4. Distinctions between economics, industry and business.—Business, in the narrowest interpretation of the word, is made up of activities designed to effect a specific purpose within the field of each industry; manufacturing is a broader term than plant; trans portation than railroading; exchange than banking. Therefore, if we are to get a clear understanding of a business we must discover the basic functions which give character to it, or which, as we commonly say, de termine the nature of an enterprise. This is a some what difficult matter under the present confused con ditions of thought concerning economics, industry and business. But, briefly, the differences are these: I .
Economics treats of land, labor and capital in their relation to human wants; the social point of view is emphasized. In industry these three factors become parts of systems or processes by which society is fur nished with economic goods. In business these ele ments are used for the purpose of producing revenue or dividends.
Thus we see that in economics the point of view is social. In industry it is partly social and partly pri vate. In business the social point of view is com pletely submerged, and that of private interest pre dominates. These three points of view are clearly seen in the distinguishing phrases of each division. In economics they are utility, value or price; in industry they are mass production, transportation in bulk, or syndicating; in business they are corporate control, centralization and money profits.
By keeping these three points of view in mind it is possible to see more clearly the great political and busi ness problems of the nation, in so far as they have an economic basis. The railroad problem, the labor agi tation, the tariff question, etc., all lie- largely in the field of industrial organization; and the chief point at issue is to determine wher,e society's rights begin and private privileges end. Society, for instance, is interested in having the manufacturers of the nation turn out a maximum of goods. The business man is not anxious primarily about the quantity of commodi ties made, but about the amount of money received for them.
5. Managerial or business wnits.—From the man agement point of view, the corporation is a form of specialization which puts the function of ownership and policy control into the hands of a management different from that which directs the productive oper ations of a business unit. The business_ unit became so large and complex that it had to be subdivided into smaller units for purposes of management. The
corporate organization, therefore, forms one manage rial unit, made up of stockholders, directors, commit tees and officers, for the purpose of directing the finan cial policy of the business. The other division which it has been found necessary to organize into a man agerial unit is the operative or production end of the business. The latter has come to be further special ized into what may be called a staff organization and a line organization.
These management units and their relationship to the general management can best be shown in the form of a diagram, as follows: An analysis of this chart will show that: (1) the corporate unit by virtue of its ownership reserves for itself the right of determining what shall be done by the general manager; (2) the staff organization unit has become a necessary part of every large business, for the general manager cannot know how everything can be done in the best way; (3) the line organization gets its orders directly from the general manager, who is advised by the corporation and staff experts. Altho the results of the management issue directly from the line organization, yet the importance of the other units is not to be minimized. The corporate management is controlled by a body of specialists who devote their time to the consideration of financial and commercial policies ; and the staff technical experts concentrate their efforts upon the planning of methods by which the purpose of the owners may be carried out thru the line organization—the men who obey orders , and achieve results.
One important thing which should not be overlooked is the central position occupied by the general man ager. It has been pointed out how closely specializa tion must be followed by a more comprehensive organization for the purpose of developing cooper ation. With the specialization attendant upon the development of the corporate and operative units of management, there grew up an overwhelming de mand for a coordinating managerial element in the business unit. The general manager is being forced more and more to assume this very heavy responsibil ity. It is his function to correlate the policies of the corporate advisers with the methods of the technical experts, and then to harmonize both of these with his means of production as they are found in the line organization.