United States Steel: A Corporation with a Soul

by Arundel Cotter

And in this number are included employees from all ranks, including workmen, so-called office boys, elevator operators, and executives. The plan was designed to be, and is, catholic in its scope.

Naturally, the stock subscription plan has not been regarded with favor by those whose interests lie in fomenting dissent between capital and labor and the plan has been attacked in many ways. One of these is the charge that it is a money-making scheme under which the Corporation purchases its own stock cheap and sells to the workers at a profit. As a matter of fact, the operation of the plan is a continual source of expense to the Corporation which has so far spent on it an aggregate of $9,160,000. It has, however, profited from the plan in one way—increased loyalty, efficiency, and coöperation.

Only “the men who occupy official or semi-official positions and who are engaged in directing and managing the affairs of the Corporation and of its several subsidiary companies” were concerned in the profit-sharing portion of the plan, generally designated as special compensation. This was more or less an adaptation of Carnegie’s method of rewarding his assistants for good service, with the difference that it held out no allure of return for effort selfishly directed, but only that done for the good of the entire organization. It was a yearly distribution to the men above described of a small percentage of the profits above $80,000,000, part of the bonus being paid in cash and part in stock of the Corporation. At the time of the promulgation of the plan it was made plain that there would be no increases in salaries of officials. All additions to salary would come through these bonuses, and in basing them on the profits of the Corporation and not of the separate subsidiary companies a powerful motive for loyal and harmonious effort for the good of the Corporation was created.

Why did not the workmen generally share in this bonus distribution? It would have been impossible to make anything like an equitable distribution among the employees of every class, especially in view of the fluctuating character of a large mass of the labor employed in the industry. But the worker with his hands did share in profits in a more definite way. His wage was increased time and again and he received the benefits of these increases whether profits were large or small. This was more satisfactory to him. And in the stock subscription part of the plan, with its attached automatic bonus, he had an equal opportunity with the men above him in authority.

But long before the Stock Subscription-Profit-Sharing Plan was perfected steps had been taken to coördinate the work of the Corporation and to bring about economies. First of these was the institution of a system of comparative cost sheets immediately after the Corporation began its existence.

The earning of profits for stockholders was the first object of the big company, as it is in every business, and its formation had been undertaken largely with the idea that the magnitude of its operations would make greater economies possible, with a gain rather than a sacrifice of efficiency and quality.

In the old steel days the calculation of costs had been more or less haphazard, at least in most instances. Too often the entire operating expense of steel making, from mining to the turning out of the finished product, had been “lumped” at the end of the year, and there was no means of arriving at the knowledge of just where profits, if there were any, were made, while if they were non-existent or unsatisfactory it was equally out of the question to fix the blame on any one department. Moreover, such secrets of economy as were discovered by those in charge of a furnace or mill were rigidly guarded as giving an advantage over competitors; all of which did not contribute to a general high average of efficiency and economy.

The Corporation’s management first set to work to ascertain the exact cost of running each and every mine, furnace, or other department, the costs being tabulated for the information of the whole organization. The cost tables were made up in the most minute detail, the blast furnace cost sheets alone containing more than 8,000 different items, and by their aid the several departmental superintendents could see at a glance what item in their operations was below the average, was too costly, and could take the necessary steps to remedy matters. These tables also created a spirit of emulation, of friendly rivalry, between the various departmental units, which alone was a potent incentive toward economy.

So immediate and so marked was the result of this system of cost checking that, according to Charles M. Schwab, a saving of $4,000,000 was effected in the blast furnace department alone in the first year of the Corporation’s existence!

As this history does not pretend to be a technical treatise on the manufacture of steel detailed discussion of the many ways and means adopted by the Corporation to achieve economies would be out of place. But some of them are particularly worthy of mention.