The Project Gutenberg eBook, The Personal Relation in Industry, by John D. (John Davison) Rockefeller, Jr.

THE PERSONAL RELATION IN INDUSTRY

THE
PERSONAL RELATION
IN
INDUSTRY

BY

JOHN D. ROCKEFELLER, Jr.

BONI AND LIVERIGHT
Publishers New York

Copyright, 1923, by
Boni and Liveright, Inc.
———
PRINTED IN THE UNITED STATES OF AMERICA

First printing, December, 1923
Second printing, January, 1924

PUBLISHER’S NOTE

The following material by Mr. John D. Rockefeller, Jr., consists, with one exception, of addresses delivered by him on various occasions and amidst the demands of many varied interests. These addresses are left practically as they were delivered, and no effort has been made to change their form. Slight repetitions of certain points may be noted in these addresses, a condition which is expected in arguments or subjects of the character of those contained in this book.

The publishers, in obtaining Mr. Rockefeller’s permission to publish these addresses, believed that by presenting his views in this form there would be made a substantial contribution to the ever-important subject of industrial relationships.

CONTENTS

THE PERSONAL RELATION IN INDUSTRY

THE PERSONAL RELATION IN INDUSTRY

I Coöperation in Industry

I

To-day the world is passing through a period of reconstruction.

As we address ourselves to the grave problems which confront us, problems both national and international, we may look for success in their solution just in so far as we continue to be animated by the spirit of coöperation and brotherhood. The hope in the future lies in the perpetuation of this spirit, and unless increasingly it is made the foundation of the political, social, and industrial life of the world, there will not be permanent peace and good will among men, either nationally or internationally.

In no one of these spheres of human relations is the spirit of coöperation more essential than in industry, since industry touches almost every department of life. Moreover, there is no problem pressing more urgently upon the attention of the world to-day than the industrial problem, none more important, none more difficult of solution. There are pessimists who say that there is no solution short of revolution and the overturn of the existing social order.

Surely the nations which have shown themselves capable of such lofty sacrifice, which have given themselves so freely, gladly, unreservedly, during these past years of struggle, will bring to bear in the solution of this great problem powers of head and heart, not less wise and unselfish than those exhibited in dealing with the problems of the war; surely a way out of the impenetrable maze will be found.

Almost countless are the suggested solutions of the industrial problem, which have been brought forth since industry first began to be a problem. Most of these are impracticable; some are unjust; some are selfish and therefore unworthy; some have merit and should be carefully studied. None can be looked to as a panacea.

There are those who believe that legislation is the cure-all for every political, social, and industrial ill. Much can be done by legislation to prevent injustice and encourage right tendencies, but legislation of itself will never solve the industrial problem. Its solution can be brought about only by the introduction of a new spirit into the relationship between the parties to industry—the spirit of coöperation and brotherhood.

It is this theme, coöperation in industry, that I desire to develop.

We must ask ourselves at the outset certain fundamental questions:

First, what is the purpose of industry? Shall we cling to the conception of industry as an institution, primarily of private interest, which enables certain individuals to accumulate wealth, too often irrespective of the well-being, the health, and the happiness of those engaged in its production? Or shall we adopt the modern viewpoint and regard industry as being a form of social service, quite as much as a revenue-producing process?

Is it not true that any industry, to be permanently successful, must insure to labor adequately remunerative employment under proper working and living conditions, to capital a fair return upon the money invested, and to the community a useful service?

The soundest industrial policy is that which has constantly in mind the welfare of the employees as well as the making of profits, and which, when human considerations demand it, subordinates profits to welfare. Industrial relations are essentially human relations. It is therefore the duty of everyone entrusted with industrial leadership to do all in his power to improve the conditions under which men work and live. The day has passed when the conception of industry as chiefly a revenue-producing process can be maintained. To cling to such a conception is only to arouse antagonisms and to court trouble. In the light of the present every thoughtful man must concede that the purpose of industry is quite as much the advancement of social well-being as the production of wealth. It remains none the less true, however, that to be successful, industry must not only serve the community and the workers adequately, but must also realize a just return on capital invested.

Next we must ask ourselves, who are the parties to industry: The parties to industry are four in number: capital, management, labor, and the community.

I am, of course, well aware of the social theories and experiments that seek to merge capital and labor, either through ownership of capital by the state or by the workers themselves. But the difficulties that confront the realization of these plans are vast and the objection to many of them fundamental.

Under our present system, capital is represented by the stockholders, and is usually regarded as embracing management. Management is, however, an entirely separate and distinct party to industry; its function is essentially administrative. It comprises the executive officers who bring to industry technical skill and managerial experience. Labor consists of the employees. Labor, like capital, is an investor in industry, but labor’s contribution, unlike that of capital, is not detachable from the one who makes it, since it is in the nature of physical effort and is a part of the worker’s strength and life. Here the list usually ends.

The fourth party, namely, the community, whose interest is vital and in the last analysis controlling, is too often ignored. The community’s right to representation in the control of industry and in the shaping of industrial policies is similar to that of the other parties. Were it not for the community’s contribution, in maintaining law and order, in providing agencies of transportation and communication, in furnishing systems of money and credit and in rendering other services, all involving continuous outlays, the operation of capital, management, and labor would be enormously hampered, if not rendered wellnigh impossible. The community, furthermore, is the consumer of the product of industry, and the money which it pays for the product reimburses capital for its advances and ultimately provides the wages, salaries, and profits that are distributed among the other parties.

Finally we must inquire: what are the relations between the parties to industry? It is frequently maintained that the parties to industry must necessarily be hostile and antagonistic; that each must arm itself to wrest from the others its share of the product of their common toil. This is unthinkable; it is not true; the parties to industry are in reality not enemies, but partners; they have a common interest; no one can get on without the others. Labor must look to capital to supply the tools, machinery, and working capital, without which it cannot make its vital contribution to industry; and capital is equally powerless to turn a wheel in industry without labor. Management is essential to supply the directing force, while without the community as the consumer, the services of the other three parties would have no outlet. Just what the relative importance of the contribution made to the success of industry by the several factors is, and what their relative rewards should be, are debatable questions.

But, however views may differ on these questions, it is clear that the common interest cannot be advanced by the effort of any one party to dominate the others, arbitrarily to dictate the terms on which alone it will coöperate, or to threaten to withdraw if any attempt is made to thwart the enforcement of its will. Success is dependent upon the coöperation of all four. Partnership, not enmity, is the watchword.

II

If coöperation between the parties to industry is sound business and good social economics, why then is antagonism so often found in its stead? The answer is revealed in a survey of the development of industry. In the early days of industry, as we know, the functions of capital and management were not infrequently combined in the one individual, who was the employer. He in turn was in constant touch with his employees. Together they formed a vital part of the community. Personal relations were frequent and mutual confidence existed. When differences arose they were quickly adjusted. As industry developed, aggregations of capital larger than a single individual could provide were required. In answer to this demand, the corporation with its many stockholders was evolved. Countless workers took the place of the handful of employees of earlier days. Plants under a single management scattered all over the country superseded the single plant in a given community. Obviously, this development rendered impossible the personal relations which had existed in industry, and lessened the spirit of common interest and understanding. Thus the door was opened to suspicion and distrust; enmity crept in; antagonisms developed. Capital not infrequently used its power to enforce long hours and low wages; labor likewise retaliated with such strength as it had, and gradually the parties to industry came to view each other as enemies instead of as friends and to think of their interests as antagonistic rather than common.

Where men are strangers and have no contact, misunderstanding is apt to arise. On the other hand, where men meet frequently about a table, rub elbows, exchange views, and discuss matters of common interest, almost invariably it happens that the vast majority of their differences quickly disappear and friendly relations are established.

Several years ago I was one of a number of men who were asked two questions by a Commission appointed by the President of the United States to deal with certain labor difficulties.

The first was: “What do you regard as the underlying cause of industrial unrest?” The second: “What remedy do you suggest?”

I stated that in my judgment the chief cause of industrial unrest is that capital does not strive to look at questions at issue from labor’s point of view, and labor does not seek to get capital’s angle of vision. My answer to the second question was that when employers put themselves in the employee’s place and the employees put themselves in the employer’s place, the remedy for industrial unrest will have been found. In other words, when the principle adopted by both parties in interest is: “Do as you would be done by,” there will be no industrial unrest, no industrial problem.

It is to be regretted that there are capitalists who regard labor as their legitimate prey, from whom they are justified in getting all they can for as little as may be. It is equally to be deplored that on the part of labor there is often a feeling that it is justified in wresting everything possible from capital. Where such attitudes have been assumed, a gulf has been opened between capital and labor which has continually widened. Thus the two forces have come to work against each other, each seeking solely to promote its own selfish ends. As a consequence have come all too frequently the strike, the lockout, and other incidents of industrial warfare.

A man, who recently devoted some months to studying the industrial problem and who came into contact with thousands in various industries throughout the United States, has said that it was obvious to him from the outset that the working men were seeking for something, which at first he thought to be higher wages. As his touch with them extended, he came to the conclusion, however, that not higher wages, but recognition as men, was what they really sought. What joy can there be in life, what interest can a man take in his work, what enthusiasm can he be expected to develop on behalf of his employer, when he is regarded as a number on a pay-roll, a cog in a wheel, a mere “hand”? Who would not earnestly seek to gain recognition of his manhood and the right to be heard and treated as a human being, not as a machine?

Then, too, as industry has become increasingly specialized, the workman of to-day, instead of following the product through from start to finish and being stimulated by the feeling that he is the sole creator of a useful article, as was more or less the case in early days, now devotes his energies for the most part to countless repetitions of a single act or process, which is but one of perhaps a hundred operations necessary to transform the raw material into the finished product. Thus the worker loses sight of the significance of the part he plays in industry and feels himself to be merely one of many cogs in a wheel. All the more, therefore, is it necessary that he should have contact with men engaged in other processes and fulfilling other functions in industry, that he may still realize he is a part, and a necessary, though it may be an inconspicuous, part of a great enterprise. In modern warfare, those who man the large guns find the range, not by training the gun on the object which they are seeking to reach, but in obedience to a mechanical formula which is worked out for them. Stationed behind a hill or mound, they seldom see the object at which their deadly fire is directed. One can readily imagine the sense of detachment and ineffectiveness which must come over these men. But when the airplane, circling overhead, gets into communication with the gunner beneath and describes the thing to be accomplished and the effectiveness of the shot, a new meaning comes into his life. In a second he has become a part of the great struggle. He knows that his efforts are counting, that he is helping to bring success to his comrades. There comes to him a new enthusiasm and interest in his work. The sense of isolation and detachment from the accomplishments of industry, which too often comes to the workers of to-day, can be overcome only by contact with the other contributing parties. In this way only can common purpose be kept alive, individual interests safeguarded, and the general welfare promoted.

While obviously under present conditions those who invest their capital in an industry, often numbered by the thousand, cannot have personal acquaintance with the thousands and tens of thousands of those who invest their labor, contact between those two parties in interest can and must be established, if not directly, then through their respective representatives. The resumption of such personal relations through frequent conferences and current meetings, held for the consideration of matters of common interest, such as terms of employment and working and living conditions, is essential in order to restore a spirit of mutual confidence, good will, and coöperation. Personal relations can be revived under modern conditions only through the adequate representation of the employees. Representation is a principle which is fundamentally just and vital to the successful conduct of industry. It means, broadly speaking, democracy through coöperation, as contrasted with autocracy.

It is not for me or anyone else to undertake to determine for industry at large what specific form representation shall take. Once having adopted the principle, it is obviously wise that the method to be employed should be left, in each specific instance, to be determined by the parties interested. If there is to be peace and good-will between the several parties in industry, it will surely not be brought about by the enforcement upon unwilling groups of a method which in their judgment is not adapted to their peculiar needs. In this, as in all else, persuasion is an essential element in bringing about conviction.

With the developments in industry what they are to-day, there is sure to come a progressive evolution from the autocratic single control, whether by capital, management, labor, or the community, to some form of democratic coöperative control participated in by all four. The whole movement is evolutionary. That which is fundamental is the idea of coöperation, and that idea must find expression in those forms which will serve it best, with conditions, forces and times what they are.

In the United States, the coöperation in war service of labor, capital, management, and Government afforded a striking and most gratifying illustration of this tendency.

After all, the basic principles governing the relations between the parties to industry are as applicable in the successful conduct of industry to-day as in earlier times. The question which now confronts us is how to reëstablish personal relations and coöperation in spite of changed conditions. The answer is not doubtful or questionable, but absolutely clear and unmistakable: it is, through adequate representation of the four parties in the councils of industry.

III

Various methods of representation in industry have been developed, conspicuous among which are those of labor unions and employers’ associations. As regards the organization of labor, it is just as proper and advantageous for labor to associate itself into organized groups for the advancement of its legitimate interests as for capital to combine for the same object.

Such associations of labor manifest themselves in collective bargaining, in an effort to secure better working and living conditions, in providing machinery whereby grievances may easily and without prejudice to the individual be taken up with the management. Sometimes they provide benefit features, sometimes they seek to increase wages, but whatever their specific purpose, so long as it is to promote the well-being of the employees, having always due regard for the just interests of the employer and the public, leaving every worker free to associate himself with such groups or to work independently, as he may choose, they are to be encouraged.

But organization is not without its dangers. Organized capital sometimes conducts itself in an unworthy manner, contrary to law and in disregard of the interest of both labor and the public. Such organizations cannot be too strongly condemned or too vigorously dealt with. Although they are the exception, such publicity is generally given to their unsocial acts that all organizations of capital, however rightly managed or broadly beneficent, are thereby brought under suspicion.

Likewise it sometimes happens that organizations of labor are conducted without just regard for the rights of the employer or of the public; methods and practices are adopted which, because unworthy or unlawful, are deserving of public censure. Such organizations of labor bring discredit and suspicion upon other organizations which are legitimate and useful, just as is the case with improper organizations of capital, and they should be similarly dealt with. We ought not, however, to allow the occasional failure in the working of the principle of the organization of labor to prejudice us against the principle itself, for the principle is fundamentally sound.

In the further development of the organization of labor and of large business, the public interest as well as the interest of labor and of capital will be furthest advanced by whatever stimulates every man to do the best work of which he is capable and to render useful service, by a fuller recognition of the common interests of employers and employed, and by an earnest effort to dispel distrust and hatred and to promote good-will.

Labor unions have secured for labor in general many advantages in hours, wages, and standards of working conditions. A large proportion of the workers of the world, however, are outside of these organizations, and unless somehow represented are not in a position to bargain collectively. Therefore, representation of labor to be adequate must be more comprehensive and all inclusive than anything thus far attained.

Representation on the employers’ side has been developed through the establishment of trade associations, the purpose of which is to discuss matters of common interest and to act, in so far as is legally permissible and to the common advantage, along lines that are generally similar. But here also representation is inadequate. Many employers do not belong to employers’ associations.

In the United States during the war, the representation of both labor and capital in common councils was brought about through the War Labor Board, composed equally of men from the ranks of labor and capital, together with representatives of the public. When differences arose in industries where there was no machinery to deal with such matters, the War Labor Board stepped in and made its findings and recommendations. In this way, relatively continuous operation was made possible and the resort to the strike and lockout was less frequent.

In England there have been made during the past years various important Government investigations and reports, looking toward a more complete program of representation and coöperation on the part of labor and capital. One is the well-known Whitley Report, which owes its distinction to a single outstanding feature, namely, that it applies to the whole of industry, the principle of representative government.

The Whitley Plan seeks to unite the organizations of labor and capital by a bond of common interest in a common venture; it changes at a single stroke the attitude of these powerful aggregations of class interest from one of militancy to one of social service; it establishes a new relation in industry.

“Problems old and new,” says the report, “will find their solution in a frank partnership of knowledge, experience, and good-will.”

Another investigation and report was made by a Commission on Industrial Unrest, appointed by the Prime Minister. This Commission made, among others, the following interesting recommendations:—

(1) that the principle of the Whitley Report as regards industrial councils be adopted;

(2) that each trade should have a constitution;

(3) that labor should take part in the affairs of industry as partners rather than as employees in the narrow sense of the term;

(4) that closer contact should be set up between employers and employed.

A third report was prepared by the Ministry of Labor. This report deals with the constitution and operation of works committees in a number of industries. It is a valuable treatise on the objects, functions, and methods of procedure of joint committees.

Light has been thrown on the general questions treated by these inquiries in an able report by the Garton Foundation on The Industrial Situation after the War. This report is a study of the more permanent causes of industrial friction and inefficiency, and of the means by which they may be removed or their action circumscribed.

Mention of these several reports, taken at random, is made simply as indicative of the extent and variety of the study which has been given to the great problem of industrial reconstruction in England. All point toward the need of more adequate representation of labor in the conduct of industry and the importance of closer relations between labor and capital.

IV

A method of representation similar to the Whitley Plan, though less comprehensive, and which is constructed from the bottom up, has been in operation for varying periods of time in an ever increasing number of industries in the United States. This plan of representation is worthy of serious consideration. It begins with the election of representatives in a single plant and is capable of indefinite development, to meet the complex needs of any industry, and of wide extension, so as to include all industries. Equally applicable in industries where union or non-union labor or both are employed, it seeks to provide full and fair representation to labor, capital, and management, also taking cognizance of the community. Thus far it has developed a spirit of coöperation and goodwill which commends it to both employer and employee.

The outstanding features of this plan of industrial representation, varied to meet the special needs of each plant or company in which it has been adopted, are as follows:

Representatives chosen by the employees in proportion to their number, from their fellow workers in each plant, form the basis of the plan.

Joint committees, composed of equal numbers of employees or their representatives and of officers of the company, are found in each plant or district.

These committees deal with all matters pertaining to employment and working and living conditions, including questions of coöperation and conciliation, safety and accident, sanitation, health and housing, recreation and education. Joint conferences of representatives of employees and officers of the company are held in the various districts several times each year.

There is also an annual joint conference, at which reports from all districts are received and considered.

Another important feature of the plan is an officer known as the President’s Industrial Representative, whose duty it is to visit the plants currently and confer with the employees’ representatives, as well as to be available always for conference at the request of the representatives.

Thus the employees, through their representatives chosen from among themselves, are in constant touch and conference with management and representatives of the stockholders in regard to matters pertaining to their common interest.

The employees’ right of appeal is the third outstanding feature of the plan.

Any employee with a grievance, real or imaginary, may go with it at once to his representative. The representatives not infrequently find there is no ground for the grievance and are able so to convince the employee.

But if a grievance does exist, or dissatisfaction on the part of the employee continues, the matter is carried to the local boss, foreman, or superintendent, with whom in the majority of cases it is amicably and satisfactorily settled. Further appeal is open to the aggrieved employee, either in person or through his representative, to the higher officers and to the president.

If satisfaction is not to be had from the company, the court of last appeal may be the Industrial Commission of the State, the State Labor Board, or a committee of arbitration.

Experience shows that the vast majority of difficulties which occur in an industry arise between the workmen and the foremen who are in daily contact with them. Foremen are sometimes arbitrary, and it is by their attitude and action that the higher officers and the stockholders are judged. Obviously the right of appeal from the decisions of foremen and superintendents is important, even if seldom availed of, because it tends of itself to modify their attitude.

A further feature of the plan is what may be termed the employee’s Bill of Rights.

This covers such matters as the right to caution and suspension before discharge, except for such serious offenses as are posted; the right to hold meetings at appropriate places outside of working hours; the right without discrimination to membership or non-membership in any society, fraternity, or union; and the right of appeal.

Where this plan has been in operation for a considerable length of time, some of the results obtained are:—

First, more continuous operation of the plants and less interruption in the employment of the workers, resulting in larger returns for both capital and labor;

Second, improved working and living conditions;

Third, frequent and close contact between employees and officers;

Fourth, the elimination of grievances as disturbing factors;

Fifth, goodwill developed to a high degree;

Sixth, the creation of a community spirit.

Furthermore, the plan has proved an effective means of enlisting the interest of all parties to industry, of reproducing the contacts of earlier days between employer and employee, of lessening misunderstanding, distrust, and enmity, and securing coöperation in the spirit of brotherhood. Under its operation, the participants in industry are being convinced of the soundness of the proposition that they are fundamentally friends and not enemies, that their interests are common, not opposed. Based as the plan is upon principles of justice to all, its success can be counted on so long as it is carried out in a spirit of sincerity and fair play.

Here, then, would seem to be a method of providing representation which is just, which is effective, which is applicable to all employees whether organized or unorganized, to all employers whether in associations or not, which does not interfere with existing organizations or associations, and which, while developed in a single industrial corporation as a unit, may be expanded to include all corporations in the same industry and ultimately all industries.

Just what part labor organizations and employers’ associations can best take in such a plan remains to be worked out, but certain it is that some method should be devised which will profit to the fullest extent by the experience, the strength, and the leadership of these groups. While, doubtless, defects will appear in this plan and other methods more successfully accomplishing the same end may be developed, at least it is proving that in unity there is strength and that coöperation in industry is not only idealistically right, but practically workable.

If the points which I have endeavored to make are sound, might not the four parties to industry subscribe to an Industrial Creed somewhat as follows:—

(1) I believe that labor and capital are partners, not enemies; and that their interests are common, not opposed; and that neither can attain the fullest measure of prosperity at the expense of the other, but only in association with the other.

(2) I believe that the community is an essential party to industry and that it should have adequate representation with the other parties.

(3) I believe that the purpose of industry is quite as much to advance social well-being as material prosperity; that in the pursuit of that purpose, the interests of the community should be carefully considered, the well-being of employees fully guarded, management adequately recognized, and capital justly compensated, and that failure in any of these particulars means loss to all four parties.

(4) I believe that every man is entitled to an opportunity to earn a living, to fair wages, to reasonable hours of work and proper working conditions, to a decent home, to the opportunity to play, to learn, to worship and to love, as well as to toil, and that the responsibility rests as heavily upon industry as upon government or society, to see that these conditions and opportunities prevail.

(5) I believe that diligence, initiative, and efficiency, wherever found, should be encouraged and adequately rewarded; that indolence, indifference, and restriction of production should be discountenanced; and that service is the only justification for the possession of power.

(6) I believe that the provision of adequate means of uncovering grievances and promptly adjusting them is of fundamental importance to the successful conduct of industry.

(7) I believe that the most potent measure in bringing about industrial harmony and prosperity is adequate representation of the parties in interest; that existing forms of representation should be carefully studied and availed of, in so far as they may be found to have merit and are adaptable to conditions peculiar to the various industries.

(8) I believe that the most effective structure of representation is that which is built from the bottom up, which includes all employees, which starts with the election of representatives and the formation of joint committees in each industrial plant, proceeds to the formation of joint district councils and annual joint conferences in a single industrial corporation, and admits of extension to all corporations in the same industry, as well as to all industries in a community, in a nation, and in the various nations.

(9) I believe that to “do unto others as you would that they should do unto you” is as sound business as it is good religion; that the application of right principles never fails to effect right relations; that “the letter killeth, but the spirit giveth life”; that forms are wholly secondary, while attitude and spirit are all important; and that only as the parties in industry are animated by the spirit of fair play, justice to all, and brotherhood, will any plan which they may mutually work out succeed.

(10) I believe that that man renders the greatest social service who so coöperates in the organization of industry as to afford to the largest number of men the greatest opportunity for self-development and the enjoyment of those benefits which their united efforts add to the wealth of civilization.

V

In these days the selfish pursuit of personal ends at the expense of the group can and will no longer be tolerated. The reign of autocracy has passed. Men are rapidly coming to see that human life is of infinitely greater value than material wealth; that the health, happiness, and well-being of the individual, however humble, is not to be sacrificed to the selfish aggrandizement of the more fortunate or more powerful. Modern thought is placing less emphasis on material considerations. It is recognizing that the basis of national progress, whether industrial or social, is the health, efficiency, and spiritual development of the people. Never was there a more profound belief in human life than to-day. Whether men work with brain or brawn, they are human beings, and are much alike in their cravings, their aspirations, their hatreds, and their capacity for suffering and for enjoyment.

What is the attitude of the leaders in industry as they face this critical period of reconstruction? Is it that of the standpatters, who ignore the extraordinary changes which have come over the face of the civilized world and have taken place in the minds of men; who, arming themselves to the teeth, attempt stubbornly to resist the inevitable and invite open warfare with the other parties in industry, and who say:

“What has been and is, must continue to be; with our backs to the wall we will fight it out along the old lines or go down in defeat!”

Those who take such an attitude are wilfully heedless of the fact that its certain outcome will be financial loss, general inconvenience and suffering, the development of bitterness and hatred, and in the end submission to far more drastic and radical conditions imposed by legislation, if not by force, than could now be amicably arrived at through mutual concession in friendly conference.

Or is their attitude one in which I myself profoundly believe, which takes cognizance of the inherent right and justice of the coöperative principle underlying the new order, which recognizes that mighty changes are inevitable, many of them desirable, and which does not wait until forced to adopt new methods, but takes the lead in calling together the parties to industry for a round-table conference to be held in a spirit of justice, fair play, and brotherhood, with a view to working out some plan of coöperation, which will insure to all those concerned adequate representation, will afford to labor a voice in the forming of industrial policy, and an opportunity to earn a fair wage under such conditions as shall leave time, not alone for food and sleep, but also for recreation and the development of the higher things of life?

Never was there such an opportunity as exists to-day for the industrial leader with clear vision and broad sympathy permanently to bridge the chasm that is daily gaping wider between the parties to industry, and to establish a solid foundation for industrial prosperity, social improvement, and national solidarity. Future generations will rise up and call those men blessed who have the courage of their convictions, a proper appreciation of the value of human life as contrasted with material gain, and who, imbued with the spirit of coöperation, will lay hold of the great opportunity for leadership which is open to them to-day.

In conclusion, let it be said that upon the heads of those leaders—it matters not to which of the four parties they belong—who refuse to reorganize their industrial households in the light of the modern spirit, will rest the responsibility for such radical and drastic measures as may later be forced upon industry, if the highest interests of all are not shortly considered and dealt with in a spirit of fairness.

Who, then, will dare to block the wheels of progress and to let pass the present opportunity of helping to usher in a new era of peace and prosperity throughout the world, brought about through coöperation in industry?

II Labor and Capital—Partners[1]

I

Labor and Capital are rather abstract words with which to describe those vital forces which working together become productively useful to mankind. Reduced to their simplest terms, Labor and Capital are men with muscle and men with money—human beings, imbued with the same weaknesses and virtues, the same cravings and aspirations.

It follows, therefore, that the relations of men engaged in industry are human relations. Men do not live merely to toil; they also live to play, to mingle with their fellows, to love, to worship. The test of the success of our social organization is the extent to which every man is free to realize his highest and best self; and in considering any economic or political problem, that fundamental fact should be recognized.

If in the conduct of industry, therefore, the manager ever keeps in mind that in dealing with employees he is dealing with human beings, with flesh and blood, with hearts and souls; and if, likewise, the workmen realize that managers and investors are themselves also human beings, how much bitterness will be avoided!

Are the interests of these human beings with labor to sell and with capital to employ necessarily antagonistic or necessarily mutual? Must the advance of one retard the progress of the other? Should their attitude toward each other be that of enemies or of partners? The answer one makes to these fundamental questions must constitute the basis for any consideration of the relationship of Labor and Capital.

Our difficulty in dealing with the industrial problem is due too often to a failure to understand the true interests of Labor and Capital. And I suspect this lack of understanding is just as prevalent among representatives of Capital as among representatives of Labor. In any event the conception one has of the fundamental nature of these interests will naturally determine one’s attitude toward every phase of their relationship.

Much of the reasoning on this subject proceeds upon the theory that the wealth of the world is absolutely limited, and that if one man gets more, another necessarily gets less. Hence there are those who hold that if Labor’s wages are increased or its working conditions improved, Capital suffers because it must deprive itself of the money needed to pay the bill. Some employers go so far as to justify themselves in appropriating from the product of industry all that remains after Labor has received the smallest amount which it can be induced or forced to accept; while on the other hand there are men who hold that Labor is the producer of all wealth, hence is entitled to the entire product, and that whatever is taken by Capital is stolen from Labor.

If this theory is sound, it might be maintained that the relation between Labor and Capital is fundamentally one of antagonism, and that each should consolidate and arm its forces, dividing the products of industry between them in proportion as their selfishness is enforced by their power.

But all such counsel loses sight of the fact that the riches available to man are practically without limit, that the world’s wealth is constantly being developed and undergoing mutation, and that to promote this process both Labor and Capital are indispensable. If these great forces coöperate, the products of industry are steadily increased; whereas, if they fight, the production of wealth is certain to be either retarded or stopped altogether, and the well-springs of material progress choked.

The problem of promoting the coöperation of Labor and Capital may well be regarded, therefore, as the most vital problem of modern civilization. Peace may be established among the nations of the world; but if the underlying factors of material growth within each nation are themselves at war, the foundations of all progress are undermined.

II

Capital cannot move a wheel without Labor, nor Labor advance beyond a mere primitive existence without Capital. But with Labor and Capital as partners, wealth is created and ever greater productivity made possible. In the development of this partnership, the greatest social service is rendered by that man who so coöperates in the organization of industry as to afford to the largest number of men the greatest opportunity for self-development, and the enjoyment by every man of those benefits which his own work adds to the wealth of civilization. This is better than charity or philanthropy; it helps men to help themselves and widens the horizon of life.

Through such a process the laborer is constantly becoming the capitalist, and the accumulated fruits of present industry are made the basis of further progress. The world puts its richest prizes at the feet of great organizing ability, enterprise, and foresight, because such qualities are rare and yet indispensable to the development of the vast natural resources which otherwise would lie useless on the earth’s surface or in its hidden depths.

It is one of the noteworthy facts of industrial history that the most successful enterprises have been those which have been so well organized and so efficient in eliminating waste, that the laborers were paid high wages, the consuming public—upon whose patronage the success of every enterprise depends—enjoyed declining prices, and the owners realized large profits.

The development of industry on a large scale brought the corporation into being, a natural outgrowth of which has been the further development of organized Labor in its various forms. The right of men to associate themselves together for their mutual advancement is incontestable; and under our modern conditions, the organization of Labor is necessary just as is the organization of Capital; both should make their contribution toward the creation of wealth and the promotion of human welfare.

The labor union, among its other achievements, has undoubtedly forced public attention upon wrongs which employers of to-day would blush to practice. But employers as well as workers are more and more appreciating the human equation, and realizing that mutual respect and fairness produce larger and better results than suspicion and selfishness.

We are all coming to see that there should be no stifling of Labor by Capital, or of Capital by Labor; and also that there should be no stifling of Labor by Labor, or of Capital by Capital.

While it is true that the organization of Labor has quite as important a function to perform as the organization of Capital, it cannot be gainsaid that evils are liable to develop in either of these forms of association.

Because evils have developed and may develop as a result of these increasing complexities in industrial conditions, shall we deny ourselves the maximum benefit which may be derived from using the new devices of progress? We cannot give up the corporation and industry on a large scale; no more can we give up the organization of labor; human progress depends too much upon them. Surely there must be some avenue of approach to the solution of a problem on the ultimate working out of which depends the very existence of industrial society.

To say that there is no way out except through constant warfare between Labor and Capital is an unthinkable counsel of despair; to say that progress lies in eventual surrender of everything by one factor or the other, is contrary, not only to the teachings of economic history, but also to our knowledge of human nature.

III

Most of the misunderstanding between men is due to a lack of knowledge of each other. When men get together and talk over their differences candidly, much of the ground for dispute vanishes.

In the days when industry was on a small scale, the employer came into direct contact with his employees, and the personal sympathy and understanding which grew out of that contact made the rough places smooth.

However, the use of steam and electricity, resulting in the development of large-scale industry with its attendant economies and benefits, has of necessity erected barriers to personal contact between employers and men, thus making it more difficult for them to understand each other.

In spite of the modern development of Big Business, human nature has remained the same, with all its cravings, and all its tendencies toward sympathy when it has knowledge and toward prejudice when it does not understand. The fact is that the growth of the organization of industry has proceeded faster than the adjustment of the interrelations of men engaged in industry.

Must it not be, then, that an age which can bridge the Atlantic with the wireless telephone, can devise some sort of social X-ray which shall enable the vision of men to penetrate the barriers which have grown up between men in our machine-burdened civilization?

IV

Assuming that Labor and Capital are partners, and that the fruits of industry are their joint product, to be divided fairly, there remains the question: What is a fair division? The answer is not simple—the division can never be absolutely just; and if it were just to-day, changed conditions would make it unjust to-morrow; but certain it is that the injustice of that division will always be greater in proportion as it is made in a spirit of selfishness and shortsightedness.

Indeed, because of the kaleidoscopic changes which the factors entering into the production of wealth are always undergoing, it is unlikely that any final solution of the problem of the fair distribution of wealth will ever be reached. But the effort to devise a continually more perfect medium of approach toward an ever fairer distribution must be no less energetic and unceasing.

For many years my father and his advisers had been increasingly impressed with the importance of these and other economic problems, and with a view to making a contribution toward their solution, had had under consideration the development of an institution for social and economic research.

While this general subject was being studied, the industrial disturbances in Colorado became acute. Their many distressing features gave me the deepest concern. I frankly confess that I felt there was something fundamentally wrong in a condition of affairs which made possible the loss of human lives, engendered hatred and bitterness, and brought suffering and privation upon hundreds of human beings. I determined, therefore, that in so far as it lay within my power I would seek some means of avoiding the possibility of similar conflicts arising elsewhere or in the same industry in the future. It was in this way that I came to recommend to my colleagues in the Rockefeller Foundation the instituting of a series of studies into the fundamental problems arising out of industrial relations. Many others were exploring the same field, but it was felt that these were problems affecting human welfare so vitally than an institution such as the Rockefeller Foundation, whose purpose, as stated in its charter, is “to promote the well-being of mankind throughout the world,” could not neglect either its duty or its opportunity.

This resulted in securing the services of Mr. W. L. Mackenzie King, formerly Minister of Labor in Canada, to conduct an investigation “with a special view,” to quote the language of an official letter, “to the discovery of some mutual relationship between Labor and Capital which would afford to Labor the protection it needs against oppression and exploitation, while at the same time promoting its efficiency as an instrument of economic production.”

In no sense was this inquiry to be local or restricted; the problem was recognized to be a world-problem, and in the study of it the experience of the several countries of the world was to be drawn upon. The purpose was neither to apportion blame in existing or past misunderstandings, nor to justify any particular point of view; but solely to be constructively helpful, the final and only test of success to be the degree to which the practical suggestions growing out of the investigation actually improved the relations between Labor and Capital.

V

With reference to the situation which had unfortunately developed in Colorado, it became evident to those responsible for the management of one of the large coal companies there—the Colorado Fuel and Iron Company, in which my father and I are interested—that matters could not be allowed to remain as they were. Any situation, no matter what its cause, out of which so much bitterness could grow, clearly required amelioration.

It has always been the desire and purpose of the management of the Colorado Fuel and Iron Company that its employees should be treated liberally and fairly.

However, it became clear that there was need of some more efficient method whereby the petty frictions of daily work might be dealt with promptly and justly, and of some machinery which, without imposing financial burdens upon the workers, would protect the rights, and encourage the expression of the wants and aspirations of the men—not merely of those men who were members of some organization, but of every man on the company’s payroll.

The problem was how to promote the well-being of each employee; more than that, how to foster at the same time the interest of both the stockholders and the employees through bringing them to realize the fact of their real partnership.

Long before the Colorado strike ended, I sought advice with respect to possible methods of preventing and adjusting such a situation as that which had arisen; and in December, 1914, as soon as the strike was terminated and normal conditions were restored, the officers of the Colorado Fuel and Iron Company undertook the practical development of plans which had been under consideration.

The men in each mining camp were invited to choose, by secret ballot, representatives to meet with the executive officers of the company to discuss matters of mutual concern and consider means of more effective coöperation in maintaining fair and friendly relations.

That was the beginning, merely the germ, of a plan which has now been developed into a comprehensive “Industrial Constitution.” The scheme embodies practical operating experience, the advice and study of experts, and an earnest effort to provide a workable method of friendly consideration, by all concerned, of the daily problems which arise in the mutual relations between employer and employees.

The plan was submitted to a referendum of the employees in all the company’s coal and iron mines, and adopted by an overwhelming vote. Before this general vote was taken, it had been considered and unanimously approved by a meeting of the employees’ elected representatives. At that meeting I outlined the plan, which is described below, as well as the theory underlying it, which theory is in brief as follows:

Every corporation is composed of four parties: the stockholders, who supply the money with which to build the plant, pay the wages, and operate the business; the directors, whose duty it is to select executive officers carefully and wisely, plan the larger and more important policies, and generally see to it that the company is prudently administered; the officers, who conduct the current operations; and the employees, who contribute their skill and their work.

The interest of these four parties is a common interest, although perhaps not an equal one; and if the result of their combined work is to be most successful, each must do its share. An effort on the part of any one to advance its own interest without regard to the rights of the others, means, eventually, loss to all.

The problem which confronts every company is so to interrelate its different elements that the best interests of all will be conserved.

VI

The industrial machinery which has been adopted by the Colorado Fuel and Iron Company and its employees is embodied in two written documents, which have been printed and placed in the hands of each employee. One of these documents is a trade agreement signed by the representatives of the men and the officers of the company, setting forth the conditions and terms under which the men agree to work until January 1, 1918, and thereafter, subject to revision upon ninety days’ notice by either side.

This agreement guarantees to the men that for more than two years, no matter what reductions in wages others may make, there shall be no reduction of wages by this company; furthermore, that in the event of an increase in wages in any competitive field, this company will make a proportional increase.

The agreement provides for an eight-hour day for all employees working underground and in coke ovens; it insures the semi-monthly payment of wages; it fixes charges for such dwellings, light, and water, as are provided by the company; it stipulates that the rates to be charged for powder and coal used by the men shall be substantially their cost to the company.

To encourage employees to cultivate flower and vegetable gardens, the company agrees to fence free of cost each house-lot owned by it. The company also engages to provide suitable bath houses and club houses for the use of employees at the several mining camps.

The other document is an “Industrial Constitution,” setting forth the relations of the company and its men. The Constitution stipulates, among other things, that “there shall be a strict observance by management and men of the Federal and State laws respecting mining and labor,” and that “the scale of wages and the rules in regard to working conditions shall be posted in a conspicuous place at or near every mine.”

Every employee is protected against discharge without notice, except for such offenses as are posted at each mine. For all other misconduct the delinquent is entitled to receive warning in writing that a second offense will cause discharge, and a copy of this written notice must be forwarded to the office of the president of the company at the same time it is sent to the employee.

The constitution specifically states that “there shall be no discrimination by the company or any of its employees on account of membership or non-membership in any society, fraternity, or union.” The employees are guaranteed the right to hold meetings on company property, to purchase where they choose, and to employ check-weighmen, who, on behalf of the men, shall see to it that each gets proper credit for his work.

Besides setting forth these fundamental rights of the men, the Industrial Constitution seeks to establish a recognized means for bringing the management and the men into closer contact for two general purposes:

First, to promote increased efficiency and production, to improve working conditions and to further the friendly and cordial relations between the company’s officers and employees; and,

Second, to facilitate the adjustment of disputes and the redress of grievances.

In carrying out this plan, the wage-earners at each camp are to be represented by two or more of their own number chosen by secret ballot, at meetings especially called for the purpose, which none but wage-earners in the employ of the company shall be allowed to attend. The men thus chosen are to be recognized by the company as authorized to represent the employees for one year, or until their successors are elected, with respect to terms of employment, working and living conditions, adjustment of differences, and such other matters as may come up.

A meeting of all the men’s representatives and the general officers of the company will be held once a year to consider questions of general importance.

The Industrial Constitution provides that the territory in which the company operates shall be divided into a number of districts based on the geographical distribution of the mines. To facilitate full and frequent consultation between representatives of the men and the management in regard to all matters of mutual interest and concern, the representatives from each district are to meet at least three times a year—oftener if need be—with the president of the company, or his representative, and such other officers as the president may designate.

The district conferences will each appoint from their number certain joint committees on industrial relations, and it is expected that these committees will give prompt and continuous attention to the many questions which affect the daily life and happiness of the men as well as the prosperity of the company. Each of these committees will be composed of six members, three designated by the employees’ representatives and three by the president of the company.

A joint committee on industrial coöperation and conciliation will consider matters pertaining to the prevention and settlement of industrial disputes, terms and conditions of employment, maintenance of order and discipline in the several camps, policy of the company stores, and so forth. Joint committees on safety and accidents, on sanitation, health and housing, on recreation and education, will likewise deal with the great variety of topics included within these general designations.

Prevention of friction is an underlying purpose of the plan. The aim is to anticipate and remove in advance all sources of possible irritation. With this in view a special officer, known as the President’s Industrial Representative, is added to the personnel of the staff as a further link between the president of the corporation and every workman in his employ. This officer’s duty is to respond promptly to requests from employees’ representatives for his presence at any of the camps, to visit all of them as often as possible, to familiarize himself with conditions, and generally to look after the well-being of the workers.

It is a fundamental feature of the plan, as stated in the document itself, that “every employee shall have the right of ultimate appeal to the president of the company concerning any condition or treatment to which he may be subjected and which he may deem unfair.” For the adjustment of all disputes, therefore, the plan provides carefully balanced machinery.

If any miner has a grievance, he may himself, or preferably through one of the elected representatives in his camp, seek satisfaction from the foreman or mine superintendent. If those officials do not adjust the matter, appeal may be had to the president’s industrial representative. Failing there, the employee may appeal to the division superintendent, assistant manager, or general manager, or the president of the company, in consecutive order.

Yet another alternative is that, after having made the initial complaint to the foreman or mine superintendent, the workman may appeal directly to the joint committee on industrial coöperation and conciliation in his district, which, itself failing to agree, may select one or three umpires whose decision shall be binding upon both parties to the dispute.

If all these methods of mediation fail the employee may appeal to the Colorado State Industrial Commission, which is empowered by law to investigate industrial disputes and publish its findings.

So as adequately to protect the independence and freedom of the men’s representatives, the Constitution provides that in case any one of them should be discharged or disciplined, or should allege discrimination, he may resort to the various methods of appeal open to the other employees, or he may appeal directly to the Colorado State Industrial Commission, with whose findings in any such case the company agrees to comply.

The company is to pay all expenses incident to the administration of the plan, and to reimburse the miners’ representatives for loss of time from their work in the mines.

VII

Such in outline is this Industrial Constitution. Some have spoken of it as establishing a Republic of Labor. Certain it is that the plan gives every employee opportunity to voice his complaints and aspirations, and it neglects no occasion to bring the men and the managers together to talk over their common interests.

Much unrest among employees is due to the nursing of real or fancied grievances arising out of the daily relations between the workmen and the petty boss. Such grievances should receive attention at once, and this plan provides that they shall.

Just as in the case of bodily wounds, so with industrial wounds, it is of prime importance to establish a method of prompt disinfection, lest the germs of distrust and hatred have opportunity to multiply.

This plan is not hostile to labor organizations; there is nothing in it, either expressed or implied, which can rightly be so construed; neither membership in a union nor independence of a union will bring a man either preference or reproach, so far as the attitude of the company is concerned.

The fact is that the Colorado Fuel and Iron Company Constitution does not restrict in any way the right of the employees to regulate their own lives, nor does it abridge their right to join any organization they please. At the same time it does insure the men fair treatment and an opportunity to make their voice heard in determining the conditions under which they shall work and live.

The plan does not deny to the representatives the right to act in concert; it does not deny to the men the right to employ counselors or advisers to assist them in formulating their views as to any situation. Indeed, the door is left wide open for the natural exercise of any right or privilege to which the men are entitled.

There is nothing in the plan to prevent the men holding open or secret meetings as often as they like, either in the separate camps, the districts, or as representing the whole industry. Such meetings are not specifically provided for because all those who are connected with the corporation are considered to be partners in the enterprise, and their interests common interests.

The plan provides a channel through which not only may the men confer with the management, but through which also the officers may lay their purposes, problems, and difficulties before the employees.

It provides a medium of adjustment, as between employer and employees, of the problems which constantly arise in the conduct of business, while in regard to the relations of both it recognizes that the voice of public opinion is entitled to be heard.

The acts of bodies of men in their relations with other men should always be illuminated by publicity, for when the people see clearly what the facts are, they will, in the long run, encourage what is good and condemn what is selfish.

Some may think that the form which the organization of labor takes must necessarily be originated and developed by Labor. If, however, a workable method of coöperation between managers and men is actually developed, which is satisfactory to both, is its authorship of consequence, provided only its provisions are adequate and just and it proves to be an effective instrument through which real democracy may have free play?

The Colorado Plan has been devised for the employees of the Colorado Fuel and Iron Company, and without reference to the employees, or organizations of employees, in other companies. Some people will maintain that the men’s interests cannot be adequately protected or their rights at all times enforced without the support of their fellows in similar industries.

This may be true where Labor and Capital do not generally recognize that their interests are one. But when men and managers grasp that vital point, as I believe this plan will help them to do, and are really awake to the fact that when either takes an unfair advantage of the other the ultimate interests of both are bound to suffer, they will have an incentive to fair dealing of the most compelling kind.

It is clear that a plan of this kind must not overlook the interests of the stockholders, for no plan which disregards their rights can be permanently successful. The interests of Capital can no more be neglected than those of Labor.

At the same time I feel that a prime consideration in the carrying on of industry should be the well-being of the men and women engaged in it, and that the soundest industrial policy is that which has constantly in mind the welfare of the employees as well as the making of profits, and which, when the necessity arises, subordinates profits to welfare.

In order to live, the wage-earner must sell his labor from day to day. Unless he can do this, the earnings of that day’s labor are gone forever.

Capital can defer its returns temporarily in the expectation of future profits, but Labor cannot. If, therefore, fair wages and reasonable living conditions cannot otherwise be provided, dividends must be deferred or the industry abandoned.

On the other hand, a business, to be successful, must not only provide for Labor remunerative employment under proper working conditions, but it must also render useful service to the community and earn a fair return on the money invested.

The adoption of any policy toward Labor, however favorable it may seem, which results in the bankruptcy of the corporation and the discontinuance of its work, is as injurious to Labor which is thrown out of employment, as it is to the public, which loses the services of the enterprise, and to the stockholders whose capital is impaired.

This plan is not a panacea; it is necessarily far from perfect, and yet I believe it to be a step in the right direction. Carefully as it has been worked out, experience will undoubtedly develop ways of improving it.

While the plan provides elaborate machinery which of itself ought to make impossible many abuses and introduce much that is constructively helpful, too strong emphasis cannot be put upon the fact that its success or failure will be largely determined by the spirit in which it is carried out.

The problem of the equitable division of the fruits of industry will be always with us. The nature of the problem changes and will continue to change with the development of transportation, of invention, and the organization of commerce.

The ultimate test of the rightness of any particular method of division must be the extent to which it stimulates initiative, encourages the further production of wealth, and promotes the spiritual development of men.

The Colorado Plan is of possible value in that State, and may prove useful elsewhere, because it seeks to serve continually as a means of adjusting the daily difficulties incident to the industrial relationship. It brings men and managers together, it facilitates the study of their common problems, and it should promote an understanding of their mutual interests.

Assuming, as we must, the fundamental fairness of men’s purposes, we have here possibly a medium through which the always changing conditions of industry may be from time to time more closely adapted to the needs, the desires, and the aspirations of men.

FOOTNOTE:

[1] Note.—This article, “Labor and Capital—Partners,” originally appeared in the Atlantic Monthly, January, 1916.

III The Personal Relation in Industry[2]

Heretofore the Chief Executives of important industrial corporations have been selected largely because of their capacity as organizers or financiers.

The time is rapidly coming, however, when the important qualification for such positions will be a man’s ability to deal successfully and amicably with labor. Yet how to do this is a subject which, I fancy, is never taught or referred to in the classroom.

Like knowledge of the problems of sex, than which no department of life is more sacred, vital or deserving of full and ennobling instruction, an understanding of this subject is left to be acquired by experience, often costly or bitter, or through chance information, gleaned too frequently from ignorant and unreliable sources.

Just as the first of these two themes is coming to be taught sympathetically and helpfully in our schools and colleges, so I believe the second, the personal relation in industry, will eventually be regarded as an important part of those college courses which aim to fit men for business life.

After all, is it not the personal relations with one’s fellows which, when rightly entered into, bring joy and inspiration into our lives and lead to success, and which, on the other hand, if disregarded or wrongly interpreted, bring equally sorrow and discouragement and lead to failure?

Think what the ideal personal relation between a father and son may mean to both. Some of us have known such contact. Our lives have been fuller and richer as a result, freer from sin and sorrow. Others of us know from bitter experience what the absence of this relationship has involved.

How helpful to a student is such a friendly association with some professor who commands his confidence, respect and regard, and who is interested in his college work, not for itself alone, but quite as much because of its bearing on his future life’s usefulness.

What would college life be without the personal relationships which are formed during its happy days and often continued close and intimate through life?

Can you imagine a successful football team composed of strangers, having no points of contact, no sympathy with each other, no common cause inspiring them to strive for victory? Team play, the support of one player by another, would be well nigh impossible.

Even in the army, where formerly the man who had become the most perfect machine was regarded as the best soldier, it is coming to be accepted that in addition to being obedient and subject to discipline, the man who thinks, who is capable of acting on his judgment when occasion arises, who is bound to his fellow soldiers and his officers by personal friendliness, admiration and respect, is a far more efficient soldier.

And whereas formerly, particularly in the armies of Europe, privates were not allowed to have any personal association or contact with their officers, we learn that in the World War a spirit of comradeship was developed by the officers with their men off duty, which personal relationship was building up rather than weakening the morale of the armies.

What is true as to the relationships which I have mentioned is equally true in industrial relations, and personal contact is as vital and as necessary there as in any other department of life.

Let us trace briefly the history of the development of industry, that we may see where this personal relationship is present, where absent, and what is the effect of its presence or absence.

Industry in its earliest forms was as simple as it is complex to-day.

The man who provided the capital was frequently the director, president, general manager and superintendent of the enterprise, and in some instances actually worked with his employees. These latter were few in number. They were usually born and brought up in the same community with their employer, his companion in school days, his friends and neighbors, often calling him as he did them by their first names.

There was daily contact between employer and employee, and naturally if any questions or causes for complaint arose on either side, they were taken up at the next chance meeting and adjusted.

Next came the partnership, a development necessary because more capital was required than a single individual cared to or was able to provide. Two or more partners were thus associated together, but otherwise the situation was not materially different from that just described, except that more employees were required.

With the invention of the steam engine and its application to railroads, which quickly began to make their way over the face of the earth; with the development of the steamboat, replacing to so large an extent the old sailing vessels and making possible the regular and frequent transportation of the products of the soil and of industry from one part of the world to another; with the perfecting of the telegraph, cable and telephone, there came the need for larger aggregations of capital in order to carry on the ever expanding industries that were required to keep pace with this growth.

This led to the development of the corporation, the capital for which was supplied in larger or smaller amounts by few or many individuals, thus making possible almost indefinite financial expansion. And this form of business has continued to grow, as commerce and industry have become not only national but international and world wide in their extent, until we have to-day the United States Steel Corporation, with its 120,000 stockholders and its 260,000 employees.

It stands to reason that corporations of such magnitude have necessarily become highly specialized.

The responsibility of an individual stockholder in a corporation is of course in proportion to his interest, but the function of the stockholders in general consists in casting their votes each year for the election of directors to represent their interests.

The directors in turn are charged with the general responsibility of developing the policies of the corporation, some of which are matured by the officers, of selecting its officers and of seeing to it that the corporation is properly managed.

The officers as the executives of the company carry out the company’s policies and are charged with the actual operation of the company and the employment of labor.

As we contrast this gigantic organization with the simple form of industrial organization first described, it is at once apparent that in the very nature of the case the man who supplies the money seldom if ever comes in contact with the man who supplies the labor.

Here we note a marked and serious change. While deplorable, this situation is practically inevitable. Frequently the industry in which a stockholder has invested his capital is located in a far distant city. Not only this, but often investments are made in corporations which conduct business in other countries almost at the ends of the earth.

As a result of this lack of contact between Labor and Capital, the personal relationship has disappeared, and gradually a great gulf has grown up between the two, which is ever widening, so these two great forces have come too often to think that their interests are antagonistic, and have worked against each other, each alone seeking to promote its own selfish ends. This has resulted in the strike, the lockout and the various incidents of industrial warfare so regrettably common in this day and apparently on the increase.

Reports of the United States Bureau of Labor Statistics show that for the first eleven months of 1916 there were 3,134 strikes and lockouts in the industries of this country, as against only 1,147 for the corresponding period of 1915.

These industrial conflicts have in some instances come to be little short of civil war; vast sums of money have been lost by both sides, untold hardship and misery have followed in their wake.

The New York City street railroad strike of last summer (1916) is estimated to have cost the companies some four millions of dollars, not to mention the loss in wages borne by the employees or the losses sustained by the public.

Last summer[3] four hundred thousand railroad men, constituting the four brotherhoods, voted in favor of a strike on 225 American railroads. If the average pay of these men had been only $2.50 a day, which is considerably lower than the fact, such a strike would have meant a daily loss in wages of a million dollars, not taking into account the far greater loss to business and the inevitable inconvenience and distress which would have been brought, directly or indirectly, to the doors of the entire population.

I have not had access to data showing the cost to this country of strikes and lockouts. However, the following quotation from a recent address made by Mr. Frank A. Vanderlip, President of the National City Bank of New York, throws light on the subject. Mr. Vanderlip said:

The cost of the recent garment workers’ strike in New York City has been estimated to be in the neighborhood of fifty million dollars.

The last anthracite coal strike in the short course of five months caused a loss of one hundred and twenty million dollars to employers and employees in the community.

I have seen the statement that in a single year the losses that could be attributed to labor disturbances in this country total more than a billion dollars.

These are extraordinary figures, and though some of them are doubtless merely estimates, they serve to show what enormous proportions the industrial problem has assumed and how serious and vital a question it has become.

May I add that almost beyond belief as these figures are, they do not include those terrible mental and moral losses growing out of struggle and conflict, nor do they take account of the depleted bank balances of the workers, and the hunger, suffering and distress which extend into the homes and which touch the lives not only of those immediately concerned, but of tens of thousands of innocent women and children.

What I have said leads me to advance two ideas, both of which I believe to be profoundly true, but which have received far too limited consideration.

The first is that Labor and Capital are naturally partners, not enemies.

The second, that the personal relation in industry, entered into in the right spirit, gives the greatest promise of bridging the yawning chasm which has opened up between employer and employee.

The mistaken point of view in regard to the relation between Labor and Capital exists on the part of both Labor and Capital, as well as among the interested and disinterested public.

Too often Capital regards Labor merely as a commodity to be bought and sold, while Labor not infrequently regards Capital as money personified in the soulless corporation.

It might seem that technically speaking both of these definitions could be justified, but they are far from being comprehensive and adequate. For both Labor and Capital are men—men with muscle and men with money. Both are human beings and the industrial problem is a great human problem.

This is one of the first things we need to recognize, and it is just because human nature is involved in this problem that it is so intricate and difficult to solve.

The popular impression that from the very nature of the case Labor and Capital are two great contending forces arrayed against each other, each striving to gain the upper hand through force, each feeling that it must arm itself in order to secure from the other its rights and its just dues, is even more unfortunate than it is untrue.

I cannot believe that Labor and Capital are necessarily enemies. I cannot believe that the success of one must depend upon the failure or lack of success of the other. Far from being enemies, these two factors must necessarily be partners.

Surely, their interests are common interests, the permanent well being of neither can be secured unless the other also is considered, nor can either attain the fullest possibilities of development which lie before both unless they go hand in hand.

Only when the industrial problem is approached from the point of view of a firm belief in this doctrine is there any hope of bringing about closer, more healthful and mutually advantageous relations between these two forces.

If, therefore, my first statement is true, namely that Labor and Capital are partners, then certain things must follow. They must have contact. This standing aloof one from the other must end.

Respect grows in the heart of each for the other, confidence is developed, and they come to realize that they are working with a common interest for a common result.

But this attitude, this relationship, is the personal relation in industry. Nothing else will take its place, nothing else will bridge the chasm of distrust and hatred.

It is the recognition of the brotherhood of man, of the principle of trying to put yourself in the other man’s place, of endeavoring to see things from his point of view. The old saying that honesty is the best policy is often scoffed at and pronounced unpractical, but there never was a truer saying. Honesty is the best policy.

You may be able to deceive a man once or twice, or, if he is exceptionally gullible, half a dozen times, but you cannot deceive him indefinitely. You may be able to deceive a number of people sometimes, but you cannot deceive all of the people with whom you have business dealings all of the time. You may be able to make a contract which gives you an unfair advantage of the other man, but the chances are that you cannot do it twice.

From a purely cold-blooded business point of view, honesty is the best policy. Likewise do I say that to treat the other man as you would have him treat you is an equally fundamental business principle.

This does not mean that you should surrender your rights or neglect to avail of your opportunities. It simply means that in the game of business, the same rules of sportsmanship should prevail as in a boxing bout, in a match of golf, or a football game.

Play fair and observe the rules. Let the contest be clean, gentlemanly, sportsmanlike, a contest always having regard for the rights of the other man.

Assuming, then, that the personal relation is a vital factor in successful industrial life, but recognizing the impossibility in this day of big business of reproducing it as it existed between employer and employee in the early days of industrial development, how can a like result be brought about, how can personal contact be established?

Granting that it is impossible for the stockholders of a great corporation, because of their number, because of their geographic relations, to come into frequent or even semi-occasional contact with their partners, the employees of a company; and that the situation is much the same with the directors—at least it is possible, and must be made increasingly so, for the leading representatives of the stockholders and directors, namely the officers of a corporation, to have such contact with the employees, special officers being appointed for that purpose alone if necessary. Because of the vast numbers of employees in many a company, even this is difficult and altogether too infrequent to-day.

As the officers of our great corporations come to see more and more that the problem of understanding their employees and being understood by them is a vital problem, one of the most important with which the management is confronted, they will be convinced not only of the wisdom of devoting far more time to such contact, but of the desirability and the advantage to themselves, and to the employees as well as to the company, of such closer relation and intimate conference in regard to matters of common interest and concern.

If we look into our own experience, we find that the misunderstandings which we have had with other men have been largely the result of lack of contact. We have not seen eye to eye.

Men cannot sit around a table together for a few hours or several days perhaps and talk about matters of common interest, with points of view however diverse, with whatever of misunderstanding and distrust, without coming to see that after all there is much of good in the worst of us and not so much of bad in most of us as the rest of us have sometimes assumed.

But someone says, “We grant the desirability of the personal relation in industry. Theoretically we accept your suggestion as to how this theory can be put into practice in the industrial life of to-day, but practically, will it work?”

I can best answer this question by saying that such a program has been put into operation in a certain coal company in Colorado, in which my father and I are interested and of which I am a director.

If you will pardon a personal reference, may I say that when I visited Colorado some eighteen months ago, I had the opportunity of talking personally with hundreds, if not thousands, of the employees of that company. These men and many of the people of Colorado had formed their opinion of anyone bearing the name of Rockefeller from what they had read and heard. Because of certain industrial disturbances which had developed in the State, bitterness and hatred had existed to a high degree.