This is a book about The Williamson Company, published for Williamson people. It summarizes Williamson's history, briefly, in terms of the evolution of its products, over the years. It explains the Company's policy as to personal relationships. It describes the Company's philosophy as to costs and profits. And finally, it tells the story of Multiple Management, which many of you know, but which will always bear repeating.

 

We like to feel that Williamson is different from most companies. That's why we've called this book "The Williamson Way".

 

 

The history of this company goes back to 1890, when A. W. Williamson, who for some years had been a schoolteacher, decided to go into the furnace business. He realized that school-houses -- and some of them were pretty primitive in those days -- urgently needed better heating. So the Company's first major product was a furnace for schools. It also began selling "Round-Cased" furnaces for homes. Both types were cast iron, and both were designed to burn either coal or wood.

 

 The Company, then known as the Peck-Williamson Heating & Ventilating Company, had no foundry at first. It designed its own castings, made its own wood patterns, but had the castings produced by a foundry in Wellston, Ohio.

 

It is hard to realize how new the country still was, in those days. In 1890, the Government was still worrying over what to do with the Indians, who had been newly placed on reservations. The first transcontinental railroad was completed. Idaho and Wyoming were admitted as States of the Union.

 

The Cincinnati Enquirer said that Cincinnatians celebrated the coming in of January 1, 1890, by "bells pealing, steamboats at the landing shreiking, the deafening crash of toy cannon and rockets rising in the air." It also reported that a thief had tried to steal a car-load of hay; and it carried an ad featuring "corset covers and Mother Hubbard gowns."

 

 

The turn of the century! The January 1st issue of the Enquirer, reporting on the day previous, said, in a dispatch from New York,"The transactions on the Stock Exchange today were more or less interrupted by the holiday frolics of the brokers on the floor."

 

Our war with Spain, assuring Cuba of its independence, had just been concluded; but our soldiers were still on the island. We had just taken over the governmental administration of the Phillipines. There were more gold strikes in Alaska. Kaiser Wilhelm was described in a dispatch from Berlin as returning to the city with marching troops and brass bands.

 

In Cincinnati, the new Cincinnati Gym held its first New Year's reception; the Music Hall announced a concert by the Cornell Glee, Banjo and Mandolin Club; and the bill of fare of the Queen City Club's New Year's Luncheon included "hindquarter of antelope." The Enquirer carried an ad for horse linament, and Puerto Rico cigars were advertised at $1.65 per hundred.

 

Meanwhile, Williamson had constructed its own loft building (reputed to be the first reinforced-concrete building west of the Alleghenies) at Fifth and Central Avenues, just one block from the famous old Grand Hotel and two blocks from the old Union Station. The first floor of the Williamson Building housed its administrative, sales and engineering offices, and the five upper floors were leased. By 1900, also, the Company had established a sheet metal shop, for the manufacture of tin duct, pipe and fittings, in a rented building located at Plum and Commerce Streets, near the river.

 

The great western move of our population was underway. Home building was going on apace -- and home heating had become Williamson's main business.

 

Then, as always, there was competition; and Williamson had already adopted the policy of product development and improvement that was to stand it in such good stead over the years. For by 1900, we were developing the "Underfeed" furnace -- a radical departure from "conventional" designs of those days, and the fore-runner of the automatic stoker.

 

 

Said an editorial in the January 1st issue of the Enquirer, "Nineteen Hundred and Ten opens to the world under the most promising conditions and the most encouraging and hopeful indications. Peace reigns supreme on all the five continents and in every isle of the sea."

 

In Congress (as usual) they were arguing about the tariff. The Panama Canal was under construction. Our own William Howard Taft of Cincinnati was President. In an interview in New York, his brother, Charles P. Taft, "admitted" that he had a deep interest in National League Baseball.

 

In 1902, the Company had purchased the Wellston foundry and from then on produced its own furnaces completely. By 1908, the Company had bought a 30-acre farm on Madison Road in what was then the Village of Oakley. In 1909, the foundry was moved to this site from Wellston, along with quite a few of the foundry employees.

 

The Middle West was growing even more rapidly than before. Following a national depression in 1908, a brisk business recovery had set in; accompanied, in Cincinnati, as elsewhere, by a boom in residential building. Duplex houses were especially popular.

 

Thus, bigger markets for Williamson were on the make. By then we had established a line of both "Top-Feed" and "Underfeed" Round-Cased Furnaces -- although the idea of boxing a furnace in a cabinet, so that it would be a good-looking piece of furniture, had not yet been dreamed of.

 

Living had not been much "modernized" by 1910. In the Bowery, in New York, it was reported, the price of a lunch was advanced from 5¢ to 6¢. In the Enquirer, as the year opened, there was an ad featuring "Kentucky-Bred Mules for Sale" -- and a department store advertised "An incomparable array of underfinery -- the Frenchiest."

 

 

The Company's participation in World War I production consisted of supplying substantial quantities of specially constructed cast iron furnaces for heating cantonment buildings at many of the Army Training Camps which Uncle Sam established all over the country.

 

In 'its first edition of 1920, the Enquirer predicted "an enormous amount of new residential building east of the Missouri and north of the Ohio." This prediction proved correct. Again Williamson's potential market was expanding -- and the Company was ready for it.

 

Among its models, that year, was one called the "pipeless" furnace. It was called "pipeless" because a single large register provided both a warm air outlet and a cold air return. This was really the first step toward a return-air circulation system, which returns and reconditions the air from upstairs in the house, rather than having to heat up cold air taken from the outside. With the end of World War  this new line of Pipeless Furnaces was appropriately named the "Victory" line.

 

Meanwhile, natural gas had begun to come in, from West Virginia; first to Louisville, and then to Cincinnati. Williamson was all set for it, with a gas-burning furnace; but the supply of gas was unreliable. Thus, one of Williamson's current models, that year, was a "Combination Gas and Coal" furnace.

 

The Company's name in 1914 had been shortened to The Williamson Heater Company, in view of the fact that the Williamsons had bought out the Pecks several years earlier.

 

In 1920, the Company moved its sheet metal manufacturing operations from the down-town location, to a new building of its own on the Oakley property.

 

In the Enquirer, news about automobiles had now begun to appear! It reported, with amazement, that at the end of 1919 there were actually 32, 000 autos in Hamilton County; and Ohio's Governor Cox denounced a tax on autos imposed by the State Legislature.

 

In the Enquirer appeared this rather amusing sentence: "Cincinnatians believe it to be absolutely necessary to have a foundation under the entire house, while in other cities a basement of that kind would be a novelty."

 

 

As 1930 opened, the nation was beginning to feel the full impact of the Great Depression, that had been touched off by the stock market collapse in the fall of 1929. President Hoover and the Congress were trying to figure out -- vainly, as it turned out -- what could be done about it. Meanwhile soup kitchens and bread lines had started, in New York City.

 

The country was still unsuccessfully attempting to enforce prohibition. In the newspapers there was now, on the business pages, mention of the "airplane industry" -- and Lindberg boldly predicted, in a speech, that "flying will continue." The U. S. Treasury reported that during "fiscal" 1928 the public debt, believe it or not, had been reduced by $726, 000, 000.

 

Williamson simply refused to let the depression get it down, and went about business as usual. Hard times or not, homes had to be heated. As a matter of fact, it was in 1930 that the Company began marketing a new and much more rugged line of cast-iron furnaces, redesigned from the bottom up and introducing the revolutionary one-piece radiator. This new unit was known as the Model A, and strangely enough coincided with Ford's transition from its Model T to its Model A.

 

And another big advance made by our Company was the introduction of the blower principle -- which eventually revolutionized the entire warm air furnace industry. Our first blower -- as shown in the drawing on this page, reproduced from one of our advertising folders of those days -- was actually merely an attachment. Soon thereafter, of course, the blower became an integral part of the furnace itself.

 

In Cincinnati, political orotary was following its usual pattern. Mayor Wilson, in his inaugural speech to the Council, said, "I shall not announce my definite policies as mayor; my sole guide shall be municipal patrotism."

 

 

An amazing advance in the technique of warm air heating took place in the decade from 1930 to 1940. For it was in this period that controls were perfected and put into practical operation. The thermostat was the first. By 1940, Williamson had them all -- thermostat, blower, filter and automatic water pan filler.

 

Still another revolutionary development of the 30's was the restyling of furnace casings. We were among the first to box the furnace in a cabinet -- much as we do today. This transformed the furnace from a drab-looking utilitarian object into an attractive piece of furniture. As somebody said, "it took the furnace out of the basement and put it in the parlor." And this was not too much of an exaggeration; because now, with blower and other controls, a Williamson furnace could be placed almost anywhere in the house.

 

Over the years, Williamson duct, pipe and fittings for air distribution systems had been sold merely as accessories to the sale of Williamson furnaces themselves. But in the mid-1930's, the Company set out to merchandise its fittings independently of its furnaces, as well as with its furnaces, - i.e. to distributors of its furnace-manufacturing competitors, as well as to its own distributors. By 1940, fittings sales volume was commanding a much more formidable share of Williamson total volume than had ever been thought possible.

Meanwhile, another major development had been taking place -the shift from cast iron to steel. We had been experimenting with steel way back in 1928. By 1940, it had become evident that the furnace of the future would be made of steel.

 

By 1940, fuel oil had entered the picture, as well as gas in reliable supply. So we put out furnaces that would burn gas, oil or coal, or combinations thereof.

 

In 1940, ominous events were building up tension in Europe. Germany had invaded Poland and its armies had over-run Denmark, Norway, Holland and Belgium. Russia had gobbled up Latvia, Lithuania, and Esthonia. We were supplying munitions to France and England. Hitler was now very much in the news; and there was serious talk in Washington about National Defense. President Roosevelt announced that he hoped Federal expenditures for the year ahead could be held to "as little as nine billion dollars."

 

But in Cincinnati, it was still "business as usual." The Enquirer predicted, as the year opened, that the building of new homes and apartments would "go rapidly forward." That meant business for Williamson. Cincinnatians were feeling pretty good at the turn of the year -- for in the previous autumn, the Cincinnati Reds had captured the National League pennant, which it did again in 1940.

 

 

During the year 1942, the Company found itself in the process of converting many of its facilities from the production of civilian to military products, - fabricated and heat-treated Armor Plate for tanks, and aluminum tail assemblies for Navy Bombers. 1946, in turn, witnessed the Company's re-conversion back to heating products, by which time it had moved into the manufacture of steel furnaces - having acquired the drawings and tooling of a steel furnace manufacturer in Detroit.

 

By 1950, we were witnessing the complete demise of the castiron coal burning furnace, as well as a drastic decline in the use of coal as a residential heating fuel.

 

Gas and oil, so-called "automatic" fuels, were really coming into their own. The monstrosity of the basement, the "gravity" furnace, with its low-hung octopus-like pipes, had practically disappeared.

 

Now, furnaces had taken on the appearance of pieces of furniture. Now they were being placed in a corner of the basement, with all ducts and pipes concealed up between the joists. Now, furnaces were beginning to be completely assembled and wired, cabinet and all, right at the factory, - not only basement models, but models for installation in utility rooms with the air-duct system above the ceiling (the Hi-Boy unit), or under the floor (the Counterflow unit).

 

Meanwhile, at North Madison, Indiana, we had acquired a plant in which we had expected to supplement our Cincinnati production of heavy gauge steel furnace components -- which it still does -- but which, as it later turned out, enabled us to get a succession of contracts, for jet engine and missile containers, from the U. S. Government. Madison has helped to balance our operations and stabilize the Company's earnings.

 

By 1950, World War II, with its triumphs and its tragedies, was over. The United Nations was in operation. So was the Marshall Plan -the start of our Foreign Aid program. And the Chinese Communists had begun to invade Korea.

 

In Cincinnati, an Enquirer headline announced that-" street cars are being put out to pasture." By now the Enquirer was mentioning "public housing" in its building forecasts.

 

 

The early 1950's found the Company again converting much of its talents and facilities to military production in support of the Korean conflict. Not only did this take the form of container production at the Indiana plant, but we were back in Armor Plate production on an infinitely greater scale than had been the case during World War II. While Armor Plate ended with the Korean war, requirements for Container products have carried right on into the ever increasing missile programs.

 

The 1950's witnessed further evolutionary improvements in gas and oil-fired heating units, - greater compactness, greater efficiencies, - along with great strides in electronic air cleaning and automatic humidifcation of the circulated air. Electricity as a fuel began to manifest itself significantly. The heat pump began making substantial progress, in the south particularly.

 

But the most significant development of the 50’s, by far, was the birth and growth of central home cooling, tied in with the air distribution system for heating.

 

We first experimented with cooling way back in 1931; but the public was not ready for it. Commercial refrigeration was well known; but the idea of centrally cooling a house just didn't seem to percolate.

 

We were convinced, however, that eventually there would be a real market for household cooling units; and we set up our own experimental laboratory to study the subject. By 1955, our output of cooling units had grown to where there was not enough room for it in the laboratory -- and we moved cooling production out into the plant.

 

It was at this time, because of the tremendous potential which residential cooling seemed to hold for us, that the stockholders authorized deletion of the word "Heater" from the name of the Company, and it became "The Williamson Company."

 

For some years we were disappointed with the volume of cooling sales. But we kept right on improving the product. And all this has now begun to pay off. Today cooling units constitute a really impressive share of our total business.

 

At long last the public has caught the idea. So have our dealers and distributors. We have learned to sell all-

year-round comfort -with heating and cooling, humidifcation and air-purification, all part of the package.

 

Tremendous growth in the sale of fittings occurred during the 1950's, -thru a combination of greater sales and promotion efforts, the advent of the market for central cooling installations, and the revolutionary improvement in the product itself, with the development of our patented "Seal-Tite" features.

Madison Plant

 

Where we stand today is best illustrated by the examples of our current advertising literature, inserted in the back cover of this booklet:

 

TOP MANAGEMENT

AND THE

PERSONNEL ACTIVITY

By W. L. McGrath, Chairman

 

W. L. McGrath, Williamson's Chairman of the Board, who joined the Company as a salesman in 1920, developed, over the years, and instilled within his associates, a concept of the personal side of the management function which is, to say the least, somewhat different from that prevailing in many companies. Not long ago he was asked to contribute a chapter upon that subject to a "Top Management Handbook", published by McGraw-Hill. Because it is so appropriate to this book it is here (with minor omissions) reproduced in full.

 

THE BIG UNLISTED ASSET

Every financial statement includes, on the asset side, the item P P & E --- property, plant and equipment.

 

But of equal significance is an item not listed; namely, M W & I - men, women and ideas.

 

Human facilities are just as vital as physical facilities, and should be given equal weight in top management thinking.

 

The typical production unit is man-plus-machine. If there is something wrong with either one, output suffers.

 

If, on a machine, the controls get out of kilter, or the lubrication goes wrong, or anything happens to slow down output or result in down-time, the maintenance department is on the job in a hurry.

 

But what happens if the man gets out of kilter ? His ideas, which are his control system, may go wrong. Then he slows down. The result is less output from the man-plus-machine team; due this time to the human factor instead of the machine factor.

 

Now the maintenance man can't come running to fix up a man's ideas. It isn't as simple as all that. In his mind distorted notions and misconceptions may have been gathering for some time. Some of his gripes may be little things that the foreman could straighten out, but some may have to do with the overall conduct and policies of the company.

 

What's going through this man's head may be:

 

"I should be getting the same rate as so-and-so."

"They should have transferred me to that other machine.'

"Oh well, they don't give a darn what happens to me.

The front office doesn't even know I exist."

"There ain't no justice anyhow. The bosses and the owners get all the gravy and to hell with the working man."

 

If that sort of thinking is running through the plant, there's trouble -production trouble. And, in my opinion, it is too often top management's fault. The industrial relations department, working with the foreman, can straighten out things like comparative job rates and job assignments. But what the men think of the company itself, and its management, is in many respects beyond the power of the industrial relations department to handle.

 

I am convinced that a good deal of the unrest in industrial plants in recent years is due to the fact that top management has turned over to industrial relations departments matters having to do with human relations that can, and should, have the attention of top management itself.

I have been talking thus far about the plant. But now let's go into the office. Let's look into the mind of a sub-department head:

 

"I should have had the office with the window.' I

"That purchasing agent is a drip. What do they want all that aluminum for?"

"No, I won't get out that report for Kelly. Would he do anything for me?"

 

Is that sort of thing going to be cured by top executive conferences on equipment, product design, pricing and sales, followed by golf and a trip to Washington?

 

Here's another situation. If you had a machine in your plant capable of turning out thirty parts per hour, and you found it was being operated to produce only ten parts per hour, you would do something about it, and fast. But in the corner of a department there is, let us say, a young man named Jones sitting on a dead-end job. He knows it by heart; he could do it with his eyes closed. He has spent hours dreaming about better ways and means of doing various things he sees going on around him. He used to try to talk to his department head about some of his ideas; but he got nowhere and he quit trying. He has a good mind that is quietly going to dry rot.

 

"What's the use," he says to himself. "They just don't give a darn. The front office doesn't even know I work for the company."

 

There, in effect, is a human machine capable of turning out thirty units per hour being operated at a ten unit per hour rate. But is anythingbeing done about it?

 

What's wrong in that picture?

 

What's wrong, to put it simply, is that the Boss is not taking a proper interest in People.

Which is unfortunate -- because People are always interested in the Boss.

 

That is the key to the whole situation. What the Boss thinks, what the Boss says, even what the Boss looks like -- these are things to talk about for a week.

 

Therefore, there is simply no substitute for the Boss appearing in person. The Boss must get out into the plant, he must get around the office, and talk to people. This he cannot delegate, for the very reason that he is the Boss. It is the Boss that the folks want to see.

 

People aren't logical; they're human. That's the whole point. They are full of whims and notions and quirks. From the standpoint of cold logic, a company president with top-efficient production experts need not actually set foot in a plant. So, in theory, a general can direct a battle from his tent. But historically, what does the general always do, the night before the battle ? "The General rode through the ranks --" you've read it time and again.

 

If the Boss, just once, can step up to a man at a machine and call him by name, gone forever is that man's idea that the "Front office doesn't even know I exist." Gone too, with that one brief moment, is the concept of the Boss as an inhuman icy-blooded dollar-squeezing ogre. It's amazing what it means to a man in the shop to be able to say, "I know, the Boss personally."

 

In my many years as executive head of our company, I have always made it a point to get into the plant often and to talk to as many of the shop people as possible, both individually and, in situations which called for it, in groups. Many times I have talked to mass meetings of everybody in the entire organization. I have done this as a consistent and necessary part of my job. I know what it means to have the Boss come around. I started in a shop myself.

 

You may say that most company presidents simply can't take the time to do this. In recent years, when my activities have taken me out of town a great deal, I myself have found it increasingly difficult. But, you see, I have a counterpart in the person of our President. Since he was top man when I was gone, he became, in the minds of the men, the Boss. Actually, the two of us, over the years, have constituted a top-management team. Let me illustrate our "personal appearance" theory by an incident which a friend of mine reported to me not long ago.

 

Our President was taking my friend out into the plant to see a new machine. It happened to be just at change of shifts, with men coming and going. Our President was talking about the machine -- but my friend was counting upon his fingers. He told me that between the time they entered the shop and the time they reached the machine, our President had called seventy-six men by their first names.

 

And as far as the supervisory and office people are concerned, the operation of procedures later described in this chapter insures that our Executive Vice-President, our President, and myself are consistently on a basis of close personal acquaintanceship with all of them.

 

THE PROBLEM OF THE LARGE COMPANY

 

To the people in an operating unit, who is the Boss? The president of the company, located, perhaps,, in a distant city? Oh, no. He's merely a legendary character. The Boss is the man in charge of that operating unit.

It is up to the executive head of a large company, therefore, to impress upon the heads of each of the operating units the necessity of doing a human relations job in their respective units. In short, to the people in a branch plant the manager must be, in effect, the president.

 

One great trouble today lies in the fact that in too many cases, plant managers are not given the freedom to do the right kind of a ,job, along this line. If a man can't talk like the boss, if he can't act,. like the boss, if all he can say is "I'll have to ask the home office, " how can he possibly develop the proper sort of boss-employee personal relationship ? If every employee could say "I know the Boss, I believe what he says, he tells the truth, he's not such a bad guy, " a great deal would be accomplished, right there.

 

But for the desired personal relationship between the People and the Boss to become a reality, the president of the company must inaugurate and enforce the policies and procedures required to effectuate it. He, or his counterpart, must pay as much attention to human assets as to physical assets. Along with P P & E he must always be conscious of that even more important, though unlisted item on his balance sheet, M W & I -- men, women and ideas.

 

MISCONCEPTIONS

 

The Socialists and the Communists -- in the United States, especially the Socialists -- are persistent, clever and plausible. Toward this end they have consistently fostered certain misconceptions. These false concepts have been mouthed so repeatedly by "welfare state" politicians and by labor leaders with socialist leanings that a great many people have come to believe them. Here, for example, are three of them:

 

1.         The owners and the bosses get too much of the income of the company and the workers and the men down the line get too little. That's not fair. Surveys made a few years ago showed that most people in all walks of life thought that the average industrial company made an annual net profit of at least 25% on sales.

2.         Companies don't need to save any money out of their earnings for reinvestment in the business. That's just a dodge. It's not fair to the workers. Companies could pay all that out in wages and finance all their capital needs by issuing stocks or bonds. This has been seriously advocated by a union spokesman.

3.         Competition is the bunk. The big fellows get together and fix prices. It's all a conspiracy to squeeze more out of the working man.

That's not fair.

 

Here are three charges of unfairness. All are based upon de= liberately fostered misconceptions. All of them are false -- certainly they are false as far as your own company is concerned. But do the company's employees know that?

 

If you believe these charges, would you give whole-hearted allegiance to the company for which you worked? If your whole organization is shot through with such ideas, how can you expect to develop what you term "employee morale"?

 

What to do? Well, there is an old proverb that says, "The best defense is the truth." The answer is, "Give the people the facts in a form that they can understand."

 

This is a job of communication and calls for the participation of top management. We're back to "People and the Boss." Here is what the Boss should tell the People to offset the three misconceptions listed above.

 

1.         For each fiscal year, the amount of the company's income, where it came from, an itemization of the purposes for which it was spent, how much money the employees got, how much Uncle Sam got, how much profit was left for the company, how much of that the owners got, how much of it was reinvested in the business.

2.         An explanation of why a company must reinvest a certain portion of its earnings in the business, in order to keep its products, plant and equipment up to date and remain competitive.

3.         An explanation of the working of the free competitive system and a description of the competition faced by the company.

 

How effective will such information be, in correcting misconceptions? This will depend largely upon the extent of past personal contact between the Boss and the People. If by such means he has gained their confidence -- if they know the Boss and they believe the Boss -it will have a very substantial impact.

 

Now let us consider methods of communication. There are only two ways of direct communication between the Boss and the People -- the spoken word, or the written word. The Boss can talk to people in groups, as I have done; publish a company report for employees, as we have done; publish employee messages in the plant paper, as is done in many companies; issue bulletins, write letters, etc. But this is not enough. A follow-through job must be done with middle management people, and particularly with the foremen.

 

To accomplish this, it is necessary to give the foreman not only the end facts, but the explanation behind the facts. For example -why a depreciation allowance? What is working capital, how is it acquired, and how used? What is surplus? How does a company tackle competition? What is a price-volume relationship? What is the function of dividends ? What is the tax-earnings relationship? How are costs related to competitive prices?

 

In short, foremen should be given a course in the practical working of the competitive free enterprise system, in terms of the actual problems of their own company. Only then will they have the degree of understanding that will enable them to evaluate properly their own functions, and to answer intelligently questions asked them by the people in their departments.

 

IGNORANCE

 

So much for misconceptions. Now let us go on to the subject of ignorance. I must differentiate carefully between these terms. Misconceptions are false ideas implanted in people's minds from the outside. By ignorance, I mean lack of knowledge of company affairs because men are not properly informed as to what is going on in the company.

 

If all the supervisory people in an organization are to work on a team, each person on the team must know what the other members of the team are doing. A football eleven would certainly be in a mess if the quarterback called a play known only to the fullback, leaving the rest of the players to guess at what was going on. And yet that, I regret to say,  is what happens only too often in companies today.

 

Unless there is a system of cross-sharing of information, departmentalization can be carried to a point of utter confusion, where each sub-department head is only concerned with his own little bailiwick and coordination is well-nigh nonexistent.

 

The job cannot be done by bulletins or memoranda. A man can't ask questions of a bulletin. There is simply no substitute for group discussion, -- and furthermore, the Boss must be there, because in many cases he's the fellow who has to answer the questions.

 

In our company, therefore, one or more of our principal executives attend a never-ending series of meetings, all designed to make sure that everybody understands the what and why of things. For, without such understanding, there can be no effective team work.

 

MEETINGS PROGRAM

 

Let's start with the monthly meetings of the entire management personnel of the company, including the supervisors. These meetings are presided over, in rotation, by one of the top executives of our company. At these meetings all of the facts of our company's business, as well as any other topic that may be of general interest, are discussed.

 

At these meetings the supervisors from the various departments involved -- such as finance, sales, maintenance, production, engineering, industrial relations -- rotate in their reporting, in order to provide each person with the opportunity of getting on his feet and expressing himself.

 

This cultivated ability to state their ideas calmly and clearly opens up the opportunity to tap the reservoirs of information reposing in our supervisory force and to direct this knowledge into constructive channels of activity.

 

Through this type of people-relationship the person with latent ability is given the opportunity to prove his worth and his capacities to the executive management of his company. It provides, furthermore, a wonderful opportunity for the development of future management leader ship.

 

We have mentioned before that one of the subjects discussed at these meetings is our current operating picture. As part of this discussion we cover, at the appropriate time, our sales and earnings forecast for the coming year. This is done in dollar figures; the entire group has the same facts as the front office.

 

One year the going looked pretty tough. The outlook for ourbusiness was not good. Our sales projection and operating forecast indicated that we might come out of the coming year with a net profit ofone-half that of the previous year. The competitive picture was suchthat an increase in price was out of the question; in fact, we had to reduce prices to hold our market.

 

Cost savings were obviously imperative. The problem was laid before the full meeting. Everybody was asked to come up with costreducing ideas. Meanwhile top management also went to work on the situation.

 

The cumulative result was a cost-reducing program that wasfine as far as it went, but it did not go far enough. Even with the indicated savings we would have to reduce salaries; and profit-sharing bonuses would be out of the question.

 

I so reported at the next meeting. I said, "If you want salary levels maintained, and if you want Christmas bonuses, we'll have to do better than we have so far."

 

You should have seen the commotion that followed. Somebody  said, How much profit do we have to make to hold salary levels and assure Christmas bonuses?" And finally, the $64 question, "How much more must we cut costs in order to earn that profit?"

 

I gave them the answer in a dollar figure" Throughout the following six weeks ideas came pouring in. The end result was that our costs were cut the required amount. And the big payoff came when, toward the end of the year, business turned upward -- enabling us to net a margin on increased volume which we would not have enjoyed had not previous economies been made. Our profit picture ever since has been improved because of the economies effected in the emergency.

 

I cite this as a specific example of personal-relationship teamwork, founded upon complete disclosure of the facts to all members of the team. Top management, working alone, could not have done this; all management, working together, did it.

 

There are the usual functional meetings, in our company -- for example, Monday afternoon meetings of all Division Managers with the two top executives, and Saturday morning meetings of each Operating Division Manager with his own supervisory staff.

 

But what I have said thus far is only part of the story.

 

REVERSING OBSOLESCENCE

 

From the day you install a new machine in your plant it starts running down hill, due to physical wear and tear and to obsolescence.

 

So you depreciate it over, probably a twenty-year period. During all that time it will never be any better than when you got it. Its performance will gradually decline.

 

But now let's take a young man and put him in your plant. If you give him fair treatment, the facts he needs to develop his understanding, and the mental tools he needs to function properly, he will do just the opposite from the machine. Instead of depreciating, he will appreciate. At the end of twenty years his productive value may be five, ten, even twenty times what it was when he first came to work. He will reverse obsolescence.

 

It is standard practice to write off machines, over the years, in order to maintain, on the balance sheet, a realistic figure for P P & E. But how many companies have an active program of human development, so that they can write up that intangible unlisted asset, M W & I -- men, women and ideas -- to its maximum potential?

 

In our company we realized very early that our policy of giving everybody (especially our supervisory people) all the facts about the business was generating a great deal of excellent thinking upon the part of many minds. We were amazed at the way constructive suggestions would pop up from the most unexpected quarters.

 

There should be, we decided, some machinery by which a company should be able to get the benefit of these ideas; some way whereby more men could contribute to the formulation of policy and the development of practices and procedures. This led us to our adoption of a system of management development conceived over twenty-five years ago by Chas. P. McCormick of Baltimore and which he names "Multiple Management."

 

I am not going into Multiple Management further at this point, because the details of its operation are thoroughly covered by a later chapter in this book, authored by our Executive Vice President, Mr. Herrmann.

 

EMPLOYEE RELATIONS

 

It happens that our employees are represented by a certified independent union -- and a strong and effective one. The fact that it is strong and effective, I feel sure, is a direct reflection of the mutual understanding and respect in which the people in our management group and the people in our worker group hold one another.

 

The objectives of an industrial relations department are excellently summarized in the Sears World, the Sears, Roebuck and Company magazine, as follows:

 

Our company's personnel program will be directed

toward providing employees with:

A chance to get ahead.

A chance to earn a good living.

Reasonable security for themselves and their families.

Opportunity to do something worthwhile and to be recognized for this contribution.

Information about what is going on and a voice in things affecting them.

Working conditions that are considerate of their safety and health.

The kind of leadership in which they can have confidence.

Our management sets up policies and proceduresaimed at such objectives.

 

In our company personnel practices follow in many respects a pattern that is generally accepted, and which therefore calls for no detailed description here. Such features are covered briefly in the following summary, abbreviated from our Employees Manual:

 

A major objective is steady work and steady pay.

The company pays wages equal to or better than the community average for similar work.

The usual time-and-a-half provisions, plus seven paid holidays per year.

Seniority.

Vacations with pay.

Complete group insurance protection.

Service awards.

Suggestion plan (paid awards).

Employee purchases of company products at discount.

Employee company stock purchase plan.

Applicant testing and physical examination.

Three months probationary period.

Relatives of employees ineligible for employment.

Grievance procedure.

Cafeteria, rest rooms, lockers, showers, vending machines, parking space.

Baseball, basketball, bowling, etc.

Credit Union.

Medical aid.

 

In addition, our employees manual (printed and given to every employee, which we believe very important) contains, spelled out in detail, our safety regulations; regulations as to ringing in and out, absences, tardiness, wage advances, etc; and a set of rules for employee conduct and behavior, with specific penalties for infractions.

 

An unusual feature is that although our personnel department screens applicants, the candidates are submitted to the supervisor for whom they will work, before the hiring takes place. Thus the Personnel Department acts in fact as a service agency. The actual hiring decision is left to the supervisor. The same principle applies as to discharges from employment. If a supervisor is not satisfied with a man in his department, an effort is made to place the man elsewhere in the company. If this fails, it is up to the supervisor to decide whether or not the man is to be discharged.

 

Another feature has to do with what we terrri'lateral promotions:' When an employee shows work characteristics and leadership qualities which indicate that he might be supervisory material, we start giving him diversified experience. He may shift to a new job in his own department. Such rotational transfers add to a man's understanding of plant operations and to his skills. They dispel the feeling of frustration which tedious repetitive work brings to the imaginative mind, and engender a sense of accomplishment. Thus a man is ripened for a supervisory position, when the opportunity occurs. The same rotational system is followed up through the higher management brackets.

Note the emphasis, not on functions, but on people.

 

SUMMARY

 

All that I have said in this chapter boils down to three basic principles, namely:

 

1. Give people the facts, to destroy misconceptions and ignorance.

2. Get all people in management, including supervisory forces, to thinking about the problems and operation of the company as a whole.

3. Maintain personal relations between the Boss (top management) and the people.

 

These are the means of developing all the people in the organization into a working team.

 

You hear men talk about "building up a company, " as if it were something that could be done by money, machinery or executive decree. A top executive can't build up a company. But he can build up people, and help them to build up themselves -- and they can buildup the company. Remember that unlisted asset, M W & I -- men, women and ideas.