ORGANIZATION OF ADMINISTRATION 1. Few principles but many methods.—The princi ples of management hold true in every kind and branch of business. It makes no difference whether the business unit is a, billion-dollar corporation or a foreman's department where pig-iron is handled. But the methods of applying these principles are as varied as the types of business themselves. There is a particular method most suitable for each business and each department. Businesses, like people, have personal characteristics; no two are exactly alike. If every person vvere to dress in the most appropriate style, it would be necessary to put him in the hands of an expert and let the latter study all the points of harmony so as to dress the customer accordingly. In such a case, ready-made clothing vvould disappear and valets and custom tailors would increase in num ber. Such great economies have been effected, how ever, by the adoption of certain standardized units, such as hat, coat and trousers, that a tailor or a cloth ing house that tried to eliminate or seriously modify these clothes, would soon go out of business.
Likewise, economic society has adopted certain busi ness units for purposes of management. These units of management correspond roughly with a natural di vision of the anatomy of business enterprises. The legal corporation and the commercial organization are units of management because the anatomy of a busi ness is naturally divided into a head for ownership and a body for production. A style of hat which obscured the eyesight would sacrifice efficiency to vanity. A method of corporate management which neglected the stockholders would sacrifice an ownership function for a selfish reason worse than vanity. Now what we wish to show by the comparison is this : Just as there are many styles of hats, so are there many methods of management; and just as the best hat is determined by its fitness to serve the purpose of a hat, so is that method of management best which carries out most efficiently the functions of the department which it serves. The basic functions of a hat are protection and adornment ; the prime functions of management are control and direction. Methods, like styles, must conform to the purposes for which they were created.
2. Economic units.—The economic unit, starting with the family, at length grew to include the town and finally embraced the nation. But as nations de velop and extend their territorial control, the lines marking out the boundaries of the present economic units become more and more arbitrary, and only tend to confuse, instead of to help, clear thinking on eco nomic subjects. This economic fiction is being main tained thru the necessities of political policies rather than by the demands of economic science.
The best units in a science of economics are not de termined by their size or weight, etc., but by the func tion which is performed. Thus, we find that the sci ence of economics is divided into the four fundamental branches of production, distribution, exchange and consumption. Each of these, in turn, is divided into -units which are classified according to the function which each performs; thus, production is considered from the points of view of the three units of capital, labor and land.' Now each .of these units is again divided into other units; hence, capital is spoken of as fixed or circulating, according to the way it performs its function—and thus we may go on subdividing and resubdividing as long as a single shadow of difference in performance of function remains.
It was by such rigid analysis and classification that economics was reduced to a science of business rela tions. It is only when the basic units have been de termined that true measurement or judgments can be made between the respective demands of labor and capital. We must know the function of each before we can determine the rights of each from the social point of view.
3. Industrial units.—In the broad field of economic activity we distinguish the different industries. Here again we search for the unit of classification based on the function which each industry performs, and we find manufacturing industries, transportation systems, banking or exchange houses, etc. Each is an in dustry, in that it uses the elements of land, labor and capital to effect different objects. These functions are sufficiently described by the names themselves.