Social Crisis andCorporate Response

Social Crisis andCorporate Response

BY DONALD P. KIRCHER

CORPORATE PARTICIPATION in solving

the problems of race, the centralcity, education, and minority employ-ment IS a currently popular topic whichhas attracted the attention of some stu-dents of the subject and many orators.The more extreme examples of grandioserhetoric would have one believe that, allelse having failed, business was the lastbest hope for solving every problem thatbesets our society. Much of the hyperbolewhich has attended discussions of thesubject is due to the striking contrastbetween private affluence and publicsqualor. Corporate business, as the prin-cipal mechanism which has producedprivate aflSuence, is seen as successful,capable, vigorous, confident, optimistic.

The public sector simultaneously pre-sents many unedifying vistas. The streetsof our cities are jammed and filthy; chil-dren in the ghettos are badly educated;the nationalized and semi-nationalized

transport systems in and around tbe citiesare barely operative; welfare systems,while relieving distress, have institution-alized poverty and dependence; and eventhe relatively simple matter of deliveringthe mail seems to strain both the capaci-ties and the budget of the Federal Gov-ernment. And hanging over everything isthe ominous cloud of the race problem.

The 1969 McKinsey Foundation Lectures,entitled “Of Men and Markets—Diversi-fication in a Worldwide Setting,” weredelivered recently at Columbia Universityby DONALD P. KIRCHER, President ofThe Singer Company. They will be pub-lished next fall by the McGraw-Hill BookCompany. This article, drawn from thelast of the three lectures, appears here bycourtesy of the publisher and of theGraduate School of Business, ColumbiaUniversity, co-sponsor of the lectures.

Is battling poverty, racism, and urban blight really the business of

husiness, as tbe rhetoric of tbe day suggests? This chief executive thinks

so—but he nams that corporate action programs must be kept consistent

with basic business disciplines, purposes, and performance criteria.

streaked occasionally with lightningflashes of violence and riot. The publicsector thus presents many aspects of mal-aise and decay, of uncertainty and pes-simism, and areas of disruptive changesand demoralization.

The contrast leads to the assumptionthat corporate business can and shouldbring its disciplines and capabilities moreprecisely to bear upon tiie solution ofthese social ills. I agree emphatically thatit can and should, but the manner of itsdoing so requires more exact definitionthan it has commonly received.

Tha Need to Keep in Character

In attacking social ills, businessshould act within the framework of itsproven special abilities, skills, and dis-ciplines. Only by acting in the mannerwhich has made it successful in its previ-

ously more narrowly defined sphere canit be a meaningful force on the largerstage upon which it is now called to playa major role. This point is critical. All in-stitutions have distinctive characteristicswhich differentiate them from others andwhich enable them to act effectively in acertain specialized way. They have or-ganic aspects—the fish out of water is anapt analogue of the institution trying tobehave in a noncharacteristic manner.For example, Jacques Barzun in his workon the modem university ascribes nosmall part of the present problems in thelarge universities to the fact that societyhas tended to use them as a convenientdumping ground for a variety of essen-tially noneducational problems, with theresdt that their sense of identity and com-mon purpose has become diffused, andtheir ability to perform their prime func-tions has been diluted.

What are the essential characteristics

of corporate business that make it aneffective mstrument”‘ These are critical toassessing its proper role in a broadersphere.

Shareholder Power

To begin with, I think corporate man-agement has shown itself to be responsi-ble in serving its prime constituency—the owners of the enterprise. It is not anuncontrolled mechanism serving the self-aggrandizing ends of the individuals whohead it. Since the time of Berle’s earlywork on the modem corporation, it hasbeen recognized that the general separa-tion of ownership and control of largecorporations has created at least thedanger of divergent interests as betweenowners and managers.

The control of management by share-holders is, in fact, a complex processwhich operates on a ntmiber of differentlevels. First, there is the electoral processitself, the process by which shareholderselect the directors, who in tum appointthe management While this is an im-perfect process, the concurrence of stock-holders in the selection of managementand on many important specific mattersmust be sought and obtained. The efficacyof this electoral process is aided by thefact that responsible managements arehighly sensitive to the views and opinionsof individual shareholders, exactly aspoliticians take quite seriously the viewsof individual voters back home.

A second mechanism of control byshareholders over management, and onewhich is highly effective, derives from thepublic reporting procedures. No otherbody of men is called upon to report sofrequently, so publicly, ui such detail, and

in such precise quantified terms as arecorporate managers.

Furthermore, this detailed and fre-quent reporting is against standardswhich center around the necessity for theenterprise to perform well. It must growin volume; it must grow in earnings; itmust grow in earnings per share. Theseperformance standards have been ac-cepted not only at the top levels of thecorporate enterprise, but they have alsobeen disseminated throughout the entirefirm, with the result that they are a partof the fundamental thinking of the mem-bers of the organization—a thing given,an accepted axiom, a major premise thatpermeates the entire apparatus and influ-ences daily action. The influence of fre-quent and detailed public reports, com-bined with commonly accepted standardsof performance in terms of growth, pro-duces in effect a kind of public score-board which makes highly visible thesuccess or failure of corporate manage-ment-visible not only to shareholdersbut to the financial community and thepublic generally.

The influence of this process in guid-ing the action of management is highlyeffective in practice. It is also effective inbringing about desirable changes in man-agement and the requisite changes arecommonly made, by direct action of di-rectors or as a consequence of dissatisfac-tion in the ranks of management itself,long before stockholder dissatisfactionreaches the point of organized revolt.

It is perhaps not beside the point tonote that business is quite unique in thisrespect. No other institution accepts asnormal the need to report and justify bothits actions and results so continually andprecisely. While other institutions, suchas foundations or universities or even de-

partments of the Government, may reportpublicly, they are not required to accountfor results in specified, quantified terms,and it is this latter requirement which isdistinctive to business.

Explicit Endi and Diiciplined Means

The next attribute of corporate busi-ness, which is important in the currentcontext, is the fact that corporations aredisciplined entities. I do not use the term”disciplined” in a military or hierarchicalsense, but ratiier in the sense that corpo-rations function by setting specific goalsand objectives and then acting in an or-ganized manner to attain them. The en-tire planning/budgeting/reporting cyclein modem business operates to make theenterprise a results-oriented mechanism.It is the attainment of goals that is re-garded as critical, not the steps which arepreliminary to this. No responsible busi-nessman confuses the making of anappropriation, for example, with the at-taitunent of the objective of the appro-priation, which may be a new and betterproduct on the market, or a new plant inoperation, or whatever. Another exampleis the fact that the appointment of a com-mittee to study some matter is not re-garded as an end but a means, and usuallynot a very good one.

Pervading everything in the modemcorporation is the discipline of the eam-ings statement, the final, precise, unchal-lengeable Scoreboard which tells whetherit is winning or losing. The discipline ofthe earnings statement applies not only tothe total enterprise but also, in a well-runcompany, to each of its operating seg-ments. One of the most effective steps wetook in the rehabilitation of Singer was to

restructure the entire company into alarge number of profit-centered operatingunits, thus bringing the discipline of theearnings statement to all the segmentsand units of the enterprise. In the per-formance environment of the modemcorporation what counts is results, and itis only seldom that the rhetoric of excusesand explanations is accepted as a substi-tute for performance.

Capacity for Change

An allied characteristic is the fact thatmodem corporations are pragmatic and,therefore, flexible. As they are concemedwith results, their structure and hierarchyare regarded as means which are subjectto being rapidly changed when found notto be suitable. In Singer, for example,each of the recent years has seen one ormore major structural reorganizations aswe accommodated to some extemal or in-ternal change, or to some new perceptionof how we could more effectively accom-plish the corporation’s purposes.

A concomitant of this characteristicis that circumstances in recent years havemade it necessary for corporate businessto acquire the ability to manage changein an orderly fashion. Someone has ob-served that the great social changes whichhave occurred in history have tended todestroy the societies in which they oc-curred. Our problem today is to bringabout major changes in our society with-out destroying the fabric in the process.A principal reason that corporate busi-ness has a large measure of the ability tobring about major change in an orderlyfashion and without destmctive effects isthat in the postwar period it has had toaccommodate itself and all of its pro-

cesses to a period of the most rapid tech-nological change in human history. Thisbroad statement is frequently made butlittle understood outside the ranks ofbusiness and those engaged in the phys-ical sciences and technology. For ex-ample, in the recent past, the entire largesegment of industry concerned with elec-tronics has twice revolutionized itselftechnically. The replacement of the vac-uum tube by discrete solid slate deviceswas the first revolution. The second isonly now occurring—the replacement oftransistors and other discrete solid stateunits by integrated circuits. In previousperiods a change of the magnitude ofeither one of these would have occurredonly over the period of a generation. To-day the periodicity of such fundamentalchanges has been reduced to a few years.

Another example is the following: Inone of our own major operations we haveplanned for and are currently introducinga major new product, the product life ofwhich is planned to be precisely 18months, at which time it will be succeededby another major product change Theseare not mere model changes, but theproducts mvolved are fundamentally dif-ferent and of new design. Corporate man-agement lives with rapid technicalchange as a daily condition and, as a re-sult of this, has learned, sometimes pain-fully, how to manage such change withouttearing apart the fabric of the organiza-tion itself. This means that large corpo-rate organizations must always be pre-pared to transform themselves in termsof organization structure, in terms of in-dividual managerial responsibilities, and,of course, in all the marketing and otherfunctional areas of the business.

In our own company a decade ago achange in one of the principal sewing

machine models was a convulsive eventfor the entire organization. Now in thecourse of a year, across all our variousproduct lines, we make a hundred prod-uct changes of equal or greater magni-tude with hardly an organizational rippleto mark these events

The importance of this almost uniqueand recently learned ability is that thesocietal problems in many areas cry outfor basic and rapid change, and the so-cietal danger is that such change willhave a destructive effect upon societyitself, the fabric of which is already seento be torn and rent in places and cer-tainly tattered at the edges.

Influence for Liberalization

The next characteristic of the mod-ern corporation to note is that, in action,it may well be the most potent liberaliz-ing force in the society. This may seem astartling idea to some—especially thosewhose views of large corporations wereformed in the prewar period or from thehistory of the era I myself have neverbeen able to read the history of the NewDeal era without a feeling almost ofdespair that the business attitude at thattime was so universally one oi negativ-ism. Although the condition of the coun-try was desperate, the business positionwas one of opposition to nearly everyproject which emanated from Govem-ment or other groups to attempt to dealwith the situation. Whatever the reasonsmay have been for this attitude of theThirties, the picture today is entirely dif-ferent. The ideological conflicts of theThirties have largely been resolved andthere is little disposition today to oppose,merely for the sake of opposition, the

current efforts to attack the social prob-lems of today.

More importantly, the business en-vironment has become increasingly lib-eral. It is preeminently an open society.Its need for talented men is great and in-creasing. Its emphasis upon performanceis one of its principal characteristics andthe entire thrust of its personnel policiesis to ask not who a man is or what hisbackground is, but simply whether hecan perform or not. As a result, the busi-ness society is open and mobile, with pro-motion, influence, and power comingrapidly to those who can perform. In theold phrase, it is a “career open to talents.”It is open not only to talented men but tonew ideas. Accommodation to constantchange means that dogma and conven-tion have insufficient time to take rootand exert their stultifying influence. Itsemphasis upon problem solving and thepragmatic attainment of measured re-sults are liberalizing influences. Structureand status give way to accomplishment.Its current state of optimism and confi-dence in the future are exemplary of theliberal idea that the condition of man canand should be improved.

We must never forget that we are theheirs and practitioners of the IndustrialRevolution and its current phase—theTechnological Revolution—and that thesehave been truly revolutionary in the im-provement they have brought in the con-dition of man in all the Western coun-tries. In the long reach of history it wasonly a brief time ago that poverty was thealmost universal condition of man Theindustrial system has been so successfulin elevating man from poverty that oursociety and those of other Western na-tions are now able seriously and practi-cally to decide that we intend to elimi-

nate poverty from the relatively smallareas of our society where it remains.This is no mean or ignoble task, nor is itan overstatement to call it the most liber-alizing movement in the modern era.

I would assert, therefore; (1) thatmodem large corporations have shownthemselves to be responsible and respon-sive to the interests of their prime consti-tuency, their stockholders; (2) that theyare accustomed to act in a disciplinedand orderly fashion for the attainment ofspecified goals; (3) that they are prag-matic and structurally flexible; (4) thatthey have shown themselves to be ac-complished in managing rapid change,and, finally, that in action, if not in statedphilosophy, they are a major liberalizinginfluence.

Strategy for Success

In many respects these can be seenas characteristics that would make themeffective instruments in attacking ourmajor social problems; and, generally, Iwould agree, with one important proviso.If they are to be effective in this en-deavor, they must bring to the task thespecial characteristics which havebrought them their current success; and,most importantly, they must brmg theirprimary internal and external discipline,that of the earnings statement. It hasbeen suggested by some that in the attackon current social problems, corporationsshould organize a separate nonprofit de-partment or division which would thenfunction, I suppose, somewhat similarlyto the manner in which a charitable foun-dation functions To me this would re-quire a corporation to act in this field likesomething which it is not. It is no more

capable of acting effectively as a founda-tion than would a foundation be able toact effectively as an industrial corpora-tion. If it attempted to do so, a corpo-ration would lose its discipline and oneof its principal sources of strength.

An example of btisiness functioningeffectively in one current problem area isthat of minority employment. Bringingpeople into the labor force and trainingthem is an essential part of the regularfunctioning of any enterprise. In our owncase we have done this not only in theU.S. but in all the countries abroad. Wehave established new factories in up-country areas in underdeveloped landswhere the entire labor force which had tobe recruited and trained came from im-poverished and illiterate farm workers inthe neighborhood.

As a world enterprise whose employ-ees and customers were of every color,race, and nationality, the Singer Companyhad for a long time maintained a policy ofnondiscrimination in employment. In theearly Sixties the policy was restated inmore precise terms and its enforcementwas organized in a more vigorous way.As a result, minority employment in-creased, but some time ago, in commonwith many other companies, we realizedthat the results of even a rigidly enforcednondiscrimination policy were unlikely tomeet the requirements of the situation.We therefore organized an affirmativeeffort to bring into our employment ranksminority people who, in the absence ofspecial training, could not have qualified.This effort was meticulously organizedwith training programs for personnel peo-ple and supervisors and vigorous follow-up by the top management of the com-pany.

The results of this affirmative, or-

ganized effort have been to accelerate therate at which members of minority groupsare entering our work force. Simulta-neously, we have provided support for avariety of new minority businesses andfor such ventures as day care centers forthe children of working mothers. Otherlarge companies have had similar experi-ences, and I cite ours here not because itis so distinctive, but as evidence of thefact that when a large corporation organ-izes an effort such as this and establishesit as a visible program, it can attain re-sults. Furthermore, it is important tounderstand that this is not a charitableeffort, even though it is quite costly.Rather it is business performing, withsharpened focus and effort, its traditionalfunction of recruiting and training newemployees with the intention of makingthem fully productive employees whowill eam their way and make their con-tribution to the success of the enterprise.

Tha Singer Eiperience

Needs create markets and corporatebusiness exists to serve markets. One ofthe needs of our society is vastly im-proved vocational training and educa-tion. What our company is doing in thisfield provides an example of how I be-lieve large corporations in serving mar-kets within their competence can con-tribute effectively to the solution of socialproblems. Singer has had a long back-ground of experience in a narrow seg-ment of vocational training. As the dis-tributor of the first mechanical device tobe used in the home, our predecessorshad long ago organized sewing schoolsand provided instruction for generationsof girls and women all over the world.

We taught the world to sew, and todaythe newest generation of family seam-stresses is leaming the sewing skill fromthousands of Singer teachers around theglobe.

Less than a year ago, against this his-torical background, we analyzed the totaltraining and education market and ourown diverse capabUities in this field. Asa result, last fall we established an Edu-cation and Training Group as one of ourseven operating groups and gave it abroad charter in this field. The initialcomposition of the Group consisted of anumber of operating units serving seg-ments of this field which had formerlybeen organizationally separated. Theseincluded a unit operating in the field ofaudiovisual equipment; another whichprepared and distributed to schools film-strips, instructional material, and similareducational software; a unit which oper-ated a Job Corps Center at Camp Breck-inridge in Kentucky; another in the fieldof designing and producing closed circuitTV equipment for school use; and theLink Division, with a long record ofleadership in computerized simulationequipment for training pilots, astronauts,and auto drivers.

Since the organization of the Group,we have been awarded the task of oper-ating the Delta Project in Mississippi,which is a retraining program for dis-placed agricultural workers, largelyblack. Organized as a centrally directedoperating Group, the corporation thushas a very wide range of ability in thistotal field with prime emphasis upon vo-cational training. It ranges from verycomplex large computer systems for sim-ulation all the way to the less technicalbut equally difficult techniques of bring-ing high school dropouts back into pro-

ductive society. We have learned a lotand are leaming more, not only about thestandard aspects of training and educa-tion, but also about the specialized prob-lems of training disadvantaged people.At our Job Corps Center at Camp Breck-inridge we have been able to train highschool dropouts with greater effective-ness and at less cost than the universitywhich managed the camp before we did.

We believe that we are making a con-tribution to the solution of the country’seducational problems, and we intend tomake a greater contribution in the future.In addition to expanding our existing op-erations, we are now studying the possi-bility of establishing Singer Schools orLeaming Centers to which we wouldbring all of the latest techniques to bearupon the problem of obtaining more ef-fective education at lower costs. We arealso studying the question of whether wecan effectively participate in the vasttraining and educational requirements ofthe underdeveloped countries in theSouthern Hemisphere.

The essential thing to note is that ourEducation and Training Group is a fuUyoperational profit-making segment of thetotal company, which is serving marketsresulting from society’s need for bettereducation and training. It brings to thisfield the same disciplines that our otheroperating groups bring to their respectivemarkets. We are acting like a businesscorporation, not like a charity or founda-tion, or a welfare department; and oureffectiveness in this area will continue tobe dependent upon our doing our ownthing and not somebody else’s.

To sum up, we can hardly over-stress the importance of every corpora-tion positioning itself in a positive andinteractive way with the basic economic

and social trends of the present andfuture. There is no doubt in my mindthat today this requires positive partici-pation by large corporations in servingactively the current and emerging needsof our society, but acting always withinthe framework of its special skills and

disciplines. The large modern Americancorporation is a powerful and effectiveinstrumentality, and those of us whohave leadership responsibilities in thisarea will be called upon in future to faceeven more complex problems of exercis-ing that power responsibly.

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