Chapter 2

From Mechanics to Social Responsibility

There is usually something to be gained by taking a look at the past. We can often determine more correctly the direction in which we are headed if we view it from the perspective of past events, and we can often manage to avoid actions that have been proved, by past experience, to be mistaken. For the student of management, the past helps to give a clearer conception of the present status of the subject. For these reasons, in this chapter we shall present a brief summary of selected significant aspects of the history of personnel management.

MECHANICAL APPROACH TOWARD PERSONNEL

Industrial management in this country has done an excellent job in the mechanical and electronic implementation of production. For over a century managers have applied the principles of interchangeable parts, transfer of skill from human to machine, and operational specialization to machinery, equipment, layout, and the general plant. This has been accomplished with a high degree of success. It is not surprising, therefore, that the same basic mechanical approach should be applied to labor. If machines can be made more productive by extreme specialization, so can people. Jobs can be created requiring such little ability that bodies, properly numbered, can be interchanged readily. Just as we try to purchase machinery and plant with the lowest direct outlay, so we can hire labor as cheaply as possible. Just as we try to keep plant and equipment operating economically as long as possible and junk them for better when necessary, so we can use and discard human labor.

This basic approach, which we have labeled "mechanical," has also been called the "commodity approach" or the "factor of production concept." These titles are descriptive of the attitude which assumes that labor must be classified with capital and land as a factor of production to be procured as cheaply as possible and utilized to the fullest. The fact that a human being is involved in this factor is of little significance. In effect, we are adopting a closed-system stance or strategy in our approach to the management of personnel. We assume that personnel are controllable, predictable, and interchangeable. The firm is shel­tered from outside forces such as government or labor unions that might attempt to "interfere" with. the mechanistic approach to personnel. Related to this attitude was the "scientific management" movement, which also adopted a rationalistic, deterministic, and closed system approach to the management of the enterprise. Its recognized founder, Frederick W. Taylor, introduced such techniques as motion study, time study, incentive wages, and specialized foremanship in the pursuit of technical efficiency. As he stated, "Each man must learn how to give up his own particular way of doing things, adjust his methods to the many new standards, and grow accustomed to receiving and obeying directions covering details, large and small, which in the past have been left to his individual judgment."' Man is viewed as an excessively simplistic human system who only strives to avoid pain and obtain money, the "economic man" model.

Since labor is human, with multiple complex motives, the mechanical approach usually results in the creation of various management problems personnel problems. Many of these problems are quite old and have their beginning with the original adoption of this approach toward labor. Without implying that these are the only such problems, we believe that this presentation should assist in providing some perspective for the personnel function as performed in the present. The selected problems are (1) technological unemployment, (2) security, (3) labor organization, and (4) pride in work. Some indication will be given of how the problems arose, what management did about them using the mechanical approach, and what the consequences were of such proposed solutions.

Technological unemployment

Loss of jobs through the development of new machines or new techniques of work is termed "technological unemployment." Labor is replaced either by machines or by management innovations that result in more work being done by fewer people. The mechanical approach of management toward technical prob­lems pays off in the immediate sense. In that same sense the losses to labor are obvious. Reactions of labor in the past were not greatly different from those of today to similar events fear and resistance. Yesterday there were riots and attempts to sabotage the new machinery. Today there are more subtle types of resistance, such as slowdowns and union negotiated introduction of laborsaving devices.

What are some of the proposed solutions to the personnel problem of minimizing the adverse effects of technological changes? First, it should be pointed out that for over a century industrial managers in general did not particularly worry about the problem and that they mechanically laid off the employee. This was the free enterprise system, in which employees looked after themselves. But growing public dissatisfaction with the manner in which this problem was being ignored stimulated the proposal of some individual solutions.

A few isolated companies, such as Procter and Gamble, advanced the philosophy of sharing part of the company's profits with employees in order (1) to allow workers to benefit from the company's improved position and (2) to provide some additional funds to help tide the worker over in case of unemployment. This solution was not widely accepted, to say the least, though the Procter and Gamble plan, started in 1886, exists to this day. A few companies, such as Nunn Bush Shoe Company, Hormel Company, and again Procter and Gamble, proposed the idea of guaranteeing an annual wage for all eligible employees. Though they might work a short week or be laid off entirely, covered employees would to receive pay for a limited time, a year being, in most plans, the maximum. This employer initiated guaranteed annual wage plans did not spread. In 1935 the federal government in the Social Security Act imposed a responsibility on private industry for partially financing the out of work employ­ee through unemployment compensation. Funds collected from taxing employ­ers are available to eligible persons seeking work. In the 1950s we had the union version of the guaranteed annual wage as an imposed solution to this problem. In most instances, this means an employer financed supplementation of the unemployment compensation, which would raise the total amount paid to the employee to over 50 percent of the base wage. It should be noted that these plans cover all types of job losses other than discharge for cause and organized strikes. Perhaps the two most common reasons for job loss are technological change and layoff due to the reduction in the need for output.

All the above cited plans profit sharing, unemployment compensation, and guaranteed annual wages will be discussed in this text. Our purpose at this point is to demonstrate (1) that we are dealing with a very old personnel problem, (2) that the problem was long ignored by private industry, (3) that the problem will not take care of itself through relying on the usual long run economic adjustment, and (4) that solutions imposed from without, by government and labor unions, will fill the void left by private industry. Few thinking people oppose these technological improvements, but many are concerned with the manner and timing of their introduction in order to minimize the short run effects on employment.

Security

It is evident that decreased economic security is also a current problem that results partially from other problems, such as technological unemployment, and in turn creates still other problems, which lead to the creation of labor organizations. The mechanization of production creates the factory system. With the forming of factories, labor must move from a predominantly agricultural environment to the locale of a city. The tool or machine assumes greater importance, and the worker is often relegated to the position of machine tender. The uncertainty of steady employment, coupled with the problem of coming old age, works to produce a greater feeling of economic insecurity.

Granting the increase in the insecurity of employees, we might ask why management should be concerned, in a free competitive society. Such unconcern was at one time the attitude of industry in general, a philosophy that was consistent with the mechanical approach. This reaction to the problem proved to be wrong, and outside forces stepped in to impose certain solutions. In the first is an indication of a decentralization of authority. In addition, the basic policy of the AFL was to refrain from direct participation in politics, a policy which was followed until the 1940s, when the passage of the Taft Hartley Act jarred the organization away from this philosophy.

Almost from its inception, the American Federation of Labor dominated the labor movement. During these years, industrial management was well aware of the efforts being made along the line of employee organization. Many attempts, mostly successful, were made to halt the spread of unionism. A large number of these attempts involved force and violence. One interesting example should demonstrate the attitudes of union and management and the types of activity utilized by both sides in these contests.

The steel industry in 1892 had a union of skilled workers, the Amalgamated Association of Iron, Steel, and Tin Workers. It was a fairly strong union. The Homestead, Pennsylvania, plant of the Carnegie Steel Company had been struck by this union even though relations between company and union had been fairly friendly prior to this time. Carnegie, who had stated that he was wholly in favor of unions, was away in Europe and had left the factory in the hands of the plant manager, Henry Frick. A wage cut brought on the strike, whereupon Frick shut down the entire plant and prepared to protect it. The workers seized the mill property. Frick rose to the occasion by hiring some three hundred Pinkerton detectives, whom he armed with Winchester rifles and placed on two barges, which were towed up the Monongahela River near the plant property. For 1 full day a battle that would have done credit to almost any small war raged on the banks of the Monongahela. The strikers tried to sink the barges with cannons, and when this failed, they poured oil on the water and set it afire. The detectives, with three dead and several wounded, surrendered and were marched out of town. Frick then appealed to the Governor of Pennsylvania for aid, and 1 week later the state militia took over the town. With this protection the company reopened the plant and started to bring in outside personnel. It was estimated that only 800 out of nearly 4,000 strikers got their jobs back. So thoroughly was the job done that it was not until the 1930s that another effective union was established in steel.

By 1916 there were approximately 3 million members of labor unions. During the next 4year period, the number was almost doubled, because of wartime prosperity and favorable government attitudes. As usual, the movement suffered during the ensuing short depression and managed to stabilize again at about 3 million during the 1920s. With some further losses during the Depression of the 1930s, the membership stood at less than 3 million in 1933. Twelve years later, there were approximately 15 million union members. The most powerful factors contributing toward this increase were the favorable public attitudes, wartime prosperity, and passage in 1935 of the Wagner Act, the Magna Charts of labor. Collective bargaining was pronounced our national policy, and the right to organize was protected. Management's authority over another function was reduced and rigorously regulated.

In 1976 union membership stood at 20.8 million, a decline of almost 1 million from the 1974 figure. Most of the current memberships are in unions affiliated with the American Federation of Labor Congress of Industrial Organizations; the rest are in nonaffiliated unions such as the Teamsters, United Auto Workers, United Mine Workers, and various local independents. Approximately 21 percent of the total labor force is organized into unions. This represents a decline from a high of 27.1 percent reached in 1953. It is evident, however, that despite this decline, turning back is impossible; the labor union is here to stay as a definite factor in our economy. We do not suggest that since unions have come this far, management should accept them completely. Such acceptance is neither desirable nor legal. But it should be evident that this problem of labor organiza­tion is one of the foremost of our time and requires more constructive thinking than has been evident in the past.

Decreased pride in work

The tightly designed organization structures and precisely planned work systems have played a role in lessening the freedom of the individual organization member. On the operative level, the increasing transfer of skills to machines has often left the worker with either a task of machine tending or no task at all. For managers, introduction of computers and data processing systems has served to regulate more closely their activities. Chris Argyris has suggested that industrial management in general has tended to underestimate the intelligence, resource­fulness, goodwill, and creativity of the American worker. He contends that jobs call have been designed that for docility, passivity, submissiveness, and short-term perspectives. In his terms, the net result is psychological failure. We should, therefore, be concerned with a resulting absence of individual pride in accomplishment engendered by traditional structures of organization and opera­tion.

As we consider this problem, we should first ask if pride in work is necessary. So long as the employee grinds the work out day after day, regulated by a system of production and managerial controls, why worry? Yet, when a problem is ignored, certain solutions are contributed by others which may not be the most desirable. This work situation, as we have briefly described it, is essentially the plight of the mass production worker. The CIO split from the AFL in 1936 for the specific purpose of representing this group of employees. The practice of ignoring the many requirements of the mass production worker has led to more unionization. The CIO, of course, later rejoined the AFL to form the AFLCIO in 1956

There are no laws or union demands that require management to create employee pride in work. The management with a mechanical approach toward labor has no interest; consequently, it can see no need and therefore no possible profit in considering the employee's psychology. Further analysis of this problem has led many to change their minds and, thus, their approach to labor. If stimulated, employees can often utilize their talents to make greater contribu­tions than the minimum required. There is a large, relatively untapped reservoir of ability, loyalty, and interest.

Various other problems of personnel could be classified as a part of this series. But we feel that the essential point has been made that management has played a large part in creating many of our modern personnel problems and that these problems have been too long ignored. Much of the progress made concerning these and similar problems has taken place within the last 20 years. Personnel management is a youthful, skilled profession dealing with some old and ingrained problems.

PATERNALISM

Although not all firms and managers held with the mechanical approach toward labor, it was fairly predominant in our economy up until the 1920s. Then suddenly there was a drastic reversal of form by a substantial segment of industrial managers. Some believe that a different approach was created by a fear of labor union growth, for during World War I the union membership almost doubled in number. Employees had demonstrated that they could escape from the managerially engineered closed system. As employers observed the break­down of total control, they attempted to reclose the system by demonstrating to employees that there was little need for an outside force, the labor union. They began to undertake "voluntarily" a number of humanistic activities that they, the "fathers," felt that the employees needed.

Paternalism is the concept that management must assume a fatherly and protective attitude toward employees. The cold, impersonal attitude of the commodity concept is now replaced by a personal, and sometimes super personal, attitude of paternalism. The 1920s were the period during which personnel management became known as the glamour field of management. Here is where the need arose for the "backslapper," the "personality boy," and the man whose sole qualification was "liking people." During this time very elaborate personnel programs were developed, emphasizing such activities as company stores, company homes, recreational facilities, and the like. If the objective of this approach was to contain unions, it succeeded for a time, since the labor movement actually decreased in membership during this period. If the objective was that of buying employee loyalty and gratitude, it failed, since the employees considered themselves adults rather than children.

We do not believe that merely supplying many benefits, such as housing, recreation, and pensions, makes a management paternalistic. Of firms that offer identical benefits, one might be properly labeled paternalistic and the other might not. To be paternalistic, two characteristics are necessary. First, the profit motive should not be prominent in management's decision to provide such employee services. They should be offered because the management has decided that the employee needs them, just as a parent decides what is good for the children. This is not to say that the services may not prove to be profitable, but profit is not the prime reason for their installation. Second, the decision concerning what services to provide and how to provide them belongs solely to management. The father makes the decision that he feels is best for the child. If a firm offers a program of employee services because (1) it feels that such treatment of labor is a sensible and profitable undertaking that will advance the entire organization, or (2) the employees request and participate in the establish­ment of such programs, or (3) the labor union demands such programs, then that firm cannot properly be labeled paternalistic.

It is interesting to note that the paternalistic era coincided with the initiation of a second school of management thought. Just as the first, scientific manage­ment, developed in conjunction with the mechanical approach, the second school grew out of a series of lengthy experiments at the Hawthorne plant of the Western Electric Company beginning in 1924. This school, variously titled "human relations" and "behavioral," encouraged the adoption of a new model of the person. The pendulum swung from one extreme to another, from simplistic economic person to simplistic social person. Developing employee morale was viewed as a certain means to higher productivity. The interests of humans and organizations were deemed to be substantially identical. The impact of this school of thought, populated primarily by psychologists and sociologists, was felt primarily in the 1940s and 1950s. Just as the scientific management philosophy exacerbated certain human problems within the organization, the softer, human relations programs did not meet the requirements of organizational effectiveness in the experience of many managers. The problem is, instead, a highly complex one.

SOCIAL SYSTEM APPROACH

Paternalism died largely during the Depression of the 1930s, though certain managements still claim to utilize this basic approach even today. Having learned through experience of the values and dysfunctions of prior approaches, managers and researchers began to realize that the management of personnel is no simple process. The pendulum has moved from its extreme simplistic positions to a more complex location involving analysis of multiple and often conflicting forces. We shall term this third view of personnel management a "social system" approach. In brief, the organization, or firm, is viewed as a complex central system operating within a complex environment which can be termed an "outer extended system." Managers recognize that the central system cannot be closed and directed in a mechanistic fashion. Options are available to central system members, both within the boundaries of the firm and on the outside with the aid of such external units as labor unions, government, and various public groups. Significant elements of the systems are depicted in Figure 2-1.

There are many and varied definitions of the term system. The definition by Beckett "A system is a collection of interacting systems" is perhaps most accurate, though confusing. A system is a conglomerate of interrelated parts, each of which in turn can be viewed as a subsystem. Our central system, the firm, is a part of a larger system generally known as the "economic system." The economic system is a part of the political system of our nation. Our country is a part of the political system of the world. The world is a subsystem of the solar system, which in turn is a subsystem of a largely uncharted space system. Thus, when we state that a system is a collection of interacting systems, we are emphasizing the inevitable interconnectedness and relationships that manage­ment must consider if it is to develop viable programs of personnel management.

The major components of any one system, as depicted in Figure 2-1, are (1) inputs from the outer environment; (2) a processor component, consisting of people, functions, and physical factors, that transforms these inputs into another set of utilities (e.g., steel into automobiles, ill patients into healthy people, uninformed students into knowledgeable citizens); (3) a set of outputs desired by members of the outer environment; and (4) a nerve system, usually designated "management," which regulates the inputs, processor, and outputs. One of the significant subsystems of the processor is termed "personnel." Though located within the boundaries, modern managers recognize that they do not have total control over the talents and attitudes of their employees, thereby requiring an open systems strategy of adaptation, negotiation, persuasion, and compromise. Each individual employee is a complex human system. Employees tend to develop friendships, cliques, and associations that, in turn, become informal subsystems. We have learned that serious study of individual needs, as well as of informal group processes, can lead to personnel programs that help to align central system objectives (outputs) with the goals of the personnel component. It should also be noted that the subsystem of "management" has been divided, as suggested in the preceding chapter, into the functions of planning, organizing, directing, and controlling. After plans have been developed, the processor is designed and populated through the organizing function. Direction provides the initiating impulses for the processor to begin operation, while control works from the feedback of information concerning the nature and level of ensuing opera­tions. Thus, the management component is also a subsystem.

Consideration of the members of the outer extended system provides the basis for a third school of management thought. An exclusively scientific or exclusively behavioral approach to managing gives way to one that has been termed "contingency" or "situational" management. If the outer system mem­bers are powerful, the central system will have to adapt and accommodate; if less powerful, the central system can try to close and operate on the basis of rational efficiency. And, as indicated above, if internal personnel have important powers of knowledge and cooperation, management must adapt and accommodate; if they possess less power because of substitutability, management may move closer to scientific processes. There is no one way to manage that is applicable to all situations. Thus contingency managers recognize that other system members, internal and external, possess powers that are important to the well being of the enterprise.

TOWARD THE SOCIAL ROLE OF THE BUSINESS FIRM

In recent decades, there has been a growing concern about a redefinition of the proper role of the business firm within our society. That this is a problem is demonstrated by various surveys of public opinion concerning the design and operation of the business system. Over one half of the public believe that the bad features of our business system either equal or outweigh the good.' The public estimate of the level of profits per dollar of sales is 28 cents; the actual amount is less than 5 cents. In addition, the general public has a low opinion of the caliber of business ethics. Though 70 percent contend that business has an obligation to help society even if it means less profit, less than half would accept that executives have a social conscience.

Inasmuch as the business system is a subsystem of organized society, the modern business executive must be concerned with societal expectations. Execu­tive decisions concerning the direction and operation of business organizations have social consequences that can no longer be ignored. We have become increasingly concerned with the preservation and enhancement of (1) our physical resources on this planet, and (2) our human resources. Concerning the first, it has become only too apparent that our physical resources of air, land, and water are being seriously threatened by uncontrolled pursuit of economic goals. Second, with the labor union movement of the 1930s and 1940s and the civil rights movement of the 1950s and 1960s, society has demonstrated its marked interest in how business utilizes its citizens as employees. The personnel manager has an important and inescapable responsibility in helping the firm's management to recognize, define, and fulfill thief enlarged concept of its social role.

Bases of social responsibility

If one grants that the business firm is a subsystem of the economy, which in turn is a subsystem of the total society, it still remains to determine the nature and extent of that firm's societal obligation. Normative statements of what business ought to do with regard to social responsibility will not ensure that action will be undertaken. There are a number of rationales or theories upon which social action can be based. Among these are:

1. Long run profit maximization and social responsibility are substantially similar concepts.

2. The changing ethics of business managers are in concordance with the changing norms of society.

3. Firms will prepare a list of goals in order of priority with noneconomic social values being included.

4. Firms will be socially responsible to the degree they perceive power threats in the environment.

With respect to the coincidence of a long term view of profit and social responsibility, it has been stated, "The longer the range a realistic business projection is, the more likely it is to find a sound ethical footing. When Henry Ford II explained Ford's extensive hard core unemployed hiring and training program to stockholders, it was justified on the basis of preventing future riots in Detroit. When insurance companies undertook extensive investments in slum reconstruction, they explained to their stockholders that they were opening up future markets for life insurance. When money is contributed to private educa­tional institutions, stockholders are told that the firm's management is helping to develop professional employees for the future. All of these implications are logical, but exclusive benefit to the spending firm is difficult to prove.

There is some evidence that firms that are more socially active tend to be more profitable as well. Of the companies listed as Fortune's "Top 500" in 1973, eighty were selected as being significantly more active in multiple social areas than the remaining 420.7 These eighty firms had significantly higher net income as measured as a percentage of sales, percentage of stockholder equity, and earnings per share. A second study suggests that excessive activity in the social area can be almost as detrimental to profits as too little activity. Those firms with a medium level of social activity provided a return on investment of 16.1 percent. This compared with a return of 10.2 percent for those with little activity and 12.3 percent for those with a great many social programs. A highly plausible basis for the coincidence of profits and social activity is that the factor underlying both is superior, sophisticated, and intelligent management. Those who can solve technical and economic problems can also work out an effective relationship with members of the outer extended system.

The sociological view of a movement toward greater business social responsi­bility rests upon the impact of changing cultural values upon the firm's managers. It is contended that as concern for physical and human resources spreads throughout society, individual managers' consciences and codes of ethics will lead them to make more socially responsible decisions. One negative note is sounded by a survey and comparison of codes of ethics of practicing marketing managers and young college students in both business and liberal arts fields. In asking over 1,500 students and businessmen their views on questionable actions in twenty hypothetical situations, there were no significant differences in the answers from the three groups: businessmen averaged 34 percent approval, business students 36 percent, and liberal arts students 33 percent. Lowest average approval was for an action involving hiding your wife's expenses on a report of a recent business trip (4 to 8 percent), while highest approval was given to using "long distance" telephone calls from nearby cities to reach busy executives (81 to 88 percent). Using hidden tape recorders in conducting personal interviews received approval by approximately a third of all respondents.

A more usable basis for injecting a greater measure of social responsibility into decision making is the contention that managers may preach "profit maximizing" but they practice "profit satisficing." Rather than exacting the last possible dollar profit out of each decision, one strives for a reasonable level that will satisfy significant members of the outer environment, e.g., stockholders, financial institutions, etc. The manager then utilizes remaining resources in pursuing social values of lesser priority such as hiring the hard core unemployed, utilizing the physically handicapped, or locating new plants in underdeveloped ghetto areas. Hired professional managers are more likely to use a profit satisficing approach than are owner managers. The latter are more inclined to manage the firm using a more restricted number of goals.

The final basis is considered by many to be the only realistic approach to the concept of social responsibility. The firm will be socially responsible to the degree to which it perceives power threats from others in the system. As outlined in Figure 2-1, there are significant and powerful groups operating in the environ­ment of the business firm. Labor unions and governmental units are perhaps the most powerful. Consumer groups, led by such people as Ralph Nader, are working to increase their power. Special purpose groups, such as the Urban League and the National Organization of Women, try to bring pressure upon those in authority.

Managers will assess the power of each group and its potential threat to organization activities. They will attempt to reduce these threatening forces by such actions as (1) stockpiling products to reduce the effect of labor union strikes, (2) lobbying government officials and securing business personnel appointments to governing commissions, (3) advertising to influence customers, (4) appointing a few minority members to the firm's board of directors, (5) developing multiple sources of materials supplies to reduce influence of particular vendors, (6) retaining earnings to reduce power of financial institutions, and (7) seeking stockholder proxies in order to control board of director elections. To some, many of these actions designed to reduce central system dependencies are antagonistic to a broader view of social utility. However, two points can be made. First, the basic requirements of all social systems involve this movement toward control and predictability; this is the source of much efficiency and effectiveness. Second, there is no way that the system can be entirely closed and made completely rational; we can never eliminate all of the contingencies. Thus, powerful others will always have impact on the decision processes of private managers. When managers go too long without responding, they risk the possibility of new legislation, new institutions, and perhaps even a new system.

Obligations of the personnel manager

Since society's expectations regarding appropriate treatment of its citizens are constantly changing, the personnel manager occupies a unique position in the firm. With respect to defining and fulfilling this enlarged social role, her or his obligations are primarily three in number: (1) insuring that expectations con­cerning the quality of work life are met, (2) insuring that the organization is in compliance with appropriate laws and regulations affecting employees, and (3) participating in the design and execution of periodic social audits.

Beyond adequate compensation and a safe work environment, there is evidence of a growing demand for challenging and interesting jobs, according respect for personal privacy, permitting greater individualism in dress and life style, and assistance in planning lifelong careers. A type of "corporate constitutionalism" is beginning to enter private enterprises when the executive's power to make unilateral decisions is restricted. The employee does not give up his or her societal citizenship when entering the organization. There will be increasing expectations in terms of "due process" in deciding upon layoffs and discharges, freedom of speech in regard to revealing unsafe or illegal organiza­tional activities, and the right to not reveal personal information of no concern to the organization. It has been suggested that firms should be measured in terms that will reveal the quality of work life, e.g., absenteeism, turnover, alcoholism, drug addiction, and mental illness." If "acceptable levels" are exceeded, firms should be fined or taxed just as they are when they excessively pollute the air or water. Of course, measuring and determining what are acceptable levels would be very difficult tasks. In addition it is not at all certain that the quality of work life is the only possible cause for alcoholism, drug addiction, and mental illness.

Though some firms successfully ignore threats issuing from failures to improve the quality of work life, they are much less able to avoid the uniform measures imposed by governmental legislation. Each year, a greater obligation is placed upon the personnel manager to ensure organizational compliance with a host of laws and governmental rules concerning hiring, training, compensating, and utilization of various special groups in our society. Personnel management is increasingly becoming a legalistic process as society has become impatient with voluntary social action. And though a personnel manager would prefer to acquire higher status through the initiation of sound voluntary programs, the fact is that today's elevated status of the field owes much to the intervention of government. The following chapter will be devoted in its entirety to these laws and the fair employment practices that they detail.

Finally, the modern organization will display a concern for periodic auditing of social activities, both voluntary and required. Because of the coverage of human resources, the personnel manager has a significant role to play in its design and execution. A social audit is defined as "a commitment to systematic assessment of and reporting on some meaningful, definable domain of a company's activities that have social impact. Its uses are to provide internal information to management which aids in decision making and to provide external information to the public in response to pressures upon the enterprise to be socially responsible.

Four possible types of audits are currently envisaged: (1) a simple inventory of activities, (2) compilation of socially relevant expenditures, (3) specific program management, and (4) determination of social impact. The inventory is generally the place where one would start. It would consist of a simple listing of activities undertaken by a firm over and above what is required for ordinary operation. For example, one firm itemized the following social activities: (1) minority employment and training, (2) support of minority enterprises, (3) pollution control, (4) corporate giving, (5) involvement in selected community projects by firm executives, and (6) a hard core unemployed program.

A step forward in sophistication would be an attempt to itemize the costs incurred in these socially oriented activities. Such expenditures would be more impressive to external publics but more depressive to internal managers without some indications of offsetting benefits. One utility company determined that it had spent $30,000 in 1 year in the human resources area, with an additional $90,000 being allocated to pollution control. Further documentation was provided in such areas as: (1) emission levels of particulate matter, sulfur oxides, and nitrogen oxides for coal, oil, and gas used, (2) temperatures of water received and discharged from the plant, (3) workdays lost due to employee injuries and illnesses, (4) number of minority and female employees hired and trained, and (5) charitable contributions.

In the program management approach, each separate project is researched to ascertain not only its expenditures but also its outputs, in terms of specific management objectives. In the Bank of America, for example, the Small Business Administration Minority Enterprise Program is evaluated in terms of additional costs incurred for this type of loan, compared with a projected goal of loan successful minority enterprises established. The Student Loan Program would involve a comparison of the costs of the lower rate of interest received with a goal concerning numbers of young people financed in college. This "Management by Objectives" approach permits managerial determination of the degree of success without invading the issue of the impact of goal accomplishment upon the welfare of society.