The Human Side of Business Administration

I

WAR is shorn of its glory. Men who have fought, on many battlefronts, whose well-won decorations show that cowardice is only a name to them, are yet profoundly convinced that such a catastrophe as that which overtook us in 1914 must be made impossible in future. In short, we are gradually awakening to a realization of the fact that for civilized communities to settle their differences as if they were superhyenas or super-jackals does not reflect much credit on the intelligence of the human race. And so that intelligence is gradually ceasing to develop the science and machinery of war, and beginning to develop the science, and perfect the machinery, of peace.

God knows that men have struggled against, this development. They have adopted every artifice and argument to persuade themselves that war is a magnificent thing; that true greatness of character is impossible without it; that all the virtues which go to build up a virile race have their origin in the war-spirit. Only a demonstration so overpowering that it came near to ending the civilization of Europe has persuaded them of their error.

To-day, men are thinking peace. They are thinking it in Washington, they are thinking it in Geneva, they are thinking it in Paris, Rome, and London. Nations are anxiously seeking to discover means by which they can settle such differences as may from time to time arise between them, on a basis of right rather than of might. This constitutes the hope for humanity.

This development in international relations leads us to believe that the time has come for those who are responsible for the conduct of industry to think industrial peace, and to set it before themselves as an ideal, to be realized, not in some far-distant century, but now. Its realization is perfectly possible. The perpetual industrial warfare from which the whole world suffers, and which we euphemistically call ‘unrest,’ can be ended in your lifetime and mine.

The trouble is that, hitherto, both Capital and Labor have regarded industrial unrest as inevitable, and have accepted it just as they accept rain and sunshine, summer and winter; whereas it is not inevitable — on the contrary, its existence is a serious reflection on the ability of those who are responsible for the management of business. I believe profoundly that it is possible practically to secure industrial peace without any fundamental changes in the basis of industry. It is possible today; it may be impossible to-morrow. The war has had a profound effect on the psychology of the workers. It has shaken them out of their ruts, it has broadened their outlook, so that to-day they are not prepared to accept industrial conditions just as they find them. They are asking many questions that they never asked before. Even the basis of industry is being questioned, and the social and economic developments in Russia and Germany are being watched with close interest.

Now I hold no brief for capitalism. I would gladly see it abolished to-morrow if I were sure that it would at once be replaced by some system which would better serve the interests of the community as a whole. But I see no such alternative, and I am convinced that, whatever the ultimate basis of industry may be, the right course at present is to work for improved conditions within the capitalistic system. It is, however, important to recognize that many workers — and their number is by no means confined to men holding ‘ Bolshevist ’ opinions — are profoundly dissatisfied with some of the conditions in industry to-day, and are determined to remedy them. If they can do so without upsetting the capitalistic system, they will be quite content; but, if they cannot find a remedy in one way, they will find it in another. I think it important to emphasize the changed psychology of the workers, because I have observed that many employers are trying to persuade themselves that the labor problem of to-day is that of 1914. To act on such an assumption is to court disaster.

II

Now, let us ask on what terms industrial peace can be secured.

It cannot be secured by ‘keeping the workman in his place.’ The day for that kind of thing is past. Popular education and political democracy sealed the doom of industrial serfdom, and the war put the last nail in its coffin. The attempt being made by some employers, to take advantage of the present industrial depression to ‘teach the workers a lesson,’ suggests the shortsighted cunning of the opportunist rather than the wisdom of the statesman. Nor, if we are wise, shall we attempt to secure industrial peace by establishing a balance of power between Capital and Labor, in a state of equilibrium so delicate that neither party dares take the risk of upsetting it. Such an expedient is too dangerous, and contains no basis of permanence.

There remains only one way to establish industrial peace: it is to remove the occasions of industrial war. That sounds like a mere platitude; but is it not extraordinary that so little constructive thought is being given to working out this remedy?

No one can carefully observe modern industry without being struck by the difference between the way in which the average employer approaches the solution of technical difficulties in his business and the way in which he approaches labor difficulties.

I have just visited a large number of factories in the United States, and I have been amazed by the high degree to which research departments have been developed. There arc magnificent laboratories, with every kind of apparatus, and staffed by the ablest men of science. They are not only investigating the immediate difficulties presented by manufacturing processes, but are spending years in the exhaustive investigation of scientific problems perhaps only remotely connected with the practical work of the factory. Why do they do this? Because they want thoroughly to explore the why and wherefore of any factory process. Modern industry cannot afford to do things by rule of thumb. True progress depends on accurate knowledge and understanding.

But when the heads of these factories pass from the technical to the human problems of industry, the scientific spirit seems to leave them. Their dealings with ‘Labor’ are comparatively crude and unscientific, and are characterized by the very ‘rule-of-thumb’ policy which is so rigorously avoided in connection with technical problems. There is none of the spirit of the explorer, of the research student, in the dealings of the average employer with labor problems. He is inclined to take things for granted — to accept theories which he has never examined.

He employs certain stimuli, out of which the virtue has long departed, in order to produce certain desired reactions; and because he does not obtain them, he grows impatient and finds fault with the workers. If he were working with iron or rubber instead of human beings, he would act quite differently. He would say, ‘I want to obtain certain results. I have employed certain means but have been unsuccessful. I must hand this problem over to the laboratory, to find out where I am wrong.’ Then his experts would patiently work on the problem, not blaming the iron or rubber, but seeking out just how it should be treated to secure the desired result.

Now, the point I want to make is that we shall allay industrial unrest only if we approach the problem in the patient, scientific spirit that we adopt in other departments of industry. The ‘reaction’ we desire is that Capital and Labor, instead of spending a large part of their energy in fighting each other, shall devote it all to wresting from nature the wealth she is always willing to yield up to honest effort.

We must not only ascertain and establish the basic conditions necessary to secure industrial peace, but we must establish right human relations in all our dealings with the workers.

III

I believe that our examination must cover the following items: —

1. Wages.

2. Hours of work.

3. The worker’s economic security.

4. The worker’s status in industry.

5. The financial interest of the worker in the profits of the industry in which he is engaged.

Wages. — Minimum wages should be based on human needs. Wages above the minimum may be left, to the higgling of the market:—

The minimum wage of a man should be such as will enable him to marry, to live in a decent house, and to maintain a family of normal size in a state of physical efficiency, leaving a reasonable margin for contingencies and recreation.

The minimum wage of a woman should enable her to live in similar comfort, providing for herself alone.¹

Now there are to-day, in America as well as in England, large numbers of men and women of normal ability whose wages fall below this standard, though the proportion of these is higher in England than America. So long as this continues, there is no hope of industrial peace.

The first duty of the employer who is studying the question scientifically is to ascertain, for his own locality, what money-wage is necessary to enable workers to live in accordance with the above standard. How many employers have done this? Is it not obviously the first thing to do? Limitations of space prevent me from discussing how such an inquiry can be made; but the information can easily be obtained.²

It may be urged that it is futile to discuss any means of securing industrial peace which involves an addition to wages. As to this, I will make two observations. First: if there were real industrial peace, — not merely a suspicious abstention from open hostility, but the kind of peace that leads to cordial cooperation, — wages might be increased without a corresponding increase in the cost of production. Secondly: I do not suggest, that wages should, in all cases, be immediately advanced. The advance, if necessary, can be made gradually, as circumstances permit. The point of importance is that the workers shall know, beyond the shadow of a doubt, that the employer, on his own initiative, recognizes his responsibility in the matter, and is straining every nerve so to increase the efficiency of his business as to enable him to pay an adequate minimum wage. If they are convinced of this, they will be willing to wait. What leads to unrest is indifference on the part of the employer to the human needs of the workers, and his refusal to raise inadequate wages save under the pressure of a strike or the threat of a strike. Such employers often protest that to raise wages will ruin their business. But the strike succeeds, wages are forced up, and the business continues to provide adequate profits. Is the anger of the workers surprising?

Hours of Work. — Workers should have sufficient leisure to enable them completely to recruit, their energies after the day’s work, and to express their personalities in their own way.

In America, and perhaps even more in England, we have established a normal working-week of reasonable length; but there still exist factories and even industries where the twelve-hour day is worked. It is no adequate excuse that, the period spent in the factory does not consist of constant labor, but includes many spells of leisure. The point is that, when a man has to be on duty so long in a factory, his life can consist only of ‘bed and work.’ He cannot live like a normal citizen. It is a fairly safe rule that the claims of citizenship should take precedence over those of industry; and, where this rule is continuously broken, dissatisfaction and consequent unrest are sure to result. Wide experience points to fortyeight hours of work a week as a reasonable standard, and any deviation from it should be justified by special circumstances.

The Worker’s Economic Security. — In approaching ihe discussion of the economic insecurity of the worker’s life, we come to that condition of modern industry which, probably more than any other, contributes to industrial unrest.

I do not think that employers generally have in the least realized how heavily a sense of insecurity weighs on the worker’s mind. Of the three main sources of insecurity, — unemployment, illness, and old age, — the first is the one that causes the worker the deepest concern.

As I write, there are millions of men and women who are out of work. Their unemployment is due, not to any fault of theirs, but to world-movements which they are powerless to control. When the trade depression struck America and England with the suddenness and force of a tropical tornado, millions of workers were simply ‘laid off’,’ and left to shift for themselves till their services should be needed again. Meanwhile, industry is not concerned with them. The individual worker may have a wife and children at home; wages may not have been high enough to enable him to save — it is all the same. Industry has no word of comfort. Perhaps the foreman was sympathetic and said, ‘I’m sorry, Jack, but we’ve no orders in. I can’t help it. Let you know when anything turns up.’ But his sympathy availed nothing.

Think of the whole situation — the agony of breaking the news at home; the hopeless trudging-round, looking for work, in a world where there were scores of applicants for every job; the piling-up of debts with the landlord, the grocer, with every tradesman who can be induced to extend credit to a man without a job; the pawnshop; then short rations, the wife and children getting paler and thinner; the empty stove, the empty purse, the heart empty of hope.

That is the abyss on the edge of which the worker lives. I know a couple — a bricklayer and his wife. They are charming people, and their home is a delight to enter, so full is it of simple refinement. The man is a first-rate worker — no 300 bricks a day for him! But, during the present period of depression, his wife says that she dreads to see him coming home on pay-night, lest he should bring the news that he has been ‘laid off.’ Ah, yes; it may be easy for an employer to say, ‘I’ve had to lay off 500 “ hands”'; but the words are fraught with sombre meaning to each of the ‘hands’ laid off, and to his wife and bairns.

I wish the community realized what a tragedy unemployment is. It is a standing marvel to me, with what indifference this great evil is regarded by the man in the street, and with what a spirit, of fatalism by the workers.

A spirit of fatalism — yes, t hat is true. But the evil engenders a deep sense of injustice. It drives the iron deeper into the heart of the worker than any other ill that besets him. There is profound bitterness in the thought that his labor (and therefore himself, since he cannot be separated from his labor) is mere chattel, to be bought and kept while needed, and, when no longer needed, to be throwm away like an empty tomato tin. That thought makes the promises of the revolutionist orators sound inviting, and is the chief cause of industrial unrest.

Effective steps to deal with the menace of unemployment must be taken before peace can be hoped for in industry. We must, as a community, adopt every possible means of lessening the volume of unemployment. I have not space even to outline some of the measures which might prove useful in this connection, but will say only, first, that there is no panacea for the cure of the evil: it must be attacked from many sides. Second, that when the utmost has been done to lessen t he volume of unemployment, there will still be a considerable proportion of it left to deal with; and the problem of removing the menace of unemployment from the minds of those for whom work cannot, be found can be met only by some scheme of unemployment, insurance.

I have met in America a curious objection to unemployment insurance. It is partly due to grossly exaggerated accounts of the abuses which have attended its introduction in England. Of course, when, by a stroke of t he pen, eight million workers are insured against unemployment, just at the beginning of the worst trade depression from which the world has ever suffered, some abuse is sure to occur. It takes time to build up the machinery necessary to check it; but to say that the Unemployment Insurance Act in England is a failure is to betray ignorance of the facts. Not hing has occurred in England to indicate that the policy is unsound, whereas much has occurred to justify it. But of course the fifteen shillings for which the British worker is insured, though much better than nothing, is quite inadequate to remove from his mind the menace of unemployment. Much more than that is required.

Careful calculations made by an unofficial committee in England show that by setting aside, year by year, a sum equal to about 3¾ per cent of the wagesbill, it would be possible to insure all adult workers for half wages during unemployment, with an additional 10 per cent for a man’s wife and 5 per cent for each dependent child under sixteen, up to a maximum of 75 per cent of the family wages.

There are no reliable statistics of the average amount of unemployment in America, but there is no reason to suppose that it is higher than in England. Is it not worth a sum equal to 3¾ or 4 per cent of the wages-bill to remove forever the menace of unemployment from the worker’s mind?

‘Ah, but,’ I have heard some employers say, ‘nothing could be more demoralizing than to pay men when they are not working!’

Of course, we must guard against any danger of abuse in a scheme of unemployment insurance; but it is not difficult to devise effective administrative checks. The best form of check is to make the scheme a cooperative one, the premiums being paid partly by the employers and partly by the workers; and then to leave the responsibility of administering the fund primarily in the hands of the workers. Given a wellthought-out scheme, with proper safeguards, there is no fear of abuse on a serious scale. I have seen one or two individual factory schemes working admirably in the States, and a scheme giving unemployment benefits of 50 per cent of the average wage to single men and women, and 75 per cent to married men with three children, is proving satisfactory in my own works in England.

At any rate, it is certain that any danger there may be from this source is insignificant compared with the danger of inaction. I repeat once more that the menace of unemployment is the most potent cause of industrial unrest.

The Worker’s Status in Industry. — Earlier in this article I referred to the changes, resulting partly from education and partly from the experiences connected with the World War, which have affected the outlook of the workers, causing them to ask many questions, among others: ‘Why should we always be regarded as the servants of Capital?’

I can imagine some capitalist saying, as he reads this, ‘Really, what are we coming to? Am I no longer to be master in my own house?’ But I beg him to be patient, anti to remember that we are trying to examine the problem of labor scientifically, without any feeling, and, above all, without any preconceived ideas.

Certainly, we employers have always assumed that we were masters, and the workers servants. But is that quite fair? What is the bargain that Capital makes with Labor? Is it not essentially this: ‘My capital is useless to me without workers who will use it and make it fruitful. Your labor can effect but little without my capital. Let us coöperate, and we will share the product’? But does this necessarily imply a relation of master and servant?

Briefly, what the workers ask to-day is that they shall have a definite share in determining the conditions under which they shall work. They don’t like to come into the factory some morning and find, posted on the wait, some new shop-rule, vitally affecting their lives, in the framing of which they have had no part.

I think that a minority of them go much farther. But the great majority of workers do not ask to share in the control of the financial and commercial sides of industry. All they ask is to share in determining the working conditions.

This demand is being widely made, and I have been struck by the readiness with which employers are recognizing its justice and are trying to meet it. Everywhere shop councils are springing up. Evidence shows that this new claim on the worker’s part can be met, without weakening discipline or lowering efficiency.

I would utter only one word of warning. Some employers are trying to put off the workers by giving them a voice in determining what I may term ‘welfare’ matters. But this is not what they are asking for. On t he other hand, I have seen a factory where all shoprules are drawn up jointly by the workers and managers; where the workers are consulted before foremen are appointed; and where anyone punished, by dismissal or otherwise, for a breach of discipline, has a right of appeal to a committee consisting of two members chosen by the workers, two by the directors, and a chairman agreed upon by the four. Here the workers have a real share in the legislative, executive, and judicial sides of works-administration; and the scheme works admirably. In other factories, I have seen even more democratic methods of administration working well.

If we would secure industrial peace, let the watchword of the management be: ‘How far can I invite the cooperation of the workers in the industrial side of works-administration?’ — not, ‘ How little of my power need I give up? ’

The Financial Interest of the Worker in the Profits of the Industry in Which He Is Engaged. — I come now to the last item in the account that we must meet if we would purchase industrial peace. I have included it only after much consideration, and in ihe face of long-held prejudice. But a very detailed inquiry into the results of profit-sharing, where it has been given a fair trial, has convinced me that I must lay aside my old bias.

The workers say: ‘Why should we do our very best, as you are constantly urging, when the chief result, so far as we can see, is to increase the dividends of shareholders whom we have never seen and for whom we care nothing?’

It is useless to try to persuade such a questioner that the interests of Capital and Labor are really the same; and, as a matter of fact, they are not fully the same.

But the position would be quite different if an arrangement were made under which, after labor had received its standard wage, and capital the standard interest on secured capital, plus a reasonable premium to cover risk, any Surplus profit should be divided between Capital and Labor in a previously agreed proportion. I nder such a scheme a manager would be justified in urging everyone to give his best, of brain as well as brawn.

I know all the arguments against profit-sharing; I have used them for years. But a close examination of the facts has convinced me that this means of developing cooperation between the two parties in industry is an essential condition of lasting peace.

IV

These then are the items in the account which we must meet if we would purchase industrial peace: reasonable wages; reasonable hours; reasonable economic security; an improved status for the worker; a share to the worker in the profits of industry.

Some of us have tried one of these methods, others have tried others; and we may have been disappointed. I do not think that we shall achieve full success until we try all five together.

Employers in America have sometimes said to me: ‘Ah, yes; that’s all very well in England, but our problem is different.’ Of course, there are superficial differences, and of course the administrative methods of applying a principle will differ in the two countries; but I am convinced that, fundamentally, the problem of securing industrial peace is the same in England and America, and that the solution in both cases will be found on t he same lines.

I recently visited a factory in America, where all the five points I have mentioned were being adequately dealt, with; and the results were all that could be desired. So far from the experiments proving costly, the output per man-hour had increased by 25 per cent; and although the workers were getting 50 per cent of all profits after capital had been paid 6 per cent, the president of the company told me that he thought the stockholders were better rather than worse off than they would have been under the old regime.

One word in conclusion. It is necessary, first, of all, to establish basic conditions in industry which are just, and which take full account of the changed outlook of the workers; and, secondly, to see that all administrative acts are carried out in the right, spirit. We may have a machine perfectly adapted to its work, which may fail to function because the engineer does not thoroughly understand how to manipulate it. Similarly, an overbearing foreman or manager, while conforming to the letter of admirable regulations, may completely spoil their spirit. And an ideal code may yield disappointing results because it is clumsily administered.

Those of us who are responsible for ‘dealing with Labor,’ as we somewhat crudely express it, cannot too often remember that there is no such thing as ‘Labor.’ The working force consists of a number of individuals, each having a personality different from all the rest. They are as sensitive as we are to encouragement and discouragement, as easily roused to anger or suspicion, as easily roused to loyalty and effort.

Put the best man in the works in charge of labor, the man wit h t he wisest head and the biggest heart. Don’t minimize the labor side of business. That is the mistake we have made in the past, and for which we are paying bitterly to-day.

And lastly, let us not forget a warning uttered by Tolstoy: —

‘It all lies in the fact that men think there are circumstances when one may deal with human beings without love; and there are no such circumstances. One may deal with things without love; one may cut down trees, make bricks, hammer iron, without, love; but one cannot deal with men without it; just as one cannot deal with bees without being careful. If you deal carelessly with bees, you will injure them, and will yourself be injured. And so with men.’