Higher Education and Business Standards.

by Willard Eugene Hotchkiss.

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

There is a strong tendency to go at business the way Helen went at the garden. She knew what to do with bouquets; raw material for making them was within her reach; what more natural than to turn it, in the most obvious and simple way, into the product for which it was designed.

From her standpoint such a procedure was entirely correct--she was making bouquets for herself and her friends; every one in her circle would share the benefit of her industry.

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

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

This is the new idea in business; it has already taken deep root; but it needs to be further developed. We have the difficult task of reducing an idea to a practical working plan. How shall we go about it?

Fortunately the idea itself contains a hint for further procedure. A new att.i.tude in business must be coupled with a new att.i.tude in public policy.

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

But should not the child be restrained? As far as necessary to protect the garden, and perhaps also to make her conscious of an authority in the world outside of her own will, yes--but that is not the main task.

The main task is to educate her, to develop an understanding of the garden, to get her in the frame of mind in which she will derive her greatest enjoyment when she cultivates it and sees it grow, and when she restricts her picking to a reasonable share of what the garden produces.

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

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

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

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

But efficiency was able to prove an alibi; we were told that the thing which posed as efficiency was not efficiency, but special privilege, and we were again persuaded of the great service a regenerate and socialized efficiency could render. Just at this point came the outbreak in Europe; efficiency was again caught in bad company, and we began to hear such phrases as the "moral breakdown of efficiency,"

"efficiency, a false ideal," and others of similar import. In an article bearing the t.i.tle, "Moral Breakdown of Efficiency," published in the "Century" for June, 1915, it was maintained that pursuit of efficiency had led and was still leading civilization on a downward path.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Just what are the principles that are being worked put in order to determine the forms and the limitations under which business energy shall be expended, and how do they differ from those followed a generation ago? Take the other side of the efficiency ratio: toward what results are we trying to have business energy directed? Again, what are the instruments with which society is enforcing its purpose?

How effective are they, how effective are they likely to become?

Finally, what bearing will this social effectiveness or lack of effectiveness have on standards of business efficiency for the generation about to begin its work?

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

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

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

This circ.u.mstance has a very marked bearing on the nature of our task, when we try to approach business from the standpoint of education.

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

Every one of our great industries--steel, oil, textiles, packing, milling, and the rest--has its early story colored with pioneer romance. The same romantic atmosphere gave a setting of lights and shadows to merchandising and finance and most of all to transportation.

Whether we view these nineteenth-century activities from the standpoint of private business or of public policy, they bear the same testimony to the pioneer att.i.tude of mind.

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

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

In its theory and its broad outline the land-grant policy is not hard to defend. The difficulties came with execution. We know that in actual operation the policy meant reckless speculation and dishonest finance.

We know that no distinction in favor of the public was made between ordinary farm lands, forest lands, mineral lands, and power sites. We know that the beneficiaries of land grants were permitted to exchange ordinary lands for lands of exceptional value without any adequate _quid pro quo_; and we know that there were no adequate safeguards against theft.

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

And how about the railroads from the standpoint of private enterprise?

A railway financier once described a western railway as "a right of way and a streak of rust." The phrase was applicable to many railways.

Deterioration and lack of repairs were, of course, responsible for part of the condition it suggests, but much of the fault went back to original construction. It was the wonder and the reproach of European engineers that their so-called reputable American colleagues would risk professional standing on such temporary and flimsy structures as the original American lines. Poor road bed; poor construction; temporary wooden trestles across dangerous spans--everything the opposite of what sound engineering science seemed to demand. Why did not the owners of the roads exercise business foresight to provide for reasonably solid construction?

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

Public sentiment has judged and condemned the men who in their own interests thus perverted national policy; and we approve the verdict.

But it is not so easy to condemn the policy itself or to indict the generation that adopted it. Looking at the matter from the standpoint of the nation, it was precisely the inefficiency and the corruption in government which augmented the theoretical distrust of government and made it unthinkable to the people of the seventies, that the Government should build and operate railways directly. The land-grant policy entailed corruption and waste, of course; but what mattered a few million acres of land! No one had heard of a conservation problem at the close of the Civil War. Resources were limitless; without enterprise, without labor and capital, without transportation they had no value, they were free goods. The great public task of the nineteenth century was to settle the continent and make these resources available for mankind. This task it performed with nineteenth-century methods.

From our standpoint they may have been wasteful methods, but they did get results. In its historical setting, the viewpoint from which the task of settlement was approached was not so far wrong.

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

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