.GOOD MANAGEMENT-

When Is A Company Well Run?

AN impressive list of U.S. industries have recently found themselves in trouble. Proxy fights toppled the managements of the New York Central and New Haven railroads, stockholder complaints plagued American Woolen Co. and now a fight is shaping up for Montgomery Ward & Co. Some of these difficulties might have been averted by better stockholder relations; good management would have prevented even more. Most stockholders, if convinced their companies are well run, will support management.

When is a company well managed? At one time, the profit sheet at the end of the year was the only yardstick. But well-managed companies no longer take such a short view. Now, the profit picture is projected over a period of years. Frequently a well-managed company will sacrifice short-range profits and dividends for long-range gains. e.g., Du Pont spent $27 million before it had nylon ready for commercial production. Moreover, shrewd managers do not become complacent even when their profits, year after year, are large. The test is whether the company's profits are growing along with the industry trend. For example, Montgomery Ward's percentage of profit on its gross business always compares well with Sears, Roebuck's percentage. But the profits of Sears have grown far beyond Ward's because of Sear s vast increase in total business.

While profits are being viewed in a new light, the changing philosophy of business has loaded other new responsibilities on management. Now a well-run company, in addition to making a profit, must also maintain good relations with labor, customers, stockholders and the communities in which it has plants. It must develop new products and carry on a research program; it has to assure itself of a continuing market for its products and of a pool of trained executive talent. In short, a company needs a clear policy and a plan for the future. It not only has to know where it is going, but it must define its goals so that its executives can see them clearly.

St. Regis Paper Co., which once operated only paper mills, has grown by a careful program of buying up an adequate supply of raw materials and developing better products from them through research. As a result, the company's sales have climbed from $9,000,000 in 1934 to $200 million a year. Says President R.K. Ferguson: "We've always kept to kindred products based on utilization of our basic material-wood pulp. Good manage ment is one that concentrates in a given field." The company has also been careful of its community relations. Recently it decided to close its paper mill in Oswego, N.Y. But first St. Regis found another company that needed a mill and arranged to have it take over the plant, thus assuring an industry for the town.

Other successful companies have not been as single-minded as St. Regis. Glidden Co. branched out from paints and naval stores to plastics, food products and many other items. But such companies are not as helter-skelter in their diversification as they may seem at first look. They carefully pick new items that will fit into their old sales and manufacturing organizations.

One of the key marks of a well-managed company is that it must have enough executives to cope with any crisis. To keep young men moving up, Chicago's big First National Bank has a chart on executive and employee requirements 25 years ahead. For every executive Detroit Edison has a No. 2 man who is familiar with his job. General Motors has so many executives who can take over in an emergency that American Management Association Vice President James O. Rice said: "They're like the Notre Dame backfield--three deep."

Another test of good management is the ease with which ideas are exchanged. Jersey Standard solves its problems by calling conferences that reach all the way down the management line. Said one management expert admiringly: "In most management meetings, you get the feeling a decision is going to be reached arbitrarily. But at Jersey's meetings, if anyone has anything to say, he'll be listened to rather than have the gavel slapped down."

Jersey Standard usually appears on lists of the most skillfully managed companies, along with such other giants as G.M., General Mills, Procter & Gamble, Du Pont, Eastman Kodak and American Telephone & Telegraph. But good management is not restricted to the giants. Some of the smaller firms on a "best-managed" list would include Neptune Meter Co., Harris-Seybold Co. (printing machinery), Torrington Manufacturing Co. (fans) and Smith, Kline & French (drugs). In short, what management experts have found is that the same factors that make a small company successful also make a giant a success--and it is often the good small company that turns into a giant.

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