Chapter 6: Changing Expectations


It would be shortsighted, I believe, to talk about what I have learned in the management of a large organization without also referring to what I have come to believe is the place and responsibility of such organizations in national life. In common with most businessmen, I have formed some views on how business can best fulfill its larger role as a part of the nation.

It is in this area of the national well-being that the business community will be judged most critically in the years ahead. Business has demonstrated how successfully it can innovate and produce. What we must now do—it would seem to me—is to assign a higher order of priority to the national interest in our business decisions.

The constant necessity to recognize public or national interest in all our business operations is a relatively new requirement for the businessman. Historically, we've always been able to count on the relatively free exercise of self-interest in our society to bring out what's best for all in the end. The manager of a large organization does what he thinks is best for his company. His competitors do what they think is best for theirs. Labor looks after itself; farmers do the same; and even government agencies develop ends of their own.

Out of the interplay of these forces in our economy there has developed a rather amazing system of checks and balances. As a result, all those forces usually complement one another and make each other stronger.

The system has its imperfections. Today, for example, it is entirely possible to have a contractual agreement between a very large company or industry and a very large union which will benefit both the industry and the union and at the same time have a detrimental effect upon the country as a whole. But we must never forget that the system works—it works and it produces. It produces more than any other economic system in the world. It spreads that production across our society in such a way that almost everyone benefits from it. Belief in the basic soundness and worth of our economic system does not, however, imply that it may never need adjustment. Conditions change. Expectations change.

The fact is that we have continually adjusted and improved our system in the past and must continue to do so. There never has been any future in the status quo. In business, the status quo means inevitable failure, and I would think the same conclusion could be drawn with nations.

Furthermore, what people expect from their society has been changing over the years. In the agrarian society of only a few generations ago, the demands of our citizens were relatively modest. But our society has altered in many ways since that time. In the light of these changes, it is necessary that we reexamine the basic premises on which this society was laid down to see if we are meeting society's needs as well as we should by today's standards. This means that we must continually review the opportunities for all individuals in America. To some degree, of course, these opportunities are modified, beneficially or detrimentally, by the era of bigness in America—by big business, big government, big labor. Bigness itself is a relatively new phenomenon in our society. Even if nothing else had changed, the vast concentrations of power in our society would demand that businessmen reconsider their responsibilities for the broader public welfare.

More and more there seems to be entering into relationships between government, industry, and labor a fourth force—the force of the public. Anyone particularly interested in some segment of the economy must increasingly recognize the force of public or national interest. Ultimately we are held accountable to it. We exist at its tolerance. We are bound by its laws. In planning for the future of our own particular interest, we must recognize the rights and requirements of the public and the millions of individuals who make it up.

The theme of my remarks here is this: The several major elements that make up our American society are going to have to learn how to work together voluntarily and in partnership. Each must adjust its own interests to that of the public or risk one of two unpleasant alternatives—legislation which will make cooperation compulsory or internal division which will make it difficult for the United States to hold its world position.

In other words, we're going to have to learn to think in two dimensions: on one plane as a businessman, labor leader, or government official, each with his own particular point of view—on the second as a citizen whose first duty is not to a special interest but to the well-being of the whole nation.

A businessman's point of view, naturally, is business-oriented, as a government official's is oriented toward government and a labor leader's toward labor. Each must perform for his constituents or be voted out of office. But each, I submit, can pay attention to public need as well and still be successful.

I would be one of the first to admit that it's a good deal easier to state this proposition than to put it into practice. One of our most important continuing problems is the question of how we can strike a balance between what is sound business practice in the management of our large organizations and what is good for the national interest. It is a dilemma which will confront us more and more often in the years ahead.

How can the manager of a large organization run his business in the interests of his company and stockholders without, on occasion, doing something which is contrary to the broader interest of the United States? And whatever course the manager of a large organization elects to take, how can he be sure he is acting in such a way as to preserve his own freedom of decision in business matters?

Obviously this concept of self-restraint in the national interest introduces new problems into the already complicated business of corporate decision making. These are difficult questions—as difficult as any management has had to face, and they are made all the more difficult by the times in which we live.

Too often, I fear, we businessmen turn to conventional solutions when the world around us is demanding the very utmost in creativity, imagination, and boldness. Communists can't be dealt with on a business-as-usual basis. Our free society can survive, but not necessarily with the old ground rules. I believe we need new attitudes and new acts to meet new conditions.

The changed circumstances that make great cooperative effort necessary are not limited to the increasing threat from Communism—critical as that is.

Along with the growth of Soviet power, we are having to adjust ourselves to the economic recovery of Japan and Western Europe and the formation of new marketing alliances, particularly within the area of the Common Market. We face what some have called the "revolution of rising expectations" among the underdeveloped lands. We can no longer set the pace and timing of our national growth to suit ourselves.

These outside pressures make it necessary that we grow fast enough and in such a way as to command the respect of our enemies, the confidence of our friends, and the hopes of the underdeveloped nations.

We're competing in world power; we're competing in world trade; we're being asked to help bridge the gap between the rich nations and the poor nations by sharing our resources. All these activities have become vital to our national interest.

At home we must provide for the continuing cost of defense without neglecting our domestic social needs. How do we create a million and a half new jobs every year? How do we provide for the education we must have and for adequate medical care for all? These questions, too, are directly related to the national interest.

In addition, these domestic tasks are complicated by the population growth that has taken place in the United States. Some people contend that such things as unemployment insurance and old-age security are private concerns and should be left solely to private solutions. But just how realistic are these views in a nation which already has 187 million people and which will have 260 million by 1980? In a nation as large as this, hard times may befall only 5 per cent of the people. But today that 5 per cent represents 9 million people. And, very clearly, no nation can turn its back on the plight of 9 million people—their well-being is essential to the well-being of the nation.

Take all these tasks—the ones resulting from pressures outside, the ones resulting from pressures within—and you can see how new and huge are the problems that confront our society. To my way of thinking, we're going to have to look for improved ways of doing the job. And as a starter, I believe we're going to have to ask ourselves a little more seriously if what we are planning to do in our business decisions is as good for the employees as it is for the stockholders—and as good for the country as it is for both those groups.

Earlier, I tried to make the point that a business organization has need of a set of principles or beliefs to give it a common and consistent sense of direction. As conditions change, an organization must learn to accommodate change within the context of its beliefs. The same principle, I believe, holds true for our society as a whole.

Our national beliefs have come to us in many ways—some from documents like the Declaration of Independence, others from tradition, legislation, and practice. They survive because our people continue to value them. From them, I believe, comes much of the strength which moves the United States forward.

These beliefs are well known

We believe in political and religious freedom and in the need to exercise these freedoms with responsibility.

We believe in a government of law to serve man and in the changeability of law to meet changed conditions.

We believe that society exists to help the individual better himself—intellectually, spiritually, and materially.

We believe in equality of opportunity and in extending a hand to help people to help themselves.

And finally, we believe in freedom of enterprise. We equate it with equal opportunity. We believe that everyone should have the opportunity to do as much as he can for himself with a minimum of interference and restriction.

There are some who might say that this last belief has fallen by the wayside, that businessmen are the only ones who really believe in it any longer. I don't think this is so. But I would agree that since most Americans now work for someone else, they tend to look upon it a little differently than they might have a hundred years ago.

In the 1860s there was much government land to homestead. There were many avenues open to entrepreneurs at all economic and social levels, and millions took them. How very different is the United States today where eight out of ten people work for someone else—where thousands of factory workers can suddenly be laid off as a result of circumstances over which none has very much control.

Because they feel so vulnerable in the highly organized economic activity of today, most Americans insist that free enterprise so operate as to guarantee their right to such things as a job, a fair wage, humane working conditions, and old-age security. And when they feel that free enterprise comes into conflict with these wants, they line up solidly in defensc of them. But this does not mean they have lost their belief in free enterprise. It simply means that they believe free enterprise must operate in a way that is reasonably compatible with these requirements.

Much as we may dislike it, I think we've got to realize that in our kind of society there are times when government has to step in and help people with some of their more difficult problems. This does not mean that we have abandoned our traditional faith in American self-reliance. It means we have recognized that changing times have presented us with changing conditions which sometimes exceed the limits of self-reliance. And these changes are characteristic of a system as dynamic as ours.

Self-reliance cannot always provide an answer to every need, especially in a society as big as ours where people can get caught up in forces over which they have little personal control. Thrift is a necessary virtue, but there are times when even thrift does not make it possible for the ordinary family to cope with extraordinary problems.

Programs which assist Americans by reducing the hazards of a free market system without damaging the system itself are necessary, I believe, to its survival. If large numbers of people are made to feel that they're entirely at the mercy of that system or that they will be abandoned every time it undergoes one of its periodic adjustments, they can be expected to have less enthusiasm for the system than it deserves.

In acknowledging the need for some government intervention, it nevertheless is difficult for anyone to say what the proper limits of government in meeting these human needs should be. At what point does government weigh so heavily on the business system that it slows down our whole rate of economic growth? And at what point do social welfare programs begin to affect individual initiative and cause people to lose their incentive?

Obviously, there are no clear-cut answers. In a free society questions like these are resolved in the tug and pull of leadership and public opinion.

Businessmen, of course, are influential leaders in public opinion. That is why it is so important that they be as open-minded and far-sighted in matters concerning the general public need as they are in questions relating to the operation of their businesses.

To be sure, the rights and guarantees that the average man believes in and insists upon may inter fere, to some degree, with our ability to manage our enterprises with complete freedom of action. As a result, there are businessmen who either ignore or deny these claims. They then justify their views by contending that if we were to recognize or grant them, the whole system of free enterprise would be endangered.

This, it would seem to me, amounts to an open invitation to exactly the kind of government intervention that businessmen are seeking to avoid. For if we businessmen insist that free enterprise permits us to be indifferent to those things on which people put high value, then the people will quite naturally assume that free enterprise has too much freedom. And since the people have voting power, they will move against free enterprise to curtail it in their own interests. They do this, however, not because they are opposed to free enterprise, but to obtain and, in some cases, to protect the rights they believe themselves entitled to under a free enterprise system.

Historically, I think we can show that restraints on business have not come into being simply because someone wanted to make life harder for us businessmen. In almost every instance they came about because businessmen had put such emphasis on self-interest that their actions were regarded as objectionable and intolerable by the people and their elected representatives.

For centuries the businessman has been a favorite whipping boy, and the reasons are plain to see. Businessmen acquired wealth. With wealth, they gained power. And until this century, much of that power was employed almost solely in their own interests.

Despite its historical abuses of power, business has always been one of the world's great forward forces. The business record in the United States is one in which we can all take pride. As much as any other group, we have helped to build this country's national power. And as much as any group, we have helped to provide the great opportunities which exist in the American society. Furthermore, I believe that American industry—as much as any other single force—has within it the solutions to our present peril.

In spite of these many achievements we still have a mixed business legacy, whether we like it or not. We are all familiar with the freewheeling actions of big business in the half century following the Civil War.

Interestingly, as these excesses got out of hand, a public reaction set in. In 1888 all the political parties closed ranks to demand Federal restraints on business. Two years later we had the Sherman Antitrust Act. And although it was little used in those early days, it did establish one telling proposition: Business is subject not only to existing law—but to the tolerance of the public. Lawful or not, if business does things which the public regards as wrong and abusive, that public has the power to demand new laws with which business will have to comply.

This proposition was reaffirmed again and again during and after the early 1900s. In law after law Congress upheld the principle that business operates at the tolerance of the public, and that freedom of enterprise does not grant business the license to trespass on what the government regards as the public interest.

My own company became involved with the Antitrust Division in 1952, and we now operate under a consent decree. It never seemed to me that this action gave me grounds to criticize the government. In fact I have frequently stated that I believed the law was a force for good and that I have no quarrel with the decision in relation to IBM.

With the onset of the Great Depression in the 1930s a new consideration came into the picture. People were not only angered by what they regarded as the excesses of business—they were critical of a system which failed to provide old-age security, unemployment compensation, and such things as fair standards in wages and hours. In the changed context of the times they now saw all these as their rights. They therefore insisted on them, in the light of their new beliefs, and they demanded and got a whole new pattern of social legislation.

This, too, should have taught us a lesson. It should have reminded us that when people insist on social betterment and justice they are not going to be dissuaded by cries of alarm at what they may be doing to the free enterprise system. They look on the system as a changing institution—one which must change with the times. And as their needs become greater, or as their wants and ambitions grow, they demand new laws and programstrusting in the ability of that free enterprise system to bear the costs.

What we must always remember is that countries and systems exist for the benefit of their people. If a system does not measure up to the growing expectations of those people, they will move to modify or change it. To keep faith in our business system and to help build our country, the best thing we can do is to make our system work so that everyone shares fairly in it. We won't build good citizenship and we won't build a strong country by holding people back. We will build by helping people to enlarge their goals and to achieve them.




A Business and Its Beliefs  .The Ideas That Helped Build IBM
A Business and Its Beliefs .The Ideas That Helped Build IBM
ISBN: 71418598
EAN: N/A
Year: 2003
Pages: 13

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