THE SOCIAL AND INDUSTRIAL BACKGROUND SUMMARY (a) The continuity of historical progress ; need for comprehension of the

historical perspective. The general influences of social life upon industry ^publicity, self-development, association, science. (6) Development of general public knowledge of industrial affairs, preceded by the development of public intelligence, and emphasized by the war ; effect upon management. (c) The new conception of work ; work for interest rather than profit ; recognition of the social value of recreation ; effect upon management. {d) The spirit of association ; present disintegrating forces; the unrepresentative character of official Trade Unionism ; the opportunity of management to make the factory the basis of association. (e) The growth of the scientific spirit, in both labour and management ; the possibility of a science of management. (f) Need to survey the mentalities of Labour and Capital ; men-tality of Labour cannot be judged either from the individual worker or from the Labour publicist. Distinction between "ferment "and the " mass." The character of the revolutionary spirit ; the effect of increased education. The ethical nature of Labour mentality. The change to industrial action. The power of Labour mentality ; its attitude to status and working conditions. The lesson for management. It is a distribution of power, advantages, and opportunities, based upon no acceptable code of ethics, to which the spirit of the mass of Labour is opposed. It asserts that the present distribution of power amongst individuals isnot entirely ineffective for good, not wholly unrepresentative, not unprogressive, not unworkablebut ethically unjustifiable. that wealth is in itself an ultimate end. for its own moral right to be given an open road to self-realization. {g) Capital as such has no mentality ; effect of joint-stock owner-ship ; need for making Capital human. The position of the director ; union of Capital and administration in the salaried director ; possibility of Capital becoming humanized. " The capitalist was a factor and a merchant. He controlled materials and markets, but the worker largely owned his own instruments of production and settled his own working conditions. Gradually, however, even before

the application of power to machinery, the capitalist began to encroach on these spheres. He began to own the looms and other instruments necessary for manufacture, and lend them out to domestic workers. Later, he began to group these instruments in single buildings, and bring workpeople together to operate them. When steam power came, these tendencies became general practices, and the factory system began. The capitalist became not only a buyer of material and a seller of products, but also a direct employer and owner of plant. If Capital is to be a permanent partner in industry it cannot remain impersonal. It is not enough that it should raise the money and take the dividends ; it must breathe the industrial air and throb with the industrial heart. It must take its responsibility as well as its dividends. It must become a human as well as a financial agent in production. To hold an industrial share must be regarded as a pledge of loyalty to the great body of industry. (h) Essential humanity of industry ; the uneven development of material and human sides of industry : need for a motive, leadership, and co-operation. The onus on management to set up the right ideal. Necessity for a renascence of public thought before industry can follow such an ideal. The older idea of an industrial trinity Labour, Management, and Capital is passing. Capital is only an industrial partner in so far as it is absorbed in Management. Otherwise, it remains an impersonal factor in the form of money, machines, and buildings. As a human element in industry, it is only expressible in terms of Management and Labour. How best can we achieve and maintain a fair balance between the things of productionthe machines, the buildings, the materials, the systems and the humanity of productionthe workers, the foremen, the managers, the shareholders ? This is the problem which is at the root of all the problems facing industrial management. Industry cannot be rendered efficient while the basic fact remains unrecognized that it is primarily human. It is not a mass of machines and technical processes ; it is a body of men. It is not a complex of matter, but a complex of humanity. An industry designed to meet the needs of our lifephysical, mental, and moral^must be living. The aim of management must be to render industry more effectively human^more truly a corporate effort of human beings, united for a common object and moved by a common motive. To achieve that end we need, firstly, a motive and an ideal ; secondly, leadership and co-ordination ; thirdly, work and co-operation. All these factors are

interdependent.

CHAPTER II THE FUNDAMENTALS OF MANAGEMENT SUMMARY (a) Definitions of Administration, Organization, and Management ; Management is the outcome of human association for an object. The distinction between the art and science of management. The science of management cannot be final since it includes the human element. Administration is the function in industry concerned in the determination of the corporate policy, the co-ordination of finance, production and distribution, the settlement of the compass of the organization, and the ultimate control of the executive. ^Management proper is the function in industry concerned in the execution of policy, within the limits set up by administration, and the employment of the organization for the particular objects set before it. Organization is the process of so combining the work which individuals or groups have to perform with the faculties necessary for its execution that the duties, so formed, provide the best channels for the efficient, systematic, positive, and coordinated application of the available effort. ^ Organization is the formation of an effective machine; management, of an effective executive; administration, of an effective direction. Administration determines the organization; management uses it. Administration defines the goal; management strives towards it. Organization is the machine of management in its achievement of the ends determined by administration. Management, in this general sense, including both Administration and Organization, is the natural outcome of human association, whether in industry, household, or State. Wherever persons are grouped together for a common purpose, the need arises for a leadership which shall determine policy, settle spheres of authority, and organize and control the application

of effort. In this respect, industry shares a need common to every social enterprise from church to guild, municipality to empire, war to university. Just as an orchestra requires a conductor, so a social enterprise, furthered by the combined efforts of human agents, requires direction, regulation, and co-ordination. Management is to be regarded, therefore, not as an imposition upon industry, but as an inevitable development from the expansion of industry. It is not external to, but inherent in, industry. The development of management as an industrial art, therefore, must come, not only by the construction of scientific principles governing the methods by which management may achieve certain ends, but also by the growth of a spirit in industry, governing the relations between all the various grades engaged in the conduct of industry. (b) Management began as synonymous with Capital; divorce between the two brought about by inventions, wider markets, and consequent expansion. The effect of joint-stock ownership was finally to separate ownership and management. This was facilitated by improvement in general standard of public probity, by rise of factory esprit de corps, and by factory legislation. Rise of Trade Unionism gave a new direction to management. The effect of the Labour movement and of the social activities connected with it upon the development of management may be traced in three distinct ways : (1) as a result of Trade Union organization ; (2) as a result of the assumption, either by the State or by voluntary bodies, of responsibility for the social conditions of the labouring classes ; (3) as a result of the recognition of bargaining in the determination of wages and conditions, and of the machinery instituted to carry out the bargaining on recognized and standard lines. The growth of the Trade Union movement during the last century has been the main factor in bringing management into its inheritance. The change in the status of Labour has been the one great revolutionary force in industry since the beginning of the factory system. Growth of factories, the development of trade agreements and factory understandings, legislation, scientific methods and inventions, and foreign rivalry have contributed their quota to the emergence of the function of management, but by far the greatest influence has been exerted by the increasing solidarity and organization of labour.

(c) Management has become a profession. Impetus given to this tendency by certain effects of the war. This depends upon the stability of management in industry. Management has gradually become a profession. Its task has increased in difficulty, responsibility and complexity, until today it touches all the sciences, from chemistry and mechanics to psychology and medicine. The older methods of management were not adequate to bear the weight of war-time pressure. Weaknesses were revealed, which served to indicate the further expansion which management must undergo. The war-time factors conducing to this end may be stated as briefly as possible, without the elaboration they deserve, in the following terms. (1) The progress of industrial science, stimulated into prodigious activity by war requirements, and furthered by the war-time researches of the more technical Universities. (2) The post-war economic situation, with its sudden demand for the increased production of peace-time goods,and the increased costs of labour and material consequent upon the rise in prices. (3) The stirring of the social conscience, slowly but implacably demanding, with no uncertain voice, that the old state of affairs in industry shall not return. (4) The electrifying impulse from America towards efficiency in every sphere of industrial management. (5) The urgent necessity for economical production, in view of the incessant wage demands, the high cost of raw materials and running expenses, and the need for producing cheap goods to cope with restricted demand and adverse exchanges. (6) The recognition of the importance of conferences, both in industry and outside. (7) The continued growth of inventions for both manual and clerical operations. The sum of these influences has been to add to the complexity and responsibility of management, and, at the same time, to emphasize and define its position. Upon management has been cast the burden of reconstruction. {d) Management is being actuated by spirit of analysis; it is the science of applying other sciences. It is a group of interdependent functions. The fundamental divisions into Finance, Administration, Preparation, Production, Facilitation, and Distribution. Division of Preparation into the functions of Design and Equipment; of Production into the function of

Manufacture; of Facilitation into the functions of Transport, Planning, Comparison, and Labour. The distinction between Distribution and Production; division of Distribution into the functions of Sales Planning and Sales Execution. We should be careful to note, however, the distinction between the science of management and those sciences which management employs. As the instruments which management uses become more scientific, the use of those instruments itself must become scientific. The coordination, organization and direction of sciences is itself a science. Production may be described as the actual making of the products; Preparation, as the activities necessarily preceding such manufacture ; Facilitation, as the activities contributory to production ; Distribution, as the business of disposing of the products. {e) The faculties requisite for execution of functions. Misconception with regard to clerical work. The division of faculties into Determinative, Administrative, Executive, Service, and Operative. (e) Assurance of three fundamental principles ; that there exists a scientific basis of management ; that management can function by scientific means ; that graduation in the science must come to be the main qualification of the manager. It remains here to note three fundamental principles which this chapter has revealed. Firstly, we are in a position to be convinced that there exists a scientific basis of management. Secondly, if we have estabhshed the principle that management can be reduced to a science, we have simultaneously arrived at the conclusion that management can operate by scientific means rather than by the autocracy of the"boss." Finally, we must be convinced that the practice of management can no longer be entrusted to incompetent individuals.