7. Basic principle in inanagement.—Little need be said about the power which manifests itself thru the aid of machines. This force in production is very evi dent and its utilization has been the point of attack for a hundred years or more. In fact, so much attention was given to this factor that the managers of great enterprises overlooked nearly all the other elements in production. To get a new piece of equipment, a machine, a filing cabinet, an adding machine, seemed to be the climax of many a manager's ambition. Con centration upon this single side of the proposition has brought its penalties as well as its rewards. Man agers fixed their eyes upon the size of their output. Bulk, production on a large scale, tonnage became the great words in managerial circles. To secure these results the machine was developed to the highest point. Mechanical invention was the only thing considered, and the mechanical engineer became the most impor tant member of the staff of managerial experts.
But finally the machines became so plentiful, the factories covered so much space, the output grew so large, the employes numbered so many thousands, that the energy which was developed and directed by means of the mechanical equipment began to be lost and wasted. The old standards of achievement could not be maintained and the management began to ask itself the reason. The inquiry led to the discovery of the basic principle in management, which deals with the conservation of energy and the correlation of the forces of production. When this point was reached many problems arose which had not up to that time in truded themselves. For example, the question of fuel supply was no longer a question of weight but of heat ing power. The belting problem was no longer a question simply of price per foot, but of lost power thru inattention to the proper belt tensions, etc. Thus we might run thru the whole list of problems of man agement and find that in their last analysis they all resolve themselves into terms of power, force or en ergy.
8. Purpose of management is profit.—It is well, when so much is being said about the methods of gain ing productive efficiency, to draw attention to the fact that the ultimate purpose of enterprise is profits. A saving of energy formerly lost, or the institution of a frictionless organization, may have other purposes than maintaining or increasing the profits ; but unless these things bear upon this element somewhere in the course of the firm's operations, they should be counted up to the concern's philanthropies or advertising and not to its productive management. The manager or efficiency engineer who is unable to organize or reor ganize a system of management without sacrificing permanent profits has not the faintest conception of the nature of his work. Such a person is generally trying to "instal a system." It should be borne in
mind, however, that a thorogoing plan of management may, and for that matter generally does, involve an outlay of money which may not show immediate re turns. A suitable foundation for a building may not show its advantages over a flimsy structure for se-veral years ; yet a wise business policy would not sacrifice the permanent profits for the sake of immediate sav ings.
9. Immediate versus future profits.—No one busi ness policy has caused the wrecking of so many firms and the shattering of so many managerial reputations as that of paying dividends, regardless of the means or source of income. A manager must gain the profits by putting the materials and forces of production thru certain processes. The legitimate gains of his activity as manager show in a product of higher value. He starts, we will say, with a ton of iron ore, and after many smeltings and purifyings and temperings, thou sands of fine. steel springs are produced. So long as quality determines value, and value determines price, the manager's duty is to shape his methods toward meeting the conditions of that market the judgment of which passes upon the quality of all products. He therefore turns out steel springs of a quality that satis fies the particular demand for that product. His in fluence upon the profits will show in his maintaining the quality demanded by the customers, and in his ability to effect economies in the use of the forces of production and in the handling of his productive organization.
But, having been urged to show immediate results, many managers have tried to short-circuit their forces of production. Instead of putting the capital which should have gone into materials, new machines, new roadbed, new cars, etc., into these investments of pro duction—investments which would have brought profits in the future—some managers have short-cut the process and put the capital directly into the divi dends. The "skinning" of many railroad properties and industrial plants by this short-circuit process was too common a few years ago. It is not unknown to day, and it is a very alluring method for a young or inexperienced manager when a short-sighted director ate insists on "results." This practice of sacrificing the permanent profits for the immediate "showing" is not less fatal when applied to the business organization of a company than when used to "skin" the equipment. Poor routing of materials thru the shops, slack timekeeping, persistent soldiering, bungling storekeeping, etc., may mean a very economical organization for a certain period, but the effects of such disorganizing practices upon the output of a plant will prove in the end to be even more damaging than the mere skinning of the capital or equipment.