BRIGHAM YOUNG UNIVERSITY COLLEGE OF BUSINESS/GRADUATE SCHOOL OF MANAGEMENT

ADVERTISING REGULATION: WHEN THE SIZZLE SELLERS FORGET THE STEAK

FALL/WINTER 1976

:XCHANG3 CONTENTS BRIGHAM YOUNG UN IVERSITY COLLEGE OF BUSINESS/GRADUATE SCHOOL OF MANAGEMENT

FALL/WINTER 1976 VOLUME 1 NUMBER 1 Articles

Looking to the Future(s) 2

Tear Down the Pyramids Paul H. Thompson 6

When the Sizzle Sellers Forget the Steak H. Keith Hunt 10

Return to Literacy Warner Woodworth 19

Retai ling - Some Strong Selling Points 24

The Challenge of Affluence J. B. Ritchie 28

Understanding the ORGANIZATION or How I Spent My Summer Vacation Paul D. McKinnon 32

Minding Your Business - The Auditor Jay M. Smith 36 36

Departments

Profile I Jan Erteszek: Putting the Golden Rule into Production 14

Taking Inventory 40

Speaking Out: Social Critic Daniel Bell 44

Comment: The Paralysis of Pessimism Gene W. Dalton 46

Publisher: Merrill J . Bateman Published by the College of BusinesS/Graduate School of Management, Brigham Editors: Mary Kay Stout Young University, Provo, Utah. c Copyright 1976 by Brigham Young University. All rights Warner Woodworth reserved. All communications should be sent to Exchange, 154 Jesse Knight Building, Copy Editor: Richard B. Bronk Brigham Young University, Provo, Utah 84602, telephone area code (801 ) 374- 1211 Art Director: McRay Magleby ext. 4121 . Design: Thomas Pratt The views expressed in Exchange are those of the various authors and not necessarily the College of BusinesS/Graduate School of Management.

Cover Photo by D. A Jones & Assoctates

BYU and Merrill Lynch at Snowbird LOOKING TO THE FUTUREISI

Mention commodities and even The talk may have centered on most play-for-high-stakes execu ­ the Chicago, New York, and tives get a little uneasy. For most, Londonexchanges,butnourban futures trading is synonymous skyline could stand up to Utah's with double-or-nothing-type risks Little Cottonwood Canyon with its -with odds on the nothing side 11 ,000-foot elevation and view of Since 1972, commodity prices. on the Wasatch and Oquirrh Moun­ the average, have doubled. Yet tains. In the winter, Snowbird the highly volatile prices of raw resort is host to 450 inches of materials often determine a com­ annual snowfall, not to overlook pany's ability to compete, and some thousands of skiers. In the compete effectively. Likewise, summer, the rough-timber beams, raw material sellers must hedge natural skylighting, and massive against sudden drops in price. stone fireplaces make a com­ This has forced many companies fortable, rustic setting for con­ to reexamine their positions as ferences, seminars, and retreats. buyers and sellers of raw materials. For the futures conference. gone The need was obvious. The were the three-button suits; it was nation's largest commodity strictly Saturday-morning attire The semmar provided time to take brokerage, Merrill Lynch, Pierce. in the mountain view while against the thick foliage and Fenner & Smith Inc., and the BYU discussing sessions and individual jagged cliff rocks. "This beats the Graduate School of Management commodtlies w1th others interested heck out of New Haven or Ph ila­ combined forces to cosponsor a in the futures markets delphia," commented an three-day summer conference for Easterner. " It's different for me 60 businessmen and leading cern for forecasting commodity not being able to see the air I commodity specialists from prices. breathe," said another. throughout the country. Presi­ Some businessmen needed in­ The casual setting invited con­ dents, treasurers, controllers, formation to "sell the idea to top versations. In specific com­ buyers, and sellers met experts in management and the board of modity sessions. over enchilda­ sugar. lumber, plywood, grains, directors." Others came to dis­ and-refried-bean lunches, on cocoa, fats and oils, meats, metals, cuss accounting aspects, look at steep mountain trail walks, and and money markets. Conglomer­ specific hedging plans, or examine during mid-morning breaks, busi­ ates and small fami ly firms; east­ various forecasting techniques. nessmen and specialists shared side New Yorkers and Idaho Many felt they should start some questions and experiences­ farmers ; those who had had a kind of hedging program and just some good. some not so good. taste of hedging and those who came with questions and inex­ The success rates of past in­ hadn't- they all shared a con- perience. volvements with commodities may

:XCHANG3 FALL/WINTER 1976 3 A native of Belgium, Joseph Vandeputte has specialized in the feed grains oil seed complex. He is currently senior vice-president of Commodiiies Corporalio1 and manages the firm's Brussels office

Cliff Lodge at Snowbird resort hosted BYU-Merri/1 Lynch's The structure of the futures industry was outlined by Jack B. cosponsored commodities conference vice-president at Merrill Lynch

have varied, but the quali ty of the currencies, according to David modities in the forward markets or questions didn't. The executives Meiselman, a keynote speaker and performing the same types of knew the jolt from 1972 corn author of The Phenomenon of transactions in the various tutu res prices of $1.25 per bushel to a Worldwide Inflation. " Du ring markets represent forms of hedg ­ current average of $3. Within the recent years it has become almost ing . A disadvantage of cash same time period, many of the habi tual for an Englishman to sell markets is the difficulty of revers­ food processors had had to deal sterling for copper, cocoa, sugar, ing your position if market condi­ with sugar prices soaring from 9 or some other internationally tions change. On the other hand, cents to 50 cents per pound. traded commodity at the slightest futures markets provide flexibility Likewise, soybeans have climbed suspicion of sterling weakness. in reversing your position but have from $3.50 to $7 per bushel, and This additional demand factor has very strong cash flow risks, and cocoa has jumped from 30 cents been partly responsible for the operations in these markets must to $1 .10 per pound. strong price rises in many of the be carefully controlled. The dramatic increases in price commodity markets," he said. Whether they were producers, indicate that internationally traded Other discussions centered on consumers, or middlemen, those commodities are particularly different forms of price protection attending the conference were volatile because they represent for commodity buyers and sellers. interested in financing of raw an alternative to depreciating Buying or selling physical com- materials, organizational struc-

4 Photography by Doug Martm ...... ,.....__ __,'" ~ 'V"'I!ftiii--.-,J Conference participants met m small groups to d1scuss tndividual commodities. Highlighted were cocoa and sugar. lumber and plywood. grains. fats and oils. money markets. meats. and metals. Companies represented included Safeway, Campbell Soup. Eli Lilly, Green Giant. and Wickes

Cocoa and sugar expert F. .Helmul Weymar heads Ann Beggs Rautt attended the conference H. Fred Baerwald, chairman of International Minerals the New Jersey-based Commodities Corporation mdependenlly of any firm and Metals Corp., led a discussion on metals futures

lures for hedging, building fore­ Louis, added, "I hear these things buyers and sellers who had felt casting models, and evaluating and I know they're possible they faced a limited number of operational costs. ("It doesn't We 're not doing hedging and we options. Although the participants take a million or even $250,000 to probably should. We 'lllook to represented various positions in get started," the experts agreed.) bring in a specialist." commodity transactions, they Developing internal staffs or going "My company is growing," said shared the expertise of leading to outside firms as well as one vice-president of purchasing. specialists. The obvious interest brokerage research were key " Our inventory is growing and we in futures indicated by those issues. need to protect that through the attending the Snowbird con­ "The conference didn't give all use of the futures markets. We 've ference, combined with numerous the answers but it gave you ques­ been using hedging on a limited inquiries about additional semi­ tions you can go back and start basis but haven't been that active nars, has led BYU and Merrill working on," commented E. N. and we need to expand. The or­ Lynch to consider a number of Henney. vice-president of Safeway ganizational procedures that were suggestions. including the re­ Stores, Inc. outlined will be a real help." quest that winter and skiers be G. L. Zang agreed. The presi­ Perhaps the greatest benefit of given equal time by scheduling dent of the Sunmark Companies. the conference was the discussion sessions in the evening leaving manufacturers of candy in St. of alternative approaches for days free for stem christies. •

:XCHAN

:XCHANG3 FALUWINTER 1976 7 moving on to the next. Individuals professional work in the organiza­ age and salary level increase. As who continue to move through tion is done by individuals in this a resul t those who remain in th is these stages re tain their high per­ category. About 40 percent of stage after age 40 tend to receive formance ratings; those who do professionals are in Stage II . lower performance ratings. not move tend to be less valued However. from an individual point Professionals who move into by the organization. Four stages of view. it is risky to remain in this Stages Ill and IV are quite success­ are identified, in the accompany­ stage because managers have ful in avoiding that fate. ing box, with Stage I noted as the rising expectations as a person's The last two stages are char­ apprenticeship period. Here an acterized by greater breadth of individual works under relatively interest and activities and by in­ close supervision and direction. volvement in the careers and In addition, most highly successful development of others in the or­ professionals have an informal ganization. The activities in Stages "mentor" at this time. Surpris­ Il l and IV are highly valued in pro­ ingly, some people stay in this fessional organizations. and stage most of their careers and people in these stages receive are never able to assume in ­ high performance rankings. The dependent responsibility for their table below presents the average own work. However, that group performance rating for the four represents a small minority. The stages in one research organiza­ majority of professionals make a tion that was studied. successful transition into Stage Stage Average Performance Ranking II-the independent specialist. I 17 percentile A majority of professionals II 34 percentile look forward to having thei r Il l 65 percentile own project or area of re­ IV 89 percentile sponsibility. Earning this Some have commented that opportunity and taking these stages are just de­ advantage of it moves scriptions of diHerent a person into Stage II . levels of management Most of the solid and that all that has

Stage I Stage II skills and application of areas of work • Works under the supervision • Goes into depth in one those skills b. organizational leader­ and direction of a more problem or technical area • Stimulates others through ship and policy formation senior professional in the • Assumes responsibility for ideas and information c. integrating the work of field a definable portion of the • Involved in developing others to a significant end • Is never entrusted with project, process, or clients people in one or more of • ln.fluence gained on the work entirely his own but is • Works independently and the following ways: basis of: given assignments wh ich produces significant results a. acts as an idea man a. past ability to assess are a portion of larger project • Develops credibility and a for a small group environmental trends or activity being overseen reputation b. serves as a mentor to b. ability to deal effec­ by senior professional • Relies less on supervisor younger professionals tively with outside • Lacks experience and or mentor for answers, c. assumes a formal c. ability to affect others status in organization develops more of his own supervisory position inside the organization • Is expected to accept resources to solve • Deals with the outside to supervision and direction problems benefit others in • Has the ability 10 engage wi llingly • Increases in confidence organizations, i.e .. works in wide and varied • Is expected to do most of and ability out relationships with interactions: the detailed and routine client organizations, a. at all levels of the work on a project Stage Ill developing new business, organization • Is expected to exercise • Involved enough in his etc. b. with individuals and "directed" creativity and own work to make groups outside th e initiative significant technical Stage IV organization • Learns to pertorm well contributions but begins • Influences future direction • Involved in the develop­ under pressure and working in more than one of organization through : ment of future key people; accomplish a tas k within area a. original ideas, leading a sponsor for promising the time budgeted • Greater breadth of technical the organization into new people in other stages

8 been done is to give the pyramid concrete recommendations may Reward Professional another name. Yet research does be helpful in meeting that ob­ Contributions not support this observation. In an jective. If an organization is going effort to better understand this to keep talented employees doing concept, third-level managers in Focus on Stages, not Ladders professional work, it must provide five organizations were asked to Promotion as an indicator of ca­ meaningful rewards to high­ list each person in their depart ­ reer growth has serious con­ performing individual contributors. ments in one of the four stages. sequences for a professional or­ An individual should be paid for We then compared the descriptions ganization, but very few managers his performance and not for his with current performance rankings. and professionals have had satis­ position or the number of people On the average, people in the later factory ways to evaluate careers. he supervises. If an individual con­ stages were rated higher than The concept of career stages is tributor is doing Stage IV work, he those in early stages, as the above one alternative. This idea has should be paid more than the table indicates. But an analysis of manager doing Stage I II work. proportion of managers and non­ A critical incentive for an ex­ managers in each stage reveals Before lone, perienced professional is the con­ some interesting results: aehemlst, fidence that he is influential in Stage Proportion of Nonmanagers making important decisions. The I 100 percent whohu manager who makes all decisions II 100 percent on the basis of the authority of his Ill 65 percent the abllltJ to position has a stifling effect on the IV 26 percent develop whole organization. Managers who make use of the expertise of It is true that there are many man­ a new product individual contributors have found agers in Stages Ill and IV, but the practice pays off. those stages are by no means that mar mean One reason promotion into reserved exclusively for managers. management is an important sign In fact, a majority of the people in millions of of success is that it provides in­ Stage Ill were individual con­ dollars in profits, creased visibility, often in the form tributors. This indicates that a of status symbols such as a private person can remain an individual decides that office, reserved parking, and the contributor doing work primarily like. The distinction between man­ in his specialty and still be highly he wants to agers and nonmanagers in these valued by the organization. Un­ become areas is often counterproductive. fortunately, the pyramid and If distinctions must be made, it associated reward systems in a manager would be better to use stages as a many organizations make it diffi­ basis rather than managerial cult, if not impossible, for man­ because that's status. agers to show the individual con­ where the tributors in Stages I II and IV that The pyramid, or corporate they are highly valued. It becomes monerls hierarchy, may be a major cause evident that major changes must of unrest and disenchantment in be made tf organizations are going the ranks of professional em­ to succeed in keeping competent been received positively when ployees in organizations. Many professionals working hard at presented to both professionals competent professionals want to their professional work. and their managers. They seem make their contribution to the almost rel ieved that there is an corporation in their area of Toppling the Corporate Ladder alternative way to examine ca­ specialty. If they can believe that In order to manage professionals reers. The four-stage system is a such a contribution is valued and effectively, executives need to tear useful tool in seminars focusing on rewarded, they will remain highly down the pyramids. Instead of careers as well as on a one-to-one productive. It will not be an easy highlighting the corporate ladder basis in performance appraisal task for managers to communicate and tying all rewards to promotion, and long-range planning sessions this view to their professionals, that aspect of rewards needs to be between professionals and their but tearing down the pyramid is a substantially deemphasized. Some supervisors. step in the right direction. •

::x.a-tANG3 FALL/WINTER 1976 9 ADVERTISING REGULATION: WHEN THE SIZZLE SELLERS FORGET THE STEAK by H. Keith Hunt I,would be nice if a discussion they had not been substantiated proof regarding the validity of ad­ of "Advertising in the Public before the ads were run. The case vertising claims to the advertiser, Interest" involved the many ways was, in fact, dismissed because and (2) the truthfulness of the the federal government enables, the ingredients were generally claim is no defense to a charge of helps, cajoles, and sometimes held to have pain-relieving unfair trade practice where the demands advertising of maximum properties, so no test of the spe­ advertiser has not substantiated use to business and to the con­ cific formula for UNBURN was the claim in advance. sumer. Instead of a helping re­ needed. However, the hearing But what if you advertise that lationship, however, government examiner said that to advertise an your 1977 model automobile gets and advertising continue as ad ­ untried remedy without adequate 17 miles per gallon? That state­ versaries: the government trying testing would be an unfair trade ment by itself is untestable be­ to get better advertising through practice. cause there are too many unde­ rules, threats, and various con­ On appeal to the commissioners fined influences - driving condi­ straints: and the advertising in­ the dismissal was upheld. But in tions, speed, proper tuning, and dustry often earnestly, and always their decision the commissioners so on. So a companion concept desperately, seeking to parry made the following statement: is needed. these encroachments on their es­ Affirmative Disclosure Given the imbalance of knowl­ tablished means of operation. Affirmative Disclosure simply edge and resources between a Businesses must be aware of a requires that all relevant informa­ business enterprise and each of number of programs the Federal tion be stated in the advertisement. its customers, economically it is Trade Commission is using cur­ If you want to make a miles-per­ more rational and imposes far less rently in its attempt to limit decep­ gallon claim, you must define the cost on society to require a manu­ tive advertising. test situations so that consumers facturer to confirm his affirmative Advertising Substantiation understand the conditions under product claims rather than im­ Perhaps the most important FTC which the car got 17 mpg. Be­ pose a burden on each individual program affecting advertising in cause advertisers have the obliga­ consumer to test, investigate, or the past 20 years is Advertising tion to include all significant facts experiment for himself. The manu­ Substantiation. If an advertise­ in their ads, they can go to court facturer has the ability, the know­ ment makes any claim, that claim and fight the FTC regarding how, the equipment, the time and must have been substantiated relevance or degree of disclosure, resources to undertake such in­ before the ad ran . If you want to but the basic principle that rele­ formation, by testing or otherwise, say your crunchy peanut butter vant information must be provided ... the consumer usually does not. has more chopped peanuts than in ads is firmly established. (CCH Trade Regulation Reporter. any other peanut butter, then you Advertising Substantiation and Par 20,056 at 22,033, 1970- 1973 are expected to have proved that Affirmative Disclosure bring about Transfer Binder, FTC, July 11, claim by objective testing pro­ dramatic changes in the advertis­ 1972) cedures before you say so in an ing regulation. No longer do pub­ ad. The commissioners passed a lic officials need to quibble with Ad Substantiation arose out of a resolution asserting the FTC's advertisers about whether an ad case concerning UNBURN, a sun ­ authority to req uire advertisers to claim is false: any claim must be burn pain reliever marketed and provide documentation of their proven before the ad is run. If a advertised by Pfizer. An FTC claims prior to making them claim isn't substantiated because attorney fi led a complaint that public. it hasn't been tested, there is an UNBURN 's claims to pain-relieving This decision and resolution automatic law violation. If the properties were unfair because mean (1) a shift of the burden of claim is tested and found false but

:XCHANG3 FALUWINTER 1976 11 is run anyway, it is automatic false information be included, and that Th e most notable case using advertisement, proven invalid by deceptiveness of ads be judged on injunctive power thus far involved the advertiser, and not by the the basis of the meanings con­ tours to the Philippines to obtain regulator. And if adequate in­ sumers get from them. "psycho-surgery" - surgery formation is not provided to en­ Ou r first feelings on learning of without opening the body. Rather able the consumer to make a these interrelationships might be than spend years getting the reasoned decision, then the that the pendulum has swung too matter through hearings, delays, and so forth , and allowing the practice to continue, the ads were stopped by injunction. Then the If you say your peanut butter is the crunchiest, parties could litigate as long as you 'd better have the facts to back your ad before they wanted. The FTC has publicly you run it stated, though, that the injunctive power will be used not in land­ mark cases that seek to test novel legal theories. but only where a regulator requires the advertiser far in favor of the regulators, clear violation of the law has to provide it. Al l this is an obvious putting advertisers in an almost occurred and no unique or novel sh ift from only a few years ago impossible position. legal theory is involved. when the test of fairness or decep­ But we need to recognize that tion lay in the literal truthfulness of advertisers are professional per­ Corrective Advertising the ad. suaders- society's supercom­ Now, what about the ad cam­ Legal Definition of Deception municators. They sell their skills paign that runs tor awhile, has Another critical change is cur­ in the business community as general public awareness, and is rently and slowly occurring­ experts who develop messages then judged to be deceptive? The reexamination of the legal defini­ and check their impact on con­ campaign is killed (or more likely tion of deception. The shift is from sumers. They do it all the time. has already died naturally); do the deception being determined by Part of their expertise is knowing effects of a deceptive ad stop literal content of the ad to decep­ what consumer perceptions of when the ad stops? (Or does tion being determined by con­ their ads will be. It is, therefore, in some deceptive residual remain in sumer perceptions after exposure no way an imposition to hold them consumers' minds?) to the ad. For all these years we responsible tor their work. As a proposed remedy for er­ have judged deception without We can now view the pendulum roneous beliefs that continue after ever checking to see if consumers as having swung tor the first time the offensive ad has been stopped, were actual ly deceived. How do to the public interest. It has just corrective advertising carries a we know whether deception has crossed to this side, and con­ statement that previous ads were occurred? Only by measuring straints on advertising are going to deceptive or misleading, and it consumer perceptions and com­ get a lot tougher before the usually makes some attempt to paring them to the real state of pendul um starts back the other correct the information. There natu re. If consumers incorrectly way. have been several applications of perceive something and that in ­ the corrective advertising con­ correct perception can be at­ Injunctive Power cept, but thus far each has been tributed in part to the ad, then the For the first time the FTC now through a consent order, an agree­ ad is deceptive. In other words, has the power to temporarily stop ment by which the advertiser does it's not what the ad says that ads from running until a proper not admit to guilt but agrees to makes it deceptive; it's the in­ investigation and hearing are held. abandon the alleged misdeed in correct perception gained by In the past, ad campaigns would the future. Corrective advertising consumers resu lting from ex­ be exhausted and discarded be­ has been included as part of posure to the ad. This is a radical fore the commission ever got the several consent agreements in­ shift in advertising regulation. matter settled. Now, tor cases volving false and/or deceptive Coupled with Ad Su bstantiation having no novel or unique char­ advertising. and Affirmative Disclosure, this acteristics needing court review, The first litigated corrective new view of deception requires the FTC can seek a temporary advertising was ordered by an FTC that ad claims be substantiated injunction stopping the ad from admin istrative law judge to correct before running, that all relevant running. advertising claims made by Lis-

12 terine mouthwash. The ads pro­ ing dietary value of refined sugar case the FTC used a weak penalty, fessed that regular use of Listerine (it won 't really help you lose weight and the advertiser wisely opted reduced the severity and frequency to eat some sugar before each for the penalty. Hawaiian Punch of colds and sore throats. The meal); and motorcycle safety hel­ was required to state the natural administrative law judge found mets that weren 't really the safest frui t-juice content for one year. that claim to be fal se. The deci­ helmets built (in fact, on a normal, After the year it could show by sion was appealed by Listerine to hot, sunny summer day the helmet, consumer survey that set per­ the FTC commissioners sitting in when struck, would shatter like centages of consumers correctly an appeal function. The com­ ordinary window glass). understood the actual natural missioners essentially upheld th e Each of these followed some juice content of Hawaiian Punch. findings of the administrative law variation of the same idea - the As it turned out, the natural juice judge. Listerine has appealed the advertiser would have to spend content message was so skillfully second decision to th e federal 25 percent of the next year's ad­ embedded in the labels and was court system and is waiting a vertising budget presenting the stated so smoothly in the ads, that decision at this writing. corrective message, which had to there was no adverse effect on All other attempts to require be approved by the FTC. product perception. So the com­ corrective advertising in a "Just Do It" pany has opted to continue run ­ litigated case have failed because Then a real breakthrough oc­ ning the statement rather than of the extreme difficulty of proving curred. In the Hawaiian Punch trying to correct consumer percep­ residual effects from deceptive case the advertiser was given the tion to meet the requirements of ads. How do you show that an ad option of either runn ing an affirma­ the consumer study. that ran two or three years ago tive disclosure stating the natural Still, the concept is good be­ sti ll influences consumers today? fruit juice content or showing from cause it allows the advertiser to By a simple before-after research design? But the " before" measure would have had to have been taken years ago, before anyone Constraints on advertising are going to get a lot suspected a need for such a tougher before the pendulum starts back the measure. And if the erroneous other way beliefs held today seem to be due to the earlier deceptive advertising, how can we know that that linkage acceptable consumer surveys make the correction his way and is correct? Maybe the current that consumers correctly under­ to stop as soon as the correction erroneous beliefs stem from stood the natural juice content of is accomplished. The Hawaiian sources other than advertising, Hawaiian Punch. This is a clear Punch alternative for handling the such as friends' comments, claims advance because it gets the FTC elimination of deceptive residual made by similar products, out of the message-creation-and­ allows the FTC to regulate by statements from salesmen, and ad-writing business and leaves the setting an objective and allows so on. It is a most knotty problem. responsibility with the advertiser. the professional communicators Sliced Thinner All the FTC says is " Here's what to figure out a way to meet the Several corrective ads have run. you have to do-you fig ure out objective. Profile Bread was the first, with how you want to do it. Just do it. " Advertising Substantiation, Af­ Julia Meade informing us that we No one procedure for corrective firmative Disclosure, a new legal wouldn't really lose weight by advertising will actually remove meaning of deception, injunctive eating Profile Bread - it had the deceptive residual in every power, corrective advertising­ fewer calories per slice only be ­ case. Al l the FTC cares about is these are some of the current FTC cause it was sliced thinner than that the residual is removed. So it activities encouraging advertising other similar breads. Other ap­ seems reasonable to let the FTC in the public interest and, ulti­ plications were for Ocean Spray set the objective and let the ad­ mately, for the good of the private Cranberry Juice Cocktail, con ­ vertiser decide how to accomplish sector as well. What remains is cerning its nutritional value; it. further evaluation of currently Domino and Spreckels sugar, Of course, there has to be a employed regulatory devices and concerning nutritional claims; the penalty if the objective is not exploration of new ways of sugar trade association, concern- achieved. In the Hawaiian Punch handling old problems. •

:xcHANG3 FALIJWINTER 1976 13 :XCHANG3 PROFILE I JAN ERTESZEK

It is because, not in spite, of a "participating spirit" that the Olga Company's growth has surpassed its competitors, says President Jan Erteszek

The original investment 35 years ago was ten dollars - five dollars to rent a sewing machine and the remainder for fabric- and the results were fashion samples that convinced a Bullock's Wi lsh ire buyer in Los Angeles that Jan Erteszek and his wife, Olga, understood quality design. Yet few $10 investments turn into companies listing more than $31 million in annual sales. Back in 1941 . when Olga was designer-seamstress and Jan was salesman-promoter, the Olga Company was satisfied picking up a couple of dozen orders here and there. Today business is good, to say the least. During the last four years, the Erteszeks' Olga Com­ Founder/President Jan Erteszek heads the 35-year-old Olga Company and is an ardent pany has reported a sales increase spokesman for incorporating Sunday ideals into the lives of businessmen and employees of 120 percent while enjoying a 155 percent jump in profits. The company is recognized as an industry leader in a full range of diversified intimate fashion ap­ parel. Without merger, acquisition, or entering the mass merchandis­ PUTTING ing market, the Olga Company has increased in both volume and profits in almost every year since THE GOLDEN RULE its inception, at times growing at five to six times the industry rate. INTO PRODUCTION The company's ads are quick to Photography by Dave Holt point out that " behind every Olga there really is an Olga .. , (She

14 remains active as Vice-President he returned to his homeland to soldier's obvious concern with -Design). And behind Olga is find all his financial resources service, regardless of the risk of Jan Erteszek. Since the early exhausted. ridicule from others. Yet this days, when Erteszek took his "On a rainy night in late 1939, sincere example of kindness con­ wife's samples to Los Angeles I was arrested by a group of trasted sharply with the unjust buyers, the two have worked Soviet soldiers at the then newly treatment he saw under Soviet together; it has been a common­ created Soviet-German border. occupation during the height of venture endeavor. He has also As I was being led to the closest the Stalin regime. The brutality sought to carry over this same detention camp, one of the Soviet around him convinced Erteszek common-venture philosophy to guards walked over to me, picked that "without the impact of the the more than 1 ,700 " Olga up a bag I was carrying, and hav­ urge that is spawned in the deeper associates" in manufacturing ing noticed I was having some strata of human emotions, life will operations in California and problem with my leg, started to lose its meaning and become a Mexico. These individuals receive carry the bag for me. I still ruthless exercise of those who are 25 percent of the company's remember the look on this before-taxes profits in profit soldier's face, which was both one sharing and stock plans. It is of embarrassment and concern, because, not in spite, of this for certainly, what he did was not " participating spirit" that the Olga the thing to do for a conquering Company's growth has surpassed soldier of the victorious Soviet its competitors, says Erteszek. army, vis-a-vis a member of a "We don't give anyone anything, vanquished nation." we share what we produce Erteszek has of1en told the together. And we share not only story of this caring soldier in in blessings, but in problems as conversations and speeches. well." Everyone talks about what This example of truly concerned business ought to be doing, but action for another human being sitting and listening to Erteszek, left an impact on him. He says he Administrative ASSIStant Maxine Dayley reviews the day's agenda with Erteszek and recognizing his truly astound­ has repeatedly thought of that ing success. you know he is in the position to. act He tells you that individual and social responsi­ bility have to work together- and you feel he has tried to do this. This strong regard for articulat­ ing justice through private enter­ prise has actively involved Erteszek in civic and professional organizations. He is a director of both the Los Angeles Chamber of Commerce and the Merchants and Manufacturers Association. In addition, he serves as a member of the Brigham Young University College of Business/Graduate School of Management National Advisory Council. A native of Poland, Erteszek received his law degre e from the University of Krakow in 1938. After working for a Polish govern­ ment agency in the United States, The Olga Company sales meetings are informal and samples line the walls for review

:xCHANG3 FALUWINTER 1976 15 stronger over those who are of the company depends upon weak.' ' each one of its members. " (2) Living in a communist state also "Participation is built on the committed him to the principle of conviction that those who produce individual responsibility as a the results also share in them." prerequisite to a free way of life. (3) Trusteeship is essential "to the "I realized that the dynamic power consumer, to our fellow em­ underlying man's contemporary ployees, to the community-at­ dream for economic justice and large." (4) Creativity involves equality of opportunity was cap­ original products and a sense of tured and then manipulated by "company excellence that adds to ruthless men for their own ends. the strength of our American Yet the urge itself, for economic society." (5) And the Golden and social justice, was authentic Rule " is not only a sound policy and genuine. " When he returned Enthusiastic in relating the success of for living, but for operating a such company programs as profit to America in 1941 , Erteszek says sharmg and stock opltons, Erteszek business as well." he began to see business as an believes busmessmen must recognize This all looks great on paper, important medium for achieving to themselves and to others the but even the nonskeptics have to man's desire for both a purposeful, contribution of each employee wonder if this well-meaning fulfilled life as well as his economic philosophy ever gets out of the aspirations. He was convinced through-Friday industry situations. executive planning sessions and that basic Christian principles Most companies' annual reports into the daily lives of the produc­ provide the know-how to meet are strictly cut-and-dried financial tion line workers. Yet Erteszek has individuals' "hunger for meaning, statements surrounded by done more than talk. He has pro­ purpose, and dignity." And he pictures of the latest advance­ grams that test as well as imple­ saw businessmen committed to ments in "widgets." The Olga ment his intentions. this ideal as instrumental in Report doesn't neglect to display Twenty percent of the helping to fill man's economic its balance sheet as well as its company's profits are put into a goals and need for self-realization. peignoirs, but in addition states profit-sharing fund and five Today, Erteszek has become an the backbone reasons for the percent are used for purchasing active spokesman for incorporat­ company's dynamic growth: (1) stock for employees. In light of ing Sunday ideals in Monday- Man Comes First- ''the success this, and the fact that the company

Production Manager Roger Falquez and Erteszek discuss production line operations in the company's Van Nuys, California. plant

16 finances itself purely from its plants with a 600-employee work profits, Erteszek says that Olga is force. "able to make more money than Wherever he is in the organi ­ most of the garment manufacturers zation, any Olga associate can in the industry." He adds, "Unless take a gripe to Erteszek, provided you identify the interest of the he first talks to his supervisor, his company as the interest of the supervisor's supervisor, and so person who is a part of the com­ on up the line. Since his office pany, you leave out the climate of door is a matter of yards from the legitimacy in trying to sell or main plant production line, no one promote or impress your team has to look very far to find the that they ought to work harder or president if there is a problem. better." He also sees this climate What works for the Olga Com ­ as important to quality, absen- pany works because Erteszek has communicated and shared his The employees' beliefs in individual and coopera­ tive stewardship with his Olga co­ financial success is .... workers. He also is equally actually tied with the -- sincere in his drive to tell this to success of the others in business. In a letter company and Erteszek written to U.S. News and World makes it very clear on Report Editor David Lawrence, "harvest day" that he's that was printed in the magazine as an editorial, Erteszek stressed not being a "nice guy" --- that preservation of our lifestyle is - no one is given not enough , ourcausemustbe anything an expansive universal ideal. " The main difference between teeism, the concept of the second Communism and our philosophy mi le, and creating a sense of of li fe is of a spiritual character Erteszek goes over fabric and design and revolves around beliefs per­ self-dignity. The employees' coordination with {left) Jan Pack, financial success is actually tied taining to the nature and destiny merchandise manager of design, and of human beings. Thus, it is in the with the success of the company, designer Rury /chihara and Erteszek makes it very clear realm of faith that our conflict on "harvest day" that he's not must be fought out, " he wrote. being a " nice guy." Profit sharing better. Under a recently intro­ " We might defeat the Russians is not a management bribe to duced plan, each employee, by force of arms alone but never push for higher productivity - no during the course of the year, has will we defeat Communism by one is given anything. Because the opportunity to state what he force of arms alone. If we lose the it takes everyone to produce in or she can do to make the com­ spiritual battle, we will have their common-venture organiza­ pany better. Likewise, Olga gained nothing except chaos and tion, everyone participates in the associates throughout the com­ spiritual vacuum." organization's success. and every­ pany have participated in design Again, you have to wonder if one shares. In fact, non­ creativity sessions. Employees the "nice theory" ideas get off the supervisory, nonmanagerial have advanced from positions as paper. Does the bottom line employees have developed up to sewing machine operator to figure really relate to involving $15,000 of vested interest. designer; utility boy to production production-line workers in Sharing profits isn't the only manager; secretary to personnel planning sessions? Erteszek has area where Erteszek has worked manager; clerk to buyer; and faced caustic college students and to make good one of his basic floor girl to assistant production somewhat amazed and perplexed beliefs - a good company is one manager. A former bell-hop businessmen curious to see if it's where good people become moved up quickly to head two all " for real." It is. And he's

:XCHANG3 FALUWI NTER 1976 17 serious in his desire to articulate standing partner, Olga, and their the vision but also the best sug­ his belief that the American ethic three daughters. In addition, he gestions for implementation. The is rooted in Judea-Christian is a director of the Laymen's implementation of that vision is concepts. He has written and Movement and an elder in the what I want to do in business. " • lectured extensively throughout Brentwood Presbyterian Church. the country. He sees civic, Erteszek's interest in Brigham professional, and religious organi­ Young University stems from an zations as focal points in reaching Olga executive and BYU graduate concerned individuals. He is who recognized many of the same "Christian concepts currently at work on a book shared commitments. Erteszek emphasizing his conviction that has supported the University are not the concepts life is a relationship of trust and because he feels it has " the of yesterday but of the communal life is a relationship freedom and the credentials to tomorrow. Business is of common venture. In addition, operate in a climate of Christian not only a way of Erteszek has worked with uni­ conviction. Th e need for the making a living, versities in reviewing manage­ 'additional dimension' of Brigham but a ment education programs. For Young is now not only an esoteric the past three years, he has helped or noble objective of people of way of life" fund Brigham Young University good will, but a requi rement of faculty and student research in pragmatic and practical dimension organizational and leadership in th e business environment. areas. including work values, Hard-nosed businessmen realize human satisfaction, career stages. that they need this additional performance, and managerial dimension. not because they have action. This research will be suddenly developed a new sense published with data reviewing of moral pu rpose. but because younger and older workers' views their other tools have not worked toward the protestant work well enough. " ethic and will include analyses of He also feels there is a strong the career patterns of successful need to bring together others who professionals. share his conviction that unless Erteszek hopes that his business the style of corporate life in the achievements bring him credibility United States is dramatically in talking with other executives. altered, neither the free enterprise He believes he has shown th at system nor our free way of life will his ideas of a just system in survive. He adds, "Chri stian private enterprise are workable. concepts are not the concepts of and th at they work for the organi­ yesterday but of tomorrow. Busi­ zation as well as the individual. ness is not only a way of making a In fact, they cannot. in the long living, but a way of life." run. work for one and not the Until the beginning of the other. nineteenth century, the vision of He is also a busy man. But he's responsibility for the weak and the not too busy to sit in on marketing poor rested with Christianity. strategy sessions or talk with a Erteszek stresses that this sewing machine operator about monopoly has ended. Com­ her contribution to Olga. He still munism and socialism, among gets in an occasional round of other socio-economic and golf and a little farming and ranch political systems, offer alternatives. With his wife, Olga, £rteszek founded the Olga Company. and today it ing. But most of his time away But he has lived with these alter­ lists annual sales of more than $31 from his work, writing, and natives and is convinced million and production plants in speeches is spent with his long- "Christianity provides not only California and Mexico

18 Return to Literacy by Warner Woodworth

19 Much of today' s best logic will be irrelevant, even misleading, for grappling with the realities of tomorrow. To keep pace, you need to recognize yesterday's "facts;' as primitive and crude attempts to explain a society which has become today' s dramatically new world

've been intrigued recently by re­ lutionary invention , mankind has intensifying conditions books be­ I sponses of people to my inquiry been able to visually produce for come transient, as evidenced by about the kinds and quantity of the the masses information that was the giving way of durable, leather­ reading they were doing. A West previously restricted mainly to bound books of past centuries to Coast professor confided he had word of mouth. Today the world cloth bindings and, more recently, read only two books in the past five output of books is over a thousand to the influx of disposable paper­ years: one manager boasted, with titles a day, some 60 mi llion pages backs. a certain disdain, that he had not a year being produced in scientific Not in spite, but because, of read a sing le book since complet­ and technological areas alone. these times of accelerated social ing his grueling MBA program The paradox is that while we and economic change, we need to back more than a decade ago. It are living in a veritable " booksplo­ return to literacy. University is unfortunate that such individuals sion," we seem to be reading less faculty members are often locked miss the major intent of school and and less. It may stem from in­ in to teaching from old, too-familiar career. Academia and the work formation overload, from the ad­ texts. They may be engaged in place are but different scenery vent of other media, from an contemporary literature within a for engaging in learning. My two increased lifestyle pace, or from narrow realm of research special­ acquaintances did not see the our discomfort at having the things ity, but they are often unfamiliar importance of reading as a pri­ we " know" challenged by new with the hottest best-sellers their mary vehicle for dealing with facts and ideologies. This last students are discussing. And, changes in theory and application effect is what Alvin Toffler calls although in my experience the since their student days. The trend " future shock" - the impact of higher you look in a corporate toward increasing illiteracy has accelerating changes forcing headquarters, the more you en­ turned the avid reader into an people to relearn continuously, a counter executives reading current oddity. Today's college freshman process that, as it speeds up and books, many managers don't read reads at the level of yesterday's broadens its impact, may create beyond their own province of junior high school student. too great a strain on the individual. finance, personnel, etc. The ex­ This development is a curious In Toffler's logic, " We are creating cuse of the professor is that he's phenomenon of the 1970s. Look­ and using up ideas and images at already studied the issue (albeit ing at the historical perspective, a faster and faster pace. Knowl­ years ago as a graduate student), Marshall Mcluhan has argued that edge, like people, places, things, and the businessman may ratio­ print gave tribal man " an eye for and organizational forms, is be­ nalize that he is already in the an ear." From Gutenberg's revo- coming disposable. " Under such hard-knocks school of producing

20 goods and services (rather than suggestion to cut loose from the "is a change in our imaginative evaluating and questioning past, but rather to emphasize the picture of the world." whether things should be pro­ need to build on it and to link it All this denotes a dynamic duced at all or how to do so with the perceptions and ideas and process rather than static as­ better). analyses of today. Mcluhan has surances about life. As a uni­ The concern remains that in articulated the image of the book versity professor, I believe the school and work institutions, as as an extension of the eye. To­ criteria for learning among stu­ well as in the rest of society, read­ day's books are lenses for more dents should not be obtaining ing is passe and the printed page clearly perceiving and focusing facts or worshiping concepts and may become an endangered upon contemporary events. To texts - because these are transi­ species. I'm aware of the glut of the individual a book becomes a tory. Einstein 's overthrowing of other media- TV, radio, film, way of seeing and making sense Newtonian physics is the norm. newspapers, magazines, public out of the social thrusts around us. The emphasis with students must opinion polls, ad infinitum. These In coping with the ongoing be learning how to learn- obtain­ are legitimate instruments of processes of existence. " What is ing the tools for analysis, the communication. Anyone claiming demanded," said Bertrand Russell, methods for thinking, and the interest in corporate America awareness of alternative argu­ should be reading Harper's and ments and approaches. Much of The Village Voice as well as the today's best logic will be irrelevant, Wall Street Journal. Yet I'm con­ Reading is passe and the even misleading, for grappling vinced that nothing can quite take printed page may become with the realities of tomorrow. To the place of the experience of an endangered species keep pace. you need to unlearn sitting down with a book. There and recognize yesterday's " facts" are lot's of substitutes and books in as primitive and crude attempts to cassette form that can be played explain a society which has be­ in the executive car during the two come today's dramatically new hours of daily commuting between world. Unless you continually up­ home and office. (You can now date, revise, and analyze ideas, supplement Bach's greatest hits you run the risk of perceptual lag with Drucker on management, and which results in frustration (be­ the gimmicks of a thousand hype cause the world doesn't fit your experts on how to be more effec­ vision) and in inappropriate and tive, how to move up the ladder, ineffective behavior. the 23 points of good leader- As a case in point, at a recent ship .... ) national conference on business But I'm arguing for a return to and society, I watched CEOs at­ the roots of the understanding tempt to discuss regulatory process - the simple experience agencies, consumer attacks, of the printed book. We need a minority demands, labor conflicts, renewal of literacy in the sacred environmental criticisms, and in­ halls and the boardrooms of the ternational bribery scandals. As corporation- a return to reading. they squirmed and struggled to To clarify, I don't bemoan the state their rationale and to field decline of the book because of a questions. it became clear they did personal interest as a novelist, not, on the whole, understand librarian, or English literature either the issues or the strategies teacher. Rather. my bias stems of social change. Rather than con­ from the pragmatics of survival, of vincing the participants, their understanding and coping with the statements rendered contradic­ turbulence of today's world and tions. The holes they dug only got the need to do so on today's terms deeper. It became obvious that rather than on an assumption that the pressure groups they were try­ yesterday's approaches provide a ing to deal with knew a great deal timeless guarantee. Mine is not a about the corporations. These

:XCHANG3 FALL)WINTER 1976 21 special interest organizations had organization that requires them to short, mental vacation that comes done their homework, studied the keep updated in their reading? from a good book. If the reader speeches and practices of man­ The input from current books will counters with " Well , that 's all nice agement, and thoroughly delved mean greater knowledge in sounding, but I'm too busy to just into specific company business. decision-making. The payoff for sit and read, " my rebuttal is that Yet the executives' sensitivity and increased reading may be not only such a person is going through the insight into the " enemy" was better business, but a better psyche motions but forgetting the task. severely limited. They hadn't read and- I 'II venture the prepos­ One needs to take time to refill. ecologist Barry Commoner's views terous- better physical health. Reading can result in a rein­ on energy or sociologist William Workaholics tend to break down vigoration of the mind, a recharg­ Domhoff's analysis of power and eventually (corporations schedule ing of energy sources. It can wealth in America. They were formal leaves-of-absence and increase intellectual curiosity, simply unable to handle the issues vacations to force employees to cleanse the brain, allow for reflec­ in a defensible and competent way. rest, escape, change). People tion, and point out new territory to Are today's middle managers ought to learn to escape while on explore; in so doing it can repair fami li ar with Norman Mailer, the job too- get away from the both the psychological and physi­ Jonathan Kozol, and Erica Jong? routine of work with the occasional cal being. In an important addi­ Or Theodore Roszak, Michael tional sense, reading is not a pro­ Harrington, Gore Vidal, and Ivan fessional responsibility but an lllich? These, as well as Galbraith, opportunity, a mixture of material Drucker, and Moynihan are im­ Today's books are lenses and ideas with which to have some perative sources in understanding for more clearly fun. American society today. While I An effective person is an in­ make no pretense of presenting a perceiving and focusing dividual of ideas who is solidly complete list, the writers men­ upon contemporary connected to the contemporary tioned represent the range of events world. The alternative is pro­ depth and erratic quality of thought fessional adolescence. Much of which exists and which reflects on the emerging literature is con­ our institutions and way of life. tradictory in image and does not These authors are becoming contain nice, neat, orderly resolu­ highly valued in society, with ac­ tions of our problems. But life, companying rewards of wealth or personally and professionally, is fame. And they are making an itself perplexing. Today's publi­ impact. cations do not tend to portray our Now just to reduce the possi­ society with easy certainties; but bility of misinterpretation, I have no they may provide a mirror. They illusions about accountants be­ reveal much about the nature of coming scholars or vice-presidents our complexities and serve as a turning into literary experts. I'm useful problem statement within not calling for a revival of the which each of us can construct Rennaissance man or scholarship our own framework of analysis. per se. But a return to readership In terms of the relevance of -for breadth if not for specific reading good books, I would pre­ depth-is crucial for an increased dict that successful businesses acquaintance with information and will become more involved not ideas, histories, and forecasts only with the exchange of goods within the context of society. and services, but with the market­ In practical terms, there is un­ place of ideas. Read ing will help certainty as to how to influence us as individuals - as well as our others to read. Can you establish institutions- become the focus a policy against illiteracy? Most of an interchange of creative companies verify prospective thought, of a broadening and employees ' reading ability before deepening sensitivity to the issues they are hired, but where is the of the larger, contemporary culture.

22 the origins and interworking of and reconciling life's paradoxes. From Galbraith Hitler's closest associates in the Gail Sheehy's Passages is a kind Third Reich; Coll ier and Horowitz of operator's manual for people as trace the rise and struggles of one they pass through the crises of to Breslin to of America's great financial power­ adulthood- coping with our­ houses, The Rockefellers: An selves after we move beyond the Solzhenitsyn ... American Dynasty. Terrible Twos and the Sweet Politics: Analyses of the drive Sixteens into " maturity. " for power in the White House have Management: Working by come from several outside writers: Studs Terkel is an aggregate of Breslin's How the Good Guys taped interviews of workers that is Finally Won, Dan Rather's The useful for managers in under­ Current reading focuses on Palace Guard, T. Wh ite's Breach standing subordinate needs, dis­ powerful ideas, societal insights, of Faith, and, of course, Wood­ satisfaction, and frustration. For alternatives to mainstream thought, ward and Bernstein's All the an inside view of the financial and personal relevancies. The President's Men and The Final world, read Mayer's The Bankers following are widely read titles to Days. (Whi le there are certainly on the methods, norms. and help break elevator silence. many political books worth read­ integrity (or lack of it) of today's Economics: E. F. Schumacher's ing, Watergate has helped provide money handling. Two of the most Small Is Beautiful stresses reorder­ instructions for understanding widely read books of the past ing economic priorities to better events, relationships, and tactics year that reflect a certain American meet human needs. The Money of organizational hierarchies.) D. obsession with power are Ringer's Book by Sylvia Porter is the con­ Boorstin's sweeping outline of The Winning Through Intimidation and sumer's bible to tackling home Americans examines our political Korda's Power!: How to Get It, mortgages, auto warranties, and cultural development as a How to Use II. Both are essentially supermarket inflation, etc. A. people. Essays on the shift from texts on moving up the ladder of Sampson analyzes The Seven democracy's origins in the U.S. success. They contain an array of Sisters, the major oi l companies, are the focus in I. Kristol's On the exploiting, manipulating, and self­ and vividly details the impact of Democratic Idea in America. Look assertive gimmicks for maximizing these multinationals on the world: too forT. White's The Making of interpersonal impact. D. Bell in The Cultural Contradictions the President, 1976'. Organizations: With an under­ of Capitalism explores the para­ Self-Growth, Learning, Ex­ lying warning that organizations doxical processes in society which perience: "Adam Smith's" Powers may be dangerous to your health, are moving toward a major crisis of the Mind describes a series of you can read a variety of works on point in history; and B. Com­ the·rapeu,tic activities for decreas­ the oppressive, dehumanizing ex­ moner's new work, The Poverty of ing inner stress. Freeing yourself perience of modern man caught Power, shows how the loss and from hypertension and the daily in the treadmill of bureaucracy. waste of energy creates a shortage rat race is also the subject of The You can take your pick of the cops of jobs and capital. Economics in Relaxation Response by H. Benson (V. Marchetti 's The CIA and the the Public Purpose, Galbraith 's of the Harvard Medical School. In Cult of Intelligence) or the robbers sequel to The Affluent Society and another view, T. Gal lwey:s The (M. Puzo's The Godfather). Ex­ The New Industrial State, presents Inner Game of Tennis suggests amined are the healers (1. lllich's a comprehensive theory of reform the parallels between mental Medical Nemesis) as well as the for both the public and private processes on the court and coping whole health-care system (K. sectors. with nonathletic challenges, ad­ Kesey's One Flew over the Biography : Tarrant's account vocating specific techniques for Cuckoo's Nest). The challenge of of Drucker: The Man Who Invented your mind/body operations. survival confronts us in Andean air Corporate Society is a new attempt Pirsig 's classic of several years disasters (P. Read 's Alive), U.S. to explain the man and the context now is Zen and the Art of Motor­ schools (J. Kozol's Death At An out of which Drucker's concepts cycle Mainrenance, a fascinating Early Age), and Soviet prison of management have emerged; inquiry into values, technology, camps (Solzhenitsyn's The Gulag A. Speer in Spandau reflects on and ways of thinking, perceiving, Archipelago). •

:XCHANG3 FALU WINTER 1976 23 Skaggs Institute of Retail Management RETAILING Some Strong Selling Points

When an industry receives the suggestion by committing $1.8 Department of Labor's highest million over the next ten years. outlook rating projected through The result is the new Skaggs 1985, it should expect "extremely Institute of Retail Management rapid" growth. When that industry which will offer retail ing and re­ is retailing and currently employs lated courses, develop continuing nearly 20 million people, it can education programs for pro­ look for 12,000 to 15,000 new fessionals, and fund faculty management openings annually research. from attrition factors alone, not According to Dean Merrill J. including expansion or growth Bateman, the major student thrust increases. will be at the undergraduate level, A ten-year graph of retailing with sophomores and juniors in­ sales in the United States shows volved in internship programs the industry's high resilience. throughout the country. " We in­ (Since 1967, its seasonally ad­ tend for this program to be na ­ justed monthly sales have climbed tional in scope by establishing steadily from $26 billion to $53 contacts with major retail organi­ billion.) In spite of inflation, un­ zations. We will also enlist the employment, and general reces­ support of these major retailing sionary periods, Americans con­ firms in funding scholarships, re­ tinue to exercise their purchasing search, seminars, and executive power- and retai ling is booming. Skaggs: "Retailing training both on and off campus." When the Skaggs Foundation, needs a greater Pricing, Displaying ... established by the nation's second But does it take a college de­ contribution from the largest drug retailers, Skaggs gree to sell anything from fish ing Companies, Inc., approached academic community tackle and tennis balls to baby BYU with the idea of creating a than is now occurring" food and ballpoint pens? retailing institute, it backed the L. S. Skaggs, Jr., Skaggs chair-

24 Photography by Mario Lee man of the board, thinks it to work and serve the public definitely helps. " Retailing needs willingly - individuals who a greater contribution from the recognize that the customer is the academic community than is now one who pays the paycheck. " occurring, and we hope the in­ Attracting good people to the stitute will help fill this void." field means exciting students Skaggs stresses that managers about the many underdeveloped need a strong background in opportunities in both practical/ merchandising, accounting, working areas and research. BYU finance, personnel, and advertis­ faculty members have already ing, as well as specialized voiced strong interest in the field knowledge in such areas as -for example, H. Keith Hunt and pricing, consumer buying motives, Darrel G. Clarke in advertising and store security, and displaying. sales; Michael R. Guerts in sales " Challenging opportunities exist forecasting; Paul H. Thompson in in retailing, and we believe that career development and assess­ those who decide to explore a ment programs; and Ronald L. career in this field can be signifi­ Schill in purchasing and cost cantly assisted by university structure and control. training." Pinning Down Performance To those on the outside, the The Skaggs Institute will be apparent pros of retailing appear headed by E. Doyle Robison, a to be losing out to the taken-for­ former vice-president and general Bateman: "We intend granted cons. But those who've merchandise manager at Roches­ spent years sitting in on sales for this program ter, New York's Sibley's, a division meetings and planning merchan­ to be national in of the Associated Dry Goods dising strategy know this isn't so. scope by Corporation. He has had No one is denying the long hours establishing contacts extensive experience in mer­ or demanding consumers. But at with major retail chandising, buying, sales de­ the same time, the trade also velopment, promotion, and store organizations" provides the time to get in up to expansion. Robison sees retailing your elbows and the opportunity as misunderstood by most young to give the public what it wants. people. " They don't understand The tough competition forces that a person can advance much "survival of the fittest. " Seasonal more rapidly than in many other trends and fickle public buying fields because he can be pinned patterns encourage special ad­ teaching," says John Hartman, down to exactly what he can vertising and selling campaigns, Skaggs vice-chairman of the produce- his pay is based on as well as forecasting future board and chief financial and de­ his ability to make decisions. In needs and wants. The fluctuating velopment officer. "The main retailing you can evaluate very income proves that earnings and reason for a retailing institute is closely how a person is perform­ advancements are commensurate the need to point out the oppor­ ing, and you can afford to pay with effort. And the hard work­ tunities that exist and to attract someone who can produce sales it's still just lots of hard work. good people to the whole field of and whose net profit performance "College graduates have over­ retailing, whether it be Sears, is really positive." looked retailing, and universities Albertson's, Penney, Safeway, While students are now learning in recent decades have almost or Skaggs. There's a need to get of increasing opportunities in ignored the field as regards to competent people who are willing retailing, the industry likewise

:XCHANG3 FALLJWINTER 1976 25 them of statistics. marketing, human relations skills, and accounting will not require many years of training before moving into management positions. They will bring these abilities with them to the industry and will be ready to assume responsibility." Anyone in retailing knows that for many the classic banking hours just don't exist. Whether it's Wool­ worth's or Bloomingdale's, some individuals can expect not to work eight to five. five days a week. "Retailing needs people who are not afraid to get their hands dirty," says Skaggs. " If they are, they won't like it because they definitely will get their hands dirty. And with this comes experience and re­ sponsibility. It isn't just a joke Hartman: "There's a when you start signing an order Robison: "In retailing need to get competent for $10,000 or $20,000 worth of you can evaluate very people who are willing merchandise and it ends up sitting closely how a person is to work and serve the on the shelves. You learn to make performing, and you public willingly - some hard decisions, and you can afford to pay learn very quickly. " individuals who someone who can When it comes to making quick. recognize that the hard decisions. the Skaggs or­ produce sales and customer is the one ganization doesn't need to open whose net profit who pays the the front door to find a prototype performance is really paycheck" that makes Horatio Alger look like positive" an underachiever. In 26 years, L. S. Skaggs has taken a family business of 11 stores and 9.5 million in sales and developed it recognizes that it needs greater into 248 stores in 22 states with goods to feed his fam ily, and it input and better qualified sales of $625 million and $13.2 wasn't long before he had his individuals. For the Skaggs million net income last year. sons out sell ing extra case lots to organization and many other large Cheaper by the Dozen neighbors. Soon the fami ly retai lers, this is critical. Not bad for an organization established a small grocery store "We're tending to grow at a whose origins stem from an Idaho and later acquired various other rate where we can 't raise up farmer and Baptist minister's stores, including a small chain in people inside of the company fast supper table. L. S. Skagg's California named Safeway. Ulti­ enough to meet our expansion grandfather raised six sons and mately. the six brothers, and by and maintain the quality that we six daughters and could have marriage several of the sisters aim for, " says Skaggs. "Individ­ coined the phrase ''cheaper by also, spun off of the original firm uals with an understanding behind the dozen. " He bought case to organize or direct many of the

26 major retailing companies in the West, including Pay Less, Long's, Sav-on, Safeway, and Skaggs. It was L. S. Skaggs, Sr., one of those six sons, who 37 years ago started what is today the second largest drug chain in sales in the nation. After his death in 1950, his son, L. S. Skaggs, Jr., took over the company with one of many formidable goals in mind­ he was 25 and wanted to be number one. Back then, Skaggs decided that the competition was not going to change his plans, and today Walgreen's can expect to This 1940s forerunner to today's Skaggs drug centers was part of the Pay Less Drug chain. hold the top spot by dollar sales Skaggs Companies, Inc. has 248 stores and annual sales in excess of $625milllon until 19 81. At that point, Skaggs, Jr., will have made good his self­ challenge. But a company whose earnings were up 32 percent last year (and profits increased 39 percent and 57 percent in 1974 and 1973, respectively) isn't going to let the cash registers get dusty. In fact, investment banking com­ pany Kuhn, Loeb and Co. reports that drug chain sales " will grow at perhaps two times the industry rate. Furthermore, a few of the larger chains should grow at as much as twice the rate of all drug chains. " During the past five years, Skaggs' sales have jumped 95 percent, and income during this time has increased 158 percent. ment further indicates the com­ Through this institute, the Univer­ Skaggs Companies, Inc., is the pany's willingness to support ad­ sity intends to provide significant largest Utah-based corporation ministrative and leadership train­ leadership and research for the in the state. The company­ ing for young people. In addition, retailing industry itself. With this established Skaggs Foundation, both the University and the Skaggs program of research, executive as well as L. S. Skaggs himself, organization recognize the need training programs, and qualified, has taken an active role in com­ to bring retailing managers to­ experienced young people enter­ munity and educational develop­ gether in on- and off-campus ing the industry, retailing can ments, including major financial seminars to help them increase expect to provide new ideas, support for the University of Utah's their understanding of industry technological advances, and school of pharmacy. Backing the problems and long-range, as well skilled manpower for consumer Skaggs Institute of Retail Manage- as immediate, business issues. services in the years to come. •

:XCHANG3 FALUWINTER 1976 27 Ill CB&LLBIGB OF

by J . B. Ritchie

28 It may seem incongruous to days of struggling for survival, The assumption about deserv­ discuss the challenge of affluence of always being hungry, and of ing success is often supported by in an era of economic uncertainty. walking barefoot to school. The analogy to theological principles, As we look at our contemporary challenges of a society where but in this regard economics may world, we may be less than com­ basic physiological needs domi­ not be like theology. The Deu ­ fortable with international eco­ nate or where a frontier is being teronomic Code has a strong logic nomic instabi lity, high domestic settled are fairly straightforward. to it: work hard in keeping the unemployment, accumulation of The problems and their solutions, commandments, and the Lord vast reserves by oil-exporting while not simple, are generally promises a reward. Economics nations, no-win battles between easily recognized. has no such logic- risk and energy and ecology advocates, However, the challenges result­ change mean there is no sure and anxious computations of the ing from success and affluence are formula relating behavior and suc­ effect of congressional hearings not so simple. In traditional eco­ cess. So we begin to have trouble. on New York's financial stability. nomics the primary focus is on the First, we develop a strong sense of Looking at the issue another conservation of scarce individual competition, demonstrating that way, however, this may be the resources. But in an affluent so­ one of the strengths of our eco­ ideal time to discuss the challenge ciety, the focus is on the wise use nomic system is also one of its of affluence. Obviously, our cur­ of abundant resources, including weaknesses. We want enough for rent economic situation has us such things as skill, time, and our own or our family needs, but thinking about such considera­ knowledge, as well as money. "enough" soon means we want tions; in boom times we may be This problem is much more difficult. more than our neighbors. This in­ too busy investing and spending The "American Dream" centive to get ahead naturally our money to reflect on the value The push tor affluence, clearly leads to more progress, but considerations of affluence. an overpowering goal , has always progress always has its costs. Furthermore. perhaps the major been seen as a possible means of How prepared are we to really source of our current problems can undercutting the family and calculate these costs? be traced to our attitude regarding attacking worthwhile values. Most For example, several years ago "our right to affluence. " For of us begin to have trouble with I made a decision to enter the example, the energy consumption our values when we cross the academic world. I made that rate in the United States - about threshold from " barely making it" decision for a number of reasons, 6 percent of the world's population to "almost having it made." one relating to the flexible sched­ using over 50 percent of the For example, we begin to be­ ule it would provide with respect energy consumed each year­ lieve that we deserve to do well to summer activity. My wife and I has to be seen as a type of index of social and economic attitudes. Therefore, this may well be a most relevant time to examine our We want enough for our own or our attitude toward affluence. I wou ld argue that we act as if we were familJ needs, but "enough" soon means living in an affluent society, and we want more than our neighbors furthermore, in most respects we are living in an affluent society. We symbolize well-being with new cars and large homes, braces on financially. The'' American Dream'' had decided we wanted to spend our children 's teeth, color televi­ suggests that if we commit our­ time as a family traveling, camp­ sion sets, boats and mountain selves to being successful and if ing, and enjoying the outdoors. cabins, skis and ten-speed wewo~ha~ . ~enwed~erve~ Th is was a conscious decision. bicycles, and contributions to make it. But reality says that, in But occasionally, and often without charities. addition to commitment and hard realizing it, I find myself computing In short, in spite of current work, for many of us it may be that the additional potential income I problems, we are surrounded by having the right skill at the right would receive from accepting the symbols of affluence. Most of time and in the right place is also opportunities that wou ld require us are very much a part of a so­ important in determining economic giving up family activities. Then I ciety that has gone far beyond the success. really have to force myself back

:X.CHANG3 FALUWINTER 1976 29 to my basic assumptions. I made manage corporations to suit them­ First, some of us may need to a choice in order to achieve cer­ selves. Thus corporate calamities abandon the idea that the Lord tai n goals that I valued more highly are created by men. And ... the has promised us great wealth. If than others. I could have made a basic cause of the business we live righteously and do the best different choice, but I did not. But disaster Is greed, human greed, we can , the Lord has promised we unfortunately, most trade-offs are simple and unadulterated. (p. 292) will have enough to care for our gradual and unconscious to most needs. But his determination of of us. Keeping Up with the Joneses what is " enough" may be different One problem is that pursuit of Problems with values, of course, from ours. affluence may lead us to dis­ are not limited only to those who content over contributions we can have great wealth. The most Remove far from me vanity and make to society. It may lead us to serious problem is often with those lies; give me neither poverty nor prejudge contributions of our­ who are only marginally well off. riches; feed me with food con­ selves and of others, and it may One of the most common diffi ­ venient for me: Lest I be full, and affect values by forcing us into culties faced by most of us is deny thee, and say, Who is the contradictory or inappropriate " keeping up with the Joneses. " Lord? or lest I be poor, and steal, ordering of priorities. There was a time when the and take the name of my God in In both sacred and secular Joneses were pretty easy to keep vain. (Proverbs 30:8-9) writings we find many comments up with. Most of our associates, If we obey his commandments, regarding wealth, some condemn­ like nearly everyone else, were in the Lord will bless us. But that ing and some consoling. The about the same economic class­ does not mean he will bless us condemning part is related to the a class that had to struggle for with more than our next-door high probability that those who basic survival, not for luxuries. neighbor. In fact, he may bless us seek worldly wealth and recogni­ Great wealth belonged to the with less. tion will become corrupt in the Rockefellers, the Morgans, and Second, we need to consider process. the Vanderbilts. Those who were the way we make money. Most Money and position are a means really rich were too far removed people earn a living by selling to the exercise of power in our from most of us to present much their labor, or goods produced by economic system. Recent busi­ of a challenge. But now the con­ their labor, to others. The sub­ ness scandals suggest that there spicuous consumers are next sequent possibility for exploitation is very high for both the buyer and the seller. Employee integrity in performing a job and employer leariJ ever,bodJ has an upper-elass integrity in dealing with sub­ ordinates are both threatened in "Jones" to keep up with. That ean contemporary organizations. The become a ver, destructive game cry for honesty should be loud in an affluent society. Third, the express goal of making a lot of money so we can " help others" or promote "a good are many individuals exercising door. Nearly everybody has an cause " is a dangerous one. While " unrighteous dominion" in order upper-class "Jones" to keep up this may be a result , means and to achieve and maintain their with. That can become a very ends have a strange way of be­ economic position. They exploit destructive game. coming confused. The more ap­ others by various forms of control Our consideration so far has propriate commitment would seem or even by setting up unreason­ been with problems each indi­ to be to a life in harmony with able expectations which others vidual should be aware of in an divine principles. Then, if circum­ are unable to attain. A book en­ affluent society. Because of the stances and our best efforts result titled Great Business Disasters potential dangers, it is imperative in wealth, that wealth can be used (Barmash, 1972) puts the issue as that each of us identity the means for a good cause. Becoming rich follows: of keeping our values in order in order to better live a Christlike Corporations are managed by while pursuing economic achieve­ life or living righteously in order to men; and men, never forget, ment. become successful or rich illus-

30 benefits that affluence can provide are the time and resources needed to really enjoy those things that have always been ours - nature, We act bJ choice rather than family, and our fellowmen. bJ necessitJ and are therefore Of course, one of the most discussed contemporary issues more accountable for our actions related to affluence deals with the use of natural resources. Respect for our total environment is a condition necessary to maintaining !rates the very essence of the pline requires self-imposed rather any of the benefits of affluence in "right thing for the wrong reason." than external standards and the future. The most significant Those who become successful control. We need to know more benefit of affluence- the oppor­ and live honorably provide useful so that we can intelligently analyze tunity to choose among many evidence that the two are not the increasing number of alterna­ alternatives- is clearly con­ necessarily inconsistent - a very tives wh ich present themselves to strained by our utilization of important lesson. us. We need to make choices current resources. more carefully because with Also, in order to justify itself, I The Struggle for Luxuries increased opportunity to make would argue that an affluent Whi le there are ways individuals good choices comes the society may have to commit itself and society might compromise increased chance of making a bad to increased support of the arts. their values, let us explore some choice and suffering the con­ Good music, drama, literature, and components of a positive social sequences thereof. The burden dance have great potential to lift attitude toward affluence. of affluence carries with it the us to a more noble view of our­ We are free from the struggle burden of more enlightened selves and others. It is interesting for survival, although it has often decision-making. to note that throughout history, all been rep laced with the struggle Another dimension of affluence societies, both primitive and for luxuries. We have education, is strongly rooted in the universal sophisticated, even in times of health care, and the time and re­ ethic.of loving your neighbor. If struggle, channeled substantial sources to serve our fellowmen as we have the resources, we ought resources into culture, art, and we have never had them before. to use them in the service of our education in addition to the crea­ Affluence has brought new oppor­ fellowmen. A variety of things can tion of capital. tunities to learn and expand. A be done for those not prepared to While many yearn for the " good new attitude toward education is cope with the world or for victims ol' days," it is worth noting that the reflected in an increasing number of misfortune. Endless oppor­ goal of people who lived then was of current students of all ages. tunities exist to help people to achieve the very opportunities Rather than just a means to a job, through difficult times and to try we now have. They had little they see education as a vehicle to to assist them to a more meaning­ choice in their decision about help them appreciate life, under­ fu l life. Our affluence also forces what was important; our affluence stand their fellowmen and the us into a larger world in many has given us the opportunity to world, and make them better respects. Our narrow geographi­ select among many alternatives. parents and citizens. In short, cal boundaries give way as travel We act by choice rather than by education can provide the and communications bring al l necessity and are therefore more potential for living a good life mankind close together. Our accountable for our actions. rather than just an avenue to definitions of brother and neighbor The question, in the current making more money. expand to a global concept. setting, is whether we are wise As we are freed from the purely enough to use our resources to physical struggle for existence, we Real, Not Fringe, Benefits facilitate rather than to hinder miss the discipline that comes to Many young people have criti­ providing the greatest good for those who survive the conflicts. cally examined our affluent culture our fellow human beings. Such We must replace that physical and have reminded us, often provision may not be easy, but it discipline with a mental and poignantly and sometimes in demands our best effort. This is spiritual discipline. Such disci- bizarre ways, that among the real the challenge of affluence. •

:xcHANG3 FALL/WINTER 1976 31 Understanding the ORGANIZATION or How I Spent My Summer Vacation by Paul D. McKinnon

Illustration by Brent Burch al low every organization to operate easily, effectively, and efficiently. Much work was devoted in the early part of this century to discovering those precise rules. Although the view of As this century progressed, however, it was shown that such organizations or rules and such a view of the study individuals as being of organizations were inadequate rational has changed, in that they did not accurately some people continue reflect the way things were. Al­ to think that though the view of organizations somewhere, somehow, or individuals as being rational has changed, some people con­ a given set of rules will tinue to think that somewhere, be discovered that will somehow, a given set of rules wil l ensure business be discovered that will ensure organizations of efficient operation for business efficient operation organizations. Some business­ men, for example, continue to seek a certain "right way" of running their business just as they seek a "right way " of handling the people in their organizations. Such was my thinking during one year of study in organizational behavior. After fairly intensive One of the easiest ways to en­ indeed understandable. classwork and reading, I felt that I vision organizations is to think of Early organizational theorists had a good understanding of how them as machines or precisely had the same type of feeling about organizations operate. Yet my runn ing instruments, things that organizations and bureaucracies. assumptions about organizations operate by a given set of pre­ People, again, felt that bureau­ were of the same type as those dictable ru les. If something goes cracies were rational. Somehow, held by seventeenth and eigh­ wrong, you just fix it - like re­ they should operate according to a teenth century scien tists. I felt that pairing a flat tire so that the car given set of rules. The study of organizations were giant machines, runs just as well as it did before organizations wou ld lead to the that they operated according to the flat. This is similar to the think­ development of a certain set of certain well-defined rules, and in ing of seventeenth and eighteenth hard-and-fast ru les that would order to understand organizations century scientists who felt that the you simply had to learn those world operated on a given set of rules. In short, I felt that I was rules and that true science or true ready to face some "real world" scholarship was discovering those problems. rules; by finding those rules, you At this time I was given the op­ could determine the course of the portunity of working for three universe. Later discoveries and months in a company as a summer further increases in knowledge led intern. My role, or my title anyway, to a new definition of science. This was that of consultant. At least new definition accounted for new that 's what I was call ed . The com­ complexities in the world and pany that I worked for was a allowed that, although the large, oil-related industry pro­ world didn't oper­ ducing tools, equipment, and ate according to a chemicals. I worked for a sub­ given set of rules, it was division located in a large city in the South. The mai n problem in how anything related to what I had ing to replace the same part. the organization, as they defined learned in my first year. In fact, it you 're almost destined to fail. So it, was the very high annual turn­ seemed li ke I was no better pre­ organizations become vastly more over for lower-level employees, in pared after one year in the organi­ complex, and so do problems. It some job classifications up to zational behavior program than I may not take more effort (although 100 percent. This wou ld not be would have been had I been in the most of the time it does) but the too serious in organizations where same position a year before. After methods of deali ng with these the lowest level is comprised of a short amount of time, I had all complex problems are totally unskilled workers who can be but abandoned any conceptual, different. In fact, the model of an easi ly replaced. In this company, theoretical understanding of what organizational change agent is not however, the lower levels were I was doing and more or less just one of a mechanic who can tinker highly skilled. In order to perform " winged it" on my own. I did a lot with parts or replace them. Instead and to compete, these employees of interviewing , but I really didn't this individual becomes more of a had to be well qualified in elec­ see any implications with theory. politician, someone who is willing tronics and, in general, knowl­ My main problem at this time to work with people and make sure edgeable about the oil industry. was attempting to make the organi­ that the proposed changes are When they hired me, they asked zation fit into a predetermined acceptable to the right people. if I would determine the reasons scheme- a rational, clear-cut, The value of any change as deter­ for the high rate of turnover, and very impersonal system. Now, mined by those within the organi ­ recommend what should be done, all of a sudden, I was dealing with zation wi ll be substantially different and suggest some things that people. The things that I did than the value of that change as could be changed. They wanted hadn't worked the way I had ex­ determined by someone outside. to find the parts of the old machine pected. Those with power in the organiza­ that were broken or worn out and After two months, maybe even tion must see the value of any no longer working. The company three months, I began to see a new given change in order to insure hadn't had a real problem in the conceptual scheme. I also made success. past, but in the last three or four several discoveries. It became very clear to me at the years the turnover rate had be­ Organization is a process­ end of my internship that people come increasingly worse. not a unit; it is something people are not simple and, likewise, or­ To me, it seemed like a very do. They combine together and ganizations are not simple. People clear case. I would go out and do form a system. They all give have self-interests, and regardless a lot of interviewing- talk with as something and they al l get some­ of how good or bad suggestions many people in these job classifi­ thing in return. People comprise are, the likelihood that they wi ll be cations as I could; talk with as organizations and people operate implemented is determined by the many managers as I could; and out of self-interests. In order to perceived value of the change by talk with as many top-level people understand organizations, you those within the organization. as I could. Then I would put all have to understand what it is that As I ended my internship and this information together, know the people are getting out of the presented my final report to some reasons that workers were quitting, organization. The value of the very high-level people in the and present those reasons to the rewards that they are receiving organization, I was told it was head of the organization. He, in helps determine how they operate authentic, it clearly identified turn, would take those sugges­ within an organizational setting. issues, and it presented some very tions, consider them, and, if he Since organizations are people, good recommendations that believed them good recommenda­ people who combine to do some­ would clearly help the organiza­ tions, would implement them. thing for an outcome of what tion. I walked away thinking, "All At the outset of the project perhaps is considered a common right! I really did a good job." everything seemed very clear, good, then organizations can- . But the report at that point was almost simple. Arduous perhaps, not be considered machines fi led , put on a shelf, put in a box, but in scope iMeemed very simple. where you can replace one little put somewhere, but never looked This tied in very well with my view part with something else. That at again and never considered. of organizations. one person you replace may be In defining, writing, and presenting Yet as I got more involved in the key individual and the whole recommendations, I really hadn't my study of the company, it system falls apart at that point. looked at some of the political seemed like nothing that I had There are no exact replacement angles. I hadn 't considered power. learned applied. I couldn't think parts. In fact, if you keep attempt- I hadn't considered who was

34 It was about this time in my thinking that I began to wonder whether there was actually a field of organizational behavior, or whether it was just a matter of correctly playing politics. I won ­ dered why you should study or­ ganizations if there were so many variables, if things didn't really Organization is a operate according to a pattern. process- not a unit; At th at time, I began to reflect it is something people back on those things that I had do. They combine studied in my first year and had together and form a continued to study. And I drew some conclusions. I realized system. They all give that organizations are not in­ something, and they all decipherable or alien. They do get something in operate according to reasonably return consistent patterns. Many organi­ zational theories that have been developed in the last 10 to 15 years go a long way in explaining how organizations actually oper­ ate. This , I feel , is what the field or organizational behavior can con­ tri bute - theories and stud ies of organization. Theori es have often been written off as impractical, as good for actually going to implement the middle-level bureaucrats of its university studies but not for any­ changes. I made some rather usefu lness. As a result, the de­ thing else. However, theori es are impersonal recommendations velopment of radar was carried able to account for many that everyone agreed were good, out quickly, passing through the variables, including some that but at the same time they all proper channels without delay so may not be readily apparent to understood that nothing would be completed units could be installed those actually in the situation. done about th em . Just because a for the Battle of Britain . Theories also give direction to suggestion is good, it doesn't According to a classic bureau­ those trying to understand their mean it's going to be implemented. cratic model, decisions and ef­ position in the organization, and to You have to do a political sales­ fectiveness should not be deter­ recognize why things do or do not job in order to get anyth ing done mined by lower-level individuals. happen. in any organization. But you need only reflect on your Those tryi ng to understand I then began to formulate a own experiences in large organi­ organizations as being very ra ­ different strategy of studying or­ zations to see the truth of what tional and machine-like will find ganizations. An example that I Snow was talking about. In order frustration. What is happening in came across further developed to understand how and why an reality will not correspond with my thinking. C. P. Snow in his organization operates, you have to what they think should happen. series of lectures entitled " Science know what is meaningful for those Just as early scientists were of Government" described the inside the organization. This eventually forced to abandon in­ efforts to q.jevelop radar at the creates disadvantages for the accurate assumptions regarding outset of World War II. He noted external consultant because he the nature of science, those seek­ that the developers of radar were really can't understand the value ing understanding of life in organi­ able to push it through gov­ system of those with in the organi­ zations must abandon some rather ernment red tape not because of zation. It also poses problems for traditional assumptions about how top politicians' support but rather the boss trying to control others people operate in organizational because they convinced the from a distance. settings. •

:xcHANG3 FALU WINTER 1976 35 MINDING YOUR BUSINESS .... THEAUDI10R

by Jay M. Smith

What has happened to the argue that this philosophy leaves companies to report payments in­ ethics of America's b'usiness and everyone the loser. As more dis­ tending to influence, directly or government? Both in America and closures come to light, questions indirectly, foreign government abroad newspapers bring to light are raised: Who should decide officials. new disclosures of Americans in­ what is moral in business and At the same time many busi­ volved in questionable ethical and government? Is it the people at nesses have initiated conflict-of­ moral behavior. Government the marketplace and at the polls? interest policy statements or en­ leaders are charged with sexual Should government agencies be forced those already in effect. At promiscuity, expense-account responsible to police their own least publicly, they agree that some padding, accepting kickbacks, house as well as American busi­ changes are necessary. The pri­ offering bribes, and using tapes to ness? Or should the control come vate sector has another voice ad­ blackmail. Corporations have from the private sector itself? Can dressing this problem- the acknowledged foreign payoffs, American business restore order certified public accountant, who ill egal political contributions, and to its house? serves the business and financial manipulation of financial state­ Government Views Morality community as an independent ments. Americans are not the only It is clear that the government is auditor. Many CPAs are hesitant ones involved in such activities­ moving into the ethics area. When to become involved in this area, or even the most flagrant offenders the Securities and Exchange but as questionable activities im­ - but the American image, with its Commission asked corporations pinge upon financial statements, emphasis on freedom, democracy, to voluntarily disclose any illegal they find themselves drawn into and high ideals, implies that more or questionable payments made the controversy. No longer can should be expected of its citizens. abroad, more than 100 companies the rationale of materiality protect Although there seem to be responded with public disclosures the auditor from determining ac­ immediate outcries at each new of such payments, some clearly countability when an audit is disclosure, business tends to material to the resources of the performed. rationalize its position and go back company involved. The Internal Out of the Dark Ages to its daily routines. " It's just part Revenue Service has proposed a To better understand the alter­ of doing business," many execu­ detailed questionnaire to be an­ natives facing the auditor, it is tives claim. " You can't operate swered by corporations to deter­ necessary to trace the major profitably in many societies unless mine if illegal deductions have changes in his role over the past you participate in the same finan ­ been included on their tax returns. centuries. Audits began during the cial games that other countries President Ford has asked for feudal period in Europe when the play. " Yet some businessmen additional legislation requiring lords of the manors would hire an

36 Illustration by Ron Eddington individual to public ly read trans­ cannot be relied upon to disclose been found guilty. In most of them actions. The subjects, few of defalcations and other similar ir­ the court has held that the auditor whom could read, would have a regularities although their dis­ did not adequately perform his chance to hear the report and covery may result. function in detecting serious either accept or reject the results. manipulation of the financial Public Expectations As one historian wrote, "To audit statements. The defense, in indi­ Even though the auditor openly is to hear whatever may be said on cating that the auditor followed denies responsibility for the moral the subject in hand, with a view of common audit practice, failed to activities of his clients, the public passing judgment generally ap­ persuade the court. For example, continues to believe the indepen­ plied to the examination and in the first major criminal trial in­ dent audit report gives some as­ passing of accounts by persons volving an auditor, the Continental surance against fraudulent ac- denominated auditors." If the Vending Co. case, the major de­ peasants felt someone had his fense argument involved pro­ hand in the till, they would fol low cedures which experts claimed th rough and eliminate the problem Carefully were not required by the profes­ if they had sufficient power to do sion. But the court held the so. concealed fraud auditors to a higher charge and It was probably these early found them guilty. According to experiences that led auditors not the courts, the standards applied only to examine the overall position and collusion were not representative of what of the company, but to actually the general public expects. look for fraudulent entries and ac­ are difficult Auditors Look at Themselves tivities. Many wou ld-be thieves It was in this environment that in were suppressed by the threat of to detect October 1974 the auditing pro­ discovery. But as societies be­ fession, under the direction of the came more complex. no longer AICPA, sought to establish the re­ were detailed reviews of all busi­ even with sponsibilities of the auditor. Was ness transactions possible or even the auditor filling the role expected desirable. Creditability of fi nancial sophisticated of him by business? By govern­ statements was sti ll important, but ment? By the public? If not, what it had to be achieved by audit auditing tools changes would be necessary to techniques that permitted test better meet these expectations? checks of the detail, evaluation of The AICPA study is not yet con­ the internal control, and overall tivities in the company. In an cluded, but a li st of concerns has review of the summarized data's extensive survey of financial ­ been published, and the question soundness. The detection of statement readers, it was dis­ of responsibility for management fraud, whether by employee or by covered that 66 percent felt that fraud and questionable business management, was accepted as a detection of fraud was the auditor's activities is one of the more promi­ secondary function. Instead, number one responsibility. How­ nent issues. primary emphasis was placed ever, legal liability issues have The fact that great differences in upon the auditor's report and its caused the auditor to be leery of views exist among auditors was announcement, " These statements assuming additional responsibility revealed to the author when he fairly present the financial position in this area. Even without accept­ conducted a research survey of and results of operation for the ing the role the public thinks they audit partners of several national periods indicated." This attitude shoul d, auditors have not fared CPA firms. The partners were is captured in the current state ­ well in the courts. Case after case given a case study involving a ment of auditing standards issued involving both civil and criminal company distributing semifinished by the American Institute of charges have been brought and fin ished boats. The semi­ Certified Pub ~ic Accountants against both large and small CPA finished boats were distributed to (AICPA): firms. Many have been settled out another company that finished and The ordinary examination directed of court. In cases involving court sold them. The company involved to the expression of an opinion on action many of the auditors have in th is activity was completely financial statements is not pri­ been acquitted. But in several owned by six officers of the manu­ marily or specifically designed and landmark cases the auditor has factu ri ng company- a company

38 whose stock was fairly widely sold. in more specialized areas. how a balance must be reached as The sales prices for the semi­ Passing a rigorous two-and-a-half to a reasonable liability to place finished boats provided little profit day examination is needed to upon the auditor. This same situa­ for the manufacturing firm but qualify as a CPA. Ongoing train­ tion faces other professionals, i.e., allowed considerable profit to the ing programs are conducted by doctors and lawyers. If some re­ distribution company. The audit national CPA firms as well as by striction on their liabili ty is pro­ partners were asked what respon ­ the AICPA. Audit techniques have vided auditors. they may be more sibility, if any, the auditors would been streamlined and designed willing to assume additional re­ have to detect and disclose this for computer assistance in per­ sponsibility as the conscience of relationship. Responses varied, forming the audit function. This America's business. but on the whole most partners in ­ streamlining includes expanded Cleaning House terviewed did not feel the auditor Ultimately business must clean had any special responsibility to its own house and establish its detect or disclose this type of re ­ own standards of morality. Based lationship, even though the out­ Ultimately on the events of the last several side shareholders of the manu­ years there is no assurance that facturing company were being business must today's government can success­ hurt by the relationship. The re­ fully control morality or that it spondents emphasized that should determine what moral auditors cannot be the conscience clean its own standards must prevail. Every of America's business. effort must be made to keep such A Voice of Conscience house and control in the private sector. Edu­ But the auditor is in a unique cation for businessmen and ac­ position to act as conscience, and establish its countants must address the topic he should do so. Though the with the hope that a common pos­ client pays for the service, inde­ ture can be obtained in the private pendence of conclusion has long own standards sector. been an auditing trademark. The Auditing is entering a challeng­ profession is governed by a gen­ of morality ing area. One writer likened the erally accepted code of ethics. auditor's position to that of the Opinion differences between client oarsman in a crowded rowboat. and auditor are now being resolved Near where he sits in the boat, the more successfully through audit use of statistical sampling tech­ auditor suddenly discovers a hole. committees composed of external niques that allow auditors to He's not responsible for making members of the company's board statistically determine the reason ­ the hole, and he cannot be blamed of directors. Use of a separate ableness of the accounting rec­ for finding it, but he has an in­ group on the board has the auditor or9s. Many feel that these tools escapable responsibility for at­ reporting to someone who would would have uncovered the fraud of tempting to repair it. If he remains probably not be involved in any the Equity Funding case before it silent, his responsibility is as great questionable company activities. reached the massive size that as though he had caused the hole. The audit committee is usually preceded its discovery. And maybe, just maybe, the state­ given the responsibility to interface Despite these attributes, auditors ment made to the author 20 years both with the independent outside have been reluctant to accept an ago is no longer true. When I auditors and the internal auditor. expanded role. Carefully con­ questioned a fellow army auditor The auditor is also well qualified cealed fraud and collusion are concerning business practices he technically to perform an expand­ difficult to detect even with sophis­ was condoning, such as under­ ing role in this area. In most ticated auditing tools. If the audi­ the-table sales, he said, "Jay, states, entrance to the profession tor accepts some responsibility in you'll never be successful as a requires either a bachelor or a this area, will the public demand CPA. You 're too honest. " All of us master's degree in business. with infallibility? Will this expectation can speak up more forcefully for an emphasis on accounting skills. be taken to the courts where an moral values. and it is time for the In integrated university accountin·g impossible standard may be auditor to assume much of this programs, students are trained in imposed to the financial detriment responsibility in today's business broad business subjects as well as of the entire profession? Some- environment. •

:xcHANG3FALUWINTER 1976 39 :XCHANG3 TAKING INVENTORY Keeping the Numbers Straight It's still possible to sell your birthright for a mess of pottage, especially if you are an accountant • with flexible ethics. Accounting students are looking • at some professional pitfalls in a new class offered this fall by the Institute of Professional Accoun­ tancy. The course doesn't intend to remold principles but examines some of the " grey" areas en­ countered on the job. Men such as IBM's Thomas J. Watson, Jr., GM's Alfred P. Sloan, J. C. Penney, George Washington LBSS IS IIOBB; SPBBD IS PO\VBB Carver, Thomas A. Edison, and Henry Ford and their philosophies For 50 years the success of Working with Christensen have are examined by students. Case many executives, as well as been BYU faculty members Ted D. studies. as well as lectures from secretaries, has depended on Stoddard and R. DerMont Bell, legal, government. and accounting John Robert Gregg's system of both of the business education professionals, are also included shorthand. But The Wall Street department, and Mary Ellen in the class. Journal writes, " Now Gregg and Oliverio of Columbia University " The students gave ideas for [publisher] McGraw-Hill face a and Berle Haggblade of California the problems they foresee in their challenge- a shorthand State University, Fresno. careers in the area of ethics," originated by Edward L. Christen­ Taught in all 50 states and said Karl M. Skousen, professor of sen, professor of business man­ overseas, Century 21 shorthand accounting and course instructor. agement at Brigham Young was first offered at BYU in 1962. "We're looking at very practical University." After continued research and situations. The students are re­ The Journal explains that " a modifications, the system was solving individually to set stan­ computer analysis of the English marketed nationwide in 1975. The dards that they won't compromise. language helped develop Century method has been widely adopted They also study the professional 21. The analysis determined the by universities, junior and com­ ethics of the American Institute of most frequently used alphabet munity colleges, and high schools. CPAs. " letters, words and phonetic.com­ In its promotional material Above all, each student states binations. It also determined the South-Western emphasizes com­ his own views in papers on such directional flow of the longhand puter involvement in data process­ topics as: the importance of writing most Americans employ. ing of vocabulary, numbers, ethical behavior in discharging The results, rpublisher] South­ phonetics, and frequencies in contractual liabilities to clients; Western says, is a shorthand word beginnings and endings. trends in court cases and the ac­ incorporating large parts of Gregg The company is marketing texts, countant's liability to third parties; while eliminating its incon­ tapes, charts, and self-paced what it means to be a "profes­ sistencies, idiosyncrasies, and learning manuals of the Century 21 sional"; and the student's per­ other 'glaring shortcomings. ' " method. sonal code of ethics.

40 INTEREST AND PRINCIPAL

Every university appreciates ment courses, and the need to chairs, reference material, and the support of professionals­ continue recruiting outstanding scholarships. While each NAC especially when it adds up to $1 students and faculty members. " member has pledged his financial million. Sears, senior vice-president of support, these individuals will When the National Advisory Phillips Petroleum Company, has also be helping the school raise Council of the College of Busi­ met with NAC members for ses­ money from other sources for its ness/Graduate School of Man­ sions in New York, Los Angeles, development program. " agement held its annual meetings and Salt Lake City since the The National Advisory Council last November. the 70 members meetings last fall and found both members, all of whom are leading voted unanimously to donate $1 their moral and financial support officials in either the public or million to the school. overwhelming. private sectors, are contacting " The National Advisory Council "I sincerely feel the National individuals and businesses to ask members themselves came up Advisory Council is committed to their support of the school 's goals. with the idea to raise $1 million serving the graduate school and In addition, the NAC members over the next five years.· · said college. " says Sears. "The new help with job placement and in­ Robert N. Sears. NAC chairman. management building alone will ternship programs, counsel ''They saw the inadequate cost $12 million and additional students regarding professional facilities. the increasing enroll­ funds are needed for academic goals, attend seminars. and ar­ ment in business and manage- programs, research, endowed range for campus speakers.

the J. Fish and Lillian F. Smith Kindleberger is also the author Looking to Chair of Economics at BYU this of Europe and the Dollar, Ameri­ winter. He will lead a series of can Business Abroad, Economic Developments seminars for students and faculty Growth of France and Britain, members as well as address the 1851- 1950, and The Interna­ in Economics studentbody at large. tional Corporation. One reviewer has written, A former research economist Markets for goods, sources of "Kindleberger's The World in for the Federal Reserve Bank of supply for materials and invest­ Depression is the best book on New York and Bank for Interna­ ment outlets, and population the subject, and the subject, in tional Settlements, Kindleberger pressure (if trading opportunities turn, is the economically decisive has served as a consultant to the exist and domestic full employ­ decade of the century so far." Treasury Department, Department ment is maintained), are excuses of State, and President's Advisory tor imperial adventure leading to Committee on International war, not causes. The causes lie Monetary Arrangements. in the drive to domination or the He was appointed professor of breakdown of the balance-of­ economics at MIT in 1948 and power equilibrium. served as Chairman of Faculty Charles P. Kindleberger's state­ from 1965 to 1967. Prior to join­ ment from his book Money and ing MIT, he was chief of Division Power is based on consulting, of German and Austrian Economic research, and writing on economic Affairs. Department of State. development, international Having received his Ph.D. from monetary relations, and European Columbia University, Kindleberger economic history. Currently Ford was awarded an honorary doc­ Foundation Professor of Econom­ torate from the University of Paris ics at MIT, Kindleberger will hold in 1966.

::xcHANG3 FALUWINTER 1976 41 relatively simple theoretical model," added Wimmer. Smith drew examples covering the years 1350 to 1 750, taken from such exotic locations as Calcutta, Acapulco, Sicily, the Yucatan, Buenos Aires, the East Indies, Siberia, and Peking. Even the index shows the na­ ture of the man and his times: beggar: " depends upon benevo­ lence, once synonymous with scholar"; cabbages: "are Y2 the price they were 40 years ago" ; gardening : "not a profitable em­ ployment" ; Lati n: "a useless smattering sometimes taught in Scottish parishes" ; and men of letters: " improsperous race. " Smith 's two central themes were also stressed by Wimmer. (1) The error in the prevailing mer- cantilist notion that economic activities among individuals and nations is a " zero sum game," meaning that wealth can only increase at the expense of another, and thus any act transferring money out of th e homeland is bad and should be discouraged (imports, capital flows abroad, etc.) and actions transferring money into the country are good and should be encouraged (pri­ HAPPY BIBTBDAY,ADAII! marily exports) by special privi­ leges, favored tax treatment, It wasn't re al ly Adam Smith's planation may be that it was writ­ bounties, etc. (2) The insistence birthday. but the economics de­ ten in English, in Great Britain, at that a system of natural liberty, partment called it a birthday party the dawn of the Industrial Revolu­ allowing each to seek his own and honored the Scottish tion, " said Wimmer. "The world interest, will not lead to chaos. economist with punch and donuts was ready for the Wealth of Na­ Instead it will expand production anyway. Actually, the 200th tions. Written 100 years earlier or and wealth, establish order, and annive rsary of the publication of in some other language, it may reduce abuses associated with Smith 's Wealth of Nations called have been viewed as an insightful special privi lege. for a student-faculty get-together relic of our ancestral past. Ironically enough, Smith spent to review the book and its impact. " With some exaggeration, it many years as Commissioner of Larry T. W,immer, associate pro­ might be said that the Wealth of Customs in Edinburgh, supervis­ fessor of economics, presented a Nations contains 50 pages of ing the enforcement and collection bicentennial tribute to Smith and analytical economics and 850 of tariffs. A week before his death discussed his book's profound and pages of examples and illustra­ in 1790, he ordered 16 volumes of lasting influence. " A partial ex- tions as empirical tests of his unfinished manuscripts destroyed.

42 A Winning Way with Words No longer is business alone in facing the barrel of a ready-to­ blast shotgun- the subject of ethics. With vocal public concern on regulations, appropriations, and appointments, government at all levels is caught up in the issue of morality. Susan Wakefield, a 1976 Master of Public Administration graduate now appointed a Utah State House Fellow, believes that Plotting the Primrose (Career)Path "ultimately the answer for ethical behavior lies not in external con­ Deciding between a career in tions. The "how to" aspects of trols but in internal ones which corporate portfolio management job hunting, interviewing tech­ must be inculcated by the educa­ or new product marketing or per­ niques. and resume writing are tion process." Miss Wakefield sonnel can lead to a lot of intro­ studied. Students also participate won the top national student essay spection and, perhaps, varying in role-playing situations. award of the American Society degrees of frustration. Dalton, the author of Orientation for Public Administration. For second-year MBA students and Conflict in Careers and The "Development of the attitudes the realities of career objectives, Distribution of Authority in Or­ and qualities of character incident resumes, job interviews, and ganizations, is stressing to stu­ to ind ividual responsibility cannot follow-up letters are immediate. dents that they shou ld become be left to chance," wrote Miss Gene W. Dalton, professor of familiar with the careers of leading Wakefield. " In order for individual organizational behavior, is teach­ individuals in various management values to be a viable force for an ing a new graduate class on ca­ and business fields as well as ethical public service, rigorous reer planning and development. interview on-the-job professionals. efforts must be made to bu ild and The course involves students MBA candidates will also take strengthen internal commitments examining their own backgrounds, vocational interest and personality to moral government. Only then likes and dislikes, influential re­ tests and read current literature can individual responsibility serve lationships, strengths and weak­ on career stages and human as the first line of defense against nesses, and individual expecta- development. unethical behavior." Miss Wakefield will spend a year in the State House Fellows Program working in the offices of KUDOS TO ACCODITAITS major state agencies. She will participate in decision-making Two BYU students were among chairman of the National Society sessions with legislative and 22 chosen nationwide to receive of Public Accountants Scholarship judicial officers and executives scholarship grants from the Na­ Foundation, " It is an honor for the from business and local interest tional Society of Public Accoun­ NSPA Scholarship Foundation to groups. tants. have students of this caliber and The winning essay, "Ethics and Randall H. Walker of Henderson, overall abilities as recipients of the Public Service: A Case for Nev., and Jerald L. Martin of San the scholarship grants." Individual Responsibility," will be Jose, Ca. , were selected to receive Both students received $500 published in an upcoming issue the awards from among 814 and were selected according to of the Public Administration applicants. scholarship, letters of recom­ Review. According to Horace J. Landry, mendation , and career potential. •

:xcHANG3 FALUWINTER 1976 43 =>

"We are so caught up by the media, ... by the excitement of the news, and by the issue­ Social Critic attention cycle that each moment we are stampeded into a different problem. It becomes harder for Daniel Bell us to really understand what are the underlying structures and currents which shape a country and which shape a society." Daniel Bell is an ardent spokesman for reestablishment of culture and religion in America to link our past and present and provide direction for the future. The author of Work and Its Discontents, The End of Idealogy, and, most recently, The Cultural Contradictions of Capitalism, Dr. Bell has served on the editorial board of Fortune and is currently a professor of sociol­ ogy at Harvard. He visited BYU recently, talking to students and faculty members . . . . on a country "created by active will" A nation or a people is shaped in the end by nature, religion, and history. Mountains or plains or seas influence the variety of na­ tional character. Religion provides Puritans, implicit in the deism of hours (as against trains which had an anchorage even when people Jefferson- that through God's to take two to three days before) are uprooted. History, bound by providential design a new pattern and, of course, the revolution of the principal of inheritance, pro­ would be unfolded on this con­ communications. Television puts vides a sense of distinction and tinent, something which had not us on real time throughout the continuity. In the United States, it been seen before in the history of whole country; 144 million tele­ was essentially nature and religion the world. phones can reach every other which intertwined to form the ... on a nation becoming a phone in the country through a dial character of this country. This was national society system; and even a national the first new nation created by The point is that about 30 years newspaper, the Wall Street active will and brought together in ago, we became for the first time a Journal, comes out on the same those terms. But, lacking history, national society. We'd always day coast to coast through there were these other elements ­ been a nation. We became ana­ satellite communication. We've nature and religion. It was an tional society because of two become a national society, but one awesome expanse of land with an technological revolutions - the of the things we've failed to do is extraordinary variety of fertility. revolution of transportation which to match the scale on which Equally, at the start, there was a allowed us to go from coast to national activities function. covenant- explicit with the coast in jet planes in five to six Perhaps the best way of seeing

44 Photography by Stan McBean what's at stake here is this: from . .. on innovations' dependency Today 65 percent of every 100 about 191 0 to 1930 we became on knowledge persons in the United States are for the first time a national econ­ There's one other dimension of engaged in services. By 1980, it omy, insofar as we created na­ the post-industrial society which will be 70 of every ·100. Most coun­ tional markets and national cor­ gives it an even more radical tries are still preindustrial. Most porations. We didn't have the thrust: innovation increasingly Latin American, African, and Asian institutions to manage a national depends upon theoretical knowl­ nations are primarily engaged in economy. If you look back now edge. What you have here is extractive industries: mining, with some historical perspective at something radically new. Just as fishing, timber, etc. These are the New Deal of Franklin Delano capital and labor have been the games against nature in that fun ­ Roosevelt, it wasn 't what people major resources of an industrial damental sense. Western Europe, thought it was in their rather sterile society, so information and knowl­ the United States, Japan, and ideological debates at the time: edge are the main resources of Russia are industrial countries, creeping socialism , fading capi­ the post-industrial society. As you using energy and machinery, play­ talism. It was neither of those have a labor theory of value which ing games against fabricated na­ things. It was an effort, fumbling perhaps can explain exchange of ture. In an industrial society, you in its way, to create institutions to industrial products, you have in a have services which are auxi liary match the scale of operations: to post-industrial society a knowledge to industry: transportation, utilities, organize a Securities Exchange banking and finance, etc. The Commission to regulate financial One can try to most important cosmological fact markets, a National Labor Rela­ reorganize political about a post-industrial society is tions Board for labor bargaining, institutions, but one that, in the daily experience of and various other institutions to does not engineer a work which shapes the character of people, nature is excluded­ match that scale. As a national culture. One does not society we failed, and failed badly, people no longer work against to match those things. And one of engineer a belief. nature. Fewer and fewer people the resu lts is that the delivery of These come out of work against things. (Less than 15 services, upon which any society shared experiences or percent of the auto workers even depends, simply aren't there, out of spiritual work on the assembly line). One whether it be the delivery of mail crises .. . works with and sometimes against or the collecting of garbage or the one another- student-teacher, providing of law and order and theory of value. This is because doctor-patient, bureaucrat-client, security. The whole administrative what is created comes essentially etc. system of the society, if you will from knowledge, and knowledge . .. on character structure excuse the colloquialism, is out of is radically different in one other If one contrasts great nations whack. It makes no sense. way: it's cooperative, it's coordi­ against weak nations, it is that ... on "engineering" nated. It comes in and through unifying principal, either a moral, cultural experiences people working together in re ­ religious, or historical destiny, One can try to reorganize politi­ search and through the sharing of which is unified through the char­ cal institutions, but one does not knowledge in this fundamental acter structure of the people. The engineer a culture. One does not way. So, in that sense, we are on protestant ethic is a character engineer a belief. These come the threshold of a huge transforma­ structure which unified a mode of out of shared experiences or out of tion in the very nature of the whole work, a sanctification of work, a spiritual crises. Therefore, you world society at a time when the calling. To some extent I simply have, for the moment, a shaky rest of the world is struggling to make this as a sociological ob­ balance between a society trying organize itself politically and even servation: the strength of the to better manage its economy, to come on "economic hill." Mormon Church is that it still inte­ seeking a better sense of justice in . .. on people vs. nature; grates a character structure with a its polity, and its growing uneasi­ people vs. people belief system. But throughout ness about what is going on in the We have become an increas­ most of American society there is underlying elements of its cu lture. ingly service-oriented society. no such integration. •

:xcHANG3 FALUWINTER 1976 45 :XCHANG3 COMMENT THB PARALYSIS OF PBSSI.IS• by Gene W. Dalton

O ne of the paradoxes of modern judged by historical standards, our history is that the United States. society has progressed from an after producing and living under agricultural society to an industrial an economic and political system society to what our economists which has led the world for a and sociologists have come to century of unprecedented prog­ breathlessly call the post-industrial ress , has arrived at a point of society. The largest part of our resigned pessimism and despair work force has been freed about that system. from the tasks of pro­ Under this system, the United ducing food or goods States led a revolution in agricul­ to performing services ture and the production of food and generating and pro­ that has permanently transformed cessing new knowledge the world. Through the efficient and information. Under the application of modern tech ­ system we have led a revolu­ nology - the cotton gin, tion in communication and in- the grain harvester, improved formation transmittal beginning seeds, etc. - the United States with the mass applications of the has moved from a position where telegraph, telephone, rad io, 90 percent of its productive man­ motion pictures, television, satel­ power was required to feed itself lites, computers, microcircuits, to the point where less than 6 per­ and microfilming. Transportation cent not only feed the nation but has undergone a no less dramatic export vast quantities of food. shift through the exploitation of It then moved us through an era the internal combustion engine in where, through the use of auto­ the automobile and the jet turbine mated energy (electrical energy, engine in the airplane. In the automated and computerized con­ process, the nation has moved to trols, etc.) only 23 percent of our a position where annual income work force is required to manufac­ per person has risen to an average ture the vast array of goods we of over $3,500 while most of the use and export. world's population is struggling to In an incredibly short time, increase average per person in-

46 Illustration by Harvey Cusworth comes above $200. And in almost The sense of resignation has Religious Beliefs and all of these changes, America's also begun to show itself among Business Systems business organizations played the businessmen. This spring I During my study and discussion leading role. interviewed several chief executive about the future of business this The Pessimism officers of some of the largest last year, I became convinced that Yet, today we find many of corporations on the West Coast those of us associated with or America's most influential writers and found degrees of the same interested in Brigham Young anticipating the decline and pessimism about the future of our University have a role to play collapse of the system under business system. One board because of the view of history which we have produced these chairman and chief executive of a which our convictions give us. An achievements. Robert Heilbroner corporation listed in the "Fortune analysis of the economic and in his recent books, The Human 500" talked at length about the political systems in this country Prospect and Business Civilization increasing demands being placed indicates they were clearly shaped in Decline, describes the "in­ on our institutions to provide by the religious views and values evitable" demise, al ready well security for individuals. After of their creators. As Weber has advanced, of our business system. describing his expectations of pointed out, the " spirit of capi­ He foresees as its replacement a governmental efforts to meet these talism was present in New England "tightly controlled society where demands and to force business to before the capitalistic order. " the traditional pillars of capitalism comply, he resignedly fo recast The most notable feature of -the legitimacy of private something very similar to Heil­ Adam Smith's Wealth of Nations, property and the operation of the broner's "tightly controlled so­ from the point of view of its de­ market mechanism- have been ciety" run by state planners and parture from previous economic amended beyond recognition." the demise of our business thought, is the doctrine of He describes what he views as system. " natural liberty. " Smith and most the relentless forces of history by Nor is the pessimism restricted of his readers believed that "man's which "the driving force of capi­ to those forecasting the future of self-interest is God's providence." talist entrepreneurs will have been our economic system. Jacob Equally central was the value of replaced by the carefully super­ Bronowski's famous television individual responsibility. Religious vised calculations of state plan­ series and subsequent book The convictions of that day taught that ners. " The latest book of Michael Ascent of Man concluded with the each individual had a "calling" to Harrington, whose book, The statement, " I am infinitely do the work of the world. Labor Other America, played a central saddened to find myself sur­ was not merely an economic role in arousing America to the rounded in the West by a sense means but a spiritual end. Often "war on poverty, " is entitled Twi­ of terrible loss of nerve, a retreat this sense of individual respon ­ light of Capitalism and is dedi­ from knowledge." sibility is described as the cated to "the fu ture of an almost It is ironic that when most of the Protestant Ethic. But Irving Kristol forgotten genius: the foe of every world is struggling to achieve the has recently noted that what is dogma, champion of human free­ freedom from want already at­ described as the Protestant Ethic dom and democratic socialist­ tained by the United States, when is very much present in Jewish Karl Marx. " Norman McRae, the world is faced by the need to religious thought and the behavior deputy editor of The Economist, find a new source of energy (the that flows from it. Other writers notes his concern that "Americans type of pursuit for which America have commented on its rise in on the eve of 1976 are showing is best equipped), we find our­ American Catholicism in recent the same drift from dynamism as selves troubled by a loss of faith decades. the British did at the end of their in our institutions. The most This close connection between century in 1876." Schumpeter, disturbing thing to me, however, religious convictions and the who descrtbed the process by is the paralysis that seems to be shaping of our business and which the very successes of associated with this pessimism. economic institutions is of more capitalism would seal its doom by Nearly everyone talks about than historical interest to us, of undermining the institutions of "forces of history" or a feeling of course, because the connection church and family, is enjoying a decline which he sees no way to is very likely to work both ways. renewed popularity. influence or counteract. If it is religious and ideological

:xa-tANG3 FALLJWINTER 1976 47 values which shape our business values upon which the systems world is ready to acknowledge and political institutions·, the shape were built, not so much by the that we have an efficient system; of those institutions will inevitably nature of the developments but it asks if we have a just system. and fundamentally affect our by our responses to them. We must help answer that ques­ freedoms. Business and political Technological changes have tion, but only when we have institutions which promote and had a dramatic and unexpected enlarged the question to ask if reward individual choice and impact on our lives. The dis­ we have individual justice, and action may well be a requisite locations, the required specializa­ individual freedom, and individual condition for the continued free­ tion, and the sudden obsolescence responsibility. dom to practice our religion and of skills have made vast numbers We intend to make Brigham teach it to our children. of people feel anything but free. Young University a center for the The Task Automation and the creation of study of values, organization, and As we have discussed these vast complex systems make it human freedom. In the College of issues among ourselves and with hard for individuals to understand Business/Graduate School of businessmen, we have concluded and feel responsible for outcomes. Management, we want to - that BYU should be deeply involved The size and complexities of our in countering this sense of pes­ organizations have made possible 1. Articulate those values which simism and resignation, as well as the integration of vast amounts of form the core of our economic the conditions that foster it. We are human and mechanized effort and political system ; the strongest of the religiously­ toward a single objective. But 2. Identify the way these values based universities. If there is to they have also threatened the are embodied in (or violated by) be a focal point for those con­ values of individual freedom and practices and policies in organi­ cerned about these issues - for responsibility. The multileveled zational life today; businessmen and for academics hierarchies and apparent aristoc­ -we are the ones with the largest racies of entrenched power and 3. Identify and publicize practices stake in providing it. privilege have often left the indi­ which move us toward those It has also become increasingly vidual with a sense of powerless­ fundamental values rather than clear to us that we cannot do much ness and hopelessness. away from them; alone. We will need help from Our system has also become 4. Influence intellectual and those of you reading this publica­ an object of criticism in the thirst public thought as well as organi­ tion and from people you know. for social and economic justice zational practice and public We will need help in identifying that has preoccupied the world in policy. the critical issues that must be the latter half of this century. Even addressed. We need help in though this thirst has repeatedly We believe this can best be done identifying innovative and suc­ been betrayed, it remains. Th is is through the publication of ideas cessful management approaches no simple drive for equality, and research in those magazines which address some of the prob­ although it often degenerates to and books which reach business lems which so deeply concern that. Rather, the yearning seems leaders, political leaders, and both the critics and the leaders to be for some shared basis on students throughout the country. of business. which difference in power, Our Request We are convinced that we would privilege, and property are dis­ What we propose will take time, not be most effective in preserving tributed according to some effort, and money. We believe the values important to all of us by morally meaningful criteria. In an there are many individuals who trying to defend all present busi­ earlier day, capitalism was would like to help. Will you let us ness practices. Since the estab­ described as the most just social know if you are concerned about lishment of our economic and order the world had ever wit­ these issues and are willing to political institutions, history has nessed because it replaced in­ work with us? Will you help us ushered in conditions unimagined herited distribution of power and identify other individuals, organi­ by those who planted the seeds property with a system more zations, or foundations who might from which these conditions directly linked to personal merit. be able and willing to support emerged. These developments This perception is no longer as such an effort? We would like have posed serious threats to the widely shared as it once was. The to hear from you. •

48

College of Business/ Graduate School of Management Nonprofit 154 Jesse Knight Building Organization Brigham Young University U.S. Postage Provo, Utah 84602 PAID Address Correction Requested Provo, Utah • Permit No. 49