this general principle, was able to dominate the 
 steel industry; and Mr. Ford, by the same 
 token, became the greatest automobile manu- 
 facturer in the world. The war has backed up 
 Mr. Carnegie and Mr. Ford by proving that pro- 
 ductive capacity is enormously more important 
 than wealth, but inasmuch as our credit sys- 
 tem has been based on '* tangible assets,'' and 
 not on productive capacity, there has been 
 developed as yet no generally accepted mecha- 
 nism for measuring the value of productive 
 capacity. 
 
 The cost and accounting systems in general 
 vogue take note only of what are called the 
 *'tan;^ible assets,'' which are necessarily static, 
 showmg only potentialities. They make but 
 little attempt to find out how these assets are 
 being used. The reason undoubtedly is that they 
 see such assets from a sales standpoint ; in other 
 words, our economic system is still patterned 
 after the one which was originally built up to 
 serve the needs of buying and selling. Pro- 
 ductive capacity, on the other hand, can be 
 measured only by taking account of what is 
 happening. When w^e begin to regard matters 
 from this standpoint, the so-called ** tangible
 
 56 ORGANIZING FOR WORK 
 
 assets'^ are not nearly so important as the use 
 being made of them, or the amount of product 
 being turned out. In other words, the modern 
 accounting system which deals with production 
 must give us a picture of what is happening, 
 as well as of the mechanism which causes the 
 happenings. It must be based on charts which 
 show what progress is taking place, and which 
 bear the same relation to statistics as a moving 
 picture film does to a photograph. 
 
 The question naturally asked is : If the above 
 statements are correct, why have we not realized 
 their correctness before? It took a great war, 
 which required us to put forth all our strength, 
 to wake us up to their importance. They have 
 been increasing in importance for a number of 
 years, and our failure to recognize this fact 
 was one of the factors in producing the great 
 catastrophe through w^hich we have just passed. 
 
 For many years previous to the outbreak of 
 the great war, financiers told us there couldn't 
 be any war, because the bankers wouldn't stand 
 for it. They thought money controlled the 
 world. Books were written to prove that we 
 could have no more war. The idea of w^ar was 
 called ''the great illusion." Wlien this ''illu- 
 sion" was realized, they still maintained that 
 the war could last only a few months. Never- 
 theless it lasted over four years, to the great
 
 THE CREDIT SYSTEM 57 
 
 confusion of our economists and theorists. We 
 all know now that it was supported, not by 
 finance, but by the grand scale production of 
 modern industry. It stopped, not for lack 
 of money, but for lack of means to live and 
 fight with. We see, then, without any pos- 
 sible shadow of doubt, that inasmuch as pro- 
 duction was the controlling factor in the 
 great war, it will hereafter be the controlling 
 factor in the world, and that nation which 
 first recognizes the fundamental fact that pro- 
 duction, and not money, must be the aim of our 
 economic system, will, other things being equal, 
 exert a predominating influence on the ci\'iliza- 
 tion, which is to be built up in the period of re- 
 construction upon which we are now entering. 
 
 Our immediate problem, then, is to develop a 
 credit system that will enable us to take ad- 
 vantage of all the productive forces in the com- 
 munity. Such a credit system must not only be 
 able to finance those who have ownership, but 
 also those who have productive capacity, which 
 is vastly more important. This is equivalent 
 to saying that our ivealth in men is more im- 
 portant than our tvealth in materials. So far 
 we have never used this force to more than a 
 small fraction of its capacity, simply for the 
 reason, as previously stated, that the origina- 
 tors of our financial system were traders and
 
 r.8 ORGANIZING FOR WORK 
 
 not producers. Now, however, when the su- 
 preme importance of the producer has been 
 recognized, we must enlarge our credit system 
 in such a manner as to enable us to take full 
 advantage of his possibilities; in other words, 
 we must make it democratic. 
 
 To meet the exigencies of war the Federal 
 Government had no hesitation in inaugurating 
 such a finance, for the benefit of the community. 
 "While it was done in a new and crude manner, 
 we recognize that it was in the main successful. 
 We shall soon find that there are exigencies in 
 times of peace also that could be helped by a 
 similar financial method. Some nations are 
 going to see this, and realizing that the credit 
 system of the country must always be available 
 for the benefit of the community, take such ac- 
 tion as to accomplish that result, and thereby 
 force others to do the same. Through the War 
 Finance Corporation Act (amended) section 
 21, March 3, 1919, we have already taken such 
 action with regard to exports. During the war, 
 we financed necessary production with public 
 money; now in time of peace we finance an- 
 other essential activity with public money. This 
 is a most encouraging beginning. Can we not 
 make public money av^ailable for the financing 
 of all socially necessary activities whether of 
 war or peace?
 
 THE CREDIT SYSTEM 59 
 
 In the past what a man could do was limited 
 by his financial and social condition; hence 
 many of our most capable men were severely 
 restricted in their activities. To be sure, a few 
 have been able to rise above their restrictions 
 — a railsplitter becomes the president of a great 
 republic, and a harness-maker the first presi- 
 dent of another. These examples, however, 
 only illustrate the possibilities that are unuti- 
 lized, because our credit system has not been 
 democratic.
 
 VII 
 ECONOMICS OF DEMOCRACY 
 
 The prime function of a science is to enable 
 us to anticipate the future in the field with 
 which it has to deal. Judged by this standard, 
 economic science has in the past been practically 
 w^orthless; for it absolutely failed to warn us 
 of the greatest catastrophe that has ever be- 
 fallen the civilized world. Further, when the 
 catastrophe burst upon us, economists and 
 financiers persisted in belittling it by insisting 
 that the great war could last only a few months. 
 Are they any nearer the truth in their theories 
 of labor and capital, protection and free trade, 
 or taxation? 
 
 When they talk about preparedness, w^hat do 
 they mean? Do they mean that we must so 
 order our living as to prevent another such 
 catastrophe, or do they simply mean that ice 
 must aim to he strong ivhen the next catastrophe 
 comes? 
 
 The latest economic thought indicates clearly 
 that the fundamentals of both kinds of pre- 
 paredness are the same, and that preparation 
 
 60
 
 ECONOMICS OF DEMOCRACT 61 
 
 for the former is the best basis on which to 
 establish preparation for the latter. True 
 preparedness, then, icould seem to consist in a 
 readjustment of oit\ economic conditions ivith 
 the object of averting another such catastrophe. 
 
 In considering this subject we must realize 
 that : 
 
 The Nation reflects its leaders. 
 
 The Army reflects its general. 
 
 The Factory reflects its manager. 
 
 In a successful industrial nation, the in- 
 dustrial leaders must ultimately become the 
 leaders of the nation. The condition of the in- 
 dustries will then become a true index of the 
 condition of the nation. If the industries are 
 not properly managed for the benefit of the 
 whole conmmnity, no amount of military pre- 
 paredness vdW avail in a real war. The military 
 preparations of Germany, vast as they were, 
 would have collapsed in six months had it not 
 been for the social and industrial conditions on 
 which they were based. 
 
 Army officers and others have told us most 
 emphatically what military preparedness is, 
 and how to get it. Innumerable papers have 
 been written on industrial preparedness, and 
 people in general are getting a pretty clear idea 
 of what we mean by the term. Moreover, many 
 are beginning to appreciate our lack in this
 
 62 ORGANIZING FOR WORK 
 
 respect. Figs. 2, 3, 4, and 5 illustrate what this 
 means. 
 
 Admittedly these pictures are not typical of 
 our industries, but they do represent a condi- 
 tion which is all too common, and which must 
 be corrected if we are to be prepared either for 
 peace or for war. 
 
 Our record in the production of munitions, 
 especially of ammunition, is not one to be proud 
 of. Note what Mr. Bascom Little, President of 
 the Cleveland, Ohio, Chamber of Commerce, and 
 Chairman of the National Defense Conunittee 
 of the Chamber of Commerce of the United 
 States, said in the spring of 1916 : 
 
 **The work of Mr. Coffin's committee has seemed 
 to us very important, and so clearly related, in such 
 practical ways, to what the business organizations 
 of the country are trying to do to further national 
 defense, that those with which I am connected im- 
 mediately formed a union with the committee on 
 learning of its work. 
 
 ''The thing that has stirred up the business men 
 of the Middle West during the past eighteen months 
 has been the lesson they have learned in the making 
 of war materials. It points a very vivid moral to 
 all our people. It all looked very easy when it 
 started a year and a half ago. The plant with which 
 I am associated in Cleveland got an order for 250,000 
 three-inch high explosive shells. It was a simple 
 enough looking job — just a question of machining.
 
 Fig. 2. — Uxprepabed 
 
 Fig. 3. — Prepared 
 
 Two views of the same shop doing substantially the same work. 
 The lower picture was taken about a year after the upper from, 
 a slightly different viewpoint.
 
 ECONOMICS OF DEMOCRACY 63 
 
 The forgings were shipped to us and we were to finish 
 and deliver. It began to dawn on us when the 
 forgings came that this whole order, that looked so 
 big to us, was less than one day's supply of shells 
 for France or England or Russia; and we felt that 
 in eight months by turning our plant, which is a 
 first-class machine shop, onto this job we could fill 
 the order. In a little while we got up against the 
 process of hardening. That — and mark what I say 
 — was fourteen months ago. To date we have shipped 
 and had accepted 130,000 shells, and those, about half 
 our order, are not complete. They still have to be 
 fitted by the fuse maker, then fitted in the brass 
 cartridge cases with the propelling charge, and some- 
 where, sometime, maybe, they will get on the battle- 
 field of Europe. Up to the present, none of them 
 has arrived there. 
 
 "Now this is the situation in a high-class efficient 
 American plant. This is what happened when it 
 turned to making munitions of war. The same thing 
 has occurred in so many Middle Western plants, that 
 their ouTiers have made up their minds that if they 
 are ever going to be called upon for service to their 
 o^vn country, they must know more about this busi- 
 ness. They feel that they are now liabilities to the 
 nation, and not assets in case of war. Proud as we 
 may he of our industrial perfection, it has not worked 
 here, and the country — particularly you in the East 
 — may as well know it." 
 
 The comment on this will be that it is three 
 years old, and that we have made great ad-
 
 64 ORGANIZING FOR WORK 
 
 vances since then. In reply I can only say that 
 if we have made marked advances I have been 
 utterly unable to discover them. 
 
 The most casual investigation into the 
 reasons why so many of the munition manu- 
 facturers have not made good, reveals the fact 
 that their failure is due to lack of managerial 
 ability rather than to any other cause. With- 
 out efficiency in management, efficiency of the 
 workmen is useless, even if it is possible to get 
 it. "With an efficient management there is but 
 little difficulty in training the workmen to be 
 efficient. I have proved this so many times and 
 so clearly that there can be absolutely no doubt 
 about it. Our most serious trouble is incompe- 
 tency in high places. As long as that remains 
 uncorrected, no amount of efficiency in the work- 
 men Avill avail very much. 
 
 The pictures by which this chapter is illus- 
 trated do not show anything concerning the 
 efficiency of the individual workman, but they 
 are a sweeping condemnation of the inefficiency 
 of those responsible for the management, and 
 illustrate the fact, so well known to many of us, 
 that our industries are suffering from lack of 
 competent managers, — w^hich is another way 
 of saying that many of those who control our 
 industries hold their positions, not through their 
 abiUty to accomplish results, but for some other
 
 Fig. 4. — Unprepaeed 
 
 Fig. 5. — Prepared 
 
 Two views of the same shop doing substantially the same work, 
 taken from the same point. The lower view was taken about a 
 year after the upper.
 
 ECONOMICS OF DEMOCRACY 65 
 
 reason. In other words, industrial control is 
 too often based on favoritism or privilege, 
 rather than on ability. This hampers the 
 healthy^ normal development of industrialism, 
 which can reach its highest development only 
 when equal opportunity is secured to all, arid 
 when all reward is equitably proportioned to 
 service rendered. In other tvords, ivhen in- 
 dustry becomes democratic. 
 ' We are, therefore, brought face to face ^vith 
 a form of preparedness which is even more 
 fundamental than the Industrial Preparedness 
 usually referred to, and I am indebted to Air. 
 W. N. Polakov for the name ''Social^repared- 
 ness,^' which means the democratization of in- 
 dustry and the establishment of such relations 
 among the citizens themselves, and between 
 the citizens and the government, as will 
 cause a hearty and spontaneous response on 
 the part of the citizens to the needs of the 
 countr}\ 
 
 At the breaking out of the great war in 
 Europe, the thing which perhaps surprised us 
 most was the enthusiasm ^vith which the 
 German people entered into it. Hardly less 
 striking was the slowness with which the rank 
 and tile of Englishmen realized the problems 
 they were up against, and their responsibilities 
 concerning them.
 
 66 ORGANIZING FOR WORK 
 
 A short consideration of what happened in 
 Germany in the last half of the nineteenth cen- 
 tury, or before the war, may throw some light on 
 this subject. Bismarck and Von Moltke, follow- 
 ing the lead of Frederick the Great, believed and 
 taught that the great industry of a country was 
 War. In other w^ords, that it was more profit- 
 able to take by violence from another than to 
 produce. The history of the world, until the 
 development of modern industrialism^ seemed 
 to bear out that theory. Bismarck argued that 
 to be strong from a military standpoint the 
 nation must have a large number of well 
 trained, intelligent, healthy men, and he set 
 about so ordering the industries of Germany 
 as to produce that result. 
 
 Military autocracy forced business and in- 
 dustry to see that men were properly trained 
 and that their health was safe-guarded. In 
 other words, because of the necessity of the 
 military state for such men, the state saw to it 
 that industry was so organized as to develop 
 high-grade men, with the result that a kind of 
 industrial democracy was developed under the 
 paternalistic guidance of an autocratic military 
 party. 
 
 Under such influences, the increase of educa- 
 tion and the development of men went on apace, 
 and were soon reflected in an industrial system
 
 ECONOMICS OF DEMOCRACY 67 
 
 which bade fair to surpass any other in the 
 world. 
 
 In England, on the other hand, the business 
 system was controlled by an autocratic and 
 *' socially irresponsible finance,'* which, to a 
 large extent, disregarded the interest of the 
 workman and of the conununity. At the break- 
 ing out of the war, the superiority of the in- 
 dustries of Germany over the industries of 
 England was manifest, not only by the feeling 
 of the people, but by their loyalty to the Na- 
 tional Government, which had so cared for, or 
 disregarded, their individual welfare. This su- 
 periority became so rapidly apparent, that in 
 order to make any headway against Germany, 
 England was obliged to imitate the methods 
 which had been developed in Germany, and to 
 say that the industries (particularly the muni- 
 tion factories) ivhicli were needed for the salva- 
 tion of the country, must serve the coimtry and 
 not the individual. The increased efficiency 
 which England showed after the adoption of 
 this method was most marked, and in striking 
 contrast with the inefficiency displayed previ- 
 ously in similar work. 
 
 Confessedly our industries are not managed 
 in the interest of the community, but in that of 
 an autocratic finance. In Germany it was 
 proved beyond doubt that an industrial system,
 
 68 ORGANIZING FOR WORK 
 
 forced by military autocracy to serve the com- 
 munity, is vastly stronger than an industrial 
 system which serves only a financial autoc- 
 racy. 
 
 The method by which Germany developed a 
 singleness of purpose and tremendous power 
 both for peace and for war — namely, autocratic 
 military authority — is hateful to us, but we 
 must not lose sight of the fact that such power 
 was developed and may be developed by some 
 other nation again in the future. If we would 
 be strong when we are again faced with a con- 
 tingency of developing a greater strength, or 
 submitting, we must first of all develop a single- 
 ness of purpose for the whole community. 
 
 England demonstrated the same thing; for 
 had England not rapidly increased her efficiency 
 in the production of munitions, it would have 
 been indeed a sad day for the British Empire. 
 
 In considering these facts, we should ask 
 ourselves if there is not some fundamental fact 
 which is accountable for the success of industry 
 under such control. The one thing which stands 
 out most prominently is the fact that, in the 
 attempt to make the industries serve the com- 
 munity, an attempt was made to abolish in- 
 dustrial privilege, and to give evert/ man an 
 opportunity to do what he could and to reward 
 him correspondingly.
 
 ECONOMICS OF DEMOCRACY 69 
 
 As before stated, the industrial system of 
 Germany was developed largely as an adjunct 
 to its military system, which, to a degree at 
 least, forced the abolition of financial and in- 
 dustrial privilege, and thereby in a large 
 measure eliminated incompetency in liigh 
 places. What results may not be expected, 
 therefore, if we abolish privilege absolutely, 
 and devote all our efforts to the development 
 of an industrialism w^hich shall serve the com- 
 munity and thus '' develop the unconquerable 
 power of real democracy f " 
 
 The close of the war and the abolition of 
 political autocracy has brought us face to face 
 with the question of a choice between the eco- 
 nomic autocracy of the past, or an economic 
 democracy. To prove that this is not 
 mere idle speculation, note what one of our 
 leading financiers said on the subject during 
 the war: 
 
 *'The President of the New York Life Insurance 
 Company," says Mr. Charles Ferguson, "told the 
 State Chamber of Commerce, during the great war, 
 that under modern conditions the existence of even two 
 rival sovereignties on this little planet has become 
 absurd. This is true. We must therefore drive for- 
 ward, through incredible waste and slaughter, to the 
 settlement of the question of which of the rival 
 Powers is to build the New Rome, and establish a
 
 70 ORGANIZING FOR WORK 
 
 military world-state on the Cassarean model — or else 
 we must now set our faces toward a real democracy.'' 
 
 What is the basis of such a democracy? 
 
 The one thing in all the ci\dlized world, which, 
 like the Catholic Church of the middle ages, 
 crosses all frontiers and binds together all 
 peoples, is business. The Chinaman and the 
 American by means of an interpreter find a 
 common interest in business. Business is 
 therefore the one possible bond which may 
 bring universal peace. Economists and finan- 
 ciers fully realized this, and believed that an 
 autocratic finance could accomplish the re- 
 sult. That was their fatal error. The bene- 
 ficiaries of privilege invariably battle among 
 themselves, even if they are 'strong enough to 
 hold in subjection those that have no privileges, 
 and who have to bear the brunt of the fight. 
 
 This is true whether the beneficiaries be in- 
 dividuals or nations. Hence neither internal 
 strife nor external war can be eliminated as 
 long as some people have privileges over others. 
 
 If privilege be eliminated not only wall the 
 danger of war be minimized, but the causes of 
 domestic strife will be much reduced in number. 
 Then, and not until then, will the human race 
 be in a position to make a continuous and un- 
 interrupted advance.
 
 ECONOMICS OF DEMOCRACY 71 
 
 The nation which first realizes this fact and 
 eliminates privilege from business, will have 
 a distinct lead on all others, and, other condi- 
 tions being equal, will rapidly rise to a dominat- 
 ing place in the w^orld. Such a nation will do 
 by means of the arts of peace, that which some 
 Germans seemed to think it was their mission 
 to do by means of war. The opportunity is 
 knocking at our door. Shall w^e turn it away? 
 
 The answer is that we must not turn it away. 
 In fact, we dare not, if we would escape the 
 economic convulsion that is now spreading over 
 Europe. Soon after the signing of the armis- 
 tice Mr. David R. Francis, formerly ambassa- 
 dor to Russia, said that the object of the Soviet 
 Government was to prevent the exploitation of 
 one man by another. According to Mr. Francis, 
 the cause of this convulsion is the attempt of 
 the social body to free itself of the exploitation 
 of one man by another. Then he added, '*Such 
 an aim is manifestly absurd." The convulsion 
 is made all the more severe because there are 
 people in every community that not only con- 
 sider this aim absurd, but use all their influence 
 to prevent the accomplishment of it. 
 
 If, at the end of a victorious w^ar for de- 
 mocracy, a prominent representative of the 
 victors is willing to proclaim publicly such a 
 sentiment, it is perfectly evident that we have
 
 72 ORGANIZING FOR WORK 
 
 not 3'et soh^ed all of our problems. Wliether we 
 approve of the Soviet method of government or 
 not, even Mr. Francis must admit that their 
 aim, as expressed by him, is a worthy one. It 
 would be surprising if in the time which has 
 elapsed since the Russian revolution an entirely 
 satisfactory and permanent method should have 
 been developed to prevent the exploitation of 
 one man by another, but the fact that they have 
 not yet established such a government is hardly 
 a basis for the statement that the establishment 
 of such a government is absurd. 
 
 This statement by Mr. Francis brings clearly 
 to the front the question — Is our business sys- 
 tem of the future going to continue to be one 
 of exploitation of one man by another, or is it 
 possible to have a business system from which 
 such privilege has been eliminated? 
 
 In this connection it may be interesting to 
 note that, for the past fifteen years, I and a 
 small band of co-workers have been attempting 
 to develop a system of industrial management 
 which should not be dependent on the exploita- 
 tion of one man by another, but should aim to 
 give each as nearly as possible his just dues. 
 Strange as it may seem to those of the old 
 way of thinking, the more nearly successful we 
 have been in this attempt, the more prosperous 
 have the concerns adopting our methods be-
 
 ECONOMICS OF DEMOCRACY 73 
 
 come. In \dew of this fact we beg to submit 
 that the proposition does not seem to us to be 
 absurd, even though we may not admit that 
 any of the solutions heretofore offered have 
 really accomplished the result. In a subsequent 
 chapter, however, we shall present the progress 
 which we have recently made in this direction.
 
 VIII 
 
 DEMOCRACY IN PRODUCTION 
 
 (Progress Charts) 
 
 It is unquestionable that the strategy of 
 General Foch, who so promptly took advantage 
 of the error of the Germans in not flattening out 
 the French salient between Montdidier and 
 Chateau-Thierry, enabled him to establish his 
 offensive which, with the new spirit put into 
 his whole force by the splendid fresh troops of 
 the American army, would undoubtedly have 
 wrested victory from the Germans in the long 
 run, even if they had been able to stave off the 
 revolution at home and keep their economic sys- 
 tem in good shape. It is a fact, how^ever, that 
 a growing discontent due to the increasing hard- 
 ships which their economic system was unable 
 to relieve, and which threatened a revolution, 
 was unquestionably an important factor in 
 lowering the morale of the army and worked 
 strongly in our favor. Of course, a knowledge 
 of the real conditions at home was kept as much 
 as possible from the soldiers at the front, but 
 
 74
 
 DEMOCRACY IN PRODUCTION 75 
 
 from what we have learned since the armistice 
 it must have been perfectly clear to those in 
 control some time before the armistice, that 
 their economic strength was exhausted, and 
 hence, the end had come. 
 
 It has even been suggested that the attempt 
 of the Germans to extend the salient at Chateau- 
 Thierry before they flattened out the salient 
 between Montdidier and that point, was taking 
 a /'gambler's chance," for they realized then 
 that they were near the end of their economic 
 resources and that they must have a quick vic- 
 tory or none. 
 
 Wliether this theory is true or not, the fact 
 remains that the threatened collapse of the 
 economic system was a controlling factor during 
 the last few months of the war. In other words, 
 war cannot be waged unless the economic sys- 
 tem is capable of supporting the population and 
 also furnishing the fighting equipment. To be 
 as strong as possible in war, therefore, we must 
 develop an economic system which will enable 
 us to exert all our strength for the common 
 good, which will therefore be free from auto- 
 cratic practices of either rich or poor, for such 
 practices take away from the community for the 
 benefit of a class. 
 
 It is pretty generally agreed that this philoso- 
 phy is correct in time of war, but both the rich
 
 76 ORGANIZING FOR WORK 
 
 and the poor seem to think that we do not need 
 to be strong in time of peace, and that we may 
 with impunity go back to the pull and haul for 
 profits regardless of the results to the com- 
 munity. Such a condition does not produce 
 strength, but weakness; not harmony, but dis- 
 cord. 
 
 In the struggle that arises under the above 
 conditions, between an autocratic ownership and 
 an autocratic labor party, the economic laws 
 which produce strength are largely disregarded 
 and the whole industrial and business system 
 becomes infected with such a feebleness that it 
 is incapable of supporting our complicated sys- 
 tem of modern civilization. This is exactly 
 what is happening in eastern Europe, where 
 civilization is tottering due to the fact that the 
 industrial and business system by which it was 
 supported is no longer functioning properly. 
 The production portion seems to have abso- 
 lutely broken do\\Ti, hence there is a shortage 
 everywhere of the necessities of life. This 
 failure is undoubtedly due to a combination of 
 causes; but whatever the cause, the result is 
 the same, for the violation of economic laws, 
 whether through interest, ignorance, or indo- 
 lence, will ultimately, to use the language of a 
 distinguished economist, ^^blow the roof off our 
 qivilization just as surely as the violation of
 
 DEMOCRACY IN PRODUCTION 77 
 
 the laws of chemistry wall produce an explosion 
 in the laboratory." 
 
 We must avoid the possibility of this explo- 
 sion at all hazards. If we would accomplish 
 this result we must begin at once not only to 
 make clear what the correct economic laws are, 
 but to take such steps in conformity with them 
 as will get the support of the community in 
 general, and lessen the danger of following 
 Europe into the chaos toward which she seems 
 heading. 
 
 Those who believed the war could last only a 
 few months based their opinion on the destruc- 
 tion of wealth it would cause. They had abso- 
 lutely no conception of the tremendous speed 
 with which this loss might be made good by the 
 productive force of modern industry. They did 
 not understand that the controlling factor in 
 the war would ultimately become productive 
 capacity. 
 
 When we entered the war, it was of course 
 necessary to raise money, and through the 
 persistent use of the slogan Money uill ivin the 
 ivar, our loans were promptly oversubscribed. 
 Although we were able to raise all the money we 
 needed, w^e had difficulty in transforming that 
 money quickly into fighting power, for we made 
 the fundamental error of considering that those 
 who knew how to raise money, also knew how
 
 78 ORGANIZING FOR WORK 
 
 to transform it into food and clothing, weapons, 
 and ships. The sudden ending of the war pre- 
 vented us from realizing how great this error 
 was. Even a superficial review of what took 
 place during 1918, however, reveals the fact 
 that our efforts at production were sadly in- 
 effective. So true is this that some of those in 
 aoithority not only discouraged all efforts to 
 show comparison between their promises and 
 their performances in such a manner that the 
 public could understand, but they actually for- 
 bade such comparisons to be made. 
 
 There was, in Washington, at the beginning 
 of the war, however, one man who understood 
 the necessity for just this kind of record, which 
 should be kept from day to day and should show 
 our progress in the work we had to do. This 
 man was Brigadier General William Crozier, 
 Chief of Ordnance. Apparently alone among 
 those in authority at that time, he recognized 
 the important principle that authority and re- 
 sponsibility for performance must be centered 
 in the same individual, and organized his de- 
 partment on that basis. Before the breaking 
 out of the war a simple chart system, which 
 showed the comparison between promises and 
 performances, had been established in the 
 Frankford Arsenal. This system General 
 Crozier began to extend throughout the Ord-
 
 DEMOCRACY IN PRODUCTION 79 
 
 nance Department as soon as we entered the 
 war, in order that he might at all times see 
 how each of his subordinates was performing 
 the work assigned to him. As the method was 
 new, progress was necessarily slow, but before 
 General Crozier was removed from his position 
 as Chief of Ordnance, in December, 1917, a 
 majority of the activities of the Ordnance De- 
 partment were sho\vn in chart form so clearly 
 that progress, or lack of progress, could be 
 seen at once. No other government department 
 had at that time so clear a picture of its prob- 
 lem and the progress being made in handling it. 
 The following incident will serve to show the 
 results that had been produced by this pol- 
 icy. Late in November, 1917, Dean Herman 
 Schneider of the University of Cincinnati, was 
 called to the Ordnance Department to assist on 
 the labor problem. Before deciding just how 
 he would attack his problem, he naturally in- 
 vestigated the activities of the department as 
 a whole, with the result that early in December, 
 1917, he wrote General C. B. Wheeler, under 
 whom he was working, a letter from which the 
 following is an extract: 
 
 **The numler of men needed for the Ordnance 
 Program should be ascertainable in the production 
 sections of the several divisions of the Ordnance De-
 
 80 ORGANIZING FOR WORK 
 
 partment. Investigation so far (in three production 
 sections) discloses that, except in isolated cases, a 
 shortage of labor is not evident. 
 
 ''Each production section has production and 
 progress chart systems. These seem to vary in minor 
 details only. Even without rigid standardization, 
 the charts give a picture of the progress of the whole 
 Ordnance Program including lags and the causes 
 therefor. Combined in one office and kept to date 
 they would show the requirements as to workers, as 
 well as to materials, transportation, accessory ma- 
 chinery, and all of the other factors which make or 
 break the program. 
 
 ''With a plan of this sort the Ordnance Depart- 
 ment would be in a position to state at any time its 
 immediate and probable future needs in men, ma- 
 terials, transportation, and equipment. 
 
 "The other Departments of the War Department 
 (and of other departments engaged in obtaining wiar 
 material) can, through their Production Sections, do 
 what the Ordnance Department can do, namely, as- 
 semble in central offices their production and progress 
 charts through which they would know their immedi- 
 ate and probable future needs. 
 
 "Finally, these charts assembled in one clearing 
 office would give the data necessary in order to mahe 
 the wJiole program of war production move with fair 
 uniformity, without disastrous compe ition and with 
 justice to the workers.'^ 
 
 This letter not only sets forth clearly what 
 General Crozier had accomplished, but it shows
 
 DEMOCRACY IN PRODUCTION 81 
 
 still more clearly Dean Schneider's conception 
 of the problem which at that time lay immedi- 
 ately before us. General Crozier's successors 
 allowed the methods which had been developed 
 to lapse, and Dean Schneider's vision of the 
 industrial problem and ability to handle it were 
 relegated to second place. 
 
 The methods referred to by Dean Schneider 
 were afterward adopted in an elementary way 
 by the Shipping Board and by the Emergency 
 Fleet Corporation. Although they were never 
 used to any great extent by those in highest 
 authority, who apparently were much better 
 satisfied simply to report what they had done, 
 rather than to compare it too closely with what 
 they might have done, they were used to great 
 advantage by many who were responsible for 
 results in detail. 
 
 Fig. 6 is a sample of the charts referred to 
 above. This is an actual Ordnance Department 
 chart, entered up to the end of December, 1917, 
 the names of the items being replaced by let- 
 ters. It was used to illustrate the methods 
 employed and to instruct people in the 
 work. 
 
 The distance between the current date and 
 the end of the heavy or cumulative line indi- 
 cates whether the deliveries of any article are 
 ahead or behind the schedule and how much.
 
 82 ORGANIZING FOR WORK 
 
 It is thus seen that the short lines indicate in- 
 stantly the articles which need attention. 
 
 As said before, when General Crozier was re- 
 moved from his office about the 1st of December, 
 1917, he had a majority of the items for which 
 he was responsible charted in this manner, and 
 was rapidly getting the same kind of knowledge 
 about the other items. Charts of this character 
 were on his desk at all times, and he made 
 constant use of them. 
 
 This chart is shown only as a sample and 
 represents a principle. Each item on such a 
 chart as the above may have been purchased 
 from a dozen different suppliers, in which case 
 the man responsible for procuring such articles 
 had the schedule and progress of each contract 
 charted in a manner similar to that on Chart 6. 
 Chart 7 is such a chart. The lines on Chart 6 
 represented a summary of all the lines on the 
 corresponding detail charts. 
 
 Similar charts were used during the war to 
 show the schedules and progress in building 
 ships, shipyards, and flying boats — and are now 
 being used for the same purpose in connection 
 with the manufacture of many kinds of ma- 
 chinery. The great advantage of this type of 
 chart, known as the straight line chart, is that 
 it enables us to make a large number of com- 
 parisons at once. 
 
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 Fjg. 6.— Progress C'habt (topi and Fio. 7.— Order Chart (bottom) 
 At the left of the upper chart is b list of articles lo be [trocured The amuuiita for which orders have been placed 
 shown in the column hiadcd "Amount ordered" The dati-s between ivliith deliveries are to be miide are shown by angles, 
 amount to be delivered each month is shown by a tigure at th<- left aide of the ajtace assigned to that month. The figure at 
 right of each time space shows the total amount to be delivered up to that date. 
 
 only half the amount due is received, this line goes only h 
 of lines indicates the amount delivered during that month 
 The hea%'y line shows cumulatively the amount deliver 
 line IB drawn to the scale of the piriods through which it 
 will represent the amount of time deliveries are behind or 
 which requii 
 
 
 iiount delivered up to the date of the last entry It will be noted that, if this 
 ugh which it passes, the distance from the end of the line to the ciirrinl tlatr 
 ime deliveries are behind or ahead of the schedule. It is thus seen that the short cumulative lines 
 .ention. as they represent items that are farthest behind schedule Z represents no di'liveries 
 chart is a avimmary of the individual orders and is represented on the upper chart by line A.
 
 DEMOCRACY IN PRODUCTION 83 
 
 From the illustrations given the following 
 principles upon which this chart system is 
 founded are easily comprehended: 
 
 First : The fact that all acti\dties can be 
 measured by the amount of time needed to per- 
 form them. 
 
 Second : The space representing the time unit 
 on the chart can be made to represent the 
 amount of activity which should have taken 
 place in that time. 
 
 Bearing in mind these two principles, the 
 w^iole system is readily intelligible and affords 
 a means of charting all kinds of acti\'ities, the 
 common measure being time.
 
 IX 
 
 DEMOCRACY IN THE SHOP 
 
 (Man Records) 
 
 In the chapter on **An Extension of the Credit 
 System,'^ we referred only to financial credit. 
 The term credit, of course, has a much broader 
 meaning. For instance, when a man has proved 
 his knowledge on a certain subject, we ^'give 
 him credit'* for that knowledge; when he has 
 proved his ability to do things, we **give him 
 credit'' for that ability. In other words, we 
 have confidence that he will make good. The 
 credit which we give a man, or the confidence 
 which we place in him, is usually based on his 
 record. We placed confidence in General 
 Pershing because of his record. We gave him 
 credit for being able to handle the biggest job 
 we had, and our faith was not misplaced. If 
 we had an exact record of the doings of every 
 man, we should have a very comprehensive 
 guide for the placing of confidence and the ex- 
 tending of credit — even financial credit. 
 
 Inasmuch, however, as our record of indi- 
 viduals is exceedingly meager and our informa- 
 
 84
 
 DEMOCRACY IN THE SHOP 85 
 
 tion concerning them is usually derived from 
 interested parties, we have very little sub- 
 stantial basis for placing confidence in or ex- 
 tending credit to people in general. It is there- 
 fore hardly to be expected that a business sys- 
 tem mil risk investment without a more sub- 
 stantial guarantee for the financial credit it 
 extends. It would seem, then, that if we really 
 wish to establish such a credit system as is 
 described in Chapter VI, we must keep such a 
 record of the activities of individuals as will 
 furnish the information needed to give a proper 
 guarantee. 
 
 All records, however, are comparative, and 
 the record of a man's performance is compara- 
 tively valueless unless we are able to compare 
 what he has done with what he should have 
 done. The possibilities in the modern industrial 
 system are so great that there is scarcely any 
 conception of them by people in general. In 
 fact, many accomplishments which have been 
 heralded as quite extraordinary, are shown on 
 careful examination to have been quite the re- 
 verse, when a comparison is made with the pos- 
 sibilities. 
 
 In the past if a man has accomplished a de- 
 sirable result, we have been pretty apt to let it 
 go on its face value, and have seldom inquired 
 into how it was done. We have no criticism of
 
 86 ORGANIZING FOR WORK 
 
 this as a habit of the past, but the war has 
 brought an entirely different viewpoint into the 
 world, and shown others besides Americans how 
 inefficiently the world is conducting its civiliza- 
 tion. Other peoples have realized that the real 
 asset of a nation is its human power, and un- 
 doubtedly will soon begin to adopt means of 
 measuring this power to the end that they may 
 use it more effectively. 
 
 Some of us have made a start in this work 
 by keeping individual records of operatives, 
 showing as nearly as possible what they have 
 done in comparison with what they might have 
 done, with the reasons for their failing to ac- 
 complish the full amount. By systematically 
 attempting to remove the obstacles Avhich stood 
 in the way of complete accomplishment, we have 
 secured a remarkable degree of co-operation, 
 and developed in workmen possibilities which 
 had been unsuspected. Further, we have de- 
 veloped the fact that nearly all workers wel- 
 come any assistance which may be given them 
 by the foreman in removing the obstacles which 
 confront them, and teaching them to become 
 better workers. Chart No. 8 is an actual chart 
 of this type from a factory and covers a period 
 of two weeks. Each working day was ten hours, 
 except Saturday, which was ^ve. The charts 
 are ruled accordingly. If a worker did all that
 
 DEMOCRACY IN THE SHOP 87 
 
 was expected of him in a day the thin line goes 
 clear across the space representing that day, 
 and if he did more or less, the number of such 
 thin lines or the length of the line indicate the 
 amount. The number of days' work he did in 
 a week is represented by the hea\y line. Wher- 
 ever a dotted line is shown, it indicates that 
 during that time the man worked on a job for 
 which we had no estimated time. The letters 
 are symbols indicating the cause of failure to 
 perform the full amount of work. A key to 
 these symbols follows Chart No. 8. 
 
 Inasmuch as, according to our idea of man- 
 agement, it is a foreman's function to remove 
 the obstacles confronting the workmen, and to 
 teach them how to do their work, an average 
 of the performance of the workmen is a very 
 fair measure of the efficiency of the foreman. 
 This is shown by the line at the top of the 
 chart. It may readily be seen that such a chart 
 system gives a very fair means of fixing the 
 compensation of workers and foremen, and a 
 series of such charts kept up week after week 
 will give us a measure of the amount of confi- 
 dence which we may place in the individual 
 foreman and workman, for if all obstacles are 
 removed by the foreman the workman's line is 
 a measure of his effectiveness. 
 
 Just as the line representing the average of
 
 88 ORGANIZING FOR WORK 
 
 all the workers is a measure of the foreman, so 
 a line representing the average of all the fore- 
 men is in some degree at least a measure of the 
 superintendent. 
 
 The improvement which has been made by 
 workers under our teaching and record-keeping 
 systems involves more than is at first apparent. 
 For instance, it has clearly been proven that 
 poor workmen are much more apt to migrate 
 than good workmen. The natural conclusion 
 from this is that if we wish to make workmen 
 permanent, our first step must be to make better 
 workmen of them. Our experience proves this 
 conclusion to be correct. 
 
 Many of our large industrial concerns have 
 estimated that the cost of breaking in a new 
 employee is very high — running from about 
 $35.00 up. We have already satisfied ourselves 
 that if only a fraction of this amount is ex- 
 pended in training the inferior workman, we 
 can reduce migration very materially. In other 
 words, money spent in proper teaching and 
 training of workmen is a highly profitable in- 
 vestment for any industrial concern, provided 
 there is some means of measuring and recording 
 the result. So beneficial have our training 
 methods proved that we are inclined to believe 
 that the practice of stealing good workmen from
 
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 I I do the work. 
 Estimated time for work done. 
 
 .pected to do. The reasons for his falling behind i 
 
 fallen hehind wh
 
 DEMOCRACY IN THE SHOP 89 
 
 one^s competitor itill ultimately prove to he as 
 Mtipro fit able as stealing his property. 
 
 Before the rise of modern industry the world 
 was controlled largely by predatory nations who 
 held their own by exploiting and taking by force 
 of arms from their less powerful neighbors. 
 "With the rise of modern industrialism, produc- 
 tive capacity has been proven so much stronger 
 than military power that we believe the last 
 grand scale attempt to practice the latter 
 method of attaining wealth or power has been 
 made. In this great war it was clearly proven 
 that not what ive have but ivhat ive can do is 
 the more important. It clearly follows, then, 
 that the workers we have are not so important 
 as our ability to train others ; again illustrating 
 the fact that our productive capacity is more 
 important than our possessions. 
 
 That the methods which I have here so in- 
 adequately described are of broad applicability, 
 has been proven by the fact that they have re- 
 ceived enthusiastic support of the workmen 
 wherever they have been tried. As previously 
 said, it is undoubtedly true that the *' efficiency'' 
 methods which have been so much in vogue for 
 the past twenty years in this country, have 
 failed to produce what was expected of them. 
 The reason seems to be that we have to a large 
 extent ignored the human factor and failed to
 
 90 ORGANIZING FOR WORK 
 
 take advantage of the ability and desire of the 
 ordinary man to learn and to improve his posi- 
 tion. Moreover, these ** efficiency'' methods 
 have been applied in a manner that was highly 
 autocratic. This alone would be sufficient to 
 condemn them, even if they had been highly 
 effective, which they have not. 
 
 In this connection it has been clearly proven 
 that better results can be accomplished if the 
 man who instructs the workman also inspects 
 the work and not only shows the workman 
 where he is wrong, but how to correct his 
 errors, than if the inspection is left to a com- 
 paratively ignorant man, who is governed by 
 rules. The attempt to combine instruction and 
 inspection in one man has met with the highest 
 approval among the workmen, with the result 
 of better work and less loss. This method is 
 contrary to the usual practice, inasmuch as 
 instruction and inspection have been considered 
 two functions, the former requiring an expert 
 and the latter a much less capable, and hence 
 cheaper, man. We are satisfied that this 
 analysis is defective; the inspector who can 
 show the workman how to avoid his errors is 
 usually worth far more than the extra com- 
 pensation required to secure his services. It 
 may be impossible to measure the exact 
 material value of these methods individually,
 
 DEMOCRACY IN THE SHOP 91 
 
 but the total effect is reflected in an improved 
 and increased product at a lower cost. 
 
 Inasmuch as there is no necessity for any 
 coercion in applying these methods when we 
 have an instructor who is capable of being a 
 leader, we rapidly attain a high degree of 
 democracy in the shop. On the other hand, if 
 the instructor chosen fails to measure up to the 
 standard of leadership, it is never long before 
 his shortcomings are exposed, for through the 
 medium of our charts available facts are easily 
 comprehended by all. By these methods we 
 automatically select as leader the man who 
 knows what to do and how to do it, and when 
 he has been found and installed, progress is 
 rapid and sure.
 
 DEMOCEACY IN MANAGEMENT 
 
 (Machine Records) 
 
 Having demonstrated by experience that it is 
 possible to run a shop democratically and that 
 the idea of giving every man a fair show and 
 rewarding him accordingly is not really absurd, 
 we naturally ask how far upward into the 
 management we can carry this principle. The 
 world still believes that authority must be con- 
 ferred, and has a very faint conception of what 
 we mean by intrinsic authority, or the authority 
 that comes to a man who knows what to do and 
 how to do it, and who is not so much concerned 
 with being followed as on getting ahead. 
 
 The problem of the manager is much wider 
 than that of the superintendent or the foreman, 
 for he must see that there is work to be done, 
 materials to work with and men to do the work, 
 besides numerous other things which are not 
 within the sphere of the foreman. 
 
 The object of a shop being to produce goods, 
 the first problem which comes to him is to find 
 
 92
 
 DEMOCRACY IN MANAGEMENT 93 
 
 out to what extent the shop is performing the 
 function for which it was built. In other words, 
 are the various producing machines operating 
 all the time and if not, why not I An oppor- 
 tunity for our chart comes in again, and the 
 reason why a machine did not work at all is 
 indicated by symbols. Chart No. 9 is one of 
 this type. The thin lines represent the number 
 of hours each day a machine was operated; 
 the heavy line represents the total number of 
 hours it operated during the week. The sym- 
 bols indicate the causes of idleness ; some were 
 due to lack of work; some to lack of material; 
 some to lack of men; some on account of re- 
 pairs, etc. If we have not work enough to keep 
 the shop busy, we must look for the cause by 
 asking: Is there work to be had? Is our price 
 low enough? Is our quality good enough? The 
 answer to the first two must be determined by 
 the manager in connection with the sales de- 
 partment. The third by the manager in connec- 
 tion w^th the shop superintendent. If our idle- 
 ness is due to lack of material, the question 
 must be taken up with the buyer and store- 
 keeper. If it is due to lack of help, the labor 
 policy and the wage system must be studied. 
 If the idleness is due to repairs on machinery, 
 the question is one for consideration by the 
 superintendent and the maintenance depart-
 
 94 ORGANIZING FOR WORK 
 
 ment. In every case the responsibility for a 
 condition is traced directly to its source. More- 
 over, as it is entirely possible to determine the 
 expense incurred by idleness, such expense may 
 be allocated directly to the responsible parties. 
 Inasmuch as a real management system is 
 simply a mechanism for keeping all concerned 
 fully advised as to the needs of a shop, and for 
 showing continuously how these needs have 
 been supplied, the comparison between what 
 each man from the top to the bottom did and 
 what he should have done is easily made. 
 Under a system of management based on our 
 charts, it soon becomes evident to all, who is 
 performing his function properly and who is 
 not. A man who is not making a success, knows 
 about it as soon as anybody else, and has the 
 opportunity of doing better if he can. If he is 
 not making good, it is very seldom that he has 
 any desire to hold on to the job and advertise 
 his incompetency to his fellows. Moreover, 
 it takes but a short experience with these 
 methods to convince a man that his record will 
 discredit him very much if he uses opinions 
 instead of facts in determining his methods 
 and policies. We are thus able to apply the 
 same standards to those in authority that we 
 apply to the workmen. In other Avords we ask 
 of all — how well did he perform his task? A

 
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 H Lack of help 
 M Lack of or defec 
 P Lack of power 
 
 R Repairs 
 T Lack of 1 
 W Lack of
 
 DEMOCRACY IN MANAGEMENT 95 
 
 short line on a chart points unfailingly to him 
 who needs most help. 
 
 The Machine Record charts just referred to 
 have to do with, what proportion of the plant 
 was operated. The Man Record charts indicate 
 the effectiveness with which the machines were 
 operated during the time they were operated. 
 For instance, if a machine were operated only 
 one-half the time, and with only one-half of its 
 effectiveness during that time, we should get 
 out of the machine only one-quarter of its pos- 
 sible use. A combination, therefore, of these 
 two sets of charts, which gives a measure of the 
 manager, is a basis of our faith in him, and a 
 measure of the financial credit that may be ex- 
 tended to him as a producer. A little con- 
 sideration will show that such a record is a far 
 safer basis for financial credit in many cases 
 than physical property, and affords a means 
 of financing ability or productive capacity as 
 well as ownership. It is not to be concluded 
 that this subject is being presented in its final 
 and complete form, but it is claimed that enough 
 has been established to enable us to make an 
 irdelligent start in the operation of the new 
 credit system, which the Federal Government 
 was obliged to adopt without any guide. 
 
 Further, it is safe to say that if such records 
 as the ones just described had been available
 
 96 ORGANIZING FOR WORK 
 
 for the prominent business men of the country 
 at the breaking out of the war, we should have 
 been saved much time, and the expenditure 
 of many millions of dollars. 
 
 The fact that such a system is applicable to 
 the arts of peace as well as those of war; that 
 it will pay for itself over and over again while 
 it is being installed; and that it will enable 
 us to value men according to service they can 
 render, would seem to be sufficient reason why 
 we should lose no more time than is necessary 
 in taking steps to extend it throughout the 
 nation. The fact that it is not an efficiency 
 system as the term is generally understood, 
 nor a system of scientific management as that 
 term is understood, but simply one which en- 
 ables us to use all the knowledge available and 
 in a manner which is intelligible to the most 
 ordinary w^orkman as well as to the best edu- 
 cated executive, is responsible for the enthusi- 
 asm with which it has been received by the 
 workmen as well as the executive. It is de- 
 signed to enable all of us to use all the knowl- 
 edge we have to the best advantage, and does 
 not in the slightest interfere with, but rather 
 supplements and supports, the work of those 
 w^hose problem is to acquire additional knowl- 
 edge. 
 
 In the preceding chapters we have given our
 
 DEMOCRACY IN MANAGEMENT 97 
 
 ^T.ew of the economic situation; of the forces 
 that were affecting it, and whither it was tend- 
 ing. We have also shown our mechanism for 
 making effective use of all the knowledge avail- 
 able. We also see that with increase in the 
 amount and availability of knowledge the more 
 certain our course of action is outlined, and the 
 less we need to use opinion or judgment. 
 
 Moreover, our record charts invariably indi- 
 cate the capable men, and not only give us an 
 indication of how to choose our leaders, but a 
 continual measure of the effectiveness of their 
 leadership after they are chosen. We thus 
 eliminate, to a large extent at least, opinion or 
 judgment in the selection of leaders, and in so 
 far do away with autocratic methods from 
 whatever source.
 
 XI 
 *^THE RELIGION OF DEMOCRACY" 
 
 For over a thousand years the history of the 
 world has been made by two great forces — the 
 church and the state — the church basing its 
 power on idealism and moral forces, the state 
 depending almost entirely upon military power. 
 At times these two forces have seemed for a 
 while to co-operate, and then to become antago- 
 nistic. Today they are absolutely distinct, 
 working in different fields, with but little ground 
 in common, and a rival claims the middle of the 
 stage, for during the last century there has 
 come into the world another force, which has 
 concerned itself but little with our religious 
 activities, and interested itself in our political 
 activities only in so far as it could make the 
 political forces serve its ends. I speak of the 
 modern business system, based on the tre- 
 mendously increased productive capacity of the 
 race due to the advance of the arts and sciences. 
 The rapid expansion of this new power has 
 thrown all our economic mechanism out of gear, 
 and because it failed to maintain a social pur- 
 pose, which is common to both of the other 
 
 98
 
 ''THE RELIGION OF DEMOCRACY" 99 
 
 forces, produces cross-currents and antago- 
 nisms in the community which are extremely 
 detrimental to society as a whole. 
 
 One hundred years ago, each family — cer- 
 tainly each community — produced nearly every- 
 thing needed for the simple life then led. 
 
 The village blacksmith and the local mill 
 served the community, which existed substan- 
 tially as a self-contained unit. 
 
 With the growth of the transportation sys- 
 tem and grand scale production many of the 
 functions of the local artizans were taken over 
 by the factory, just as the flour mills of 
 Minneapolis supplanted the local mills, which 
 went out of existence. 
 
 In the same manner other large centralized 
 industries by superior service drove out of ex- 
 istence small local industries. By reason of 
 improved machinery and a better technology 
 the centralized industries w^ere able to render 
 this superior service, at the same time securing 
 large profits for themselves. Unfortunately for 
 the country at large, those who later came into 
 control of these industries did not see that the 
 logical basis of their profits was service. When, 
 therefore, the community as a whole had 
 come to depend upon them exclusively, they 
 realized their opportunity for larger profits 
 still, and so changed their methods as to give 
 
 ew^'=V'2L
 
 100 ORGANIZING FOR WORK 
 
 profits first place, oftentimes ignoring almost 
 entirely the subject of service. It is this change 
 of object in the business and industrial system, 
 which took place about the close of the nine- 
 teenth century, that is the source of much of 
 the woe that has recently come upon the world. 
 Unless the industrial and business system can 
 rapidly recover a sense of service and grant 
 it the first place, it is hard to see what the next 
 few years may bring forth. 
 
 The great war through which we have just 
 passed has done away with political autocracy, 
 apparently forever, but it has done nothing 
 whatever in this country to modify the auto- 
 cratic methods of the business system, which 
 is a law unto itself and which now accepts no 
 definite social responsibility. This force is 
 controlled by and operated in the interest of 
 ownership, with, in many cases, but little con- 
 sideration for the interests of those upon whose 
 labor it depends, or for that of the community. 
 We should not be surprised, therefore, that the 
 workman who is most directly affected by this 
 policy is demanding a larger part in the control 
 of industry, especially as the war has taught 
 him, in common with most of us, that the method 
 of operating an industry is more important to 
 the community than the particular o\vnership 
 of that industry. The result of this knowledge
 
 *'THE RELIGION OF DEMOCRACY" 101 
 
 is that the workers throughout the world are 
 striving everywhere to seize the reins of power. 
 Unfortunately for the world at large, these 
 workers as a rule have no clearer conception of 
 the social responsibility than those already in 
 control. Moreover, having had no experience 
 in operating grand scale industry and business, 
 it is more than likely that their attempt to do 
 so will result disastrously to the community. 
 The industrial system as a whole is thus threat- 
 ened with a change of control which we can 
 scarcely contemplate w^tli equanimity. We 
 naturally ask if there is any possible relief from 
 the confusion with which we are threatened. 
 We think there is, but not by any of the methods 
 generally advocated by ^'intellectuals'' who are 
 not closely in touch with the moving forces. 
 
 One class believes that the answer comes in 
 government ownership and government control 
 of industries. The experience of the world so 
 far does not, however, give much encourage- 
 ment along these lines, for in some quarters 
 where public utilities have to a large extent 
 been run by the government, it is frankly ad- 
 mitted that the government is being run by the 
 business system, which leaves us just where we 
 were, unless we can get a social purpose into 
 that system, in which case the need for govern- 
 ment ownership would disappear. Is such a
 
 102 ORGANIZING FOR WORK 
 
 thing possible? Unless it can be shown that a 
 business system which has a social purpose is 
 distinctly more beneficial to those who control 
 than one which has not a social purpose, I 
 frankly confess that there does not seem to be 
 any permanent answer in sight. On the other 
 hand, if it can be shown conclusively that a 
 business system operated by democratic 
 methods (and the test of such a system is that 
 it acts without coercion and offers each man 
 the full reward of his labor) is more beneficial 
 to those who lead than the present autocratic 
 system, we have a basis on which to build a 
 modern economic state, and one which we can 
 establish without a revolution, or even a serious 
 jar to our present industrial and business sys- 
 tem. In fact, so far as I have been able to 
 put into operation the methods I am advocating, 
 we have very materially reduced the friction 
 and inequalities of the present methods much 
 to the benefit of both employer and employee. 
 
 In 1908 I wrote a paper for the American 
 Society of Mechanical Engineers, on ^'training 
 workmen'' in which I used the following ex- 
 pression: ^'The general policy of the past has 
 been to drive; but the era of force must give 
 way to that of knowledge, and the policy of the 
 future will be to teach and to lead, to the ad- 
 vantage of all concerned.''
 
 ''THE RELIGION OF DEMOCRACY" 103 
 
 This sentiment met with much hearty sup- 
 port, but inasmuch as no mechanism had at 
 that time come into general use for operating 
 industry in that manner, the sentiment re- 
 mained for most people simply a fine sentiment. 
 At that time the organization of which I am the 
 head had already made some advance in the 
 technology of such a system of management, 
 and since that time we have continued to de- 
 velop our methods along the same lines, as 
 sho^\^l in the previous chapters of the book. 
 
 Throughout this little book we have at- 
 tempted to make clear that those who know 
 what to do and how to do it can most profitably 
 be employed in teaching and training others. 
 In other words, that they can earn their great- 
 est reward by rendering ser\'ice to their fellows 
 as well as to their employers. It has only been 
 recently that we have been able to get owners 
 and managers interested in this policy, for all 
 the cost systems of the past have recorded such 
 teachers as non-producers and hence an ex- 
 pense that should not be allowed. Xow, how- 
 ever, with a proper cost-keeping system sup- 
 plemented by a man-record chart system, we see 
 that they are really our most effective pro- 
 ducers. 
 
 We have attempted in this book to show an 
 example of the mechanism by which we have
 
 104 ORGANIZING FOR WORK 
 
 put into operation our methods, and some of 
 the results that have been obtained by them, the 
 most important of which is that under such a 
 system no ^' blind guides'' can permanently 
 hold positions of authority, and that leadership 
 automatically gravitates to those who know 
 what to do and how to do it. Moreover, we have 
 yet to find a single place where these methods 
 are not applicable, and where they have not 
 produced better results than the old autocratic 
 system. Moreover, they produce harmony be- 
 tween employer and employee and are welcomed 
 by both. In other words, ive have proved in 
 many places that the doctrine of service which 
 has been preached in the churches as religion 
 is not only good economics and eminently prac- 
 tical, but because of the increased production 
 of goods obtained by it, promises to lead us 
 safely through the maze of confusion into which 
 we seem to be headed, and to give us that in- 
 dustrial democracy which alone can afford a 
 basis for industrial peace. 
 
 This doctrine has been preached in the 
 churches for nearly two thousand years, and 
 for a while it seemed as if the Catholic Church 
 of the middle ages w^ould make it the controlling 
 factor in the world ; but the breaking up of the 
 Church of the middle ages into sects, and the 
 advance of that intellectualism which placed
 
 '*THE RELIGION OP DEMOCRACY" 105 
 
 more importance upon words and dogma than 
 upon deeds, gave a setback to the idea which 
 has lasted for centuries. Now, when a great 
 catastrophe has made us aware of the futility 
 of such methods, we are beginning to realize 
 that the present business system needs only 
 the simple methods of the Salvation Army to 
 restore it to health. It is absolutely sound at 
 the bottom. 
 
 The attempt to run the world by words and 
 phrases for the bcaneiit of those who had the 
 power to assemble those words and phrases in- 
 volved us in a great war, and the continued 
 application of these methods seems to be lead- 
 ing us into deeper and deeper economic con- 
 fusion. We are therefore compelled to recog- 
 nize that the methods of the past are no longer 
 possible, and that the methods of the future 
 must be simpler and more direct. 
 
 It should be perfectly e\'ident that mth the 
 increasing complexity of the modern business 
 system (on which modern civilization depends) 
 successful operation can be attained only by 
 following the lead of those who understand 
 practically the controlling forces, and are will- 
 ing to recognize their social responsibility in 
 operating them. 
 
 Any attempt to operate the modern business 
 system by people who do not understand the
 
 106 ORGANIZING FOR WORK 
 
 driving forces is sure to reduce its effective- 
 ness, and any attempt to operate it in the in- 
 terest of a class is not much longer possible. 
 
 For instance, under present conditions the 
 attempt to drive the workman to do that which 
 he does not understand results in failure, even 
 if he is willing to be driven, which he no longer 
 is; for he has learned that real democracy is 
 something more than the privilege of express- 
 ing an opinion. We are thus forced into the 
 new economic condition, and, whether we like it 
 or not, will soon realize that only those u'Jio 
 know ivhat to do and lioiv to do it will have a suf- 
 ficient following to make their efforts worth 
 while. In other words, the conditions under 
 which the great industrial and business sys- 
 tem must operate to keep our complicated sys- 
 tem of modern civilization going successfully, 
 can be directed only by real leaders — men who 
 understand the operation of the moving forces, 
 and whose prime object is to render such service 
 as the community needs. 
 
 In order to secure such leaders they must 
 have full reward for the service they render. 
 This rules out the dollar-a-year man, whose 
 qualifications too often were not that he knew 
 how to do the job, but that he was patriotic and 
 could afford to give his services for nothing. 
 In spite of such a crude way of selecting men
 
 ''THE RELIGION OF DEMOCRACY" 107 
 
 to handle problems vital to the life of the 
 nation, many did good work during the war. 
 
 The laws of the United States, however, for- 
 bid a man to w^ork for the government for 
 nothing, and both those who served at a dollar 
 a year, and those who accepted that service, 
 \dolated the spirit of the law, which was aimed 
 to sustain the democratic practice of reward- 
 ing a man according to the service he rendered. 
 Any other practice is undemocratic. 
 
 In 1847, Mr. Lincoln wrote: **To secure to 
 each laborer the whole product of his labor, or 
 as nearly as possible, is a worthy object of any 
 good government. But then the question arises, 
 how can a government best effect this! * * * 
 Upon this the habits of our whole species fall 
 into three great classes — useful labor, useless 
 labor, and idleness. Of these, the first only is 
 meritorious, and to it all the products of labor 
 rightfully belong ; but the two latter, while they 
 exist-, are hea\y pensioners upon the first, rob- 
 bing it of a large portion of its just rights. 
 The only remedy for this is to, so far as pos- 
 sible, drive useless labor and idleness out of 
 existence.'' 
 
 Attempts are always being made to eliminate 
 the idleness of workmen and useless labor by 
 the refusal of compensation. Unfortunately, 
 however, there has been no organized attempt
 
 108 ORGANIZING FOR WORK 
 
 as yet to force capital to be useful by refusing 
 compensation to idle capital, or to that expended 
 uselessly. Capital which is expended in such 
 a manner as to be non-productive, and capital 
 which is not used, can receive interest only by 
 obtaining the same from capital which was pro- 
 ductive or from the efforts of workmen, in 
 either of which cases it gets a reward which 
 it did not earn, and which necessarily comes 
 from capital or labor which did earn it. 
 
 Reward according to service rendered is the 
 only foundation on which our industrial and 
 business system can permanently stand. It is 
 a violation of this principle which has been made 
 the occasion for socialism, communism, and 
 Bolshevism. All we need to defeat these 
 *4sms'' is to re-establish our industrial and 
 business system firmly on the principles advo- 
 cated by Abraham Lincoln in 1847, and we shall 
 establish an economic democracy that is 
 stronger than any autocracy. 
 
 Moreover, it conforms absolutely to the teach- 
 ings of all the churches, for Christ, who was the 
 first to understand tjie commanding power of 
 service, thus stands revealed as the first great 
 Economist, for economic democracy is simply 
 applied Christianity. This was also clearly 
 understood by the great leaders of the Church 
 of the middle ages, whose failure to establish it
 
 ''THE RELIGION OF DEMOCRACY" 109 
 
 as a general practice was largely due to the 
 rise of an intellectualism which disdained prac- 
 ticality. 
 
 Now, however, when a great catastrophe has 
 shown us the error of our ways, and convinced 
 us that the world is controlled by deeds rather 
 than words, we see the road to Universal Peace 
 only through the change of Christianity from a 
 weekly intellectual diversion to a daily practical 
 reality.
 
 INDEX 
 
 Ability to Do Things, 41, 42, 
 
 64, 65, 84 
 Accountants, 18, 19, 32, 33, 
 
 38 
 Activities (Charting), 17, 74, 
 
 78, 79, 80, 81, 82, 83, 84, 
 
 85, 86, 87, 88, 91, 92, 93, 
 
 94, 95, 97 
 Allies, iii 
 
 America, 14, 23, 32 
 American Workmen, 6, 13, 44, 
 
 106 
 Authority, 92, 103 
 Autocracy, 8, 176 
 
 Bankers, 7, 8, 53, 54, 55, 56, 
 
 69 
 Bolshevism, 7, 8, 108 
 Business Men, 5, 8, 9, 24, 62 
 Business System, iv, 3, 5, 13, 
 
 15, 17, 24, 53, 67, 70, 72, 
 
 76, 81, 85, 90, 98, 99, 100, 
 
 101, 102, 105, 108 
 
 Capital, 12, 26, 108 
 Carnegie, Andrew, 55 
 Church, 70, 98, 104, 108 
 Civilization, 3, 11, 12, 86 
 Coal Administration, iii, 10 
 Cost Keeping, 25, 26, 28, 29, 
 
 30, 31, 32, 35, 37, 38, 39, 
 
 42, 43, 44, 48, 49, 55, 103 
 
 Cost of New Employees, 88, 
 
 89 
 Credit, 84 
 Credit System, 52, 53, 54, 55, 
 
 57, 58, 59, 84, 85, 95 
 Crozier (General), 78, 81 
 
 Democracy in Industry, 65, 
 
 74, 89 ' 
 
 Democracy in" Management, 
 
 92 
 
 Democracy in Politics, v 
 
 Democracy in Production, 74 
 
 Democracy in the Shop, 84 
 Dollar-a-Year Service, 18, 20, 
 
 106, 107 
 
 Economic Conditions, 12, 41 
 Economics of Democracy, 60 
 Economic Force, iii 
 Economic System, v, 57, 60, 
 
 74, 75, 96, 97 
 Economists, 41, 60, 70 
 Efficiency and Idleness, 23, 
 
 24, 25, 33, 47, 48, 49, 64 
 Efficiency Campaign, 23, 25, 
 
 89 
 Efficiency Methods, 89, 90, 96 
 
 111
 
 112 
 
 INDEX 
 
 Emergency Fleet Corporation, 
 
 8, 9, 12, 81 
 England, 67, 68 
 Europe, v, 6, 10, 11, 12, 14, 
 
 15, 71, 76, 77 
 Expense of Idleness, 26, 33, 
 
 44, 47, 48, 50, 51 
 
 13, 17, 20, 21, 22, 41, 42, 
 
 66, 68, 69, 76, 85, 108 
 Industrial Unrest, 4, 5, 6, 7, 
 
 16 
 Inspection, 90 
 
 Kaiser, 8 
 
 Federal Government, 8, 10, Labor, 26, 108 
 
 24, 54, 58, 95 Labor Unions, 11, 26 
 Federal Reserve Banking 
 
 System, 52 Machine Records, 45, 92, 93, 
 
 Federal Trade Commission, 94, 95 
 
 10 Managers, 50, 61, 64, 90, 92, 
 
 Financial Credit, 84, 85, 95 94 
 
 Financing, 8, 9, 52, 53, 54, Man Records, 84, 85, 86, 87, 
 
 55, 56, 58, 70, 84 88, 91, 94, 95 
 
 Food Administration, iii Manufacturers, 28, 29, 30, 31, 
 
 Ford, Henry, 55 32, 33, 34, 35, 37, 38, 39, 
 
 55, 86, 87 
 
 Germany, iii, 61, 65, 66, 67, Militarism, 7, 66 
 
 68, 69, 71, 74, 75 Military Autocracy, 66, 68 
 
 Government Financing, 8 Military Methods, 41, 65, 66, 
 
 Government Ownership, 101 
 Great Britain, 11 
 
 69, 74, 75, 98 
 Munitions, 62, 64 
 
 Harvesting Dollars, 24 
 Human Factor, 89, 90 
 
 Idleness, 23, 25, 26, 27, 34, 
 
 37, 43, 44, 45, 47, 48, 49, 
 
 92, 93 
 Industrial Engineer, 16, 20, Political Autocracy, 69, 100 
 
 21, 38, 39 Political System, iii, 41, 69, 
 
 Industrial Management, 72, 98 
 
 73 Preparedness, 60, 61, 62, 65, 
 
 Industrial System, iv, 3, 8, 69, 78 
 
 Opinions vs. Facts, 20 
 Ordnance Department, 78, 79, 
 80 
 
 Parting of the Ways, 3, 6, 14 
 
 Pershing (General), 84
 
 INDEX 
 
 113 
 
 Privilege, 65, 68, 70, 71, 72 
 Production, 20, 28, 54, 56, 57, 
 
 63, 64, 76, 79, 80 
 Production and Costs, 28 
 Productive Capacity, 54, 55, 
 
 57, 62, 63, 64, 77, 95, 99, 
 
 100 
 Profits, 5, 7, 12, 14, 17, 33, 
 
 44, 54, 99, 100 
 Progress Charts, 17, 74, 78, 
 
 79, 80, 81, 82 
 Public Money, 50 
 Public Service Corporations, 
 
 9, 10, 12 
 
 Radicals, iv, 6 
 Religion, 98, 104, 108, 109 
 Religion of Democracy, 98 
 Russia, 6, 7, 11, 71, 72 
 
 99, 100, 103, 105, 106, 
 108 
 
 Schneider (Dean), 79, 80, 81 
 Sherman Anti-Trust Law, 4 
 Shipping Board, 81 
 Social Preparedness, 60, 65 
 Social Responsibility, 15, 
 
 100, 101, 102, 105 
 
 Soviet System, iii, 6, 7, 11, 
 
 15, 71, 72 
 Statisticians, 18, 19 
 
 Theories, 32, 43, 57 
 Training Workmen, 86, 87, 
 
 88, 89, 90, 91, 102, 103 
 Trusts and Combinations, 4 
 
 Value of Industrial Property, 
 41, 42 
 
 Service, iv, 3, 5, 8, 10, 12, 13, 
 14, 17, 18, 22, 67, 68, 96, 
 
 Wall Street, 52, 53 
 War Labor Board, iii
 
 from which it was borrowed. 
 
 THE LimtAKt 
 SITY OF CALIFORMJJ 
 
 LOS ANGELES Library 
 <Jraduate School of Business Administration 
 University of California 
 Los Angeles 24, California
 
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