Institut international d'administration publique Association du corps préfectoral et des hauts fonc.

Administration : the journal of business analysis and control online

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the face of severe German competition.
December 14, 1921, President Vauclain
himself sailed for Warsaw to swap
locomotives to the Polish Government
for lumber, with the idea at the back of
his mind of going on to Moscow to see
what Lenine might have to trade, if
developments should warrant. In any
event he proposed to hurry back to Phil-
adelphia and from there to run over to
India to swap locomotives for any old
thing the Hindoos might have to trade
— perhaps for hemp, unless Senator
Watson should object on the ground



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No. 2



that hemp might be manufactured into
ropes to hang the rest of the army with.

It will be remembered in this con-
nection that President Vauclain took a
swing around the European circle in
1920, swapping locomotives to the
Polish Government for bonds, locomo-
tives to Roumania for oil, and locomo-
tives to Serbia for wheat, until his
board of directors called a halt. Pres-
ident Vauclain had promised his board
that the sales policy should be pegged
at 50 per cent of the output for domes-
tic trade, and 50 per cent for foreign
trade; but his skill in trading had given
the policy a list to port almost as bad
as that of the Imperator, the German-
built ship on which he crossed the
Atlantic and which acted as if it was
thinking of turning turtle, which made
the passengers jumpy all the way
across and resulted in the vessel being
sent to the shipyard for rebuilding.
After his trip the ratio of sales had be-
come 60 per cent foreign, 40 per cent
domestic.

If the sales policy of the Baldwin
Locomotive Works had been reduced
to a rigid formula to be conned by rote
and adhered to, whatever befell, nothing
like this could have happened. But a
philosophy provides for contingencies,
which a formula never does. While
the Imperator had to go to dry-dock,
the sales policy did not, for interest on
the Polish bonds is being paid punctu-
ally; the Roumanian oil is being deliv-
ered with a scrupulous regard for the
letter of the contract, and the cargoes
are being converted into cash before
they ever leave the Black Sea; while
wheat in Europe is as good as money in
the bank.

In addition to about $18,000,000 in
domestic credits the firm is carrying
approximately $30,000,000 in foreign
credits. In view of the attitude toward
export trade so frequently found it is
decidedly interesting to learn that the



Baldwin Locomotive Works has never
had a bad foreign credit — a fact which
should strengthen faith in the Vauclain
philosophy.

That 1920 trading tour gave a lot of
other people an idea. Now, when a
good many national currencies are not
worth much more than the market-
price for waste-paper, and a great deal
of breath is wasted in telling how dread-
ful the times are, a great deal of swap-
ping is going on, and it is a potent
factor in expediting Europe's come-
back. Not that the idea of exchang-
ing goods is new, but Vauclain appears
to have developed a peculiar facility in
adapting the requirements of the seller
to the resources of the purchaser. The
trick is not difficult to this man who
has turned it so successfully; for some
of the countries worst hit by the war
are rich in natural resources, a fact
which appears to be pretty well under-
stood, as the continent is overrun with
concession hunters and get-rich-quick
promoters. But those Europeans know
a thing or two, if not more, which
knowledge makes things unpleasant
for the concession hunters, but quite
the reverse for those who go on legiti-
mate business.

Ingredients in the Baldwin recipe for
building bigger business under difficult
circumstances include a clearly defined
philosophy, a loyal and enthusiastic
organization, and an unusual executive.
Perhaps the last item should come first,
only President Vauclain might demur.
One may hear from him much about
what great work Smith is doing, about
how valuable a man Jones is, and how
clever Robinson has proved to be;
but Irvin S. Cobb's favorite pronoun
rarely falls from the president's lips.
To hear him tell it, he is the man most
likely to be wrong. If it were not for
the invaluable counsel of his brilliant
staff there is no telling what might
happen. They are the boys who de-



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serve the credit for the fine record the
corporation is making in these unprec-
edented times. Of course no one
around the shop cherishes any delu-
sions under this head, nevertheless this
attitude helps along the esprit de corps.

Nor is it a mere pose. A fundamen-
tal requirement is that representatives
of the firm shall be humble in spirit;
shall give others credit for being as
clever and as honest as themselves.
The president exemplifies his own phi-
losophy by setting the example in this
particular, as in others. Moreover, the
Vauclain conception of teamwork is to
let each man pull his share of the load,
then give him full credit, or perhaps a
little more for good measure, for doing
it.

All this constitutes the chief corner-
stone of a philosophy of selling, which
is producing business where business
is not. It is not so much an elaborate
sales organization as the spirit behind
the organization which produces re-
sults. This is not to say that the firm
lacks a good sales department, for it
has an admirable organization covering
the whole world. President Vauclain
said, in describing the new sales
organization:

Immediately after the World War, I con-
cluded that our domestic business would
soon become unreliable; that we should be
confronted by the mountains of prosperity
and the canyons of depression, both unprof-
itable for the manufacturer. Therefore, in
order that we could at all times be assured
of business remunerative both to employer
and employee an effort should be made to
bring to Philadelphia a fair share of the
world's work of such kind as could be pro-
duced by us. The sales department was
divided and a vice-president put in charge
of each section — one domestic, the other
foreign — and the world in its entirety
divided into zones. A manager with a
necessary staff was provided for each zone
so that each part of our organization might
devote its entire time to the customers in



its particular zone. It surely was a depart-
ure.

As president I do not sell anything. In
fact, I really do but little of anything, dis-
covering or devising new methods which,
properly applied produce results. Natu-
rally, I am always willing to serve my sales-
men, and consider it no hardship to travel
to the end of the earth to assist them in
putting over propositions of magnitude.

Thereupon he digressed to explain
how important it was to do everything
that could be done to help a department
out, but never to interfere; never to
minimize its importance, but rather
to minimize your own importance.

Continuing his description of the
sales organization it appears that Can-
ada and Mexico are considered as
belonging to the domestic grand divi-
sion, because the railroads in those
countries have direct physical connec-
tion with the railroads of the United
States so that through passenger trains
and through cars of freight may pass
from one country to the other. Prob-
lems to be met are common to all three.

Domestic territory is divided into
eleven zones with a manager in charge
of each, with headquarters at New
York, Philadelphia, Chicago, St. Louis,
St. Paul, Richmond, Pittsburgh, Hous-
ton, Portland, Ore., San Francisco, and
Mexico City. A twelfth division is
devoted to electrical motive-power and
equipment.

As Caesar divided Gaul into three
parts, so the foreign sales department
divides the rest of the world into three
zones, one being composed of Europe
and Africa, the second composed of
Australia and the Far East, the third
of South America, Central America,
and the West Indies. Each zone is in
charge of a sales manager whose head-
quarters are at Philadelphia, though
these headquarters are not necessarily
occupied continuously by the managers.
On the contrary, they are expected to



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do enough traveling to keep in live
contact with their respective territories.
There are no armchair snaps in this
organization.

Under the direction of the three zone
managers are local managers or agen-
cies at 27 strategic points. Ranking
first in charge of a representative of the
Baldwin Locomotive Works is Buenos
Aires; next in order are Rio de Janeiro,
Paris, Havana, Harbin, London, San
Juan, Lima, Bandoeng, Calcutta, Buch-
arest, Johannesburg, Warsaw. In
addition to these the company has
agencies at Tokio, Valparaiso, Hono-
lulu; in Scandinavia, Portugal, China,
New Zealand; three in Australia, and
three in Brazil.

It is now the policy of the company
to establish its own offices in all these
places in lieu of agencies, placing young
Americans in charge who have been
brought up by hand at the works. In
the opinion of this concern it is essential
that a salesman should know the prod-
uct he is selling. But since no man
can be expected to know all there is to
know, mechanical engineering experts
are kept constantly out, going from
place to place and spending as long a
time at each district office as may be
required to help the sales manager out
on technical matters. Each district
manager is provided with an office in
keeping with the dignity of the firm he
represents and is provided with what-
ever staff he may need, ranging from
two or three to eight or ten.

Authority is decentralized as far as
is practicable. The sales manager in
charge of a zone establishes the policy
for that zone under the direction of the
vice-president. He fixes salaries, se-
lects men, and sends them out to their
stations; relieves them, fixes prices,
credits, and policies regarding contracts.
New questions involving precedent or
improvement are passed up to the vice-
president. The zone manager works



for the man in the field; the man in the
field works for the customer. The only
man left to see that the stockholders
receive any returns on their invest-
ments is the president. Responsibility
is fixed; it is at the head. The presi-
dent is responsible for policy and profits.

Sales managers are instructed to sell
at cost plus a certain percentage of
profit. The sales department has no
influence whatever in fixing prices.
That is done by the estimating depart-
ment which has instructions to esti-
mate on a certain basis, including in
actual costs the price of materials,
labor, and overhead. The engineering
department goes over the figures and
tells the estimating department what
is necessary. From the decisions thus
arrived at there is no recourse except to
go to the president.

In order to sell, one must have cus-
tomers. To get customers it is neces-
sary to put men in the field to find
them; they will not find themselves.

If there is one precept that more
than another is burned into the souls
of these men in the field, it is that they
are sent out to work for the customer.
Theirs must be more than lip service.
It is their duty always to look out for
the best interests of their customers.
They are not merely to sell locomotives,
they are sent to advise when not to
buy. President Vauclain more than
once has been called into consultation
with railroad officials regarding con-
tracts for locomotives, and has advised
them not to buy because conditions
from their standpoint were not then
right. He has done this when his own
establishment was badly in need of
orders.

In the latter part of 1920 a leading
railroad journal planned a " Buy Now "
number in the interests of its advertis-
ing patrons, the manufacturers of rail-
way supplies, urging railroads to place
orders for the very large amounts of



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supplies of one kind and another which
they undoubtedly needed. One of the
men asked to contribute an article or
a letter to this "Buy Now" number
was President Vauclain. Orders for a
few hundred locomotives would have
come in very handy just then, but
instead of writing the sort of letter he
was expected to contribute he sent a
brief but strongly worded letter saying
that in his judgment conditions were
not right then for the railroads to buy
anything and that he would advise
them to keep their money in their
pockets or in the banks, or wherever it is
that railroads carry their loose change.
The letter was published just as he
wrote it. It did not bring any orders
to the Baldwin Locomotive Works by
return mail, but it did bring a batch
of letters from railroad executives com-
mending him for his courage.

The company will continue to draw
dividends on that letter for many a
day to come. For even locomotives
wear out in time and some day the
roads which, following Vauclain's ad-
vice, declined to "Buy Now," will be
compelled to purchase new motive
power. When that time comes many
of them will go to the Baldwin Loco-
motive Works. Every salesman on
the pay-roll is expected to follow his
president's example under similar cir-
cumstances. President Vauclain says :

A good salesman is always at odds with
his home office. A good salesman is a poor
man to rely on to build up prices. The
question of profit should be taken away
from the salesman and left to the manage-
ment. The salesman should be given the
lowest price at which an article can be sold.
If I were to give a salesman a price and he
increased it I don't think he would sell any
more for me. Such a man would be too
dangerous to have around. But if, after
a price was given him, he was to telegraph
bade asking if we couldn't give further con-
cessions I should feel that he really had
the customer's interests at heart.



Selling is a matter of confidence. To sell
a man anything you have got to make him
feel that you are taking an interest in his
needs. Of course there is a kind of selling,
like bidding for bonds or buying coal or
grain on the exchange which is just a cold
matter of business. But when it comes to
manufacturing it isn't the amount of money
a man pays for a thing, but the amount of
money he realizes on his investment.

In this connection there are two points
to be considered: adaptability and dura-
bility. The salesman is expected to be
competent to advise his customers on what
is best adapted to his needs and not merely
to quote prices. That is the reason why we
are sending young men trained in the works
to points at which we have had agencies in
former years. We shall never go back to
the agency system again.

It is rather mystifying to hear Mr.
Vauclain assert that there is no par-
ticular credit to be taken for sending
in an order for 50 or a 100 or 200 loco-
motives. The purchaser on so large a
scale is going to buy anyhow; and it is
with him merely a question of getting
the best quotation. Regularly each
month a list of new customers is laid on
the president's desk and this he scans
with far greater interest than reports
on the volume of sales. But it is all
explained upon learning that the rail-
roads buy only about half the locomo-
tives that are sold annually throughout
the world. The other half is absorbed
by big industries of one sort and
another, logging railroads, contractors,
and plantations in the tropics.

The banker is always interested in
the number of depositors, not merely in
the big depositors, for the latter do not
leave their money in the bank very
long. They are withdrawing it con-
stantly to use in business. The small
depositors are more important in the
aggregate because they leave their
money in the bank. The same princi-
ple applies to locomotive building or
any other kind of business. When one



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is liberally supplied with both big and
little customers one is "in to clear," to
quote Vauclain.

Owing to circumstances he is sure of
getting the big orders, anyway. There-
fore the greatest importance is attached
to the small orders. No amount of
trouble is considered too great to ac-
commodate the small customer. When
a representative out in the field finds a
lumberman or the manager of a sugar
plantation who wanted a locomotive
yesterday he promises to get it for him
tomorrow; and the management in
Philadelphia will move heaven and
earth to get it to the customer before
breakfast on the day it was promised.

As an illustration of this point of
view, a certain western railroad wanted
to try out, in a very great hurry, an
oil-burning locomotive of a new type.
The order was received on Saturday
noon. President Vauclain himself went
down to the office Sunday morning,
called in a draftsman and by 1 o'clock
had the engine schemed out. By noon
Monday the boiler-plates were laid
out and all the material was ordered.
In 30 days the engine was under
steam.

From the Vauclain point of view it is
a greater crime to lose a customer than
to lose an order. Some of the leading
railroads of the world write to Phila-
delphia asking that some salesman who
has proved his devotion to that road's
interests be sent to give advice regard-
ing contemplated purchases. Innum-
erable requests are received from custo-
mers all over the world for an endless
variety of things in no wise connected
with locomotives or lomocotive sup-
plies. Such requests receive the same
scrupulous attention that is given
orders.

A request for permission to see some
of the forms and blanks used brought
out some very decided views on the
subject. Mr. Vauclain said :



If you are going to use printed forms,
you might as well give up. You can have
forms for keeping accounts; that is proper.
But as for the rest — why, every day the
situation changes. Forms take away ini-
tiative. The man who fills out a form
thinks that when he has finished filling he
has nothing further to do. If he has no
form to fill he gives you all the facts; if
they are few he will not manufacture any
in order to fill out all the spaces in the form;
if there are more than are provided for in
the form you will get them. By his re-
ports you may judge a man's interest in
his business. If they are voluminous, he
isn't fit for the job; if they are crisp and
every item sharp as a spike he is pretty
good. But if his remarks are few and value-
less he is worse than the garrulous man.
The greatest art in business is to keep your
communication on one sheet of paper and
on one side of that sheet. Then you have
the other side for an advertisement.

Reverting to the subject of standing
by salesmen, on which he holds most
emphatic views, it transpired that Mr.
Vauclain's trip to Europe in the spring
of 1920 on which he closed contracts
for business aggregating more than
$10,000,000 in an absence of 53 days
from Philadelphia, was due to the fact
that he had assumed full responsibility
for a contract pending with the Polish
Government, and he "didn't want any
mud thrown at the man who developed
the business." Besides, it was a major
transaction, the amount involved being
$7,000,000, so it was a matter to which
the president should properly give his
personal attention. He did just that.
He had the bonds printed in America
and carried them to Paris, chartered a
private car for himself and party and
went to Warsaw where he witnessed the
signing of the bonds by the Minister of
Finance.

For about three months the Baldwin
representative at Bucharest had been
negotiating with the Roumanian Gov-
ernment for the saleof fifty locomotives.



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He had the earnest backing of the
Queen, but the national treasury was
as bare as Mother Hubbard's cupboard
was when she went to get the poor dog
a bone. Here was a deal amounting to
$3,250,000 hung up for lack of execu-
tive authority on the spot to decide
important details, but principally to
find some way to pay the bill when
there was nothing to pay with. So
Vauclain decided to run down to Bucha-
rest and help the salesman out. Pos-
sibly the fact that representatives of
English locomotive builders were mov-
ing heaven and earth to get the order,
may have had something to do with
his decision not to leave the salesman
in the lurch for the want of quick action.

Roumania is rich in oil. What was
more natural than to propose that pay-
ment for the locomotives so desperately
needed should be made in oil? The
Minister of Public Works thought that
a fine idea. So did the Queen, who
Vauclain declares is "the best business
man in Roumania"; so also did the
King. With such backing there was
no difficulty at all in arranging a con-
ference with most of the members of
the cabinet at which the details were
threshed out to the satisfaction of both
parties.

As finally agreed upon the Rou-
manian Government contracted for 50
consolidation locomotives paying 10
per cent either in cash or oil before the
delivery of the first locomotive and the
remainder in 60 monthly payments
either in oil or cash plus 6 per cent
interest and 1 per cent for financing,
the interest to be included in the face
of the notes. In addition contracts
were made for a quantity of spare
parts and half-a-million dollars worth
of machinery. When the Minister of
Public Works handed the signed con-
tract to Mr. Vauclain he said:

The cornerstone of a new Roumania has
been laid. I rejoice that it has been laid



by you, an American, as all things done by
the Americans endure.

In saying this the minister was refer-
ring to Roumania's desperate need of
transportation. The country had been
stripped in war. The few locomotives
left in the country were there because
they were in such bad condition that
the invaders -could not run them out.
The few passenger trains running were
packed until there was standing room
only, with people riding on the bumpers
and on the roofs of the cars. Freight
could not be moved. The country was
stagnating for want of transportation.
Indeed, that is the chief need of all
Europe today.

To meet this need the Baldwin
Locomotive Works and the American
Locomotive Company formed the Lo-
comotive Export Association under the
Webb-Pomerene Act which permits
combinations for export purposes. By
this arrangement the two big corpora-
tions divided orders so that the burden
of credits would not fall too heavily on
either. One of the orders obtained
under this arrangement prior to Vau-
clain's $10,000,000 tour was for 150
locomotives for devastated Belgium, a
deal approximating $8,300,000.

That little job at Bucharest required
only five days.

It may not be amiss to remark that
a manufacturing business consists of
more than a sales department. There
must be a manufacturing department
to turn out products of the quality and
at the time promised by the sales
department, which is not always easy
if work is constantly interrupted by
labor troubles. It is a tribute to the
traditional policy of the Baldwin
Company as well as to its present chief
executive that labor troubles are
unknown. Even to the most casual
observer it is apparent that everybody,
from the sweeper on the floor to the



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highest official, feels a sense of proprie-
torship, of responsibility, and a genuine
interest in his job, whatever it may be.
In the president's office beneath oil
portraits of Mathew Baldwin and
former members of the firm is a row of
photographs of veteran employees, men
who have been with the company 40
and 50 years. There is even a photo-
graph of one man now 95 years old, who
has been on the pay-roll 75 years. You
are prepared to believe the president
when he says:

American labor is the best labor in the
world. There is nothing like it. I have
20,000 men working for me and I cannot
find a single fault with those men. All I
care for is that they shall work as hard as
I do and they have got to do that.

I find it not at all difficult to be at my
office at 7 o'clock in the morning. Why do
I want to be at my office at 7 o'clock?
Because my men go to work at that hour
and we have an iron-clad rule that every
foreman must be there at 7 o'clock in the
morning. He must have a cheerful face.
He must welcome the men with a smile.
They will stop on the pavement to see
whether I have come down the street in an
automobile. They don't object to my rid-



Online LibraryInstitut international d'administration publique Association du corps préfectoral et des hauts foncAdministration : the journal of business analysis and control → online text (page 27 of 115)