Re-organizing a Big Business
ARTHUR WARREN IN SUCCESS MAGAZINE
Mr. Warren opens his article with a disquisition on the modern director, whom he describe* in a clever manner. He then proceeds to outline, in the portion of his article which we reproduce, the work which lies before the executive head of a big business, who is required to re-organize the entire system. The difficulties lying in his way are pointed out one by one.
REORGANIZING a business, a big business, a big “trust,” is harder work, far harder work, than organizing a new undertaking. The new president has an uphill road before him. That is why he was selected. He has had no connection with any of the cliques of the corporation, or with any of the concerns that were absorbed. He finds himself at the head of a huge business whose several manufactories are hundreds of miles apart, and whose directors, as likely as not, meet a thousand miles away from the head office. His selling organization, that is supposed to cover the country, is going to sleep, and a capital of, say, forty or fifty millions, half of which is water, is not earning dividends. Of his board of directors he is the single member who has had a practical experience at manufacturing.
No diagram can suit all cases. It suggests actual conditions rather than elaborate details. As the business management of the nation is divided into three parts—executive, legislative and judicial—so the management of a many-millioned company has its three branches — executive (which furnishes the money and the policy), manufacturing, and selling. It is one thing to lay this out on paper ; it is another thing, a very different thing, to carry it into effect. For, consider : the company has
bought, leased, and absorbed smaller companies. Each company thus brought into the fold increases the friction, for it brings in a fresh field
for the exercise of jealousy, and jealousy is a very powerful force in business. The concern that is newly taken over finds very quickly that it is playing second fiddle, or even third, where formerly it was a star soloist, or, at any rate, the first violin. Now it takes orders instead of giving them. Its president becomes merely a director in the larger enterprise ; its treasurer is swallowed up in the general accounting department ; its chief engineer misses the “chief” from his title and is instructed to report to another chief in a distant city. The superintendent finds that he superintends only a wing of the army and reports to a general superintendent, perhaps a thousand miles away. The former sales manager directs the sales of Department Q, under the orders of a general manager of sales of whom he never heard until yesterday. A good part of his former authority has gone from everybody in the absorbed concerns, but his human nature remains intact.
There is resentment, of course, although it may not appear on the surface, and by dealing with it the new organizer will show what manner of man he is. If he is a bully, as some men in authority are, he will fill the rank and file with discontent ; if he permits subordinates to approach him over the heads of their superiors, or behind their backs, as some men do, he will disrupt the service. If he mingle firmness with courtesy, and if, at the same time, his directors have the good judgment to back him, he
will win. He may have these qualities, but the directors may not have the judgment. Under the best of conditions it will take him a year, at least, to straighten out all the tangles, find the new men he needs, and get his organization on a strong productive basis. You want time and money for this sort of thing.
First of all, it is a search for men. Some of the great companies have an understanding that they will not take men from one another. Others take them where they can be found. A company employing ten thousand men does not easily fill its roster. There are not so many geniuses, or exceptional men, in the woods as some professional preachers of progress appear to believe.
The three main branches of the business have to be co-ordinated, authority has to be defined, and overlapping has to be diminished, as far as possible.
At the head of the manufacturing end of the business a thoroughly trained man must be placed, responsible for all designs, all methods of production, and all products. A prodigious share of the reputation of the company will come from what he does for it. Under him is the general superintendent, and under the latter are the superintendents of the respective works ; under the superintendents are the various shop departments and foremen, and under the foremen are the operatives.
Between the receipt of an order for a cumbrous piece of machinery and the completion of the machine there is a vast and intricate system of records, instructions, and requisitions which is the despair of the layman. You pass through a huge manufactory where furnaces are glowing, forges roaring, steam hammers pounding, and lathes, planers, milling machines,
boring tools, and so on, turning out thousands and tens of thousands of metal parts, and you wonder how it is that these myriad pieces traverse the great acreage between their design and completion and are ultimately assembled at their proper time and place to make a perfect-fitting, perfectly operating mechanical giant. Think of the clerical work that has been required to keep trace of it all —all the material, all the parts, all the time, and all the costs ! If the mechanical processes must be exact, the clerical processes must be not less so ; yet there are big concerns that do not know their costs with anything like accuracy. That is one of the troubles with which our new organizer must deal. It took many pounds of paper to get this big machine through the shops.
Costs are too high. What costs ? Shop costs. What about costs of administration, selling costs, general expenses, the “burden,” — “long costs” ? They are too high, or your long cost is not high enough. We need a new plant at Brasstown. Impossible ! Our old plant is valued at so many millions and should be sufficient. Yes, but it isn’t. You have valued your old machinery at what it cost you ten, twenty, or twenty-five years ago. Ah, that must have been done before we were taking in, that is to say, combining other concerns, and before we had unloaded, that is to say, before we had admitted the public to our new flotation. That may be so, but the present fact is that the whole concern needs overhauling.
The new president reduces the nonproductive costs by a couple of hundred thousand dollars, or a couple of million. He knows how to produce more work for less money. He discovers interesting things as he digs
into the old organization. A head of a department had contracted to equip a great power house in an important city. The machinery was built and shipped just before the new administration came on the scene. The new administration finds that the head of the department had forgotten to provide foundations for the mighty machinery. There is a sudden vacancy.
The selling force, it seems, had been accustomed to modifv designs to meet competition, and had been in the habit of instructing the works to make these alterations without in any way consulting the management. The results were heavy expense, lack of standardization, and unnecessary multiplicity of patterns and drawings. Costs, too, were made up on ihe road instead of at the works. The company’s inspectors were under the shop foremen, upon whose work they had to pass judgment ! The directors didn’t know these things and a hundred things like them. How should they ? Most of them never set foot in the works. Their meetings were held a day’s journey away. Besides, the average director wouldn’t know a pattern from a pill box. But they all knew that the many millions were not earning dividends.
A great business has grown up partly on the strength of a great reputation, partly through the prosperous conditions of the country. The business amalgamates with others. A large corporation is the result. It is the work of a mighty group of financiers. Now, the merits of democracy have no relation to business. Autocracy is needed. Where every man’s judgment is as good as another’s the business will go on the rocks. The component companies which have been taken over retain their respective officers and conduct business in the same old way. The men who had
made the reputations of the component companies have died, or have been succeeded bv their sons—estimable gentlemen, but not masters of affairs. They had been friends, but they become enemies, and they hotly oppose one another in the board meetings and out of them. Then there are too many vice-presidents with ill-defined authority. Each of them wishes to be president. Each thinks the concern he had formerly headed should have the strong hand in the new corporation. Each suspects the other of seeking undue advantage. Their subordinates take sides. Subordinates are very quick to perceive these contests, no matter what pains are taken to conceal them. The internal contest goes on. The new president has to call upon the board to reorganize itself. This is a bold step to take. The board reorganizes, but he is not forgiven.
A strong man is bound to make enemies in business as well as in politics. He may be forced out of his position for doing his duty to the shareholders. In such cases the powerful directors take good care that he will never become connected with any of the ten, twenty, thirty, or forty other companies which they so serenely direct. They have a good deal of power in this way and can make the fortunes of a man, or mar them.
There is no secret about successful organization. The method is clear enough ; first, you must know what you want to do ; second, you must get the right men to do it. The commonest error, in these days of large enterprises, is to permit managing men to swamp themselves with detail. But some concerns compel this by declining to pay adequate salaries for proper assistants. If you see that a manager’s desk is always
choked with work you may be sure that he has not learned the most successful part of management—division of labor. He hasn’t the right kind of assistants. Perhaps he thinks he doesn’t want them. Perhaps the company won’t give them to him. In any case the result is the same, for the right kind of man will relinquish his position and will decline the responsibility when he finds that the company will not employ the right kind of men.
The concern has a large staff of salesmen, all more or less technically trained. The country is divided into districts. Each district is in charge of a district manager with his office in the most important city in the district. The territory allotted to him may cover five hundred thousand square miles, or it may cover fifty thousand. The district manager may have five salesmen under him, or he may have twenty, according to circumstances. There are thirty districts, perhaps more. A wide-awake sales manager has to direct them all —a man who can do something more than squabble over expense accounts, screw down salaries, and bully his men. All contracts above a certain figure have to be referred to him. The new' executive must overhaul the contract forms used by the company. The chances are that they were not adequate to the purpose. The sales manager watches the records of his men, and knows who sells at the least expense. He must, in conjunction with the executive, fix the prices in important transactions, in spite of any fables put forth by the price-list department.
Some companies have a man-of-allwork to pare down expenses wherever he can see them. He may be a vice-president, or he may be an assistant to the general manager. It
doesn’t much matter what he is called, so long as he is eyes and ears for his chief. He watches everything, makes confidential verbal reports of everything he hears, “pumps” and “jollies” with the same breath, questions subordinates when their superiors are away on duty, looks for leaks, and busily makes suggestions for changes and improvements. His is not the pleasantest job in the world, although some men seem to like it. It requires a peculiar talent and temperament.
There was a vice-president, once, who watched his heads of departments and district managers by the aid of detectives. This man was known as the greatest disorganizer in forty states.
He was the most successful trouble breeder in the temperate latitudes. The telephone switchboard in the general office of his company had a detective wire to his desk, and the chief operator was privately paid by him to switch on any conversation that he might be interested in overhearing. A reforming president stumbled on this condition of affairs, removed the operator, cut the connection, installed a new switchboard, and persuaded the directors to relieve the vice-president of his duties, in spite of the fact that the overthrown busybody was one of the largest holders of the company’s stock. The irate vice-president never forgave this intrusion upon his cherished and long-standing prerogatives, and he intrigued until he succeeded in removing the reformer. Square dealing is powerless against some men.
Jealousy is one of the obstacles which the organizer must encounter. Any business which needs reorganizing is bound to be well saturated with this disturbing spirit. Many men are little-minded. They may be
good enough men, in their way, as human entities, but brush them up together in a big business undertaking and you ruffle all their little weaknesses. The ten thousand men represent every sort of human nature. The strong character at the head dominates all these, if he is given time enough. Most men represent their leaders fairly well. The file is apt to reflect the qualities of the rank. So a great business organization, in its policy, its product, its methods, and its men, comes to reflect the character of its executive. A broad-minded, liberal man wants men about him who can appreciate his methods and carry them into effect. A mean spirit seeks its kind. But, let the executive be as big and broad as he may, there are not enough liberal spirits to go around and supply all the positions of authority.
A great corporation contains a good many prizes, and there are always men who will intrigue for them and knife their friends in the dark. Almost every great concern has these characters meddling with affairs within it. Business is like politics in this.
The sort of reorganizer we have been considering will be a just man, and square in his dealings. He will not permit any man to accuse another behind his back. He may be severe but he will examine both sides of a question and will not jump at any conclusion. He will recognize faithful service and will know how to get under the appearances of things. He
will do his best to suppress “company politics” ; he will not permit men to go over the heads of their superiors, or around the back way, for when that kind of affair goes on things happen which don’t get into the papers.
The great art in successful business management is that of managing men. The right men, rightly managed, will take care of the material in the right way. Managers who ride roughshod over their staffs, and who browbeat and encourage tale-bearing, never obtain the best results. They never inspire loyalty, and loyalty is a more powerful force for business success than many men realize. A mere board of directors does not inspire loyalty. What men want is a man. Square dealing breeds loyalty, but only a square man can deal squarely.
Every man in a position of responsibility should have an understudy. Illness, death, promotion, resignation and the growth of trade may, and do, cause vacancies. Too much time is lost, too many experiments are tried, and too much bad feeling is engendered by a policy that drives men too hard, on the one hand, or, on the other hand, always seeks for outsiders to fill vacancies or newly created positions. A concern may easily be “penny wise and pound foolish” in this regard. For one thing, a good understudy would be a capable assistant, especially under a liberal management.