Cyclopedia of Commerce, Accountancy, Business Administration, v. 01 (of 10)

by American School of Correspondence

ADMINISTRATIVE AND INDUSTRIAL ORGANIZATION

1. With little fear of contradiction, it may be stated that every commercial enterprise is conducted with the one purpose in view of making money for its owners. Naturally, the owners desire the largest possible returns from their investment of money or time, or both. Every person connected with the enterprise, in any capacity whatsoever, is indirectly working for the same purpose—to make as much money as possible for the owners of the business.

The largest possible volume of profitable business must be transacted; the business must be conducted with economy; the returns from each dollar expended must be as large as possible. This very condition is one of the beneficial results of modern business methods. The demand for a greater volume, lower cost of production, and more economical methods, has brought with it an incentive to greater effort on the part of the individual, with corresponding rewards.

That the efforts of the individual may be productive of best results, he must have the coöperation of other individuals engaged in the same enterprise. The enterprise must be properly organized.

Realizing the absolute necessity of harmoniously working organizations, keen students of business affairs have given much study to the question of how to organize a business. They have studied the plans of operation of the most successful enterprises, for the purpose of discovering those factors which have contributed most largely to their success. They have investigated and improved old plans and methods and invented new methods.

2. The Business Engineer. The investigations of these men have brought into being a new profession—that of the business organizer or business engineer—a profession that has quickly gained recognition. Business men, especially those at the head of large enterprises have not been slow to avail themselves of the services of men who have mastered the science of business organization.

For the same reason that he has long employed an architect to plan his building the modern business man calls in a business engineer or systematizer, to perfect his business organization. As in every other profession, some incompetent men are found posing as business engineers, but an increasing number of trained men are entering the field. It is the work of these men that is placing the profession on a high plane.

The successful business engineer must have the ability to quickly grasp the plan of operation of any business with which his work may bring him in contact; he must be able to analyze conditions and to determine the factors which make for the success or failure of a business. His work is to organize and systematize every step of the work in every department.

3. The Preliminary Investigation. The first step in the organization or systematizing of a business is to determine its natural divisions. What is the nature of the business, and what are its distinguishing characteristics? Be it a manufacturing, jobbing, wholesale, retail, or professional concern, there is some one head on whom rests the final responsibility for the success or failure of the business. He must be surrounded with subordinates, each having certain duties to perform, who will be responsible for the performance of those duties, thereby coöperating to carry out the purposes of the enterprise.

The highest type of organization is found among the great industrial enterprises. These enterprises with their many activities most readily lend themselves to the application of scientific principles of organization. Here, organization can be carried to its final conclusion; in a smaller enterprise the same principles apply, but modification of details is necessary.

If we study the organization of a large enterprise, regarding it as a type, we can more readily grasp the requirements of a smaller business. But it must be remembered that in any event, the individual business must be studied and the organization made to fit the business. A tailor does not cut all coats from the same pattern.

In certain respects a great industrial organization may be likened to the army. At the head of the army is the commanding general, on whom rests the responsibility for the success of any campaign. He is surrounded by his staff, with whom he consults on questions of importance. When any important move is decided upon, the members of the staff—themselves in command of divisions of the army—issue orders to their subordinate officers. They, in turn, pass the orders along, and at a predetermined moment, an entire army is set in motion.

Another important feature of the army organization which should be applied to the organization of a business is the disregard of the individual. Military authorities long since discovered that a high standard of efficiency could be maintained only through the organization of the army along certain lines. The question was not one of creating offices the duties of which would conform to the capabilities of certain men; the offices were first created, and then competent men were selected to fill them.

4. Individuals Disregarded. In creating responsibilities in a business organization, the individual should be disregarded, just as he is in the army. Unfortunately, the importance of this question is not always recognized. Too frequently the best interests of the organization as a whole are subserved to the interests of individuals. Business enterprises are organized and offices divided among the principal owners without seriously considering their respective abilities. This is wrong in principle, and works to the detriment of the business. It is one of the important problems to be solved in organization. Jones, who is a natural born financier, prefers to manage the selling end of the business, while Brown, a salesman of ability, is made treasurer. Neither is in the right place; change them about, and an efficient team would result.

Before we can perfect an organization, we must know what the business is. We must ascertain for what it is organized; what class of business is carried on; manufacturing, mining, jobbing, wholesale, retail, or a combination of two or more classes; whether conducted entirely in one plant or through branches; the method of marketing the goods; by traveling salesmen, agencies, or mail; the facilities for obtaining supplies, raw materials, or manufactured goods. When we understand the nature of the business, we are in a position to work out an impersonal, systematic organization.

Referring again to the necessity of a disregard of individuals in perfecting an organization, it is not the province of the business engineer to determine the qualifications of the men. He must be governed solely by the requirements of the business. When his work is completed, it is for the management to decide who is best fitted to assume the duties and carry out the purposes of the departments and positions created.

We refer, for convenience, to the business engineer or systematizer; the principle is the same whether the one doing the work is acting in a professional capacity, perfecting the organization of his employer's business, or even solving the problems of his own establishment.