THE PROCESS OF CHANGE IN THE SOCIAL SYSTEM OF A LARGE, CQMS’LEX CORPORATION ”Ti-ruin Tet The Degree a? D. B. A. MECMGAN STATE UMVERSETY Sawge £3. Dawning 3964 JHESIS V IIMWWMWHWWII LIBRARY 31293 10713 2783 Michigan State ‘ University 1 This is to certify that the thesis entitled THE PROCESS OF CHANGE IN THE SOCIAL SYSTEM OF A LARGE COMPLEX CORPORATION presented by George D. Downing has been accepted towards fulfillment of the requirements for _D...B.A._degree iansiness Administration Wt L/i/li/ ~lltl/p'a/{pr/ Majo{ professor Date _.No.vemhe.L_5.,_l.969__ 0-169 ROOM ”SE 0:21. ROOM USE ONLY. Wt / ”9311;? «A -.... o'n‘" v- F- ~ . twewk .I'- - A“ o - —4 yo I - Tn .,<-pn‘ ~ ..~ ..-\. ... »-~ . . “‘ .. 0-" .. . _ '5 .-:,.-. ._ v u .‘.l Q - "'- ~v‘.-.. y - “‘ v-..~_‘,_ . u 7 ' . . .fl ’ _ > ‘ - — ‘ .. .—--,.. , __ 4 ‘~ .. c "‘."~ -‘I- ‘. u L- ‘-.“. —-'- " v -.‘"‘ra s1 “ .. hr r. 1.“"' - a - ‘ . _“ ‘r’ . \_ - 4' b.. .r D ' ' ‘s.. A ~.._; . V1 1 a . -. _‘ .en‘. . n ‘U i .. n . ~—.- -r'V .._ .; _.._, __._ T; I 2‘~2 r " '-. -"r .,Ml . . . .. *sn _ . "'~.L .47 V 2 V‘. i...,‘ -. . \-t ‘h‘ I‘ «Y \._A “”'—I V ~«K‘ " \- ~.-~_ . ‘v '.~ ~.,.} -- A ., - ‘--‘ ,“:. e». x.‘ :.-."‘~_ ‘ . '“m “.‘_ ,- ..I r v‘.-— _ \— .- \ M 3. 1 v- 2 v . v- §~ . r L- . .._ ‘ K; .'- . p‘ "‘ ~ . n.‘l—.S “.- - h a . e ‘- s ._: -‘Q‘ '~-: -.- ‘ C .. ‘r -I-s "H. v- ., _§_, - - a s! v- "l’§ ‘. ‘~. -‘ .1 . l "t 7‘; a. _ v ‘s. —. a ll r>~ ‘ v.‘ VA .‘_ "L' .1 \— ‘ ("I ABSTRACT THE PROCESS OF CHANGE IN THE SOCIAL SYSTEM OF A LARGE, COMPLEX CORPORATION by George D. Downing This thesis is a case study of the process of change in a highly market~oriented business enterprise, the General Electric Company. It is based on the premise that to re- main viable, the modern business enterprise must adjust to its changing external environments—~and particularly to the exponentially changing technological environment. To do this, the enterprise must itself create new technology, or absorb and adOpt new technology created ex— ternally, and develop new processes, procedures, and stra— tegic action-programs. It is hypothesized that such new technology and innovative programs can be absorbed by the existing organization structure only up to some point, after which organization structure itself must be changed to accommodate additional absorption of new technology. But, it is proposed, formal management organization struc- ture changes do not occur in isolation. All other elements hithe total social system of the enterprise undergo con— comitant, reactive changes. The forces of new, rational technology interact with the ongoing, symbolically rain— fbrced traditions of the social or moral order of the social . g . e n .A‘.r 2" ~ .,. ' -r J _.~. -‘ ',-.. v .- '5; —n _a r- . . ""’-’~-~ D— C ‘ " ..-v v“ .u.~--'- - " - no ‘... :r" ‘ .. I".,l ‘..J JA‘I“ ‘ u ...'..q ’r:. ".. " " .I- _.,_.u v..-- - . ..,-. .r...l-‘l,—~ -\ ' 5A '- -.. no. ‘0‘. v . ,-. ... u- at! .. . .t' -‘C. ... ,.‘,-¢.ou‘- a. - . u-y..,l- _. .. - — . -.¢..- .-«- ._y... ‘ "1"":"2 .‘_. . —--‘..-....-- - ... . ,. b A. - 'C.\ Q " -.. ..--~-\. \ - ,..:,,; 9v.” ‘ I ‘”"é~ ~o -.. . -. a. 9’; ~Y‘~'. ._ ...- "~-~ ‘. -... - . .l 3., ." V-‘ -., ~““'-.A...- - -‘-. ~ ‘- “‘v:»,‘- .. ...._‘->—S, l r I T.‘w‘ '"r'-‘ t -"‘-~L . " *‘ ..‘- ' \- ‘fil.’ -- ‘. . v ' I ': e-_ . vu. *a- -5 . A‘__-\ . " h»; .‘ ‘r~- v" "-...“ CT;r ._' . "‘-L ._ . ""‘-.. ..‘ A. '-r~!. -. A "‘ 9ur~ "¢v_. h"; u .‘a ‘._. ' - 'fi. . -...'- ‘u :v- ‘ w» ‘.._‘ .“.“ “-5-", Q‘s: A - ~_.A. 3' E'J‘ .. IV-.. '- ‘~..... 3 Q- .1 b_~‘ . . "‘._;‘ a: . A " ~ —-':*. '~~-. ._.“ r, ‘I v ' h . 0.. ‘u, t 5“ Fa... .‘ 0.“. " U ‘ "\ ‘, TE}. 1 . ~« A . . F e. ‘Ua. r, " ..-~_ .‘~ o‘ Q \.-~ " -‘ a- '. ~‘Vz-- "« v George D. Downing SyStENn, each adjusting to the other, in a moving equilib- Idlun, sometimes easily and adaptively, sometimes with clifficulty'and disfunctional conflict. It is further hy- pmfiflnesized that identification and analysis of the symbol systems providing commonly shared meanings and sentiments permit eXplanation and prediction of the degree, duration, and parochial location of intergroup, interpersonal, and intrapersonal conflict. The thesis presents the history of formal organiza— tion change from the formation of the corporation in 1892 through the great decentralization of the 1950's. Against this structural change, it describes changes in other social system variables, and the symbolic meaning of these changes affecting managerial behavior patterns. Particular atten— tion is focused on two large organizationally independent, but interdependent and interacting components of the compan —— one of which was changed structurally and adapted readily to new ideology and programs, the other of which was left un- changed structurally and resisted emergent change. From a social system analysis of the ensuing conflict, a number of abstractions are drawn, which appear to vali— date the working hypothesis of the thesis. Further, it is contended that current organization theories can explain some,‘but not all of what happened in this company, and do rmt provide the predictive ability of contemporary social System theory. Lisa-:1 Copyright by GEORGE D. DOWNING 1965 Lilia 5. ll THE PROCESS OF CHANGE IN THE SOCIAL SYSTEM or A LARGE, COMPLEX CORPORATION By George D. Downing A THESIS Submitted to Michigan State University in partial fulfillment of the requirements for the degree of DOCTOR OF BUSINESS ADMINISTRATION College of Business Administration 196M d..._<. 7'34: 3'3”!— . linl ACKNOWLEDGMENTS The author expresses deep gratitude to his many (hneral Electric friends who exhibited interest in this dey, and who contributed so freely and intimately their mm.observations and experiences in this great company. Further, he extends heart felt thanks to his thesis cmmnttee, and particularly to Professor W. Lloyd Warner, Mm>for three years guided him into new avenues of tMnght and analysis. ii . _. .4.- o .n. our ~.."v-: I . I -1..-“-~ - - o 0-“... I . .Au ‘V . . .- - ‘.-—-.~..‘_ - - M -‘.. _.._ -1 I- .0 ~~ :- . - ... _. . '°° hu‘..._,. .- ...~ _ "“ ‘u'... ..l -‘_ h. ‘3'" vavl T.“ -"h . ' ."~ II“... V‘-‘ . _ '- 4 - 4 c» h _ v u ‘ -n. I.“ "h I‘ . . P-3- \. ”"‘I\--—, ~ 0 ""“-|-t.. I“ “"T~l\-v_,. -_ _ _ .. .‘~~'-"‘"“—L4 «-e -I‘.‘ ..’ .— ‘h ’h 0-. ~.| cook 4"..'. ‘H- T‘Ru- . ‘N M ' \ .1‘ a . O e.\r— ‘M‘ ‘. ." _ .ou. ‘.,.~ .- ‘ -. l o— -. I sue. ..___ H‘ .u..-..,‘ fl~ I..._'~ l. ., N n...’ T ~_~ "‘ H. I“ ' . 'J~IJ ~"N .. _ ~.‘ _: ..‘ ~N~ »,. “‘I.~ 'm... n“ -"—~~.. sen.....- ‘ a“ u...“ -‘P-. V“. _H >‘ ‘. ‘~ ‘ -.4 -‘- "N. H u ‘~H~‘ .“‘ ‘— ffi~~~ .‘e. v- TABLE OF CONTENTS Page ACKNOWLEDGMENTS . . . . . . . . . . . . ii IJST OF TABLES. . . . . . . . . . . . . v Chapter I. INTRODUCTION. . . . . . . . . . . 1 II. THE BROAD INDUSTRY BACKGROUND . . . . . 28 III. GENERAL ELECTRIC"S EARLY BEGINNINGS--1892 . 33 IV. THE PERIOD OF CONSOLIDATION AND GROWTH, 1892- 1922 . . . . . . . . . . 38 v. PERIOD OF CENTRALIZED FUNCTIONAL ORGANIZATION, 1922-1940 . . . . . . A8 VI. REORGANIZATION, 1951-1960 . . . . . . 71 VII. THE APPARATUS BUSINESS . . . . . . . 9A \UII. POST DECENTRALIZATION, 1956-1960 . . . . 113 IX. THE MORAL ORDER, AND THE BELIEF AND VALUE SYSTEMS, 1925-1940 . . . . . . 131 x. EMERGING CHANGES IN THE MORAL ORDER AND THE BELIEF AND VALUE SYSTEMS, 1950-1955 . 171 XI. APPARATUS SALES—-THE CLINGING T0 TRADITION. 218 XII. THE PRODUCT DEPARTMENT--APPARATUS SALES' DILEMMA. . . . . . . . . . . . 23A XIII. PROCESS OF CHANGING POWER RELATIONS . . . 2A9 iii ...v -. —...-~H"""“' I -‘ 'c-I -0 .._‘,. J'“‘-~‘.-- .0. -l'“ ’v-"nn "fl __ ,—~ “ a on... o-'J"‘"'- ~_‘,.,..avp\" \ 'V d ._.-.....s-—.- «--.~-'-""' . , v—t ,_-.'..,... ..- ”‘1. .‘AQ .. '5 ,sl 'I 1", IJ f1 Cha pt er Page XIV. REORGANIZATION OF APPARATUS SALES. . . 293 xv. THE PRESENT MOVING INTO THE FUTURE . . 304 XVI. CONCLUSIONS . . . . . . . . . . '32? BIBLIOGRAPHY . . . . . . . . . . . . 336 APPENDICES . . . . . . . . . . . . . 3339 iv AO-l .4 2"- o. P ,— -‘l A .- o..- ~ -JA» d g '.15' g--,.r - .- -VA" .- -71.— . v- “.4 A ..l- g p -..-.-v¢ 9.. - '..- u v. a. . _.. .A ‘. rd“ r” n. E .H 2 r. c. c. 2:3 2. C» 2.. Z” i L t .9. h. he 2. s . rt?» UT \10\ IO. ll. 12. 13. 14. LIST OF FIGURES Initial Organization Structure,.1892 Formal Organization Structure, Circa 1910. Organization Structure, 1929 . . . . The Functional Hierarchies. Product Department Organization Structure. The "Function" Organization Structure Management Organization Structure after Decentralization Growth of Product Departments and DiviSions, 1946-1960. e o 0 Operating Executives, 1961. Apparatus Sales Structure prior to Decentralization Structural Relations, Apparatus Sales, and Product Divisions and Departments. Apparatus Sales DiviSion Organization Structure, 1951. . . . . . Apparatus Sales DiviSion Organization Structure, 1955. . . . Levels of Management, Apparatus Sales Page 37 L15 ’60 61 83 84 87 ”89 90 103 106 109 124 125 o‘- ‘- n...._ L. v. C . e v e . CHAPTER I INTRODUCTION This thesis is a case study Of the structural changes in the management of the General Electric Company from 1892 to 1960, of the forces underlying these changes, and of the resultant changes both intentional and uninten- tional in the total social structure of the company beyond the formal organization changes themselves. It will de- scribe the history Of change along several dimensions-— management organization structure; management ideology; market growth in size and diversity; physical growth in plant, products, output, and people, geographical diSper- sion. It will interrelate these dimensions in an heuristic attempt to better understand the process Of change in the modern complex corporation, just as the greater society within which it exists as a system is, itself, in the process of emergent change. A major focus of the study centers on two large com— ponents of the company, separately organized but interde- pendent and interacting--one of which was formally restructured on a highly rational basis, the other Of which retained (for marketing reasons) its ”old," highly h *- _._. p. .. s. "m ., :. ._. .. .. 3.. L. n v. 3» 1 . - ‘1 k. 1.. I. n. .,. .1 ~ — I: _. ZJ ... ... . . Q» ... .sv «u . . t. ,3 fix; “1.. I: v . . .. . traditionally oriented structure. The study will document the changing relations between these components resulting in intergroup and interpersonal conflict, and the ensuing process of ultimate structural change. From all this, the thesis will abstract generaliza- tions tending to support hypotheses, to be presented later, relative to the process of change in the corporation social system. Basic Assumptions on the Nature of the Business Enterprise as a System Every corporate business enterprise has a set of Ob— 1 They may be explicit or implicit, rationally jectives. based or traditionally based, definitive or amorphous. They may include with varying relative valence profita- bility, sales volume, market share, growth and expansion, product and service diversification, market diversification, corporate image, social contribution, employee and com- munity relations, etc. But underlying all these Objectives is the prime one, usually implicit, of sheer survival-- perpetuity of the enterprise. 1Although we take this as given, it is probably an oversimplification. See, for example, Herbert A. Simon’s, ”On the Concept of Organizational Goal,” Administrative Science Quarterly (Volume 9, number 1, June, 1964), pp. 2-22, in which he proposes that a set of ”constraints” rather than ”goals” influence the decision-maker—-and that only certain constraints, those that motivate the decision-maker to search for action (rather than test potential actions) are ”goal—like" in character. Here, however, we merely propose that in a corporate organization, top-level executives do establish targets of achievement for the corporation as a whole. Snc‘Y. \ _..~-“J -"‘ Awf‘ ‘ . up .-. h. c ‘-. O— -1 -\.. What are the dynamics behind the struggle for cor— porate existence which finds itself expressed in terms of greater profit, greater physical size, greater industry position? Consider the business enterprise which over time has succeeded in identifying a market to serve, in developing a line of products which provide want-satis- factions to purchasers or users, in establishing good service facilities in the eyes of users, and in fair pricing in the eyes of users. The enterprise will have secured for itself a share of the market, a niche, a ”core” of customers who habitually do business with this enterprise. This "core market" of customers who consistently, or nearly so, patron- ize the enterprise may well be an adequate one insofar as a better—than-breakeven volume is concerned. The enter— prise could be content with its profit to sales and invest- ment from such a market. The enterprise has competitors whose market offerings are substitutable. Each competitor, too, develops a ”core market" of loyal customers, and it is conceivable each enterprise in the industry Opuld be content with its market achievement. To be sure, there are purchasers who are indifferent as to supplier, and who purchase from any of several enter- prises in the industry, for a number of reasons. Hence, each enterprise has a core of its "own customers” aug- mented by some share of the "indifferent" purchasers. a I. t . i v .o . s . I . . . A... .. . W. 3 _ Cu 7.» . . r... L» C. 1 . . v . . E I .. a. _. m. _ ,. .. ... h. E E e a A ..... r. E E .. _. I. E C ;_ . I . .. :1 r: r . E l; a; . v . . . 2 Q9 ~ P4; VL- . . . .. _J . l 1.. NJ A_ . Y. E s.— . .. «\w 0.. fie V. .. W h . ‘Lv ”no. .P . s. .h .\ . W. 5v — r. W. t a. ‘ . u v x“ A 9 g . cc 3 .. . v. a .. s C. E E .1. .3 _ m. .. . a. .l E T. . . T E E a... .. . ,. ._ .1 S T . .1 .fl 1. T p. r: C» v. o. . v . v. A. . AC . . u « ca \ 2 \ . a» A v Q. . . g.— .L. .fiv w“ “A 6 i r: F. r . .. _ :c A . . . e . r: C» . A . . p. . n .m a“ . C» r.. Q.» 2.; . a S .1 3. A... I. C. 3. w. .. r. 2» I «Q 2. .n.. ~.. 5: .n. r... e l a. v . - Ahb .f ” ._. u 0 a w n. . ~\~ . u . Aha h v 9! % v us A 4 . . . n. . :a . . . a ‘5' . a 2. v“ A v 2‘ a . o. A o. \ ... ,. i M p... r .v . u . a, a. . . 1. C. v. . . e.» g 1 . . _. . Q. o. u a.. 1., r . u . \\~ - - ~\9 7 s a . v o . . v . . . . . . .. ‘ . K . A v r ._— ._- . _ 1.... : 3 ... . .. .. .. . - ..._. E... .. L ... ... . . . . i _.l .. _ ,.. .. 1.4. S..\..~. .. _ v» u .4.. e. . . t. .. x « Note that we are assuming substitutability of products and services, as perceived by customers. What upsets this status quo? The executives of some one enterprise consciously or unconsciously begin to fear that if there were any erosion of the core market, the enterprise would experience difficulty in surviving. Or, as some students of the psychodynamics of the executive propose, the psychological drive for achieve- ment may influence the executive to become dissatisfied with the status quo. Or, as will be discussed subse- quently, the sheer weight of pyramiding technology outside the industry may upset the status quo, through no particu- lar desire Of the enterprises within the industry. In any case, the executives of some one enterprise will initiate actions to enlarge the core market--to reach out into the fringe, "indifferent" segments of the market and seek to envelop them into the core--ultimate1y, even to attack the core markets of competitors. This is the catalyst for innovation--innovation in many forms, technological innovation in new or redesigned product, technological innovation in manufacturing processes, innovation in marketing. This is the generating force behind new strate— 2 gies, new programs. 2Wroe Alderson,_Marketing Behavior and Executive Action (Homewood, Illinois: Richard D. Irwin, 1957), proposes an ecological system analysis of the enterprise. 1... e 1 . o . ._ 1 .1 . v . . . . u . 1 1 . 1.. .1 _ .e. . . ..1 .. 1 . y e. . x 1. . 1 . H . . 1 . 0.. 1). _ . . .V. v. s : 3‘ . . . .. .-. w. .\_ .. 1 .. . . . y. 'g o. v “u ~\ .1 .1: . A\b . .1.“ 1..1v .n. w .9.. .. I ‘ 1 ‘. ~\V _ 1. 1 1 . . . . . . _ 11 . 1 . I. 1 . .. 1 E . . .1 E E I W1 : 1: 1 1 0.. . . . . . . v . _ 2» o c . .4 .4 Au . . . Yks . . 44 v. ~h « 1 . . . . ‘ 1.: 1 :: .mu 1; . r 1 e“ . . L. r; 1: 2. 44 .m; «u . . . ~ :1 1c .. 1. 44 as n“ a. «C . r. w. 3. 1 v.1 . .u . . . . a. . . n” . . .1 v. 1,. w. e: 1... we. .1 :§ «3 .1‘ ~ A: f: . . 4 . . . 1 . . rk. Is .fiV 5\~ Ca v 1 :1 2. 1.: 1. :1 . 1 11 a: 1: . 1.; o . U . . .1 . r1¢ «\w r” e .L . W1 ‘ Y. - \\~ ”a; a. ax. .14 n. . u o . . . . u . . . a . Ah. v. ~_. A—“ 5‘» e. s , o. ‘ 1‘ v a. ‘ 1. "m A” ‘1 e». . _ C. .1. . . h . 1 . . . 1 .m.. ..¢. ._. ... . . f. . . .1, L. seam ._. r‘. v“ V.‘ ~x~ .\~._N~ u a N...” .. 1 .. , 1 1 .1 .. .L 11... 1 G 1 . 1 . .. 1 _. . 1. 1 r 1. . 1 1 . ... 1.1 . . ‘1‘ __ 1. 1 .. .1... .. . 1 .1 . ..1 .1. 1 1 1 . .. .1 1.1. .1“ .,~.1 11 1.” M‘. 1». 1.. I..|1a.1:..J1. at . . . 1. m. . :i \fl Competitive enterprises perceive these innovations and new strategies and perforce react to them. Hence, intra-industry competitive forces develop and grow, a set of dynamics well understood by economists-—the seeking of differential advantage.3 But other and perhaps more important sets of forces are at play, impelling the enterprise to innovate technoc logically and to create new strategies and action—programs. 'Phere is some limit to intra-industry competition via innovation and strategy beyond which it is not economically or legally feasible to go. Hence, inter-industry competi- tion develops which, with mushrooming technology, is accel— erating rapidly. This is the aluminum industry invading the steel industry, the paper industry invading the glass container industry, the chemical industry invading almost everyone's industry. Again, this is a force requiring enterprises in an industry to themselves innovate, expand markets, diversify markets, create new markets, develop new strategies-—or wane and die. Other powerful forces are at work, prohibiting the enterprise to hold a status quo, if it is to remain viable. The American Society is changing, emerging into a new, greater society, bringing with it great social changes, 3Eward Chamberlin, The Theory of Monopolistic Competi- tion (Cambridge: Harvard University Press, 19fl7). ...» . y- p... -\...v n-v» .A.-\J .. v- a. . exerting forces changing consumer wants and demands. Economic forces, domestic and international political forces, the forces of large-scale labor unions, and legal forces are in flux. And perhaps most important (and pera haps least really understood) are the forces unleashed by the compounding technology, bringing to American business great new market opportunities to exploit, but also bring— ing unparalled problems requiring technological, economic, and social adjustment. This is the great complex, changing milieu in which the enterprise exists. To adjust to this changing exter- nal environment in its market places, the enterprise in- novates technologically——either by creating new technology through its own research, or by uniquely adopting and adapting existing technology to its product or process developments. Additionally, it innovates in its marketing, creating new marketing strategies and programs. Such technological innovation and development of new repertoires of strategic programs may be accommodated within the exist— ing structure of the enterprise. The Problem of System Adjustment But it is one thing to introduce new technologies and programs to an existing system which can accommodate them, and it is quite another thing to change the system itself in order to accommodate them. When structure is changed, . .1 .. 1. 1 r1 1.1 11 . . 1 1 .1 1 . 0“ .1 ..i a; . H o. . 1 1 r 1 1 1 , 1 . . 1 1 1 1 1 1 1.1 1. 1 . 1 1 u, 1 .r . “C . . 1 11,1 1 1 ..I. 1 ‘ 1.1L w 1 1 . 1 ~ 3 .1“ 1.1 1 a f“ 0- . v._.. A N y u ‘. ‘ A1” .L 1. 1... 1. 111 T v1 v1 :1 r. 1. r; .11“ ._y.. -«« Y1 §. «1 01‘ 1. .1 1 1 1 a: ..... 1 . 1. . 1 1 Q~ 1. . 0 . a.» n\« 1.. 111 1 1 E 11 .11 S 1. 11 1,; . 1 1: 21 :1 1.. .1“ n1. «C Q» 1-1 11 111 1: W1. ..H :1 11 :1 L1 :1 ~11. r11 :1 .1. 1 1 .11 11. v.1 1C 1.. r. .1.. :1 .1.” .11 r1” 1. 111 r 1 v .1. 1. .1 -. .11 Q1 v.1 £11 1..1 “1111 111 . 1. .. 1 1w. .1. 1; :1 1, 1 1 1 91. ~12 v.1 1 .1 1 1. .1. 1 .1 1 1 1 1 1 1 1 1.. ~1 1?. 1 O: .. 1.. 11 1 1: «xx 1 1 1 . .1... 1 .. 11 . .1. the social system itself changes.“ And what happens when the scmflal system changes? In either case—-accommodation of new technology and strateegies by an existing structure, or the development of new sizructure for their accommodation-—the resultant pro- grams are implemented by fallible human beings acting indixridually and in groups. The efficacy of planned change depernfls significantly on the behavior of individuals in the (Irganization. What happens when changing structure changges the status system, the expectations, the roles of indi\/iduals? What happens when the common meanings attached by iludividuals to the many aSpects of corporate life change? that happens when time-honored traditions, customs, and Iitueals are eliminated, or become meaningless in the new SOCiEil system? How does all this affect patterns of mana- gerigal behavior? In what manner do individuals and groups adapfi: to new structure, new modes of behavior, new social relationships? Conversely, how are the new technologies and IDrograms for which new structure is created assimilated by tkle new social system which emerges? What conflict arisees, functional and disfunctional, intergroup, inter- perscanal, and intrapersonal, and can such conflict be . \ . 4This is a key proposition of this thesis. We state “3338 a "given” here, but shall present it in our theoretical fralnework section as a generally accepted proposition of SOCioiogy and social anthropology. ‘~ . " " A-'~U 4 _..- , ‘...- .‘_\ .. -- ‘ ’7'. ‘..h\rh§ ~-' ‘ o I-“ ..,.-3-,. Cy-n ; ' ....u -. ,,......., o ‘ " _,. ~'.,— .- ~‘ — ." p: F .. ..." \lvuu v: .v ' o ‘ A n. . ..:A~—w P;“ N». 1 \ ~. _ , ,.-' Ui-AIt ~v~ l..- - r»- fl‘n’v‘;_'\ . t ..t.-.d.‘..-u -.. . . . - ' ” P‘. r ~vv- -_ 1 >4 -‘-' -Q -~-.....-. . . ,_ _ . F-.. “| " .‘ h r «1‘ ,— . "' ~- -..., k1AL. -.. ——-. __ In. ———__.. '- C-b- — C LY? ",~,—‘.__ .1. ~'---v. .A..U~_ .‘ ‘ V‘s; “A’V‘v‘1'h " “ L 5—: ' V‘l‘k"\... . ' -‘\ 0‘ - ”f" 'V‘v‘ 1- ,‘ - n,“ _..u ‘_ ' 1 . A..\.-,,._.- I . _. . "‘«>,, ‘.(‘. .," ". -l-'l Q \ L, ‘---y ~_ .lv. ‘ . ‘- :z" r.. ._ ‘ I.‘- "A -.w . "‘ ‘! O— s. u ‘. v..\_ _- ' ‘ ‘. .“-~.° , ‘\ r‘ A.‘ - fl .~‘ ' r-m . ~ “‘5 >— ~ " x..., ~ ¢ -- —.. y- ’r._ ~ " -,_C- -.1 ,_ .N ‘- ~”‘_- . . -3 r r‘. ,- be. ‘- ’. “~|. “5—. rAV‘.-"._’ 3-“; v‘ Q —" \— . , . u‘ ‘ . I ~\ ,- ‘ "U C. y—C‘ . ‘evy. . ‘ “,~ c »., . "w. L'- y x," . . Iv‘. ‘ v w‘ . "'~ r‘ “ -. ~‘-Q . *~\1. . 4 n v. “ro‘- v Y a.‘ s.‘y ~ A Id ~‘V‘. ‘« 7“ 3 \ PI .v“; ‘- 7' ,1 ~‘v_ l.‘ - Y.» o.“ Q y— g ”o. “w 'r "v— ‘§ pradicted? When conflict arises, what will be its strength, its dLLration, and its compromising effect on the new pro- grmns?’ How does the very process of planned change in the sociafll system become itself a catalyst for continuing emerguent, unplanned change? How does all this affect the techriical, economic, and social efficiency, and the pro— ductisvity of the business enterprise? The Research Hypothesis To better understand the process of structural change in tkle large complex corporation and the effects (both planrled and unplanned) of change on its efficiency and PTOdLlctivity, this study proposes a working hypothesis, to be teested by the evidence of the empirical research, and ConSisting of the following interrelated propositions: l. The catalytic forces underlying the innovating of new technology have their roots in the cor- poration's markets. 2. As new technology is created and or absorbed, the corporation will initially accommodate it within its existing structure. 3. Continuingexxmmmmflationcf new technology leads to increasing complexity of technical process and or product and engineered—system design and application; and/or product diversification: and/ or market diversification. All this leads to i, _ ~ , . . Z I . . . ‘Pug .- I‘*Vv .vlt .. .. . . . ._ .l ., l v . . . ~ . . o . a .. .u .. y 1.. .. t I 2‘ ,_ x‘ . L. . ., . ». .. ,1. a. a: h.» _,.v C; C» o . . v. .3 . . r.” .. . . .1. E a. v. T: C . ‘ Cw r. r. go . .3 _, .L L .. . .J 4 C. V. i» 0“ w. . ~ an. ~V Q~ w. 5‘ ah. . .... _. .1” r . . . 4. ..- A_» l . u AF . . .v“ — _ 3; . h . . . n ‘ . . v .0 x .P-» e 3 .. . a. .A .. u 1 :4 . ~‘ ‘ Q» r. 04 .. . . ¢ . U. I‘. , . .1 v .43 r u f y. Y u. ny -. ‘ g . ~\b .: . n .I‘. I ‘C § 2 \ ‘ -u 3. a. .4. .NJ .Mhu. ._. v ‘ «xv a: p: sy . . i.». u so . C. . . . g p». UT physical growth in plant and people, and ulti- mately to Spatial expansion, geographically. New strategic programs (e.g., market action pro- grams) to exploit the new technology will like— wise initially be accommodated within the existing structure. As new technology, new processes, and new strate— gic market programs are adopted, and as they are "tacked on” existing structure, the vertical, functional hierarchies of the organization will adjust them and adjust to them, and will grow in depth and breadth, hierarchially. As this hierarchial growth increases, coordina- tion between work-functions of the existing structure becomes more complex and difficult; as work centers get farther away organizationally and Spatially from coordinating executives, execu— tive control decreases and real power is diffused. With lessening of executive control and with diffusion of power, the parochial work functions will continue up to some point to adOpt new technology, but in a way unique to themselves. The new technology is adopted but is shaped, adapted, by them to their traditionally learned social organizations. n"-T » “rm- 2 ~- k.» ‘._.. -¢ Q» 10. ll. 10 The new technology will interact with the tra- ditions of the social organization and thus is an input of social—organization change. How- ever, the more traditionally oriented the be- liefs or more commonly shared the "meanings" in the social organization and the stronger the valence of these beliefs and meanings, the less readily will the social organization adjust to new technology. Put in another way, the less readily will it accommodate new technology, after some point. If, in a given corporation social system, strong, traditionally oriented beliefs "blunt" the ab- sorption by the system of new technology and strategic programs, and if the executive per- ceives that the rate of absorption must be ac— celerated (for the organization to reach its rational goals), changes will be imposed on the system via organization structure changes. But changes in organization structure do not occur in isolation; they echo throughout the social system, and all social structure elements of the system must adjust. The more drastic and the more rational the im— posed structure change (i.e., the more signifi— cantly changed the status system and tfilL-f V -. I ‘ F»-- -\ ‘C."'* :..'J J}.,«... .- ._ A n. "L! z I r-v --A\...~\.¢ v..- . '5 "r" Inn‘s. >— ~\ - . " "VV ~-u. L . ‘ . ”’nrn .. ' . lp“ . “““‘V‘-' -- \ _ A . " ‘r‘~ »»'_ _‘ r- ’ ... ---- . “. - - Y.f\ .‘ _ ‘ -f “ ' .. a 'A‘ V ~..,.'._ ' "N «- ._ .4\ VP!” (2 .r «H ‘.-‘l v '- -.-C by... _"_.._ E "cV w. ’- E’V .' - CQ .- R ‘ «VHS V:.E —.' .- E Q .— « st M4 I V s ~n f .— ..F3 c “N“- -‘r y" - - _.__ 5 r‘: ~ 'A’L ...¥ K‘F. : v \n—v‘" OA‘-{\‘:’ v.1..4“ ‘s~ “ -' | I ~ ~ rlfi§v.g_: ‘ I I ..‘A“““ .- J'- ..;\ ’. v‘ l‘v-pr i, __ ““4. ..¢ ¥ ~ A V“. "‘VE 3“», V- g; fi . -..e .r'. - .. Rdw‘ ! 'u ‘7‘ k.» fi‘waw ,. ”14' "u *N- F § Ay— ! “-3" ‘l’ -u -“C_ g. ,. t... Q P. ‘- «.r- 12. 13. 14. ll expectation-sanction system, and the more rational and quantitative the change in performance measure- ments) the more readily will the other elements of the system adjust, i.e., social relations and modes of behavior. On the other hand, if formal organization struc— ture change is not imposed, but allowed to evolve as new technology is inputted, and the stronger tfluetraditional‘base for social structure and the stronger the symbol—systems reinforcing shared sentiments, the greater will be the resis~ tance to social system change, and hence the less the accommodation of new technology and strategic programs. The stronger the traditions and symbol systems the greater will be anxiety, frustration, and conflict within the social system, when its individuals perceive imminent imposed structure of change. Once structure change is imposed, the stronger the traditions and symbol-systems, the greater will be the lag in ultimate adjustment and equilibrium between all elements of the systems, and the longer and more disfunctional will be the anxiety, frustration, and conflict. ‘ ,‘o-.~V’.G .A,_._,,A.-I .A’Y'.‘ a; ‘. 3 C: ,v 16. 17. 18. 12 Once this equilibrium has been reached, however, and the greater the rational base of the ”new" structure, the more readily will all elements of the social system adjust to additional further change. If in the process of social change, time-honored symbol systems are threatened, altered, or de— stroyed, new symbol—systems must emerge to keep pace with the social system change, and behavi- oral adaptation to system changes will vary directly with the Speed of evolution and strength of such new symbols. If time-honored symbol systems are powerful and if they persist even though not "fitting" newly- evolving structure, they may cause an adjustment of the structure. New technology and the social organization are always in interaction, each adjusting to the other and finding a moving equilibrium, a pro- cess which in itself is a prime ingredient of change. The efficiency and productivity of the organization is directly affected by the rela- tive ease or difficulty by which this moving equilibrium is achieved. ‘ ;_ a. .c: 3 T i . .,. 2‘ fixk . . .1 . I. a . . . . 1 U. u. s \w 1. . i sk . . . . .. A. . ... g . r. .. . a .. . I _ 3 2 E .. . . o . . . . . . . . S .1 .. E S T. .J :i..;.f.: ._ ..\.;T.... ‘;v _ _ ‘ AHV Fuv r.- A~h ~\~ Yk. a... \ \ Y.\ . . 3. . . :s 3: al . . . . .. . e r. 2. 9 ... 432...; .T7\ r. ._ on“ .A. ‘2. a. .. A. .. 2. v.‘ 3. Vs‘ «. A... Qu .nu Hrs ». Q.. 0 « ..Z. . V. w. :4 . . a. 2. c. k u n. m? ... ha a u A: O». z. . - . . a. . . 3 «C as «C v; .J. .. A ..... .N« w” .. .m.. o. E .: S r. n. T. .3 S E \ g i. T. . a: C. .. C. . A: C; o. C» 2. 2c »” 4 s 7C r“ .C : « “x. a. 2‘ x; ..., .. a» . u} c _: ... z. .. T. ._.. ... .. f. S .. 3: a: T .. 3. . P. . 3.. ... no a . .w 1. s C... . . ... rag A _ r.. «\k ... .... J. :1... .... . . :. . v... .... . g. .. . .2 . _ . : . . . . . l... A .. . , .. .. .. . . . ... . u. x L. . . . .. . . .. . a... ...... . .. . M. ,. .. ,- K 13 The Theoretical Framework The corporation is more than a technological and eco- nomic system. It is a social institution, and as any social institution pOSsesseS influencing, even coercive power over the behavior of individuals within it. This is more than for- mal management directives, job specifications, and the like. At the level of the individual, the individual perceives a web of phenomena which recur and persist, and which he tran— slates as meanings for his behavior.5 At the level of the social institution, these recurring phenomena become commonly perceived by all individuals, and become a directive and con- straining force on behavior. This is as true for the cor— poration as it is for the many other social institutions to which man belongS—-hiS family, his church, his club. The Social phenomena peculiar to a particular social institution are not perceived in isolation by individuals but are perceived as interrelated. The patterns of be— havioral response which evolve result from a complex of phenomena.6 To understand behavior patterns in any organized —— 5Here we follow Emile Durkheim. See particularly The Rules of Sociological Method (Chicago, Illinois: The Chicago University Press, 1938), p. 10, in which he bases his theo— retical constructs and method on ”social facts" defined as phenomena recognized by the coercive or constraining power they possess over the thinking and behavior of individuals and by the resistance with which they oppose every endeavor to change such power. 6E. Durkheim, The Elementary Forms of Religious Life (New York: Collier Books, 1961) proposes a meaningful con- nection between ritual and ceremonial life, metaphysical beliefs, and forms of social organization. o I .,.~ ~— .,A Qy .- e. 7...; 2. 1; Qw A... “2 AL om. _ . i . .1 7. .C . a . S C : n: :U. . A A4. “A \N. Q5 w H ‘ .F4 C QV a A O u « r; . . C. at 3C e -. ‘ ‘ . 5.. r. .... ~ . 0“ ‘1‘ O ,, a: w“ . v . r; a: t. c I- s “V «a w my x” n r: C. . .. — . fin. \ . a . . . x 3.» .:.. 14 social collectivity, therefore, we can not jerk out of total context any one phenomenon or set of phenomena, but must study it with relation to interrelated phenomena. The meaning to the individual of one set of phenomena (and influencing his behavior) is interconnected with the 7 meaning of other sets of phenomena. This leads to the concept of the Social system. Here we define "system" in its purest sense, as an organic or organized whole, consisting of an assemblage of elements united by some form of regular interaction or interdepen- dence. Our theoretical concept of a social system will follow that of Radcliffe-Brown:8 1. If a suitably selected collection of individuals be examined, it is possible to discover by a study of their behavior certain social usages, or modes of behavior usual among the individuals in this collection, and distinguishing them from others. 7B. Malinowski, Argonauts of the Western Pacific (New York: E. P. Dutton,1950). Malinowski found by inti- mate observation of the Trobriand Islanders' society that even such a clearly identifiable institution as trading goods was not merely a system of economic exchange but was (Xfly in part an economic activity, and involved the parti- cipants' minds, emotions, and feelings far beyond those related to the economic act. Similarly, in Crime and Custom in a Savage Society, he observed the linking, interrelation, and overlap of the economic system, kinship, sorcery, and crime. The customs and traditions regulating behavior, maintaining social stability, and providing common meanings thus evolve from a complex of interrelated phenomena. 8A. R. Radcliff-Brown. A Natural Science of Society (Glencoe, Illinois: The Free Press,1957), pp. 151—155. 15 2. Whenever the actions of an individual are dependent upon the existence of some other individual or individuals, social relations exist. 3. Social structure is the totality in this collection of individuals, of all Social relations recognized in and by social usage. 4. A social system, therefore, can be distinguished by (a)_the social structure, (b) the totality of all social usages, and (c) the Special modes of thinking and feeling which can be inferred from behavior and Speech, and which can be related with the social usages and social relations making up the structure. This is the theoretical base. Beyond this, gaining complete knowledge of a Single social system (which will provide description, explanation, and prediction) requires: 1. Knowledge of its form, i.e., of the parts or elements of which it is composed, and the rela- tion of those parts within the whole. 2. Knowledge of its functioning, i.e., what it does or how it works, and what is the function of each part in relation to the functioning of the whole.9 3. Knowledge of its derivation, i.e., of the process 10 by which it came into existence. 4. Knowledge of its potentialities for future devel— opment. 9Note that Malinowski centered almost entirely on this one step, end generalized from it, only. 10Note that here, Radcliffe-Brown uses history as a tool, to determine origins. llNote here the dynamics, i.e., the seeking of under- standing of the process of change. .a. .r.. . 3 _ .. 3 . L. k «C a...» Y.‘ s ‘ _ w. v. ... F _ a. . 0“ 0“ F a n xv su 3 .3 2. 7... .r fixk AKv ‘f. ‘ 0. s as. .u. .... 3: a. n. . ‘ E. fixV v.‘ To: . . .n .. ._. i. K. x A . .r.. ~ ~. . . ~. ~ .s. _ ex. . . _.._ .. 1. ~ ‘ , .. .. .... ~.u..\.n‘ .7. 16 Both dynamics and statics enter into the under- standing of a social system in that both diachronic and synchronic problems and investigations are involved. Dia- chronic problems are those relating to how social systems change or develop (dynamics) synchronic problems are those concerned with the functioning of a social system as it exists at a particular moment of time irrespective of its past or future development (statics). This study centers on the process of change in a corporate social system and therefore requires an additional theoretical construct, for which we turn to W. Lloyd 2 Warner.1 It includes the following propositions: l2W. Lloyd Warner, The Corporation in the Emergent American Society (New York: Harper and Brothers,19@2). Warner particularly focuses on the process of change of society. Structure, functioning, and derivation are im- portant to him, but the elements or ingredients and their interaction within the social system which result in its continual becoming, or emerging into something which it is not now, is the main thrust of his theory. He postu- lates that the American society is emergent; that is, its nature is such that change is built into it and is an essential part of it, and that to be what it is at any one moment in time, the society must continually change and become something else. This process of change is such that "while the forms of the past are being absorbed in the present and losing their identities, the present ones, re-formed by the future, are becoming something different from what they now are." Warner's theories encompass not only the greater American society, but also, to understand it and what it is coming to be, postulate about the several identifiable social systems making up the greater society--particularly the emergence of such large—scale complex organizations as big corporations, big governments, big unions, big churches, big associations. Each of these large organizations faces the problem of relating to the larger society, as they grow in hierarchial structure, Spreading throughout the national society. ot.’ KY! 17 Men live in several environments, and their societies are mechanisms enabling man's adjust- ment to these environments. Three kinds of environment exist: (a) the natural or physical environment surrounding them, (b) the environment of their own human species, and (c) the super— natural environment which all men believe exists. Social systems develop sub-systems which control and regulate these environments. The technologi- cal sub-system consists of a rational body of tech— nical knowledge and Skills. The moral sub-system is composed of basic rules of behavior, principles, and value concepts which regulate behavior, and which are perceptually diffused by systems of symbols. The third sub-system is composed of sacred beliefs and symbolic rites. All these sub—systems are interactive and are mutually dependent on one another. Changes in one are reflected by adjusting or reactive changes in the other. Therefore, three types of social adaptation result, each with its own sets of beliefs and values. The process of change is an integral part of the social system. Each part of it, each of the tech— nological, moral, and sacred orders has something coming into being, and the society itself can not persist unless it accommodates these changes, and itself emerges into Something it is not now. Growing technology has change built into itself, producing new culture. Individuals can not therefore stop learning; to maintain adaptation to the real world, they must continually learn to relate to a physical reality which is continu— ally becoming something new. AS it develops, the society iS becoming increas- ingly complex and heterogeneous, in Spite of the force of tradition and custom tending to retain its degree of homogeneity. The sub-parts of the society are becoming more Specialized and diver- sified, and hence require more coordination. Thus more coordinating statuses are required. In turn, the requirements of coordination and control over the technological and the Species environment place more power in the hands of individuals whose status gives them such control. Such power must be institutionalized and regu~ lated by the moral system. . u . 5‘ a\ u . ..o ., ... . .t .... .. .... _ .... .. . r... . .v. 3 .... .... .... ... ... .. . . . . 4 . u .. ..~ .‘ en“ v .9: .... ...;1 ..., - .... . w... ..... nu We ..vL 3‘ ..v.. E raw Cy Qk .1. by . .. ... . . L. H... ...: s» w... ‘y u... ..... C. ‘C . E ’3.“ e a. 7. ... . . E . . 5.. E E . . C ?: E . i E .s. .C ... A I1 ‘ 1 k. v‘ ‘ ~H\¢ 0. ~ foo W o. xiv vk. ...» rko r.. 2.1. ”H Qy a. .-. .3 no ...... l a: A: v... ~.. »: 2. a» L. .m. .. .. .. .r.. .4 n. «a r.. .: .nu Cy a: a; r} h. .6“ ...r~ .rL d. 3 . a . a: QM .7. A.» any .P» \II« A... Q9 xzy s .y 18 6. The velocity of change is increasing. The very fact that change occurs (in each sub—system and in the relations between) seems to increase the potential of the society for even more change. 7. As change occurs in the technological sub—system, the moral sub-system with its body of customs, traditions, beliefs, and sentiments tends to blunt it, or hold it back. But in the process, new social usages evolve and old ones reform. Each sub-system adjusts to the other, finding a new equilibrium-—but a continually moving equili- brium. 8. Underlying the above process are symbols,13 pro. viding meanings. AS new equilibria between changing technology and the adapting but re— sisting moral order evolve, new and Specialized symbols and systems of symbols come into being. A complex society must have a common core of basic understanding understood by everyone. Hence, the Social adaptation (the moving equili— brium) must be accommodated by changes in sym~ bolic meanings. AS the society becomes more complex, more diversified, and more heterogeneous, its symbols must keep pace. 9. The large-scale complex organizations in the society (economic, political, ecclesiastical, and academic) must relate themselves to the larger society which is itself in the process of change. Any one such organization may perceive the radi- cal changes in another require that it, too,must change radically, a change which may not have been demanded without such perception. AS the large-scale organization increases in size and complexity, it also expands in geographical Space, and more and more communities and geo— graphically separated people become involved in the development of these large organizations. l3w. Lloyd Warner, The Living and the Dead New York: Yale University Press,1959), pp. AA7-506, pro- vides the theoretical base for our analysis of symbol systems. 1.. . . . C. r: n. E .. ... . . . ... . a... .u. . .. o . « .... u. .. . . _ . .. . P . u . O. n e I. - .4 T. .1» F . .7. .I 1.... . w v .. .1 . . u v ~h~ . . N I. * s “CH mx~ “\~ I r. . . ... ... w. _ .. _ ... \ s s _ .. _. .r. m. . . . “n. n_ I. Qu ...u 0.. I C T.‘ H.“ .... H.» ... 3. C. V\.. C» Y.‘ .f. n. .. a a ‘ . we. .1: U. . . ... H,“ r“ .r.. .... . l _. .o C... .C .3 v . w” . . .. .. r5 .. IL .. my . n. .. .... .. r” ...: v.. on. n. ... Q» Q. 1‘ .. .... S . .. . . . . .... o, r: 3 . . .l E 2.. S .. .... ~ _. _ a: H.” . . r“ ’ o .u .. mxk .. . ...... .. . . u I. . . J. . . C» L. .. . T: s v Q. 3... 3 z . fm , C. .u. .F. . a .‘a n—w ...u V. W. r . P . n . ..u .... v.. x». . . .. . :g ... .M ... s u . . pg. LA. 2». v. s u I w s r... -.. -. . . 4.. ...U ... ... ... n ._ ... .2 a. ... .. v . .... .... .... w“. :ul. :«0 3‘ i. x . gy .. T. ... ...... . ... .. . . U... ~.-‘ 3 ‘ u. s C. . . . .. .. . . . . x .. ... s .. s v . .. . .... a . ... s . A.- ’.\.u 19 Organization Theories Another proliferating body of knowledge exists pertaining somewhat more Specifically to organization behavior—-the various management and organization 14 theories. Classical or traditional theory.--Springing from Frederick W. Taylor's "scientific management" concepts and also based on Max Weber's observations of bureaucracy, classical organization theory centers about groupings of individual tasks to be performed (to achieve rational objectives), the grouping of jobs into administrative units, the grouping of administrative units into larger units, or departments. From this, classical theory pro— poses "principles" of monagement--those of the planning, organizing, coordinating, and controlling functions of 15 management. Neo-classical theory.—-The ”neo-classicists, how— ever, propose that the individual in the organization is more than "instrumental" man, that he brings his whole 14 w. G. Scott, ”Organization Theory: An Overview and Appraisal,” in Journal of the Academy of Management, Vol. A, April, 1961, provides an excellent description of the sev- eral categories of contemporary organization theories. C; 1“D. E. McFarland, Management Principles and Prac- tices (New York: The Macmillan Company,196Aj. McFarland goes beyond the classical ”principles" of management, and relates revisionist theory, human relations theory, and quantitative decision-making theory into an integrated treatise. He does, however, present a clear description of the classical ”principles.' self to the jOb: “it? I "Y I referred to as the Elton fiayo's famous ' science oriented app Emu variables and and the unanticipat‘ oretical elements i cacrdination, and 1 actives; and the e: (u: ,_.te-:ming from him; net Specified by t‘ M & theory , vi neo-classicist th pQSHEd (or attem. “‘k 20 self to the job, with sentiments and emotions. Commonly referred to as the "human relations school" and based on Elton Mayo's famous Hawthorne studies, this behavioral- science oriented approach to organization theory considers human variables and their impact on organizational behavior, and the unanticipated consequences of such behavior. The- oretical elements include: theory related to motivations, coordination, and leadership; individual attitudes and motives; and the emergence of the informal organization (stemming from human associations in the work place, and 16 not specified by the formal organization structure). Modern organization theory.--This is basically systems theory, viewing the organization as a complex of interdependent, interacting and variable parts. As a social system theory, it overlaps, of course, with the neo-classicist theories. But in some senses, it is being puShed (or attempts are being made to puSh it) beyond merely the social system. Modern organization seeks an- swers to a number of interrelated questions which are not considered in classical or nee-classical theory: (1) What are the strategic parts of the system, (2) what 16The literature of the human relations "sdhool" is profuse. See particularly, Gardner and Moore, Human Re- lations in Industry (Homewood, Illinois: R. D. Irwin, 1955); Keith Davis, Human Relations at Work (New'York: MchawHHill, 1964). ,2. .. T ., . .. Q .i .... i. _. T f. ... _ A. i L .... ... e ... .fl... c. a. S S .C ..u .. .... . a. m. ..u ... a...‘ S .34 6 ”A 1.” i. ... ,U .... .... ii. .. m. E .: Saul: E .. .. t .. . . A ... a. .L S e .C t G 1, S .C _,.. .... : .2 .J. 3 91+ 5 3 3: E . . 3 a. u ... a . 3 .... r” . s A .. 3: E 3 a ... . E .... .. .... . . a c C : .C .r. r. o. v”. . _ W. . . r“ ... fl. . . r; . v 3. a: Tk. ”v AN» .4 n. .. . Ce .... . . .3 n: _ s . . E Q» 2. a . cc 0. .. re. a: L. C. _. _. .. L. .... u .. us. a: :2 a .. A} 2. .1 r” Q» 4; v. a. 2... ... v.. .. ‘3 “e. h. . . .. r.. K. r.. r" .. _. __ A: .. ... m. .t .... .4 ‘2. ate: ... ... n.” .. v. 1, ... ... .l 2. a: ‘1. o ~ .... «C I. ... ‘..v . . ... ... r” . . . . . . .C . . :» ... s. a ~ ~ . a o. n . .. , ... ...v .. .... q . ... _. , ..... ..._. .... v . .._.. .... ... .5 . ... . ... . . a . . . u ... r . .\ ... . . , _ . _ c . . . ... .. .V .. . . ... ... \A 21 is the nature of their mutual dependency, (3) what are the main processes linking the parts together, and facili- tating their adjustment to each other, and (4) what are the goals sought by systems? Modern organization theory is conceptual and analyti— cal it relies on empirical research; it is integrating in character. It does consider the individual and his 17 personality structure; it studies the formal organization, and it factors in the informal organization.18 It attempts to interrelate the interacting parts of the system in terms of role theory, communication processes, and decision—making processes. It introduces mathematical concepts and models. It attempts to strike at the balancing or equilibrium— process via cybernetics, applying the feedback, control, and regulation devices of the technical or engineered system. Knowledge of General Electric Coming to a more Specific plane, a body of knowledge exists about the business enterprise under study, in two l7Typified by C. Argyris, Personality and Organization (New York: John Wiley 1958). Argyris, of course, is noted for his consideration of conflict. Many psychologists are theorizing about individual human behavior and individual adjustment processes in the business organization context. See also George C. Homans, The Human Group (New York: Har— court, Brace, 1953). —T 18J. C. March and H. A. Simon, Organizations 'New York: John Wiley, 1958). 22 categories--(l) public knowledge, including press and trade articles, books and documents written by executives, financial reports by stock brokerages, etc., the annual reports, and books written by "outsiders" about the com— pany or its executives; and (2) internal documents pre- pared for use of company personnel only, and the history, lore, and myth carried in the minds of individual members or former members of the company. A documented history of the company from its forma— tion in 1892 to the present day is non—existent, either for public or private use. This writer Spent a full day in the company's library, aided by company librarians, and found only smatterings of history in a wide varity of internal publications. From these, the history of organization structure change can be accurately recon- structed. One written l'history" does exist, 9 covering the period 1892—1939, but it is an impressionistic and idealistic account. One era is well documented insofar as the executive philoSOphy is concerned by an excellent biography of President Gerard Swope.2O Another era of 19J. w. Hammond,_Men and Volts (New York: A. B. Lippincott, 1941). 2ODavid Loth, Swope of G. E. (New York: Simon and Schuster, 1958). ..po- adv A.q--wpy‘ -1... -«...».. 4 II. 01"! 23 executive philosophy, that of President Cordiner, is also well documented by his own book.21 Perhaps the most meaningful documentation from which generalizations about the process of structural change can be drawn is that prepared for internal use in the ”Advanced Management Course" and the "Professional Business Management” course, given to essentially all managerial personnel (including this writer) in the late 1950's. Method The empirical research presented in this study is compiled from three distinct bodies of evidence: (1) per- sonal observation, (2) documents, both public and internal company, and (3) field interviewing. Personal observation.--This writer was personally employed by General Electric from 1937 to 1960 (a period of twenty-three years), and served during the last fifteen years in a variety of management positions in the Apparatus Sales Division (an organization component later to be described). Entering the company near the end of Swope's regime,serving under Wilson's regime (with five years of military leave of absence during World War II),and serving under all but the last three years of Cordiner's regime, he 21R. J. Cordiner, New Frontiers for Professional Managers (New York: McGraw-Hill, 1956). -.- O . Sci-h- . ... - ~fil ....-.w--._sa:. --t. - . . M. I. ... ., , ... .. . . n... C; . r . r. h. yr. . v . . .. v.. 3 ... . . v I. . Ax~ z i h b ‘o a.— .. .. _ . mag o . . n I l C ..- A n. ‘ .¢.. 1;» «\9 .FN .v : New . . .. . . ~.h ... _ % « 7& r. ..H .2 L. L. . .... .... ._ r . p . ..J ... c. .p.. .na ... “A v” r.u V. . . . v a a o \ . ~ I any. .,.- ‘ » Y-. a... .vu Ia‘ r. \r P. ,w . CV . .- .«J .c «.2 ... 3. .v.» .m4 2. H. .3 k v a; L . a: L. ..n C. K” . . u... . a {a .v «.3 a. Z. L. L. on n” L. ..N r” -U 2.. .... .t AC .... r. ..J h. 4.1 a . ...... .. -. ... . . .. ... .3 S ... . . ... .... : .. . Q I, . L. w w E . us a. . .H L. ...n . \ v5. ‘ s We ... .. . n ...A _ . .fi . . v.. .. RI: h” . .~ J ._. . a a . . . .3 . A of. .C\» i...— .n.. 1 .~ :. .\~ ~.-.. ... ._ ... ..u g . .... .. . _ M‘s \ . rm ‘.~.. v : .... _. .... ., .. _. .. -. . .. . ...... .. ; i _,.. . s . ,.. ... .. ., . .. ... .. ., t. ... . \ .. . . . . . . . .. . . .. .. ... . x ... e 24 personally observed the massive reorganization change ("decentralization") in the 1950's, and assisted at the field level in planning the implementation of some of these changes. AS a staff manager in a large regional operation, he was Specifically charged (among other things) with developing the new and changing relation- ships between the field saleS operation and the newly forming decentralized product operations. He personally attended managerial training programs accompanying the organization changes, and personally conducted some in the field. He assisted in the implementation in the field not only of structural reorganization, but also of new salary and job description programs. To put this all in historical perspective, he wrote a ”personal history" (not included in this thesis) of his career with the company. Documentary evidence.—-A wealth of documented bits of history exist regarding Specific acts of the company. The business and trade press (including such newspapers as the New York Times) is a productive source of information reporting organization changes, technological advances, and occasionally the eXpressed philosophy of the executives. In large part, however, library research in these media merely validated or reinforced data and evidence already in this writer's possession. C. ...: v. .... n- ,. . . .A C. r;. u ”I. - a A ..3 .... .w.. .c w“ r. L. .7. f. ~15. no. 0.. .. C» .A I.” .... ... ... .\. w“ 3* Wu .v r—y .... .J r.“ r. v”. .v By A.» .- .Nu ... r». . . .ru .. CV v. 2. . . 4.. m. a. Q. ..4 A” .Aa r” a: .. . r“ w. . . . ... ... r“ ... ... .. .4 . I . n—v - u s 1 . . .. . . .. . .. . ... v ¢ H . v . n v . . . . .. . .. .. 25 A richer source of documentary evidence comes from the company's internal publications of all sorts, explaining organization changes, stating objectives, describing new policies, procedures, and programs, etc. Much of such documentary evidence is in this writer's personal posses— sion; some of it was loaned to him by management friends still in the company; some of it was recorded from a study of documents in the company library in 1962. Of particular value is a set of volumes written for use in the advanced management development programs in the late 1950's. Because such documents are company property, they will not be directly quoted or footnoted, but occasionally will be broadly referred to. Field interviewing.--A third source of evidence comes from information given to this writer in 1962 by managerial individuals in the company. The company was first approached, at executive staff level, with a request to officially participate in this research. This request was considered for some time, but was finally declined. This required the field work to be narrowed to two major elements of the company--one producing and marketing, and the other selling capital "engineered," and indus— trial apparatus,22 where the writer had the access of 22These two elements of the company account for roughly half the company's total sales—~or about two billion dollars at the time of the field research. f r ‘ Y. “*"V‘ "V. TV. l .. . ‘ \I .A L. - ,..4~:.-‘ fl ' . r A.‘ O ~y~‘-.‘. " " "- V ....l_. V ... 0.. v‘ -‘ .. '! ..., r -r_- . "v-,-: ‘,. ..- ‘ «v k.4-_;. .....- ' a - -. o. 'r n ‘ rfi~~..[‘ ._ \ J-.-u.A.4-\.. - I 0' -.. .' ... u... H . 2"‘v-~-‘ a.. - ‘h- ‘ p—' 5.. .. ... -..-.-- ,-_ .. “3 ‘r‘ ..FC. 71-, ‘ ...» ,H 4...- 1_ a ' ‘. ‘ ffl ' -—.--. "‘ \ ‘- .. .... ...JHV ~ - ‘ . . H v-s “"r- ..., . :1 2 N ‘ ......J_H.~. H . o . . ,Yz-r‘" '__" .- -( ‘ ‘ ..-..h ..-” - ~— VK.‘- I ‘ ' ‘r s .n r‘ ‘VV‘V "“ C: n . . .. -_.V V ~¥.\ . :‘vv, . . _y.‘ r I‘- "V Q ‘~. - ' . O’ ”e- \.,.g ._£ v ‘ . ., ‘i Cap Ccf‘ r “"““.A C ‘ - V -. :V'.",-“ ’ -...» __'Q I "V“\.’ ; F"\ I . -_\P r‘fh,' van‘ “\5‘ ‘ ~“‘Lo_J’ “ In. Y. ‘ ' ”A 1“ > "N b... ( V‘s» ~ .“_‘ - “‘ . I '.‘ ‘hfi‘ . a,“ - pf V.""\r *- .,_ :l , ,‘ M‘ - ‘. a- .-.... " Viiwr‘ -.“ .- "-, ~ 3 I' “ran... v A. V "1 --‘V~. \ ‘— L— . "~‘ ‘ :4 ..v. r2..fi ‘- .Q“'~ ‘9 26 friendship or prior business association. A judgment sample of forty managers was selected ranging in position from District Sales Manager to Group Vice President.23 Individuals in the sample were interviewed infor- mally, entirely on an open-end basis. They were told that the interview was to help in the writer's doctoral thesis on the process of organization change. The inter- viewees must be considered ”informants" rather than "respondents." Each was promised anonymity. Limitations of the Personal Observation During his twenty-three years of observation of change in the company, this writer was not an objective observer, but was personally and emotionally involved. This introduces a bias which must be recognized. Even the interviews, conducted after he left the company, may have been biased, because he knew the informants person- ally. On the other hand, this bias may be outweighed by the fact that he knew what questions to ask, to get Sig- nificant information; personal friendship with informants unquestionably stimulated them to reSpond in a way they H would not have to a "stranger; he knew the unwritten as well as the written history; he had shared traditional and symbolic experiences with respondents. 23Salary range for the sample is estimated at approxi- mately $20,000 to over $100,000. This is not particularly important, except to indicate the status—authority posi- tions of individuals in the sample. ‘ . ... .. - , _,...- . ., . .. F;— r. “r ,..4 .4 v..- y..‘~ -- . ‘o n -“T‘ fi‘fi‘ - Q N; ... _ \‘ ~ , ...~-..— -.. U-~I—.l.-s. ' V ,y , v’ "‘ rm“n-$.& ' 7" ~x.— - "" New~~..y .- . :"' “ .Y‘C ~ ..- 3 .' . "‘-"--*-v «...4 .... ... ‘0 ~ v :V‘. N-[». V" .. . up.-. u--§.‘ ‘-V ‘I . : » ‘ o ‘ - :.“< I}—‘-_,.‘ .. v v...‘ ‘..-.‘.- ’_ T‘e—w..,r ‘_ V. ‘ ‘—_ ~ v. ~.vnv,_.‘ ' ---. .Q ‘ a "r ‘3’! 9 ~ ., .. .‘ , . .. ____\ . 't o I ...“ ....vr-b-Ar _-_-.4.--.. .- —_.___ Q 3 ‘ .‘rh 3n<~c "p >- ,uv --~u-'\-' " 27 Limitation of the field research.——The field research had to be limited to only a portion of the company, albeit a significant portion. This may cloud generalizations pro- jected to the entire company. However, it may have been a blessing in disguise; the two organizational components studied present a marked contrast. One changed drastically in structure and in social system during decentralization; the other did not. But these two components were interde- pendent and interacting, and the process of changing rela- tions between them, and the emerging of new structure is almost a laboratory situation. w... -. ...u ..A x ‘ c n . q Vl-rfr v. V” t ‘ ...suL—‘ ..- k.. _ ... -.‘o‘-‘~-~ .- ‘- .. .... p—' \ ,. .. ‘¢--'v'~4‘d~l .- . .- n ‘ ~. , ~A. . \“ Q .Q b---.,,. _ H L o -' ‘ TA" -‘ ‘nr w. r. z . _ - ' " V'” v-ny .... . . ‘F A w “" r.- ‘3‘» ,1 CC" 1 .- . h“ \z' ""J-.-—- _.V. ‘Vpr- m. _ ' "A I --"‘ "" r. -.< . -"-~. “‘ ‘. A I |'-" 2“ .— ..... ._ Q :— -"“ Lvy ‘1; lb ‘:..' ._. --. LIA ‘r~ r r _‘ - n \- A -V ‘V‘..;:‘ A..¥‘ ‘.V' r- ‘ ‘ ‘ ‘_. Q _""\ ‘fl’. v . n. Jud d. h L . 1 '._ . _'.. ‘r-_"- ( _ I. '-- --_V“\ ..g‘ -... 4...,4 h ‘ v "f. .- ~-~ -. \ ‘ N. .— » ._b~ ~‘ \ A~.,.. ‘ ’ ...s. : .._/- r5“ - 'V‘. kk l . .- “ 1;??? : - ‘ M.“' ' " ‘\..\_ V ‘-.LA .‘ -'- _, b ' .- .A‘ .g‘- . . 'J‘4Q r, V —\‘ —- “a v", , ...“ -;«... “A " \ ‘~ ~ A V»:‘_. Pk A n w y." ~_ y \- 7 \,‘ ‘flyfl‘ ‘ ‘ er, "‘i" m ‘ . v‘ 5 \l -_,. » ..‘vp . \ ‘u “s ‘. "‘* i‘ “a. u: ‘v 0 \“ it“... ‘ "ys V. ”‘4" a- ‘ .‘-_. ._I o ' 2 ~.;‘--.1- - - w .“ . CHAPTER II THE BROAD INDUSTRY BACKGROUND Probably no single industry so vitally and dynam- ically effects the American economy and the welfare of the American society as does the electrical machinery industry. Born from the amalgam of technological inventiveness and entrepreneurial innovation, it has grown and is still growing by feeding upon the very technological innovation it creates. The industry has a history of vast prolifer- ation. With its technological roots in the development of arc lighting and incandescent lighting in the late 1870's and 1880's and the power apparatus systems required to op- erate theml-—and with the marketing and financial innova— tions marshalled to finance, produce, and install lighting systems even before demand for them existed2--the electrical machinery industry has found its research, development, manufacture, and marketing contributions reaching into every segment of the economy and the society. Hardly a 1Harold C. Passer, The Electrical Manufacturers, 1875— 1900 (Cambridge: Harvard University Press, 1953), pp. l-l3. 2Edwin Vennard, The Electric Power Business (New York: McGraw-Hill, 1962), pp.h-1o. 28 \ b ‘I . . . . _ ..- . . .. . ‘. ._ . v. . .. . . n I. . r... . . ‘ . . flu . IV; ..9 . . . » ¢_. . . .. w». ..r. (I. I: . w. A .4 ~. . ~ . I. . ML» — fi . _. i .fiJ .u r g r“ ... .& y A. ‘ A ‘ v _ . ”J «Pu. F . 2.. L.. . o .5 i . 3 l I vu v . A.» W. . .. ... gpy .r~ a :4 . ‘Wu 1. .. . 6 t . l . . . . S .. CH v. . ‘ QM ~fiuu . a. . r“ C.» —. p. 1 O. 2. .w. .. . r: .... S S E r . . .. S I. .. . v . c .. . .. . c. at . . . E E t i vi“ fi. u. . .— . r . ....u .a 4 . a . . t I: . C . . . .1 . . r: r . . . . ' v” .C 2.. Va. 2. 1 . ..e .. _ v c w - . -~ .. .. _ . . . .... ... w” . . .. . .3 V. .. .~ w ... . .. u..». 9.. .\v .v . . I U... .... L . . ~ ,. . . u . . q “ .... . ... . ‘\u r c. .c 29 product exists today--consumer or capital—-which does not owe its present utility directly or indirectly to the technological and marketing achievements of the electrical industry. On the economic side, the electrical industry has permitted vast enlargement of productive capacity and out- put; it has directly influenced, more than any other factor, increased productivity per worker, increased national in- come, and increased employment—-through its making possible the greater tool—power of the worker. Strictly in the economic sense, the electrical industry provides the pro— ductive life—blood of our complex industry-based economy. On the social side, the contributions of the electri- cal industry are enormous. Higher living standards, reduc- tion of drudgery in home and factory, convenience and comfort, increased leisure, and higher real incomes have been and are being made increasingly available to essen- tially all social and economic segments of the American society.3 Born and developed initially as the direct result of technological innovation, the electric machinery industry has continued to draw on new technologies. Research and development evolving new products and new engineered—systems 3Jules Backman, The Economics of the Electrical Machinery Industry (New York: New York University Press, 1962), pp. 308—3I8. .. _ - . . ,, -.A..u.l VJV‘OL-‘v- . - D ' 'r ~wr Ava-pr? - . \ .‘ w - - ...; -...L.--...-... - . .- ..3 :..,. .... --,. ~‘ .— -~ A...‘—‘» L; .. ~.. 0. ‘ . " - -v- v~ p _ {WP .51. _ ......-.-.,,y, Uv ..- _ . v , ‘ " "..‘f rh~n - -- I . I (In . . ‘rs ‘Z‘V‘nv' ~44»... . k -..u 4,. H Q U IAI'Q‘Yuv v. Q \- ) 0 ’V.»' a... x o 30 is compounding. Ever—increasing innovations not only provide a widening array of consumer products (television, home laundry equipment, etc.) but also serve as the im- petus and implementation of new engineered-product sys— tems utilized by other industries in increasing their productivity, decreasing their costs, even making possible their own product innovation. The electrical industry has always been recognized as a leader in research; in 1940 the industry's investment of 4.85 per cent of sales in research was almost twice that of the next largest industry-contributor to research. By 1957, only the air- craft industry surpassed the electrical industry in actual dollars Spent in research (a direct result of the Space program); in that year, the aircraft industry expended 2.5 million dollars, the electrical machinery industry 1.2 million, surpassing all other industries by a wide margin. The electrical machinery industry was, in 1957, expending in research at twice the rate in dollars as the chemical industry, five times the rate of the petroleum industry, five times the rate of the telecommunications industry, ten times the rate of the primary metals industry. The significance of technological research in the electrical machinery industry is further emphasized by its employment of scientists and engineers; the National Science Foundation reported in 1959 that this industry employs one out of every eight of the 764,000 scientists and engineers in the .. ..-ur . 9-7“. ’- " '-,.. A ~ 4‘. a “ ...: H . o _ . ~.>.-; «r» <‘*"' .7 ‘4 v1 vuc "- I- ..--‘r s, . '.o . ...],r mum: .. “IV . -p--- , o . ,- --. . ,. ~wAr0'Q 71‘ _ ' - '- B .-' .-. ......»V, - "-‘ “ . .‘fi ,‘ A",..,c“,.-~- A v . -..L.A.y..- .. .- . ' o .-., a '. . 5... . C - . ..'. v.1 VAAV «- _-- . - C n < """‘V‘ ‘ ....P,.~ 3 .‘r . -- P“ - -~ ----.. -... yo-v ‘, o ‘ ,, 1 ‘ q o ”I": «o "r“ . ' , ..- ...-Iv VA v..-b .. - -. .. 0 o o .. ‘r 'VQ“ .— .. . .. . | ' “‘ -hIUv‘y.( - ‘ _, .-.. ... . ‘A - . ,n 5 .. -.‘- 0- C -."$'. ,fir ‘V y .0 *V\' vA A- . g ”"1; h-’_‘ o ‘ ._‘.“,. ~fi arr“_‘.__ ‘v‘vu ‘\ "‘ “‘\‘~Aky- ... . -.r. "‘v». Ch.‘ "v .- -~.._,. , 4 T‘T’.' b ’ ““ 9,4- 0 ... e V" Yr. -~_‘ III-3.?! o ., .1 “A“ SQ. ." H - -. ‘-— 0 ."~ r..-|r~ 'V ‘a . ~-~_“‘ a. eh~ V-- -2; ._ ‘ ., ". s3 .“ ”4“, w. >‘ ‘ Il.‘-k - G A ‘ 'uo \ . ._ i‘Ns.‘ ‘ k ‘.C 1 ~ I- “. '-L..,: r-v ‘ (A. V ‘A ‘_ \-' . “ "H; v". . ~ ‘.| Q ‘ .. ~ ~~ :2»: ‘iv‘ \> ..‘. . -.‘ . "-‘l: 'y “1 pr.“ \. Uh" -‘ -.- .._~ '~.. . ‘ C. -. up. *1 ‘ V4. ‘. vfl Y‘y,,‘r:. « ‘4 VA ‘ .:-‘ I ._v VJAI .. a, e ‘ ‘y .— . , “nu .35?" My! ‘. 31 country, for a total of 92,700--Second only to the 9M,9OO employed by the aircraft industry.u Further, no industry has such a diversification of research objectives and achievements, ranging from Space and national defense, to the development of nuclear power, to industrial produc— tivity, to the farm, to the home. Research——technological innovation--inventiveness—-these have been and are the hallmarks of this industry, and have clearly established it as an institution, or collectivity of institutions with imparalleled economic and social significance for the society. The electrical machinery industry is a complex of many related industries, all engaged in the manufacture cfi‘machinery, apparatus, and supplies for the generation, storage, transmission, transformation, and utilization of electrical energy-—a wide variety of products ranging fI‘om multi-million dollar turbine—generators to lamp bulbs costing a few cents. The corporate make-up of the iJidustry is diverse; at one end of the Spectrum are many r<31ative1y small companies Specializing in the manufacture crf one or two products; at the other extreme are General Elexmric and Westinghouse, the two largest companies in the hidustry, participating in many, or most, phases of the industry. —_I 41bid., pp. 185-190. ..A _ ‘ —_"'w-‘ ..--w v-ov-‘, . Wi'e ’4 ..--»vv ' " Ho ' ‘4 O " P‘ \D fiw‘v’ I ..uv o-..~4..'~- 9 ‘V‘ -f‘ v .'.- v.. rfi-r“ ‘ '11 v - x..u....r\ vb».... U .. "C I"'~‘v-s-~ h .‘ \C: buy ... fir"r""r‘ a , :- v..v-..'\ -..; \— ..z :v‘fl " - , u...A _. inc“; 3% “Fa-b- ‘ g I A5,. . \ .- ~-1C.. v (I) 32 Here, then, is a complex of corporate enterprises whose collective achievements in research and manufacturing and whose financial and marketing ingenuity has boundless impact on the American economy and society, and whose ever— compounding technology is providing new and forceful inputs into the changing world and changing lives of every indi— vidual in the society. One of the greatest of these enterprises, and a titan among all companies on any count, is the General Electric Company, the subject social—system of this study. ‘“.—-~ - v v-sv H - ' ... "-1‘ to ~ ‘ “......u... 1...“..- -. - ‘1 v A... o - "r..- ‘v‘ >- 1”. .. ..-v ‘v'. 1‘.“ v'-»n- , . . a . -"v-{r affi..c~‘~‘u. ----«-Vu- ‘..J~AL¢-- I " A - -’ - \ ”CU: Cr*.:r-~w.-. "—5-oou—~~ Loo-v- L‘ ..t . n V \ . ‘_"- ‘ I n-1'_ .. . ' t— ' ' . "“r vb-.... \ ',- r . n ’1 1" 7‘ “a.“ 1'» l 'D y { c... w. :. _ T.‘ Wm‘cn é-a ' ‘4... V "'_Y. v 'v . .--- f T‘;r; ‘ ...vi‘. - "F. n.. ‘ ---- r: E «rm-L ' *vx...” - .. F“fl‘§ ‘-- Q). " '1 * ‘ - V‘fi ‘:.‘V‘..:\ V‘V.,~ \r L" .\ "‘».. .' L a . a, v: “u :- N 1 C . ‘b , :V ‘ ‘ e. *;'_‘_- '._'-J"‘ - "i I . ‘u e {V‘r‘ - * ‘ ‘. . u ‘ .41 b T‘! ". ",$. - ‘.‘_ rm.“ . M4. :rfip‘ v ‘.‘v . y‘ w ‘ ‘0 7". "‘¢Ie ‘2 A .C *v I § \ . C «x..‘J‘;":g‘I ’—4 a * A 4 ‘- u' 11" ‘ ‘u. (’2‘: ~'V“ ‘v‘ IK.‘ "t . ,.: V.e~‘~: _ ‘V 'f ,J. CHAPTER III GENERAL ELECTRIC'S EARLY BEGINNINGS--1892 The formation and the early development of the electrical industry is marked by three important facets of business enterprise which persist in the industry to this day--(l) technological invention, (2) entrepreneur ingenuity, and (3) marketing ingenuity. Springing from the laboratories of such scientist-inventors as Edison, Brush, Sprague, Thomson, and others, corporate enterprises were formed to market products for which no market then existed. The development of electric powered arc lamps for Street lighting provided the initial stimulus. The early inventor—entrepreneurs, however, had to do more than in- vent and develop the end product; concomitantly, power égenerating, regulating, and transmitting apparatus had to t>e developed, and an entire new capital market had to be c:reated. The industry development, therefore, had three dj_stinct but interdependent phases. 1. Invention of end product (lighting) 2. Innovation of associated power apparatus 3. Marketing of lighting systems by stimulating creation of syndicates which formed independently 33 : ..’.. -“\An U .. HA.» \.\.« ‘- v . ; vddfign. -5 :‘:.... ... . ' -- uivL--.‘ o . ~- I . '- A.:Q\ - ‘Q : U-L—Auu- .1 -U o ‘ ‘ :rr~--ro-. ' ‘7": 1”..- “‘7“ ’-4. .... . .-1-.r‘q'r- ‘€;—\' -‘ .z. - 1.. -....fi.“ 7, . F\v Q.‘.": 1..rZ '3 gy‘v“ .- . - —. (i ‘ x . "M" 1.".Q whec ‘fi 1. - x O A... I‘M; L; V A ‘. . l"-~~‘~' *‘r .- mh‘ff ~\ - \ e A h .l ‘.’.‘M.~. '"‘ -..-.. v v; - 'YAW‘RC‘:‘3 ...v- I -... v-v..g"v‘.v".-' . . ‘ ' I W FL..p “Y‘ r‘ \- o _ . anv v !\.“~‘..h‘ . \- ..‘ 9'2”. ‘3‘"...0 " ’3 Ca; 5. r.r_._ ‘- Ad‘Hh-y '1 L ‘ ‘ 4. .. fl . ‘ . " ”Var-iv: MN.-. ..-:'\— ‘4‘: «..u“ I ._ .' ‘ ‘n~'-~‘ ‘a w—ng. ...‘u ~ 2 f -.‘4‘, vv “.va . ..~~R .- . i, V ., Q A? r‘ a ... ..J-Abviv.. H . .‘~-~ A ‘ I . . .\ V‘" ~ W I ' r‘,‘ ‘ ‘ -..». -..u C“: .-. “,- ._ “ "- ”4"“? “ \ «k ~u\b.‘. QY‘ 'Y‘V‘y . \o..v ‘ ‘1‘ . y‘ at . 'fl . \‘-. 'WWZY.‘ |n VV.‘ \1 \ I; “o- 34 owned lighting companies, securities in which were accepted by manufacturers as past payment for equipment (the birth of the electric utility industry). It is a classic example of the integration of tech— nological innovation, entrepreneurial foresight and Skill, manufacturing techniques and marketing ingenuity. Circa 1880, a number of companies had been formed and were pursuing different technological paths. The Brush Company was producing and selling direct current arc—lamp systems; the Thomson Houston Company was more or less in direct competition; the Edison Electric Light Comapny was further developing the incandescent lighting system invented by Edison. A maze of patents developed, both contributing to and hampering individual companies' growths. Resultingly, according to most observers, mergers were enhanced.1 The {Thomson Houston Company purchased a number of small com- Ioanies and the large Brush Company in 1889. Meanwhile, tzhe Edison enterprise had likewise purchased a number of Ennaller companies, and had been reformed by 1889 into the Ekjison General Electric Company. These were the major (mampanies at this time, with Thomson Houston largely SPGCializing on arc—lamps, and Edison G. E. on incandescent l Passer, 0p. cit., pp. 352-353. . Q .. , «e.» r‘ ”C -..- .. ‘ _‘ .- VA. ’ . ";. 'v ...- - v-2fip‘h: are - l' A "v::~--vMV-“‘~ '- an l . fimwwl“.' fl v‘v..u-.A.v» u . ,' :1 {,. ..e:r.wr.1-e , 1.. . ’:v‘"r‘\'vqe _‘ .— .-..F~..V-Au V I (I\ (I) ’" ' A o-- r -F‘ : r‘ \‘." r‘ ’4' V -- ...--‘.o 5‘ HA. u..\J .- ~ . v~”~ wr‘v, ' 0—- .....- . _ .- — .‘---’u .....- ; - ..V v -_ l ‘ ~ 2. 2“": "an; _. . ..y ¢-- g. «r_ . ‘ ”.... > g - L'" rvxawAc..._‘ ’ “ “"' ~- .. ~ “ 'VV‘AV‘ _._._ f; p..- ‘ . ..- :— swag“ ~—,. - _ ~-'V-..\..«\_,~u ,_ ~._V .. _, _ . . _ "'Y‘.‘ *5 .r .__ >—-\ -v y. _ “-s—\. g . L'- g ‘ - ‘ “ a “'n ., ’--- T" - ‘ 0 ~_-&. 4":- meg- V , “O U«g. ‘I A. “FH‘F’b-r‘ unrc— '\ arr. HV‘H “¢~‘\A s A‘ s. ~t 2" ~ : .. ,_ A - ...r N A x“. . c 4.‘ ‘. V ,- .. - “‘-.\i ‘ l \';v".«‘ ‘5‘ ._ ‘ ~ -_ ..l._ . ‘ ~*€"V h- 1“ V‘ . .V I *‘ . ... 7 .-“‘~-.!.. ~._ I 'Q lighting. Both had begun to diversify into industrial power applications, particularly in the railway field. Both were committed to the use of direct-current power. Meanwhile, in 1886, George Westinghouse had formed the Westinghouse Electric Corporation as an outgrowth of his Union Swith and Signal Company which had served the railroad market--notably with Westinghouse's invention of the air brake. Westinghouse entered the electrical market promoting alternating—current power-~which ulti— mately extended the use of electric power into homes and factories by permitting transmission of power over relatively long distances. Mergers and consolidations continued in the 1890's. The two major competitors, Thomson-Houston and Edison General Electric merged in 1892, to form the General Electric Company. Executive management was vested in Charles Coffin, the entrepreneurial genius whose financial, Organizational, and marketing expertise had guided Thomson Piouston in the ten years of its life to a sizable corpor- 3 tion, by the standards of the era. Again, the newly fcormed General Electric Company was a balanced amalgam qf'entrepreneurial talent and technological ability.2 2John W. Hammond, Men and Volts, The Story of General 21222319 (New York: Lippincott, 1941), pp. 191—212. Ln .. 0 -“-‘V'."V'Q r. \ ‘- y ..-H u- an ‘ 3 . ..- '.-,- fi~wv~ . .,_': ‘_\..~.L- ._ . .. b I . . >_ ._....~ YfiAr ”WC QM--. L- Sg-C...|—r - .s . . . .fua as“ I,»_r~,p.>y 5......7- ..gll \c-«k.-v .- - . V a - - '. You \ , . - . a ,C- , . no: pyv V-“ v:- . ~ '1 “We" {LWQ . -..,, .-- L- ‘L-\...U, .. d .‘ :73 fle ’ufirv w ' ':¢v"I -.. — -. . . '- . “a" r » . . ' . A' C “C. ‘V- ‘ V --'-,J-, .... - \, _- : ,_ b 'w'-. .‘..,3‘ o o , as. ‘. “A‘-~-E.S i" .“" o .4 v .. in c. o . --.. —" r". 1”C.n . " wonv. --.—V ; .pr‘vr _, ‘ ‘ 7V '- . . n — - x“... ‘ C. x . ‘b- - ‘ . .,_ ' .- T‘L" r.'..,q h‘ .a‘.,: :- ‘J .1 a .' ’ V .. ‘4‘", v v . 4‘ p.” A ‘. 9“. . v 1 . c . --. ‘ VE‘ r». f s ,4 -, "fioll ‘ Q - y. ‘ e- _‘ y “..e CV‘IP‘ ‘ ‘cu » A J “x ‘20,? ‘ - V..\- W, ' t A \"":v ,n . . .g“4 : ., 36 Historians agree that this merger, too, resulted from the complexities of interlocking patents, the heavy financial problems of license fees, and the difficulty of securing new capital.3 At the very outset, General Electric faced organi- zational problems, never to end as the company prospered and grew. The competing companies' management required melding, and reorganization of the duplicate manufac— turing facilities was required. The new company had a simple centralized organization structure consisting of five centralized operating and staff departments: Manu- facturing and Electrical, Selling, Accounting, Treasury, and Law Departments. The initial organization structure, shown in Figure 1 below, and also on Chart 1, Appendix I, was a Simple line and Staff, centralized structure: 3Backman, op. cit., p. 106; Passer, op. cit., pp. 324—326. . 2.3T; . ...HZSLZL. n-.. 22% .w...N.—:r_um.:v H. ...n .w almil . N ,S.~:m:._.~ 37 ucoE pCmE pCoEpngoQ [panama . . uppmgoa pCoEHonQ psoEpngoQ H Hwofiflooam pew mp5mmope swam mQflfiaooo< mCHHHom wQHhSpomQDsz BZMQHmmmm .mme «ohdpoSme CoflumNHCmMLo HmeHcHuu.H madem --. "Fun‘r "\ T -.- ‘4‘.— 4.1 .4 I -..y - .. FPOfiNVZQ . h—v ‘ kwv- ..- \' .. . v"‘\ l-v’3‘” ‘ L. .zl..--.‘. . -..V ‘ o WMMILW :C.‘ ‘Q . “.-----Vn _. ..«e, ' .. ‘ I "M“ ar~,.. ..- r‘ .....‘*_‘_‘ K. V‘ ‘ U k. V “ ‘ - a v-,“ 02:“:‘ :.~fiCQ ~"t “»“‘V~\'~ ... 3 ... . ”v- ~Y‘.s. 2%.- ..‘l ‘. g..:.-¢ LA..V ‘I. {.5 ' ‘ « Q '.N~\ ‘r‘ "r‘ pr -h H...~'\vn. -.‘:1 ~ \ ‘F‘w.. ‘ ... ...-.. l h '4 I ““46, ““A . v- “ ‘ ...:~‘S \C. H ‘,—._‘ k \r ‘*‘.‘R V ‘fl ‘;~ \. . K»: I N '3‘. «vs ~‘a‘y‘q.. ‘31” L‘; V .... IT‘E‘Cge 'Q ‘~| ‘ I ‘ K“I o h . . V ‘ n. Q A me... 6 EC“ \ K . he v ‘.‘ 5 ’~. ~ "A 21" 5 ..‘n y §““.‘ ‘ 2‘ “AV? F‘- v ‘\ . .» ‘- t. '-... . Q "8 V3 0"? ‘ r .L “": _ ~P .~7‘ ‘0“ > ~.*‘:'~.“~ V K \ U CHAPTER IV THE PERIOD OF CONSOLIDATION AND GROWTH l892-l922 The Charles Coffin Era The 1893 depression burst upon the young General Electric before it had become a smoothly running, efficient organization. The panic, however, served to accelerate organization adjustment, and by no means dampened entre- preneurial enthusiasm. Both General Electric and Westing- house used this period for consolidating merged manufac- turing facilities and for planning for growth. Particu- larly important was the bringing of the district sales offices (which had been operating under almost complete autonomy) under the centralized direction of the head- Quarters Selling Department (the forerunner of the Apparatus fSaleS Division which will be described in detail in subse~ Cluent chapters). Nonetheless, the financial situation in 1893 was deasperate. The predecessor companies had each helped market (kenmnd growth by variously assisting local power and light mistomers to finance their new enterprises. Frequently, the nmnufacturers accepted securities in the local power 38 . ~ A . I‘ ‘\ r‘ C "wit —”b :.c_ - Jun—v, .... . . \ :'_ . .,....er 1'r1’5f‘ .. ~- 3.»: '1..-\'~- - ‘ V“. v rrCWZ‘ ‘Q C ,. :L..d..avv\U0 0“ .'.I.E'.."" EYE? CELLO u L ' ‘9 ....y' fig'w‘AZVICQ y- ‘ .-.. VV.A.L‘AL.J.\.U ‘._ ‘ b - - < o- “':-:"v- _ o- I' ’ ‘---~:"I ~Av ‘.. ~. ...- 4. . ' ~- 0 . , fl . "\,_W ‘1 Q fir '~-'~. y- u.«v.. A 4" "“""2”"::Q var-r " 'vw-k~4..o.\.u I- . w- . - A.” ‘W'3nr-O-2...- ‘-~nh| \ ”:- : fi'r- Y ...- -.. V--\. L. Q 7' ' ' ' "‘ _| _ ' ,g h\ «ya v . ~a....‘- 3. v.‘ J . .. -. \ ”“-:r r» -, . I. ,< v‘:".l “‘V v.. I r “ ‘ . - .. -..., LA an ..., C. ‘ "‘~M\A v..'\_. w v 1‘ ":1,“ - fin :- .. '- V- . H "‘ w: ‘ w A - ‘D-d ...-0 -0 .1 ‘ ’ 'I. -.." r‘ 1 7-, .. IA‘ ~ . ... ‘vrb vs ‘ “ _ V :‘V- ‘4 ~_'.»‘. ‘ A'v . A‘A-q: r W "h ‘ u n 2, V‘V~*L~L . V ~‘ “ .- fiv- ‘ v '4 A. ‘§ v e .. ‘ he ‘-\. _. h F"h\~ “'§..- 1‘ v .- ~g. C sly." ‘ .‘i. ,_.’ ,- .. ’-... ‘v 3 . - ' t, .. "r 1‘ . ”- a I ‘1'; s I: “I‘: H r“ en *1 h z ‘ y .‘ VA r ‘x- ‘-_o .- .‘ .‘. \ A. ‘4 V *V V-ehn’w ‘ ‘v: e "v- ... _ la.-_ "Nl . .’ ._ .. 4‘“; A- ~ vu'I‘ewg h _ ‘«y ,«rr ...-“ 1“ ~2~b,fi “v... .v- ., . ‘J‘du ‘- 39 companies, and also frequently endorsed the customers' bank loans which in turn were offered in part payment for apparatus. There is some doubt that the electrical industry ever could have come into being had the prede- cessor companies not engated in this innovative marketing strategy. But in the 1893 depression, General Electric as endorser of such loans became liable, as many of the local power companies were unable to meet the demands of their banks. Liquidation at substantial loss of stocks and bonds held in the power companies, with approval of New York bankers on G. E.'s Board (including, incidentally, J. P. Morgan) at thirty-three and a third cents on the collar, pulled the young company through its perilous first year.1 By mid 1894, business began to improve and G. E. began a long period of growth, stimulated by a proliferation Of technological innovations. Untold credit for this is due to one of the great geniuses of the age-~Charles P. ESteinmetz. Steinmetz had come to G. E. via the Eickemeyer CZompany, which G. E. Purchased in 1892, and by 1894 was "kad Engineer" in Schenectady. Steinmetz' mathematical genuus overcame many of the obstacles in the use of alter— ruating current and enabled the growing company to progress lHammond, op. cit., pp. 220-226. ‘rpcr .. ..r: S .-‘ v_~—-r. ...v‘ “0" a..~\¢ ». """?‘. I I I l . . . e . 4. I. * ..Hvu v a s . V. vl . .. ..uA. . . P“ r.... Q~ r_.. . 1 . 1 .v o « k _ 4/ a . n. . r... r; o. .r 4 ...e “I Wk. ’ QM , DJ 2. Au :. "1 3 . T A: «s. .M; e 39 . c r.” 8 Op .1.‘ 1L & v e . V” a...» \. fly rLs 1P . .. ... . oi... 2 . «\y 0‘. . P. cc cu n. ~m n. it s. i. .. ‘ .v "i... . » fly “is V“ I. s 7. C. ..u .5 I. at am .0 .n. l A: _ . Q» ~.. .a.. C» . . n .. C. v c. .. . .».. ..e .—~ ... l. C» .1. V. «\M v . .. ~ .: e . .. . . . ... a. A r.” . .\..u ~\w .. ~— . ~.\—u» .. .- 40 from the period of light to the period of light and power, paving the way for electric power into factory and home. The necessity of training of young engineers was recognized even in these early days,2 and Steinmetz, as "Head Engineer" personally instructed classes in mathe- matics applied to electrical equipment design-— the fore- runner of a vast family of training programs for which General Electric later became famous throughout industry (to be detailed later). Many individual scientists and inventors of the predecessor companies remained in the company, including Brush, Thomson, and Van Depoele (Edison himself had left active service), and hence the aura of research and development persisted. Steinmetz was conducting formal research in his barn; and engineering department was es- tablished in 1899 with a Technical Director. In 1900, however, the research activity was formalized, with Willis Whitney as its first director, dividing his time between the new General Electric Research Laboratory and profes— sorial duties at the Massachusetts Institute of Technology. It was the first laboratory to be established in industry for the purpose of fundamental research-—the few others having been confined to product development and manufacturing 2ibid., p. 230. u . I r ‘ rr- "' .r—r“'D= -a C ~C;‘. I~0-¥|‘VU "‘ V . . ‘.. rrr'Q " “Orv-" " a l I ,. . .....nu v v .. ”s. u- ,- ' 0‘ 'Y' . .e,ryr- e v ' ..-‘..l..-- , L. - . JCC’S‘S. " C"V' " -....a~u~x...v ..a...L_ s. . "r’nCA r... N H _. “. ‘ v n ....vbyu V». U. Le. hwy-n - : .— wt..g - "' “ . ‘ V-w . -‘-..f: L CO‘Ifi: \ ' ”"‘ -~v‘v~ L». ,; iT-g: 3y. ”‘1 ‘ - ..." .... .\' A... V-LE t :js:.. 1,, “~-.,‘. -\'._ C-WY ._ 9' 'v...L€'- . 1.. I : \ .‘rr ‘ .. _ Ira PH 2......”bec K. LVirw,‘ % ‘--....:r\' :WQo-:._ . .v "“~dv .A .‘ ... .. ... ‘ . A‘YJ-y. L' '--~ - FY..- "hf: “ H ’ “' 12. r a ‘ ,—. . u . 3‘31- .- u g. ._ J... V.e ZQQ . —,. “tag \' .."~ " I‘Q‘r‘ . “‘13. "n“ v“, .-< ‘ L‘bifi "F 4.. o. -.,='3 a .‘U ‘5‘. A her. 0, rr ._:- Al techniqueS-—and began an illustrious history of its own which ranks it today as one of the world's greatest scientific laboratories. Meanwhile, product and market development in the incandescent lamp business proceeded.a-pace. NQnufacturing techniques were improved; automatic lamp making machinery was developed (outside G. E., and rights to which were purchased by G. E. in 1917). On the market side, many small lamp competitors of G. E. ”consolidated” into the National Electric Lamp Association, a collectivity of relatively independently operated small ”divisions" head- quartered in Cleveland. To all apparent extent, this collectivity competed with G. E.'s Edison Lamp Works-~but it was financed by G. E.3 In 1911, the United States Government instituted an anti—trust suit against G. E. and thirty-three of the ”association” companies; G. E. submitted to a decree; the National Electric Lamp Associa- tion was ordered dissolved. Even before the decree was issued, G. E. had exercised its option of purchasing all stock in the association and had become its sole owner. The association headquarters became known as "Nela," coined from the initials of the association; the affiliated lamp companies were merged into G. E. Thus came into being ”Nela Park,” the familiar and famous home of G. E.'S Lamp Division of today.LL 31bid., pp. 300-301. “Ibid., pp. 340-344. . . . . | i s - ... -. .. .... .. r. E . . 2 1 .c o v e n V” . 2 . . \ . _ WM 0 W . . #1 a; 3: r“ r... a . .0 ... ..C :1 Cw a.» o.“ R.“ a l Qy *. (C r. e r“ _ . S 7. .w. .. -s 2‘ 5: T S . I n. E S .T E l t T Q d w. A. ”A mJ e 1... w“ A.» .c E .2“ j .i. \. t. 3 d ... ..J ..a 2. QC 10 .-.. e :N s . S l "J .7. S n. S r... . E . S 2 . X E .r t O .G . . 2c N n P r. e a; a; ... .1 n n o O l . o E E at 01 e 2 D n 6 no QM V4 o n—a —hlu 5. g a . 554“ h‘ ‘ ~ All» «fly a, w h.‘ 0 ... ..-: L 9 . . r“ . A.» Cy fl. . w” ... . «Wu “J O . Cw .«l. a” .. .r . .. C» a . c» h. 2.. CL C» ‘0 .... ... .. m“ . . ...“ .... .. I“ a e... .... ... .C .... pr... ..rm rm ”a“ ..“w ...... ...» a.» .. .. .... .. ‘. .~.u Us. ...—... _ . «rs .Msd» » .m . . ...“ ..W H... .. . ... .... ... .. u... .... ts ... vu ... ~u .. ~ A2 The young electrical industry was rapidly expanding into the fields of power machinery, developing applications in rail tranSportation (locomotives and street railway) and in industrial usages (steel mill motors, etc.). Important inventions by G. E.'S Alexanderson and Langmuir in the field of radio transmission put G. E. squarely in radio research and development as early as 1906. By 1919, when these G. E. scientists had developed transmitting equipment capable of trans-oceanic transmission, G. E. was considering the sale of such equipment to the British Marconi Company. The United States Government appealed to G. E. in 1919 to refrain from selling to the British company; G. E. then itself entered the telecommunication industry by purchasing the American Marconi Company and establishing a new company to serve as selling agent for G. E.'s radio products, under the name of Radio Corporation of America. (By Federal Court decree in 1933, the common stock in RCA which was held by G. D. was distributed to G. E. stockholders as a dividend.)5 In 1913, Charles Coffin, having served twenty—one years as President and Chairman of the Board, relinquished his duties as President. E. W. Rice, who had entered Thomson- Houston thirty years earlier as a clerk-assistant, was named 5Ibid., pp. 376—42u. , .i , "l 991,» r ‘.!«'\Fr‘ ‘3 " ~ 'JV--L.. .- _..~odv.nv 0 ‘.:r U. “Q I .— .«-..\r V ... -.‘2 ”:1“ c.‘:.pn'..o—.. ..‘v' ‘v v‘ ..4 ...- A .- . ",n~~ ~.. ,- - . _ ";,_‘ ‘1 Y ~c-- wtvvJv.‘-\, . 4 . “ "wwf‘ - ... ’ o- _ j ‘7 '4" 9 r {4 "‘ '-"-‘-4..U 4- - '30 .: 0—,3 . ‘,1Q._ . “" V'-V --- y. ‘ .' a . - f3“ ‘ .r‘ ‘ . 3 "' “VJ—U ‘ 1 . I C ) 4 t3 5 I Ar‘. .. 7:”;17-‘25 3| c ..celq‘fg , .—. - ’ - 5n . ’~ “"~.~ Y‘ t, "3.; ‘V‘Q‘. .1“ “V ‘v ’3 i'fin ”I “....g; .V. ‘- .1, sy A ‘. Was bag“ .,u~ 43 President. Coffin nonetheless apparently did not relin- quish his "keen supervision over (the company's) affairs."6 Nine years later, in 1922, Coffin and Rice retired, and the new executive team of Gerard Swope (President and Chief Executive) and Owen D. Young (Chairman of the Board) took command of the company's destiny. As the first executive generation left the active scene, it could look back upon remarkable growth in size, sales volume, diversification of product, entry into new domestic and foreign markets, and continuing expanding technology. As the historian Hammond proclaims somewhat poetically, "General Electric (in 1922) was more than a manufacturing concern. It was an institution of science and engineering, of vocational training and of character building, an institution of wide social and economic in- fluence.”7 It was that, as subsequent chapters will amplify. But there is no question about the successful growth of G. E. in its first thirty years. But despite growth in many dimensions, the formal organization structure remained unchanged. By 1922, it was still basically a simple line and staff centralized structure. Of course, there were some changes and additions; the "manufacturing and electrical 6Ibid., p. 349. 71bid. w . V- .2 V'LQ Q‘Hx. . . ..-‘V’WCV‘ ‘..4U Lr—r- " ...vco" ,7... H ‘ ‘1“V'b“ 7.- . A - "3' :..€v-o ‘_,_. ..1 '-' ‘ 6—,— ~- ,,.-',. Tcrqw’; 1“ .. ,, ’ v .—:._._ Hat-V- Jr ‘1 fifi .V . ‘O , - A‘f n Q...‘ - J-- -I u‘va- - ~V .- *'_’_ -r‘vw-“r’w: '7 “:1- A:-..: - .. - fl (.V-.’A,.Q r- 4 “WW. 2-.«---..U, v.. .. v- . .. 1V. :2? ., O. Q "" ..- V v ... ' -- , .. P‘Q _Ah~:, fi‘ --...Lv VA >4..‘_. .v , ...- ./ --- _. « q. q — ”‘C‘,’\“Vv~ ‘Q (_ “ ""v AVA... ,‘_ «jug-2,»: ..".e 1 PW. P ._‘ _ .. n "AA: v.. ‘.‘_~.k A " ra: "w- . .\ » «..., -J.L __..¢_ 4. A "‘ >4 ~ , "-M ‘3'..- Snfil‘ V .‘-«v. _ . \v..v “Vb-Ax}... _. “:"u h . ., f, ‘ ‘r-med d 883. -L :--.- , ‘ ‘ ~..--..L“h ,ZY'p fl .-, r“ in.‘ (I. \. 1" ao‘ . " A ‘ ‘N s F‘V‘N. V ‘ ‘ “-KL Ear”. V .. VA us. \ ~1‘~ . v ~4V In}. a ‘9‘ , “x ‘ A .. .-..~7 '~ - i. Q ~~_“' T‘Y‘flr‘n v A.-\_‘ ~\ :r ‘u‘. ‘1. \a "v x; a: . . ,_ ‘ -...“ Q .‘V‘ .‘ ..\. ‘4‘ W“, ‘«\._.‘: AA department" was separated into a "manufacturing department" and an "electrical department" in the early 1900's. The Research Laboratory was added as a formal function in 1901. Other staff functions were added periodically. Regrouping the above conponents as staff and operating functions, the formal organization structure at about 1910 appeared as in Figure 2, page 45. This organization structurally is unchanged from that of 1892. A modicum of decentralization was accomplished by separating the lamp business from the above structure around 1910. But this was probably an accident due to government action.8 As noted above, governmental action precipitated dissolution of the National Electric Lamp Association, and G. E. Formally assumed operation of this group of engineering, manufacturing, and sales functions. But while formal organization structure remained basically unchanged and the executive organization philoso- phy remained unchanged throughout the Coffin era (1892- 1922) great changes had occurred in other dimensions. Although by 1920, the company's manufacturing facili- ties had not diSpersed geographically to any major extent, centering mainly in the northeastern quadrant of the country, the number of plants had multiplied over thirteen-fold, from four in 1892 to fifty-four in 1920 (Chart 2, Appendix I). 8Note that this is the writer's conjecture. President ] Research Accountinfi Law‘ Treasury STAFF Lab. D t. D t' D t‘ ep ep ep FUNCTIONS (Engineer- 7 - - ing Mangiiing Sales OPERATING Dept. Dept. Dept. FUNCTIONS Figure 2.——Formal Organization Structure, Circa 1910. . ‘ "\ We “ECOTCEO ‘ &-\.t0" ‘ .1 'l‘ ...; nnAyv eAQV ‘ g ':.\—1 . v- Au .0 v NVJ ._l ‘N "W" i‘rcs - > 9.4-4 ......» - P 2 *r 1. JLYLL‘.‘ Q . ‘ .n. ""vU~ g.“ v. ' ‘ ....,...., “r . ‘ y. ‘- '_p ,4 --..»I. .. .. . ‘ -r ‘ : rep.‘c . “ - ..-b ‘L A -y , V .4. ..g ‘l‘~ \ V«U"'~. \'-9-. hr” ._ ‘1‘ 2 039.6 V..\: - vc.‘ ’. ‘ . - ~ -_".‘Q‘~TV‘: (“\Vzw,‘ . .-Qv-.s:: -V-,._“ w..' “- .‘ - ‘ ‘ ‘ K I 3. ~. ' .. ..rz-€ 09.6 ‘ I Q a“ . \. m ”E "e c.. ‘i, V“ ‘9 la y.- .. ' . I I n . ._ . lcn ‘lv - - ‘ ‘ h ’ .‘§.;b~ {'6‘ e l . .2: r. !.f‘. ‘N ' . _ ' .1 4 ' ‘1 ._ ' ,! vs... 6" J.“ in?” a ‘ - ‘ ‘- . ..‘.' r‘" q “C5 ... I“. V..*~ L‘- . c. .‘ . .. .‘. . .. 2Q p,“ > ' ~A§9§L~ J; 02" ‘ . ”‘5- _ ‘ « .r“" ‘V ‘u, . r ‘~| fl .‘ . . I ”E SEQ-A"- ... C k. D (0 ‘ 2‘!“ . .‘_ .'., .§|*_ ‘1 AMY ‘ F ~ ‘I v J..Q - .. r .... a .1 1“” ‘- . ' ‘k.e Chm . . v»* A“ Y a“ K. Mi.‘ L‘: " A ‘9 q C‘A‘WY-A k : -..‘ V“‘\.: v ‘ :~ a,‘ . k ‘. gr) fl . -. ‘y‘ y I , r «A V‘. 3‘.e :‘r‘ ‘- n r- “ IV ~ A rm”. . ‘ ..A...k’er) r0 \~ g ' ‘ ‘I . .“ “hm ‘ '-,“. I ALI‘ \J .. U ‘ V v . r ‘ H H” 1. ‘ ' 5‘ JQAC“ 7 .2 ,. .: A ,3 v I-L_A ““‘ehe‘f“— W I ‘~_, ‘ rr . id 146 Equally dramatic is the company's growth in the dimensions recorded in Chart 3, Appendix 1. Sales in- creased from eleven million to 276 million dollars; employees from ten thousand to eighty—two thousand; stock owners from three thousand to seventeen thousand; number of product lines9 from five to eighty-five. Of particular interest is the last datum; the increase in product lines during this period was due to increasing technological innovation and the aggressive creation of new markets-— in this period, capital-goods markets for engineered products. Note that this great growth was accommodated by the existing formal organization structural form. As new products were develOped, and new markets created and ex- ploited, the new engineering, manufacturing, and sales facilities were ”hung on” the existing structure. We have no way to evaluate the productive efficiency of the company in this period of great growth, but certainly facilities of capital and labor, and output were increasing sharply. We assume, therefore, that the growing technologi- cal and economic sub—systems were able to grow within a relatively constant social—structure system. 9The term "product line” throughout this study is de- fined as a compatible group or "family” of products grouped together on one accounting basis. A "product line" will in- clude a number of different individual products. For exam— ple, the "product line" distribution transformErs (included as one product line in Chart 3) may include a hundred or more different models, or types. .: .4" “ADI-3'. .1. .. ~’v.--.-, . . n 'u... .Cyflfr{n;i ..L...' ub‘v.~.L'V-A..4_ . ‘ . ‘-Ipl'~fl r ewf“. ~ ~\\ ....”va ..v $ to ... . """‘V‘:: p‘fiw "~"-M«« A...... n) D t, t «‘0 "1’: ~- I L 147 Thus, after thirty years under the executive leader— ship of Coffin, General Electric was ensconced as a large, fughly technically oriented, innovative, and prOSperous business enterprise, with basically the same organization structural form. ~ ‘ ' "” ”‘3 e e . _,. ~~.\. - r 'x- .- :ncfi-‘o-u'yye , ‘ ‘ -C. “‘"\'Vv‘v-' L-- h- “3 "~v- an r( H -.h [‘V-t p4. k” - A I . ‘l 1... .. -.--,1'- "2“‘V. -"I~"‘: o-ewv - L ...... . ' _ .“‘; ‘“.W'u"‘.'~ . » ~».-,‘- K-~'H... . V n", . ":‘{'\w (10" Y‘V.1n‘ “..v"-l"“ v f-A VKA 4.- . I ...:htfi‘.“ 'n " .- ... ......w..-t, c,‘G 1“ .. ‘AL «xxz‘f‘d P‘- ‘2- 71“ ~v-‘ db V.- ;;..‘:h ‘ I ‘ I"‘ e r” l ’ «Q “ v I‘l b0. ‘ 'yv ‘ ‘ . ..-.” 3‘ ~: r" "15's :.- ...V .. V \, .L.. ‘l 1 .. . 2. r,».'_§ : q .. L‘AQ“I\', L", . "“v-..Q ~‘ M“. Q ' I “I k. ‘9». 4:16: ‘ - w: 5-... . . .- ”‘22-“...‘1n Ixo . Vy‘~ K, 6‘- ¢ :I“:cy~.:’_‘1 . ‘ ._‘ — ‘ --. lei leg- A”? \J‘ v: I\. ““v . ~. ‘I F'rn , ." ' _%.s V.“ p- “~VEPQ - . ‘ q I «u F_“' .. std} ld T AV“;\ “’vr“ «ivy-Q ..AQ QT“. ”A.“ ‘ ' . . ‘ . V,“ ’ 4—“ | .‘U 4.. a) .. . .Q . ’ ~. r“ \b C ”7“ Y ”"b'e*' ... F'TH'P‘“ r-I— ’ to-J-s-v~ r— y-. CHAPTER V PERIOD OF CENTRALIZED FUNCTIONAL ORGANIZATION, 1922-194O The Gerard Swope Era With the election of Gerard Swope1 as President and Chief Executive Officer in 1922, General Electric passed fronlits pioneer period, and entered a period of growing humistrial maturity. This was to be more than merely Phyfkical growth in physical size, sales volume, and diver- sifixaation of product. Significantly, under Swope's leadexrship (and that of Owen D. Young, elected Chairman Of tile Emerd at the time of Swope's election as President), 9Xecnat3ive philOSOphy changed. General Electric came to be SOWE-”thing more, in the eyes of its own management and later 0f tiles public, than a scientifically oriented manufacturing entexblxrise. The forces behind this changing philosophy and .Ffl?actice of executive of management and their impact on managerial ideology in the company will be described in late”? <2hapters. This chapter will describe Swope's \ S 1David Loth, Swope of G. E. (New York: Simon and OEknifiyter, 1958), provides the source of much of the content t is chapter referring specifically to Gerard Swope. 48 . 1 ., pnpf' Y~ W C..:a.&-boe: c. La the..- -..' v '_ V. ‘ ~2Y‘ gs s“e, c"9*~ .. 1 1 3‘ ’ were -ce“ ...... $M‘ " ‘ .r f Ar ..-‘w.. .'--.~-n-u v AV}. ....,:.,:.‘.1N.. )1 I . . 'p‘zur‘V ‘r " r ‘I r‘ .. , _. -.....-..I~, V-A I L6 ‘2- . w v 1"r'r~’r~'v "Ava" ‘ p A I H ‘ A -v V.u4.-’\-A~F Ally- v4 - s. ~. .. a . . v -...“e b-‘..o— o- 1‘ .- “"-v*. o ...(v ...f ’ vul- ' - -Y’LjQWQr-- v... "“"‘:V>-«\-..u l . ... "'"YAQ ‘--..A_ . , G‘s“: \- ».4.4.._. V w * Stern A. v4- A9 eXpressed philosophy, his actions as President, and the seeds of changing structure and activities of the company. To be sure, changing managerial philosophy and its impact on managerial ideology are variables beyond those of formal organization which are being described here. Strictly Speaking, they belong in later chapters which deal with the changing moral order and the changing totality of social structure. But the changing philosophy of the new execu- tive management was the genesis for formal organization structure change, which change did not culminate until the next executive generation. It was a significant input into the process of change, and,therefore, must be presented as a backdrop for the remaining discussion of the change of formal organization structure. Swope was an organizer. After graduating from Massachusetts Institute of Technology in 1895, he was em- ployed by Western Electric Company at which time that company manufactured not only communication equipment, but power apparatus as well, hence, competing with General Electric and Westinghouse. In the next twenty—four years, he was successively electrical engineer; salesman; sales manager; general manager of engineering, manufacturing, and sale of all machinery business (including the large Haw- thorne Works), Vice President of International Western Electric. ‘ d "‘ 'l‘ 7‘: “- "' r- Y‘ . \. J.€:C€ v » ' O 'V l‘ ‘ -v:;-V'i"CY“V U DIED J... ...-Auk“ " .-‘— f‘ v , ‘c ---1. ..Ar-qr c ' . .’-3.--'C :1er .-M' y. . ..n .1”, :..,- "*C ' ° ' z. use- ... s. -... ..v. . .‘ I ‘ a. .. a u?» ‘Ap “7"“ “ T «:--:U at-.. - _. I“~A"fl&-: ,— _ H ,- .‘-=-V.‘¢v".. ... afra‘hq ‘- nfiv‘:~,—.l . _‘ ‘ ‘ ......»~ We Jt“\. _. . ‘ O ‘ -:,-.-y~ V‘ :‘NQ . '_r “......L- g~,,“~‘ - \ i .::-»~:.1 4.. a.',-c_ ,. “h"“4- v... ‘..-‘- -1» W ”27'6“: T: L 2‘ u-.. g .4 ‘V \ Ll“ no AV“ A t" ‘“ 4..-: CF 2: 2 . “i x... ~ ‘TY‘I. r' - y * ‘ V‘ 2 Qua-A ‘1 .L r" C \r A‘ “*~ ‘:.‘-:~ I». . .-....gemeyu. .1- £ \- ..v ‘ h‘-~\ 2h...- A .,_ (‘1 . ‘ vvr‘n *V I‘l ‘~ _ “~:‘“~"'~1.. 'V“¥"u"‘:~1+~‘.— .- ..‘ ~44. - "\ '\.‘ VA‘g ‘ylv‘v h ‘0 q“ I .,.. . ‘9‘ “‘v ,1“ A.‘ ,‘ . ‘E \ ‘_ . ‘b “'32,,~ Q ...“ \‘ V O A. \_'-.' j.— V '5- >\ \\ RV ‘ ., :‘G . t ' P-o~ve “‘k ‘ ;"-'A ' si» ‘vv‘.Q ‘ \Q \nik. ‘ 7‘ ‘. ‘Q \l- n‘ ‘ ._ :"m a“ SO Threaded through all his experience at Western Elec— tric was Swope's organizing and systematizing ability. He had reorganized Western Electric's selling operation, re- organized the Hawthorne Works, reorganized Western Elec- tric's foreign operations--all with notable success. He was called upon for particularly difficult special assign- ments--negotiation of sale of Western Electric's machinery business to General Electric; reorganization of sales com- pensation plans; negotiation of purchase of patents essential to the automatic telephone. General Electric hired him in 1919 as President of International General Electric. Here again, Sw0pe embarked upon a vast program of reorganization, including the setting up of International General Electric for the first time as an autonomous operation. Early in his career, Sw0pe had formulated an approach to management which he called, ”analyze-—organize--deputize-— ' a phrase to become widely echoed throughout supervise,’ General Electric management. Swope practiced his formula diligently--although some of his critics maintained that he did not practice the ”deputize" element. Ample evidence exists that Swope was a dynamic, strong executive who made firm and prompt decisions and who held very close control. Swope's election as President of General Electric was viewed with concern among the company's managerial rank and file. The company had a strong engineering and u In-r'" '1 . ,‘ .l—i 1v- «Y. ‘ Q". .- ~a~JuA VY“ ‘V“v v. find" I. .-. . .I A“ ' _ n : NW.“ SH . .--. ' ...-..u-U\-v- ' . ‘ ‘ .' rvr - ~ fi‘ . :rfl 0 Q ,. ‘ -. “L _ ‘4 ‘ ,4 ...u ..-w . . O (‘A n I“YI""_V"" p. ...C AEJAP.¢\¢Q‘~ . . ...—rum” .._\ 7’65.“ 3 ‘ “ A ,_.-......;.\.U, v i . -u \- , ‘ P' wl‘ r r_ v, ..V‘ ...4.. ....4.. g ‘ I “0‘" Q '4 r‘r'n-x yhgye U 1‘ L Li'- - . - ‘ I" "\r ha 6-,- .. ..-AuAJ.. b4 v..e ‘- : '“V‘AfiAn:~ 2 . . Y‘ "nZ. ~y‘:.v¢u'" A. L‘- HZ" ’19- ...“ 3 “1“: e: 3". EC .‘I-Vfigw‘ _ . .. v _. Y‘.‘ ‘ "Ri‘..“.-‘ \' . -.: -\~ C495 ‘f‘ . . '-\.\.\' ‘V E .§ q _ ”an .. ,. . . - 3" «‘ A r~-Q‘ y "‘ \- up ‘. ‘.~.'N ‘ ‘x‘r‘ -s Q‘s" ~ v ...- ..‘v‘- I -.: ‘17:." ‘5‘.” - “""'~A\. re ' ~‘ V . “v, .v. {\tt's wf_v_ ' 7 j ...‘A.‘--: ~ .‘r‘ ‘ ' A‘w- ‘. ‘«-..‘. b“; .. .‘ ~.‘ V.‘ ‘~-. ..Q 0 ("y S‘Tw7-- ‘1. are”- : ..‘~: .. ~ \ 'r .{bi..€—SS 6"6 ‘3 \ ‘v~ d y: - ...; «F‘QV‘fir ,. 'VVJ Q“ r 4- ‘-~__\ ‘1‘7 ~ 4 w' AQ - «d U1 rs: Q ‘~ . ..‘U .r', v 51 production orientation, and Swope was regarded as a "merchandiser." His record of reorganizing ability preceded him, and his appointment stirred no little alarm. The reorganizing started at the top. The Board was reorganized, to reduce and ultimately eliminate membership by any General Electric executives other than the President and Chairman. Swope's approach to executive management and his con— tribution to the changing orientation and activities of the corporation can be summed up in the following six broad categories. Changing philosophy of executive responsibility.-- Swope viewed the corporation as a broader institution than merely a business enterprise. He felt, and his person— al actions demonstrated, that an obligation was vested in the executive to enhance the security and the human rights of workers, management and labor alike. In this he laid no claim to humanitarianism; he stated publicly that this view was simply "good business." He overtly declared that the business executive must lead in the development of the social reSponsibility of the corporation. In this he was ahead of his time, and was viewed as ”radica" by many of his executive peers. The building of men.--Swope put into action adminis- trative actions to prepare men in the management and -\ .r- ,- .— 6' ‘ _ r l .. ..M-Z‘; . it: . v ‘ ‘ . ~ aLy.” -‘ ,_~ <4". 9 {-V ‘ v ‘- r*.c:mpf‘.' re - ~ :..:v-bv-"’, -4“ \ n“Y\fin .-'.Vl -‘ ; V‘ f. Ely“- ‘V v ..‘v-- fl .3.. ~v.",“"-Q A. W, ' -... 1 by V- """ ~ . ‘ .,,.. "y‘fl V‘fi“"‘ “‘Q -‘ —- ‘, -... «..u 1.1- 4‘ ‘ “‘ n O . 2....qu—‘vv q -h-~-- . *‘ -u--uv‘-‘: K, -.-- .* a ‘VV~YP~:.‘Y\ A.— ' -‘. Wr“_ ‘ v ...-.a.-c.. ...C- - -..; \, .. A- s- A . nfi‘V“\ ". ‘v‘v v “ i--- VU“ V . .. I . ..' . . _ ‘r', ‘ "t.fir“~ 3 u L~ ‘ -- .. _o ‘- .... » ..a .- .... 9 --‘v .A tr‘ ‘ - L56 \A‘ h‘ . .‘ :_ : .fi'xv—v—rvi-a. - .~ ...... , -,_r“~~ -.A ~~-...g,_i‘ , . -' g -- ....“ ‘ ‘ .. .. ‘~‘~ Ce C. "\V-r‘ - vyavk' 3 . a - ~~.. ‘i‘ JVA-.:; rye" ' C. U ... ‘n - \ VP. ...... sqc.‘ V . *».\_.L {67“- h 2" ‘ I ‘ **. o ‘ ‘— U ‘Q. .,‘: : " ‘~.* Q“ L * __‘S~C>~-\ . \...u~\‘ M“ ‘ "-_~ ~C . a ‘.»v \F \v K—V‘ o.‘ VM‘. 4' "~ c. .,\ : ‘WQ '1‘», :V‘ N “HO a l .. v.~| :‘r‘ifi .‘ I. V, {‘L' -s. Q. ‘1‘ \ .\~ .— \'--. ~ . g. ‘ uV‘:\fi ‘v*‘3b ~— ¢s Q‘. ‘K— ‘— ...,” ~ ‘4 Q‘I A .‘ w ‘. .. fl.- ‘ law? ‘\4 w ‘x‘ V t . : y‘ ~ '\ “‘\CQr} s.“ :Q “K; 2, . - ‘._. Y‘ -' . k. I ..‘fix- ‘ K ‘ ~. ‘2‘» . ~\"~ Bl: - 'N ~L\ ‘ K. 1" '- 52 sub-management levels for greater managerial responsibility. As President, he instituted practices he had developed in Western Electric of holding "management seminars," in which groups of managers from diverse work functions were brought together to gain the ”broad concept” of the objec- tives and problems of the entire enterprise. He initiated an "advisory committee” of twenty-one top executives of the corporation meeting monthly to discuss individual group and collective company problems. This did not mean he relinquished control; all lines of authority clearly focused to him. But it did cause a new awareness through the growing company of a sense of personification of the company. He developed the formal practice of "spotting” tal- ented young men; every manager down to the lowest super— visory level kept a "PYM" list of "promising young men," and passed this list upward through channels--a practice which remained in vogue until the IQHO s. (Evaluation and rating systems will be described in detail later.) He began the famous "Island Meetings.H Some years before, and before its merger into G. E., the National Electric Lamp Association had purchased a small island in Lake Ontario, fitted it as a summer camp, and named it ”Association Island." Here were held management meetings, unofficially referred to by managers as "adult education disguised as a picnic." Swope used the Island as a medium to further his objective of establishing management group to Y 16»: i '1' - °‘ ,. ‘ -..:‘1 . '*“w i ce.;ll .....-u‘v . ' ' X‘M‘ - .1, _,; .. C ..:...€u v3 “fie ~ .~ -"1rQ.-:.".'pr -..Uv‘v‘v" -y ' ' -' v.4- L~ - .- O .\ 2", {'0q.-.' fly" I" 0" ‘UV-.. VJ .. p;;f\.fkr1~: '3 ‘ - - ’ AVIQ ‘l " "inevu 1 . ‘ "Q F.‘: n ‘V‘fi- -..v ~A-“U‘-_l _ ‘0 I "A v” A. . :Z.-. .4" .S *’“c_ m ‘- ‘I'hv '.-\' V . ~ a v. ..1 - --... V‘ZV'AJS! aw.- -‘..“‘\‘~u.~ w “h‘ "A ... ‘ ' Uttmflfi ,. ‘Fv- o‘y--\v “V ‘3‘. . , . . Y‘ Q- .--I -.. VT‘E 113 Q C V \ ‘.' I.‘- .2. n“.— ‘- i‘. "’ F , w~ ‘ ‘v u“' vue \ n-.~“F‘ . q ....S 311‘ 1c en "‘ l :55“.._ "“'EC the d. c. - 2: A‘ ‘Q A. t‘ ‘H.'. r50 “B I. w‘ L a“ §,“‘ L.“ \' ‘ " N ., Euis’nw ‘ V-‘ ..~ . ‘w: \ meetings to view the company "as a whole." (Part III will describe in detail the function of and the meanings attached to "The Island.”) He instituted the "Elfun Society," a quasi-formal company-wide management group designed to encourage "extra curricular” attention to overall company problems. (This activity and its impact on managerial perceptions and behaviors will be detailed later.) The building of company image.--Although by the early 1920's the company was well known in the industrial and financial communities, its name was little known in the public at large. Swope and Owen D. Young agreed early in their tenures as President and Chairman reSpec- tively that the name of G. E. should be promoted broadly. By mutual agreement, Young assumed the role of ”public re- lations officer," and for years was to devote much time and effort to the development of a public awareness and favor- able acceptance of G. E. One of the first steps was to put the G. E. monogram on all electric lamps heretofore ”branded” with a wide variety of names identifying the producing unit (National Lamp, Edison Lamp Works, etc.). The company had become unified internally. Now it began to present itself to the outer world in a "unified” sense. The G. E. monogram appeared on each of the millions of lamps, beginning about 1923. .. \- - -A... ..v a.\— U " -S- .' o— v‘ .' A ‘ Q 'v- v. t . __,J-V VJ .. -~ . - _ ' r ‘ " V. " ' J. x . 'I Q 4 'IC- ... ‘ ‘ - O .-.-A cup )-:r-€ _‘ ....C .... ....... . - ..-l «v .n can .«fi ’D— U‘ V ' , V“. ‘-v. ‘ - ..uw -v‘. a ‘ .‘.“ ’ .-.;~,~A .fi V‘“ '- 4 «E ...-.C _L. ._~._-‘ “~y:: 5;» ~'—€ V. . . ...u .‘ ... f” I‘ . ‘ e: “ :1 r‘p r, .‘IU l‘-‘ k» kl 1.4:nw A?“ h 1“,“ . ‘ A L .-.-.-., y- .A ‘. : .— V . _. '2“ u‘hqfi {v- .....0 ‘*‘UV, ‘v ~ 0 u . Vy-hr‘ A Q‘Y.~.‘- -...| \.-... -A by- _.__ y .. !‘-=‘-s‘.‘“:“y‘ 3' -. ~.U~-vdv-v.. ‘- .‘n_- \ ‘ - ‘_"\:fi ‘ (2.. ~ "-"‘VV V \v uC‘ ~ 5 '- . . C flavvy—ny.-- :.- . "nv ’ ,— “.‘kfi'l' *.~ ‘."I “r Q‘Wr-e. c ., _ «..--.. V,k‘ '6. S . Kn v _ r. .-.. -. .. " ‘ - A -‘—n J 'Q l. ‘ 0 . {4‘ b CE“. -‘ r.:‘ ‘ . “A ' _ ;- A -....lrx 1,, n -.- .. . ‘ , v‘ .‘v.‘ . ,. . .z “-,.1 : .. . - \. ‘ ‘ A ~ 7 ‘““L‘L re_ 3. ~ __~ y ' \ s V ,- ‘5‘: “*1; x H ‘ "V‘us. .1 V‘ “'\ h . ‘ \d A.‘~‘-E$: ."‘ ._‘ r «a . . '. ‘ fl» 1 u; . A __ we . , ~45 .a‘ I". . . ,‘ A. I g,\(..vvhl ‘7‘;— , ..‘ H r ”‘4 k6: f\ .1 x.- n 54 At the same time, and as the company began more broadly to enter the consumer-good market (discussed below), a well known advertising firm was retained to promote the name of G. E. The famous slogan, ”More Goods for More PeOple at Less Cost” was coined-—a slogan to become identified with the name of G. E. throughout all sectors of the public. As will be discussed in more detail in Part III, this building of a highly reSpected public image had a two—fold effect. First, it tended to make synonomous the name G. E. with a strong, vast, and economically highly impor- tant institution in the minds of the general public; second, it tended to develop and reinforce an awareness of greatness of the company in the minds of company personnel. Public opinion surveys conducted periodically and as late as the early 1950's demonstrated conclusively that no brand, trademark, or monogram of any industrial company had as high public recognition, or as high favorable acceptance. Diversification and eXpansion into consumer markets.-- As Swope entered his presidency in 1922, the company was struggling under the impact of the 1921 depression. One- fourth of the 1920 labor force had been laid off; the long heavy boom had been arrested. Many management people, inside and outside the company, felt that future industrial growth would proceed at a slower rate. Further, many n _ . .. . . . . _ . u , . . I I ‘ . y . . y a .. . n . . c . A ’ . _ . . > . .. u. . n * : — .r . .I . a _ y. . ~ .~ ~ u . p. I t _. 5“ .. “r. C e. K .. .... J .: n, . I .-. ... .. a a I v .. I . . . . u r , . u a, _. v .v.. .4 ,. .. w . . u u. * ;. w: 2.. C. - s. .. .. v . ... . ,. . . c . .. . _ Z r; N“ .. l w... . . . 3 . . m . ..a . a ‘ Cw mg I . a: n. _ . 3“; WM ...l . . x. .c a... 2. ... . T. \V 2‘ r;. .... ... . . ... ..-” 3 . a: H- ... 2‘ g . Oi .54 CV n.» ..A‘ «JV 3. A . . f” 3 . I «N» .fa- ‘3“ _. .. :w r: Ct. . v ._ . .. e f: ... «C n... . . g » amv A: «C ..i. J“ . . :5 :.~ :— W” e v 2w . I. . o . .f . g y , c -4 ah» «N» s V v».- :\‘d V“ w” an; I. . :» :~ ~_ _. W . .. «..L ..w ‘ s5 .. .. ...». .4 a « n~d ... .1 _ . . . . a . r . E g .... h. a . .fiu s :w w; ..v ... .1 . ~ - . ... - 3‘ . e s. _. e an» \ v ...a .. .r . .. u . ._ _. . ”\~ fl. . v .a. e v ... . x s . ..u. I .4 .... ... ... t .‘ . . . ... .. . u .s. . . . r . . . . l . . l . . .. ... . . .. w .. . x. .. . .. .... \Il U7 management people within the company having witnessed tremendous growth felt, and so expressed, that the com- pany was as large as physically possible. Additionally, there is.evidencettat highly placed people in government and elsewhere, still recalling the great trusts and their social impact, felt that the company was at maxi- mum size "for the safety of the company." The company was large, and powerful within its industry, in 1922. It had become the fourth largest in— dustrial corporation in the country in a short thirty years-—significantly with many of its founding engineering and financial fathers still actively engaged in its manage- ment. Its volume of sales was double that of its nearest competitor. The company centered primarily on the power industry, producing and marketing power—generating appara— tus for electric utilities and power utilization apparatus for industrial firms. The consumer market served was limited to that for electric lamps. In Spite of the widely prevalent feeling that the company had reached some kind of optimum size, Swope saw new fields for the company, and made the decision to expand and diversify the company into consumer markets for electrical appliances. This decision, made early in the 1920's to diversify the company's business into about equal thirds——capital goods, industrial—user goods, and consumer goods--was one of the most far—sighted :r“ v a- -‘--v..u_l \ N— "H -.. V- 56 decisions in the company's history. The resulting addi— tional decision to enter the electric refrigerator market on a mass-production basis put G. E. into the electrical appliance business--a decision which, with a steadily in- creasing array of appliance products and a concomitant buildup of advertising and public relations made the G. E. name a household word. Development of ”employee benefit” programs.--Swope consistently maintained that "men were more important than machines." Both his critics and his admirers agree that he was a pragmatist, and not an idealist in this regard; Swope was a superior organizer and integrator, and possessed the executive talent of optimally mar- shalling and deploying all resources, human, physical, and financial. He frankly rank—ordered the various ”publics” with "customers and the general public” placed first, followed in order by ”workers," ”the industry," and ”stockholders” (Late in his career, he placed ”workers” in the first position).3 The emphasis on the workers as a vitally important resource led to implementation of a number of employee- benefit programs. A pension plan had been initiated as 3Loth, op. cit., p. 162. 7‘ "‘ ‘1 .. r, A “v" :\ J «...,A ' in. -_,-’ , ...... . f‘ v- ‘- -- 'rA “.Awr _Y' L i F‘ ‘ .. .4..I ...u v- \— l. . .... . - I . . . ._ 1. 4 ~yew~ - ..A ‘ . . ~ V ‘ ‘ _.~ L--.».~ -..-y- . ... a Q-‘ ‘ 2."? .. 3* . -...»lo ~--:,-an -V _ ’3 ~ ”“7 ’ ~~u1 r_ "’"‘ ) o ~- «. ' ' —‘:~-. —- v.- . f" ' -..-a ”..-- ._ ‘ rl‘.“'.-,r-.~. § _ _ . .. ,4 . ..,.. g- __._ .4. ‘~ . V _ - . ‘ V ' . O “,,_...¢...,,_‘_‘ _‘ ' -"— h—n ~,. V..vv-l.-_ I vs. I‘ ‘ F:‘Y‘r\'- I“: . A¢_‘\.~_k“‘ ‘.,, ‘ u ~ _. § . “3"»: ~-.-- - - l “‘u." v‘... \ \ ..._..\. ‘5'... . ‘:u ”C. r 5 V..\_..~ 3; ..'-‘ ‘Q «o. A - v-» “\/v ' V \4 r: I" v ‘.v ‘ A _‘ .4. E. ...?“ x.‘_ at: -_ v‘ ‘ g“.‘ ‘:~ ‘ y; ‘ ”.h‘s .‘ _— ,‘, «us-s" “hAN‘ v I .k" -‘g‘ ‘ V y. . I" I ‘a. h‘f‘.“ V‘ «C .“ ‘ M ‘ r". ‘ r‘ ' ‘.::. , Q “‘\o ' H W .-. ,.\ M N n . \— n‘ A Q "‘ a ‘l"“ ‘ § v " 5“, k~~t f V.‘ .- : rip . 5A“ -L_‘$~ ‘7‘ \- ‘ $.~ ’— P. v‘ ‘7‘ early as 1915, and was greatly expanded in the 1920's, with the company paying the entire cost. Numerous other programs involving insurance, health benefits, savings plans, employee training programs, unemployment insur— ance, etc., for all employees were pioneered by the com— pany. This must be viewed in the proper perspective; such programs, common~place today, were perceived by many executives in industry at that time as ”radical" in character. Development of union relations.-—Closely allied with the importance attached to employee benefits was the philosophy developed by top executives of relations with trade unions. Swope believed in unions, and accepted them as functional. This is not to say that there were not continual problems and negotiations. But the G. E. executive management was not anti-union, and again was regarded by other industry executives as "radically” progressive. In brief summary: 1. The company continued to grow through the dec- ade of the 1920's by diversifying into consumer markets. The public image of the company grew both in public awareness and in public reSpect. 2. The research ane engineering achievements of the company continued Space. The famed research ~y-«-, Vi- -- . in...“ .-i.. . « n .. .~‘\~,-‘ . bv L- v-~,-¥- é-E _*_, ‘ _. ‘ v-_nn_’_._-l_ A m. H ' o‘l‘ >-- ‘ _ 4' -..» ‘ ‘ . ' 0 Fr, .‘ _ >— ‘ ,: - \“““»-.,.~ ... V‘w'. --\.. _ _ g- L . . “‘1‘ q"‘ o < _ 9‘ “.1 *~.~ k-’__lt‘\_' v . 3 ~' -"‘v. 7 .‘.. . ~~ A l a ' _ -,_.__ . “ .-R A. -.L" + “hypr ‘ -v ‘ *y-“_; ‘ _| ~ . ‘ \ VIA..- L " " -“~ “"‘A 3 ’vb‘ Lg y‘ . ““-\. “. .-.. _ "‘ I‘ " .'-- ._ ‘- ‘Q- . A , ‘v "“ '3 “‘s.. ‘ M- _ N ‘ ‘ s ‘~—.‘v‘u.“ L‘v‘ y'u - 'Vba,‘ . ”-H . k‘n ~.. VvtK. V ‘v-.J‘ -..‘ _\ ‘-L ‘Q -. .V 1 ”\u'. \v H... ,3 y‘ \: f; ’- .‘A '."“ Ana "" 'v "r,“ "“K"‘ .v- v, A "o-, i .v a .A - ‘ u‘ . ‘Hr .‘~‘ .- a. . “‘..‘Q r“ - \_ .——. W ‘- ‘A¢‘ .‘ \4 i y, ‘g '2'—".. ‘. r~' A ‘w Y‘IA ‘ V 1"“ y. . K'\. r- -., ‘ "‘ J . V \‘ . . . . a «3"; -.AQV- .4 f -- a! v- :v‘ “stoma . ‘4‘. ‘A- - \ W'f'v‘" ... d-v'v.~ v 5" 'l halo-J E ,_ .§ 3 ‘ 1 ~& 4. i ‘5:— k xi". " ‘ -.-‘ 3 ‘~: rx vigng‘. s \ k-Q”-.~ ‘1‘ ‘Nr ‘V‘.!. «. ‘4‘ g-‘ «s. 58 laboratory and its noted scientists introduced an array of technological innovations; develop- ment and application engineering groups devel- oped new technologies for the application of electrical power equipment to industry, revolu- tionalizing industrial productive techniques. ' side of the company was increasingly 3. The "people' emphasized. A wide variety of employee-benefit programs evolved——viewed by business men out— side the company as ”liberal,” or ”radical," and, 4 in some cases, as ”dangerous.” The Formal Organization Structure, 1922-19MO The formal organization structure at the beginning of Swope's regime in 1922 is pictured in Figure 2, page 46. Basically, the organization structure was to remain un- changed throughout Swope's era. There were adjustments and modifications, of course. As the company moved into the appliance business, the ”Appliance and Merchandise Department” was created as a separate operating component, with its own self contained functions of engineering, manufacturing, and sales. Further, as the company acquired other electrical enter— prises, e.g., Telechron (electric clocks), Hotpoint “Leon Keyserling, Chairman of the Council of Economics Advisors in the Truman administration recently remarked that when Congressional hearings were held in the mid 1930's on Social Security, Gerard Swope of G. E. was the only business executive testifying in favor of the concept of Federal Social Security. o ‘7 'v v.1.L a..- . -v-vv"‘ .3 fl ._ ...l . _ ... . . . e . u _ . .iv a pa“ . . . u . . . r . . . r_¢ I. * .r . * . d. V L. .A- H o ~q .k » “Ky .« S . ... .... ... . c r: r: . . . . . .. ... y . . . «v I.» ..y. A r. 0‘ L» n: v... A.» .r. My. ”4 1;. v; V“ L.» w... xv v. 01 w v. ‘fiq Wu C.» WA“ 0. x ..g ..C 2.. ...u v... .2» ~. V 7.‘ ho ....»u D: .. 3 3: n U. a . . . S . . new .3 . ‘ a; E 3 .n .. V” “.4.“ W N «ha» WV ~fihb‘ O‘,* a a 0.. m. ~N H Rd“ N‘\U ya M has r~m . w “v” o. _ ‘1. . V.“ . Q a v “0‘ Am» «K.» \»v Vt: ‘r« o. . .. u u r. O . . . . an .r .. .9 4 v M...“ re. .fiu ... m: . A - M. u my .4 Q» TL .5 T . .2 4 d a. 2. AL V, . .t. .. .. .. z. a. s . . , . . . . .qfl r. .... r u TM. . . A: aL C. ... L. rm . x Z. . . . n I I. 3' m . . ...v ‘.v .n. ... ~ .... . NLy !. .\ P W. s .. ens . . .. ”x . . . .1. u. . . r.. ... ... .4 ... ._ a . g‘. . ... _. . ~< v Company (appliances), Locke Insulator Company (insulators), an executive policy decision was made permitting these acquired companies to continue to operate quasi-autono- mously and under there own names. Hence, by 1930 (see Chart 1, Appendix I) the formal organization structure remained essentially the same in form. It was still highly centralized. Even as late as 1939, nearing the end of Swope's regime, the structure remained the same; an additional operating department, the Radio Department had been added, but the anatomy was unchanged. The important point to note about organiza- tional development from 1892 to 1940, the end of the Swope era, is that the organizational structure remained in a set of vertical functional hierarchies (engineering, manufacturing, and sales). Executive control was highly centralized; that is, no integrated control existed over all the functions short of the President’s level. True, the slight exception existed for the Lamp, Appliance, and Radio Departments, each of which had a Vice President in charge of all functions. But the functional hierarchies within these departments were highly centralized; for example, the manufacturing function of the Appliance and Merchandise Department consisted of a wide variety of separate production operations for a great diversity of products ranging from toasters to refrigerators, each reporting through a channel of manufacturing management, 60 .mmma quSDoSAPW coapmwflsmwh0un.m opswfim mmHo .. 2.310%: 0.123 mmim .cmz mmmfiwfi 523.3%. .mmmm .mmmm .mmmm .mmmm .mmmm mo; mo; mo: mo; mo; mezm BE ES momammmm mmmpmsmma fiflomamzoo .mmmm .mmmm .mmmm mo: mo; mo; BZmQHmmmm F Th 0 Eng 1 n e ("1" ing Hi era-1 rc hy §, ‘EUre 61 with no management tie at respective management levels with comparable engineering and sales operations. Hence, from its early beginnings to the early 1940's, the organization structure can be described as highly centralized, and structured in vertical, functional hierarchies. Schematically: Executive Staff Tl. ,__.__ h h c .C o a a EU as s. E’ h w o 3 g a :r: ‘33 m m ‘8? .3 "* H 5;, :1: a 5 m 8 t: .31 C1 CU £6 *4 L‘ U) s g c . g c m E z m E‘ a ——-J ‘I Figure A.-—The Functional Hierarchies r w A)“ h. J‘ -.. . a a -V ..uA~-- up r‘~h—r ..sAo-ok :2 I.’ ~r‘ .u Z; ax» ... a <\‘ . .6 Y‘V‘Yv‘ C, ‘Y‘A V. -.~A4..\ SevvaV-L.. .: I” ,3 r; .. z . . Lu Fl 6 f, T . . ....J 11.7. E 3.51 e .2 t I. 1.: F. ..-n :i ;L ll A: r. T E e P E e .T .nu . r: m“ .4. LL r“ Ox. QM Di ..vu flu . a: .n.. o. ‘ «g r. g a .r.. u,“ 7 ~ ”1... 3 - 41 s v «v w). « Z 3: p.. ~h. . . .P; 4/ r.. n." C. a; 1. ~ I s . r .H ..~a. .... \. v x C... \ ... .... NH . 62 It is significant to note that formal organization structure did remain anatomically the same during this period (1922-1940) of changing executive philos0phy, changing objectives, changing market direction. But it is even more significant to view this organization- structure stability against the great changes in company productivity. Note Chart 3, Appendix I. From 1920 (just prior to Swope's election as President) to 1940, sales rose from $276 million to $456 million; number of employees rose slightly, from eighty-two thousand to eighty-five thousand;5 number of stockowners increased from seventeen thousand to 212 thousand; number of plants remained the 6 same at fifty-four; number of product lines increased 5These data are misleading. Note that in the decade 1920—1930, number of employees fell from eighty-two thousand in 1920 to seventy-eight thousand in 1930, the drop occurring in 1929 and 1930 because of the Great Depression. In fact, during the early years of the 1930's, employment fell even below this. We have data only for 1930 and 1940, and do not know how far it fell below the 1930 figure. Thus, though the employment level at the end of the Swope era is only modestly over that of its beginning, great increase had oc- curred in the period 1936—1940. 6This, too, is misleading. In 1930, midway in the Swope era, number of plants had drOpped to thirty—three pri- marily because of retrenchment due to the depression. But in 1940, it had risen to fifty-four, indicating significant physical growth in the period 1930—1940. And this did not mean that closed plants were all reopened; in some cases new plants were Opened. We have no data on Specific plants closed and/or opened; hence, there is an element of conjec- ture in these statements. But the cyclical swings in employ- ment of resources due to the Great Depression must be con- sidered here. O x . ,. . ...; “mow Eu: ....-. —‘ V‘ out 0‘ ..vd v rt" .. ..-... r r' a v. . a ‘.I p L ‘ " I.~_v '~ . A a . ‘ . 9— ,~ ""7 "“Zfln'f.v* -:n.. vat—Au; ~4on _, . . .— . "‘ Ivnfin a A , .r ‘ 'b—i rd “"" h‘v‘v uLa. u».. .-r.‘ p. ... l l.»‘ H... n >f“ '1’“.\.1:.—~(~(‘ 4-..:- "“1¢~Lv.‘\.v . v I ~. “‘V4 -n. ..v ~-.“ ‘ .- vfinwfif‘w.. r‘ _\‘ . .- .-...|‘_‘“' U.-,. ... ~ “ ‘ .,,‘ - ‘ ._,'u fif‘“ "V'.(‘_ ..-~- ..~ V-..‘v A- b \— " ~,‘-v . , r :"u’fi ‘Vr‘vw- ... dvrv’“‘ u . .I . ‘4’ .. :‘hua‘ ‘~_. . --.. sv.‘ . ‘ e . .,‘ ‘ . 'h ‘ ._ rp— '_ ~ I e E‘ v... — .g x .‘ 7-,~ ‘ -. In" ‘ r“ G qr. .) c... “a” w... ‘ - ., "' ‘.::1 r~ ~ "““I' F f- 3.1 ‘4 «no “1v1‘ . n <.1,. -. ‘é. ‘LAV ., ~ .' :V.r~~ . .—‘.::‘~I‘.Q f O v» No \" .. "‘ ~ ‘Hr'fihr ‘ -..V‘,‘ ‘ 7 ‘ d J *~€G \. .' ‘~ ‘ .. "v CA ‘- .{ ”“91””01 “th 7' “3‘ \A_‘_ .‘ A1 ‘A “v H: ‘2 “k ~f‘ v 4‘ , ‘ . —V. '_ 63 significantly from eighty—five to 281;7 number of affil- iated companies increased from five to eleven. The geographical diSpersal of the company during the Swope period was largely limited still to the north— eastern quadrant of the country. Some of the acquired plants were in other locations (e.g., Hotpoint in Chicago). But the company had not yet begun to expand its manufac- turing facilities broadly throughout the national community. There is no way to measure the productive efficiency of the company during this period. But the data show con- clusively that great growth was achieved, and that such growth was accommodated within the existing formal organi— zation structure. Many, many new product operations were "tacked on” the existing hierarchies of engineering, manu- facturing, and sales, and each vertical hierarchy expanded vertically and horizontally, striving to accommodate the Erecursors to Organization Change But there is evidence of uneasiness in the minds of many managers of higher levels regarding the ability of the centralized, work-functionally hierarchial organiza- tion to continue to operate efficiently. There were two 7Not all this increase came from entry into the appli- ance markets. New product lines in the industrial power apparatus and the electronics markets were also proceeding apace. . 'p- ‘ “Wr;"< .‘ Cc V1..LJ--- --.» ‘ ' s ”e *e \r A .2 -.. V A '7. ”A ~1.’ 7' 7‘9 — VA am» y!!.:_ I. ""r .r -- -r ’Q‘V. ..\ .. :4~v~‘.~ {ox/.1- ‘ 2 r -V‘ 2 .‘pY,P u«»...~ I| ‘ ... _ . 2‘“; “I’D WWW" f. ""~ v..\. --..k . - . " .1 _ o o —.. . er‘C . -..... v .‘ "»A F 5 ' h ' ' w , , L— ' v .._ .- ...». v-..\,,4_. . .' a' ‘ \‘“£ -. ‘r """-v‘\.-. y ‘4 h ‘v....' .- . r Lire r ' ‘ .1 < _.-I-,A‘ " x, “v y‘:"'\ .- ~: C Y... ,__..‘ ..--.. h,‘ 4., .. ‘AH, ‘ n .2 'rCC , y. ~ ...» V“ b . .__ . -I.~y~h“ ~ r ‘— V"- Auz, ... \nv 2:»:M,W r- Vv fly- ‘vu‘4V S, .. l h, v .. ..,r .. ,. L \ A”; “ VA“ " ... 5.. ‘r ._' " ..., r ... a ”‘W "Tax. “A, b‘ v ‘ . AA . -- -, .‘ CV. . “L‘.£y',r 1 *-\ ‘l . V‘ “-. A r . '4 Clay‘s. 4.. 63 significantly from eighty-five to 281;7 number of affil- iated companies increased from five to eleven. The geographical diSpersal of the company during the Swope period was largely limited still to the north— eastern quadrant of the country. Some of the acquired plants were in other locations (e.g., Hotpoint in Chicago). But the company had not yet begun to expand its manufac- turing facilities broadly throughout the national community. There is no way to measure the productive efficiency of the company during this period. But the data show con- clusively that great growth was achieved, and that such growth was accommodated within the existing formal organi— zation structure. Many, many new product operations were "tacked on" the existing hierarchies of engineering, manu- facturing, and sales, and each vertical hierarchy eXpanded vertically and horizontally, striving to accommodate the firecursors to Organization Change But there is evidence of uneasiness in the minds of many managers of higher levels regarding the ability of the centralized, work-functionally hierarchial organiza- tion to continue to operate efficiently. There were two 7Not all this increase came from entry into the appli- ance markets. New product lines in the industrial power apparatus and the electronics markets were also proceeding apace. I" x U a ’7 ”we‘» 4- ‘5”. 21;:1ed C.” v.. a. g c T; \ major precursors to organization—structure change, (1) overt criticism of the present organization structure, and (2) the creation of "management committees." Overt criticism of structure.——As early as the late 1920's (six or seven years after Swope's election), the continued rapid growth of the company in sheer physical size, the tremendous diversification of products and markets, and the compounding of technology began to evi- dence to some managers an unwieldiness of organization. Executives at the vice-presidential level, looking at the Sprawling parochial hierarchies below them began to Speak ' At a meeting of top management at for "reorganization.' Association Island in 1929, a severe indictment of the centralized functional organization was formally voiced by many executives. The sharpest criticism was presented by a Vice President destined to become President ten years later. He indicted the then present organization structure on the following bases: 1. It creates inertia. 2. It creates prolonged delays. 3. It wastes time. 4. It causes an overburden of clerical work and expense. 5. It discourages individuals' independent reasoning and reduces individual capacity. ~wfiln‘-. . v ‘V“ ,- ec .../- . . ~ . r. ..‘v.. la" ' r LA L b ...e at a c ..a. ax~ 65 6. It lessens individual reSponsibility. 7. It retards the development of leaders. 8. It causes confused thinking about problems and policies. 9. It results in compromise decisions. Here, then, in 1929 was a formal organization per- ceived by operating executives as cumbersome and unfitted to the growth opportunities and objectives of the company. It was perceived by them as a limiting constraint on growth. These were early seeds of the decentralization concept which were to germinate for nearly twenty years before fruition. The "management committees." —-As new product lines continued to be added, each, of course, required a group of design engineers, a manufacturing facility, and assimi- lation by the selling organization. This presented little difficulty in the early pioneer days of the company when the engineers, manufacturing people, and headquarters sales people were, figuratively Speaking, housed side by side and were literally personally acquainted. But with growth came proliferation of these three work—function hierarchies, and physical separation. By the late 1930's, this organization-tree proliferation had made coordination between these functions extremely difficult, if not impossible. II I o. . t I \- . . . 1 . ..\J y . I n. C E C . . . . . _ c 3.. , Mt . cw ., ._ E .. .. e S E w“ .yu E :1 .3 r. C Z w. .b. to C e e E w. r. :1 l e " 7a in . p. L... n . ‘30. AM. i s. v nag Liv u .h .- x .v .w .. .fi \ Cy fi ‘ 1 .. .... .f. S 1 t S v. I .3 E t S m l l 3 C. C; 9» Cu 1.. «v *0 Cy «. n. «C ...L h. .flc J .«v e yr... {L m . e . c A: : x w. h . 9. AC 2.. at at Q» g c .3 3: «C 3 e e .L T .. C. ..u ._ T ...T. .1. T. f. C. E F. r... . P . nun ... p: a . e an P. o. _ at r... h. .. ..o l . ~... A: ... «v 1 .. ,. . . w” ..u v. . e u: .l . c :J w. W C q, : . m. E 2 . Q. 7. Q. 5.: at T. ”a 2. :~ . . .D 3 ... a. ~m .. .2 . . .. 2.. n: w“ v 3 Cr. ..2 r” ‘ . Z. 2. ~ ~ .. . C» N. wm $1.. ..... ... ... Wu ... .. ... .. . n. . n i. . . ..C I. . ~. . V. ,. 66 To alleviate this difficulty, "management commit- tees" were established. The purpose of these "operating 1 committees,Y and the rationale underlying them, has an important bearing on the analysis of the effects of later "decentralization," and it is important, therefore, to examine it in some detail. At the various levels in the organization, manage— ment representatives of engineering, manufacturing, and sales involved in a Specific line of products (e.g., small electric motors) formed the management committee. The expressed objective of this committee was: To bring commercial and engineering groups to— gether to plan ahead, propose new products, sponsor development programs, prepare Specifica— tions, and thus strive consistently and to the utmost that the company's product will always be adapted to the needs of ingividual customers and in advance of competition. Following the example of small motors, the committee may have consisted of the following: 1. The sales manager of the small—motors product line (who may have been physically located at General Office Headquarters, and not at the plant city). 8The General Electric Review (Volume 45, No. 8, August, 1942), p. 447. This is a company published but externally distributed ”professional” magazine. p—w. C: E . ~ I. . .. f. . 4 . . . 5.. _ _ ...... r; .2. w“ 5‘ ..- 3; 3» {L x x M m.” x8 1 . ...h .1 w I .1 H... C ... . l u... L S l . , C. _ . C. F l . C. C E a w .l e .l . Q W Z d . u . r e «E Y. mm .1 «b .1 o e ”C .r .. w... big Q» w u \.l./ , a ..J .C . l I..- 1 . C ..l C 3 S a: m a l . .1. n S 3: .1 .. E P: 1 c Q» ..J h. : . ~ m T. .. . .. .. S s . . .3 v . 2,. . . .. . .. 1 .. r .. F. .... ... a. a: r.. ... 2.. i. . o ‘ . .fiu. . « .cc 4 . » .. 67 2. The manager or supervisor of the design engi- neering group assigned to small-motor design (sometimes, but not always located at the plant city). 3. The supervisor of the manufacturing facility producing small motors (always located at the plant city). (Remember that each of these managers reported organiza- tionally upward through his own hierarchy and was accountable to it.) The committee met periodically to jointly arrive at decisions affecting the operations of each of the functions. This ”formalized” lateral communication was proclaimed as a ”system which represents a_democraticapproach to problems of organizing technical skills for cooperative effort. (and is) designed to decentralize talents . . . and engi- neering skills.”9 There were many such ”Management Committees,” and based on personal observation by the author and on research findings, they provided valuable managerial process, coor- dinating activities at various levels up and down the reSpective hierarchies. 9General Electric Review, op. cit. (Underlining added). ‘ I -.., - ,. .. ...L ' - FUVA - r— --...L V‘VI-r "r ~— ... .4‘ 1 P .- _-Q “V s‘ I . "7‘ «4“: xv v ‘ I AV \‘~ .. ~\ “~Cfik 'v. s"- \ -.fi ,7“ ..4 9 Vi V ‘ {1‘ D H" 68 Note, however, that the committee had no integral managerial authority, per se. Unresolved problems had to be passed upward by each of the members through his own hierarchy until they were jointly solved by a "Com- mittee" at a higher level. Conceivably, even at the top level of the hierarchies, the vice presidential level, a problem could remain unresolved, in which case only the President could make an authoritative, over—riding decision. Members of the management committees individually had no vested authority over the other members; however, research findings indicate that individual members did achieve in many cases a measure 0f.22fl§£ over the commit- tee. There is ample evidence that in a Significant number of cases, the sales, or ”Commercial" manager ”ran the Show," and in essence dictated to the engineering and manufac- turing members. Thus, evidence exists that the formal organization structure was perceived as being inadequate for continued, effective growth--by overt expression in the late 1920’s, and by structural makeshifts in the late 1930's. If these wege indicators of the need for structural change, why is it that real structural change took so long in coming--in fact, until 1950? It could be argued that the chief executive feared the loss of control, or it could be argued that no one knew how to effectively accomplish a 0 a .,Y...— LA..V.~¢ 143.,“ I’Jv _”.F‘W' .- -.- E 5“— \AVU €35 ic depr 7, f)" '0. y'oil A»- ‘— Y.":" "5-A&.:_A.‘ ,- wr‘ .QV C J. S 69 vast structural change. We conjecture that the seeds for organization-structure were there, but two great events in the company's external world deterred their coming to fruition-—the Great Depression, and World War II. From 1930 until about 1937, management of the company turned its attention to the business of coping with the economic depression. From about 1940 until 1946, the com- pany ”went to war." From 1946 to about 1950, the company was accomplishing the gigantic feat of turning its engi- neering, manufacturing, and marketing into a vastly changed (and changing) social and economic world. Through- out the decades of 1930-1950, therefore, a "moratorium" on organizational structure change was intentionally declared. We say ”intentionally” because official company statements made at the outset of the great reorganization of the 1950's so state. And study of organization and planning for its change began in an unobtrusive way even during the war period--also evidenced by later company statements. Summary The observations in this and the preceding chapter appear to substantiate the proposition that a given formal organization structure can effectively accommodate physical growth, the development and assimilation of technology, and now programs of adjustment to external change only up to some Optimum point. Beyond this point, existing structure V , of y“; la 40.”; 44-. 0. . -..-arrr‘ ’\ '77 P ' ‘(F—L t ""'“'V‘- .49 j '0 hvr". 9— ' ,_' 97*. Q -.-.u--.. U - M ....g. ~ ..ex '1 -... .-....v \_, -. V‘ r‘c . ‘ Ir. ...-..» ' H° ‘V;::r¢. :‘VVV... f :- :ew pr :5 M e ‘. 70 can no longer accommodate such change. Thus, pyramiding technology, the drive for physical growth,10 the developing of new programs for market achievement are essential in- gredients in the process of organization—structure change. The next chapter, describing the massive organization change in the 1950's additionally supports this view, and presents explicit statements by company executives to such effect. 10We hypothesize that the drive for growth really has its roots in the drive for sheer survival. erar- p‘ , J n?“ \J)‘ A i ...!ove arr _v--4v-' l5§'v Ll v. E v. ... .- ”... a“ ......J’E. \g dr- -.u\ CHAPTER‘VI DECENTRALIZATION, 1951—1960 The Ralph Cordiner Era We are not describing in detail the period 1940—1950. In 1940, Gerard Swope retired as President and Chief Executive Officer, and was succeeded by Charles E. Wilson. Wilson was regarded within the company as an outstanding executive who would guide the company capably. He was an outSpoken advocate for a ”new" management organization structure. He had begun his service with G. E. as an ”office boy" in the early 1900's at the age of about fourteen, and was destined to achieve the quite rare dis— tinction of celebrating fifty years of active company service before the mandatory retirement age of sixty—five. He had risen through the managerial ranks of the manufac- turing component of the Appliance and Merchandise Depart— ment, had served as Vice President and General Manager of that department, had served as corporate executive vice president. Soon after his elevation to the presi— dency, his executive attention had to be turned to shaping the company's productive facilities to the war effort. For a period of two years during the war, he was tapped for governmental service in the War Production 71 3 "rd, during ..." L' .... zlsed tne Cc. ~'~A Arr/\W-' e-o..o...h. -::~-f.~,~.. ‘VAJ. ..Va. - 1 E a: T. C C T C: .C _ , .... a . .l E 0 T T. a. C. ...; h. nT‘ ‘1; 5: ad 1 e .a E St : E oi .n .. C. ... . . .l f t e m 0 C .. me. p: 1 ‘ ‘1‘ r .. .x.» hi & u e “.1. 1m m” e .1 «v e e hu 2 h. .2 m... C 7, w c f -t .r.. e .l e. a: m . “may A.» a: 3C o. « Aflu 0 . v . a v .. A 0. file , o. ‘ a: .flu - y. .n» {J u. m H en...“ Ia ‘ VA. a f r v QV N ... ..ia. . ‘ . s M. >.. ‘ ..v .... V». - .NNW ..miwu . 1&4 hflsv W N \\U ... p b. r L a... . ~ . . . .. . .... 72 Board, during which time Swope returned from retirement to serve as President. After the war, in 1946, Wilson guided the company in its readjustment to a ”new peace- time economy." Again, the focus was on expanding tech— nology, the adaptation of war—generated technology, and the expansion of new and refurbishing of old productive facilities. Note in Chart 3, Appendix I, that during the decade 1940-1950 (his term of office), sales increased from $456 million to $1,960 million; employees from eighty-five thousand to 183,000; number of plants from fifty-four to 117; number of product lines from 281 to 328. Spatially, too, the company had expanded.l Hence, the familiar story continued in the 1940-1950 decade—- mushrooming technology, Spiraling demand, increasing employment, increasing product development, expanding productive facility--a11 ”hung” on essentially the same basic formal organization structure. But Wilson, the advocate of organization change, prepared for change. In 1946, he charged Ralph Cordiner, first as Assistant to the President, and later as Executive Vice President, to formalize plans for a vast reorganization. This was not a sudden executive move. As discussed in Chapter V, company executives were expressing concern about what they perceived as inadequacies of the centralized, 1Data on number of plants and location is not avail- able for 1950. But in 1952, number of plants had risen from fifty-four in 1940 to 131, located in ninety-eight cities in every quadrant of the country. fi P10 V" t V‘ U'b- 0 1y Ayl'be "a?“ b‘ “‘1‘- n I F V ...C- ...“ .— ~-.' I c. ... . _.-Aq..o- A In- I . . _ . 1 . L: J _ v . ‘ 2‘. «q ,3 w“ 3 A. ‘C n“ w” u... e L» C: w .l r 01 .. fl: 3 L c . a. J P e i e a .T. E e 3 T . I u o o A ! C r x. . .r . “J C 75 .Q .7. d C ‘Q .4 O a t. t l r e . .. 1 n. x Qy r . v... .1 a: l .1“ s v a: s a» O S C. . u f. C a .C E ..a S x 1 mt r». 33 :1 ..A .1 hi h. \C :Q V.‘ «(J S v . E g 1-. r. e E E T. 2. e F»; ..a, W. . v r“ .nu 7‘ 3‘ Q.» .1 I .. C ... L. .. a. . . .... «a. 2,. ... F c. c. T: ... 1. .-. . -w M .. .1 ...... 2... ...: .5. ....... .9. ....u .. .. . 73 functional organization as early as 1929. During World War II, the company began a period which the present Chief Executive Officer of the company described as "almost explosive growth which caused its managers to question whether it might not be necessary to evolve new tech- niques of organizing and managing the company."2 Under the pressure of war production, the company's output shot from approximately $350 million in 1939 to $1,370,000,000 in 1943—-an increase of over four-fold in four years. Further, company executives;forecasta post-war opportunity for a continuing and compounding demand for electrical and related products-~a reflection not only of a general change in the economy and the society, but also of the burgeoning technology which had been even further accelerated by the technological innovations of the war era. By the end of the war, company officials were pre— dicting a doubling of the company’s business in less than 10 years--or, a volume of $3 billion by the mid-1950's. It was obvious as stated repeatedly and publicly by company executives that a company with such growth characteristics, and Operating on such a scale, required a different mana— gerial approach than the company of the 1920's and 1930's.3 2Cordiner, op. cit., p. 44. 3Ibid., p. 45. Wt 1C... 1. «NV. 1mm My. 1-.. 11” a“ a -. 1 A... A.» 11* Q. l a x .1 .x 11 U h. 1... “ ~75 I . .l s s | . '5‘ . . V w. 11 I 1.. E t 1.1 1.11 111 C .1... 1. W1 11 1.1 C 111 S l .11 I. L. R1 6 E .E C m o. a :. c m... 1 a e i e c a . S .1 1 1.11.1 a w .1... ...1 1i. .... r 1 .1 u 1.1.. ml. C. e Z . .G 1.1 ..1 S e .. 3 r, C P 1 1 Q 1Q E a 1 1.11 111 \ e 01 . ..C i v.1 ... :1 1 1 ~13 {L :1 .. 1. .1 . 1 . 1 1 . o o ., .2 c 1.11 .n i l P . E 1. 1... 1. a ...... 1.1 r .11 t e 1,1 1. 1.1 s e .1. r C 11 S -C r. S 1: T ..M E. 1. e 1.1 1.. E .1.. 111 1.... 1: P .3. 11.1 ..1 .....1..1 I.» C. A. . M1. “.1 ”\u. n: 0 1 s 1 “A Rd . . fix.” NW 1 ‘ h 1 #3. fl ‘ «.1. .1 u g; 1» 11 a» 1%“ DV WA \ .v .n. 1. «C .A 11 C .1...“ m” h. e. x. C .-.. 1 .. .1: h... .11 a . .. .. w... .... E :1 11,1 11.1 1 1 1.1.1 1 1 «.-. C. E 1 1 1.... Q 2 v . 1 A y r . .1 ,. 1. 1 1 . x 1.; ..Eu ...... 1 .. Li” 1.. 1 .1 4 1 .11.. 1.1.1. 11111 .. . .11 11.... 1,11 :11. 111.1 a. .. 11 .p M W.“ 11:. “r .v “s." ...—1 .r...1u ...—.— 1“... 1 1‘1: .v m. \~\\. 1. ,1 ‘p ... .uhr‘.‘ c1. .‘ .u. .1 \\..1 74 Of course, this organization problem had long been subject to "on-again, off—again” study. But during the war years, Ralph Cordiner, then Vice President and Assis— tant to the President, began the task of analyzing the problems of organizing the company for the anticipated post-war growth period, and of recommending a Specific plan of implementation. He is generally regarded, inside and outside the company, as the ”architect" of the company's decentralization concept and its implementation. He was elected President and Chief Executive Officer in 1951. In discussing decentralization as practiced in General Electric, it is important to note that this is a process much beyond and much deeper than merely a shuffling and reorganizing of facilities and organizational components. Underlying it is a managerial philoSOphy of the managerial process which differs radically from that which existed prior to decentralization. As Cordiner himself put it in his 1956 McKinsey Lectures at the Gradu- ate School of Business, Columbia University: Every company should be managed with some workable, ethically reSponsible philosophy of management. That is, the managers of the company should be in general agreement on a set of underlying principles that will guide their work in providing leadership for the company. For some companies, the set of principles that guide managers may be tacitly under- stood without ever being presented systematically. This may be a part of the company's tradition or it may even reflectuthe personal philosophy of the chief executive. “Here we conjecture he is referring to General Elec- tric, pre-decentralization. Wile Gener :29.: has ha reflects tr. :ezr s gor Y Va e n ‘- + tie pdSv \re ge manages: 1e fdertaken lvcat'sn, f While General Electric's present philosophy of manage- ment has had a long evolution in company tradition and reflects the personalities of its great leaders in years gone by, considerable effort has been devoted in the past ten years to "thinking through” and presenting this managerial philosophy in a systematic way.5 This is a significant statement to which we shall later re— turn in the discussion of the "process of social system change." The Concept of Decentralization Whereas it is true that there was a physical decen- tralization or rearranging of organizational units in smaller, more manageable pieces--and whereas decentralization was undertaken with reSpect to products, geographical location, functional types of work, and markets--the real key to the G. E. concept of decentralization lay in the thorough decentralization of reSpgnsibility and authority for making business decisions. 0r, put another way, decentralization in General Electric conceptually and definitively was the delegation of business decision—making authority and commensurate accountability for the efficacy of those decisions. Ten basic guiding principles of decentralization were established, and are being reiterated here because of their import as variables influencing managerial behavior-patterns, which will be discussed in depth in subsequent chapters. 5Cordiner, op. cit., pp. 40—41. Note the inference of "scientific management.” Note also the damning with faint praise of management via personality, possibly a hint of the coming increase of rational and secular approaches. 61bid., p. 47. C; *1 1.11 1.: S C S T. «v r. H1 3. A 1». D011 76 The Guiding Principles of Decentralization l. Puts authority to make decisions as near as possible to where action takes place. Gets best overall results by getting greatest and most applicable knowledge and most timely understanding actually into play in the greatest number of decisions. Works only if real authority has been delegated, and not if details then have to be reported, or worse yet, if they have to be "checked" first. Requires faith that man in decentralized jobs will have capacity to make sound decisions in the majority of cases. Requires realization that the aggregate of many individual sound decisions will be better for the business than centrally planned and controlled decisions. Requires understanding that the main role for the members of services (staff) components is the providing of help and advice through a few experi- enced people, so that operating managers reSpon- sible for making decisions can help themselves to make them correctly. Rests on need to have general business objectives, policies, plans organized structure and relation- ships known, understood, followed, and measured; TEE ..-. r1 ,<. 01 2. 2.1. r: w 1 .....1 G 3. T C 1. .1 .1 .1 1 e 1... E e r“ U .C :1 .C e 11.. C. .l C :1 T .l e 1 1 S d o h; MK» .1 . 1 :1 1... S . 1 C. .. 1 r. «C O A: 1... A» u . 11‘ A 1:. .-... 1". 77 but realizing that definition of policies does not mean uniformity of methods of carrying them out in decentralized operations. 8. Can be realized only when higher executives realize that authority genuinely delegated to lower echelons cannot, in fact, also be retained by them. 9. Will work only if responsibility commensurate with decision-making authority is truly acepted and exercised at all levels. 10. Requires personnel practices based on measured performance, enforced standards and removal for incapacity or poor performance. Note particularly the tenth point. We shall discuss the meansings attached to this, and other of the "guide points" in considerable depth later. However, to serve as a point- of-reference in the ensuing discussions, we make the asser— tion now, which we shall later attempt to verify by research findings, that although decentralization did in fact structurally create many "small” quasi-autonomous businesses-- and did in fact delegate considerable decision-making author- ity to managers ”down the line”—jit did nevertheless give the executive a degree of actual control over the entire company which had never been enjoyed by previous executives. We are saying that after decentralization the executive literally held more power than ever before over managerial decision-making and other behavioral-patterns. v..- I I . . . ., c .C 11 .1 a VI. 7‘ Cy a A W; r .1 71 e 1 Y2 r .2 f 1 1 .1 3 T 111 e rm. .1 C C. S .2 r. 11 v.1 .v. a 1 1 r ..-1 ..1 C P .1 1 ”.1 1.: 1 1 O a d S C 1 v .1 C ...W C S O .1 C C .C O O C 01 C .1 1 . A e 1 1 C / -- r 11 o, 1.: O ”.1 C F :1 1.. .21 C :1 :1. 8 1.... T 1: ,1 1 .11 .11 d S .l .r. «G n. .1 1 CC C D 6 me e C. 1.1 1.” c1 3 e n . .C v.1 C :1 .1.. .1 ,. .. 1 «flu . .1... 21 1H1 1.1-. .. 1 e 1 1 1. n3 :1 n. 1..” .1. K. ~.,. 1. . S .1 n ..m ...... ... .. . . .._.. .1... ...1 1... P. E ... .r .1 e . . . . .. . .1 .. 1n... 1.... ...: 1 .1. 78 Up to this point decentralization has been discussed as a philosophical concept—-as almost, in a sense, an attitude, or frame of managerial-mind. This orientation was in fact strongly emphasized by the company. The re- mainder of this chapter will describe the ensuing organiza— tion-structural process of decentralization with regard to the actual re-structuring of the organization. Structurally, the former vertical, functional hierarchies were dissolved, and the organization was re— formed into a three-part structure, distinguishing between the Product Departments (”operating” components), the Services (company-wide staff) and the Executive Office. The basic building—block of the decentralized structure was the Product Department.7 The Product Department: The Basic Building:Block The Product Department was more than simply a rea- ligned structural arrangement. It was the formation of a distinct business enterprise--engaging in an identifiable business on a profit-and-loss basis, with a single product line (or a "family" of highly compatible products), serving a definitely identifiable market. To form the Product Department, "horizontal slices” were taken out of the former vertical, functional hierarchies, assembling, 7In many reSpects, similar to the General Motors "division." 1.1 3 3 ~ P; r- i i P e ”1 ml .1 1 AJ Av no; :1 e an. 1 r... ”A r—b r” . u ..m 1 . p _ a v 4- ,1 it.; ‘A r1 ‘4 “2.. 6.1. va u.-v mo. .11 .11 a 79 therefore, for a Specific product line, the engineering, manufacturing, and sales functions into an integrated business. To the management of this business was delegated operating authority and accountability for contribution to overall company growth and profitability. The general criteria for the formation of this operating—business were: 1. The department should represent a logical, iden— tifiable, and complete product business entity. 2. It should be a "business” which is akin to a proprietorship, for which its executive manager can be held responsible and accountable for performance, achievement of required results, and achievement of profitability, in accord with measurable and assigned standards. 3. It must have an actual or potential sales volume ' quasi- enabling it to Operate "on its own feet,’ autonomously (Average per department about 25 million dollars annual sales). 4. It must possess all resources—-human, physical, and financial—-to perform its operation. 5. It must have its own distinct and identifiable market. In essence, then, the Product Department operated very much as an independent small company, with its general manager performing an executive role very similar to that of the President of a small company. n 1 .er.ai gamed out irexample: . Y‘ 7" .. L in .(j 80 Certain broad company policies, of course, were Spelled out in the "charter" of the Product Department. For example: 1. Product scope was determined for the department; that is, entry into new product fields required executive approval (i.e., the locomotive depart— ment could not arbitrarily decide to enter the automotive industry); discontinuance of a product required approval (lest its discontinu- ance have unfavorable market impact on other departments), etc. Certain company-wide activities such as company— wide letting of steel contracts, etc., were reserved. Company-wide employee-relations policies regarding employment benefits, pension, salary administra- tion policy, etc., were required to be followed. But save for the relatively few integrating policy requirements, the General Manager of a Product Department was given great freedom in operating decision—making: 1. In essence, he ”rented" building facilities from the company, and proceeded to "run" his business. He had authority to hire and fire-—to purchase his resources--to determine design of his product-— to develop the manufacturing techniques as he best saw fit--to develop marketing strategy and 1.: O 1.1 C. 4. W C .1 teva v. +1 ,1» E . . : . : 1 ml «1 Ab vhf e w} r... ‘C :1 3 .l fiib .. L Cu A 1 1L. pnv 0 make -. ‘ ‘v- I 4- ‘ \r o .3):- \ I fl II II rib S e .1 1 .(1 «r 1 0.. v. . Pk r; 1. 1L. .11 21 p n. l .....1 1.. .... i 91 1K k .1 1 w AV E #1 O 1-1 l r VH1 pm 8 T ab... 8 T C. a: -..: 2;. n .. + 1 S 01. ad h .. e Alv 3:1 . o o .. 1.1.. T l 3: 3.1 e “iv 1 v ...11 C 1 1 v v. 1 «1: .r, . € 1 2.1 2 _ Dew» .1 A“ W. .1. H 81 programs—-to price his products-~to determine terms of sale—-to establish service policies-— to train and develop personnel. 3. He had authority to make capital expenditure decisions up to half a million dollars without approval from higher executive levels. The position of General Manager, thus, was one of great authority and reSponsibility, and demanded executive ability and performance of extremely high caliber. The other side of the coin was his accountability. Although he had delegated to him great decision-making authority, and higher-level executives did not in fact tell him how to make these decisions or how to Operate his business after decisions were made, he did have a high degree of meticulously Spelled out standards of accounta- bility, and was personally measured and evaluated by his department's performance and results in the following categories: 1. Profitability, short and long range, of each of the departments product lines, as measured by return on investment, net to sales, and total profits earned. 2. Optimum sales volume--i.e., maximum long range sales volume without sacrificing optimum profits. 3. Market position (a measure of his department’s market share vs. competition). 'n 1* .s S 5'4 ‘ f‘ 1318, : meCL-v /. - 0A.- .5 7’ n. .‘1 r- ..pig A ~ :“‘V‘1 1? V" $4~7LJ~ A ’\ J ~61 r‘ , -0 ..dlg:- '1“‘¢~ .. . “Ln-OAEI‘. zc‘w‘aw ‘0‘- , ...bJ V°--e..'v aI-€ \"\. :‘~ .‘2 r .( . _“'Vr‘~hh V‘I-‘rvg-o ‘ vi 2" 7%, ‘i ‘ ‘1 v : Li .r; w‘ Q~‘, y. (0 82 4. Productivity of his department (effectiveness of his utilization of men, capital, and raw mater- ials). 5. Technological leadership. 6. Personnel development. 7. Employee attitudes. 8. Public (social) reSponsibility. 9. Balance between short range and long range goals. Although dollar amounts or numbers, assigned to these measurement areas varied from department to department, the standards themselves were uniform. Hence, although authority was delegated, a high degree of control of performance and results was achieved by setting a different kind of bounds on the General Manager-~prescribed measurable standards for the results. Coupled with this is the clearly published admonition that failure to achieve the predetermined re- sults subjected the General Manager to removal from the posi- tion. (We shall return to the delegation of authority and its accompanying accountability in Part III and again in Part IV, when we treat them as input-variables in analyzing and explaining managerial behavior-patterns. Here we are treating them only as elements of structure in describing organization change in a historical sense.) As the executive of a product business, the Product Department General Manager was reSponsible for all the work—functions required for that business. These were r... I .. . i . by ac 1|. C» AC r S E e r. 3 ti 8 e n. r O .r. . e O .l m; . d .3 .l S + e . e O to r“ C . .l l .. . 3 r“ . E a 0.; W». d i .vx r .. i K d . . f. a. e a: at “C a 3: hi Cu r. . a: 2. .. A .3 d .Fu C. r u T: . . v " n3. « .. u: ... . \ p, 1 nna r . .. v r . ... s ~ 83 classified as engineering, manufacturing, marketing, finance and employee and community relations. (A few departments had additional work-functions where warranted, e.g., operations research). Each of these functions was headed by a functional manager reporting directly to the General Manager. The organization structure, therefore, was: PRODUCT DEPARTMENT”X” General Manager i l 1 l Engineer Manufacturing Marketing Finance' EMPL. 8c COMM. Manager— Manager— Manager Manager RELATIONS Engineering Manufacturing Mark eting F inanc e Manager Figure 5.——Product Department Organization Structure :Learly and de: ...... H 4- .::..., milizi: "PD 'pl nu. . ..ob lb‘bn :V Sp'e ‘ 8A This group of management, with the general manager clearly and definitively in command, formed a "management team," utilizing and integrating executive skills and the highly Specialized functional-management skills. Each of the functional sections above, of course, had at least one, and often two additional levels of management reporting to it. For example, the marketing manager may have had a marketing organization reporting to him as follows: MARKET IN G Manager- Marketing ADVERTIS MARKET ' FIELD PRODUCT SADES SALES PROM. RESEARCH SALES PLANN ING ADMDIISTRAT IOI\' Manager Manager Manager Manager Manager Figure 6.-—The "Function" Organization Structure \— G .1 .. g Q Lust, III | LI . . . . . . . _ O . . A .C S -. f. . a .o a .o x. . .i . u... E z. . -. T. e P ,e . O l S s m. a u. .. a E C. ....i e a H .l «L C. 4% o P LL .1 * wls e S e "L... S e e C S a n . ... i T E e C 9% o. A. .. i E T. .. . .... C n... S .l r. . O . g Q a v .W‘ T; to Q Q» a . R: . .... RU : a .. A \. ~ he 3 . D» Oi h; w rt A: . e a c H .. u. «t r .. 3 . a; .., - .. .. Q; 26:. 3 ‘ 2 . 3: .. A 24. v . 1“ 7.. S. m. a: afi- , . - . r .. ...». . ~ a A. o A a .. . I. .A ‘o .s V .- ..m u s. h... .. .. 85 Each of the managers reporting to the Manager—Marketing may have had an additional level of management below him, e.g., the Sales Manager may have had a number of Regional Sales Managers. Also, there may have been horizontal divisions of labor, e.g., there may have been two or more sales managers, differentiated on a product or market basis. Thus, the functional manager actually had two elements to his role. He served as a ”line” executive, running his own functional organization in accordance with objectives and policies determined by his General Manager; also, he served as a ”staff” executive, forming with the other functional managers a ”management team” working with the "executive" (the General Manager). The "Division" Level For the purposes of executive management,8 the Product Departments were grouped into Divisions. The Division might be described as a family of compatible businesses. The Division General Manager, a Vice President and officer of the company ostensibly had the role of long-range planning for his Division, and for the periodic review of his departments' performance. Under the theoreti- cal. concept of decentralization, he was directly in the 8Cordiner, op. cit., p. 63. 86 ”line” chain of command between the Executive Office and the Product Departments, but delegated operating reSpon- Sibility to the General Managers of the departments. Practically, however, as research findings will indicate, the Division Vice President did in fact managerially be— ' operating executive, and retain more have as a "line,' operating authority (sometimes subtly) than the pure decen- tralization concept proposes. The "Group” Level Similarly, Divisions were arranged in compatible ' each "families" known in company parlance as ”groups,' headed by a "Group Executive” who was designated as a member of the "Executive Office." The ”Services” With the company decentralized to a relatively large number of quasi—autonomous product businesses, many of which were serving the same market, the need for a strong company—wide staff service was accentuated. Staff groups, 1 referred to as ”Services,’ each headed by a Vice President designated as a ”Service Officer" were composed of individ- uals highly competent in professional skills. The mission of the services was to carry on functional research in each of the functional fields (e.g., Marketing), and to be available to the operating components to "teach, advise, and counsel." '--Ig W“ 87 The Overall Management Structure Schematically, therefore, the management structure of the company after decentralization appeared as Shown in Figure 7, below. I— CHAIRMAN OF BOARD Chief Executive Office) THE — - PRESIDENT EXECUTIVE OFFICE . GROUP EXECUTIVES [Services Officer'sj 7 DIVISION VICE PRESIDENTS OPERATING ~ fl EXECUTIVES , I PRODUCT DEPARTMENT I GENERAL MANAGERS "FUNCTION”-MANAGERS I FUNCTION 1 - MANAGERS ”SUB—FUNCTION” MANAGERS — Occasionally, an ‘— extra management level here INDIVIDUAL WORKERS Figure 7.——Management Organization Structure after Decentralization. ":r-L—:::=S we 3 13:3 ‘ ~.....¢.n- .- vv- Y‘ ’1' 1 '."Cf" e i~..a-valo ..V ‘ h .C .l V e ”I“: 3 v ‘Ar~ -‘v.~" ' c 'u" VJ.. H ”€88 «vs-w 1 v ....ua. U V e 0 . Q Hts Fay? -~‘»‘ H 88 Under the former centralized structure the line of communication between an operating executive and individual workers was long and tenuous, with a great multiplicity of management layers. Further, the horizontal linkages between the long, vertical functions were accomplished only by "committees" which possessed no decision—making authority. After decentralization the line of communication from Chief Executive to individual worker was Shortened to only Six (or seven at most) levels of management. Further, the functional work was horizontally linked to— gether, with firm decision-making authority, at the product Operating level. Thus, each of the product departments became a semi-autonomous business with simple line—and- staff structure, housed "under the same roof"--highly rem- iniscent of the total company in its early days. Ideally, authority and accountability was delegated commensurate with the level and responsibility of the position all the way down the management line. "Operating" committees were prohibited. Even the position of ”assistant manager" and "assistant to the manager" were eliminated--again, based on the tenet of decentralization that authority can be delegated but not shared. The word "assistant” is non-existent in the vocabulary of the company. Accountability is assigned only to individuals. I I E E I r” C o r .- r .1. e 63 by n u +t .nl. r». .2 . as #:v C» Q» - ., . . I .. o d . T a: 7:73 «.3 A ... 1i 3. r3 aw 5 GV S 33 a .; .gfg I“- C) :21: ft A: .n .v .w. 9. .u.,gl..:4:.u/.q,«gig/SJ... o o o opax w,” a,» 5» "pi. . . T . . .-. 11* . .. ~ . .J« . . «1* ..w‘ “a R\U h c _ ‘4!“ r” ...N r L r .. ..e .n 3:... 75. .A. _. . Qp vb . m. 4C C .. . u «41 1.. Qt. w... ...... 89 Implementation of Decentralization At the end of World War II,:h11945, there were no product departments. The growth of departments and divi— sions is shown in the following figure: Figure 8.--Growth of Product Departments and Divisions, 1946—1960. Year NO. Of Departments NO. of Divisions 1946 16 6 1947 33 7 1948 33 9 1949 31 9 1950 37 9 1951 A3 10 1952 62 20 1956 100 21 léoo llO 2i The great formative period was 1951—1955, the period in which much of this research and analysis is focused. Another revealing facet of structure is shown in Figure 9, which depicts the distribution of operating executive management at the end of 1961. ||I1| .Avmm own; .HCOH .uLGgg ~C322< no ..o;_:...m.. V ~C©~ .9; 23...,omé mei.t...L..c.§ . S, O L :mra 90 mmmc ZOHmH>HQ Hm , m .Aam owma .HomH «ppoaom Hmscc¢ mm>HBDomxm mDOmU m H deom mo Zau5ooxm mCHpmhogo .m mhsmfim .- s u d gr:- ..u‘ . — ‘ ‘ \‘V ”n . ‘ f .-.. -15 -4 3L. . Q r. A “.von“- ~ ”A-“ ‘v .».\'¢~V our a WV‘ h o 6'; navy; 1:11,.gL . .. D?“ 9A ~ '1" 7‘ AAIfiL n [R ra-‘I I ‘VV, QAMV‘W ' y‘.l.p¢e)- Q fiksm ..~_. B. J no . § e for: I ‘AA V w. “r 2 LS. .C .7. a... «3 h. .1 l o: e 3 I. 2 .3 e V‘s 011‘ NUHV AF. v. u on,“ r p . :t ., . \JVI s o I .- . . ... .n. t. . . . . n ,.. 91 Note that in 1960 the company (see Chart 3, Appen- dix I) had grown to a sales output of 4.2 billion dollars; employment had risen from 183,000 in 1950 to 251,000; number of stockowners had risen from 250,000 in 1950 to 417,000; number of plants9 had increased from 117 in 1950 to 168; number of product lines had increased from 328 in 1950 to 400; number of product departments had risen from 37 in 1950 to 110. Also note in Figure 9, that this vast complex was managed and operated byja total of only 137 operating executives. Note further the pyramidal aSpect Of this management elite, and the "real" control, therefore, of the Chief Executive. The formal management organization structure for the first time in the company's history had been truly-- and drastically-—changed. (See Chart 1, Appendix I for its schematic diagram with reference to the organization of the past.) Even the "affiliated companies” were included; each was absorbed into the new G. E. organization structure as divisions or product departments. For example, the former Hotpoint Company became the Hotpoint Division; its Office of President was eliminated, and supplanted by that of Vice President (of G. E.) and General Manager, Hotpoint Division. 9We have no data for number of plant cities in 1960. However, in 1961, number of plants had risen to 170, lo- cated in 134 cities (Chart 2, Appendix I) located in every major geographical sector of the country. fi-a 4: "f" l .26 1Via-c3?“ era-ed the A \ U -;l.: ..nu‘ a .C ......O» . . ...,h... v .n’ '\ ‘Y‘cy-IA .- ' 92 Summary The highly centralized functional structure which had served the company well in its pioneering and early- growth days was recognized by management as becoming un— wieldy and limiting to continued growth. As executives looked into the future, particularly during World War II, they perceived and correctly forecast greatly expanding technology, changing social and economic environments, and Sharply increasing demands for electrical products in the home, in the factory, and in governmental defense Operations. Correctly forecasting a doubling of company volume in less than a decade, it was deemed imperative to realign the company's basic organization structure to enable the company to continue its growth. This involved much more than shuffling of resources, Skills, and facili— tieS--it required new concepts of management, new philoso- phies, new managerial attitudes. The decentralized structure described in this chapter was not accomplished without mistakes, conflicts, and mis- understandings. The Significant point in summary here, however, is that this vast company did successfully, in the net, adjust to its changing external technological, economic, and social environments; and in so doing, initi- ated processes of change which even now continue to provide forces for further change, so that the company as a system, W‘ ”G ..l ' e a.- .I'Av‘M-Ll .... ‘V‘ c . ‘ i 37.83.”.le W.. 93 and as a web of interrelated sub-systems is in the con- tinuous and momentarily present process of becoming something which it is not yet. . 4| ‘u‘l QIJI S T .T. .. * . 3 C p a V .7. r? ”M m“ #w m r 0 l i O C. r. T C. n... .rJ F. e .. . r. TC Dw v... . e n . .p . ... u E y‘. u i N v .H A . . I .2 £4 . o ...u If u a vvhd e l e t . a .. as: us .\ . ~ .- .u. s CHAPTER VII THE APPARATUS BUSINESS From its early days, General Electric has devoted a large proportion of its productive resources and capacity to the production of capital goods. Whereas it was the electric lamp which initially Sparked the entire electrical industry into being, the great bulk Of industry effort soon turned to the mandatory development of power generating machinery and transmission equipment. AS innovation in the power equipment field continued, G. E. and others in the industry turned to applications in industry. The practical application of the dynamo in larger and larger Sizes to the generation of electric power for lighting led to the development of a Similar machine-—the electric motor-—which by the late nineteenth century had found its way into railway applications. By 1887, five years before the formulation of G. E., its predecessor companies and their competitors had electric motors installed and in use in more than a hundred trades and industries, driving Shoe machinery, coffee mills, lathes, printing presses, freight elevators. With the successful development of alternating current machinery, pioneered notably by .94 .. . 2 . i .1 e T I S E . a r: r; 6 hi 2 1 »U. . t. . C "C 1 ‘ ...J . C a X h C t ... C u mt. m... . n. .C d .8 e e T t C h E a C. v C. .1 .fl . . a E g as e 30 e e r e O a; .74 n; C “C C e F k u I r. e C. u C. a P t i. n. e S . o .l -C E S O E P. C. G Wu aw ‘ . -. at a: VJ : .. n3 0 . e Av . o. 6 VJ F k ,v by. Iv . a . C. E 1... Th I. W D: .l S :t V. .J. .3 E g t r . n, .. C. A: flu . + c E n w . a e 3 .3 a ‘ paw ~ysu -. . W . n\~ a» Yer. . A F. WV :4 g C.» r u g M o P "kw a ‘ . AH» Y.. r u Add r y “. D. g s - Pu s v s s . adu Q» . . ”M . A. N.” .... :3 “an - . .. .. . 2.. . 71 «C 4.. u _ s .4 ...». .... u n L c» ‘ .h.” “A” ..-.» v2. .... . M. . ... m H . .r N. Westinghouse, transmission of power over relatively long distances became technically and economically feasible. The great era of electrical horsepower had begun-- multiplying man's productive capacity a hundred-fold.l With the exception of the electric lamp itself, General Electric's rapid growth during its first thirty years was entirely in the field of power apparatus, de- signed for and applied to industrial—use applications-- power-generating and transmission machinery; power diS- tribution equipment; electrical measuring and metering devices; power control and switching devices; power utili- zation equipment including electric motors, electric heating equipment, etc. This array of power equipment, or heavy and light capital goods, whether used directly by the purchaser (e.g., a motor to drive a steel mill roll-out table) or used by the purchaser as a component in his marketed product (e.g., a motor purchased and installed on a lathe by a machine tool manufacturer), is subsumed under the generic industry category of apparatus. The apparatus business is big. Even with the great growth Of electrical consumer goods, beginning in the 1920’s, including refrigerators, ranges, washing machines, radios, et al., the demand for apparatus applications in lHammond, Op. cit., pp. 118-119. . , o 2,..VQ-nyv cqye" ‘ ......Lu.a.J ‘VOAV ‘- . . L.. ‘_.. 3 lIIJFEeOAS EMS- -- - 3 “ ;-::.r-c in l; ‘ 3‘ o 1 n;C-i113£ (no A C feavy C E; ‘vOfTIpOTEEZ‘ light I ..‘yier‘se é fl OHSumer :r “5.. .. , . n°- .3 . " Vua..p.L. 3' Q: n C a." «d ‘v V Q - ovOds :1 h: 1 o I r 1 I I H C) :5 '!0. TBS" +. S ‘0 ini {its 2% ’“rPliCa I“: q \ .gvah ‘ .‘V J fi‘f‘n u Quc .\ lig‘ ._‘ Viv-“1’: hf" . °u ,h k-L. ‘5‘ p 96 industry continued to compound, So that even today, the apparatus business is a major portion of output. General Electric in 1961, for example, with a total sales of 4.5 billion dollars, announced the breakdown of this volume as: Heavy capital goods 24% Components, materials and light capital goods % Defense goods 24% Consumer goods 24% Even counting out "defense goods,” and considering only sale of goods to the industrial markets, about half, or 2 billion dollars plus, of G. E.'S output was in the apparatus category. Another Significant characteristic of the apparatus segment of the electrical industry is the high level of innovation in the application of electrical products and systems to industrial customers' processes. For Sixty years, application engineers and systems-engineers (as distinguished from product design engineers) have quested, constantly analyzing industrial processes ranging from steel making to neWSpaper printing, asking, ''How can we do it better, more efficiently, more productively, more 2General Electric Annual Report, 1961. K4 E C‘ y- 4‘: L . I nfi 1.1;: ed A!“ -pp l VI V" ]\ LEE nizati CHE inn:.- OWE. 0 “GI" e-l- -.-eeng . :‘15Avyoh‘ « --A v Via: L. A‘V‘.~r\ his c «r {rnl“ de 1' La‘k’ ‘A 'iC" ...q- \ I‘M-“l ‘-\ .1 97 economically?" The large electrical manufacturer (and this include Westinghouse as well as G. E.) has thus been the innovative leader in a great many industries beyond its own. The apparatus segment of G. E.'s business has been marked by (l) a truly marketing, or customer-problem orientation, and (2) a great innovative, technological orientation. From the crude early motors, to the engineered-system of electrical apparatus powering steel mills, to the new technological world of electronics, to automated factories, to nuclear power--the G. E. appara- tus organization, and G. E. apparatus people have been in the vanguard Of the great technological age of the present. This chapter will describe the G. E. apparatus organi— zation inaastructural sense, analyzing it prior to decen— tralization and after decentralization. We will examine this organization in another sense, eXplaining the under- lying processes Of change, and their functional and Some— times disfunctional results. _Apparatus Organization Prior To Decentralization Chapter V described the centralized, functional organization which existed until the late 1940's. Here the discussion will center primarily on the sales function in that organization. This is not to belittle the engi- neering hierarchy in that organization or the product- design elements of it; certainly, the research and :95, ”TQM. on ‘vV‘v-‘anlo ..V Q . veg-finno-S o-n “y‘Jva , vb . . “vac ani- -..vu. H‘Av, - ‘fP‘n"2.' : " ~~r¢|l a y‘ ‘.‘ v .’; ',-Q: {t ““-..'~.-.S O; 'F.."‘ +- ' ! .-vu 8ev tr t , "‘8 Was a #:52127: . “‘«LZ lute S'an ‘ in? ‘5! F. VA 1‘ +‘ “-4 | r. " Her 32‘: ‘ ‘I ‘Leati ‘0‘“ \4“ 25 k“; “B “AC":‘w‘ .-. ., M - 5e. 3 \,|"‘ ‘s ’ 7 'e i“ A- I‘ m 1 A 98 development of new products (the steam turbine, electronic products, etc.) provided the base for technological ad- vance. But, the majority of the great advances in the innovative application of electrical products and engi- neered-systems of products were created by the sales or- ganization. Further, the feedback of information and analysis of industrial customer processes and problems, which set the stage for new product designs, was gener— ated by this sales organization. It must be pointed out here that in addition to the Industry Sales Sections, there was a parallel group of industry-oriented and industry-assigned "application engineers" in the general—Office organization of the engineering hierarchy. Thus, for example, in the paleg industry group there was one section Specializing in steel- mill applications; in the engineering industry group there was a counterpart application-engineering Section Specializing in steel-mill applications. These two sections reported to different hierarchies, but they were physically located together (or in adjacent quarters) and were identi— fied by themselves and by others as a team. After decen- tralization they were to become literally put under the same management roof. (In the above technological discus- sion, we include these application-engineering sections and their achievements with the industry-sales groups, eral f 'V .16.”. 7‘: H are v]... aé-i '7 .55; ~49 ty’IIF - 10~U|‘ iv -«C AL .4 P‘Fzfl‘d l :A v F. a: E Y“. ~ We- :Qr‘s ' r... .13“ Q .. 99 although organization-wise they were formally within the engineering structure.) The sales organization prior to decentralization consisted basically of three distinguishable components—- the "General Office" product sales sections, the "General Office” industry sections, and the field sales organization. The ”General Office" product sales sectionS.--For each major line of products a sales group Specialized in that product line, with responsibility of providing product application information to the field sales force,of pricing the product, of determining product sales policies, of eXploring need for new products, of maintaining liaison with engineering and manufacturing. These are major functions, and do not represent an exhaustive list. (Looking ahead to decentralization, it is clear that these sections were to be "pulled out” to form the core of the marketing Sections of the new product departments. See Figure 6, page 85.) The ”General Office" industry sales sections.--For each major customer industry, there was a group Specializing in the application Of all apparatus products (particularly the engineered combination of products) to the processes of that industry. For example, there was a steel—mill section, a paper industry section, a machine-tool section, fir ax d. v 7 I I.’ a. -.A CT. w i cf Q: J . 3., Mn ‘.l e ind“ I‘ V to ‘- dus‘ ‘,.. 6“"W 4“. C‘ gen C V.. V“. 1‘ .sio .4403- .- 1 .71 ...." v- .l 1% -.. “I H 0 Isl» ‘Q . G .2 . «mo “Ere *. 100 etc. These and similar sections, each headed by an "industry sales manager" were grouped into the "Industrial Division,” likewise, there was an "Electric Utility Division" composed of sections Specializing on power generation, power distribution, etc. The reSponsibility of the industry sales section was to become increasingly knowledgeable about its assigned customer industry, to understand the technological problems in that industry, to develop new applications of electrical apparatus to the processes of that industry, to make engineering and sales proposals for these new applications, and to assist the field sales force in sales negotiations. These sections were staffed with highly competent, technical personnel, many of whom gained national and even international renown within the customer-industries they served. They often came to know more about the technological aSpects of the industry in which they Specialized than did the engineering personnel of the industry itself. (Looking ahead to decentralization, it is clear than these sections could not be spun off to individual product departments, as they were industry-oriented, not product-oriented, and were involved primarily with systems of products.) The field sales organization.--Even before G. E.'s formation in 1892, the predecessor companies had field selling organizations throughout the country. Upon the formation of G. E., these were consolidated into a ”selling A Q R .‘AU k“ h... .Lk-“ ‘A. ,. wri‘flx— . ..k 0 DH. w. * -: TM ... i . e Vb w a. . ., ,3. w“ Cu vu Av Cy : . 3 3 . m ...... .. . . . v c. re' up!“ j~v “w“;‘v ..y‘- f. E i. .. » i ..w _ S 3 ...st § » .‘I V pp 1.! QM u‘ 1‘ Q~ C C h 7 * v; k . xi :. a f i d E 1 «f. ‘0 cw I“. w; r: E C.» 2“ .L 7 \ L. mi «v. ~... .... f. A» x. Q» . w a . . Q; ... a .a .,.. . c : ..\ , n c. his AC .1 .. «A» 2». ,.: ... . p. _ i . .. ... . v . r . J: r... i v .. :r x M; 2. Q; to A .. A . .l 101 department," ultimately growing into a large, technically— trained, and highly competent sales force known simply as "Apparatus Sales.” There were other field sales components of the company, of course. After the consolidation of the lamp business, the Lamp Department maintained its own field sales organi- zation. Likewise, as the company acquired other enter— prises, e.g., Locke Insulator Company, these enterprises normally retained their sales forces. But for the apparatus- type products--the industrial, electric utility, and trans- portation capital goods products-—the Apparatus Sales or- ganization was the field selling arm. It was organized in a number of sales regions (approximately fifteen), each headed by a ”Commercial Vice President." Regional headquarters were located in such major cities as New York, Boston, Chicago, San Francisco, etc., with branch offices in smaller cities. Each region’s sales positions were staffed with college-and company-trained professional engineers; additionally each region had a corps of l'product Specialists” (field counterparts of the product sales sections at headquarters) and "application engineers" (field counterparts of the industry sales sections at headquarters). Additionally, each regional organization contained its own order-service facilities, financial facilities, engineering service facilities, warehouse facilities, etc. wtram" r‘.‘ r ..a...a-\ youy.‘ V v “‘5 1" ”‘AY‘. ‘ I '. -73»... . -..y -M‘H‘,‘ _ ... . . ~_ - .A,‘_ A q ‘ ~‘FU-U. ...A. » “I“...g.‘ V~‘{ . Iv "2*;5'6 .Q ,f, ...a..“‘:- ‘ U ‘ ... ‘ - "n Y-“r ,e, ...u .‘C‘.Spf\ x.“ ..“W ‘-.Q Y. .. . a.» . V“. ‘ La ‘ > . wr- , .y. _' t- Y‘ h ‘- \:.-. :‘V \v k , IC' . J V \v . *1- x.- CQ ”“1‘ ~“‘\'U 6“: V*.‘ ‘w- «‘.. \v‘.\’\~.,,I'3 d..q l,‘.. " UJ C"~.‘ v.; V ‘-‘--e€-'€n, ' H .f‘?‘ 16 I‘};‘ §' . P~ .. Q m “~ ~ .'~. *M‘KQ k.“ “fire. “”2 2‘”? V‘.‘ pl“? . . Q) s v.~\d" ‘prcfiu- V f— "x. 7‘»- 5‘.ch ~‘gb N 102 The sales-engineering positions (and the sub-regional management positions) were Specialized, to a degree, in the larger urban areas, on an industry and not a product basis. In the Chicago office of the Central Region, for example, the Commercial Vice President had three "division managers" reporting to him-—lndustrial, Electric Utility, and Transportation. Sales engineers in these divisions were assigned to industrial, electric utility, or railroad customers respectively. Further, where there was enough market potential to justify it, an individual industrial sales engineer was assigned to customers in one industry only-—e.g., steel, or petroleum. But, in all cases, the sales engineer sold all apparatus products to his assigned customers, with the "back-up" help of product Specialists on individual products and of application engineers on engineered—systems of products. Ample evidence exists to validate the claim that this large Apparatus Sales organization was highly compe- tent, and commanded great respect in industrial circles, considerable envy in competitive circles, and great prestige within the company itself. Prior to decentralization, then, the overall sales- organization structure can be schematically depicted in the following Simplified chart: 103 PRESIDENT VIC E PRES IDENT SALES a - m DIVISION DIVISION DIVISION :5 E! Product and E T *1 I Industry b ' ‘ ‘ f ' 0 PRODUCT INDUSTWK PRODUCT INDUSTRY E SECTIONS SECTIONS SECTIONS SEETIONS :3 rs Turbine Genera- Motors Steel ~ Transfor— tion Dis— Control Paper mer Switch- tribution etc. Petroleum gear etc. etc. etc. SALES REGIONS] 3 J R U , , m ID I I J g; ELECTRIC UTILITY INDUSTRIAL TRANSPORTA _ APPLICATION m DIVISION DIVISION TION ENGINEERING DIVISION Sales Engineers Sales Engi- Sales Engineers Appl.Engrs. Product Spec's. neers Product Product Spec's. I SpeCES. | Utility Customers Industrial Railroad, etc. Customers Customers l Service Facilities Service Engines Warehouse Financial, etc. Figure 10. Apparatus Sales Structure Prior to Decentralization. V r 1 E 6?. ‘r v W lhl 5 ..c \Y -\ f" v v .7": -5...,‘ b.__|_‘ 3 ~ 3“.”“V’3Y‘ 1. 4'. H’ wk Us-‘ 2. C» r a: r; [I‘\ he. . ... s s L \ ~\b 104 .159 Apparatus Sales Organization During The Decentralization Period As Product Departments were formed beginning in the very late l9AO's, and proceeding at a rapid rate in the early 1950's, a number of organizational adjustments had to be made in the Apparatus segment of the company's business. Note that in the non-apparatus busineSS--e.g., the Lamp Division—-the philos0phical changes and the organi- zational changes could be accomplished with relatively isomorphic or at least congruent structures. Within the Lamp Division, that is, as the "horizontal” slices were taken through the engineering, manufacturing, and product sales hierarchies, and individual product businesses were set up (Large Lamp Department, Miniature Lamp Department, etc.—-each an independent business entity). The field selling organization serving all these departments was part of the Lamp Division "family.” Not so for the apparatus-type product departments. Three different, separate turbine product departments were formed, and were assigned to the Turbine Division. Four different transformer product departments were formed, and assigned to the Transformer Division. A num- ber of motor product departments were formed, some assigned to the Motor and Generator Division, Some to another division. As these product departments were formed, of , . .. . L c E v v sf. . 1 . . .h e C 8 E .1 o a o a a,” ... r. ..d z o T C C w. . . , c .1 e .. 1 ‘9 mi. r: e . a .u, , u .u .1 .1 AU 0 . w i .C. c c. r” n; a... ..o e I; w. mt E r: PL. v. s 1. rp. C.» v . Cu w H a o Cu h». n: w s. Y. . v.1. A: a: C» Q» 4 .mb v I . . uh I. . 4.4 .«Q .. . a. r” rt. .5 3. ...H r“ .r. r” - r.4 ..v -\U A u g p .a« a. m _ . ’\Y.vv C 0 *v‘ 'rv‘ 105 course, the appropriate elements of the product engineering and manufacturing hierarchies were Spun off, and the appropriate product sales element of the general—office sales hierarchy was spun off--all integrated into the new product department (see Figure 6, page 85). Note that this left the general-office components of industry sales and application engineering, and the field sales force independent of the product departments and their divisions. This residue (which of course was the preponderate bulk of the former sales hierarchy) was formed into the "Appara- tus Sales Division" and was given the complete reSponsi- bility for the field sales function of all the apparatus- type product departments. Thus, as decentralization proceeded, the following structural arrangement evolved in the Apparatus segment of the company's operations. This chart is schematic only, and merely shows the relation of the Apparatus Sales Division to the operating components. Note that although it provided the field sales function for a number of product departments, it waS one organizational level above the Product departments. Note also that being as- signed to one Specific group executive, formal command- coordination existed only at the level of the President's Office. \ ESE. .. m: E \ 106 .mpcoappmaom paw msonH>Hm posoonm Usm .moawm mspmpmmg< .onHpmHom HmQSDosppmul.HH opswam ...H: :M: .Hmma .Hmmm Bobaomm Bobmomm T . ._ H ZOHmH>HQ __ o z __ m: ..m: mmgHQ ZCHmH>HQ ZOHmH>HQ mDB i _ . n .. .. . .u . ... ~ I. \ H\v n s h; 37 . A _ LC . . m P. .y A Viv ON « x .- h § a» NLRIV .W.v \g Q . «9. v. . r ... a as: A...» _.~ r L » ~w n~ . . o». H! o r . . r, _. I. s Is .. .~.. . s . s. . 110 The changes in this structure from that of the former sales hierarchy in the centralized organization (Figure 3, page 61) are relatively simple; the product sales sections have been moved out to the product departments; the appli—‘ cation engineering sections have been moved in from the former engineering hierarchy (the remainder of the latter, of course, having been distributed as the engineering components of product departments). Perhaps more signifi- cantly, the tapkp of this organization remained essentially unaltered by virtue of the company—wide decentralization process. Between 1951 and 1955, the period of rapid imple— mentation of decentralization, the organization structure of Apparatus Sales Division remained basically unchanged. There were some organizational adjustments, to be sure, but the basic structure remained very much the same. For example, during this period, a number of the larger regions were geographically Split and new smaller regions formed (to better plan for and operate in rapidly growing industrial markets). The "manager of regions" position ' and a was Split to a ”manager of northern regions,’ "manager of southern regions.H Several significant changes in Apparatus Sales Divi— sion organization structure occurred beginning about 1955; these will be described in the following chapter, and the influencing forces behind them quite clearly belong to the "post-decentralization" period. Ai‘ ""~"|"“‘fic. V J- . Ju'auk-v ...- . ‘ .— .‘A ~ -- "2.— . >4 k. Ausuv x.» - ' u —r- - I " — .1“ . "V. 1 ... I ““3 "s, q . 31L” H C V'- - — L, T"4-Iv-. _, . ‘ «.... ...-p Y‘ ' ' '-~..A- k‘ -~ _‘ - r.‘.‘,_.'.y,~ ”‘r~_.' _- . H'" -.-; ...,«¢. . v "-.«-. . -..-si‘fi‘fiy-‘A QQ ....-- g- ‘9» O . I - f;~- - ._. V Y‘F— ..\ - ~Vv'~..~~, & V ‘4 N.— . . ‘ l“ '\ 2 sgpla r‘ ‘A‘r “.4 .. “l~‘.. - ‘- i’Q‘ " vy- ....'\o.«k.u_l~..; ‘--- Q‘ . ' x.” T r~,\ " .. .... v C C ‘1 5- '- x.._\_ ‘7 I ‘ :‘flg- Q’- 2 » v ‘.T‘ V M.” - ‘ v 1- . - . ’. y-WFYA‘- :, ‘v_. '- . I”-..1«-._~‘ 2.: hp- 1 .. P} «\- M": _Q ‘ “ “u - . z‘fi“-f ‘ ., " " ~~ ~v ‘R "w Ce“. ->D ‘ A‘rg ‘ u-_.~ h” : VQQ'V‘ : 5’ “‘ch 1‘,‘ . '5 V is. Q “~\a >.,_ . .. . \‘ fix ‘ . v.44.'\‘ ‘ Y :‘\_ \ - ‘. ‘ v. V i -.s- I‘D-2O», y. 5 s . “”‘Ag- ._ .. F .. ‘42.. e .c -. ‘ I a“! 4‘ She. vb ‘”‘—5Qwi ..., VP‘U . . '\ ‘0 ‘i \- r.- a -‘I: "._ rs“ ‘s-.; N ‘. r. V “‘J 111 This chapter has focused mainly on the organization structure of the sales elements of the Apparatus business. It must be pointed out that during the decentralization period, 1951-1955, while this sales structure remained relatively stable, the newly formed Product Departments necessarily expended much effort on the sheer organiza- tional problems of welding together manufacturing, engi- .neering, marketing, employee relations, finance, and other functional components into an integrated, going business enterprise. Written charters for each position, objective setting, redeploying the people and physical facilities, and a hundred other complex organizational tasks were consuming managerial activities. Likewise, the "Services” from the executive office, with their wide variety of expertise in a score of Specialized functionS--organiza- tion planning, accounting and financial planning, etc., as well as marketing, manufacturing, and engineering-— largely devoted their efforts to the implementation of decentralization of the product departments. This did not happen all at once, of course; some product departments were formed early in the period-- some reached organizational and management maturity earlier than others. In some cases, a relatively large product department was formed and organized, and was later Split into two or more smaller departments—-the latter process coming much more easily than the former. If- Ar. I J" .~ 3.-.”, ‘, f .n ‘5- s A 5‘”: t5 . -... .... - ’ 0V " “n:“'~c_ . vkx. o—av_(l.t vb . '- :',~o—‘::_.r‘,: ."‘ -n‘u'y:‘ -] . ... “ x“ ' Tu .» “-.. .V -‘ ‘~ . - .4 -. .,,.,.I A . ~ .1 .. ...V-_ 9‘ h - h Vt", —-’ n _. AA. “’ IV .. "' ‘- c , .... ~-.- . .- .. _ ~ ‘ ,. ,- I h: h V y ‘ .. -e-.. V! .n_. . i‘" ‘n . \ A . l: >, ‘ _ -..-I i.‘\' c‘KL' V. ‘ ‘ :4“ ‘ .*- ..V‘ rlfi‘QV‘ .""}"“~4v..v . a. . "5"":r~ .f-..\A\...v A“ . .‘~ . “ 1 '1‘ ‘r-p.._ .i...“yv s... x. V . :M :1 LIL: -.v v‘ V“\. e: A , ~— r‘ Qkhscp I‘V.‘ y I “4 .Ax, '1 I ‘Ilhf‘I‘vv n H i - n”*‘ C, S. .' firs 1 . ...... IQWC \..~\,U.\_ ngy ‘ -' I. s 'r "V . | r J.v'*‘a ,4. \ ,,. ‘ -n F u“ .QQ'r vvk.‘. r ..., -yxs .~ “v.8“ VJ. ‘ 4. ‘h .N.V.: "~1‘ ”fie. o .. ’_ ‘ x ., h“ V t '. ~~ s a. . V}: :. ._‘« ‘ 112 But for the most part, the period of decentrali- zation, 1951-1955, found most of the company's managerial energies funnelled into the process of re—organization. It was not until about 1955 that the majority of the apparatus-type product departments were "in place," with integrated, "going” managerial teams, and hence be- gan to look outward to their markets rather than inward to their organizing processes. It was at this point of time about the mid—1950's, when the dynamic interaction of two major sub-systems of the company--the apparatus-type Product Departments and the Apparatus Sales Division--each organizationally independent of, but interacting with and functionally inter- dependent upon the other——began to produce disfunctional conflict between the two. Here was one Significant ele- ment of the company, the Product Departments, with organi- zation structure (and managerial ideology) having only recently come into being--interacting with another Signif- icant element, Apparatus Sales Division, with organization structure and tasks much the same as they traditionally had been. Here are seeds of potential conflict. The next chapter will describe whap happened, from an historical, organizational point of View; again, the underlying social or moral forces will be analyzed later. ”Y~». . - ‘ fink.) ._ .. . _" ' _ ,1 —D A L. -1, .. ‘ o shr‘ ..., .. 9~ Wiri- ' \A,§_V. . O .."\ ,~. ..‘\J k.— 0 ‘x‘ - r~ -..: ”Q v "9 ‘5‘.f-r if » r4, . ,1“ i.-~ -.., n- /~ a .. ,1- -, s11 . ~.’\.~Y‘P. ”—1., .“v‘ s 'V ,. . " .. r1\ Li v; A 'J‘Wa- "us-x... r- . —-< ' .4 9.0 I1 \v ‘ ' 2‘13. ‘S f: 9 ~ *-.~ M'r‘.r\ ‘9 ‘ML.\‘A A- ‘ - .‘\,~‘ N .«— ‘-—\,.v v.3 ‘ 7". N. w ‘ F " dim: ””4: \ u F _ s.. ....‘v’fih ., “u.“ ‘ w '1 1.4 O'\ 'Y‘ V 1 [a «"8 1 .- " . -~ . 1’": -.v -'. V‘ CHAPTER VIII POST DECENTRALIZATION, 1956-1960 By 1955, the major organizational objectives of decentralization had been achieved. Some one hundred product departments had been formed, and were operating as business enterprises. At the same time, the companies which had been acquired previously, and which had been operating as separate companies, were integrated into the G. E. organization structure as G. E. departments or division, with the same organizational standards, nomen- clature, policies, etc. Hotpoint, as mentioned earlier, had retained its identity as a company prior to decentralization; though wholly owned by G. E., it had its own President (who was also a Vice President of G. E.). Its marketing or- ganization was completely separate from G. E.'s appliance marketing organization, but there was some common engi- neering and manufacturing. Hotpoint designed and produced all electric ranges, both Hotpoint and G. E.--whereas G. E. designed and manufactured all refrigerators, both G. E. and Hotpoint. By the mid—1950's, however G. E. had consolidated all G. E. major appliance manufacture at Louisville; Hotpoint became a "division” of General Elec- tric; engineering and manufacturing were completely separated. 113 r- -r. fib"A'- 'Y‘C .41 ~..Av.»‘.¢ v u..c r“- ,i . ~-,.;-.... ' 4f. 1 t ~14... 0 -.. o \4 . q 9 ' AA A I’ .\ ....4 .....ys, V- ..- tsp” 1" ‘32., Musk». “v- _ V .. .‘1 .1“Y‘,n- Q...” ._ .4 n.-- v. ... g, v “...? . . ' I 1".~- ns‘ “V .....J.-..V‘_v.. . ‘, ”C. 'lr-w-Y '- 1"." v -...t ‘ ‘ ‘KN . \\..." "*,\3. 'JV" .1 t— - “V¥¢ Q‘ . ..r‘,‘ “‘VAA _.; .__ ,. ' Y; 1"» .. .-vi.§_ ‘- s““b' *Q‘p-m \ : V‘f'.~:qr' I x.‘,:i ". . ‘ *V‘AIA . . ... ....¢ 3" ‘V‘“{ V.‘W-~..A I V‘ ~\ ~,' ‘ "~ ~a yx "vln \"Af\ . vb “ ‘ -. A. x " C “'t. " i~~C. ‘— '1‘»- . 114 Locke Insulator Company became "Insulator Department, assigned to the Transformer Division; the Trumbull Company became two separate Product Departments; etc. Thus, by the mid-1950's, uniformity of organization structure and management philosophy pervaded the entire company. The role of product department general manager, and those of his engineering, manufacturing, and marketing managers were structurally uniform throughout the company. Uniform standards of performance-measurements and the formulation of common objectives were established through- out the company1 (the implications of which will be dis- cussed later in this dissertation). Although decentralization in G. E. was defined and implemented as a managerial process, there was an accompanying physical diSpersal of facilities. Expansion of physical plant had begun immediately after World War II, and continued through the early 1950's at a rapid rate. AS new product departments were formed, they often left the old plant cities; individual product departments, as ' appeared in new, modern autonomous "little companies,’ plants in such cities as Roanoke, Virginia; Shelbyville, Indiana; Rome, Georgia; Hendersonville, North Carolina; Bloomington, Illinois; Phoenix, Arizona; and a score of others. To the outside observer, it appeared that G. E. 1 lCordiner, op. cit., p. 75. » . é .. . E . . . . . . . vi a i .. . . . ... L o .v 1 .1 . l. l .: n. S f S a: Z C E n. ._. H 1.; .C 1., 1 I ..J 1 1 . 0“ .IJ Wm .— L x v ”A“ rfiw o. * “in M . Os * ..1- ... is .C E .2 I. E S T. T w. 1 o C E 1 . A: ... . ,1 c a: ..U H ... _ a E .. v.1 ,. . v.1 A; 9. ”a r: . . .. ~... a: :1 c. .2 . o 41.; . . o. . A, .c To a. .1” ...” 2. ._. w“ .3 i. ,1. .5 5. ..n Cc _- u . . .. . ... v . 2. ... «L a: n . .1 ..H S. ... .2 .3 ... p . 4 .... .... .. .1 L. . ... ... . . . . . . . . I . . . .a 4 VP“ .-\~_evw - 115 was atomizing its facilities; but at each new location, the Product Department General Manager and his manage- ment team were aS peas in the company pod, philosophy- wise, objective-wise, organization structure-wise. Each reported to one of about 15 Division Managers, each of whom reported to one of about three group execu- tives, each of whom reported to the Chief Executive. To the outside observer, it was obvious that G. E. manufac- tured a vast array of products (more different products than any other company in the world) distributed to an equally vast number of markets (hardly a single company, institution, or person in the society was 293 a potential customer). But the really amazing achievement through decentralization was not these great varieties--but rather, the sameness in the managerial process throughout this vast company. There were Shifts and adjustments, of course--some to correct inevitable mistakes, some to meet changing internal conditions, some to adjust to changing external environments. But such shifts in no way changed the basec tenets of the decentralization-concept, the management philosophy, or the fundamental organization structure. The Executive Office By the mid 1950's, the Chief Executive was per- force devoting his executive energies to "long-range ~.-‘v\ ..-yv ! Au Cg. A V Qp hp. at ... C ,1 A . 1.. . «C ..V C. .3 .1 e H.“ .1 . C T T .C I . E .C S E .. i .1 c e I . o ...u :1 .1 c e a. o F. . . . i 1. at .1 S E .P i. .r. t. T E .C 3 I c S E ..... E E .1... T. U o. .1. a; w“ a. c. A; . i N... C n: 5‘ 3 3 A +C at RU C.V w u o r H T 4 .1. a: .r. .. :i , 3 A. v :1 ...L fly ...u r” .my .nu TC T: Cw ..s: “L . i ~.C «C rx. w ... g . ...... .. u. . e .s . a: _ . u. . 3 . r“ .. k : . E., .. A .. . . v. .. q s e : s a. h. .r. ; . . . t» . . :~ .eu 1. . ..L. ny .. . 5 ._ a . hxs N\k C» x v f“ C. .: ... w L. I» u. . 2b . .. ... . L. ‘5 u. ‘ .n.‘ Y. _ _ . . s. .. a.» . ,.. ~1v . . ... ... .. ... ... .. .r ... 31.. .... 3.4 e _. u». l. r ll6 planning"--planning for the corporation twenty or more years ahead.2 "Long-range planning” has been structured into all operating-management positions; the higher the management level, the greater its emphasis. Accordingly, in the middle 1950's, with the great re—organization behind, the Chief Executive, then Board Chairman, dele- gated the operating executive-management of the company to the President. A number of shifts also were made among Group Executives from time to time, changing assignments not the basic characteristics of these posi- tions. For example, in 1953, five Group Executives were assigned respectively to the Apparatus Group, Appliance and Electronics Group, Defense Products Group, and the Affiliated and Foreign Companies Group. By 1960, there were also five Groups, but with different operating assignments and a different makeup of the respective division: Consumer Products Group, Electric Utility Group, Electronic and Flight Systems Group, Industrial Group, and International Group. Also by 1960, a new post of Executive Vice-President had been created. This shifting or re-deploying of top executive positions and assignments permitted flexibility in executive planning and operation without disturbing (structurally Speaking) the organization, charters, and 2R. J. Cordiner, Long-Range Planning New Dimension in Our Economy,a Speech presented to Economic Club of New York, March 5, 1956. ‘r‘. A .0 f‘..-‘ (iv- .3 ope .. F“ .\ .5: ~~ ‘ '4’" 6.; ...Ar. 4 ...-1" - . -.t Y) r“ __ a. ..v'I‘V“ n: \— I -...u - ‘4 ‘-A V ‘ E v r 117 basic operations of the operating departments. Or, it enabledcflungxa(in objectives, direction, etc.) to be introduced by executive management without either dis- turbing or being blocked by organization structure. Whether it created other, nonstructural disturbances is debatable, as research evidence presented later will indicate. The Division Level The Division, as indicated in Chapter VII, was a "family" of compatible product departments. At the out- set of decentralization, many product departments fell very naturally into compatible families-~but many did not, and as a result, some divisions were é'catch-alls." Also, as markets and technologies changed, and as some product departments adjusted technologically to these changes, they became more like, or more compatible with product departments in another division-—and were shifted to that division. In the late 1950's, many changes occurred at the Division level. Some new Divisions were created (e.g., Atomic Products Division); others changed their department composition. There is a great similarity here with the modern army, wherein a given military organization, e.g., the Corps, can retain structure and basic operating process but have flexibility in that military units V. .r . . . CL .. . (x (n . \ .>\ | A S ... .. 1 i C .... 2 E .3 .... .f r: C E f E .O . .C C . . .1 ..... .... .... S .C t ... .1 v. r“ r. l C. .. . c. . . 2. .7 e w .. S g C 6 1L 6 3 a . .. . ..ru .w... Q» «i «I; a. o .r .. 2‘ Q. . q. l P e “L. cl .MZ do; n: m . 0 fit. v“ 9’ Q.» .w a VI: m“. e A.» 7% Q.» a)... vas Qy whu S 2. t C . . C. n. ...... c. ... .... «. ... C a ,. .. . S .... 2. mm C N M d 2. C 1. 2. E ..-. 3. T. r: w-.. r .. e. E. n... 2. a». ”A «.5 C. s. C. Q. ... ... .7.» r.. ... Q; s. ... .,.. . u... C. . .. .. . . C. r c. .n . .3 «C ... .. 2.. C. r.. .. ... r .. :2 .. 2.. Q. 2,. .. “a ._ . ... T. a ... ... l... 2.. .... ... ».. ... . ‘ L. E. V. .. .. .».. ».. ND. . . . C» . .. 2. 3.. v. . . . ... 3. . . . . ...? s .. .. . s . . . . s. x . s a s a .. 118 (themselves with constant structure) can be moved in and out depending on Corps objectives and the environmental situation. All this was possible only by virtue of the common- ness of philosophy, structure, measurements, and role- expectations. The Services (Staff) The change in Services in the late 1950's is more subtle. The charter of their Services--to pursue research in all the functional fields, to develop exper- tise in these functions, and to be available to teach, advise, and counse1--remained unchanged. As staff, the Services had no command authority; but as expressed in the published company charters, they had "the authority I of knowledge.' In the early days of decentralization, when product departments were being formed, and their ” the Services exerted great in- managements were "new, fluence. One example: One of the Services, the "Manage- ment Consultation Services" contained the experts on organization-~the men who researched organization, who processed decentralization from concept to fact, who set tfluaground—rulesfor organization, coordination, etc. In the early days, they became more than staff experts-- they were in fact, executive, legislative, and Judicial. As each product department was formed, its structure vb. .... C. 3. a C. o e "J :0 m. +. C. :1 r .5.» v.1 : . k-” 3 a. ..C .n u .. ... u. . s . 3. . . . A . . :5 :— 5.. - e ”=86 n ' .I r. L -..: Li .‘R‘.. v .— U.- I; o d v ‘r 2. t\ ed a —r~:ré_ .763 ‘0.» C‘L‘) -. .. . . . . . y 2. .... e I. .T. A: a; l C «b 2 P . . T. a 1 .. S ...... a... r. .C 2. C C e C ... . e .. . ,. . a 1 r... .... E ,2 ~ .. S S .. . .. . 2. W. . ‘ : ~ r .. : ‘ ...- 2.. A~v fl. ‘ AN» N\V .~— N\& ¥.s Ax» .. .. . . .. _. t. :. . . p... ... s . : ~ . . ... ~ .. u I s s. . xx» ... 119 required approval by this Service; any deviation however slight required approval. This was tantamount to actual authority. Other Services such as marketing, manufacturing, and engineering were vital during the early days of decentralization. It must be recalled that newly appointed General Managers of Product Departments were almost entirely managers with past training and experience in only one function, and had to learn to become overall business executives. The former engineer, or accountant, or marketer, therefore, upon appointment as a business executive required and generally welcomed the active assistance of the Services. In the early days of decentralization (1951-1955), therefore, the role of the Services was highly and quite influential in the realm of operating management. By the mid 1950's, however, this kind of direct staff assistance was less required, as the company developed means of pre-training for professional general manager positions (to be described subsequently). Hence, the Services have largely reverted to the staff concept of research, teach, advise, counsel. The Apparatus Sales Division Chapter IX describes the Apparatus Sales Division as it existed through the decentralization period, 120 1951-1955. In the post-decentralization period, 1956— 1960, a number of changes occurred, at first relatively minor, and finally very drastic.3 In 1 55, the Vice President of the Apparatus Sales Division announced a major change in organization struc— ture. The avowed purpose of the reorganization was two- fold; to better align the Apparatus Sales organization to the Product Departments it served; and to provide more effective and economical distribution in the market- places. The organization structural change itself was in two dimensions: (1) the separation throughout the entire structure of the selling functions and the various administrative and service functions (described in some detail below) and (2) the ”decentralizing" of the actual selling functions (operations) and their management into market-oriented sub-organizations. Immediately below the level of the Vice President and Division Manager, all administrative and service functions were "stripped out" throughout the entire organization including the regional sales operations. These were then set up as self contained ”departments." 1. Financial and Service Operations. This "de— partment" was reSponsible for all financial 3In this section we are discussing organization structural changes only. Changes in other social system variables will be described later. _ . . , . . .I. I: .. L My.“ 15.“ w . “\- mlk Y... t. 1 m A Cu 4 1.1 AC » .. r .. v Q» 00 .1 £1. : ‘ ”C A . a L e .nV F“ W,” \fn.‘ .n M l 31* @ .r N L y . t 2. S .... E S a ; . .. a, .. a... . . 1 . Q. ... a. 3Q C .r. .. fiu 2 \ wk. 1,. u. \ . ... ...: Q. ., .. A . n .. .. F. C. 1,. ... ... . \ \ .... s .p.‘ .. . s.‘ p.s III. I‘. 121 (budgeting, accounting, credit and collection, payroll, etc.), all order—service operations, all the "housekeeping" operations, all ware- house operations. This extended to the Regions, where a Regional Manager—Financial and Service Operations was appointed, reporting not to regional management but to the "national" Manager- Financial and Services operations at headquarters. 2. Installation and Service Engineering Department. This department was responsible for engineering service facilities provided to industrial and utility customers for installing or erecting large electrical apparatus, and for engineering service after installation. The department in- cluded in addition to a large force of engineers a network of ”service shops" throughout the country, each of which was essentially a small manufacturing Operation. At the regional level, these functions were removed from the reSponsi- bility of the regional manager, where it had formerly been placed. Thus, these two national sub-organizations relieved the regional sales management of administrative and service responsibility, permitting it to become,in fact, a sales management, devoting energies entirely to selling problems and planning. (This is not to infer that the personnel administration function within the sales units was removed.) 122 The remaining sales organization was then organized into three separate sales departments, each with a head- quarters operation and a complete field (regional) organi- zation. The separation was based on broad market, or type-of—industry considerations. 1. The "User Industries Sales Department.” This department was given reSponsibility for the sale of all apparatus products and systems to customers who purchased the apparatus for their own plant use. This included customers in such industries as electric utility, steel, auto— motive, mining, paper, rubber, etc. The General Manager of this department was located at Divi- sion Headquarters, reporting to the Division Vice—President. The Department had a headquar- ters of ”general office" organization, with the industry sales and application engineering functions as before; and a regional sales organ- ization. 2. The Components and Intermediate Distribution Department. This department was given reSponsi- bility for the sale of all apparatus products and systems to customers who purchased apparatus not for their own use, but for resale. This included customers in such industries as machine tool, pump and compressor, industrial fan and !'§ A. \.~ 123 blower, etc. It also included reSponsibility for franchised distributors who resold apparatus to small industrials, contractors, etc. The organization was similar to that of the "user" department, with somewhat less emphasis on application engineering. 3. The Aviationfand Defense Industries Department, This department was given reSponsibility for the sale of all apparatus products and systems to customers in the aviation, ship-building, and defense industries. Its headquarters and regional organization was similar to the other sales departments. A simplified, schematic chart of this new Apparatus Sales Division is shown in Figure 13 on the following page. It should be compared with the former structure shown in Figure 12, page 109. As in the product operating structure, the number of vertical levels from Chief Executive to individual workers was highly compressed: as shown in Figure 14. The Apparatus Sales structure shown in Figure 13 remained essentially unchanged from 1955 until 1960. It should be noted that in this post-decentralization period; 1955-1960: 1. The Product Departments were now well oriented to their "autonomous" business operations, and ' _J H Qfi'fl o-v « '1“ _._‘|AJ--. 21...... QH> H3 ;%fi:.mns .- Ox r .r _ ...“... .NVTN .1n. 7... P... :E<: FIELD SALES COMPONENTS 1214 GENERAL OFF ICE COMPONENTS .AooppHEo mQOHuHmom 0cm mpHCD :mwwumsv mmma .mn3posppm soapmNH:mmmo QOHmH>HQ mwamm mapmhmag< .MH myswam mZOHUmm mmqMMW um ..mma um. .>< .BE ow.mzoo .QZH mmmb , , ZOHBmmm ZOHmH>HQ mmgqm mDB 125 CHIEF EXECUTIVE GROUP VICE PRESIDENT fi VICE PRESIDENT APPARATUS SALES DIVISION GENERAL MANAGER SALES DEPARTMENT MANAGER INDUSTRY SECTION INDIVIDUAL ENGINEER REGIONAL SALES MANAGER DISTRICT SALES MANAGER INDIVIDUAL SALES ENGINEER Figure IA.——Levels of Management, Apparatus Sales. .... 5.. . 1 .. ., _ . 11. a. .2 a. C 3 o. E C L. . . .. ., ._ _ .t . . . . ...». _ 1 C. .H K F V. a... m a . . .. . .x... 1,. . .C r. L ...- ...: l I I O O 33 --. C . S. 7; U7 126 were in fact mature business organizations. The system of measurements, evaluating their performances had become highly operational. Whereas the Product Departments were truly market-oriented, each department was so with respect to its product line only. Thus, there was a product-market orientation. Competition in this period was increasing; G. E. market position in many product lines was either at a standstill or was decreasing. Many Product Departments had increased produc- tive capacity beyond current sales volumes, and were operating at less than optimum capacity-- with obvious effects on costs and profits. The sales function of the apparatus-type product departments was provided by the Apparatus Sales Division, also an "autonomous" operation over which the Product Departments possessed no formal authority or control. The Apparatus Sales Division with the exception of the 1955 reorganization (which was essentially a management realignment) fundamentally was per- forming the same field sales tasks as it had been for forty years. Whereas the Apparatus Sales Division was market- oriented, it was also individual-cusomter Cc I‘ -.y:..~.v\ _ . :- V‘J.LS , . .. ... 1P6 rd ‘ .l 80 ‘. rk -.- -A P“ 'ex' v ‘T‘ vA. 2. 1 h. .... K. 33:25. --.. drcs‘ 1 127 oriented, rather than purely product—oriented, perceiving as its objective the develOpment of overall relations with each individual customer to enhance the sale of all products, combinations of products, and engineered systems. Incompatibilities, friction, and ultimately conflict developed between these two interacting organizational groups, or sub-systems--the apparatus-type Product Depart- ments on the one hand, and the Apparatus Sales Division on the other.Ll The Product Departments were overtly dis- satisfied with their relations with Apparatus Sales. Lacking authority to command changes in Apparatus Sales, they indirectly forced change (by processes to be described later). In 1960, the Apparatus Sales Division again experi— enced drastic reorganization, this time destroying its identity as an organizational unit (and as a social sub- system). At the risk of over—simplifying somewhat at this point, the reorganization can be described as follows: 1. Product Departments and Divisions by 1960 had been aligned in quite compatible groupings. “It is not the purpose here to describe why this occurred, or what social forces underlay it, or what the real meaning of it became and is still becoming. Here we are only describing the history of change centering on structural change. {\D 128 For example, the Electric Utility Group con- sisted of Divisions and Product Departments whose markets were in the electric utility in- dustry. Hence, all organizational parts and functions of Apparatus Sales having to do with the electric utility market were split off, through the Division VP level, and formed into a new sales "division” entitled "Electric Utility Sales Operation," assigned to the Electric Utility Group. Some of the Product Departments in this group produced products for power distribution. Therefore, within the newly formed sales organi- zation, at the District Manager and sales engi- neer levels, a further organizational differen- tiation was made, forming some field sales units selling only the power generation products, and other sales units selling only power distribu— tion products. Other Product Departments groups inherited their share, likewise, of "chunks” of the former sales division. This breaking up of the sales division in and the assigning of its parts to different product department groupings resulted in a muCh higher de— gree of product specialization. It changed the once large and powerful Apparatus sales into a number of ff) Sch m: ‘I-:V -— r‘y‘ .- ~°:-A~S~—* ’ l LL -r_:~~~ - *vS 129 smaller units, each under the Sphere of influ- ence Of a few product departments and divisions. Schematically, the former structure was: Inputs PRODUCT DEPTS. , "’ (Set "A") 1 Inputs.__. PRODUCT DEPTS. __.. APPARATUS Outputs (Set "3") SALES '——to Markets Inputs.___. PRODUCT DEPTS. I (Set 11C”) and schematically, the present structure is: Inputs—...... PRODUCT DEPTS. :NEw SPECIALIZED - iMarkets (Set "A") SALES UNIT "A' l InputS—————41 PRODUCT DEPTS. .L NEW SPECIALIZED _#_Markets f (Set "3") SALES UNIT "B" i Inputs .‘ PRODUCT DEPTS. 'NEW SPECIALIZED __1Markets (Set ”0”) SALES UNIT ”c” Pee n-AV‘. — VA. ..5 fL .~ “‘VAOU In. ’ \y I a. ‘ ~F, wev‘l. ...u“. .. L r-\O‘ \J- V n '\ 130 This still does not give each Product Department General Manager formal and direct authority and control over the field sales function. But, it is a great step closer to that authority and control. Further, it greatly increases the dependengy of the sales units on a few Specific product departments. Additionally, each of the newly formed "fragments" Of Apparatus Sales Division is assigned to the same Group Vice President to whom are assigned the Product Divisions and Departments for which that ”fragment” is the sales organization. Looking back at Figure 9, page 90, we see how the Operating management authority and control of this giant corporation is vested in 137 individuals. Until the 1960 reorganization, some 30 or 40 Of the product depart— ment general managers whose departments accounted for $2 million in sales had no formal authority over a vital element Of their operation--field sales. After the re- organization of 1960, the actual authority and control of these 137 executives have been enhanced. More power was being centered in this management elite. 'v .v'. It: ...- :. -““ «Lu/S m-. r ' ‘ 5.3:: i." ”‘0 ’vy . ~«u “_ KL- v .. n.‘ ‘vv rn- -_ . Fr "~~«‘.." . \v CHAPTER IX THE MORAL ORDER, AND THE BELIEF AND VALUE SYSTEMS (1925-19A0) Introduction We have described a historical trace of this company from its early beginnings in the latter part Of the 19th century, through its early pioneering days, through its period of growth and consolidation, and through the period of the great reorganization and decentralization Of the company in the 1950's. We have observed and described how, as early as the late 1920's, executives of the com- pany perceived that the then centralized, functional type of organization was becoming unwieldy and insufficient of adequate management control--thereby placing a limit on the continued growth of the company. We have also Observed and described the perceived needs by executives for reorganization of the company after World War II. These executives forecast during World War II (a forecast later to be validated) that the great technological achievements during the war plus a steadily and rapidly increasing market demand presented the company with opportunity to Significantly increase its sales and the Opportunity to innovate technologies 131 1'; VCJV' Y‘. .— ...4 ..b' ‘ v - w p 6 . :"2‘ "C“XD‘ ,L,_- ...-A. guy u’l ‘ O»0~"|Ar‘.' V’ ,. ..-.-v .11.v ..L I! V q n V‘“ MEL 6.1 3"”? ‘r .'*A Vite e. 1 "“rs. ....L.‘ ‘ 2". 1 It. 1.. * [5 FA‘... . L.» n- .L . A *V 132 and new products, both in the industrial and in the con- sumer markets. It was further perceived by the executives that these opportunities could not be realized without sig— nificantly changing the organization Of the company so that it could flexibly adapt to the predicted rapidly changing external economic, social, and technological environments. Decentralization Of the company was the process by which the executives adjusted the company to meet these changing external environments. The definitive meaning Of decentralization in this company was described in Part II. In the company's own words: The concept of decentralization. . .involves much more than geographical dispersal or product diversification; more than establishing profit responsibility; and more than cutting adminis— trative reSponsibility down to manageable size. More importantly, decentralization is an attitude Of mind by which it iS expected that each manager, and likewise each individual contributor, will assume the responsibility for and employ the initia- tive required to be on his own to the greatest pos- sible extent within the framework and Objectives and policies that encompass his position. Thus, the executives viewed decentralization as something much more than merely a realigning Of organization structure. They were well aware that decentralization meant new definitions of roles, new interrelationships of people, new managerial philosophies, and new individual managerial perceptions of the company and of components within the company. 133 Describing how the executives initiated processes designed to develop new managerial perceptions and philo- SOphies concomitantly with change in organization struc- ture, it will be revealing to examine what the perceptions, attitudes, sentiments, and philosophies of management were prior to decentralization, under the centralized functional type of organization. In Chapter IX, therefore, we will examine and describe the former centralized company as it existed prior to World War II, viewing it as a social sys- tem with Social structure, identifiable with Social usages (or modes of behavior), and social relations. We will propose that roles and role expectations, the status sys- tem, the commonly shared sentiments, and the norms of behavior were all deeply rooted in tradition. Hence, in Chapter IX,we will examine the traditions which have been built up in the company for years-~traditions which had become socializing processeS--traditions which had devel- Oped symbolic meaning to individuals carrying with them prescriptions and proscriptions, expectations and sanctions, and the developments of personality organization or orien— tations to roles. We will describe all this in terms of a number of identifiable variables which apply both tO 'the social structure itself, and also to personality struc- ture, or the sets of personality organization or orienta- tion to managerial roles. This description is based partly upon the writer's Observation as a management member ...» ‘ o - .,- ...-J -¢' v —_-_y1~. .--K- » r-.'A,_ ’r R ..~ L‘w 3-. ..d . {- \f- “t ~ ‘ 3»..- . .4 - ‘rA -r-hl ..- . '~P\_ V \"\§ ‘ Ch. "UA- a! \ [‘5 ~ \ F ~~.‘- «V. .. 134 of the company, but reinforced by documentary evidence and information given by informants during the field research. Following this, Chapter X will describe the emerging changes resulting from the process Of decentrali- zation as they affected the above variables, and the emerging Of new role concepts and new personal identifi— cations. Here we will describe the emergence of a "new managerial elite” which had profound influence not merely on organization structure and the totality Of the Opera- tions of the company, but also on the adaptive and maladap- tive adjustment Of the individuals tO the newly emerging social system. Chapter X will also describe and attempt to explain the emerging changes in the moral order and in the belief and value systems themselves. Here we shall again describe the changing moral order in terms of the same variables studied in Chapter IX, describing these in terms Of their changing symbolic meaningS--the evolvment of new symbol systems, the erosion of Old symbol systems, and the per- sistence or tenacity of certain symbol systems. In Chapter XI we shall refer all this to one Specific identifiable sub-social system, the Apparatus Sales Divi- sion. Here we shall propose that this organizationally independent social system initially existed almost as an island, unaffected directly and internally by the changing 135 processes brought about by decentralization. We shall view it almost as an anachronistic small society, living its present in terms of the traditions of the past, rein- forced by strong symbol systems, and resisting social change. Chapter XII describes the dilemma and ensuing con- flict between the tradition-based Apparatus Sales Division and the emerging social system external to apparatus sales evolving through the process of decentralization. Here we view two separate social systems within the greater system of the corporation itself, independent but interdependent and interacting. Chapter XIII describes the changing power relations between these two systems. It will attempt to explain how the tradition based Apparatus Sales Division resisted change, developed defen- sive behaviors, and how its managers evolved changing personality orientations. Chapter XIV describes what finally happened as a result of the dilemma and conflict between the two separate social systems, the Products Departments and the Apparatus Sales Division. This has been described structurally previously; here we will attempt to describe it in terms of its social meaning. Chapter XV will view the social system of the corporation as it is today and attempt to explain the processes for change which are presently built into the system so that even now the company is becoming something -—v H". I ‘fYt' _ - .. -v 1 . . ‘r .. ... ‘.W.. \ o...p.. --.,‘_ ..._ ‘~~ '4‘.” -,, ‘IA‘_ . . (J! 1' ’ . (ll 136 new. We will attempt to explain how the future, or mana- gerial projections into the future are an integral part of the present, and even now affecting the process of change. -X- * -)(- 9(- -X- 96 -X- * 9(- The centralized functional management organizational structure of the company which existed from the early for- mative days of the company to 1940 has been described. But within this formal structure, what processes were there Lq for enabling the individual, or groups of individuals, or systems of individuals to learn what the company meant, to 4r. come to understand what the individual work functions meant, to learn what the managerial positions meant, to learn what was expected of them, to learn the do's and don't‘s of managerial behavior, to learn how they were to be rewarded? All Of this, of course, was learned as it is in any society, through the complex web of structure, norms of behavior, and social relationships, or in terms of a shared value system and shared corporate goals which were congruent with and interacting with personal goals. We shall attempt to describe and explain all this in terms of the social structural characteristics, the processes, and the policies existent during the period of the cen- tralized, functional organization.1 To do this we Will 1We do this with one eye ahead to the decentralization period of the 1950's, realizing that in the decentralization period, most managers in relat vely important positions were men in E§€”age group 50-60i who had ea eregothe(com anyssomet we - ve ears r v O s or n e s ur wo e s era’)‘.y Or tAose iR Ehe fio- O ear age grgup in She lgao'sphad entered the com any in the 93 's (most y in the post-depres- sion years Of 1536-19AO), also in the Swope era. I A"... 137 examine a set of variables which were either knowingly or unknowingly, consciously or unconsciously, under the con- trol of the management but which we hypothesize influenced individuals' patterns of personality orientation and there- by, interacting with certain purely structural variables influenced patterns of managerial behavior. We shall later examine these same variables after decentralization (in Chapter X). These variables are: 1. Entry 2. Early Training a. "TEST" Program b. Business Training Course c. General Course d. Functional Courses e. Social Influences Job Descriptions Individual Performance Ratings Salary Administration Mobility Later Training a. "Island Camps" b. "Elfun" \IONU‘I J—‘UO Entry The company has always followed the policy of pro- moting from within. In a few rare cases in which some highly Specialized skill was required, an experienced man was hired from the outside, but generally the prac- tice has been, and still is, to recruit the technical and professional work force directly from colleges. For example, the 1961 annual report makes quite a point of the fact that the ”average" age of officers and managers at the division general manager level and above was 52.5 III (\‘ er ra- -..- vs "ov ‘1 ‘. 138 years and the average length of service was 27.6 years. The company has maintained an active and formal recruiting program for professional employees for over forty years. Even in the early 20's, it was one of only a handful of industrial corporations recruiting engineering and business or financial graduates at colleges throughout the country. The recruiting program was largely vested in two men, one recruiting engineers designated to ultimately fill techni- cal and managerial positions in the functions of engineering, manufacturing, and sales; and one recruiting business or financial graduates, designated to fill the accounting and financial positions in that function of the company. The criteria for hiring were highly demanding, in- cluding high scholastic achievement, "dynamic and outgoing" personality, evidence of conceptual ability, and a balanced interest in extracurricular activities. One manager of the company who had become involved in extracurricular recruiting activities after World War II, when such activi- ties had become much more involved, reflected as follows about the recruiting process in the 20's and 30's: The recruiters in the early days did a fantastic job. Of course at that time the company was one of a very few actively visiting college campuses, and its recruiters visited the major colleges at least twice and sometimes three times a year. Fur- ther, even in the years when very few men were being hired--such as the early 1930's--the company contin- ued its visitation of the campuses. This, of course, was highly welcomed by the engineering and business faculties and created, I think, a very strong image of the company. As a result, the faculties came to 139 know what kind Of men the company sought and, there- fore, actually helped in the selection process by recommending students of the general characteristics looked for by the company. For example, Mr. ----- who recruited at my campus and Offered me a job with the company, later told me that based on recommenda- tions Of my professors he had already tentatively selected me even before I came in for my interview. I would say that the graduating seniors on my campus had a very clear picture Of tEe company and its pro- grams, and its Opportunities. The company recruited broadly, in a geographic sense. Each year it hired engineers and business trainees from all sections of the country. It is true that some universities provided many more graduates than some others, but there was no clear geographic pattern in this. For example, by the mid-1930's, Cornell University, Purdue University, and Iowa State College all ranked very high in number Of gradu- ates in the company-schools drawing students from widely different geographical and even social backgrounds. But there were a number of common characteristics in the college graduates hired by the company, because of the criteria for selection. One manager thinking back about his early training days remarked: One thing that appealed to me in those days was the fact that I was associated with young men who were very much like myself. I don't mean to infer any degree of conformity at all. As a matter of fact, I think that our particular group had quite a few non-conformists in it such as (here the informant named several individuals who later reached high 2The quoted statements by informants in this and following chapters were all made to the writer in the field research conducted in 1962. 140 executive positions in the company). What I mean is that, we all had ambition, pretty high level Of in- telligence, the same basic technical background. It was a fine bunch of people. The rate of hiring was fairly stable during the mid- 1920's to late 1920's. In 1930, however, because Of the great depression, essentially no new men were hired for a period Of about five years. In fact, during that period, 1930-1935, many of the younger men who had been hired in the late 20's were "furloughed" because Of lack of work; most of these men did finally return to the company, but some did not, so that during the years 1930-1935 there was not only essentially no hiring but a small net loss Of professional people. This resulted in a gap which later resulted in sharply increased rate of upward mobility, particularly after World War II and during the early days of decentralization during which time the company was rapidly eXpanding. With the upturn of business in the mid-1930's, the company again began hiring at a relatively high rate. About 400 engineers were hired in 1936, 500 in 1937. Throughout the 1920's and 1930's, the young college graduates, both engineers and business graduates, reported for work at one Of the major plant cities and were placed in a training "pool." For approximately the first year of training in the company, the young trainees were to remain in this ”pool, the engineers in the "test” program, and the business trainees in ''Business Training course," .--¢-' -- .u \r ‘ a .c on .. , '4 w .yn) p n “...... nu» I (I) ‘y.. rm 0 ‘ \ ‘-..M w.‘~~ L \ V .. ‘ L, ‘n- ‘7‘ ‘Von .. A hrs .,_ n. \ \ -V'm‘ Q .« "t‘ 5 s ‘\ 141 commonly referred to as "B. T. C." Each Of these programs, to be described in somewhat more detail below, consisted of job—rotational assignments together with formal class work. EarlygTraining The "TEST"4program.--All engineering trainees were placed on the "Test" program. This involved actual working assignments in the factory, testing large electrical appara- tus. Much of the company's lare apparatus was "custom built" to individual Specifications. Such equipment in- cluded steam turbines, large motors and generators, large transformers, etc. After these large machines or apparatus had been built they were assembled and erected by factory personnel, and a specified set of engineering tests were then made on the equipment by the "test engineers." The normal test assignment for each individual lasted for three months. He was then moved to the testing depart- ment of another factory, sometimes in the same plant city, and sometimes in another city, usually with a degree of choice in these assignments. The majority of the assign— ments were in the company's largest plant city in Schenec- tady, New York, although there were also test assignments in such plant cities as Lynn, Massachusetts, Philadelphia and Erie, Pennsylvania, Pittsfield, Massachusetts, and Fort Wayne, Indiana. At the conclusion of each three month 142 assignment, the trainee if he wished, and if he were so chosen by the company, could remain for an additional six month assignment as a supervisor of that Specific test. In the parlance of the company, he "signed up"—- hence, such supervisory positions were known throughout the company as "Sign ups." Thus, as a new man came into a test assignment he found that he was given instruction and supervision by a young engineer who had been in the company only a Short time longer than he. For the great majority of young engineers, this was the first experience actually working in a factory. These were factory jobs; the test engineers punched a time clock, were paid on an hourly basis, carried their lunches, etc. Yet they were clearly a group apart, so regarding them- selves, and so regarded by factory personnel. Although the majority Of the trainees began at the outset to aSpire to their first assignment "off” test at the end of a year, the great majority of them found this ”test” eXperience exciting. They were working with large, complex apparatus highly technical in character and often with selling prices in the hundreds of thousands of dollars. Further, these were reSponsible jobs giving the trainee a taste of job reSponsibility very early in his career. The test engineers had the final say regarding whether or not the apparatus had been built to Specifications; if in the judgment Of the test engineer the apparatus failed to .. “I,“ "- ,.- "'1'.“ ...A-.- to .,.,.~ a. ...U- . a uyf.\ ‘x .....-v. ‘E'fi‘afioc ,_ -’ (...; t y H" . ,W J _. ’A . '~ -.-. ”‘V ‘v ~‘ A 1 h ‘1‘ “s L “x. .‘xe ‘ S‘:f‘ ~n 4*!“ u ‘ fl . . s" r‘. 'n ‘3 ‘. J V‘ . A .1. t .;-. ‘1 -. pp ...“ H. ,. ‘1 - “— ‘w 143 meet these Specifications, it was not Shipped and was returned to the factory for correction. They were re- sponsible, therefore, for quality Of performance in ope eration. Each of the test assignments (there were perhaps twenty-five or thirty throughout the plant cities men- tioned above) developed a reputation for itself. Some test assignments were more popular than others; some were regarded more exciting than others because of the size, power Specifications, and operation Of the equipment. Within a few weeks after entry into the program, the new trainees began to ”compare notes" with other test engineers regarding the desirability or undesirability of other test assignments. A distinct camaraderie develOped among test engineers, due in part to the relatively common backgrounds and common personality patterns Of the young trainees. But it was also due to the high status of the test program within the company and outside the company. Essentially all of the technical people in the company had themselves been graduated from this program and regarded it with affection. TO this day older men in the company speak nostalgically of their early "test" eXperience. As one Vice President Of the company remarked: The test program certainly did something for people. It gave a background of technical eXperience, but 144 more importantly was a common denominator for all people. It certainly made men feel much closer to one another. After all, when you gather together young engineers from all parts Of the country, from all schools, and put them in a common group in their first work experience, it was bound to develOp a close and lasting relationship between these men." Another manager, presently a regional sales executive, unien.asked about his early impressions of the company re- plied: I went through a series of test assignments and then to the departmental plan, going into engi- neering first, and then to commercial in "Building Number Two." I don't remember too well what my first impressions were except that I felt that the company and had great consideration and feeling for its employees. It was a wonderful group of men, highly competent, and attractive to me. There was a wonderful family feeling. I was very proud Of the company and very proud to be associated with it. One Of the great advantages Of the test program to t3r1€3 trainee was the Opportunity to get a "feel" of the C3C>Inpany and do some personal eXploring during his first rn<>r1thw on the program before he had to make a Specific C3k1C>1ce of a career assignment into manufacturing, engi— heearring, or sales. All test engineers were hired only fOI“ the test program without specific designation as to tyDe of functional work to be performed at the end of the first year's program. As described by a manager in the (ZCanany who is reSponsible at a high level for personnel (3 eVelopment: Before World War II we made quite a point about the fact that a young man from college could come with the company, enter the initial test program, and haveaaperiodof waiting and exploration before 145 he had to make up his mind whether to make the choice between an engineering career or a com— mercial career. From the vieWpOint of the trainee there were definite advantages to this system. There is ample evidence to indicate that many young men who came with the company came with the company came with a preconceived notion of what they wanted to do as a career, but after having a chance to look around the company a bit found other avenues more attractive. The exploration was made easy for the trainees. They 'wenre encouraged to interview managers in all the functions, Inarrifacturing, engineering, and sales in each of the plant These execu- If.“ Clit:ies in which they received assignments. t:iWJeS without exception always made themselves available fVDI‘ interviews and a number Of informants have indicated 11<>vv consistent management people were in the 1920's and J-E9EVD'S in their regard for the young trainees and the tlInethey were willing to Spend with them. Of course, tZklEire was another side to his coin; managers in each of t:k1€3 functions were anxious to ”sell" their functions to tzr1€3 trainees realizing that future manpower availability iRCDI? their Specific functions came from this training In a Sense, the functions were in competition one But p001. with the other for the young engineers in this pool. the significant thing is that the young trainee quickly EVDTZ a birdseye view of the apparatus component of the com- ENinyg a feeling of cameraderie among his fellows, and by ViI‘tue of intimate contact with management people a feeling of being a junior member, but a member nonetheless of a professional fraternity. ‘\\,.- .‘A ~rr‘3r re; .“ AA..A -- a-.. 5A .‘WI‘ ". 1 . . | z. '4 .u- a C'sc’l: 117.: ~u..‘u4..\ t—\.. . ‘n‘iitl‘. will ‘ n ”a." Yurv. I......,. "x; r Fa.” Q :b-M“ AV. "'¥‘vl.. o ". ‘AL. , cc ‘ ‘1" (v '~.\‘," -1 0 Tu c 'L-i 9-“: l ' £1" :12 “OVA" ‘1. v “‘ve1: :3 :f‘e :, b" “A? 1" ’w. o‘, -‘ . 9.48 E. I-- ‘ ~32; r» . .. ‘. x. *y the ”. ,. ¢,__‘ \ s .. ‘ A -‘ uh " .p-‘V‘. mee ‘I q x: A - “H‘N .F, .b‘d 146 Normally, about six months after his entry, the trainee made a decision on the functional career he wished to follow at the conclusion of his year's test assignment. At this time he then applied for admission into the :Specialized training program for that function, a process nfllich will be described below. Business training course.——The business and financial ‘truainees embarked upon a rotational training program very Inuxzh similar to the test program, except that their three nuarrth working assignments were in various accounting =3€3crtions. Like the test engineers, they were given a r’63:].atively high degree of reSponsibility at the outset Eirlci performed working jobs in accounting or finance re- <11121ring knowledge and judgment. In the case of the business training course, the end eaI‘eer had already been chosen and trainees embarked im— rue(iiately upon a functional training program in addition t:<) the job assignments. They attended classes covering VaI’ious advanced phases of accounting and financial manage— rueht. The aSpiration of these trainees was to be appointed to the "traveling auditors staff" at the conclusion of the t I’a ining program. The general course.--All test engineers, even prior PC) career decisions, were required to enroll in the ”General Course," a set Of classes which met twice a week, 147 one meeting devoted to advanced engineering application study and the other devoted to a history of the company, a description by the reSpective managements Of the vari— ous functions of the company (accounting, engineering, inanufacturing, sales, advertising and sales promotion, etc:.). 'These classes involved outside study for which tile trainees frequently met together in groups, further Iwainforcing the camaraderie and also, more significantly, lPeeinforcing the shared perceptions Of the various facets <3I‘ the company. The functional courseS.——The test engineers electing 't<3 continue with design engineering as a career applied 17(311 entrance into the "Advanced Engineering Program." CDIWJIS was highly competitive, with only a few candidates tDering selected each year. Selection was made on the basis ()1? written technical examinations. Upon acceptance into tlkles program, the trainee was removed from the test program Eirlci again began a series of rotational assignments, this ‘t ilne of greater duration and in design engineering depart- ruerl‘ts. Simultaneously, he was enrolled in courses in engineering and pure science given by outstanding techni— ‘3511 men in the company. This advanced engineering program “His regarded at the time as far surpassing any engineering 01‘ scientific doctoral program in any technical university in the country. ...YIF :r~:rpgr‘ ..~"\a~o~‘v\' ‘ U H 1 "o c.1213 ...» Vu-v 2:389 w: . -E;3I‘t*pr “Av .A vvyy‘ ”“9” wr § ! A" . .: Pod ..-, Hub“ L4"; U 8833' O" 1)) (ft ( I ( I (D (5 v I (3. (o rt- 0) (In O .' ’1 l- (7') y‘- 148 Trainees electing to follow commercial or sales engineering work as a career applied for entrance into the "Sales Training Program." This also was competitive, with selections being made after a series of interviews Ivith eight to ten high level sales managers. After seilection into the program, the sales trainee continued 1118 test assignments but immediately began a program Of Oculrse work under the administration of the ”Sales Training Ekapartment." Courses included salesmanship, business lestter writing, effective Speaking,product applications, Eftcz. There was considerable ritual connected with this Ilrfiogram; announcements of acceptance into the program were Tnfiicie at dinner meetings held at a local country club at- tended by tOp_executives of the sales organization; the C33Leass rooms used for the sales training courses were C3€Essigned with the decor of a board room; classes were v:LSited by sales executives; instructors of classes were Well known sales managers; etc. A high eSprit-de—corps (QJJaickly built up among the selected trainees. A sales eXecutive Of the company, reminiscing about his first year in the sales training program in the middle 1930's stated: The whole sales course was superbly presented and develOped a very close personal relationship with associates. I remember we talked about very little over our cups of coffee and occasional beers other than the sales training program itself. The men in this particular group of mine were designated later to become product department marketing mana- gers, general managers, regional sales managers, and division vice presidents. Even to this day to meet with one of these men over a martini is to signal a nostalgic "remember when" conversation. g \ ' I 1*}. F‘YQ‘: .. .... LAD L.‘ o‘: "~r‘ (A0 --.. vJ. p. ,A - " ... ..aa . .. v”--_g V’: 1 a. a “a“.-.JL U ' fio P: T‘WQ“ “' -quv . Ytfi l‘ v J" o v ‘- v. x (‘ f‘ I" D.” r—I ’2 '1 ( I" I 3‘ A)? £111. ( f C/) I)? O 149 Other social influences.—-The test engineers and the business training trainees were bound together by day with common work eXperiences reinforced by the tradi- tions Of the various programs. After progressing from 'the earlier training days into one of the functional tncaining programs this common binding together of people imlcreased. But there were other social influences during tile first year or two of experience with the company hfilich.even further bound men to their reSpective groups. The living Situation in the plant cities had a Eftlnong integrating influence. As one executive recalls: In those days (he is referring to the middle 1930's) a large percentage Of the young men coming to work in Schenectady were not married. I Should imagine that most of them Spent six to nine months before marriage, during which time many lived in a sort of cooperative arrangement-—renting a house, hiring a housekeeper and setting up shop much like a fra— ternity house on campus. These 'houses" had fasci- nating names, such as "The Nudist Colony," "Pesting House," etc. They led a gay life. I can remember just the other day chuckling with one Of my Old friends about the day we had the big party at "The Nudist Colony" when we made milk punch in the bath tub. Those young men who were married banded together vqifitklyoung couples of the same vintage and usually in the S‘ame functional training program. (3EFvelOped; these men were all "birds of a feather" with QOlnmon interests, common educational background, and QCDITImon Objectives. The wives, too, had much in common; m0st were college women and they, too, banded together. AS recalled by one manager: Close social friendships rr .2- 150 We all made about the same amount Of money with nothing to spare at the end of the week for any entertaining other than dessert and bridge and an occasional bottle Of beer. It was a most inter— esting group of people; there were competent young men and their inevitably attractive wives from all parts of the country dumped into a melting pot. My wife and I still trace some of our dearest friend- ships Of the present back to those early days in Schenectady when we were making $30.00 a week on the old sales training program. Although the company plants were located in large ur— tman centers, the young trainees and their wives rarely en— teered into the social activities of the plant cities. Of CCDurse, most of these young men had a "transient" feeling, lcrlowing that within a matter Of months they would be aSsigned elsewhere in the company. This further tended to €51?<3up them socially. In each plant city the company had C3C>untry club or similar facilities which were made available 130 young trainees with dues subsidized by the company in the f‘i;rst year and partially subsidized for the year or two t311tereafter. These clubs were the center Of many social aCltivities for the young engineering and financial trainees Eirlti their wives. Summary Entry into a large, wideSpread, and highly technical <3Canany could well have been a complex if not confusing experience. This was minimized by the bringing in Of EVOung college graduates with only the labels "engineers” OI’ "business” trainees. Because the trainees were not fi—‘i em 151 immediately placed into functional job assignments but rather were given responsible work assignments in a "pool" arrangement delaying the functional—career de- cision for at least six months, the young members of the cxrganization quickly developed an awareness, an image of tile whole company. Interviews with men with 20 years or nuDre of experience with the company validate the statement tklat an intense loyalty to the company was developed in Further, because of the LEI?“ 1hr- : L . triese formative first months. eéise of access by these young men to the management per— ESCHlnel of the company, a great respect and high degree Of lOyalty to management people was quickly developed; this Eytéatement also tends to be validated by interviews. The clear definitions Of the various functional activi- tii.es Of the company, definitively presented to the trainees 531: the outset Of their general training program, plus the r‘1‘tuals and the traditions of the functional training 1317mpany to the American Institute of Electrical Engineers eat: their annual meeting in 1942, a part of which appears t>ealowz3 The Engineering organization of a large industrial business is based on a number of principles: 1. Directness of action and freedom of action without conflict. 2. The engineering organization must be part Of the total business. 3. The form Of the organization must be subordinate to its personnel and must shape to the qualifications of men. 4. The organization needs a small central staff. The organization needs supporting committees. The organization needs manpower strength with runner-ups, with education, to cultivate and exemplify loyalty Spirit and moral. 7. The traditions of the engineerigg organization must act as a catalyst for such Spirit and moral. O\U’1 Note particularly the emphasis this vice president Filaced, in 1942, on the shaping of organization to the Clualifications Of men——typical of the managerial ideology in the company at that time. Note also the emphasis placed \ 3Underlining added. 154 on education to cultivate and exemplify loyalty and spirit. This typifies the executive philosophy which influenced training Of people and the Shaping of organization (and hence jobs) to men, rather than the other way around. Other managers Speak of the development of the under- st:anding and perception of jobs without formal job des- 01‘1pt10n8. One sales executive, for example, commented: I had had over twenty years of experience in the company and a job paying over $25,000 a year before I ever had any written description of my job given me by a superior. IX vice president of the company stated: NO one ever Spelled out any management job to me. Of course, we now have job descriptions on many jobs but I think in many cases there's quite a bit Of latitude in them. When asked how he learned what was eXpected of him Eirid what he was to do in a new position as he progressed irl the company, a high level sales executive commented: We simply learned by experience. There were no specific ways in which we were taught how to do certain jobs. We were pretty much left on our own. Whenever a man took a new job he learned, of course, how the job had been done before and deduced from this how he was to perform. There were certain traditions for various types of jobs but they were informal in character. I can't put my finger on it exactly. I Simply know that in a new job I would more or less automatically come to know what was expected Of me. When asked how he learned what the requirements of his first field job which he had acquired in the late l920's were, another sales executive said that there was no fOrmal training or explanation of what was to be done in the sales job. 155 It was Simply a matter of working in the office with Older sales engineers and learning in that way. Still another sales executive remarked as follows: Even as late as the middle 1950's there was in— adequate formal description of positions. This may have been all right prior to the 1955 organ— ization change. But I found myself in a new job which had never existed before and my colleagues in other regions found this very frustrating in that we could not get an all-inclusive description Of this kind of job. Summary Individuals learned about their jobs and what was e3<13ected of them not by a formal, rational, and Objective Ixrwacess, but through the symbolic means of traditions about JCDEDS on which there was a high degree of concensus. Individual Performance Ratings Prior to decentralization there were methods for :bE3131ng the performance of employees, but these varied Widely from component to component even within the vertical flelrlctional hierarchies. One executive formerly with apparat- LlES sales described the rating system within that component a 8 follows: There were really three ways in which we rated sales people. First was in the salary itself. If we could keep salary increases coming along fairly frequently, that in itself indicated to the individual that he was doing a good job. But then there was a formal rating system which consisted of a rating sheet on which the individual was rated in a number of cate- gories, primarily personality trait kinds of things. For each Of a number of traits he was rated on a scale of excellent to poor, and then was given a final overall rating of effectiveness on the job and 156 potential for advancement. Strictly Speaking, each individual was supposed to be rated by this method once each year after being appointed to a new posi— tion for three years, and then at least once every three years thereafter. The manager himself did not necessarily make the rating. Rating sheets were given to three individuals who were supposed to know the ratee and the manager was then supposed to discuss a composite Of these three ratings with the ratee. I would say that only lip service was given‘hothisreting method. Then there was another private and supposedly secret rating of individuals which the manager made but did not discuss with them. This took two forms. One was the submission to his higher headquarters of the list of younger men in the organization who had promise of growth. This was known as the ”promising young man list." Also there was another form for each employee which was submitted to higher headquarters which rated each man on a num— ber scale from two to ten, ten being outstanding, on two points: present performance and potential for the future. This was an important rating because at times of salary reviews the ”number" rating of the man often determined his eligibility for salary increase. As late as the early 1950's, an employee attitude SLlr‘vey conducted throughout the entire apparatus sales Organization evidenced the fact that the great majority of pPOLf‘essional people in this organization had not received a for‘mal discussion of performance evaluation from their SL1Deriors in many years. In defense of the lack or inadequacy of a formal, con— Si-E‘S‘tant rating system, one executive stated: Of course, performance rating was done rather perfunc— torily prior to decentralization. But after all, one can hardly blame management of that time. After all, we knew little about measurements then. and how can one adequately rate an individual in a job without having standards or criteria which provide objective quantitative measurement Of his performance? 157 But we can conjecture here that although the individual did not often, prior to decentralization, receive formal cavaluations of his performance from his superior, he did puerceive that he was performing capably by the very virtue of? the fact that he was in a position the behavior patterns <31“ which were set by tradition, and he was following the ‘tITadition. In fact, many individuals equated their member- sskiip in components with success. That is to say, for an individual to state, "I am in apparatus sales" implicitly Hussint that he was in an organization of great prestige and C<3r1fidence, that he was following the traditions of this Expreat organization, and that, ergo, he was successfully FKEI‘forming his role. In fact, we conjecture that the very abSence of a consistent formal performance rating system, CCDupled with the high eSprit-de-corps which went with being 3- nnember of the corporation, was in itself a significant Sym‘bolic input into the web of symbol systems revolving atDCNJt positions, man to man and group to group relationships, and behaviors . Salary Administration Closely allied with the variables Of job descriptions ar“3 performance ratings is the system of salary administra— tjdbn. Later we will show that after decentralization all these variables were formally tied together. During the ‘Period of the centralized organization, however, these 158 related variables were not in fact interrelated in the management process or in the minds of individuals. As with performance evaluation, there was no Single sealary administration plan Or process which was uniform tklroughout the company. True, there were some general ggrwaund rules that had been laid down in the executive c>ffifice but each function, and components within each func— t.ian implemented salary administration quite differently. 1111. the sales organization, for example, managers down to tides level of section managers at general office headquarters 811C} district managers in the field organization conducted nSalary reviews” at least once yearly at which time they r"ecommended to higher headquarters in the sales organization lVFIErt salary recommendations they requested, by individual. T9163 "ground rules" for these reviews changed from time to tirne. Often, for example, rather than initiate the salary reView, the manager received instructions from higher head— QIlEtrters with Specific requirements for the review. For eJ'CEimple, a particular salary review may have dictated that only men with the rating 9.0 were eligible for salary in- Crease at this time; further, no man was eligible for a Sa-lary increase if he had had an increase the year before; arhi further, only men in certain salary brackets were eli— gi~ble for the salary increase at this time. In most cases tflle manager's hands were completely tied by the restrictions and requirements of the salary reviews. Frequently he felt that a certain individual had earned a salary increase but was unable to secure it for him. Both the mechanics of 'the salary review and the philosophy which underlay it tenided to "Spread around” the additional salary money when :it did become available. Although generally Speaking the mechanics of the suaZLary review were not discussed with individual professional ernIDloyees, it was pretty well known throughout the organiza— t:i<>n how the system worked. It was also quite well under- st:c>od by individuals that once meeting the requirements of tflj;s salary review, the discretion of the individual's mana— EEBI‘ was all important. Speaking Of the salary administration, together with trle? system of performance evaluation, one executive of the COimjpany who has for many years been closely involved with PNEI‘Scmnel management commented: Salary administration was difficult prior to decen— tralization because there really was no pervasive and rational method of compensation and rating at that time. Much was left to the discretion of the individual manager. You see, in those days the idea was that we paid men. Now, of course, the idea is we do not pay men, but rather evaluate jobs and attempt to set limits on the value of that Specific job to the company. Formerly, the appraisal and his resulting compensation were based almost entirely on subjective factors and, of course, these subjective factors varied from manager to manager. There was no common denominator in appraisal and compensation. AS a matter of fact, the result was, there was a tendency for sales management to rate all of their people rather uniformally "excellent." That rating system didn't really mean very much. And as I said, there was great variation in the individual bench marks used by individual managers. 160 Another sales executive in recounting his first ex- perience with a salary review commented: I received my first management position in 1948. The first time thereafter that I participated in a salary review, my immediate superior who had formerly been in that position told me how he had maneuvered the sal- ary situation in the past. He explained to me that there was never quite enough money to go around and that he had always tried to parcel it out in the most equitable fashion possible. But there was no Specific set Of criteria by which we did this, and this disturbed me very much. I knew, Of course, that some of my peOple were really considerably more valuable, yet the salary Spread between the outstanding men and the average men was really quite small. Further, salary levels in gen— eral were not very high in those days when the post- war inflation had already taken effect. Consequently, in the salary reviews, if anything, we were trying to inch up the men in the lower brackets, at the expense Of the men who really were our best performers. I think the one thing that worried me more than anything else after getting this first management job was the fear that one Of my better men would someday come into my office and demand an accounting--and I knew I really couldn't give it to him. And this was doubly difficult in those days because we had no Objective measurements of jobs at all and no way to point out to a man Specific- ally why he did or did not receive a salary increase. As a result I found myself doing what I Observed the other managers doing—-I did my best to convey to my people the impression that the salary methods were really something completely out of my control but that I was constantly doing my best for my people trying to get additional money for them. Summary The methods of early training, the process by which in— dividuals oriented to jobs, the traditional rather than ra- tixlnal and Objective development of expectations of jobs, tr“? personnel rating system, and the salary administration mettuods were all inputs into the symbol systems. We are hy— pottiesizing that the meanings Of all these processes tended 161 to develop a symbolic meaning Of the manager's job. Indi- viduals identified not, however, with the manager's job, but rather with the manager himself. There was a strong Inanager—worker relationship, a hierarchy of people rather ‘than a job to job relationship, in a hierarchy of defini- t:ive positions. Mobility Prior to World War II and under the former centralized fuinctional organization structure, mobility was essentially eiitirely upward within the respective functional hierarchy. III: was an extremely rare case for an individual to receive a promotion outside his functional hierarchy. Hence, engi— Ifleeers were promoted within the engineering component, sales FKEOple were promoted within a sales component, and manufac— tlering people with the manufacturing component. Further, even within the substructures of the several Ilierarchies, mobility was upward through the Specialized Slecomponents. That is, a motor design engineer was pro— mO‘ted up through the motor designing function and only in rare cases did he receive a promotion in another product deSign department. The rate of mobility relative to that which it acflieved after World War II was low. There was relatively little "turn over" in the higher management positions, and an Ilnusually low ”quit-rate." It was not at all uncommon 162 :for an individual to be an incumbent in a position for ten yrears or more. All this, of course, reinforced the identification of .individuals with their functions, that is, with the vertical flierarchies. Further, the relative stability of the organi— zzation reinforced the traditions and all the symbol systems :revolving about positions, components, and functions. Of course, during the 1920's as the number Of product Ilines increased, new positions were created. As a new line cof products was develOped engineering, manufacturing, and isales components were formed to design, produce, and market tfllese new product lines. However, these were "horizontal" skiifts and although they did create new positions and, lierme, provided a degree of mobility, the concepts Of the Ixasitions were identical with those of analogous product innes. In the early years of the 1930's, however, the ef‘fects of the great depression greatly retarded this rela— ti-Vely slow rate of mobility effectively bringing it to a standstill. Even when business picked up in the late 1930's, m0k>ility was affected more by retirement than any other Sillgle factor. Thus, we are hypothesizing that the vertical hier— arChies were highly provincial and parochial in character. EnStineers were engineers, upward mobility was within the erlé's'ineering ranks, engineers perceived their managerial Careers within engineering, and that was that. Further, 163 the subcomponents within these vertical hierarchies were provincial and parochial in character; Fort Wayne engi- neers identified themselves with "Fort Wayne engineers," Pittsfield engineers identified themselves as "Pittsfield engineers," etc. Likewise within sales, in the general office, industrial general Office personnel identified vvith that subfunction; regional sales people identified 'with their individual regions. In essentially all cases ‘there was a strong emotional attachment to the parochial <3omponents; and intense pride and sense of belonging devel- metimes to an engineering department, purely for techni— 0331 training. His course work continued during his second yeaar. In the third year he was normally assigned to one Of the general office commercial sections where he was Six/en reSponsibilities in such work functions as pricing, devnsloping multiproduct propositions, providing liaison 164 between field sales and engineering departments, etc. At the end Of this third year he had made a choice for his longer career--either continuing in general Office sales headquarters, or moving to one of the regional sales Oper- zations. Once he had made this decision, he expected to :follow that career for almost the balance of his professional life. But after this "early training,"there was little ad— ciitional training. To be sure, there were always product and application engineering meetings. But there was essen- tially no training for management, in a formal sense. In an informal sense, however, there were two activi- ‘ties in the company which deserve Special attention be- Clause of their influence on perceptions of the managerial IDQsitions and also because of their strong reinforcement cxf the traditionally based symbol systems. These were the "Island Camps" and the "Elfun Society." The island camps.—-As mentioned in an earlier chapter tile company had acquired an island in Lake Ontario near ttie head waters of the St. Lawrence River. This island THid been equipped as a summer meeting place and beginning about the mid-1920's was used each summer for the purpose of assembling managers above a certain level. The facilities at the Island were relatively simple. TAKE housing units were tents on board flooring Spread in a 165 semi-circle around a large parade ground or central campus. Each tent housed two men and there were facilities for approximately two hundred individuals at one time. A large central dining hall, an assembly auditorium, a recrea— i:ion building (affectionately known as the "Black Cat"), and service buildings provided adequate but by no means "plush” facilities. The Island quickly became a most evocative symbol. Merely to be invited to attend an Island meeting was equated with success. It was, together with membership in the Elfun Society, the most evocative status symbol in the company. The Island meetings were conducted with great cere- mony and ritual. The top executives of the company were always in attendance; ties and coats were forbidden; every— One was on a "first name" basis. When arriving attendees disembarked at the docks they were met by a small band playing music composed for the Island; a reception line of Company executives greeted the newcomers; a holiday Spirit was carefully contrived. After sunset on the first night of each camp meeting, a ceremony was held underneath a large elm tree, known throughout the management ranks as Sianly ”THE ELM," during which company executives Spoke to the new comers to the Island (always known as the "rookies"), Speaking Of the greatness Of the company and charging the "rookie" managers with the reSponsibility Of carrying on the great traditions Of the company. All this was done 166 Lvith.colored lights, background music, and always culmin— atxed with the appearance of an Indian in full battle Iwagalia paddling to the shore of the Island, disembarking enid giving a sentiment-charged speech. The Island meetings usually lasted three days with lausiness sessions in the morning and recreation in the afternoon. Normally there was a short business meeting afTer dinner with guest Speakers from outside the company—— rioted industrialists, bankers, university presidents, etc. Most of the Island meetings were held by function. CPhere was a "camp commercial" attended by the sales manage- rnent, a camp engineering attended by engineering management, etc. Usually there was one camp session during the summer 53s "Camp General" which was attended by the very top manage- Uuent of all the functions. But the Island meetings were Cfl‘iented to the parochial, vertical hierarchies. All these meetings were charged with emotion. To tilis day, management in the company Speak Of the Island 1With great sentiment. A vice president of the company, I’(Dr example, recently stated: The Island was simply great. It provided a tremen— dous appeal to management people. I think it was a mistake on the company's part to abandon it. The management meetings being held now are not substi- tutes for the Old Island. At the Island there was a feeling of eSprit-de-corps. It gave management people an emotional feeling, a feeling of G. E.'s image and a feeling of G. E.'s greatness. Manage— ment's meetings today are held with some Specific problem in mind such as the profit Situation, etc. The Island on the other hand had its meeting focused on the traditions Of the company themselves. 167 A lreagional sales executive had this to say about the Island: The Island meetings were wonderful not only from a personal vieWpOint, that is, I confess to a great deal of emotional thrill about the Island—-but they were also extremely valuable as far as the total organization was concerned. The Island helped to ex— tend the spirit and the integrity and the pride of the company from generation to generation. Actually, I think we need that sort of thing more now than we ever have and I think we suffered a very definite loss when the Island meetings were discontinued. A retired executive Of the company who still maintains illtzimate contact with the company today commented that the 1<>ss of the great "Old traditions” because of decentraliza- Tlian was in his opinion detrimental to the company. He SIDOke of the Island as a tradition which was highly valuable tCD management people in the company because it bound these EMBOple together with a common spirit, and a common respect arui love for the company. He stated that "there should be 53 sort of renaissance in the company, once more focusing CH1 the individual and on the 'soul' Of the company." The Island meetings did more than simply provide Gsvocative symbolic meanings to management people. The nleetings were structured to provide a free interchange of nlanagement thinking, and there is ample evidence that the COmments, proposals, and criticisms voiced by management DEEQple at the Island meetings were contemplated seriously b3? the company executives. The Island meetings provided tVVQ way communication from top executives to other manage— mEHfit peOple, and many of the ”great ideas” which later CaIne to fruition were born at the Island. 168 The Elfun Society.——During an Island meeting in 1929, the chief executive of the company proposed the formation of a group of management personnel in the company which was dest ined to have great impact on managerial thinking for the next twenty years. The overt reason for the formation Of this management "association" was to provide a means fol" the managers above a certain level to make investments On a personal basis through a trust fund or investment fund which would be administered at essentially no cost by com- Pany officials. Hence, the name "Elfun," a contraction Of the term ”Electrical Fund." But this Society quickly b€<2ame something more than that. The chief executive en- COuraged the development Of this extra—company management group into a powerful informal management policy making bOdy. Perhaps one thousand managers throughout the company he 1d the rank and stature making them eligible for entry into the Society. Local Elfun "chapters” were established at all the plant cities, and throughout all the sales re- gions of the company. These local chapters met monthly for the purpose of discussing management problems within the COmpany generally. Each chapter developed ”projects” for Study; suggestions for changes in management policy were f0I‘warded to the chief executive. The chief executive at one time called the Elfun Society ”my informal board of diI‘ectors . " 169 Here again, powerful symbolic meaning built up around the Elfun Society. To be an "Elfun" meant status, recogni— tion and provided to the individual a feeling of participa- tion in management policy making. Elfun did another thing, too; it began to integrate management thinking across the functional vertical hierarchial barriers. The local monthly meetings in each of the chapters were attended by managers of all functions in that location. To be sure, at the monthly meetings the sales peOple usually had their cock— tails with other sales people, and there was a definite tendency for managers of like jobs to hang together. Nevertheless, the extracurricular management projects studied by the various Elfun chapters were made by study committees composed of managers from various functions. For example, one regional sales manager described one Of his own activities in the Elfun chapter located in a large Midwestern city as follows: I think it was along about 1948 when I was appointed by our chapter chairman to head up a committee to study a new proposed hospitalization and insurance program purely for Elfun members. I remember that I was the only apparatus sales member of that committee which included managers from ------- Department, and ------- Department. It was very meaningful to me to work with these people and I will frankly admit that it broadened my view of the company beyond the narrow confines of Apparatus Sales to which I was personally so much devoted. Summary In this chapter we have examined a number of variables having impact on social structure, modes of behavior, and 170 SCDClal relationships. Also, we have presented evidence fléom informants indicating that these variables were sym— bCDllC in character, and helped to develop a web Of symbols pI°oviding meanings to managerial and professional personnel, arid providing the superstructure Of Shared sentiments about tile company, work groups, and jobs. In the following chapter wee shall examine these same variables Operant in the decen— tléalization period of 1950-1955, and their influence in the pnéocess of change of the entire social—system, as well as nuarely the formal organization structure. CHAPTER X EMERGING CHANGES IN THE MORAL ORDER AND THE BELIEF AND VALUE SYSTEMS 1950~1955 As discussed in Chapter VI, decentralization was the pncocess selected by company executives for adjustment of tkie company to changing technological, economic, and social eacternal conditions. That chapter also described the con— czepm of decentralization as something more than physical or stxructural decentralization; it was also a new managerial gfliilOSOphy and required new managerial attitudes and per— <3epmion Of the management job, and, hence, became the base fNor a new set Of managerial ideologies. The process of Ciecentralization required the implementation of a number of Ilew sub-processes, and these in turn began a chain of addi- Tiional social and psychological processes, some of which vnere intentionally derived but many of which were uninten— tkionally evolved. In short, the total social—system was in Cilange, not merely organization structure. The first Of these sub-processes was that of the OI‘gganization-structuring process itself. "Organizing" was sDecifically defined by the company as "the process of al?rdving at an accepted orderly arrangement of interdependent Emirts of a whole." Further, the process of organizing was 171 172 ciefined as applicable either to Specific functional compo— rients, or product department components, or to the entire <30mpany as a whole, It included: 1. Determining Objectives, and the policies, pro— grams, plans, and schedules that will best achieve them. 2. Determining the total work to be done. 3. Classifying and arranging that total work into manageable parts. 4. Defining the reSponsibilities of work of each part and the relationships or teamwork between parts, whether components or individual jobs. U"! Determining requirements and qualifications of personnel to occupy resulting positions. 6. Selecting individuals to fill all the resulting positions. 7. Establishing methods and procedures which will help to achieve the objectives of the organization. In this organizational process, each part in the struc- t:ural arrangement was clearly classified and defined as to i:he Specific work, together with the relationships of other structural parts. This was incorporated in a ”charter" for ' and each organizational component, and a ”position guide,’ "job description” for each individual. The essential prin- ciples were Spelled out in detailed reports and memorandums prepared by one of the executive ”Services." 173 At the outset, the major changes affected by the cxrganization-structuring process of decentralization affected pncimarily the positions (and the individuals selected to fill tliose positions) of product department general managers and tlieir "management team" consisting of the functional mana— guers of engineering, manufacturing, and marketing. This Ivas the management team drawn from the former vertical, func— tzional hierarchies to form a new "product business." Per- liaps oversimplifying somewhat, the actual work being per- fRDrmed by work groups under each of the functional managers (of engineering, manufacturing, and marketing was very simi— lar to that which was being performed by those work groups iprdor to decentralization. But it was largely at the level Oi‘general manager and at that of his immediate functional ESubordinate managers that the sub-process of social relations tbetween grOUps and individuals was Specifically implemented Eat the outset. New and clearly defined prescriptions and Ibroscriptions centering about these managerial roles were Cieveloped and publicized. The relationships between groups, ESuch as the functional groups intra—department, department tZO division, and department to the "services" were also prescribed. Within the overall organization-structuring process, ‘the subeprocess of decentralization Of decision-making authority with its concomitant Objective and rationally- based set of measurements on performance played a Significant 174 Ioart in the emerging social changes throughout the company. iLater chapters will discuss this in considerable detail, lDut it is important tO note here that this sub-process be- czame an important catalyst of social change. Another, and liighly important process for change which was built into tflqe overall organizational-structuring process of decen— txralization was designed to affect and change managerial idecdogies. Chapter IX described how the perceptions and arttitudes of managerial roles evolved through traditionally— loased symbol systems. The social structural variables dis- (NJSSGd in that chapter produced meanings of the managerial .job over time, sentiment-based identifications with overall n1y at the departmental executive level. By the late 1920's, many executives in the Company Vvere eXpressing fear that the centralized organization sstructure had become unwieldy and inefficient, and that I?urther growth in technology, output, and Size could no Ilonger be accommodated by such structure. The great Depression and World War II delayed execu— t:ive action for organization structure change. After World Ewar II, facing predictions of mushrooming technology and ggreatly increasing market opportunities, the Company em- "barked upon a program of decentralization, a restructuring of the formal organization structure into a large number of quasi-autonomous product businesseS--expressly to more fully exploit the market opportunities. 324 In this process, elements of social structure other tzhan merely the one of formal organization structure also ‘underwent changes, some by intent, and some not. The decentralization process was overtly pronounced by top executives as more than organization-structure change; it was a "new" executive philosophy, a "new" managerial attitude. New perceptions of and attitudes to the Company, the work functions, and the managerial position evolved. A new status system was created; a new managerial elite emerged. Concomitantly, the eXpectation system became more rational, more subject to quantitative measurement, more job-centered and less man-centered. Administrative practices long in existence and long providing meanings to managerial life were eliminated or changed. Traditions and rituals centered about and having grown from the training programs, the salary administration, the appraisal system, the mobility pattern were eroded or disappeared com- pletely. In Short, a ”new" social system emerged, with new form, new functions, new potential for change, and new meanings to individuals. However, the decentralization process had little initial effect on one large and important element of the Company, the Apparatus Sales Division. Organization structure remained essentially unchanged in this component. The time-honored traditions of this component reinforced the beliefs of its management that the Division would con- tinue to Operate as it had in the past. 325 But new training programs (at all levels), the broadly publicized concepts of the "professional manager," the com- munality of organization structure, the near-communality of other social structure variables, the increase of ration- al definition of roles and statuseS—-all this began to in- filtrate Apparatus Sales also, with this division neverthe- less tenaciously holding on to its past. Conflict arose between Apparatus Sales and the newly formed product operations primarily because the product operations were held rationally accountable for certain quantitatively measurable objectives without having control over their field sales. The product departments (or many of them) engaged in aggressive tactics designed to estab- lish some degree of power over Apparatus Sales and to force a fragmenting of this large and strong organization into small pieces more nearly allied to product department groupings. This, the product departments succeeded in doing. The centering of power in the hands of the rela— tively few executive managers of the company was enhanced. All this was accomplished in Spite of considerable resistance by Apparatus Sales management against change and by widespread personal anxiety and frustration over a period of three to five years. We conjecture (and the tenor of many of the reported interviews appears to vali- date) that the Apparatus Sales management suffered during this period a net loss of managerial efficiency and 326 productivity. Evidence also was presented indicating that the desire for additional power still exists in the product department power centers. Reference to the Problem and Hypotheses Our original statement of the problem proposed that to remain viable, the enterprise must create or adopt new market-oriented technologies and strategic programs. The basic hypothesis in Chapter I proposed that this may be accomplished by the existing organization structure only up to some optimum point, after which formal organization structure must change to accommodate continued assimilation of new technology and programming. (That thks point was reached by General Electric, and that it was known by management to have been reached, is abundantly clear). It was further proposed that when formal organization struc- ture was changed, other elements of the social structure change, and this in turn changes (or causes disequilibrium) in other components of the totality of the social system. The problem thus is concerned also with the relative ease or difficulty which individuals and groups experience in adapting to the changing social system; and with the rela- tive ease or difficulty of developing new orientations to managerial behavior. Every aSpect of this problem (or problems) is dis- cernible in the empirical research presented in Chapters ...," - 327 II to XV. We believe that the research evidence tends to validate the propositions presented on pages 8-12. Concluding Generalizations What abstractions can we draw from this study enabling us to better understand such organization—behavior problems, better predict their emergence, and better control them in the interest of optimum organization productivity and efficiency? In Chapter I we presented conceptual frameworks ranging from the broad or general to the more Specific. Here we reverse; first we Shall refer back to the more specific organization theories, and then finally shall refer to the broader and more general conceptual framework of social anthropology. From this we Shall draw generali— zations. Organization theory: classical.--A disciple of "Scientific Management School,” examining General Electric's management and organization concepts and practices post- decentralization could understandably feel that the tenets of his "school" were justified, if not actually validated. From the view point of the job of the "professional manager," General Electric did espouse the "principles” of management, i.e., planning, organizing, integrating, and evaluating. Furthermore, these ”principles" were (at first) posed as essentially the only principles underlying the manager's 328 job, to the extent that the Company executives were accused of establishing dogma. True, there has been some backing away from their all—holy acceptance, but they are still posed as an important underpinning of the managerial job. Other "principles" of scientific management are operative, even now. Such organizational structural princi- ples as span of control, etc. are employed. Further, and perhaps more significantly, the very idea of defining_jgp, its functions and its objectives, and matching an individual to those Specifications is conceptually a scientific manage- ment approach. Added to this is the increasing rationality of such matching, the increasing programming of job activi- ties, and increasing quantitative measurement of performance. The general propositions of classical or "scientific management" organization theory can be observed in Operation during and after the decentralization period. They are valuable in understanding the job content or the managerial activities of the manager, and valuable, in a static sense, of understanding the anatomy of organization structure. But we cannot find them of any value in understanding (much less predicting) what happened dynamically in the process of change in the total social structure of the social system. They cannot explain resistance to change, changing equilibria between the traditional and the technological present and 329 future. Nor can they eXplain anxiety, conflict, relative ease or difficulty of adaptation, the triggering of con— tinued change. Neo-classical theory.--The prOpositions of the neo— classical, or human-relations "school" can also be found to be operating. They can be valuable in analyzing the history of change in General Electric in regard to changing percep- tions, attitudes, identifications, and (to some extent) behavior patterns. But again, the neo—classical proposi- tions do not provide complete understanding of the process of change; they deal inadequately or improperly take as given the formal structure as established by and subject to change by the executive; they do not eXplain the growth of programmed activity. "Modern” organization theory.-—The propositions of contemporary "systems” theory can also be seen in applica- tion in this case study. With its analytical approach, its concern with the interrelatedness of strategic parts of the system, and means of linking these parts, systems theory probably has more explanatory potential than does classical or neo-classical theory. Certainly General Electric itself is employing the systems concept in its operations research techniques. But what is "systems” organization theory really? What Specific conceptual framework does it have, which 330 could permit the drawing of useful abstractions from the General Electric history? We suggest that "systems" opganization theory is a potpouri of individual theories- not yet welded into a conceptual framework capable of permitting complete explanation, and prediction. True, individual elements of "systems" organization theory (such as "communication," or "decision-making") may enable em- pirical research for itself. But the total system which is the business enterprise is more than merely the sum of 1 components, by definition of "system,' and we posit that there is no total system conceptual frame in modern organi- zation theory which is Operational and which will permit empirical research on the total system. Further, much of organization systems theory is clouded by complexity and by fixation on technical aSpects of the total business system, e.g., decision making, or communication. It lacks a simple but rigorous, all inclusive, operational and universally applicable framework.l Concepts of social anthropology.——On the other hand, 2 social system theory does provide such a framework, if lSee March and Simon, op. cit., pp. 4-7, in which these authors eXpress a similar concern. 2Of course, the "social-system" analysis of rationally ordered organizations is not new in sociology. Robert Merton in Social Theorypand Social Structure), Gensberg and Reilly in Effecting Change in Large Organizations), E. Wight Baabke in Organization and the Individual) provide examples. What we are proposing, however, is that the conceptual and ana- lytical framework advanced by Radcliffe-Brown as the basis 331 applied in the manner proposed by Radcliffe-Brown, as detailed in Chapter 1. Further if the framework is extended to include Warner's theories of the process of social change both synchronic and diachronic investigations can be accom- plished. This is the conceptual framework we have used to understand how and why events occurred as they did in the General Electric Company and to draw generalizations tending to validate our hypotheses. Certainly at this stage, our application of this social system construct is crude, and even if refined may well result in only some "box-car" predictions of organiza- tion behavior. But even this is a far cry from lack of. insight into the inevitable reverberations throughout all 3 elements of a social system, when structure is changed. Even rough predictions of conflict, and of its depth, of a "natural Science of Society" has unique application to the understanding of the complex corporation fig a social system. Adding Warner's theories of the process of change and the "emerging of a greater Society," and his theories of the nature of symbols to this, we are suggesting not only better analysis and understanding but also better pre— dictive ability as change is inputted into the Corporate social system. Hence we are not equating the conceptional framework used here with "traditional” social system analysis. 3Consider the statement of General Electric's chief executive during the decentralization period when he Spoke of "some foolish peOple” who appear to be "upset by the organization change.‘ Such a statement exhibits vast mis- understanding of the social system into which he was intro- ducing change. 332 breadth, and duration, and its parochial locations may permit the executive to prepare some preventive or ameli- orating measures. Or at a minimum, it will eliminate surprise, providing an understanding rather than an irri- tation which could cause punitive measures. We propose application of social-system theory en- tirely on a rational basis, with the objective or providing an additional management tool for enhancing the organiza- tion's adjustment to changing environments, with optimum efficiency and productivity. The Research Future "Research is unfinished business."u This study is admittedly heuristic, and represents only a first thrust by this writer in his groping to understand and predict organization behavior, a groping which began during his several years as a manager in General Electric, and which persists even after doctoral studies. A science seeks to establish universal laws, via its theories, which strive to eXplain, predict and in— fluence. Current theories of business organization be- havior are inching forward to this end, but are not yet adequate. For example, under certain conditions an “W. Lloyd Warner, in a discussion with this writer. 333 organization may have to adjust to its changing environment drastically and rapidly; or for another example, in times of severe crisis (e. G., General Electric's conviction of violation of anti-trust laws), the executive may have to shift emphasis, direction, philosophy, or even structure. But now know just how to shift, and now know the total effect of the Shift in the totality of the corporate system? We contend that current organization theories are not very clear on this. In the case of General Electric, we can find evidence tending to validate all the ”schools" of or- ganization theory, if we Sift out the appropriate evidence. Yet none of them individually nor all of them, collectively can eXplain all that did happen in General Electric, or what is happening now, or predict the course of the future. We suggest that current organization theories are really a set of sub-theories, which can be subsumed under a broader, more encompassing theoretical framework--a conceptual framework which is not directed merely at organi- zation behavior, but which is seeking universal laws of man's behavior in his world, whatever his world may be. We contend that this study in a very modest and small way lends credence to Radcliffe-Brown's proposed, "natural science of society” and to Warner's theories of the process of change and of ”the emerging greater society." One case study cannot validate anything. But this writer 334 will continue research based on this theoretical framework with the aim of better understanding and predicting what really happens in the great complex corporation—-the effi- ciency and productivity of which is so vital to the welfare of our emerging Great Society. BIBLIOGRAPHY BIBLIOGRAPHY Alderson, W. Marketing Behavior and Executive Action. Homewood: Richard D. Irwin, 1957. 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New York: E. P. Dutton, 1950. 336 337 . Crime and Custom in a Savage Society. New York: The Humanities Press, 1931. March, J. G., and Simon, H. A. Opganizations. New York: John Wiley, 1958. McFarland, D. E. Management Principles and Practices. New York: McMillan 00., 1964. Passer, H. G. The Electrical Manufacturers, 1875-1900. Cambridge: The Harvard University Press, 1953. Radcliffe—Brown, A. R. A Natural Science of Society. Glencoe: The Free Press, 1957. . Scott, W. G. "Organization Theory: An Overview and Ap- praisal," Journal of the Academy of Management, Vol. 4 (April, 196l7. Simon, H. A. ”On the Concept of Organizational Goal," Administrative Science Quarterly, Vol. 9, No. 1 (June, 1964), pp. 2-22. Vennard, E. The Electric Power Business. New York: McGraw— Hill, 1962. Warner, W. L. The Corporation in the Emergent Society. New York: Harper and Brothers, 1962. . The Living and the Dead. New Haven: Yale Univer- sity Press, 1959. 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