Intra-Company Statistics in the Standard Oil Company (New Jersey)

Abstract

After such excellent technical papers as those presented by the three previous speakers, it perhaps is fitting that the last on the program should provide a change of pace. It is to be hoped that this, the fourth paper, will serve two equally useful purposes. First, it should permit you, in the last part of so stimulating a session, to sit back in your comfortable chairs in a mood of drowsy contentment. Second, it may provide a general survey of how one large organization develops and uses statistical material as one of the many tools which are available as an aid to sound business judgment and how the development of that tool is related to organization and management. The use of intra-company statistics in the Standard Oil Company (N.J.) is intimately connected with the role that Jersey envisages for itself and the organizational plan which it has developed and is developing in order to deal with its manifold problems. Technically Jersey, the parent company, is a holding company. Those of us who work for it like to believe that it is unusual in its field and that it has special virtues of its own which are not static but which are constantly developing in response to the stimulus of new conditions and new problems. After the dissolution of the old Standard Oil Company in 1911, the Jersey company was left with a rather heterogeneous collection of oil properties. During the next 15 years these were considerable modified and expanded, especially in the foreign field. The extended old and new interests of the company presented it with new andcl complicated problemns in efficient organization and management. On the one hand current operational control required the guidance of highly trained specialists in different operating fields. On the other, there was a need for top level policy planning and coordination by men of broad horizon whose time and energies were not absorbed by dayto-day operating problems. These conflicting needs were met by divorcing the parent company of its principal operating functions and thus releasing the time and energies of the directors for long-range planning, the consideration of broad policy, and the coordination of the activities of Jersey's affiliates. The first step in this process was taken in 1927 under the farsighted guidance of Mr. Walter Teagle, then Jersey's President. By an evolutionary process, which is perhaps never complete and final, operational control has been decentralized to appropriate affiliates. This also may be said of many planning, research and coordination functions. These operations are carried on by affiliates in those fields in which they have a natural advantage through greater familiarity with the details of their specialties, more intimate contact with local conditions, and closer access to sources of detailed and specialized information. The parent company, on the other hand, conducts its activities in those areas in which it too has natural advantages through its ability to tap more and broader information sources, to recognize problems and solutions common to two or more affiliates, and to study the inter-relations which exist between the policies of different affiliates on the one hand, and between those policies and the rest of the petroleum industry and other parts of the world economy on the other. This advantage of over-all viewpoint enables the parent company not only to facilitate coordination of the current operations, long-run investment plans and policies of its affiliates, but also to render them services which would otherwise not be available. By keeping in touch with the special problems of its affiliates and with national and international developments in such fields as employee relations, public relations, production, transportation, refining, storage, and marketing of petroleum products, current and prospective technological developments in the industry, planned investment in petroleum facilities, international trade and foreign exchange, finance and broad economic trends, Jersey is able to assist its affiliates by providing a consulting and advisory service. A policy of decentralized supervision, designed among other things to encourage independent initiative and resourcefulness, requires heavy reliance on the ability to present a convincing argument. This ability, in turn, mutst be based on a thorough grasp of the basic problems involvecd and on information and technical knowledge not otherwise easily available. The statistical information assembled by the various departments and staff sections of the Jersey company have, of course, been developed primarily to meet these requirements of coordination and advisory assistance. Since inter-affiliate coordination in a company