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hospital is designed to be self-supporting--to give a maximum of service

at a minimum of cost and without the slightest colouring of charity.


In the new buildings that we have erected there are no wards. All of the

rooms are private and each one is provided with a bath. The rooms--which

are in groups of twenty-four--are all identical in size, in fittings,

and in furnishings. There is no choice of rooms. It is planned that

there shall be no choice of anything within the hospital. Every patient

is on an equal footing with every other patient.


It is not at all certain whether hospitals as they are now managed exist

for patients or for doctors. I am not unmindful of the large amount of

time which a capable physician or surgeon gives to charity, but also I

am not convinced that the fees of surgeons should be regulated according

to the wealth of the patient, and I am entirely convinced that what is

known as "professional etiquette" is a curse to mankind and to the

development of medicine. Diagnosis is not very much developed. I should

not care to be among the proprietors of a hospital in which every step

had not been taken to insure that the patients were being treated for

what actually was the matter with them, instead of for something that

one doctor had decided they had. Professional etiquette makes it very

difficult for a wrong diagnosis to be corrected. The consulting

physician, unless he be a man of great tact, will not change a diagnosis

or a treatment unless the physician who has called him in is in thorough

agreement, and then if a change be made, it is usually without the

knowledge of the patient. There seems to be a notion that a patient, and

especially when in a hospital, becomes the property of the doctor. A

conscientious practitioner does not exploit the patient. A less

conscientious one does. Many physicians seem to regard the sustaining of

their own diagnoses as of as great moment as the recovery of the



It has been an aim of our hospital to cut away from all of these

practices and to put the interest of the patient first. Therefore, it is

what is known as a "closed" hospital. All of the physicians and all of

the nurses are employed by the year and they can have no practice

outside of the hospital. Including the interns, twenty-one physicians

and surgeons are on the staff. These men have been selected with great

care and they are paid salaries that amount to at least as much as they

would ordinarily earn in successful private practice. They have, none of

them, any financial interest whatsoever in any patient, and a patient

may not be treated by a doctor from the outside. We gladly acknowledge

the place and the use of the family physician. We do not seek to

supplant him. We take the case where he leaves off, and return the

patient as quickly as possible. Our system makes it undesirable for us

to keep patients longer than necessary--we do not need that kind of

business. And we will share with the family physician our knowledge of

the case, but while the patient is in the hospital we assume full

responsibility. It is "closed" to outside physicians' practice, though

it is not closed to our cooperation with any family physician who

desires it.


The admission of a patient is interesting. The incoming patient is first

examined by the senior physician and then is routed for examination

through three, four, or whatever number of doctors seems necessary. This

routing takes place regardless of what the patient came to the hospital

for, because, as we are gradually learning, it is the complete health

rather than a single ailment which is important. Each of the doctors

makes a complete examination, and each sends in his written findings to

the head physician without any opportunity whatsoever to consult with

any of the other examining physicians. At least three, and sometimes six

or seven, absolutely complete and absolutely independent diagnoses are

thus in the hands of the head of the hospital. They constitute a

complete record of the case. These precautions are taken in order to

insure, within the limits of present-day knowledge, a correct diagnosis.


At the present time, there are about six hundred beds available. Every

patient pays according to a fixed schedule that includes the hospital

room, board, medical and surgical attendance, and nursing. There are no

extras. There are no private nurses. If a case requires more attention

than the nurses assigned to the wing can give, then another nurse is put

on, but without any additional expense to the patient. This, however, is

rarely necessary because the patients are grouped according to the

amount of nursing that they will need. There may be one nurse for two

patients, or one nurse for five patients, as the type of cases may

require. No one nurse ever has more than seven patients to care for, and

because of the arrangements it is easily possible for a nurse to care

for seven patients who are not desperately ill. In the ordinary hospital

the nurses must make many useless steps. More of their time is spent in

walking than in caring for the patient. This hospital is designed to

save steps. Each floor is complete in itself, and just as in the

factories we have tried to eliminate the necessity for waste motion, so

have we also tried to eliminate waste motion in the hospital. The charge

to patients for a room, nursing, and medical attendance is $4.50 a day.

This will be lowered as the size of the hospital increases. The charge

for a major operation is $125. The charge for minor operations is

according to a fixed scale. All of the charges are tentative. The

hospital has a cost system just like a factory. The charges will be

regulated to make ends just meet.


There seems to be no good reason why the experiment should not be

successful. Its success is purely a matter of management and

mathematics. The same kind of management which permits a factory to give

the fullest service will permit a hospital to give the fullest service,

and at a price so low as to be within the reach of everyone. The only

difference between hospital and factory accounting is that I do not

expect the hospital to return a profit; we do expect it to cover

depreciation. The investment in this hospital to date is about



If we can get away from charity, the funds that now go into charitable

enterprises can be turned to furthering production--to making goods

cheaply and in great plenty. And then we shall not only be removing the

burden of taxes from the community and freeing men but also we can be

adding to the general wealth. We leave for private interest too many

things we ought to do for ourselves as a collective interest. We need

more constructive thinking in public service. We need a kind of

"universal training" in economic facts. The over-reaching ambitions of

speculative capital, as well as the unreasonable demands of

irresponsible labour, are due to ignorance of the economic basis of

life. Nobody can get more out of life than life can produce--yet nearly

everybody thinks he can. Speculative capital wants more; labour wants

more; the source of raw material wants more; and the purchasing public

wants more. A family knows that it cannot live beyond its income; even

the children know that. But the public never seems to learn that it

cannot live beyond its income--have more than it produces.


In clearing out the need for charity we must keep in mind not only the

economic facts of existence, but also that lack of knowledge of these

facts encourages fear. Banish fear and we can have self-reliance.

Charity is not present where self-reliance dwells.


Fear is the offspring of a reliance placed on something outside--on a

foreman's good-will, perhaps, on a shop's prosperity, on a market's

steadiness. That is just another way of saying that fear is the portion

of the man who acknowledges his career to be in the keeping of earthly

circumstances. Fear is the result of the body assuming ascendancy over

the soul.


The habit of failure is purely mental and is the mother of fear. This

habit gets itself fixed on men because they lack vision. They start out

to do something that reaches from A to Z. At A they fail, at B they

stumble, and at C they meet with what seems to be an insuperable

difficulty. They then cry "Beaten" and throw the whole task down. They

have not even given themselves a chance really to fail; they have not

given their vision a chance to be proved or disproved. They have simply

let themselves be beaten by the natural difficulties that attend every

kind of effort.


More men are beaten than fail. It is not wisdom they need or money, or

brilliance, or "pull," but just plain gristle and bone. This rude,

simple, primitive power which we call "stick-to-it-iveness" is the

uncrowned king of the world of endeavour. People are utterly wrong in

their slant upon things. They see the successes that men have made and

somehow they appear to be easy. But that is a world away from the facts.

It is failure that is easy. Success is always hard. A man can fail in

ease; he can succeed only by paying out all that he has and is. It is

this which makes success so pitiable a thing if it be in lines that are

not useful and uplifting.


If a man is in constant fear of the industrial situation he ought to

change his life so as not to be dependent upon it. There is always the

land, and fewer people are on the land now than ever before. If a man

lives in fear of an employer's favor changing toward him, he ought to

extricate himself from dependence on any employer. He can become his own

boss. It may be that he will be a poorer boss than the one he leaves,

and that his returns will be much less, but at least he will have rid

himself of the shadow of his pet fear, and that is worth a great deal in

money and position. Better still is for the man to come through himself

and exceed himself by getting rid of his fears in the midst of the

circumstances where his daily lot is cast. Become a freeman in the place

where you first surrendered your freedom. Win your battle where you lost

it. And you will come to see that, although there was much outside of

you that was not right, there was more inside of you that was not right.

Thus you will learn that the wrong inside of you spoils even the right

that is outside of you.


A man is still the superior being of the earth. Whatever happens, he is

still a man. Business may slacken tomorrow--he is still a man. He goes

through the changes of circumstances, as he goes through the variations

of temperature--still a man. If he can only get this thought reborn in

him, it opens new wells and mines in his own being. There is no security

outside of himself. There is no wealth outside of himself. The

elimination of fear is the bringing in of security and supply.


Let every American become steeled against coddling. Americans ought to

resent coddling. It is a drug. Stand up and stand out; let weaklings

take charity.








Nothing in this country furnishes a better example of how a business may

be turned from its function of service than do the railroads. We have a

railroad problem, and much learned thought and discussion have been

devoted to the solution of that problem. Everyone is dissatisfied with

the railways. The public is dissatisfied because both the passenger and

freight rates are too high. The railroad employees are dissatisfied

because they say their wages are too low and their hours too long. The

owners of the railways are dissatisfied because it is claimed that no

adequate return is realized upon the money invested. All of the contacts

of a properly managed undertaking ought to be satisfactory. If the

public, the employees, and the owners do not find themselves better off

because of the undertaking, then there must be something very wrong

indeed with the manner in which the undertaking is carried through.


I am entirely without any disposition to pose as a railroad authority.

There may be railroad authorities, but if the service as rendered by the

American railroad to-day is the result of accumulated railway knowledge,

then I cannot say that my respect for the usefulness of that knowledge

is at all profound. I have not the slightest doubt in the world that the

active managers of the railways, the men who really do the work, are

entirely capable of conducting the railways of the country to the

satisfaction of every one, and I have equally no doubt that these active

managers have, by force of a chain of circumstances, all but ceased to

manage. And right there is the source of most of the trouble. The men

who know railroading have not been allowed to manage railroads.


In a previous chapter on finance were set forth the dangers attendant

upon the indiscriminate borrowing of money. It is inevitable that any

one who can borrow freely to cover errors of management will borrow

rather than correct the errors. Our railway managers have been

practically forced to borrow, for since the very inception of the

railways they have not been free agents. The guiding hand of the railway

has been, not the railroad man, but the banker. When railroad credit was

high, more money was to be made out of floating bond issues and

speculating in the securities than out of service to the public. A very

small fraction of the money earned by the railways has gone back into

the rehabilitation of the properties. When by skilled management the net

revenue became large enough to pay a considerable dividend upon the

stock, then that dividend was used first by the speculators on the

inside and controlling the railroad fiscal policy to boom the stock and

unload their holdings, and then to float a bond issue on the strength of

the credit gained through the earnings. When the earnings dropped or

were artificially depressed, then the speculators bought back the stock

and in the course of time staged another advance and unloading. There is

scarcely a railroad in the United States that has not been through one

or more receiverships, due to the fact that the financial interests

piled on load after load of securities until the structures grew

topheavy and fell over. Then they got in on the receiverships, made

money at the expense of gullible security holders, and started the same

old pyramiding game all over again.


The natural ally of the banker is the lawyer. Such games as have been

played on the railroads have needed expert legal advice. Lawyers, like

bankers, know absolutely nothing about business. They imagine that a

business is properly conducted if it keeps within the law or if the law

can be altered or interpreted to suit the purpose in hand. They live on

rules. The bankers took finance out of the hands of the managers. They

put in lawyers to see that the railroads violated the law only in legal

fashion, and thus grew up immense legal departments. Instead of

operating under the rules of common sense and according to

circumstances, every railroad had to operate on the advice of counsel.

Rules spread through every part of the organization. Then came the

avalanche of state and federal regulations, until to-day we find the

railways hog-tied in a mass of rules and regulations. With the lawyers

and the financiers on the inside and various state commissions on the

outside, the railway manager has little chance. That is the trouble with

the railways. Business cannot be conducted by law.


We have had the opportunity of demonstrating to ourselves what a freedom

from the banker-legal mortmain means, in our experience with the

Detroit, Toledo & Ironton Railway. We bought the railway because its

right of way interfered with some of our improvements on the River

Rouge. We did not buy it as an investment, or as an adjunct to our

industries, or because of its strategic position. The extraordinarily

good situation of the railway seems to have become universally apparent

only since we bought it. That, however, is beside the point. We bought

the railway because it interfered with our plans. Then we had to do

something with it. The only thing to do was to run it as a productive

enterprise, applying to it exactly the same principles as are applied in

every department of our industries. We have as yet made no special

efforts of any kind and the railway has not been set up as a

demonstration of how every railway should be run. It is true that

applying the rule of maximum service at minimum cost has caused the

income of the road to exceed the outgo--which, for that road, represents

a most unusual condition. It has been represented that the changes we

have made--and remember they have been made simply as part of the day's

work--are peculiarly revolutionary and quite without application to

railway management in general. Personally, it would seem to me that our

little line does not differ much from the big lines. In our own work we

have always found that, if our principles were right, the area over

which they were applied did not matter. The principles that we use in

the big Highland Park plant seem to work equally well in every plant

that we establish. It has never made any difference with us whether we

multiplied what we were doing by five or five hundred. Size is only a

matter of the multiplication table, anyway.


The Detroit, Toledo & Ironton Railway was organized some twenty-odd

years ago and has been reorganized every few years since then. The last

reorganization was in 1914. The war and the federal control of the

railways interrupted the cycle of reorganization. The road owns 343

miles of track, has 52 miles of branches, and 45 miles of trackage

rights over other roads. It goes from Detroit almost due south to

Ironton on the Ohio River, thus tapping the West Virginia coal deposits.

It crosses most of the large trunk lines and it is a road which, from a

general business standpoint, ought to pay. It has paid. It seems to have

paid the bankers. In 1913 the net capitalization per mile of road was

$105,000. In the next receivership this was cut down to $47,000 per

mile. I do not know how much money in all has been raised on the

strength of the road. I do know that in the reorganization of 1914 the

bondholders were assessed and forced to turn into the treasury nearly

five million dollars--which is the amount that we paid for the entire

road. We paid sixty cents on the dollar for the outstanding mortgage

bonds, although the ruling price just before the time of purchase was

between thirty and forty cents on the dollar. We paid a dollar a share

for the common stock and five dollars a share for the preferred

stock--which seemed to be a fair price considering that no interest had

ever been paid upon the bonds and a dividend on the stock was a most

remote possibility. The rolling stock of the road consisted of about

seventy locomotives, twenty-seven passenger cars, and around

twenty-eight hundred freight cars. All of the rolling stock was in

extremely bad condition and a good part of it would not run at all. All

of the buildings were dirty, unpainted, and generally run down. The

roadbed was something more than a streak of rust and something less than

a railway. The repair shops were over-manned and under-machined.

Practically everything connected with operation was conducted with a

maximum of waste. There was, however, an exceedingly ample executive and

administration department, and of course a legal department. The legal

department alone cost in one month nearly $18,000.


We took over the road in March, 1921. We began to apply industrial

principles. There had been an executive office in Detroit. We closed

that up and put the administration into the charge of one man and gave

him half of the flat-topped desk out in the freight office. The legal

department went with the executive offices. There is no reason for so

much litigation in connection with railroading. Our people quickly

settled all the mass of outstanding claims, some of which had been

hanging on for years. As new claims arise, they are settled at once and

on the facts, so that the legal expense seldom exceeds $200 a month. All

of the unnecessary accounting and red tape were thrown out and the

payroll of the road was reduced from 2,700 to 1,650 men. Following our

general policy, all titles and offices other than those required by law

were abolished. The ordinary railway organization is rigid; a message

has to go up through a certain line of authority and no man is expected

to do anything without explicit orders from his superior. One morning I

went out to the road very early and found a wrecking train with steam

up, a crew aboard and all ready to start. It had been "awaiting orders"

for half an hour. We went down and cleared the wreck before the orders

came through; that was before the idea of personal responsibility had

soaked in. It was a little hard to break the "orders" habit; the men at

first were afraid to take responsibility. But as we went on, they seemed

to like the plan more and more and now no man limits his duties. A man

is paid for a day's work of eight hours and he is expected to work

during those eight hours. If he is an engineer and finishes a run in

four hours then he works at whatever else may be in demand for the next

four hours. If a man works more than eight hours he is not paid for

overtime--he deducts his overtime from the next working day or saves it

up and gets a whole day off with pay. Our eight-hour day is a day of

eight hours and not a basis for computing pay.


The minimum wage is six dollars a day. There are no extra men. We have

cut down in the offices, in the shops, and on the roads. In one shop 20

men are now doing more work than 59 did before. Not long ago one of our

track gangs, consisting of a foreman and 15 men, was working beside a

parallel road on which was a gang of 40 men doing exactly the same sort

of track repairing and ballasting. In five days our gang did two

telegraph poles more than the competing gang!


The road is being rehabilitated; nearly the whole track has been

reballasted and many miles of new rails have been laid. The locomotives

and rolling stock are being overhauled in our own shops and at a very

slight expense. We found that the supplies bought previously were of

poor quality or unfitted for the use; we are saving money on supplies by

buying better qualities and seeing that nothing is wasted. The men seem

entirely willing to cooperate in saving. They do not discard that which

might be used. We ask a man, "What can you get out of an engine?" and he

answers with an economy record. And we are not pouring in great amounts

of money. Everything is being done out of earnings. That is our policy.

The trains must go through and on time. The time of freight movements

has been cut down about two thirds. A car on a siding is not just a car

on a siding. It is a great big question mark. Someone has to know why it

is there. It used to take 8 or 9 days to get freight through to

Philadelphia or New York; now it takes three and a half days. The

organization is serving.


All sorts of explanations are put forward, of why a deficit was turned

into a surplus. I am told that it is all due to diverting the freight of

the Ford industries. If we had diverted all of our business to this

road, that would not explain why we manage at so much lower an operating

cost than before. We are routing as much as we can of our own business

over the road, but only because we there get the best service. For years

past we had been trying to send freight over this road because it was

conveniently located, but we had never been able to use it to any extent

because of the delayed deliveries. We could not count on a shipment to

within five or six weeks; that tied up too much money and also broke

into our production schedule. There was no reason why the road should

not have had a schedule; but it did not. The delays became legal matters

to be taken up in due legal course; that is not the way of business. We

think that a delay is a criticism of our work and is something at once

to be investigated. That is business.


The railroads in general have broken down, and if the former conduct of

the Detroit, Toledo & Ironton is any criterion of management in general

there is no reason in the world why they should not have broken down.

Too many railroads are run, not from the offices of practical men, but

from banking offices, and the principles of procedure, the whole

outlook, are financial--not transportational, but financial. There has

been a breakdown simply because more attention has been paid to

railroads as factors in the stock market than as servants of the people.

Outworn ideas have been retained, development has been practically

stopped, and railroad men with vision have not been set free to grow.


Will a billion dollars solve that sort of trouble? No, a billion dollars

will only make the difficulty one billion dollars worse. The purpose of

the billion is simply to continue the present methods of railroad

management, and it is because of the present methods that we have any

railroad difficulties at all.


The mistaken and foolish things we did years ago are just overtaking us.

At the beginning of railway transportation in the United States, the

people had to be taught its use, just as they had to be taught the use

of the telephone. Also, the new railroads had to make business in order

to keep themselves solvent. And because railway financing began in one

of the rottenest periods of our business history, a number of practices

were established as precedents which have influenced railway work ever

since. One of the first things the railways did was to throttle all

other methods of transportation. There was the beginning of a splendid

canal system in this country and a great movement for canalization was

at its height. The railroad companies bought out the canal companies and

let the canals fill up and choke with weeds and refuse. All over the

Eastern and in parts of the Middle Western states are the remains of

this network of internal waterways. They are being restored now as

rapidly as possible; they are being linked together; various

commissions, public and private, have seen the vision of a complete

system of waterways serving all parts of the country, and thanks to

their efforts, persistence, and faith, progress is being made.


But there was another. This was the system of making the haul as long as

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