Business administration

Front matter

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MATERIALS FOR THE STUDY OF BUSINESS

Preface

Collegiate training for business administration is now so widely attempted that the time has arrived when experiments should be conducted looking toward the organization of the business curriculum into a coherent whole. Training in scattered "business subjects >: was defensible enough in the earlier days of collegiate business training, but such a method cannot be permanent. It must yield to a more comprehensive organization.

There can be no doubt that many experiments will be conducted looking toward this goal; they are, indeed, already under way. This series, "Materials for the Study of Business," marks one stage in such an experiment in the School of Commerce and Administration of the University of Chicago.

It is appropriate that the hypotheses on which this experiment is being conducted be set forth. In general terms the reasoning back of the experiment runs as follows: The business executive administers his business under conditions imposed by his environment, both physical and social. The student should accordingly have an understanding of the physical environment. This justifies attention to the earth sciences. He should also have an understanding of the social environment and must accordingly give attention to civics, law, economics, social psychology, and other branches of the social sciences. His knowledge of environment should not be too abstract in character. It should be given practical content, and should be closely related to his knowledge of the internal problems of management. This may be accomplished through a range of courses dealing with business administration wherein the student may become acquainted with such matters as the measuring aids of control, the communicating aids of control, organization policies and methods; the manager's relation to production, to labor, to finance, to technology, to risk-bearing, to the market, to social control, etc. Business is, after all, a pecuniarily organized scheme of gratifying human wants, and, properly understood, falls little short of being as broad, as inclusive, as life itself in its motives, aspirations, and social obligations. It falls little short of being as broad as all science in its technique. Training for the task of the business administrator must have breadth and depth comparable with those of the task.

vii

Vlll

PREFACE

BASIC ELEMENTS OF THE BUSINESS CURRICULUM

Of problems of adjustment to physical environment

a) The earth sciences

b) The manager's relationship to these

Of problems of technology

a) Physics through mechanics, basic, and other sciences as appropriate

b) The manager's administration of production

Of problems of finance

a) The financial organization of society

b) The manager's administration of finance

Of problems connected with the market

a) Market functions and market structure

b) The manager's administration of marketing (including purchasing and traffic)

Of problems of risk and risk-bearing

a) The risk aspects of modern industrial society

b) The manager's administration of risk-bearing

Of problems of personnel

a) The position of the worker in modern industrial society

b) The manager's administration of personnel

Of problems of adjustment to social environment

a) The historical background

b) The socio-economic institutional life

c) Business law and government i. Communicating aids of control, for example

a) English

b) Foreign language

2. Measuring aids of control, for

example

a) Mathematics

b) Statistics and accounting

3. Standards and practices of con-

trol

a) Psychology

b) Organization policies and methods

PREFACE IX

Stating the matter in another way, the modern business administrator is essentially a solver of business problems — problems of business policy, of organization, and of operation. These problems, great in number and broad in scope, divide themselves into certain type groups, and in each type group there are certain classes of obstacles to be overcome, as well as certain aids, or materials of solution.

If these problems are arranged (i) to show the significance of the organizing and administrative, or control, activities of the modern responsible manager, and (2) to indicate appropriate fields of training, the diagram on the opposite page (which disregards much overlapping and interacting) results. It sets forth the present hypothesis of the School of Commerce and Administration concerning the basic elements of the business curriculum, covering both secondary school and collegiate work.

In this curriculum the present volume is designed to serve as part of a general introduction. It is used as the basic material in a beginner's course in Business Administration. This course parallels another dealing with the physical environment of business and follows still another which considers social environment. The three courses thus constitute a survey of the physical and social environments of business and a general analysis of the outstanding relationships of the business administrator.

In its scheme of presentation I think of this volume as being made up of four parts. Chapter i, a very brief first part, presents a general view of the field of study and a certain mental attitude toward the field. Because I have no better term for this mental attitude, I call it a functional approach to the study of business administration. Chapter ii, a somewhat longer second part, examines a business problem — that of plant location — as a means of giving the student confidence in the analysis of business problems which is sketched rather abstractly in the first chapter and as a means of inducing him to think of the outstanding relationships of the administrator as highly interdependent activites.

Chapters iii-ix form a rather bulky third part of the book. Here, one after another of the functions of the business administrator is discussed, with particular reference to the character of the problems involved and to the control policies and devices of the manager. The reader will find that the book is a "what and why" book rather than a "how" book. It is not a manual of technical x PREFACE

practices and devices in business. It is an attempt to see the problems of business administration as an interrelated whole and to indicate the lines of study which will presumably lead to solution of those problems.

Chapter x, the brief fourth part, presents in moderate detail a "business case" for the student to analyze. It is a sort of an acid test of his earlier study.

From the point of view of teaching technique, this study of business administration is worked out through what is called, again for lack of a better name, the discussion method. Questions, problems, and cases are the tools of the discussion method and all are employed in this book.

Some ways of using these tools may be illustrated as follows: If a class were given an ordinary textual reading on plant location and the class meeting were conducted by asking such questions as, "What are the more important factors in cotton mill location?" it would be possible, at least, to get a discussion started among members of the class, although it must be admitted that the meeting might degenerate into formal routine questioning and answering. If, on the other hand, the class were given a full account of the procedure followed by the Spin well Company in determining an appropriate location for its new plant, we could readily have a discussion participated in by the students as a result of their analysis of this case material. Case study by students presumes a knowledge at the outset of the main factors to be considered. The questioning on the part of the instructor would almost necessarily go deeper into the matter than routine questioning and answering. The student would be almost certain to carry away a more vivid appreciation of the issues at stake, because in the case method the mind is aroused to activity to piece together related facts in order to find new meaning in them.

A third possible tool of the discussion method is the problem, and this may be of almost any grade of severity and may of course be combined with case material. If, for example, the Spinwell Company case contained an analysis of several possible locations without reaching a conclusion on more than one, the class discussion might well analyze the correctness of this conclusion or might be directed toward listing in order of preference the three most desirable locations, giving reasons for the order chosen. This would probably be a problem of only moderate severity if the case were well written

PREFACE XI

up. A more severe problem could be set by asking the class to determine whether a certain location, not mentioned in the case, would not have been still better than the one chosen. Now the students must presumably secure new data concerning this new location as their first step in solving the problem. This brings in of course a new opportunity for mental discipline.

As the present book is designed for use in an introductory course surveying the whole field of business administration, it does not include advanced problems. It embodies, none the less, a case and problem approach, and its emphasis is on the case and problem method, although as a transitional collection it has been thought wise to include enough material and questions of the more routine sort to enable the instructor to adapt his teaching method to the stage of maturity and preparation of individual students and classes. The final chapter — in my mind the most interesting bit of teaching method in the book — is a "case" of rather wide reach. It has been my experience that Freshmen can and do handle this case reasonably well at the close of the course: a stimulating hint of the possibilities for more advanced courses.

Perhaps it is worth adding that there is no question that these possibilities can be realized. For more than a decade the group with which I am so fortunate as to be working has been developing a case-and-problem presentation of economics and business subjects. We find the method particularly well adapted to our intermediate and advanced courses, and much of our instruction in these fields is now on the case-and-problem basis. This of course does not mean that the lecture and the textbook do not have an appropriate place in instruction.

It will be noticed that no effort has been made to give exhaustive bibliographies. It has seemed sufficient in an introductory survey, to suggest at the end of each chapter a few references for further study. The most modest library can meet the demand thus made.

It is hardly possible for me to give appropriate recognition of the assistance I have received from many sources during the preparation of this material. It has passed through three mimeographed editions, two pamphlet editions, and a "preliminary" edition to its present form. During this rather lengthy period of preparation criticisms and suggestions have flowed in from almost every member of the group with which I am most closely associated as well as from many other collegiate instructors. My debt to authors and publishers who xii PREFACE

have so kindly consented to the use of their material is equally great.

I must mention particularly the assistance of Walter Smith, Ruth

in gathering material and the kindness of Professor CO. Hardy in

preparing the chapter on "The Administration of Risk-Bearing."

A conscientious effort has been made to give credit where credit

was due. I am quite certain, however, that many questions have

been taken from sources whose origin has been forgotten in the long

period of preparation. General acknowledgment of this indebtedness

is here given.

L. C. Marshall

September i, 1921

Table Of Contents

PAGE

Chapter I. The Field of Business Administration The Many Forms of Economic Activity (Diagram) ... 2

The Zones of Business Control 3

A Descriptive Classification of Business Activities ... 4

A More Analytical Classification of Business Activities . . 7

A Functional Classification of Business Activities ... 10

Administration a Phase of the Co-ordination of Specialists . 16

Chapter II. A Sample Business Problem — Plant Location

A. Conditions Determining Location in Terms of Broad Areas — Territorial Specialization

1. A General Survey of Location Forces. E. A. Ross . . 28

2. Transportation Facilities in Relation to Location. A. T. Hadley ; 33

3. The Momentum of an Early Start and the Habit of Industrial Imitation. Bureau of the Census .... 35

4. Some Economic Advantages of Specialized Centers. Henry Clay 37

5. The Location of the Cotton Manufacturing Industry.

M. T. Copeland 38

6. Local Concentration of Certain Industries. Bureau of

the Census 45

7. The Location of the Manufacturing Industries of the United States. Bureau of the Census 48

8. Illustrations of Concentration and Dispersion. Bureau

of the Census 49

9. The Seats of Great Commercial Enterprises. /. R. Smith 50

10. The Location of the Wholesale Dry-Goods Trade.

P. T. Cherington 56

11. London and New York as Financial Centers. E. L. S. Patterson 58

B. Factors Determining Location in Subareas — Site Location Introduction and Problems 62

12. Geographical Specialization by Small Areas and the Sections of Cities. C. C. Evers 64

13. The Location of Retail Establishments. P. H. Nystrom 66

sail

XIV TABLE OF CONTENTS

PAGE

14. Site Location Considerations. C. C. Evers .... 71

15. An Outline of the Relations of Transportation to Site Location. F. M. Simons, Jr 74

16. The Interdependence of Construction and Equipment

with Site Location. Charles Day 76

17. City, Suburbs, or Country. D. S. Kimball .... 79

19. The Causes of Congestion of Manufactures in New York City. P. T. Sherman 84

C. Changing Location and Location Planning

20. How to Strike a Balance in Location Factors. H. V.

Coes 93

21. An Example of Private Enterprise in Developing Plant Locations. Central Manufacturing District .... 96

22. Another Example — the Bush Terminal 101

23. Still Another Example — the Toledo Factories Buildings.

Iron Age 105

24. Examples of City Advertising

A. Philadelphia Year-Bo ok 106

B. Advertisement in a Business Periodical .... 108

25. What City Planning Means. Niagara Falls Chamber of Commerce 109

26. The City-Planning Movement. C. M. Robinson . . in

Chapter III. The Administration of Personnel

A. Introductory Survey of the Content of the Manager's Relationship to Personnel

1. Organization of the Personnel Department. Ordway Tead and H. C. Metcalf 118

2. Functions of the Personnel Department. C. H. Fenstermacher 124

3. Another Statement of Functions. R. W. Kelly ... 126

B. Personnel Administration in Terms of Incentive and Output: Good Physical Conditions and Competent Human Machines

Introduction and Prob'ems 127

4. Some Causes of Inefficiency in Modern Industry. F. E. Cardullo 132

5. Physical Conditions of Work and Accident Prevention.

L. K. Frankel and Alexander Fleisher 136

6. Prevention of Occupational Disease. L. K. Frankel

and Alexander Fleisher 138

TABLE OF CONTENTS XV

PAGE

7. The Maintenance of Physical Fitness. United States Public Health Service 140

8. Physical Examination of Workers. J. W. Schereschewsky 144

9. Selection and Placement. N. D. Hubbell 146

10. Education and Training

A. The Industrial Information Service 149

C. Personnel Administration in Terms of Incentive and Output: the Will to Do

11. The Fears of Labor and of Capital. W. L. M. King . 164

12. The Gulf between Labor and Capital. L. P. Alford . 168

13. The Instincts and Motivation. C. H. Parker ... 168

14. The Release of Human Energy. A. D. Weeks . . . 171

15. Wage Incentive: Forms of Payment. G. D. H. Cole . 173

16. Wage Incentive: A Philosophy of Management. C. B.

Going 178

17. Wage Incentive: A Wage Formula. G. D. Babcock. . 180

18. Wage Incentive: What Are Fair Wages?

19. Profit Sharing: Its Forms. U.S. Bureau of Labor Statistics, and Mallory, Mitchell, and Faust .... 183

20. The Three-Position Plan of Promotion. F. B. Gilbreth

and L. M. Gilbreth 185

21. Employees' Representation

A. Definition. Independence Bureau 187

B. An Extreme Case. A Suggested Plan for a Con-

ference Committee on Industrial Relationships . 188

C. Another Case. National Metal Trades Association 191

D. Measuring Aids of Personnel Administration

22. Strength Tests in Industry. F. S. Lee 195

23. How Industrial Fatigue May Be Detected. United States Public Health Service 196

24. Job Analysis. Personnel . . 197

25. Some Sample Analyses and Descriptions of Occupations

A. Curtis Publishing Company 202

B. Emergency Fleet Corporation 203

26. The Field of the Psychological Test. H. D. Kitson . 204

27. Methods in Vocational Testing. H. L. Hollingworth . 206

28. Army Intelligence Tests and Trade Tests. Beardsley Ruml 209 xvi TABLE OF CONTENTS

PAGF

29. What Phrenology and Physiognomy Can Contribute.

H. L. Hollingworth 213

30. The Application Blank as a Measuring Device. R. W. Kelly . 219

31. The Interview as a Measuring Device. R. W. Kelly . 220

32. Some Aspects of Rating Scales. R. W. Kelly . . . 221

33. The Labor Audit. Ordway Tead 224

E. Organization and Administration of the Personnel Department

34. The Case for a Centralized Personnel Department.

5. H. Slichter 231

35. The Place of the Personnel Department in the Business Organization. Ordway Tead and H. C. Metcalf . . . 236

36. Organization Chart of Personnel Work in One Industrial Plant 241

Chapter IV. The Administration of Market Problems

A. The Knitting Together of Modern Spec'alists. L. C.

Marshall and L. S. Lyon 243

B. Market Forces, Marketing Functions, and Market Structures Introduction and Problems 250

1. The Forces behind Modern Market Structures ... 256

2. Marketing Functions. L. D. H. Weld 262

3. Methods of Sale and Advertising

A. A. W. Shaw 268

B. Johnson, Read & Company 271

4. Conditions Which May Result in Organized Markets. Alfred Marshall 272

5. Leading Wholesale Agencies. M. T. Copeland ... 274

6. Marketing Agencies between Manufacturer and Jobber.

L. D. H. Weld 277

7. The Use Made of the Jobber. P. H. Nystrom ... 279

8. Leading Retail Agencies. M. T. Copeland .... 282

9. The Mail-Order Business. R. S. Butler, H. F. De Bower,

and J. G. Jones 287

10. The Local Retailer's Answer to Mail-Order Competition. Northwestern Druggist 289

11. Some Characteristics of the Department Store. P. H. Nystrom 291

12. The Manufacturer and the Department Store. R. W. Johnson 295

13. The Origins of the Chain Store. P, H. Nystrom . , 296

TABLE OF CONTENTS xvii

PAGE

14. Market Structures by Classes of Commodities. P. T. Cherington 299

15. The Middleman in Distribution. A. W. Shaw . . . 303

16. The Break Up of the Orthodox System of Distribution.

P. T. Cherington 306

C. Sales Management for a Manufacturing Business Introduction and Problems 308

17. A Brief Statement of the Marketing Problems of the Manufacturer. M. T. Copeland 313

18. Analysis of Product, Market, and Channels of Distribution. Mac Martin Advertising Agency, Incorporated . 314

19. Some Phases of Market Analysis. M. T. Copeland. . 319

20. Some Phases of Commodity Analysis. C. C. Parlin . 323

21. Measuring Aids in Salesmen Control

A. Printers' Ink . 325

B. D. L. Kinney 328

22. Measuring Aids in Advertising Control. W. S. Zimmerman 329

23. Measuring Aids Applied to the Social Environment.

J. G. Fredericks, and F. M. Faker 331

24. Measuring Aids May Result in Expense Standards. Harvard Bureau of Business Research 333

25. Measuring Aids Reflected in the Profit and Loss Statement. Harvard Bureau of Business Research ... 335

26. Measuring Aids, Quotas and Budgetary Control.

M. W. Mix 337

27. Price Policies: What the Mark-Up Should Cover.

A. M. Burroughs 340

28. Price Policies: The Turnover. Wheeler Sammons . . 341

29. Price Policies: The Determination of Market Price. Jacob Viner 343

30. Price Policies of the Distributer. A. W. Shaw . . . 347

31. Price Policies: Price Maintenance. R. H. Ingersoll and Brothers 351

32. The Administration of Sales and Advertising. P. T. Cherington 352

33. An Organization of the Sales Department. Bulletin of

the Taylor Society 354

D. The Work of the Purchasing Agent

34. The Functions of the Purchasing Department. H. B. Twyford 365

35. Buying for Retail Hardware Stores. H. P. Sheets . . 367 xviii TABLE OF CONTENTS

PAGE

36. Measuring Aids: Testing in Connection with Purchasing. Waldon Fawcett 370

37. Measuring Aids: A Sample Specification. General Supply Committee, U.S. Government 371

38. Purchase and Stores under Unsystematized, Systematized, and Scientific Management. H. P. Kendall . . 374

39. The Interdependence of Purchasing with Other Functions. A. C. Ward 378

40. A Possible Purchase Department Organization. C. S. Rindsfoos . 381

41. Organization of General Purchasing Department of Western Electric Company 384

Chapter V. The Administration of Finance

A. What It Means to Start and to Finance a Business Introduction and Problems 388

1. Steps Involved in Starting a Business. C. W. Gersten-

oerg . 389

2. Promotion and the Promoter. W. H. Lough. . . . 390

3. Methods of Financing an Enterprise. Francis Cooper . 392

4. Working Capital and Fixed Capital. W. H. Walker . 396

B. The Manager's Relationship to the Financial Organization of Society

5. A General View of the Manager's Use of Our Financial Organization. H. G. Moulton 400

6. Investment Credit Institutions Used Directly by the Manager

A. The Underwriters. W. H. Lough 404

B. Investment Banking and Bond Houses

I. Lawrence Chamberlain . 407

7. Commercial Credit Institutions Used Directly by the Manager

A. The Commercial Bank. H. G. Moulton . . . 410

B. Note Brokers, Commercial Paper, Commercial Credit and Discount Companies

I. R. P. Ettinger and D. E. Golieb 413

8. Some Financial Information Gatherers

A. The Mercantile Agency. R. G. Dun & Co. . . 415

B. The National Association of Credit Men. Pamphlet 417

C. Forecasting Services. 5. P. Meech 420

TABLE OF CONTENTS xix

PAGE

9. An Omnibus Financial Institution, the Trust Company

F. B. Kirkbride and J. E. Sterrett 423

10. Some Institutions Used Indirectly by the Manager

A. Insurance Companies. A. S. Johnson . . . . 425

C. Stock Exchanges. F. M. Taylor 427

D. Wall Street. S. S. Pratt ......... 428

C. Financial Policies and Occasionally Used Devices Introduction and Problems 429

11. The Meaning of Capital and Capitalization .... 433

12. Corporate Securities Viewed as Instrumentalities

13. A Classification of Stocks. J". Adams, Jr 440

14. A Sample Stock Certificate 446

15. A Classification of Bonds. F. A. Cleveland .... 448

16. Recitals in Bonds. Andrew Squire . . . -. . . 450

17. A Sample Bond 454

18. Policies concerning the Kind and Amount of Securities.

W. H. Lough 456

19. Some Policies with Respect to Preferred Stock. W. H. Lough . . 458

20. Policies with Respect to Open and Closed Mortgages.

W. H. Walker 460

21. Amortization Policies and Practices. W. H. Walker . 462

22. Corporate Reorganization Policies. Stuart Daggett . . 465

D. Financial Policies and Frequently Used Devices

23. What the Balance Sheet Shows about Financial Matters.

Paul Havener 475

24. What the Profit and Loss Statement Shows

A. Paul Havener 482

B. Scovell, Wellington &* Company 485

25. Financial Policies Reflected in Accounting Records.

E. A. Saliers 486

26. Types of Commercial Credit Instruments. H. G. Moulton 488

27. Short-Term Loans and Trade Credit. W. H. Lough . 492

28. What a Bank Wishes to Know before Making a Loan . 495

29. Borrowing by Assignment of Accounts Receivable.

C. W . Gerstenberg . 499

30. The Meaning of Depreciation. F.A.Delano . . . 501

31. The Sources of the Surplus. W. H. Lough .... 505 xx TABLE OF CONTENTS

PAGE

32. Reserves and Other Uses of the Surplus. F. A. Cleveland and F. W. Powell 506

33. How One Firm Pulled through a Depression. Wall Street J ournal 510

E. Organization for Financial Administration

34. An Order Denning the Jurisdiction of a Treasurer. Walworth Manufacturing Company 515

35. Two Organization Charts on Financial Administration

A. New England Telephone and Telegraph Company . 518

B. General Accounting Department of Western Electric Company 519

36. Financial Standards 520

37. Budgeting for Cash Receipts and Cash Disbursements. Boston Chamber of Commerce 520

Chapter VI. The Administration of Production

A. The Background of Modern Production

1. A Brief Outline of the History of Science. E. S. Dana . 525

2. What Can Science Contribute in the Future ?

A. A Hint of the Contribution of Physics. R. A. Millikan 530

B. A Hint of the Contribution of Botany. /. M. Coulter 533

3. Technical Education. Thomas Nelson & Sons . . . 536

4. The Engineering Profession. F. R. Hutton .... 539

5. Some Consequences of Technological Industry

A. The Transfer of Thought, Skill, and Intelligence

I. D. S. Kimball 543

II. American Society of Mechanical Engineers . . 544

B. The Intellectual Effects of Machinery. J.A.Hobson 547

C. Technological Industry Is Complex Industry . 550

D. Technological Industry Is Frequently Large-Scale Industry. L. C. Marshall and L. S. Lyon . . 553

E. Standardization in Manufacturing. R. F. Hoxie 555

B. Manufacturing Functions with Particular Reference to Control

6. An Illustration of What Is Involved in Modern Manufacturing. J. V. Woodworth 560

7. The Control Problem Illustrated by Layout and Routing.

D. S. Kimball 563

TABLE OF CONTENTS XXI

PAGE

8. The Control Problem Varies with Different Types of Industry

A. 5. E. Thompson 565

9. Five Organic Functions in Manufacturing Industry.

A. H. Church 570

10. A Sample of Problems Arising in Manufacturing Functions. Library of Factory Management 578

n. Measuring and Communicating Aids: Inspection.

A. D. Wilt, Jr 581

12. Measuring and Communicating Aids: Graphic Production Control. C. E. Knoeppel 584

13. Measuring and Communicating Aids: A Progress Chart.

H. L. Gantt 586

14. Measuring and Communicating Aids: Time Study.

F. W. Taylor 588

15. Measuring and Communicating Aids: Motion Study.

F. W. Taylor 589

16. Measuring and Communicating Aids: Classification and Symbols. H. H. Farquhar 591

17. Measuring and Communicating Aids: Cost- Accounting

A. The Distribution of Expense. C. B. Going . . 595

B. The Services of Cost-Accounting. J.R.Wildman . 597

C. The Basis of Manufacturing Costs. H. L. Gantt. 600

18. The Control of Large- vs. Small-Scale Industries

A. A Protest against Too Great Centralization.

R. B. Wolf 602

B. The Small-Shop Basis of Production. G.H.Haynes 604

19. Some Organization Charts. S. H. Bullard, L. V. Estes,

and Norman Howard 605

Scientific Shop Management

20. The Beginnings of Scientific Management. C. B. Going 610

21. Scientific Management in Production

A. H. S. Person 615

22. Stages in Management. H. P. Kendall 621

23. Control of Manufacture under the Taylor System.

24. Steps in Installing the Taylor System. H. K. Hathaway 633

25. Scientific Management and Labor. R. F. Hoxie ... 637 xxii TABLE OF CONTENTS

PAGE

Chapter VII. The Administration of Risk-Bearing

A. The Character of Business Problems and Business Judgments Introduction and Problems . . . . 644

1. A Comparison of Problems in Production and Marketing.

S. 0. Martin 647

2. The Significance of the Human Equation in Business Problems . . 649

3. The Formation of "Judgments." F. H. Knight . . . 651

B. Some of the Leading Forms of Business Risk

4. Some Leading Forms of Risk. John Haynes. . . . 655

5. The Separation of Producer and Consumer Means Risk.

A. T. Hadley 657

6. Chance Means Uncertainty and Therefore Risk. G. H. Palmer 659

7. The Interdependence of a Specialized Society Increases Risk. L. C. Marshall and L. S. Lyon 661

8. Antagonism of Specialists Increases Risk. A. W. Small 663

C. Ways of Dealing with Risk

9. Entrepreneurship and Administrative Qualities . . . 667

10. The Prevention of Harmful Events and the Use of Research . ... . . . 669

11. Elimination by Combination of Risks

B. E. A. Ross. 672

C. A. C. Pigou 676

12. Some Risks of Investors and How They Are Met . . 678

13. Insurance and Risk-Bearing ........ 683

14. Risk-Bearing through Speculative Contracts

A. The Typical Speculative Contract of Ordinary Business 687

B. The Hedging Operations of an Organized Exchange. S. S. Huebner 688

C. Some Dangers of the Speculative Contract . . 690

15. Guaranty, Suretyship, and Underwriting 692

16. Organized Suretyship. American Surety Company . . 693

17. The Place of Risk-Bearing in a Business Organization. 694

Chapter VIII. The Form of the Business Unit

1. The Tests of Efficiency of Forms of the Business Unit.

L. H. Haney 703

TABLE OF CONTENTS xxm

PAGE

2. Relative Importance of the Main Forms of the Business Unit

A. The Position of the Corporation. W. I. King . 705

B. Relative Importance in Manufacturing Industry. Bureau of the Census 706

3. The Individual Proprietorship. M. H. Robinson . . 708

4. Agency as an Organization Device. W. H. Spencer. . 710

5. Ordinary Partnerships, Special Partnerships, and Mining Partnerships

A. Thomas Conyngton. 714

6. An Example of Ordinary Partnership Articles . . . 718

7. Limited Partnerships and Partnership Associations.

Scott Rowley 718

8. An English View of Their Limited Partnership Act. Solicitor's Journal and Weekly Reporter 720

9. Definition and General Nature of Joint Stock Companies.

Scott Rowley 722

10. Some Results of Incorporation. Thomas Thacher . . 724

11. Historical Stages in the Corporation. W. F. McCook . 727

12. Forms of Corporation Charter . . . . . . . . 730

13. A Charter Object Clause. United States Steel Corporation 732

14. The Powers of Stockholders. W. L. Kitchel .... 734

15. Liability of Corporate Directors

B. Frederick Dwight 742

16. The Dissolution of a Corporation. W. L. Clark, Jr. . . 744

17. Some Methods of Concentration of Control. L. H. Eaney 745

18. Simple Business Trusts. L. H. Eaney 748

19. Co-operative Industry. G. H. Powell 751

Chapter IX. Basic Features of Administration

1. The Mental Aspects of Administration

A. Management and Its Two Great Instruments.

A. H. Church 764

B. An Analysis of "Business Judgment." F. A. Kingsbury 768

2. There Is No Single Correct Form of Organization

A. Russell Robb 778

B. D. S. Kimball 783

C. C. D. Murphy 785 xxiv TABLE OF CONTENTS

PAGE

3. Some Statements on the Essentials of Organization

A. " Dimensions " of Organization. Russell Robb. . 788

B. "Laws" of Organization. C. E. Knoeppel and Company 791

C. Management "Laws." L. V. Estes . . . . 792

D. Administration as Leadership. E. D. Jones . . 794

4. Some Types of Organization

A. Line and Staff Organization. C. B. Going . . 800

B. The Unit System. C. D. Hine 801