Growing Pains

You, in Canada, have reason to be proud of your country's magnificent development. You are big now and powerful. Over the last 12 years Canada's gross national product has risen a phenomenal 90 percent. Your certain destiny is to grow much bigger and stronger. You have the resources, the "know-how," and the plans. What's more, you have the confidence--the enthusiasm--of a people who seem sure of their unlimited future. You in Canada will certainly determine your own future. And the product of your growth will be distinctively Canadian. Probably you have very little more to learn from us. But from our errors you, in your own way, may find out how to avoid some of the industrial growing pains we experienced and from which we are suffering now. You have the opportunity to create a solid basis for broad understanding of the role of business in your economy.

I don't pretend to be a doctor. I can't offer any patent remedies. I'm a businessman from the States in the basic but glamorous business of grocery manufacture. Some 40 years of experience don't in themselves entitle me to this audience. But over this span I've seen misunderstanding grow large and ugly because of innocent mistakes. And as a businessman and a citizen I've made MY own mistakes. After years of wondering and questioning, some things have become clearer. At least, it's possible in retrospect to tell which of our aches were really adolescent.

One of them was a severe case of under-emphasis. We under-estimated the size and scope of our most important responsibility, selling the system. Only recently has understanding of business by the public seemed very important in the States. Up to a point we seemed to get along fine without it. For management, the easy way out of its responsibility for understanding was to single out just two villains--the misinformed and the subversive. Unquestionably, ignorance has prevented us from putting our story across, and subversives have twisted the story and dreamed up nasty fairy tales about us. And unquestionably, we must make our story so compelling that it can't be misunderstood or distorted. But, let's face it, even many of our intelligent and informed citizens seem to feel that there's something anti-social, uneconomic, and unsavory about big business.

We can talk facts until we're blue in the face and it won't do much good. The after-effects of under-emphasis still linger. Many millions of Americans who read balance sheets, who have read Karl Marx and know it's so much bunk, still have to feel that business-big and small--is a force for the betterment of civilization. It's time we faced up to the fact that we've slipped up in assuming our social responsibility. And now our collective slips are showing.

Like the youngster whose voice is changing, our words never came out quite the way we intended. We tried to show that a people proud of their rugged individualism could find satisfactions in working for large business institutions. But somehow we made it appear that the individual would be lost in the group. Team effort, the idea of working for a boss who works for his boss and so on up the line to an anonymous group of stockholders, may not appeal particularly to the great grandson of a hardly pioneer. Nor to a child today raised on the super-soft doctrine of self-expression. Instead of singing the praises of free wheeling initiative, our voices cracked and we made our one and only pitch for "team play."

Yes, and we suffered from myopia. In our preoccupations we were just too nearsighted to see that the North American spectator roots with heart and soul for the underdog--the little fellow--to triumph in the ball park, the prize ring, or the moving picture theater. Of course, big business can't pretend it's small, and wants no part of the underdog's role. But in losing the sense of up-hill struggle, we've lost the sympathetic support of a nation of rooters. We should have seen the dramatic struggles around us-against poverty, hatred, ignorance, and corruption-all formidable foes.

Sometimes, even our own family didn't understand us. Some people made the mistake of applying to big business the theories of Darwin, "the survival of the fittest." It worked a strange misconception. The theory that nature achieves a rough balance and stability by having the stronger kill off the weaker species seems, at first, to have an exact parallel in business. But the business world is not static--rather it has enjoyed constantly expanding markets. Not only has there been room enough for large and small alike, but actually, the large have grown only as the small have prospered. The huge factories in our Detroits can't get along without the little tool works and parts manufacturers in all our Crabtree Comers. Or the small retailers, either. For sure, though, large or small, they have to make a profit that's the business rule of survival.

Stranger yet, a few of our people picked up some fantastic phobias. They find no solace in the wealth their country has built and is building. They act ashamed of material abundance. They find industry crass and crude, and neurotically they pine for the illusion of the good old days or new utopias. Having comfort, they apologize for it, belittle it, but seldom would they renounce it. To me it's an incredible reaction, but perhaps a psychologist could explain it.

But most damaging of all to our growing pains is a newcomer, a sort of creeping mercantile paralysis. This paralysis, economic rigmarole, hits at the primary laws of business. Rules, regulations, and controls are epidemic. The basic relationships of supply and demand, competition--even now, profits--work imperfectly, if at all. Legislation is one of the few constants in the business equation-and more frequently it is being directed against big business. We operate in a kind of never-never world, as weird in some ways as Alice's Wonderland, where two and two can be legislated to equal five or three. It's becoming increasingly difficult to find, let alone explain, the economic principles of free enterprise. And frankly, we're not doing too good a job. Sure, we've talked and advertised and sometimes set up elaborate programs for "education." But too often we've reduced prosperity to formulas, made it seem automatic and inevitable. We've quoted volumes of statistics, nagged the public with what the system has meant to them. We haven't paid our debt to people for making the system work.

Our failure adds up to this-we've never made the system come alive for people. And so the public believes that tight controls and restrictive regulations are the cures for business ills rather than one of its diseases.

To our own blunders, to the paradox of discontent in the midst of plenty, and to the turn of history, add a full measure of misunderstanding, stir with a demagogue, and you have the mess of trouble our big business faces today.

Industry grew like Topsy in the earlier days of the United States. It wasn't long before we reached the awkward age. Like Stephen Leacock's rider, industry "rode madly off in all directions." It prospered though lacking in pattern or plan, so insatiable were the demands of a people striving for the bigger and better. Ackwardness and immaturity made us look silly sometimes. It's no secret either that some of the "barons" of 19th century enterprise employed tactics far too rugged for a modem society. The second and third-hand memory of this bygone era--gone with good riddance--is unfortunately not entirely forgotten. Unfortunately, too, we have never in so many words disowned these disreputable characters and swept their skeletons from our closets. As a result we lost the support of some idealistic and sensitive people who should have been most loyal to the system we have.

As industry became gangly, it popped some of its seams. The fabric of communication no longer fit. It was stretched almost to the breaking point. Workers once knew their big bosses by their first name. Now they seldom see them.

We had high hopes for mass communications and perhaps they appealed to the mass-but not too well on the personal level. It seems to me that 30 years ago, when I worked in a medium-sized family business, we didn't have much trouble with "human relations." Perhaps because the company wasn't big; or perhaps because human relations is a word we didn't need 30 years ago.

It may have been inevitable, too, that adolescence robbed the great corporations of some of the distinctiveness of their personalities. In other days a grocer was known for his yams over a cracker barrel and for the pungent aromas of coffees and spices. The shoemaker's shop gave off the rich smell of leather, the blacksmith's resounded with the ringing sounds of the forge.

Somewhere along the line, business management's youthful exuberance turned to shyness. We preferred to suffer our growing pains in silence, and we withdrew from our other obligations. We went into our shells. With our colleagues we found ourselves in a very nearly exclusive fraternity. Only occasionally did we interest ourselves in our employees as people. Seldom did we meet with the influential groups in our communities--with teachers, students, church groups and women's clubs. Instead we let a good many Georges do it. And usually they did a thorough job. Our influence shrank to a whisper in local, state, and national affairs; we very nearly forfeited our right to speak at all.

Indicative of the poor impression we made was the caricatured businessman. Now, I don't believe there is such a thing as a typical executive. But apparently the public has an unflattering, mistaken, but highly styled picture of the big bosses of industry.

However you look at it, the boss is in a tough spot. Once upon a time when the boss was the supreme authority, I suppose it was easier. But today, while management has the responsibility, chunks of authority are held by other bosses--the stockholder, the union leader, the government official, the mass of public opinion--and, as always, the customer.

That's the way things are going.

One of our major concerns is public misunderstanding of profits-what they are and what they do. I am sure all of you remember in the study of arithmetic in primary school the lesson of the man who bought a horse for $100 and sold it for $125. The difference was profit and so labelled. But nothing was said about the fact that he had to feed the animal for a month, spent quite a little time in bargaining for it to buy it for $100, and more time to sell it for $125. So a misconception has arisen that where a merchant buys an item for $1.00 and sells it for $1.25 he has made a 25 percent profit.

Then we have confusion over terms-gross profit, operating profit, net profit, profit before tax, and profit after tax. Is it any wonder that the public is confused about what a profit is? Actually, it is what is left after all kinds of charges and expenses have been taken care of.

Now as to what profits do. First and foremost they regulate (and very drastically) those concerns that stay in business, because without profit no enterprise can continue. Profit is the only determinant as to what items are to be produced and in what quantities. Every day as each of us pay for the items by which we live we are voting for the concern whose goods or services we buy and against those whose goods we do not buy. It is this action on the part of the public that determines which companies grow bigger, which companies grow smaller and eventually go out of business. In other words, it is the consuming public that eventually decides the size of the organization from whom they prefer to draw their goods and services. Only by serving the consuming public can an enterprise stay in business.

As simple as these facts are, we in business have failed to get this subject across. And even if we get this story across, we still have the problem of convincing the public that profits are not nearly as high as they believe, that they are nearer five than 25 cents on the dollar. But how did we ever get backed into the position of having to defend profits in the first place?

All this may sound to you as though I believe that business is a physical wreck, that drastic changes are needed. No, thank you. No patent medicines, no cure-alls .... above all, no surgery. These are the growing pains of a healthy body. Some of them are rooted in our history, some in our character or emotions, and others .... well, they just happened. A few could have been prevented. Obviously information isn't the complete remedy because prejudices are seldom based on fact. I have confidence, though, that understanding, patience, a realistic approach to the problem will work an eventual cure.

I may have seemed harsh in my criticisms of big business in the States. If I have, it's because I'm for big business and what it has done and can do .... Because my patience is running thin . . . . And because I, along with many others, share a great responsibility. You know, my company has sometimes been called a "giant among food manufacturers." I'm not sure that it's meant as a compliment. I am sure, though, that General Foods is a Pygmy in a giant-sized industry. Our company's share of the U.S. dry grocery market is less than two per cent. And in Canada it's not quite that high.

In some ways the history of General Foods presents an interesting--if not entirely typical--case history of how businesses grow up. Actually, the company is a group of smaller product operations. We grew, at first, from a series of mergers, most of which took place in the late twenties and thirties. Why? A matter of logic--there are real economies in the combining of purchasing and marketing functions for a group of similarly handled products. There are opportunities for better service to the consumer-better goods at lower prices. And there are still opportunities to grow. The research laboratory has opened up new areas to be pioneered. Almost 15% of our sales have come from new products developed since the last war. These products and others still incubating promise a substantial part of General Foods' future.

The growth of our Canadian operation, General Foods Limited, is another case in point. Apart, as subsidiaries of separate food companies in the States, most of them were unprofitable. Only when they were joined together as one company did they show a profit ... and then only after several years of hard work. The credit, of course, goes to the people who run the business. With only a couple of exceptions they are all Canadian citizens. And they are running the business successfully.

The case against big business is so implausible and inconsistent it's difficult to answer. A will-o'-the-wispish set of tortured facts, emotions, and flimsy philosophies, the arguments are super-charged with pure poppycock. There are no generally accepted definitions, no yardsticks-when is a business big? When it has a thousand employees? fifty thousand? a hundred million dollars of sales? a billion? It is gauged by the share of the market a product holds? If so, Postum then is a big business and Maxwell House Coffee a very little one.

Certainly, there's precious little substance to the argument when comparative sizes are criticized without regard for the reason bigness was attained. And the emotional approach--that big institutions necessarily are "bad"--is not only unjustified but terribly dangerous in the face of our country's critical needs for the benefits of large scale production.

Big industry has evolved for the same reasons we find ourselves with big government and big argriculture today. And that's because we have huge demands and need the great capacity of the large institution.

A fuss is made about business concentration and monopoly. But the facts don't support any significant trend in that direction. And in many fields it's plainly impossible to set up a monopoly. I don't believe anyone could ever form a monopoly in women's hats. In many other businesses the market is way too large for any one company to cover. If the profit picture is attractive enough, competition in a free economy can and will knock over the protective fences. As businessmen-big businessmen, if you will--we believe we're better off in a competitive system. Of course, we aren't getting chummy with our competitors, but we realize that we might be in for trouble if our suppliers were monopolies and we had only a few customers. General Foods, for one, wants to go on doing business with some 50,000 suppliers and 35,000 customer companies.

But, believe me, we have the right to grow. I never heard of a small business that didn't aim to be a bigger one. Sure enough, for every business that succeeds there are ten that fail. But every business, if it serves, should have the chance to prosper in an expanding country. If companies are to risk, they want no less and no more than a fair chance of winning. If, in our economic system, the dice were ever loaded against a fair shake, investment would end right there. And the big loser would be the public. With their dollars they decide whether a business should grow or not. And that's as it should be. And it usually works out that the public is the big benefactor of the risks that pay off. Not only do they gain new products, but the chain reaction set off by an important new product creates other new businesses, new jobs, and new wealth. For instance, there's no complete record of the impact of frozen foods on the grocery business and other related industries. But we do know the business General Foods nursed through its early stages meant hundreds of thousands of new jobs and millions of dollars in new business activity.

Big business gave a powerful push to progress.

Even though the automobile, antibiotics, and electronics were once spawned in small companies, it stands to reason that it took large organizations to bring their benefits to the public. Some types of products require a large initial investment and large sums to perfect and manufacture them. Only a sound company, big or little, can survive the bleeding red ink of a new and ambitious project. It seldom goes into the black for a number of years.

Now you know, there are many practical reasons why our economy needs big business. And the growing pains which must be corrected, can be corrected. More encouraging, the job is being done, as it should be done, by men in business. In Canada and the United States, industry is now taking the lead to tell its story the way it knows best-by producing goods for an ever increasing standard of living. But the story is also being translated through words and facts. And all the while the new and dynamic business personality is taking shape in men's minds. Service ... responsibility ... integrity ... spiritual satisfactions. Here is something with meaning and significance for people. It has the power to spark a deeper loyalty for what we stand for, as well as for what we may have accomplished.

I believe you in Canada will do an even better job than we in the States. You are avoiding many of our clumsy errors. Canada is building sturdy businesses both large and small, that should have few worries about growing pains-provided you don't laugh them off. As you build and as we cure we should become even better customers and better friends. Side-by-side, but each in our own way, we can achieve our common aims.

You have not only time on your side, but natural wealth, vigor, and above all else you have mature judgment.

You have an enviable future.

THANKS OF THE MEETING were expressed by Mr. John W. Griffin.