The Work of the Business Organizer

The Work of the Business Organizer By W. S. Wanlass, Ph. D., Department of Business Administration, Agricul- tural College of Utah, formerly Professor of Economics, Union College, Schenectady, N. Y.

A basal characteristic of the present organization of industry, hardly less fundamental than private property and competition, is what is known by economists as the division of Tabor. "The history of industry can be viewed as simply the ever widening application of the principle of the division of labor." Hardly any civilization seems possible without some industrial specialization, but our own age is peculiar because of the extent to which it has been carried. By division of labor we generally mean the system under which the work to be done is sub-divided so that each worker devotes his time to one "step" or task in the larger process. In the cobbler's shop, one man makes a pair of shoes; in the modern shoe factory, the work of hundreds of men is involved in making a pair of shoes. Division of labor is really of three kinds. Historically and logically, the first form is specialization in the trades or crafts. This was one of the earlier characteristics of the development of industry following the breaking up o£ the feudal system and the establishment of towns and cities. Examples of this form of division or specialization are still seen in such trades or professions as the carpenter, mason and physician. But here, as throughout industry, the next development, the sub-division of the trade or craft into separate steps or processes, may be seen. The third form of division of labor is the geographical or territorial division. With the development of industry and commerce and a more stable political life in the world, there has been not only a territorial division tending toward maximum production within countries, but whole nations have devoted themselves largely to the production of those things which their economic situation best fitted them to produce, and have depended on the rest of the world for things which they needed but did not produce. Generally, all of these forms of division of labor, are found in combination. Needless to say, the third — form, the devotion of nations to the production of those things — which they are peculiarly fitted to produce could and would be much further developed with immeasurable benefits to humanity, if the spectre of war and deprivation were not forever

424 IMPROVEMENT ERA present. These possible economic benefits constitute a weighty argument for any feasible scheme which will make international peace more secure. From what has been said of the division of labor and interdependence, it is evident that somewhere in the economic system there must be some guiding or co-ordinating force, if this multitude of small tasks and specialized workers is to be brought together in such ways, at such places, and in such proportions as to produce the things which society desires. In Marshall's words, "the efficiency of specialized machinery or specialized skill is but one condition of its economic use; the other is that sufficient work must be found to keep it well employed." This function of co-ordinating the labor of others, itself a form of specialization, is the work of the industrial or business organizer, or, to use the French term, the entrepreneur. Of course, there were business organizers of a kind long before we had the present minute division of labor. In fact it was the creation of business units larger than those found in the home which encouraged and made possible a greater degree of specialization. But, be that as it may, we all recognize that there are today millions of workers each incapable of producing more than a very small part of the things necessary to satisfy his own wants, and most of them incapable of producing any complete thing without the assistance of others. It is to the task of bringing together these workers, whose specialized abilities and skill make them complementary to each other, that the organizer must devote a large part of his energies. But this is only a part of the function of the organizer. He it is who must perceive, often far in advance of the actual need

or demand, what society is going to want and will be willing to pay for. With the present "round about" system of production, the beginning of the manufacture of an article must generally take place months, not infrequently years, before the finished product is offered in the market. Not only this, but he must know, as nearly as can be known, how much goods or service will be wanted, and how much people can be made to pay for it. If he fails in this, his reward may prove to be a negative rather than a positive sum. He is, of course, not left to mere chance in determining these things. He is greatly assisted by an intimate knowledge of markets, actual and potential; statistical information of what has been done in the past; and, perhaps greatest of all, by stimulating, through advertising and other means, a demand where one had not existed before. Indeed, it is by the enterprise and imagination of a few, rather than by the conscious demand of the many, that new conveniences and comforts are yearly added to our life,

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and that economic progress goes steadily forward. That which contributes most to the success of an industrial institution is not the indispensable hand labor of the men, but the brain labor which organizes and directs. It is by thought and calculation and foresight that large economics are effected, processes improved, new machinery installed, and new wants perceived; in these and in many other ways the skilful organizer can do more to insure the success of the enterprise than the industry and skill of a thousand factory workers. The organizer, then, whether manufacturer or merchant, is the pivot of the modern industrial organization. On the efficiency with which he organizes the co-operation of specialists the effectiveness of their work depends. On him the consumer depends for getting what he wants and not some makeshift. Specialization is the principle on which all increase in — productive power depends specialization is effective only when the specialists co-operate, and with every -increase in the degree of specialization the work of organizing the co-operation becomes more important and more difficult. It is of the utmost importance, therefore, to the material well-being of society that the right men occupy this position. If they do not, there will be waste; inefficiency there neutralizes the efficiency of scores of hundreds and even thousands of specialized workers, just as an incompetent general can ruin the finest army. Inefficiency in the organizer means that departments are held up because other departments are not ready for their product; it means that some firms in the trade work overtime, while others are not fully employed; it means that articles are produced that the consumer does not want and will not pay for, while articles he does want are produced in insufficient quantities and, consequently, are to be had only at a fancy price. The organizers control the capital of the country, they decide,— guiding themselves, of course, by reference — to the demand of consumers, to what purpose it shall be applied and in what form it shall be applied. Want of judgment on their part may result in the creation of forms of capital — which are useless as, for instance, when mills are put up to meet an increase in demand which never comes. Originality and enterprise on their part, on the other hand, will make production cheaper and cheaper, since it will insure the application of capital, in those forms and at those points, where it is most productive. They are society's paymasters: to them the consumer hands the price of the goods which he consumes; they distribute it between the different classes of workers, capitalists, and land-owners; in a word, they employ land, labor and capital. Competition between land, labor, and capital for

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the national income takes place through the employer, and since the merchant employs the different employers in the same way as they employ land, labor and capital, the competition between different trades for the national income takes place through the merchant. They "represent," as it were, the consumer in his relations with producers. Their function, in fact, whether they perform it ill or well, is the organization of production. When it is realized how much our economic welfare is dependent upon the training and skill of the organizer of business, the importance of providing the best facilities for preparing men and women for this work is at once apparent. Just as the success of an army depends upon the training and skill of its officers, so the success of business enterprise depends upon the ability of our industrial and business leaders. Thus far, in what we have said of the organizer, we have implied that he is acting merely as an individual and almost wholly upon his own responsibility. This is true in most cases, but there is a strong trend in other directions. So large have business enterprises become in some fields that men find it necessary to associate themselves together in order to undertake them. In such cases there may be a distribution of the work of organizing and managing, or what is more commonly the case, there will be merely a distribution of the responsibility or business risk, leaving the work of organizing and managing largely concentrated in one person who is guided by a general business policy and assisted by subordinates. In other cases, the organization and management of industry may be turned over to specialists who assume little or no business risk, but are chosen for the work merely because of their special training, skill and experience. It may be apparent from what has just been said, but special note should be taken that the organizer and capitalist need not be, and often are not, one and the same person. Capitalists are the owners of goods (factories, machinery, tools, and materials) used in production, whether they direct the use of those goods or not. To be a capitalist, a man need not even own any specific capital goods, but may merely have an interest in them represented by a stock-certificate. Any person, not already a capitalist, becomes one when he refrains from spending all his income for consumption goods, and uses the part thus saved to buy, or assist in buying, goods to be used in producing other goods. There are many more capitalists than organizers, and many more than is commonly supposed. There is one other distinction we should make before we leave this phase of the subject. Somewhat akin to the work

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of the organizer, and to some extent growing out of it, but representing a still greater degree of specialization, is the work of the promoter. It is the special function of the promoter to perceive business opportunities, either in new fields or through the combining of industrial units already in existence. He must not only perceive the opportunity, but he must by careful study, by negotiations with interested parties, and sometimes by more artful means, draw up a plan or present a scheme that will convince others (unless he intends to exploit the opportunity himself) that the proposed undertaking is a feasible one. When he has succeeded in convincing others so that they are willing to finance the scheme and undertake to carry it out, the work of the promoter, as such, is ended. Due to the fact that thousands of people have been induced, by the convincing arguments of promoters, to assist in financing many "opportunities" for which little or no reward was received, "promotion" has fallen into more or less popular disrepute. There has undoubtedly been much ground for this feeling. The "blue-sky" laws of this and other states are pro- group of unprincipled promoters tests against the practices of a and their even more unscrupulous representatives and salesmen. Promotion, like most activities, may be legitimately used as well as grossly abused. Here, as elsewhere, we must learn to condemn with discrimination. When we are inclined to condemn promoters as a class, we should remember that many of our most notable modern conveniences, including the telephone and the electric light, were once in the promotion stage with many more doubters than enthusiasts. There is no more inspiring chapter in all the annals of American history than that which traces our industrial expansion. So well and so frequently has it been described that we shall not take time and space to do it here. The great movement from East to West has been called, and rightly so, the greatest migration of people in all history. From the standpoint of numbers involved and territory covered, the migrations of antiquity, about which we have read so much, fade into insignificance. Almost within the memory of men still living a veritable empire has been brought under the domain of civilized man. Nor has this industrial expansion been merely territorial and gigantic in scope. The abundance and variety of natural resources, the industry and thrift of our people, and the energy and imagination of our industrial leaders have combined to produce an economic life which, in richness and diversity, is likewise unparalleled in all history. We have spoken of imagination. The importance of this factor in past and present develop-

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ment has been frequently overlooked. Here, as nowhere else, this human faculty has found a field for exercise almost without hindrance or limit. There is an immediate relationship between the vision and foresight of our industrial leaders and the very magnitude of our economic expansion. However, when we boast of the past triumphs of our industrial progress, and plume ourselves on the strides we are making, we should remember that all the praise is not due to the few great ones who have made the discoveries and inventions, or have been gifted with constructive imagination. The thousands of hardy men and women who early came to these barren wastes, braved the frontier, procured a living, and with little or no capital bequeathed something to the future, are deserving of our gratitude. They and the millions of workers who have built our homes, tilled our fields, and constructed our railways and highways have in large part made possible the vast accumulated wealth of the present. If there were no accumulation of wealth or capital, civilization would soon lose all that civilization means. Indeed, there can be no economic progress unless there is a surplus produced over that consumed by the persons who are immediately engaged in production. With the constant increase in capital, that part of wealth which assists production, the margin between production and consumption, has gradually become larger and larger. Moreover, despite our ever expanding economic life, additions to existing capital can be made with greater and greater ease. Increased capital generally leads to better organization and in most industries brings a return which is more than proportionate to the amount of the increase. Not only has better organization increased production, but the more efficient, more effective forms which capital is constantly taking, add greatly to its productivity. Even in some of those industries which exploit natural resources where the trend is nearly always towards lessened returns, this tendency has been largely offset by the more effective use of capital. But, notwithstanding all these facts, capital is today, as it has nearlyalways been in the past, the limiting factor in our economic development and progress. With all our vast hoard of capital, which we now value in billions, there is today a demand for capital as insistent as it has ever been before. We see in every line of industry the eagerness to produce. The demand for things is in sight; there is need on every hand to increase and improve the productive equipment and enlarge the output. But the capital is lacking. We are not saving enough from current production. Not enough of our working force is employed in making provisions for increased produc-

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tion in the future. Without adequate capital, or with capital obtainable only at exhorbitant rates of interest, the business organizer or manager, no matter how capable or efficient, is distinctly handicapped and seriously limited in organizing and directing the processes of industry. Logan, Utah

Some Day! Somewhere! Some day, 'twill be made straight, sweetheart, till then We must be strong; Clouds without sunshine, God gives not to men; However long And desolate the bleak December be, In his good time, he giveth sunny skies And joys, that we May know how ever fatherly and wise The Father is to struggling souls and weak, Some day!

Somehow, 'twill be made straight, sweetheart, I know 'Tis hard to say "Thy will," and wait with patient heart and weak Until the day That God his fulfilled promises may show. We cannot tell the manner, but be sure However slow And wearily the moments pass, the hour Of our redemption comes. Strive to endure

The motto of thy life and mine, until We learn his will, Somehow!

Somewhere, 'twill be made straight, sweetheart, the place We know not now, But in a freer sphere through God's dear grace, We— I and thou— Shall findbeyond the blue unsullied skies The answer to the When, the How and Where; Shall learn how wise And gracious is the God who answers prayer; Apart on earth, Some day, Somehow, O sweet, We two shall meet Somewhere —Author unknown