United States Steel: A Corporation with a Soul. Arundel Cotter
82.50
Note: Above figures differ slightly from those given in annual reports, a few employees having failed each year to go through with their subscriptions.
Besides being given as much as three years to pay for stock purchased employees who hold their stock receive an annual bonus for five years. At first, when only preferred stock was issued, the bonus was $5.00 a year. Later, when the common stock began to have a real investment value, this, too, was offered with an annual bonus of $3.50. But in recent years the investment value of the common stock still further increasing, and it having become impossible to purchase any considerable amount of preferred stock at a reasonable price, only the junior security has been offered employees and the bonus on the common has been raised to $5.00 a year.
Latest figures show that there are now more than 66,000 employees and their families interested in the plan, that is, that number are either paying for stock or, having paid, are drawing their annual bonuses. As it is likely that there are still more employees not now on these lists but owning stock bought more than five years ago it seems fairly safe to assume that the number of employees who, as stockholders, have an interest as part owners in the great organization that they work for is not less than 70,000.
And in this number are included employees from all ranks, including workmen, so-called office boys, elevator operators, and executives. The plan was designed to be, and is, catholic in its scope.
Naturally, the stock subscription plan has not been regarded with favor by those whose interests lie in fomenting dissent between capital and labor and the plan has been attacked in many ways. One of these is the charge that it is a money-making scheme under which the Corporation purchases its own stock cheap and sells to the workers at a profit. As a matter of fact, the operation of the plan is a continual source of expense to the Corporation which has so far spent on it an aggregate of $9,160,000. It has, however, profited from the plan in one way—increased loyalty, efficiency, and coöperation.
Only “the men who occupy official or semi-official positions and who are engaged in directing and managing the affairs of the Corporation and of its several subsidiary companies” were concerned in the profit-sharing portion of the plan, generally designated as special compensation. This was more or less an adaptation of Carnegie’s method of rewarding his assistants for good service, with the difference that it held out no allure of return for effort selfishly directed, but only that done for the good of the entire organization. It was a yearly distribution to the men above described of a small percentage of the profits above $80,000,000, part of the bonus being paid in cash and part in stock of the Corporation. At the time of the promulgation of the plan it was made plain that there would be no increases in salaries of officials. All additions to salary would come through these bonuses, and in basing them on the profits of the Corporation and not of the separate subsidiary companies a powerful motive for loyal and harmonious effort for the good of the Corporation was created.
Why did not the workmen generally share in this bonus distribution? It would have been impossible to make anything like an equitable distribution among the employees of every class, especially in view of the fluctuating character of a large mass of the labor employed in the industry. But the worker with his hands did share in profits in a more definite way. His wage was increased time and again and he received the benefits of these increases whether profits were large or small. This was more satisfactory to him. And in the stock subscription part of the plan, with its attached automatic bonus, he had an equal opportunity with the men above him in authority.
But long before the Stock Subscription-Profit-Sharing Plan was perfected steps had been taken to coördinate the work of the Corporation and to bring about economies. First of these was the institution of a system of comparative cost sheets immediately after the Corporation began its existence.
The earning of profits for stockholders was the first object of the big company, as it is in every business, and its formation had been undertaken largely with the idea that the magnitude of its operations would make greater economies possible, with a gain rather than a sacrifice of efficiency and quality.
In the old steel days the calculation of costs had been more or less haphazard, at least in most instances. Too often the entire operating expense of steel making, from mining to the turning out of the finished product, had been “lumped” at the end of the year, and there was no means of arriving at the knowledge of just where profits, if there were any, were made, while if they were non-existent or unsatisfactory it was equally out of the question to fix the blame on any one department. Moreover, such secrets of economy as were discovered by those in charge of a furnace or mill were rigidly guarded as giving an advantage over competitors; all of which did not contribute to a general high average of efficiency and economy.
The Corporation’s management first set to work to ascertain the exact cost of running each and every mine, furnace, or other department, the costs being tabulated for the information of the whole organization. The cost tables were made up in the most minute detail, the blast furnace cost sheets alone containing more than 8,000 different items, and by their aid the several departmental superintendents could see at a glance what item in their operations was below the average, was too costly, and could take the necessary steps to remedy matters. These tables also created a spirit of emulation, of friendly rivalry, between the various departmental units, which alone was a potent incentive toward economy.
So immediate and so marked was the result of this system of cost checking that, according to Charles M. Schwab, a saving of $4,000,000 was effected in the blast furnace department alone in the first year of the Corporation’s existence!
As this history does not pretend to be a technical treatise on the manufacture of steel detailed discussion of the many ways and means adopted by the Corporation to achieve economies would be out of place. But some of them are particularly worthy of mention.
One example of economical methods, interesting because of the fact that is was possible only to a company engaged in operations on a tremendous scale, is concerned with distribution of iron ore to its furnaces.
Steel, although much alike to the uninitiated, differs greatly in quality and suitability for different uses. The difference lies not alone in treatment during manufacture but in the kind and character of ore used. And a plant that has large orders for a particular kind, or analysis, of the metal, would find itself handicapped greatly if its receipts of ore included a mixture of the many grades often found deposited in the earth in close juxtaposition. The right ore for the right use at the right time means better and cheaper steel.
Hence the Corporation maintains in the regions from which it receives its ores well-equipped chemical laboratories for testing and sorting the several varieties of ore. Probably the most important of these is at Hibbing, Minnesota, on the line of the Duluth, Missabe & Northern.
As the long ore trains run through Hibbing small samples of the ore are taken out of the cars and subjected to careful analysis. The trains go on their way to Proctor where the extensive yards of the railroad are located, but before they reach that centre the chemical analysis of the ore in different cars has been ascertained and wired ahead, so that the cars composing the train can be sorted and distributed in sidings in accordance with the classification of the ores they contain. At Proctor new trains are then made up and proceed to the ore docks at Duluth where vessels are waiting to convey the ore to Gary, Chicago, or, by further trans-shipment, by rail to Pittsburgh. And each ship gets the kind of ore needed at the furnace to which it is destined.
This means not only better and more uniform quality in the finished product; it means a saving of several hundreds of thousands of dollars annually to the Corporation.
The Proctor yards themselves are interesting. Stretching two miles with seventy-five miles of track and capable of accommodating 5,400 cars at one time, as many as 469,555 fifty-ton cars of ore have passed through them in one season destined for the Corporation’s hungry furnaces all over the country.
Not least among the economies following in the wake of the Corporation’s organization were the conservation effected and additional profits