So Is Employee Involvement
and Quality of Work Life Really All That New? -
Imagine, for a moment, your progressive business vision. Does it have profit sharing? Does labor management collaboration exist? Does it support and assist associates in securing affordable, high quality housing? Is there participatory management? Are employees encouraged to tinker and invent? Do they receive the patent rights to their inventions and cut of the profits? Does the firm provide and support continuous adult learning? Does it have a beautiful work environment? Does it provide high quality child care, primary and secondary education? Are on-site recreation and entertainment provided? Are the firm's facilities pleasing to the eye?
Affirmative responses to these questions might conjure up a Silicon Valley and/or biotechnology start-up paradise fantasy for superstar executives and knowledge professionals. But, believe it or not, these questions were derived from a late 1800's firm. It manufactured plumbing supplies. Employees were skilled craftspersons and unskilled laborers. This firm and its community, Leclaire, was founded by N.O. Nelson. What follows is a characterization of Nelson O. Nelson and his business vision. The Leclaire community, the firm's organizational systems and its problems and challenges will be characterized. Finally, the Nelson and Leclaire legacy will be explored.
A Brief History Of N.O. Nelson
Nelson, a Norwegian child immigrant, was raised on a northwest Missouri farm. It was here where he developed his cooperative appreciation. He observed and participated in a "barn raising" communal life. After his Civil War military service his business career began with keeping the company's books. Nelson hoped to capitalize on the post Civil War industrial age revolution although his first few business ventures were failures. However, he continued learning business and accounting. He hit pay dirt with the N.O. Nelson Company, the St. Louis firm that began in wholesaling and branched off into plumbing goods manufacturing and installation.
Nelson's Business Vision, Ideology and Philososphy
Nelson's founding business purpose was "primarily to make money and to become a prosperous businessman." Later it evolved "to incorporate into the business as much of the social and liberal and broad gauge elements as it could bear .... and to cultivate close friendship with employees."
Nelson's business vision involved a number of core beliefs. First, he supported labor-management cooperation. He also believed the laborer ought be transformed into a capitalist, or, in the words of today's vernacular, every employee ought to be a businessperson. He supported employee stock ownership and profit sharing. His was a bottom up economic development philosophy, rather than the conservative Reagan top down policy that in many ways reflected that of Nelson's capitalist peers. To cope with the boom and bust economic cycle, he instituted reduced work weeks to eliminate the need for lay-offs. By recognizing the importance of maintaining and retaining a skilled workforce and its workplace knowledge, Nelson thereby eliminated hiring and learning costs. He also realized poverty and idle hands were unhealthy for the civic order and the democractic body politic.
Second, Nelson believed in developing the mind, the heart and the hands. About education he stated: "The hand, the heart and the head must be educated together." This Nelson believed could not be limited only to associates. Educating children, based on this ideal, was also a business responsibility. He didn't engage in job deskilling.
Third, Nelson believed that possessing a comfortable home greatly contributed to the working person's welfare and contentment. He thought steady employment and fairly priced housing would lead workers to embrace home ownership.
Fourth, Nelson believed in participatory management, employee involvement and development. For Nelson, participatory management and employee involvement meant giving people a say in the business. It meant asking people for their ideas and really listening to them. Nelson held information gathering meetings prior to decision making; however, as president, he realized his own responsibility and accountability in decision making. Employee stockholders were involved in business decision making. For example, they made the decision about where to locate the Leclaire factory community. He also supported employee inventiveness and tinkering. Numerous employees secured patents for product innovations, and they shared in the profits in addition to profit sharing. His granddaughter Shaw says of her grandfather, "I can recall him working on ideas at the kitchen table."
Fifth, Nelson believed that business, employee and customer interests were interconnected. He perceived business as a wholeness rather than a competitive struggle between customer, labor and capitalist. In other words, Nelson wanted to harmonize rather than fragment. He even envisioned customers being encouraged to purchase stock and being involved in profit sharing.
Sixth, Nelson believed in and supported unions. He felt employees required collective power to counter the wealth and influence of his day's capitalists. His peers also recognized this collective power. Not uncommon was the wage reduction tactic of attempting to negotiate individual contracts rather than engaging in collective bargaining.
Finally, Nelson recognized beauty as a critical human value and need. Beauty was expressed in an aesthetically pleasing community, arts support, and factory design.
The History of Nelson's Vision and Philosophy
Nelson's vision and philosophy were reflected in his life experiences. Nelson's age witnessed the emergence of the production line system, and violent capitalist and labor clashes. There were, for example, nearly 23,000 strikes between 1880 and 1900. A general strike in 1877 led to businesses fear of labor and the near disappearance of civil order in St.Louis. At that time labor force turnover and absenteeism were massive. Ford's Highland Park facility serves as an illustration: The plant had to hire 54,000 persons to maintain its 13,000 workforce complement. On average, there were 1,300 to 1,400 persons missing from their work stations each day. Herbert Spencer, the English philosopher who preached the philosophy of "cream rising to the top" through competitive struggle leading to a utopian world, was influencing such individuals as Charles Darwin and Andrew Carnegie. Carnegie would put Spencer's ideas into practice through competition, union-capital conflicts, 12-hour and seven-day work weeks, and poor wages. When faced with Carnegie's version, Spencer said, "Six months of living in Pittsburgh was justification for suicide." While Carnegie wrote Triumph Democracy, and labor and union supporting essays suggested "take no man's job" as a new commandment, he would destroy Homestead's steel union and take thousands of people's jobs and homes away. Spencer's comment also reflected the deplorable urban conditions of that time. Cities were so constructed that factories were located at the core. Next were working class neighborhoods. Housing was poor quality rental, with slums the norm. Air and water pollution were unabated. The third ring was composed of supervisory and managerial housing. Wealthy families lived in the suburban areas.
In 1886, Nelson was appointed to a labor-management committee to mediate the violence afflicting the Gould Railroad strike; however, company management refused to negotiate. This experience convinced Nelson of an inherant counterproductive labor-management conflict within capitalism. He committed himself to developing a business enterprise based on collaborative management, "rational living" and living by the "golden rule"; that is, the greatest good for the greatest number.
Transforming Labor into Capitalists
Nelson's first system for creating his vision resulted from reading Sedley Taylor's On Profit Sharing Between Capital and Labor. Taylor described Paris house painter Edmond Leclaire's profit sharing system. Nelson perceived profit sharing as a third alternative between capitalism's labor exploitive nature, and socialism. He reasoned that a partnering between capital and labor would enhance productivity and improve economic stability. Profit sharing, therefore, was to Nelson both economically rational and socially just. Profit sharing would also allow labor to accumulate capital through stock, thereby leading labor to become capitalist.
Finally, he felt profit sharing necessitated good management. Nelson instituted this system at his company immediately. He enclosed the following letter in employee pay envelopes. "...we propose to divide profits made in our business upon the following basis: After allowing seven percent interest on actual capital invested, the remainder will be divided equally upon the total amount of wages paid and capital paid. Each employee will get his proportion according to the amount to the wages paid him for the year. This will apply to persons who have served the company for six months or over within the year, and who have not been discharged for cause."
Developing the Leclaire Idea of a Golden Rule Company Community
Nelson's second idea was for a model factory community. He scouted the community built by Jean Godin at Guise, France, where he experienced "Well built and well kept living quarters, day nursery, kindergarten, school, pension for old age and sickness, and growing ownership in the works." He also visited numerous New England progressive industrial communities.
These experiences augmented and affirmed Nelson's progressive business and enriching cultural factory community idea. What was Leclaire's purpose? Says George Ead of Nelson's vision for Leclaire, "he wanted to make business the real purpose of rational living; to throw the man who toils into the highest and most inspiring social, educational and industrial environments; to harmonize the difference between capital and labor by an equitable distribution of profits; and to make the world a better and more beautiful place to live."
The model factory community idea was presented to shareholders, many of whom were employees, at the 1889 shareholders' meeting. Nelson presented a rural or city location choice. He reports, "There was an overwhelming and enthusiastic preference for the country." Quality of life and business factors favored a rural place: lower taxes, less government interference, a healthier environment and lower land acquisition costs. Site location activities began immediately. Land outside the City of Edwardsville was selected because of community support and such locational factors as good rail access, and coal mine proximity. The city businesspersons, perceiving the factory community's economic benefits, courted Nelson. An acquisition fund was created. The city's youth, perceiving employment benefits, even collected $14.95. In turn for community support and land acquisition, Nelson promised employment opportunities and a payroll of approximately $250,000. Community and factory designer A.E. Cameron, a prominent St. Louis architect, designed the factory buildings to reflect Nelson's philosophy. They were one story brick structures. Each housed a specific function - machine, marble, brass, cabinet and varnish shop. Each structure was supplied with electricity to provide illumination. Ice water was provided. All building walls were lined with windows to provide fresh air and natural lighting. Each also contained fire sprinklers, steam heat and electric fans. Said New York World reporter Nellie Bly of the facilities, "The ideal perfection of buildings for man to labor in."
South of the factory lay a two and a half acre tract for baseball, football, tennis courts and a bowling alley and theater building. Adjacent land was set aside for a school and community building called, "the Academy." Its central location reflected Nelson's idea of harmonizing work, education and community life. There was also a small lake. Boating and swimming took place during summer. Skating was a winter event. The remaining land was designed for housing with the exception of the Leclaire dairy and farm space. A water and sewage system was constructed. Plant boilers and generators provided community electricity. The dairy farm served two purposes: first, was free milk to community residents; second, to serve as a demonstration project. Innovative practices and new equipment were imported and demonstrated. Julius Pitzman designed the residential area that was modeled after wealthy residential private places. A curved linear system was adopted and Pitzman introduced deep restrictions to control land use based on a study of European cities. He concluded a residential "artistic" effect could only be created by developing large land tracts composed of tightly structured lots. Land use was limited to housing and education. Finally a thirty foot street setback was incorporated into the deeds. Most homes, with a few exceptions, were not architectural wonders; however, they were well constructed. They were, in general, one story frame buildings. Average size was 858 square feet, with bath. More than half had hot air furnaces, running water, electricity and indoor plumbing. Today, a number are still family residences, including Nelson's home.
Beauty was also a cherished value. A company operated greenhouse provided free plants and trees for residents' yards; there was an annual best garden contest; the streets were tree lined; grass and flower beds landscaped the factory grounds, and Osage orange trees screened the factory from the residential area.
Profit Sharing Continuous Improvement
Profit sharing was improved upon with Leclaire's founding. Five percent of the profits were placed into a provident fund. This fund was used to care for sick employees and the families of deceased workers. It was managed by a committee elected by and from the workers. An additional two and one-half percent was put aside for educational purposes.
Education and Adult Learning
The educational system was designed to provide students with a sound academic education, technical skills and work experience. It also supported adult learning and personal development. The system consisted of three components. First was kindergarten to sixth grade. Kindergarten children followed a regular educational program; however, they were also taught the cultivation of flowers and vegetables. Up to the age of twelve, children followed a regular school course augmented by manual training.
Second was seventh grade to high school graduation. At twelve, boys were given a daily hour of light factory or dairy work, for which they received a stipend. Hours worked per day increased as they grew older. Girls were included, and they were also taught domestic arts. A special manual training program was also offered for small groups of boys. Teachers taught academics for half a day, and they acted as manual training supervisors for the other four hours. Tuition and boarding was paid for by the firm. Both student groups were offered employment upon graduation.
Finally, there was adult education and development. A winter evening lecture series was provided. Notable speakers included business reformer Sam "Golden Rule" Jone, Jane Addams of Hull House, and Edward Everett Hale. Sunday featured an ethics and morals dialogue. Civic and political debates and dialogues were held. There were regular music concerts, dramatizations and lantern light shows. Company personnel organized a local touring brass band.
Home Ownership Support
The firm also supported home ownership, and associates could secure an improved lot for between $100 to $150. An installment payment system was provided, or the home could be purchased outright. The firm would construct an employee's house if desired. The cost consisted of labor, materials and the firm's normal profit, thereby reducing employees' home construction costs. Monthly payments ranged from twelve to twenty dollars with the payment amount based on family size.
Resistance and Problems
Leclaire was not without problems and difficulties. First, plant relocation resulted in workers leaving because of their city and family attachments. Second, the community grew slowly. Nelson explained it this way, "an uphill job to get the men to understand that there was no boss in Leclaire. The workmen didn't want homes as much as I had guessed. They were used to renting; they were afraid of a boss; they wanted to spend all their money." They were also company-community fearful given the reputation of such a company town as Pullman. However, at one point in time, Leclaire held the highest county home ownership rate. Finally, there were labor disputes and strikes. They arose primarily from following national union dictates concerning the ratio of apprentices to journeymen and wage rate disagreements.
The Nelson Tragedy: The Ending of the Leclaire Dream and It's Transformation
Nelson was eventually pushed out of the family business, because of the failure of a New Orlean's consumer cooperative he had founded. Tensions arose amongst company executives, family members, and shareholders when Nelson created a not-for-profit cooperative. Its failure forced Nelson into personal bankruptcy after pledging his company stock to pay off the debts, providing his son-in-law and others with the opportunity to force him out.
While initially Nelson felt Leclaire was successful, this changed as the years passed. Towards the end of his life, he felt the community had been a failure. Perhaps this arose from his idealist soul's experience when faced with the realities of implementation.
Upton Sinclair, in an essay based on conversations with Nelson, characterized his disappointment in this way: "We discover some bitterness in his heart, because of the failure of so many of his high hopes, because the world was not ready for his dream. But we divine that he did not get much happiness out of his model village of Leclaire. He thought to enable working people to lead lives of dignified simplicity and stern independence; instead of which they built themselves big houses, and bought themselves pianos, and dressed their daughters in silk stockings and high heeled fancy shoes, and are trying to outdo each other in snobbery. And the old man does not believe in these things. He sees that struggle to attain them leads to ruin."
And what of Leclaire, its philosophy and the firm? Profit sharing continued until the firm was sold. Then Leclaire was incorporated into the city of Edwardsville; the academy was given to the school district; and the education philosophy was displaced by standard public school education. The lake fell into disrepair; swimming and boating ended, and the park was maintained as a fishing hole. The factory was sold to Wagner Electric, and later deeded to Southern Illinois University which converted it into a warehousing and administrative complex with some student art studios. The Leclaire neighborhood was designated an historical district, and this led to park improvement and local events. The factory site is being considered as a possible recreation site and/or retail-commercial complex. This plan has not led to the kind of community support experienced at Leclaire's inception.
The Leclaire legacy and historic significance has not been developed as have such utopian communities as New Harmony. And the Leclaire vision of management-labor collaboration, education and work, and profit sharing, has not taken root in local and/or regional businesses and school districts, with a few exceptions such as at Shell and Clark Oil.
The Nelson and Leclaire Legacy
Leclaire was a company town in the sense the Leclaire Manufacturing Company developed the land and provided services; however, Nelson's social and economic vision set it apart. Henry Ford, for example, also created a company town; however, Ford exploited his workers and butualized labor. He didn't support home ownership and Ford's factories could be more likened to Dante's Inferno than Nelson's beautiful environs. It was not until the early 1980s, facing possible extinction by Japanese competitors, that Ford engaged in management-labor collaboration, beautifing its plants, and employee involvement. It might be argued that Nelson was paternalistic; however, it can also be argued that he was a visionary ahead of his time and a creative person pushing people into the future. When encountering a person who directs others into a new vision, we may consider them paternalistic, if not arrogant and/or insensitive. They need not be. They may, in fact, be very sensitive and caring.
History suggests, however, that Nelson was a creative visionary. First, labor-management cooperation is again being practised and experimented with. Second, Nelson's profit sharing philosophy has re-emerged with Scanlon Plans and Jack Stack's Great Game of Business. Third, open book management supports his idea of revisioning labor from employees to businesspersons. Fourth, the GI Bill enactment saw Nelson's home ownership dream become reality and its educational provisions also supported economic development. Fifth, Nelson's education philosophy has taken root in the form of German-style apprenticeship programs in such places as Greensboro and Spartanburg. Sixth, numerous small firms are opening their own academies: Quad Graphic, Manco and others are but a few examples. Seventh, city planners, families and corporations such as Apple Computer are beginning to recognize the value of Leclaire's community and workplace harmonization. This is being fueled by the long home drives, a yearning for community, and the desire for more personal and family time. Purely residential suburbs are giving way to experiments with housing and recreation in close proximity to workplaces. Eighth, Nelson's customer, employee and firm linkage ideas are being practiced. Ninth, Nelson's bottom up economic development philosophy was validated by FDR's WWII union policies that disallowed wage reductions, and those savings birthed the American middle class. Finally, labor did become the capitalists, as Peter Drucker observes, through pension funds, mutual fund investments, and individual retirement accounts.
The Nelson and Leclaire legacy also suggests other ideas. First, humans are not necessarily inherently competitive; they can also be cooperative. Business is a whole and need not be fragmented into labor and management; both need to work together to achieve success. Nelson and his workers collaborated through profit sharing and employee involvement. Edwardsville residents, businesspersons and Nelson collaborated in developing Leclaire. Communities and businesses are relearning this idea.
Second, liberty, freedom and human dignity can not long be submerged and repressed. History has proven Nelson, not Ford and Carnegie, to be right. Nelson believed in the democratic values of freedom and liberty. He supported human dignity; Ford didn't. Ford's firm found renewal not in his pathos management style but in Nelson's vision.
Third, speaking about and training people in the "golden rule" may not be enough. The enterprise's domain must also be changed. Nelson didn't put his employees through a Steven Covey like seminar. He didn't force church going. He changed the firm's domain through profit sharing and the Leclaire community and factory. Even this, however, may not be enough when the culture is not yet ready for such changes: witness the successful beginning of Leclaire and profit sharing, management-labor cooperation, its demise and the rise of Ford's factory system and labor-management conflict, and its later re-emergence. Home Ownership and education are additional examples.
Fourth, visionary and creative leadership requires hard work, deeply committed feelings and attention. Nelson read about and scouted European and American communities and factories. He spoke with his day's leading progressive thinkers and doers. He had deep feelings about creating a "golden rule" business. He devoted much of his life to vision creation. He hired the best local experts to assist in community and factory creation.
Fifth, imagination and reality can be fused to create productive and effective solutions. Where contemporaries experienced only the Spencerian competitive "cream rising", and Marx's capitalist and labor class struggle, Nelson imagined cooperative business grounded in profit-sharing and experimental work and community realities. Nelson was not a naive dreamer, he was a practical businessperson, he realized strikes and conflicts were counterproductive, and he imagined a realistic fantasy as a solution. Much of this fantasy has met the test of time.
Sixth, the Nelson and Leclaire legacy suggests business is not necessarily Darwinian, narcissistic and competitive. Nelson developed a progressive business philosophy a hundred years before today's business visionaries such as Jack Stack, Tom Chappell, Anita Rodick, Ben and Jerry, and Henry Quad. Each resonates Nelson's beliefs. This suggests a strong cooperative human business impulse that is contrary to the "dog eat dog," downsizing, and self-interested business fantasy.
Seventh, Nelson seemed to have an intuitive sense for harmonizing creative and productive environmental factors. Education emphasized developing the prepared mind and body; adult learning created a thoughtful time-space; lectures nourished the mind. Environmental beauty seems to contribute to both creativity and productivity; recreation and open spaces provide a setting for collaborative encounters and inspiration. Home ownership and profit sharing address the security needs and the worry factor all too often associated with limiting creativity and productivity.
Finally, Leclaire and Nelson may suggest that those who don't know history are doomed to repeat its mistakes. Nelson's age experienced a business revolution, a middle class decline, skill and knowledge obsolescence and a redistribution of wealth much as in our own age. The results were violence, death, millions in property loss, urban poverty and lost opportunity profits. In fact, many, including FDR, feared democracy's and the free enterprise system's end. This fear was not unfounded with the rise of German, Italian and Japanese fascism and Russian communism.
Are we to go the Carnegie and Ford way? Shall we abandon the great society quest by rationalizing our inability to deal with poverty, urban degeneration and homelessness? Or, shall we embrace Nelson's vision? Will we embrace existing solutions and fuse them with our imagination? Only we shall tell.
Case, J. (1995). Open-Book: The Coming Business Revolution. NY,NY: Harper-Colins.
Csikszentmihalyi, M. (1996). Creativity--Flow and the Psychology of Discovery and Invention. NY,NY: Harper-Collins.
Kanter, R. (1995). World Class--Thriving Locally in the Global Economy. NY,NY: Simon & Schuster.
Lossau, C. (Spring, 1988) Leclaire, Illinois: A Model Industrial Village. Gateway Heritage. pp. 20-31.
Nore, E. and D. Norrish. (1996) Edwardsville--An Illustrated History. St. Louis, MO: G. Bradley Publishing.
Taub, E. (1991). Taurus--The Making of the Car that Saved Ford. NY,NY: Dutton
Carl Lossau, Ph.D, has been a planner for Chicago, St. Louis and East-West Gateway Coordinating Council. Carl was the St. Louis City long range planning director and supervised MSA long range plan preparation. Carl taught planning and geo-mapping at Southern Illinois University. He has served as Model Cities, riverboat gambling and community planning and zoning consultant. Carl served as a Edwardsville City Councilperson and its Planning Commission chairperson. He has published numerous planning and community development articles.
Bob Holder, MPA, has administered a CDBG program, facilitated strategic planning conferences and conducted applied economic development studies. Bob specializes in high involvement strategic planning and work redesign processes and conferences. He has published over 50 articles appearing in the Journal for Quality & Participation, OD Journal, Quality Digest, and OD Practitioner. Contact Bob by e-mail: HBob372917@aol.com .
Many more articles in Creative Leadership in The CEO Refresher Archives