Is "Full" Employment Attainable?
THE LOGISTICS OF PEACE
By ARTHUR A. HOOD, Director of Dealer Relations, Johns-Manville Corporation, New York City, N, Y.
Delivered before the New York Sales Managers' Club, New York City, April 28, 1944
Vital Speeches of the Day, Vol. X, pp. 523-531.
LET us answer this question with a qualified "Yes," then examine the qualifications, and lastly, prepare to meet them. "Full" employment might be defined as—a condition wherein everyone seeking and legally entitled to work, can find, within a reasonable time, a productive job opportunity.
In talking about postwar planning for full employment, I am going to assume that every one here is doing everything within his power to further our war effort, but that you are conscious also of the necessity for a plus-job—that of preparing ample work opportunities for both war front and home front men and women when hostilities cease.
Logistics is quite a word in war and I think it is going to be an important word in winning the peace that we look to so hopefully.
We know now that peace must be won and that the winning involves the retaining of our democratic way of life through the continuous provision of employment opportunity for all who want work,
American Enterprise, too, has its "Atlantic Charter"! Our business leadership has burned its bridges to the past.
The statement, "If Free Enterprise does not provide full employment, the Government must" has been sold to the American people and has been repeated too often by too many men to retract now.
The implications of that promise necessitate a radical change in traditional business planning and action.
A full employment economy will operate in a greatly enlarged and more complex framework than business has had to contend with in the past. This will necessitate a more comprehensive and objective approach by management.
We hear the terms "climate," "atmosphere" and "environment" to describe the structure which circumscribes industrial operations.
With 1,250,000 laws on the statute boob, most of which affect the economy, and with the continuing wartime restrictions, management is awakening to the rigidities of that framework. We are beginning to recognize that neither political platforms nor voting majorities can in themselves alter existing controls. It is a matter of piece by piece adjustment of the intricacies of that framework. The question is whether the alterations will be done by legislative wood butchers or trained economic carpenters.
Whoever does it, the remaining structure must embrace both private enterprise and full employment if we retain democracy.
The basic problem of providing continuous full employment opportunity is complicated by unpredictable national and international contingencies. You are familiar with the list—what are we going to do about the rehabilitation of
liberated countries; the allocation of men, money, machinery and materials; what are we going to do about taxation, tariffs, fiscal policies; what are we going to do about our buried gold; about the disposal of our war surpluses; about the disposal of government-owned plants; the utilization of the 90% over-production capacity in our ship plants and airplane plants—all of these uncertainties condition and control our thinking about the future.
Fortunately, we have a bedrock foundation which is a most solid reality in this world of uncertainty that is facing us. That bedrock foundation is our demonstrated productive capacity.
We are a little smug, however, about this productive capacity. We boast about the miracle of war production. We forget that that same miracle has been repeated every time in history by the nation which won a war—every winner produced enough to win.
Economic history has a way of repeating itself. Every time the miracle of producing enough to win is repeated, it is followed inevitably by a debacle, a depression proportionate to the size of the nation's war production effort. This succession of miracle-debacle has gone on in its vicious spiral throughout the course of history.
The formula is simple. Comes war, then, in succession, increased production efficiency, accumulating consumer demand, inventory depletions (you can just see this process going on now)—then peace, a production spurt, satisfied demand, accumulating unsold inventories, shutdowns, unemployment, depression, and, sooner or later, another war starts a new cycle.
If we break that cycle, then we really will perform a miracle. What is that miracle? It is something that has never before been done in history—never! This is to sell at a profit into annual consumption the full product of sustained full employment under the Free Enterprise System. That miracle is the real job of industrial management!
A successful approach to that objective would seem to involve the acceptance of six new,—or at least remodelled—economic principles as a preliminary to a program of planning and action:
I. The "road-block" to full employment is the accumulation of unsold inventories—or the threat of such accumulation.
The prevention of unemployment is not a matter of production but of the creation of sufficient consumption or use of the products of full employment to prevent the accumulation of unsold inventories.
And yet the overwhelming emphasis has so far been placed on production in postwar planning.
We know that our production capacity is sufficient to support an economy of full employment opportunity—but, unfortunately, production capacity alone will never do the job.
The new production capacity figures are astounding; the figures for 1943 startling! We produced and sold at retail 66 billions oi dollars in consumer goods. On top of that we produced 70 billions in war material, and that with ten million of our best producers otherwise occupied.
From here it looks like 150 billions of postwar production in today's dollars is a "cinch" with even five or six million unemployed employables.
Why doesn't this obvious production capacity answer the problem of full employment? You sales managers know the answer but production men and government leaders must become more aware of it.
The paradoxical "truth is that our traditional freedoms stand between us and the full utilization of our productive capacity.
There are certain viruses in the very air of freedom that cause the unemployment disease, which we might name—"the creeping paralysis of accumulating unsold inventories," There is probably not a middle-aged sales executive in the room who has not experienced a total or partial shutdown as a result of this disease. You know, too, how contagious it is—how historically this creeping paralysis affects one industry after another until we have another downward swing in the business cycle.
What are these viruses that cause unsold inventories to accumulate?
There are two kinds—the controllable and the uncontrollable.
The uncontrollable viruses are the freedoms of choice of the consumer; the free choice of whether to buy or not? Where to buy? What to buy? And how much to buy?
The symptoms of this virus are familiar too—frozen purchasing power, idle money, uninvested savings, lack of public confidence, money directed to speculative gambling and buyers' strikes.
The controllable viruses, on the other hand, are: faulty market analysis, unwise budgeting, inadequate advertising and sales promotion, uneconomic pricing, unwarranted distribution costs, ineffective selling techniques and inefficient sales personnel.
Somehow management must find controls for the controllable factors and cures for the uncontrollable ones if we are to prevent future depressions.
If we can seek out and eliminate the causes of the creeping paralysis of unsold inventories we will abolish depressions.
In the light of our commitment to provide full employment, the unpardonable sin of Free Enterprise tomorrow will be a widespread blight of unemployment.
It is management's job to prevent as well as alleviate unemployment.
II. The prerequisite to full employment is the creation of effective consumption or use of the total product of full employment.
Effective consumption might be defined as—selling at a profit into consumption or use the total products and services of full employment.
Effective consumption has two interrelated parts from management viewpoint. First,—to plan the strategy and tactics of distribution so that production management will have the confidence to produce at full capacity. Second,—to create the full consumption necessary to repeat the cycle. This job has never been done!
Only through adequate planning for the sale at a profit of the total product of full employment can we make full employment possible.
Then, in making the planned sales reality we make full employment continuous. It is a job of heroic proportions!
Many people seem to think that if we could only produce 150 billions of dollars in peacetime goods our problems would be solved.
It is true that in producing 150 billions in goods we do create the buying power to purchase this total, but, under a system where free buyers have free choice and where it is necessary to make a profit on the sale—the factual existence of purchasing power does not mean adequate consumption. Consumption is not a matter of purchasing power but of the utilization of purchasing power.
Our continuous production output, then, is determined by our ability to create adequate consumption.
Can we have these freedoms then and full employment opportunity too? I believe we can if our people are made to realize the relation between adequate consumption and full employment.
As sales executives we must accept the postwar fact that continuous employment will be in direct proportion to our ability to create adequate consumption and use of the products of employment.
Our income (and total employment) is the exact equivalent of what we spend or invest in consumption (use) or in work creating ventures.
And the sum total of our "layoffs" of employed is the exact equivalent of money income withheld from expenditures or investment in work creating ventures.
III. Full production once achieved will precipitate the most intensive competition American industry has ever known!
This intense competition will be caused by the fundamental law that the greater the supply of a thing the more difficult it is to sell it at a profit.
In terms of peacetime supplies some of us are just beginning to realize the appalling total production of full peacetime employment. Four factors contribute to these totals:
(a) The greatly increased productive plant.
(b) Increased number of people in working age brackets.
(c) Increased productivity per man hour.
(d) Increased percentage of employed to total employables.
Now, let's try to get into that problem in statistical terms. The other day I went through a large factory. This factory today employs 1700 people, of whom 41% are women. It is producing 40% more than it did in 1939, when it had 2300 employees, of whom 3% were women. Today, with 600 less employees, it is producing 40% more, and it has 41% women instead of 3% in those days. I don't know how your experience checks with those figures but I suspect that that phenomena of increased production per hour per man is a universal part of American business, and so it is apparent that this postwar production of 150 billions of dollars in peacetime goods is entirely feasible.
That is an appalling thought when we realize the distribution job that we men in industrial management will have to do. Do you realize what it means if we were going to produce enough to keep 55 to 56 million people employed in this country in the postwar era? It seems that we are going to have to sell at least 50 billion dollars more in goods and services to consumers into consumption and use—50 billion dollars more than we ever did before in history, and do it every year!
Now you tell me what an average sale is—I've tried to find out and I've grabbed a figure out of the air. An average consumer purchase of $5.00—I think that is high and I purposely took a figure that I thought was high. Now, you divide $5.00 into 50 thousand million dollars, or 50 billion dollars extra (keep in mind that this is extra on top of anything we have ever done before) and that means the cash register is going to have to ring 10 billion extra times. We are going to have to fill out 10 billion extra sales slips; we are going to have 10 billion more contacts between buyers and consumers—and what have we got to do that job?
Even with an enormous increase in our pre-war marketing efficiency we will need at least a 22% increase in our distributive plant.
We are going to need three to four hundred thousand additional retailers that do not exist today; we are going to need 100 to 150 thousand additional sales managers, and we are going to need a million to a million and a half extra salesmen more than we ever had before.
But can we safely assume even pre-war distribution efficiency?
There are four obstacles which must be overcome in doing so:
The FIRST is that selling at a profit becomes increasingly difficult when you increase the quantity of anything. We will double the amount of consumer goods production over what we previously had to sell. Don't you see, men, that we are going to enter the most highly competitive picture that we've ever encountered or ever dreamed of in American business? Our gross profit honeymoon is over—the minute this production begins to hit the market, we are going to see shrinking gross margins. We are going to have to make our net profits, if we maintain them or increase them, on increased volume and on increased efficiency. This competition is going to be accelerated by the fact that manufacturers will begin to compete in terms of products in a way that they never have before. I think you may be familiar with a recent survey of some 350 manufacturers—a cross-section of the 180,000 manufacturers in this country. 32% of these manufacturers said they are going to produce items they never produced before. Just think that one over for a minute!
To further complicate the quantity problem we are going to have ten times as much surplus war goods when peace comes as we had at the end of the last war.
The SECOND difficulty that we will encounter is that people who must do this job of consumer selling have a distaste for the job. People don't like to sell! I know what I am talking about there, because I have been studying this particular problem for a long time. Selling is in disfavor with the average person in the country, particularly the young people. The other day a Company in Evansville made a survey of its plant on this point (they are producing airplane wings) and they put these questions to the 2700 people producing airplane wings:
"What kind of a job did you have before you came into this plant?"
"What would you like to do after we stop making airplane wings?"
80% of those factory employees who came out of the retail business did not want to go back to retailing; only one in five wanted to go back to retailing; 50% of those who had done other types of selling did not want to go back to selling,—so we are going to have quite a job in recruiting salesmen!
THIRD, the present sales organizations are stale and rusty because of the sellers market you men are encountering every day. We are losing some of our retail and wholesale structures as well.
FOURTH, the people that sell the family consumers are the poorest paid salesmen in the world—at the very point where the toughest job of selling has to be done.
It looks like our distribution manning tables in the future are going to be about as important to us as our production manning tables are today,
IV. A successful and profitable solution of this problem of intensified competition will require (a) the elimination of distributive wastes, (b) further reduction of production costs, and (c) increased distribution per man hour.
In the process of eliminating distributive wastes, certain distribution personnel may become temporarily unemployed.
This unemployment will be short term, however, because the effect of distribution cost reduction will follow the same formula established by the streamlining of production processes and the companionate reduction of selling prices, i.e. each reduction of the selling price in a consumer product —opens up a new market in a lower income group, which, in turn, importantly increases consumption and requires the employment of additional distribution (as well as production) personnel.
Two factors will have great weight in effecting these cost reductions: increased sales volume per unit of distribution and more control by producers of distributive selling techniques.
The time has passed when a manufacturer should consider his product sold when it is on the shelves of middle-factors or the chain of distribution.
Manufacturers tomorrow will be found developing techniques for directing and supervising the economic distribution of their products clear through into ultimate consumption or use.
Inventories can accumulate to the detriment of continuous employment in three out of four classifications of sales. These four categories or sales include:
1. Selling to wholesalers for resale to industry and trade.
2. Selling to processors for remanufacture.
3. Selling to retailers for sale to consumers.
It is seen then that in all three of these divisions of selling, the creeping paralysis of accumulating unsold inventories may develop. Inventories can accumulate in wholesale warehouses, remamjfacturing warehouses, and in retail warehouses, just as dangerously as in factory warehouses, and have just as deadly an effect on the employment picture.
Only in the fourth category—Sales into consumption and use can production employment be sustained and maintained.
Distributive cost reduction programs will have a major part in assuring adequate consumption.
The real challenge to Sales Management is to assure consumption or use at the point of ultimate sale.
V. Increased distributive efficiency will require a close coordination and integration of production and distribution management on the vital problem of assuring adequate consumption and use of a company's products.
We boast about the "KNOW-HOW" of Management. "KNOW-HOW" will not be enough in tomorrow's world. Industrial management will have to know what—know when—know where—know why—to whom—by whom—and with what—distribution-wise!
We might call these techniques "Distribution Engineering", or, if you like the fancier word,—and I like it because it has begun to mean a great deal to us—the "Logistics" of creating adequate peacetime consumption.
We must apply engineering principles to this problem of distribution. What are the logistics of peacetime consumption?
In war logistics start with the production of war materials and the point of delivery is the point of fire power on the enemy to win a military victory.
The logistics of peace, on the other hand, start with consumption, and the victory we must win is full employment. We've got to create effective consumption and bring it back and deliver it to the factory in terms of productive employment It is a two-way flow—the flow of the goods out to the consumer, but,—more importantly in peacetime,—the flow of effective consuming power; effective consumer demand,—back to the factory.
With the application of engineering principles to the problem of peacetime distribution and consumption, we must have a coordination, even an integration, of the sales mind with the production mind.
An imaginative friend of mine said the other day: In American industry we have three types of mentality—The production mind, the classical sales mind and the economist. The first is the engineer who fights production cost to the last mill. The second the sales manager who believes that the beginning and the end of selling is to persuade someone to buy. The third, the statistical analyst. We must unite these minds on the problem of creating adequate consumption.
Production men must learn that sustained production and adequate consumption are two sides of the same coin and cannot be separated; that materials are not fully produced until sold at a profit into consumption. In tomorrow's world, production problems—important as they are—are bound to be secondary until we have achieved that goal.
We think a lot about production—production is on the front pages of newspapers; we have been talking about production for years in this country. The dominant postwar problem is distribution, and we must shift the weight of the emphasis of management thinking as between production and distribution.
Consumption problems are primary because we have never sold at a profit into consumption the product of full employment. Industrial management must cease being divided into two categories,—production and sales. The production mind and the sales mind must unite on the primary as well as the secondary job. There is an interrelation between the sales and distribution mind and the production mind facing this problem because selling starts by translating effective consumer demand into product engineering. I am going to repeat that—selling starts by translating effective consumer demand into product engineering, and production engineering starts with the assurance of adequate consumption or use. I am hoping this point will be set up tonight—that the production mind here will accept his job as being as much concerned with assuring consumption as the distribution mind.
Selling into consumption, and only that, is the dynamism that will effectively prevent accumulating inventories. That is the ultimate in distribution engineering. What an opportunity for the sales mind that can adapt itself to engineering techniques!
In my opinion any manufacturer here may well ask himself this question:
Can I completely entrust the consumer sale of my products to undirected distributive factors without placing my employee payrolls at the mercy of outsiders?
VI. The sixth principle is an inevitable conclusion from the other five: That the challenge of full employment will require, (a) a thorough overhauling of our distributive machinery and processes, and (b) a reindoctrination, reorientation and retraining of all administrative personnel and skilled workers.
Fortunately, there has never been a time in the history of American business so favorable to a complete overhauling of our distribution strategy tactics and implements.
Distributor inventories are at all time lows—or shortly will be. We can wipe the distribution planning slate clean and start with a fresh page.
This does not mean that new channels of distribution will be established or that distributors who will keep abreast of the new techniques will have anything to fear.
Neither will increased numbers of manufacturers necessarily go into direct consumer selling.
It does mean that tomorrow's industrial management will have a new, fresh, dynamic and comprehensive approach to the problem of creating adequate consumption and will build a sound and more efficient structure clear through to the point of consumption and use based upon increased sales volume, lowered sales and distribution costs, control of distribution techniques, and ultimate consumption and increased personnel efficiency of every human factor along the distribution chain. Manufacturers will uncover the most effective consumption creating techniques and will pass them along to their distributors in educational programs.
Efficiency is regulated by performance, performance by understanding, skill and initiative, and these in turn by education and training.
During the remaining war period we have both the time and the opportunity to make desirable changes and adjustments with a minimum of friction and difficulty. We can, think, plan, train and act with utmost care.
We have so far discussed some of the principles involved in full employment—how about action?
How can an individual company implement these principles in terms of operating tools, methods, structures and personnel? What is the responsibility of company management looking to a full employment economy?
An Action Program
Obviously, we cannot have a full employment economy under Free Enterprise unless those engaged in such enterprise organize themselves individually and collectively to make the necessary changes in their operating structures and practices to meet the two qualifications for full employment, i. e.,-much greater production and the current full consumption or use of such production.
These changes would seem to involve at least six fundamental steps: (1) A thorough-going analysis of the company's potentialities; (2) The establishment of adequate sales and profit objectives; (3) the installation of an improved waste elimination and cost reduction program; (4) The setting up of effective distribution controls; (5) The conducting of a complete retraining program for all personnel involved; and (6) The coordination of all external and internal elements which will contribute to the successful achievement of the objectives.
Let us briefly examine some of the implications of each for an individual company:
Determining the Maximum Part the Company Can Play in the Postwar Economy
The approach here should be objective, microscopic and telescopic to overcome the danger of familiarity breeding blindness to progress.
The survey should include physical resources, plants, offices, machinery, equipment inventories and all material assets.
You will probably find production per man hour has materially increased—that many labor-saving devices have been installed since Pearl Harbor.
Next, assay your man power—and women too I Take into consideration the returning military to whom you have promised jobs—multiply these by per man hour production figures on a forty hour week and you will approximate one shift production capacity.
From these maximum production capacity can be determined.
It is probable that the point of maximum efficiency in an operation will be found to be pretty close to the point of capacity production.
Executive and administrative man power should then be weighed and production figures adjusted accordingly.
The capital structure should be reviewed and financial needs determined in the light o estimated maximum production.
Estimated practical production potentials should then be fixed, item by item, both quantitatively and qualitatively, subject to synthesis when the other five steps have been taken.
Establishing Detailed Sales and Profit Objectives
You have your tentative postwar production capacity. The next problem is to adjust it to market potentialities.
This means a most thorough market analysis covering the consumption or use potentialities for each item of your planned production, carefully adjusted to your probable share of the total potential consumption.
These figures must be carefully reconciled to projected costs and to pricing assumptions at various gross margin levels; then necessary adjustments made.
Pricing policies are especially important. It should be remembered that prices based on the volume (cost) produced by maximum employment will have a tendency in themselves to produce the necessary sales volume.
Warehousing facilities, actual and potential, should be studied and thought given to the problem of providing some extra elbow room and flexibility for accumulating unsold inventories.
The export field should be studied particularly, with respect to emergency outlets for unplanned-for inventory accumulations,
A study of the pre-war danger levels in unsold inventories should be made and constructive plans developed for considerably greater postwar leeway on this problem.
Distributive sales financing and field warehousing might also be factors here. New systems of financing accumulating unsold inventories might be developed to compensate for temporarily frozen purchasing power and excess savings.
When these analyses are completed, sales budgets should be established and gross and net profit objectives fixed. Detailed quotas should then be set for regions, districts and territories and an estimate made of the needed additions to the distributive structures and man power, market by market.
Reducing Distribution Costs
The next step is most vital to the whole effort of providing full employment.
It must be recognized that any savings in distribution costs, which are passed on to the consumer in reduced prices, have exactly the same effect as reduced production costs in expanding markets and creating additional employment.
The drive for reduction in production costs, which has been intensified year after year, has placed distribution costs at a statistical disadvantage. This provides a spectacular opportunity to the distribution engineer. His opportunity for cost reduction is spelled in dollars where further opportunities to reduce production costs may be spelled in cents.
It is therefore important that every detail of distribution costs, from the packaging of the product in the factory to the ultimate delivery into consumption or use, be examined microscopically. Every process, procedure, personnel activity, mechanical function technique and physical instrumentalong the entire chain of distribution must be analyzed from the viewpoint of its necessity and efficiency.
(One manufacturer found that over one hundred and thirty forms and blanks were filled out and signed by people along the distribution chain before the final purchase by the consumer. Cost reduction techniques reduced these by half.)
Every single detail of distribution cost should be justified and if found unjustifiable should be eliminated or adjusted downward.
We must accept as final nothing that has been done distribution-wise in the past. We must conduct time and motion studies link by link along the entire chain of distribution and have the courage to give full consideration to new philosophies, channels, structures and patterns of distribution which show potentialities for important savings to the consumer.
Every manufacturer should expand his consideration of distribution costs and count as his own not only what it costs to sell the first rehandler, but every single cost between his factory doors and the ultimate consumption or use of his product.
These considerations apply especially to consumer goods, but even manufacturers selling to industrials for reprocessing can use these techniques to determine the timing of repurchases and the extent of new sales.
Every known means of reducing distribution costs should be tested in application to a company's problems, such as new packaging, transportation changes, vertical and horizontal consolidation of distributing units, widened production lines, lower financing costs, etc.
If intensified competition and shrinking gross margins are ning postwar, wouldn't it be sound planning to set up definite incentives to distribution factors all along the line, from the factory doors to ultimate consumption, which will cause them to develop and apply cost saving techniques? Incidentally, wouldn't it be sound planning regardless of whether or not we were going to have intensified competition and shrinking gross margins?
Controlling Distributive Results
It is demonstrable that what happens at the point of sale a product into ultimate consumption or use is the controlling factor which governs sustained employment in the factory which produces the goods.
Therefore, Industrial Management, committed to full employment, must exercise every precaution to see that maximum efficiency is had at the point of sale to consumers; that an aggressive and competent merchandising job is done.
This control may be exercised directly—by factory to consumer sales—or, more practically, by franchise control of distribution techniques.
The most powerful franchises in exercising such controls are those with consumer demand value and those which provide satisfactory profits to consumer selling organizations.
The most valued franchises are built through end use package engineering, package identification and national advertising of the package trade marks which spotlight the retailer and provide adequate retailing helps.
The distributors should be shown that they have an excellent opportunity for a permanent and successful business, and producers should coach them on the proper volume, margins, costs, and profits.
The consumer salesman too should have special attention. If we are going to have more production per selling man hour, we will have to recruit and select such salesmen more carefully, sharpen their selling tools, give them more security, train them better, see that their opportunities are increased and that their compensation is revised upward.
Looking back over the history of marketing we can be proud of our ingenuity and resourcefulness in developing unique techniques and incentives for increasing sales, but, with the increasing emphasis on distribution efficiency in the postwar period we cannot rest on past laurels. We must do still better.
We must plan and organize new sales stimulants and incentive methods and then set them up in terms of education and training. We are going to have to re-sell selling to our organizations, to all of our organizations. We are going to have to re-sell selling to the American people, to all American employees. We are going to have new and more effective incentives against that selling job and we are going to have to show more originality in creating full consumption and use.
It would be hard to find any weaker link in the chain of distribution than the coordination, or rather the lack of it, between advertising, promotion, and sales effort. Here is one of the greatest wastes in distribution. Creative men in the advertising and promotional departments of our companies repeatedly develop marvelous campaigns, beautiful and effective mailing pieces, and even secure maximum consumer interest in terms of inquiry coupons only to have their power diluted in the gap between the consumer interest and the ultimate sale. One example is the hundreds upon hundreds of tons of unused direct mail lying on the shelves and in bins or cellars of retailers, forgotten until destroyed to make room for more wasted material. And this is only one of the most obvious wastes brought about by the lack of effective operating coordination between advertising, promotion, and all selling factors in the distribution function. Intelligent planning and follow-through can correct these weaknesses.
Summarizing, management should constantly study techniques for controlling products clear through the channels of distribution into their ultimate consumption. If you give your franchise consumer demand value, you can control distribution merchandising techniques and assure adequate selling into consumption.
Another job at the beginning or end of each cycle of the executive's planning is to organize, supervise, interpret, and consolidate distribution research projects and tests. This should be the fundamental and underlying motivation of the sales executive's job. Until American business has learned to distribute the plenty that we can produce, business leadership must continuously maintain research structures in the field of distribution.
Training the Human Element
Training has a vital part to play in franchise building, in increasing volume, in reducing costs, in every phase of production or distribution that depends upon the human element.
The new emphasis on full employment requires a reindoctrination, reorientation and a re-education (in an economic sense) of all personnel factors—management as well as lesser employees.
In fact, retraining may well begin with management. If management objects to the term, it can be called "policy conferences."
Management retraining involves the re-examination of every company policy in the light of the obligation to full employment—the justification of that policy, in terms of postwar operations, and its revision if unjustified.
Then follows the interpretation of management's new policies to the balance of the man power, in such a manner as to assure their enthusiastic cooperation and compliance.
This will involve new teaching techniques. "Education" is literally a process of "drawing out"—stimulating thinking to the point of sound conclusions.
"Instruction" is literally "putting in" an understanding of sound new and old ideas in the minds to be taught.
"Training" is literally "habit forming"—the development of reflexes which will react correctly in any given situation.
All of these techniques should be used with both new and old employees.
After recruiting, selection, and preliminary aptitude testing, each employee might be given a full-employment-economy indoctrination course, which would bring a realization to each employee his part and the company's part in the postwar world of freedom and American enterprise—a true understanding of the American way we have fought for and won.
Next in the educational process, a reorientation of the individual with regard to the objectives of the company and the place of his job in the overall objectives. The relationship between production, distribution and consumption should be taught. Every factory employee should have a general knowledge of the key problems in creating consumption and every administrative and sales factor should understand the basic problems of production.
All employees should be brought to an acceptance of the . truth that neither individuals nor corporations can have more by producing less—that nobody in history has been able to get something from nothing.
This should be followed by specific training in the individual's job and in job relations training.
The entire training program might well be based on the policy of developing the most of the best in an employee in his own interest as well as that of the company.
Education and training may be also used as a means of executive development and up-grading.
This should be preceded by an analysis of individual and structural weaknesses in the the management staff.
All aptitude tests given to junior executives should be automatically compensated by an educational program designed to fortify any weaknesses uncovered.
Training company people is but half the job!
The new distributive techniques will probably involve the training of every executive factor in the wholesale and retail distribution structure.
Further, where new distributive processes are to be established, it may be necessary to train distributive workers as well as management.
Training of warehousesmen, mechanics, delivery and installation personnel may bring important reductions in costs, build important competititve advantages, and strengthen the morale and temper of the entire distribution structure.
And the most vital distributive training problem is, of course, the training of those who actually sell your products into consumption or use.
This will probably involve training trainers to train— training district management to train dealer management and training dealers to supplement your training of their personnel. The best way to get an executive to learn a thing is to induce him to teach it. If you can get your dealers to teach their employees your new distributive procedures, the chances of success are greatly increased.
Some companies are faced with such a serious educational problem that it is almost impossible for the company, or the industry for that matter, to undertake an adequate answer. This means that the cooperation of the formal educational facilities of the country should be secured. If it appears desirable, a sales training executive should not only look at the possibility of projecting his industry's needs into the curricula of the grade schools, high schools, colleges, and universities, but the ramifications of the George-Dean and Smith-Hughes Acts should be explored and the cooperation of the United States Department of Education secured.
The last, but by no means the least of these training problems, is Consumer Education.
Everything that is being said by the company to the ultimate consumer or user of its products, whether in the mails, verbally by salesmen, over the radio, or in publications, should utilize the educational process.
The processes of education and ethical selling are quite similar, and when consumption creating activities are given educational direction, better results may be expected.
This will involve a re-examination of the company's relationship to the ultimate consumers or users of its products and a restatement of its responsibilities, policies and objectives in consumer educational terms,—literally, a Consumer Platform for your business.
If there is need for a secret weapon to win the peace—that new weapon is training.
Our Military leadership has uncovered marvelously effective new techniques in rapid training. Our returning warriors will expect nothing less from industry.
There is no substitute for experience except training—and no substitute for training except experience.
Organizing Needed Cooperation
The foregoing completes what might be called the first cycle of the training job, but there are certain additional tasks which may come either in the beginning or the end of each cycle, depending on the individual's situation. These could come under the general heading of "Economic planning for the Postwar Era." Whether we like it or not, American business is now realizing that coordinated economic planning is going to be done and the only question is what portion of it is going to be done by private enterprise and what portion by governmental employees. It would seem logical that every company should have at least one man devoting a part of his time to this problem of coordinated economic planning.
We should work with the government people. I find that in certain of our departments in the government there is a world of help and the finest type of chaps—I don't believe there is anybody in Washington that is deliberately planning to take over the management of our economy. I think those fellows are pretty sincere Americans down there and believers in Free Enterprise, just as you and I are, but they do think that business is defaulting, and the reason they think this is because Business usually shows up in Washington as some pressure group that wants to get some selfish legislation passed. Now, if you will go to those departments —the Department of Commerce, particularly, and the Department of Agriculture, I think you will be astonished at the help that you can get.
After acquainting oneself with everything being done nationally in economic planning, the next step is to cooperate with others in the industry who are directing their attention to economic planning. The executive should work with all associations, societies, and individuals in industry and competitive groups who are studying or conducting the kind of economic planning that may have a bearing on his company's or his industry's distribution problems.
It is entirely consistent to talk about greatly increased competition and organized cooperation in the same breath! If you are going to run a swift race you want a clear track.
There are plenty of impediments and obstacles on the race track of American Enterprise. Clearing the track and keeping it clear is a cooperative job.
Of all the training* jobs before us the most important is training in cooperation.
All of us who have engaged fn postwar planning have encountered blind alleys of individual planning. Sooner or later we come to the realization that our planning is almost completely conditioned by what others are going to do. The deeper we are in planning, the more we realize that no in-dividual plan will ever provide full employment in our country. Let us not kid ourselves; if we are going to employ, and keep employed, 55 or 56 million employables, we have got to have a fairly clear picture of the part each industry in going to play.
Yes, full employment is attainable in our country but can only be managed by the "everlasting teamwork of every blooming soul," as the poet said. By cooperation between companies and industries at all levels; at community levels; state levels; national levels. The national level may be the most important because national policies tie all of this postwar planning together.
After taking the position that Private Enterprise will provide full postwar employment opportunity, the unpardonable sin that our people will not forgive postwar business will be to shut down production and lay off manpower. It is evident that we must learn the techniques of cooperative planning.
We are grievously short of tools and structures for cooperation between the basic elements in our economy. We have manufacturers organizations, wholesale and retail associations, unions, and institutes by the thousands, but until recently, there was not a single structure where Management, Labor, and Agriculture,—and the other great pressure groups—could sit down and think together.
I would like to have some time (say an hour) with you to talk to you about the work of the National Planning Association at Washington. A great job has been done in the last two years where they brought out one joint statement after another, signed, if you please, with the names of Labor leaders, Agriculture leaders, and Business leaders, who have gotten together on questions of national policy. I think it is just a sample of what should be widespread in American business at all levels.
I hope some day you read the story of what is being done at Evansville and at Syracuse in terms of cooperation between all of the pressure groups in an individual community where they seek out areas of agreement and cooperation.
We should not confuse cooperation under the Free Enterprise System with Collectivism. Collectivism is cooperation through governmental force.
Cooperation, under the freedom of enterprise, is the privilege of thinking, planning, and acting together on a plane of ethics arrived at by free men in mutual agreement.
We must bring about a representative self-government of business in the area of ethics which will obviate the necessity of more enervating laws and prevent a state-controlled economy. Because of our fear of anti-trust laws, we have shied away from many forms of cooperative action that are highly profitable, desirable and entirely legitimate.
Cooperative action intra-industry might include: pooling research assignments, group action on distribution wastes, group action on inventory problems and relating fiscal policies to distribution.
Inter-industry cooperation might include: cooperative consumption studies, exchange of cost information, cooperative cost reduction and all forms of cooperative fact finding.
How totally cooperative our modern economy is! Have you thought of the difference between the 1770's and today in terms of the necessity of cooperation? Then, 80% of our people were agricultural and only 20% industrial; today, we have 20% agricultural and 80% industrial. In that period, 80% of Americans owned the structure from which they secured their livelihood. Today 80% of us work for someone else. Obviously, this is an era of inter-dependence with the background for a Declaration of Inter-dependence. In our modern completely inter-dependent economy, we must cooperate if the wheels of enterprise are to move for even one day, and so our freedom—the freedom to cooperate—is that freedom which, under modern conditions, safeguards all of our other economic freedoms. If we cannot cooperate voluntarily, we will have more and more laws. Do you realize that we could legislate ourselves into a state-controlled economy under the Constitution of the United States? I don't know how many more thousands of laws we are going to have to add to the 1,250,000 we have on the books now before we reach that point. We may reach it without knowing it immediately!
Cooperation within the Free Enterprise System is, therefore, the safeguard of our liberties. In default of anyone else doing the job, should not industrial management undertake to write a platform for the freedom of enterprise and then implement it by making American enterprise an entity—why not in your city—why not in your state—why not in the United States?
Government is an entity! If the issue is Government versus Free Enterprise on this full employment problem, what chance has enterprise against government as long as enterprise is a hodge-podge of companies, associations, unions, and pressure groups, all lunging forward spasmodically, often in opposite directions and pulling against each other?
The big job of Free Enterprise is supposed to be providing employment, and where do we find employment service? The United States Employment Service is the only national, state, local overall employment service operated in the field of government and business! Yes, industrial management could unite American enterprise into an entity, all pulling together toward the common objective—an employment opportunity for every man willing and able to work under a system where each man is privileged to profit to his ability and to retain his earnings in private property. This will not happen until the individual accepts his responsibility.
I have talked a lot about cooperation, and I agree that isolation in any form is as dead as the Dodo bird, but I want to close on a note of individualism. There is a place for individualism—your mind is that sacred individual precinct, where no one can intrude. Anything you do with that mind has no meaning except in terms of cooperation, but neither has cooperation any meaning unless the individual first thinks. Individual responsibility for leadership—that is the greatest responsibility before American citizens today— the mobilization of responsible individual leadership in our country. If enough of us think and act creatively as individuals we will do this almost impossible task that we have been talking about tonight—provide full employment opportunity and perpetuate the freedom of enterprise.
Justice Oliver Wendell Holmes, than whom I think there is no greater American, must have had tomorrow's industrial executive in mind when he wrote these words,—I am quoting Justice Holmes:
No man has earned the right to intellectual ambition until he has learned to lay his course by a star which he has never seen; to dig by the divining rod for springs from which he may never drink;—to think great thoughts you
must be heroes as well as idealists. Only when you have worked alone, when you have felt around you a black gulf of solitude more isolating than that which surrounds a dying man, and in hope and despair have trusted to your own unshaken will, then only will you have achieved; thus only can you gain the secret isolated joy of the thinker who knows that a hundred years after he is dead and forgotten, men who have never heard of him will be moving to the measure of his thought. That subtle rapture of a postponed power which the world knows not, because it has no external trappings, but which to his prophetic vision is more real than that which commands an army."