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ISBN 0-8078-5351-8

Published: Spring 2002

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Copyright (c) 2002 by the University of North Carolina Press. All rights reserved.




Chapter 1
Redefining the Labor Problem

Prior to the advent of welfare work, employers had pursued one of two general strategies in their dealings with employees. Confronted with rebellious workers, an employer might look to the example set at Homestead in 1892. There, company management spent months preparing for an armed showdown with employees, stockpiling inventory and turning the factory into a defensible fortress. One Georgia textile manufacturer summed up this repressive approach to the labor problem when he told an interviewer that "in an acute situation where I had only men to deal with I'd just as soon get a gun and mow 'em down as not."[1] In addition to violent confrontations, the repressive model included the use of company-paid spies to ferret out union organizers and sympathizers, the immediate discharge of those employees, blacklisting, and the yellow-dog contract. This antagonistic method incorporated more subtle strategies to solve problems of inefficient labor. Whether or not they engaged in outright repression of strikes and union sympathizers, most employers manipulated wage rates, work rules, and production processes in a concerted effort to force greater output from their workers.

By the turn of the century, public officials, the courts, and industry trade groups lent a degree of legitimacy to this strategy. In a practice reminiscent of 1877, for example, government troops broke the Pullman strike and boycott in 1894. At the same time, the courts became increasingly sympathetic to employer appeals for protection of property, issuing numerous antistrike injunctions after the mid-1890s.[2] In 1903, the National Association of Manufacturers adopted an aggressive open-shop platform. Association membership accorded a degree of respectability to employers advocating the "big stick" solution to the labor problem.

Despite these sanctions, some employers turned to a tradition of benevolent paternalism to solve the labor problem.[3] As far back as the founding of the Slater Mills in 1790, some employers proffered the carrot, rather than the stick, to ensure themselves an industrious, loyal workforce. Samuel Slater promised an education in the company's Sunday School to attract young farm boys to the new mill.[4] Other textile manufacturers, facing similar labor shortages, developed more elaborate programs to entice hard-working, tractable workers to remote mill towns. Textile mills built in Lowell, Massachusetts in the 1820s and 1830s drew most of their workers from among the daughters of area farmers. Cheaper and less troublesome than men, women were an ideal labor force for the nation's first large-scale mechanized factories. However, manufacturers had to convince apprehensive parents that mill life would not strip their daughters of familial protection. Nathan Appleton, a founder of the Lowell Mills, recalled that in order to protect the virtue of their women workers the "most efficient guards were adopted in establishing boarding houses, at the cost of the Company, under the charge of respectable women with every provision for religious worship."[5] Mill owners soon added a full complement of protective institutions—schools, hospitals and churches—to the boarding-house system.

Dependence on water and coal power forced many nineteenth century manufacturers, like the textile mill owners, to locate their plants far from towns. Isolated from established institutions, employers in company towns pioneered in providing for the physical and moral well-being of their workers. However, paternalism was not limited to company towns. Prior to industrialization, most apprentices and journeymen lived and worked as junior members of the master craftsman's family. As production with waged labor replaced the apprentice system in the nineteenth century, employers continued to claim some responsibility for their workers' welfare, especially when the employers' own welfare was at stake. Employers frequently tried to help both their employees and themselves by loaning money, counseling temperance, retaining aged workers on the payroll, or supporting benefit associations.

Henry J. Heinz, struggling out of bankruptcy in the late 1870s, regularly admonished intemperate employees for the harm they were doing to themselves. In 1878, he sent an intoxicated jellyman home, demanding that the man return only "when his head would be clear," and presumably when he would be able to make the jelly clear as well.[6] Heinz's temperance campaign included a talk given in his home to all wagon salesmen. At the end he extracted a pledge from each not to drink.[7]

Like Heinz, many nineteenth-century employers provided for their employees' welfare as a personal responsibility. Gerald Zahavi describes similar practices at the Endicott Johnson Company.[8] For example, George Johnson often attended to injured workers and, when needed, fetched the doctor himself. Employers' wives played an important part in this system of benevolent paternalism. In the 1890s, Mrs. George Johnson taught sewing and domestic arts to local girls in her home.[9] Mrs. Joseph Bancroft performed similar duties for the children of Bancroft and Sons Company employees, baking turnover pies for each of the fifty children in the company's town at Rockford, Delaware.[10]

By the early 1890s, a number of employers began to question whether either method, repression or benevolent paternalism, would ever solve the labor problem. As continuing strikes and organizing drives demonstrated, workers showed no sign of being beaten into permanent submission. Large employers in particular began to find repressive strategies increasingly problematic. Aggressive anti-unionism opened the door to a public scrutiny that was damaging to both personal and corporate reputations. Nor were employers satisfied that they were extracting the most work possible from their employees. While mechanization gave employers a means of controlling the pace and quality of production, it raised the potential for costly slowdowns and sabotage by disgruntled employees.[11]

Those employers who began to search for new strategies for solving the labor problem did so in an environment very different from the earlier ones that had fostered either the repressive or paternalistic approaches. Mechanized production and an expanding national marketplace were transforming the work experience dramatically. NCR's growth was admittedly spectacular. Still, the average workforce per plant more than doubled in size in most major industries between 1870 and 1900. While workforces numbering in the thousands were common only in the steel and textile industries in the 1880s, after 1900 numerous other industries, from meat packing to electrical equipment, employed thousands of workers per plant, and steel and textile workforces grew to the tens of thousands.[12] New industries, especially the giant department stores and telephone companies, employed similarly large numbers of workers.

These larger workforces were called on to perform different kinds of jobs than were their predecessors. In some industries the demand for unskilled, and particularly for semiskilled, labor exploded. By the turn of the century, semiskilled operatives performed virtually all production jobs in the textile industry and were the fastest growing group in many other industries. Newer sectors of the economy, such as the department stores and the telephone and insurance companies, created new types of jobs. Combined with an expansion of bureaucracies within American business, retail and clerical jobs offered new options for women, who entered the workplace in ever greater numbers throughout the early twentieth century. Workers vying for jobs in this changing labor market, often seeking to protect skills or autonomy in the face of changing production processes, did not submit quietly to the new industrial landscape.

At the same time, the great merger movement of 1895-1904 resulted in the consolidation of one-quarter to one-third of the nation's manufacturing stock. Thousands of firms disappeared through mergers, leaving a small number of powerful corporations in many key industries.[13] In a number of cases these mergers prompted increased labor activism, especially as unions struggled to protect hard-won recognition in the face of corporate efforts to consolidate power over both their markets and their labor forces. This was the underlying motivation for the 1892 lockout and strike at Homestead. A decade later, when the McCormick and Deering families, along with three other firms, formed the International Harvester Corporation, union organizers found sympathetic ears among workers at both the McCormick and Deering plants. In the wake of a 1903 strike at the Deering works, one investigator reported that "if William Deering had kept the business, the trouble would not have come, but the people say 'the Company has gone into a Trust; why should we not combine?'"[14]

As at NCR, important changes in the relationship between employers and employees accompanied expansion of this magnitude. These changes affected the way many employers understood the labor problem. Small shop production in the mid-to-late nineteenth century generally entailed the employer's direct involvement in daily operations. While few may have been as persistent as Patterson, both his proximity to the factory floor and his supervision of production were typical of the era. However, as workforces and factory spaces grew, and as mechanized, mass production replaced made-to-order or small-batch production, foremen increasingly replaced owners as front-line supervisors. By the late nineteenth and early twentieth centuries, employers in mass-production and mass-marketing industries had entrusted most aspects of daily operations to foremen. In addition to overseeing production itself, foremen generally hired, trained, and disciplined workers; they set the pace of work and frequently set wages as well.[15] To the extent that foremen replaced employers as supervisors on the shop floor, workers remained subject to a highly personal and often autocratic control of their work lives.

Employers, however, experienced these changes differently. Over time, all but the smallest firms added layers of management between workers and employers.[16] In some respects the expansion of the managerial hierarchy rivaled the growth of the wage labor force.[17] While the numbers of wage-earners in manufacturing, mining, and transportation grew by almost 30 percent between 1910 and 1920, the growth among supervisorial employees exceeded 65 percent. By the early twentieth century, as many as four layers of managers might separate employers and employees in the largest American firms. Sitting at the top of the hierarchy, employers lost direct contact with their employees.

This separation was exacerbated further by the increasingly different tasks each performed. The executive of the modern firm devoted less and less time to daily operations, where contact with workers might occur. Instead, he concentrated on long-range planning and finance, often in home offices distant from the firm's many plants or in executive suites isolated from the shop floor.[18]

Employers in rapidly expanding industries felt this loss of intimate contact with their employees in a number of ways. As lines of communication spread across layers of management, workers, like those on strike at Deering in 1903, were less inclined to balance their interests and needs with those of an infrequently seen employer. Equally troublesome, employers were not entirely confident that foremen transmitted either their orders or their employees' concerns very faithfully. Reporting on conditions at the Colorado Fuel and Iron Company in the aftermath of reforms in 1914, Ivy Lee noted that "the mine superintendents and petty bosses have all the faults of their kind and the Company has no assurance that its policies are being carried out."[19]

The experience at NCR was typical. Despite a belief that his office door was always open, John Patterson had to admit that by the late 1890s a worker would have needed the "agility of a Rocky Mountain goat" to have reached him over the walls thrown up between subforemen, foremen, department heads, and the president. This loss of contact, he claimed, deprived the company of good ideas and left ambitious workers with little hope of recognition or advancement.[20] While an expanded management hierarchy promised greater productivity by rationalizing business operations, the consequent loss of personal contact between employer and employee might also entail costs.

Employers searching for a new solution to the labor problem frequently cited the lack of personal contact with their employees as a new and serious problem to be remedied. Under present conditions of industrial production, noted a speaker at a 1902 conference on the labor problem, "there remains no longer the personal touch, and sympathy is lost in estrangement."[21] In fact, nostalgia for a mythic golden past of close, caring relations between employer and employee tinged many turn-of-the-century accounts of the labor problem. As late as 1919, the president of an urban railway company attributed an unmeasurable loss of efficiency to the "failure to protect and continue in effect that close intimate relationship which obtained during the days of small organizations when the proprietor or general manager knew each man by his first name, was familiar with his family affairs, and had more or less first hand knowledge of the hopes and ambitions of each member of the organization."[22]

A growing number of executives concluded that a reformed, humanized business system must overcome this lack of intimacy. Trying to recapture this familiarity through the benevolent paternalism of an earlier era was unrealistic. How could an employer provide a timely home loan to a hard-working employee if he did not even know he existed? How could he offer sage advice to a troubled worker he had never met? They needed, as one employer phrased it, a "personal contact mechanism" between themselves and their expanding workforces.[23]

Beyond the changed environment inside the modern corporation, employers also confronted a new environment outside the factory walls. When the nation moved through the first industrial revolution and into the post-Civil War era, entrepreneurs had pointed to the invisible hand of market forces to explain the dynamics of American capitalism. Arguing that the American economy was open and competitive, businessmen claimed that concentrations of market power were the uncontrollable consequence of natural competition and that such concentrations of economic power need not be feared. The pursuit of one's personal interests, classical liberalism theorized, redounded to the benefit of all. Thus, the entrepreneur could be neither too greedy nor too successful in the competitive marketplace.

Throughout the last quarter of the nineteenth century, however, the American economy conformed less and less to the model of the classically competitive marketplace. With the rise of cartels, pools, trusts, and, eventually, integrated corporations, market control in many industries became concentrated in monopolies or in a handful of giant oligopolies. Concentrations of economic power no longer seemed to be the result of some invisible hand, but rather the consequence of active manipulation by corporate owners and financiers.[24]

With increasing frequency, corporations found themselves subject to attack from journalists, academics, and politicians. Exposés of unethical business practices, shoddy or harmful products, and abhorrent working and living conditions shocked readers of popular magazines. A new generation of economists challenged the classical theory that unfettered pursuit of one's self-interest promoted the common good.[25] Politicians, riding a groundswell of public outrage, frequently weighed in against the large corporation, as well. Corporate efforts to solve the labor problem took place in an environment that increasingly questioned the legitimacy of corporate power.[26]

One progressive reformer summed up the situation: "The alert and intelligent member of the capitalist group is aware of the fact that he and his class are under surveillance today; that they are distrusted by many of the people, and that the situation demands, not an arrogant defiance of this irrational attitude, but an earnest effort to justify their place in the social organism."[27] Business executives could hardly ignore these challenges.

The thousands of employers who adopted welfare work believed they were embarking on a new path toward harmonious labor relations. It was a path that promised to boost productivity, recapture the intimacy of a bygone era, and legitimize their place in modern society. The key to achieving these ends lay in rethinking the relationship between employers and employees. A group of prominent employers, labor leaders, government officials, and scholars gathering in Minneapolis in 1902 to discuss the "puzzling and sometimes distressing labor problem," gave voice to this new sensibility. All concurred that the nation's labor problem would remain intractable as long as capital and labor waged war on each other. Their aim was to find "some plan by which the industrial forces of the country may be thoroughly harmonized, the work of the country may be carried forward in the spirit of peace, and our whole people may advance."[28] The debate, conference participants argued, needed to be reframed and the language of conflict rejected. Modern industrial capitalism required cooperation between capital and labor and, significantly, promised mutual benefits to both. The business community, they contended, possessed the ability and bore the responsibility to initiate this transformation. It could do so by embracing the general movement toward welfarism.

Like participants at the Minneapolis Conference, welfare advocates argued that business success depended on a sustainable partnership between employers and employees. They rejected claims that an inherent conflict existed between these two groups. Employers and other welfare advocates often blamed labor problems on employees' failure to understand this. They believed that workers frequently misunderstood company goals, either because they lacked intelligence and sophistication, or because unreasonable and antagonistic union leaders led them astray.[29] The loss of personal contact between employers and employees exacerbated the problem. In addition to conflicts arising from misunderstandings, other confrontations were blamed on the inordinate selfishness of one party or the other. The task at hand was to help managers and workers recognize and overcome these problems. A good welfare program would create an environment in which workers and employers could understand their common interests and act in partnership for their mutual benefit.

When welfare advocates adopted the language of partnership, they joined a public discourse in which the idea of partnership appeared as an antidote to late-nineteenth-century social conflict. Some of that discourse, like calls by the Knights of Labor and Populists for worker and farmer cooperatives, was anathema to American businessmen. However, other strands spoke directly to their own experiences and interests. In the political arena, liberal Republicans who were influential among industrialists in the early 1870s urged closer cooperation between labor and capital. In place of labor's campaign for the eight-hour day, which they condemned as divisive class legislation, liberal Republicans promoted profit sharing as a form of "industrial partnership" that would lead to social harmony.[30]

A cultural debate about the meaning of the work ethic in the late nineteenth century also focused on the idea of an employer-employee partnership. The work ethic had promised success in the form of independent entrepreneurship to those who were industrious, thrifty, and honest. However, as opportunities for independent entrepreneurship shrank with industrial expansion, some promoters of the work ethic redefined success in terms of a business partnership. Throughout the 1880s and early 1890s, a vocal minority of businessmen and reformers publicized profit sharing as a modern form of proprietorship. Like the liberal Republicans before them, these late-nineteenth-century advocates of industrial partnership envisioned a society in which class harmony replaced class conflict.[31]

At the same time, the Social Gospel movement elevated cooperation between employers and employees to a religious duty. Washington Gladden, a leading minister of the Social Gospel movement, called on both capital and labor to lay aside their quarrels and apply the Golden Rule in their dealings with each other. While many businessmen may have questioned Gladden's assertion that cooperative relations must ultimately lead to the abolition of the wage system, they found great comfort in his prescriptions to workers. He advised workers to turn inward and find reward for their labor in the dignity of a job well done rather than battle over how the profits of industry ought to be divided. Gladden warned workers away from the "noisy, crazy, crack-brained creatures" who led labor unions.[32] On the other hand, he instructed employers to replace selfishness with a genuine concern for their employees, demonstrated by caring for their health, comfort, and religious and moral welfare. Gladden's moderate wing of the Social Gospel movement showed businessmen a way to integrate their spiritual lives with their worldly lives. It was a path that demanded little real sacrifice, yet promised considerable returns in the form of a more cooperative workforce.

Given the tenor of these public discussions, it is not surprising that the idea of partnership proved attractive to those in search of new strategies for solving the labor problem. However, they did not support the idea of partnership indiscriminately. Nor were they simply insincere in their use of this language. Instead, welfare advocates infused it with a set of meanings that clearly defined the labor-management partnership on management's terms. John Patterson referred to this partnership as a "give-and-take proposition of mutual benefit and mutual responsibility."[33] Management's responsibilities within this partnership generally included the provision of safe, sanitary work spaces and fairness in employment. In return, workers were expected to adopt the work ethic as their guide: to be industrious, disciplined, honest, and sober. A pamphlet distributed to all employees of the Endicott Johnson Company obligated managers to know their jobs, be fair, and act like gentlemen. Reciprocally, workers were to assume responsibility for maintaining machines in good order, demonstrate good morale, and earn their annual bonus.[34] Clearly, workers were not invited to join employers as partners in the executive boardroom. Nor did employers propose to join workers on the line or behind the counter.

Just as mutual responsibilities did not imply identical responsibilities, mutual benefits did not entail identical benefits. Welfare advocates promised lower costs, higher productivity, and greater profits if both partners fulfilled their responsibilities. If successful, there would be a larger pie to divide between capital and labor. As business prospered, workers could look forward to more stable employment and perhaps to higher wages as well. Companies that adopted welfare work boasted wage rates at or above those paid by other firms. By 1914, for example, the Metropolitan Life Insurance Company enforced an internal minimum wage of $9.00 per week for all female employees.[35] Welfare advocates pointed to the long-term benefits of financial security—cleaner and safer homes, time to cultivate healthy recreation, and better educated children who could escape the insecurity of low-wage jobs.

Workers could enjoy the benefits of partnership on the job, as well. In addition to safer and healthier workplaces, welfare advocates held out the possibility of shorter working hours. In 1902, for example, clerks at Filene's Department Store enjoyed a fifth of July holiday, while clerks at other Boston stores worked.[36] At the same time, the Kilbourne and Jacobs Manufacturing Company of Columbus, Ohio, inaugurated a five-day workweek, turning the Saturday half-holiday into a full holiday with no loss of pay.[37]

Welfare work offered tangible rewards to employers as well. Businessmen could expect larger profits and an edge over the competition. Yet, as attractive as these rewards might be, the intangible benefits of the welfare partnership were even more important. First, welfare work promised to solve the labor problem without seriously altering the way in which the economic pie was divided. When President Augustus Loring of the Plymouth Cordage Company considered the best way to distribute the "extra profits" generated by his firm's welfare program, he proposed a new profit-sharing plan rather than a general wage increase. In support of the profit-sharing plan, he asserted that the firm's current rates of "dividend and . . . wages [should be] considered the regular return [to] which the stockholder and employee are entitled, for their respective investments and labor." Loring assumed that the existing distribution of profits between capital and labor was equitable, and that "extra profits" ought to be divided in the same (unequal) proportions with "payment to the employee [at] the same rate of dividend on his yearly salary that is paid to the stockholder as an extra divided."[38] In 1916, the Bureau of Labor Statistics determined that a fairly comprehensive welfare program could be maintained for only 2 percent of a firm's annual payroll.[39]

Equally important, the welfare partnership promised to solve the labor problem without affecting the traditional power of employers vis-àÉ-vis their employees. President Loring's willingness to share profits with employees of the Plymouth Cordage Company did not imply any willingness to share power. At the same time that he proposed the profit-sharing plan, Loring rejected a recommendation that he establish a welfare advisory board comprised of workers. He insisted that corporate officers and the board of directors continue to make all decisions about the company's welfare program.[40] Employers who established a welfare partnership with their employees decided which amenities they would offer and how each would be administered. Virtually all financial welfare plans, for example, asserted the employers' power through clauses that conditioned eligibility on the employees' "good behavior" and granted employers sole discretion to alter or abolish the plans. In the case of pension plans, employers' control over their employees continued into retirement. Most pension plans allowed management to withdraw benefits if retired employees engaged in unacceptable behavior (read: strike support or union activities). Most plans also placed caps on the total income a worker could receive in retirement, lowering company-paid benefits in proportion to income received from other sources.[41]

Thus, the welfare partnership encompassed a hierarchical relationship in which management retained its traditional powers and prerogatives. Welfare advocates saw no contradiction between this and their belief that such a partnership could produce cooperation and industrial harmony. In fact, they entrusted the success of the welfare system itself to management's privileged role. As noted earlier, welfare advocates attributed much of the labor problem to workers' selfishness and lack of intelligence. Working people, they argued, were not mature enough to take on the responsibility of a more equal partnership with management.[42] Therefore, management ought to use its power to institute welfare programs that would educate employees up to their responsibilities. As one employer explained it, the employers' superiority within the labor-management partnership placed them in a position to "help [their] employees to help themselves."[43]

Although welfare work bore some resemblance to traditional strategies of both repression and benevolent paternalism, it developed into a wholly different approach to the labor problem. Whereas repressive strategies were designed to give employers the upper hand in this conflict and benevolent paternalism reflected a type of noblesse oblige exercised by the upper class toward the lower class, the new welfare strategy assumed that the interests and values of employers and employees were essentially the same.

The contrast with repressive strategies is obvious. In place of violence and spying and the animosity such methods produced, welfare work promised to fight labor activism by weakening the attraction of unions and redirecting workers' loyalty to the company. The DuPont Company, for example, awarded annual bonuses to those who contributed "either by invention, unusual ability, industry or loyalty . . . to the general good of the Company."[44] Despite the rhetoric touting bonuses as a reward for past service, executives clearly adopted the bonus plan as a peaceful anti-union device. Alfred I. DuPont wrote that the plan would "eliminate or reduce to [a] minimum demands for increased wages . . . [and] discourage efforts toward unionism. In case of strike this plan would exert influence with [the] men benefitted," since continuous service would be required for eligibility.[45] Welfare work provided other strategies for fighting unions, as well. The chair of International Harvester's Recreation Committee believed that company-sponsored athletic, social, educational, and economic organizations could capture the interests of employees "to the exclusion of outside attractions."[46] Rather than fighting rebellious workers, employers could reform them into a cooperative workforce.

Much less understood is the fact that good welfare programs differed as much from benevolent paternalism as they did from repressive labor strategies. Traditional paternalism fostered dependency among employees. Employees in the Lowell Mills boarding-house system, for example, depended on their employers for shelter, food, and even religious services. Fifty years later, the Greenhut-Seigel-Cooper Department Store subjected its sales clerks to a similar kind of paternalism. They could enjoy annual vacations only if they went to the company's cottage on Long Island. When Isabelle Nye began her work as welfare manager at Greenhut-Seigel-Cooper, she discovered that only a few of the department store's clerks took vacations, and they did so very reluctantly. Female clerks, Nye recalled, felt that such a "vacation" was really charity, and many preferred no vacation at all rather than accept charity.[47]

Welfare advocates recognized that workers took great offense at such treatment. Instead, they argued that employers should respect and encourage their workers' desire for independence. "Wholesale, indiscriminate charity," wrote the president of Dennison Manufacturing Company, "harms both giver and receiver."[48] A Carnegie Foundation study of pension plans went so far as to recommend only those plans that required employee contributions. The report reminded employers that "the responsibility of protecting oneself against dependence in old age belongs to the individual. . . . The duty of society does not lie in relieving the individual of this duty, but rather in providing the machinery under which the individual shall be able to discharge his obligations."[49] Welfare work, unlike traditional paternalism, promised to provide the machinery needed so that workers could care for themselves.[50]

This rejection of charity distinguished the welfare movement from traditional paternalism in a second way. While businessmen in the nineteenth century clearly expected their employees to be more loyal and industrious in return for paternal care, few justified their actions in this way. The Lowell textile manufacturers claimed that the boarding-house system was designed solely to protect their young female charges.[51] In the 1870s, Henry Heinz approached temperance as a moral crusade, not as an imperative of business success.

In contrast, welfare advocates argued that betterment work was simply good business, not philanthropy. Lee K. Frankel, vice-president in charge of employee and policyholder welfare at the Metropolitan Life Insurance Company, reported to the National Civic Federation in 1916: "We have for quite a number of years attempted to care for our people, not with any thought of philanthropy. I think it is safe to say that we do it because it pays . . . the proper care of the employee is a good business proposition." Frankel explained that the company's free lunch program was "not a gratuity; it means instead of giving them approximately a dollar a week more in wages, we are spending that money for them."[52] The company freely admitted that better nourished workers were more productive workers. While the paternalism inherent in Metropolitan Life's free lunch program is undeniable, it is equally important to recognize that welfare advocates firmly believed that pragmatic business considerations, rather than paternalism, guided their policies. Henry Dennison, president of Dennison Manufacturing Company and an enthusiastic advocate of welfare work, praised the National Cash Register Company because its program was "founded on economy, an economy which looks ahead for its returns."[53] John Patterson, president of NCR, posted signs throughout the factory with the simple message "It Pays."[54]

The argument that welfare work was a business proposition, not charity, shifted responsibility from the shoulders of the individual entrepreneur to the more abstract entity of the modern corporation. In contrast to the informal and ad hoc paternalism of the nineteenth century, welfare work emerged as a systematic and bureaucratic strategy for addressing the labor problem. This meant that policies designed to ensure employee welfare were often formally debated and adopted by top management, put in writing, and then offered to all who met eligibility standards.[55] Welfare work took shape as company- or plant-wide policy rather than as special favors granted on a case-by-case basis at the employer's discretion. Whereas nineteenth-century employers had exercised benevolent paternalism as isolated individuals, those who engaged in welfare work participated in a national movement that defined labor relations as an essential management responsibility.

The establishment of local and national organizations to promote welfare work added to the distinctiveness of this new labor relations strategy. H. H. Vreeland, chairman of the NCF Welfare Department, recalled that the organizing meeting for the Welfare Department in 1904 was the "first time that employers who were giving especial consideration to the welfare of their employees had been brought together, and that each one had an idea that this welfare work was an individual effort on his part in his particular locality, and that he was rather like the mole groping in a dark passage."[56] The National Civic Federation, the American Institute for Social Service, local chambers of commerce, numerous trade organizations, and a variety of trade and popular magazines supplied information to interested members. Employers' access to this kind of systematic information contributed to more elaborate and uniform labor practices than would have been imaginable in an earlier era. A company planning to add a lunchroom could obtain detailed budgets and equipment lists, as well as recommendations on menus. The executive charged with developing a pension plan did not have to reinvent the wheel. Through his trade group or the National Civic Federation, he could obtain explanations of the pros and cons of various plans. Upon request, he might also receive copies of specific plans that, with a few alterations, could be adopted in toto by his own company. In addition to gathering and distributing information, these organizations contributed to the bureaucratization of employee welfare by encouraging the formation of welfare departments directed by welfare managers.

Welfare managers are the least understood element of this new approach. Yet they were one of the crucial innovations of the corporate welfare system. In a business world that had grown increasingly complex, employers were not able (or willing) to devote the time needed to build a truly viable partnership with their employees. As they were beginning to do in more and more areas of operation, businessmen created a new level of corporate management to act in their name—the Welfare Manager.

Patterson's decision to hire Lena Harvey in 1897 exemplifies this new trend. Welfare managers, like Harvey, functioned as the "human contact mechanism," whose purpose was to breathe life into the concept of the business partnership. Along with the employers who hired them, welfare managers invented a labor relations system in which they served as the indispensable bridge between employers and employees. The way in which employers and welfare managers defined this new managerial position is central to understanding the kind of labor relations system that took shape.