6 



THE INDIA RUBBER \A^ORLD 



[October i, 1901. 



United States Rubber Co. and the Rubber Goods Manufacturing Co.?— 

 A. In the case of the United States Rubber Co. there has been a saving 

 of 25 per cent. In the case of the Rubber (loods Manufacturing Co. 

 the saving has been less, from the fact that the policy which has pre- 

 vailed in the management of that company has been to sustain the in- 

 dividuality and independence of each concern, believing that in that way 

 a higher efficiency would be secured in the selling branch of the busi- 

 ness. Although the latter method has been more expensive, experience 

 has proved that it has been of advantage to the company not to attempt 

 to secure the last economy. 



Mr. Flint mentioned as other benefits of combination that 

 production had been better regulated, to meet the actual de- 

 mands of the trade, thus avoiding overproduction and demoral- 

 ization of the market. There had also been economies in the 

 shipment of goods in large volume to storage houses in the 

 West. 



Asked in relation to economies in the purchase of raw ma- 

 terials, Mr. Flint replied ; 



As a rule there is not much saving to be secured in the purchase of 

 staple imerchandise. In some cases the large consolidations are at a 

 disadvantage, owing to the fact that they are such large buyers. In 

 general, I should say that some economies can be secured by them, but 

 these would not be important unless the combination should use a very 

 large percentage of that particular kind of raw material anywhere pro- 

 duced. In considering the raw material market, it is necessary to include 

 in your calculations all the raw material in the world, owing to the pres- 

 ent facilities for quick transportation. Raw material in London is as 

 available as if it were around the corner ; therefore, unless an industry 

 uses a large percentage of the raw material that is produced in the world 

 at large, no important advantage can be obtained. 



Mr. Flint said on another point : " Last year the United 

 States Rubber Co., doing a business of about $25,000,000, lost 

 less than $1000 by bad debts. - - - I think that the loss 

 by separate companies would have averaged on a business of 

 that volume over $100,000 a year." 



The interchange of secret processes among all the factories 

 was mentioned as one advantage of combination. 



Q. In case of the manufacture of rubber, are there secret processes 

 of manufacture that are of any value ?— ^. Yes ; there are secret pro- 

 cesses, and the issue of common stock would represent the value of those 

 processes. 



Q. Take, for example, twenty rubber plants. How many secret 

 processes do you suppose there would be, possessing any market value 

 which some of those concerns would have and others not?— ^4. No 

 concern would be manufacturing under exactly the same processes, but 

 the manufacturing of rubber is something that might be likened to cook- 

 ing, and in many cases it is dangerous to dictate to your cook as to how 

 she shall mix the dough. It is not possible in the manufacture of rub- 

 ber to dictate to all the companies the accurate methods that you would 

 in the manufacture of metals, but substantial advantages have been 

 gained by the general adoption of processes that heretofore have only 

 been used in one factory. 



Mr. Flmt mentioned one other benefit to the rubber shoe 

 industry from combination : " In going through the depression 

 to which one of you has referred, from 1893 to 1897, although 

 the volume of business fell oflF very materially, our factories 

 were left running and our help was regularly employed during 

 all that period, and at the same time our stockholders received 

 a fair return on the reduced volume of business. There were 

 no failures, although I would state that if it had not been for 

 the fact of the combination I am satisfied there would have 

 been three or four important failures in the industry." 



SOME GENERAL CONSIDERATIONS. 



"In general, I think that a centralized management is the 

 most desirable, if there are men of sufficient intellectual ability 



to administer an extended business. It is difficult to find a 

 man of sufficient ability to run one large business, and there 

 are not a great many intellectual giants that have the ability to 

 run ten or more large businesses. In my judgment, one of the 

 dangers to the success of industrials is that parties, without 

 being intellectual giants, are liable to attempt to centralize too 

 much. Taking men as they are, I think that in businesses 

 where high class ability is required at many places, and where 

 the business is not of such a character that its conduct can be 

 reduced to rules, and where its success depends on local ability 

 and local judgment, and where the efficiency of the selling de- 

 partment is involved with long time personal relations, such a 

 business it may be very dangerous to suddenly centralize. 



" It is far wiser, I think, in a case of this kind, to sustain the 

 independence and individuality of the separate concerns. In 

 that way you have the advantage of the organizations that 

 have created those concerns, and by an adjustment of compen- 

 sation, based somewhat upon the earnings of those individual 

 concerns, you sustain the individual interest that is essential to 

 success. At the same time your central organization has the 

 advantages of comparative accounting and comparative ad- 

 ministration, and is able to hold the separate concerns to a 

 strict accountability, or, by appealing to their pride, to promote 

 a healthy spirit of rivalry. In many cases it is my judgment 

 that this idea of centralization can be carried too far, and that 

 it is often much better to have these concerns run independ- 

 ently. Now, it may be said that you do not get the full bene- 

 fits of centralization. That is very true. But, on the other 

 hand, I believe you get a more efficient management than you 

 would by centralization. Under that plan, through a system of 

 comparative accounting, you are enabled to measure the differ- 

 ent managements, and you can go a long way toward bringing 

 the standard of all up to the standard of the best, and in case 

 of any great situation arising — for instance, like the one you 

 have just brought up — it can be better handled. [Reference 

 was made here to the formation of the American Bicycle Co. 

 which was a combination of customers of tires.] An individ- 

 ual concern could not have dealt with that problem success- 

 fully. The Rubber Goods Manufacturing Co. were able in the 

 above case to deal with the problem and make an arrange- 

 ment that was for the common benefit." 



Q. You speak of this system of comparative accounting. In your 

 own establishments how frequently do you get reports? — A. Every 

 month. 



Q. So that you can compare each one of the separate establishments 

 every month ? — .-1. Yes. 



Q. That is true of all the combinations in whose management you are 

 active? — A. Yes, practically true of all of them. 



" In most cases I think that the pride which a man, know- 

 ing that his work is being compared with others', has in hand- 

 ling his business successfully, together with the incentive given 

 him by reason of an interest in the profits of the business he 

 is managing, keeps up that individual interest that exists 

 where the person possesses a large ownership. But in many 

 cases it does not; the fact of it is, that one of the fundamental 

 difficulties of the management of these corporations lies in the 

 fact that the managers have a smaller percentage of interest in 

 the operations that they are conducting; under the plan of an 

 industrial combination than they had when it was an individ- 

 ual property or when they had a large interest in a small cor- 

 poration. 



"That is fundamental. There is no way in which that con- 

 dition can be changed. My experience has been that the best 

 way to meet that condition is through an accurate system of 

 comparative accounting, and in that accounting it is advisable 



