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FOREWORD BY THE TRANSLATOR AND THE EDITOR
It has been a great privilege for us to be allowed to translate this significant work by Ing. Zdenek Rybka. Because he actually worked for the Bata Shoe Corporation and rose through its ranks, he was able to provide a personal, yet objective view of Bata’s contributions. One of us (J.H.) learned something about the history of his own country that was known previously only to a small number of his countrymen. This information which, in these times, could be so useful to the Czech Republic, was in danger of being lost. Translating this work was essentially a labor of love.
The other of us (M.T.) learned about the true beginnings of what is today referred to as Quality Management, TQM, Japanese Management, Deming’s Way and a host of other names. Tomas Bata not only anticipated the modern development of quality principles by a full quarter century, he went beyond them. He created a living example of what business can be like if managed properly. Today, judging by books newly published, the principles laid out so clearly by Tomas Bata are being presented as though they were new and only lately tried. The opportunity to study Mr. Rybka’s work has been highly rewarding. We believe that others will find it equally inspirational.
Tomas Bata wanted the World to understand the potential of business to serve humanity. We hope that by making this translation available to a wider audience, we are helping to further his aim.
Josef Hausmann, Czech Republic
Myron Tribus, U.S.A.
January 2000
PREFACE
There now exists a considerable body of literature about Tomas Bata, the founder of Bata's Works. To begin, we must mention the large book of 400 pages by Antonín Cekota with the title: Ingenious Entrepreneur Tomas Bata, published by the Sixty-eight Publishers Corporation, in 1981 [1]
Further, many articles have appeared in journals and newspapers in the last few years. Thus, we must answer the question: what makes us write another book on this subject? There are several reasons for doing so. Two of them stand out.
Tomas Bata is well known as the small entrepreneur who started with a small cobbler's shop and created the largest shoe company in the world. He is also known as a social reformer. But he is less well known as an original thinker, whose thoughts are appreciated more and more in proportion to the time that has passed. We know that time retains only those thoughts that hold the most durable of values.
It would be a pity if we did not use his views and did not apply them to the present, which affords unlimited opportunities to every citizen.[2]
We should not let his ideas or their variants be used by others as if they were new discoveries. The fact that his ideas were so outstanding and practical can be demonstrated by the remarkable successes of Japan after WW II, where the principles he laid down about the relationship between employee and company, were applied [3]. Through the Japanese experience we have an opportunity to study and use the know-how that made Bata a world leader. Let us use it!
Tomas Bata's motto was: The day has only 86400 seconds. In this way he emphasized the need to make every second count. For senior executives perating at the higher levels of an enterprise, this motto rings true even today. Department heads and entrepreneurs have little time to read wordy publications on any subject. What they need is concise and comprehensibly organized information corresponding to their interests, together with inspirational examples that will induce them to introduce more effective practices in their departments.
Most of the publications about Tomas Bata, this important man of contemporary history, are bibliographic. This book deals predominantly with his philosophy and the basic principles of his managerial system. The Bata system may be used either directly or in a modified way in today's economy, in practically every field of human activity.
It is not our goal to lead the reader to contemplate "the cobbler who conquered the world". It would be a pity to see only his deeds and thoughts and not to notice that in his managerial system he challenged the entire social structure. If T. Bata had been a theoretical sociologist, he would have left behind large and significant works dealing with the structure of the social system as a whole. It would be facile to believe that Bata was simply fortunate in his application of American mass production methods to the Czech environment. Such superficiality would merely portray Bata in his peculiarities or in his habits of speech. Both perspectives would overlook the moral and philosophical basis of his system, which was the bedrock of his success.
Bata was an honest and moral man. This was fundamental to his character. He exhorted all his co-workers to the ideal of "service to the public" that he endeavored to pursue, not only in his own very honest way, but also by enabling others to have a direct interest in success. In those days, when industrial companies had no regard for the upbringing and education of workers, Tomas Bata not only strove to increase the performance and wages of his workers, he also worked to provide them with a practical business education. His goal was an educated, wealthy and self-confident worker, interested in business and social activities, serving the public honestly and not relying on any form of gift or welfare support. Such a worker becomes a valuable citizen of the State. Bata knew that in the education of men he had to compete with various religious, communist, fascist and other theories that were hard to beat on theoretical grounds. He did not fight against them with theory. He worked to create
practical proof. He was against institutions organized as collectives that lacked a clear relation between the work and its result, between hard work and reimbursement, between service and salary. He believed that the most important law was that individual salaries be determined according to the amount of work performed and the contributions created. In quoting and discussing Bata's thoughts we have concentrated only on those spheres where there is still some hope that they might contribute substantially in solving the problems of today. We do not deal with phenomena that have already effectively been solved in our republic, such as, for example, Bata's work to improve the existing sales network and other problems that were topical before the war.[4]
In this regard we have not considered it important to go into fine detail, by giving examples of printed forms or accounting records, etc.
Rather, we have focused on providing a comprehensive understanding of his system. That is why we begin in Chapter 1 with an extensive treatment of Bata's educational objectives and results, rather than with his business successes. The company archive houses further details about business statistics, available to anyone interested in them. The chapter entitled "Survey of data about Tomas Bata's life and work" at the end of this book has been included for those readers who wish to dig more deeply.
We prefer to quote Tomas Bata's thoughts literally, both because of their conciseness and aptness in formulating his ideas, and because we believe that the reader is more interested in original words than in another person's explanation. This work is not a mere compilation of the literature and documents published so far. The author has made use of his own experience, that of a man who completed his apprenticeship at Bata Inc. and who finished Bata's School of Work.
Although we consider Tomas Bata a brilliant character in our history, and his name appears everywhere in this study, the book is not intended as further glorification of Tomas Bata and his family. Its primary 4 purpose is to be a useful formulation of his thoughts, thoughts that them have the potential to contribute to rapid development of individual companies and to our whole society.
EDUCATOR
"During my work my intention was not to build the company, but people. I have built a man to be more proficient and effective and to serve customers better so that later he could build the company".
Tomas Bata did not have exceptional rhetoric and diplomatic talent. However, his pedagogical talent was remarkable. It was he alone who taught tens of thousands of his co-workers both at home and abroad –where he built factories and department stores - a way of work and style of life whose practical outcomes were admired all over the world. As well as practical steps towards the education of his co-workers and his youths, he was immensely interested in the public educational system. This interest is described in a separate section.
Most parents believe that they are the people best placed to control the family's fortune and that they have the right to do so. This had been the situation in this country for many generations and was so even in Bata's days. The oldest children, as soon as they became gainfully employed, handed over their earnings to their parents. As a matter of course, parents demanded the money their children earned, to use according to their own judgement to support the family and younger siblings. As a consequence, when a young man decided to marry he did not even know how much money he had and frequently felt embarrassed to ask his parents about it. The worst thing, however, was that he has neither the experience of running his own household, nor the joy of his business results. The farther East the residence, the more widespread was the family household. T. Bata saw a 50 year old man in India who humbly asked his 80 year old father for the money that he had earned himself. After he received it he kissed his father's hand.
Nowadays, the situation in this country is not so precarious for the young. Parents usually take care of their children and save money for them (and not just the money earned by them). However this approach does not achieve the purpose of teaching children to respect money and knowing how to run a financial household.
T. Bata promoted the principle that the parents should let their children, from the age of six, independently determine what to do with every cent they earned. Children should earn money for their necessities through favors, services, collecting scrap materials, etc. If a family member needed financial help, it should be in the form of a loan, not in the form of a gift. Bata liked talking about how, on his journeys, he found small boys who earned considerable money. They were not just newsboys or liftboys however. The opportunities to serve the public were unlimited. The one he most appreciated was a boy who eradicated flies for money in apartments and homes.
Young Men and Young Women [5], who entered Bata's School of Work at his company at the age of 14, immediately started running their households independently. They had to earn money for accommodation at the dormitory, for catering, for all their clothing, culture and sport, and even for school utensils. Any support from their homes was forbidden. Also, Young Men whose parents lived in Zlin had to be accommodated at the dormitory and carry on an independent life. Even during the war years it was suggested to them that it was not appropriate to accept supportive parcels. Before the war the starting weekly salary of an apprentice was set at 120 Kr. (Czech crowns); necessary expenses did not exceed 70 Kr. The goal was that a Young Man should run his own household in such a way that after returning from military service at age 24 he would have at his disposal 100000 pre-war-Kr. (as well as enhanced expertise and physical strength). A Young Woman was expected to
accumulate 50000 Kr. In due course it was supposed that everybody would live a full life, be healthy, well-nourished and well-dressed.
All employees deposited their savings at the company at an interest of 10% pa. When a Young Man married a Young Woman they would have not only an above-average salary, but also savings of 150000 Kr.
Even under extraordinary circumstances, when they had to make a living just on the interest, 15000 Kr. sufficed to provide a decent living standard. Bata's intention was that his employees would not be slaves to capital but rather masters of it. The environment described above shows that although income was much higher than anywhere else, it was out of the question that someone got something for free, in the form of a gift such as a Christmas bonus or the 13th salary, etc. T. Bata's view was that a man who was given a present started relying on gifts and not on himself. Exceptions were very rare. Every new-born baby, born to a company employee, received 1000 Kr. in a bankbook. At 10% interest, this amount would increase ten-fold by the age of 24.
Not to give anything to anyone for free was a principle maintained with such consistency that it deserves one further paragraph. Let us quote T. Bata: "I dislike financial support for unemployment, either for companies owned by entrepreneurs or for workers. Just like the employer, the employed must put their budgets into balance. If there is not enough work - as the situation in many countries proves to be in these days - it is necessary to work under the most unpleasant conditions, because only in this way can one work himself through to better times. I maintained this point of view in 1922 and my co-workers accepted 40% lower salaries. These salaries have more than doubled since that time." We can see how this fundamental view persisted, after the death of the boss, when the company organized working camps for railway construction for applicants for employment in the company when there were no vacancies at that time T. Bata was not a heartless man. From his own experience he understood that people can get into desperate situations without it being their fault. However he entrusted the more important and more responsible positions only to those people who had proven their business and organizing capabilities and who were, to a certain extent, well off. For others, he asked himself the question: How can they manage the company's money successfully and responsibly if they are not able to run their own household?
EDUCATOR OF THE YOUTH
For many centuries, guilds provided education for the young, and we can acknowledge that they did so relatively well. The proven system (apprentice - journeyman - "real world" experience - master) produced members of the guild with good knowledge of the trade, of mutual relations, and of sales practice, and a general understanding of their position and interests in society.
The industrial revolution and the rise of industry interrupted this comparatively well-proven system of education. The main reason for this was the conviction, resulting from division of labor, that a man operating a machine with a simple operation did not need expert training or education. Industry started requiring only individuals who worked with their hands. That was a mistake. The consequences for the whole society were immense.
A worker who has been executing one relatively simple operation in the company for many years gradually loses the ability to develop, interest in his personal growth, and also interest in what is happening in the company, as well as in its business results and its financial position. He considers himself a slave. He hates both the work and the company and he starts hating the social situation as a whole. This has led to social and political revolts in many countries, and has often resulted in dictatorship. Noting that some people wanted to work in his company for the sole purpose of making money, T. Bata captured the situation well with the observation: "I cannot build a company with such rabble". Decentralization, autonomy of workshops and participation in the profit - all that was meant to make every employee a manager. Of course, such a worker had to be in command of a great deal of knowledge to do so. He had to know the factory functioned, and with what results; to what extent his workshop contributed to the general results; where, at what price, and at what profit, the products were sold; where the raw material came from and at what price; and how state policy affected the company. He needed to know about laws, taxes and many more bits of knowledge that, in other companies, were dealt with behind closed door and kept secret from the employees.
It was just a small step from these considerations to Bata’s decision to educate his own youth.
Before they chose their future profession, Bata recommended to young people that they choose an industry or trade, so that they could start their own business. "No matter how great this fight may be, taking account of the dead and injured in the form of bankruptcy, where a fight occurs that is the right place for the young. From all sides you could hear: Don’t go there, that sphere is overcrowded. Most of all these words were spoken in the State service and that is why salaries are so low in State administration".
In June 1925 T. Bata placed an advertisement in the daily press: "I will accept in Zlín, 200 young men aged 14, who have finished either higher elementary school or lower secondary school with good grades, or basic school with extraordinarily good grades, for the purpose of training them to become good and decent managers."
During a gathering of Young Men in 1925 he said:
"You are unique young men in our republic. Of course, there are boys your age (14 - 15) who earn money during apprenticeship. But they are children. They stay with their parents, give them their earnings and are nourished by them. Their household and their everyday needs are run by Mummy. I have written that the word 'man' means 'bread-winner'."
In another rally of Young Men: "Don’t be sad about the fact that your parents cannot or do not want to support you at school. The whole world is a school and work is the best teacher. The best aid is poverty. Most outstanding men of our era left their homes with a bundle as small as yours. The greatness of our era consists in the fact that even the highest positions in our republic are accessible to a poor man. It depends solely on him, on his capabilities and endurance, as to whether he will manage to reach them."
The educational system of his own youth can be best illustrated through the regimen that was compulsory for Young Men and Young Women. 14-year old pupils from higher elementary schools were accepted by the company on the basis of a psychological-technical test and medical checkup. They filled in forms and had a personal interview. The tests were written. There was no preferential treatment except for sons of cobblers, who were accepted preferentially. In 1924, for example, 800 applicants were accepted as future cobblers, and additional applicants as future mechanics, electricians, stocking makers, rubber chemists, bricklayers and other professions.
Accommodation was in dormitory rooms, with 16 boys per room.
Everybody had a little wardrobe and a bed. Beds were one above another. Chief of the room was a boy from second grade. Five or six rooms constituted a train, the head of which was a professional educator. Rooms and trains competed continually in order, sports, cultural actions, etc.
Everybody was included in the production process and care was taken that everybody went through all kinds of work. A company canteen provided cheap catering (breakfast, lunch, dinner). In the evenings they attended a 2 - 3 year vocational school.
Daily regimen:
06:00 - 07:00 Morning alarm, hygiene, bed-making, cleaning, breakfast. On the way out of the dormitory, the Young Men passed through a lane of educators who inspected their dressing, shaving, haircut and shoe cleanliness.
07:00 - 12:00 work in the factory
12:00 - 14:00 noon break, lunch, rest, cinema, time for study
14:00 - 17:00 work in the factory
17:00 - 18:50 dinner, attending to private matters, study
18:50 - 20:30 attendance at vocational school
20:30 - 22:00 travel to dormitory, personal hygiene, preparation for sleep, tattoo
22:00 - unlimited study in study room at the dormitory
Many Young Men developed good habits for the rest of their life, such as cleaning shoes with polish and never having worn shoe-heels. During the war years one had to work in the factory even on Saturday mornings. In the afternoon and on Sundays there were organized sports or cultural programs. Young Men whose parents dwelt in Zlín could visit them only on Sundays in the afternoon.
There was always a competition underway, in cleaning, orderliness of the dormitory, behavior, general outlook, work output in the factory, and most of all in grades at school. Every activity was awarded points and evaluated. After two years, out of the 800 apprentice cobblers, 30 were chosen for study at the two-year Evening Business School with the option of a transfer to T. Bata's Evening Business Academy in Zlín, and another 30 for study at Evening Master Cobbler School with the option of transfer to Evening Polytechnic Cobbler High School. The rest of the Young Men finished the third grade of the Vocational Cobbler School with the prospect of becoming qualified workers with a chance to reach lower supervisory positions in the factory. Extraordinarily gifted and especially efficient Young Men were educated at so-called Tomas-ov before the war, where special care was devoted to them (broader language training, social behavior, riding a horse, more elegant clothing, etc.). The health of every Young Man was under medical supervision in Bata's Hospital, which was maintained at an extraordinarily high level. The regimen described above and the general educational system required every Young Man to keep himself in good shape at all times. All graduates from Bata's School of Work considered the discipline and conduct requirements for entry to military service as superfluous. Constant competition in every activity, even in such things as bed-making, raised every skill to a level of professional competence.
Young Women were educated using similar though differently focused methods. Besides vocational knowledge of the work in the factory, their education required them to be fully prepared for family life.
Good grades in the family school were required as well as household knowledge, cooking, sewing, childcare and hygiene, with the overall purpose of enabling a husband to be full devoted to his profession. T. Bata's vision was that his Young Women would be in demand as brides. The company required that a man devote himself to his work, fully and exclusively. The woman who took care of a household and children was not supposed to work in the factory as well. Every man employed at the company would make enough money to support his wife and children with his earnings. ("Man" was someone who took care of somebody.)
Young Men and Young Women lived the full lives of young people, filled with joys and worries, fun and tragedy. However, in an atmosphere like that described above, excesses such as alcoholism, vandalism and so on were inconceivable. The brilliance of the pedagogical successes of the Bata educational system is illustrated by the fact that many people from various nations came to Zlín to gain experience that they later applied all over the world. Even now we can meet them everywhere. They were (in decreasing order of numbers) Yugoslavs 136, German 36, French 28, Polish 18, English 14, Indians 12, Dutch 9, Romanians 8, Swiss 6, Egyptians 5, Austrians 3, Americans 2, Bulgarian 1. Most of them talk about their successful lives and relate their success to their stay in Zlín. In September 1992, the World Congress of alumni of Bata's School of Work took place in Zlín. In the almanac that was issued on this occasion, we read that Bata's School of Work (BSW) prepared an endless flow of alumni, prepared for life. BSW was successfully completed by more than 10,000 alumni.
Almost literally, BSW created Emil Zatopek [6] by forcing him to take part in his first race, where his talents were discovered. Francois Essner became a president of C.E.C. European association of shoe producers. Vaclav Skora was the only European to run shoe production in Jakarta. Dutchman Dirk Steendam was awarded the Royal Medal of Oranje van Nassau for his life achievements in 1983. Major General Pavel Kocfelda, world famous writer Ludvík Vaculík, etc. etc.
Batovian participation in the anti-fascist resistance movement was extraordinarily large. It included Tomas Bata junior, which explains why the Nazi occupation of the country found him overseas. According to incomplete information, 213 Batovians took part in the overseas resistance movement. 60 of them were BSW alumni, 26 of whom were pilots. 41 alumni were killed. 73 BSW alumni took part in the anti-Nazi Slovak national uprising, and 16 of them laid down their lives for freedom.
Tomas Bata junior said, at the rally of the World Congress of BSW alumni: "50 years ago BSW was an ideal preparation for life. Nowadays a similar school could not exist simply because young people in civilized parts of the world attend schools for up to 16 - 18 years. They start working with much more profound theoretical knowledge than the 14 year old beginners in BSW. Later they can obtain the vocational knowledge they missed out on. But my main feeling is that they are too mature to be able to accept the philosophy of work and managing that was cultivated at the dormitory".
We will leave it to the reader to judge whether it is necessary to accept this opinion and whether a way could not be found to apply the above-mentioned good experience in today's society. Even if not, we hope that this study will give our managers many other motives for successful activity.
CRITICAL LIFE DECISIONS
On three occasions, Tomas Bata faced bankruptcy. Each time, he made significant decisions. On the first occasion, it was a business choice; on the second, a moral decision; and on the third, a major conclusion on how to overcome a financial crisis.
In the first case, he left for Vienna as a 15 year old boy in 1891, having borrowed 30 florins from his sister to start up and run his own enterprise. He produced slippers. He knew neither the market nor the place and language. Hoping to grow and gradually produce and sell, he concentrated only on production. Eventually he found that his goods were unsaleable. He reached a conclusion that has guided the Bata company up to the present day: "The market is more important than production."
The second case has its origin in 1894 when he founded a shoe-making [7] company with his brother Antonín. The company was founded in Antonin's name because Tomas was not yet 18. His sister was also a partner, because they used the capital of 800 florins from an inheritance from his mother. They introduced methods never seen before: strict working hours from 6am to 6pm and a salary paid once a week. The enterprise was not successful because they tried to hob-nob with the higher levels of society instead of giving full attention to the business.
The invested capital was wasted and a further 8,000 florins were owed to creditors. Moreover it turned out that Antonín had signed bills of exchange amounting to 20,000 florins as a guarantor to a company that went bankrupt. Then Antonin left for military service!
Tomas was desperate. He decided however, that bankruptcy is a moral matter. He came from an old-fashioned family where such practices were considered indecent. He started working extremely hard. He convinced the creditors to wait for payments, because in this way they would gain more than they would have gained through seizing the assets. The creditors, having seen his efforts to pay with blood and sweat, extended the repayment period and gave him a chance. During this time of constant and feverish search to resolve his situation, Tomas Bata devised something totally novel for his time: production of light linen shoes with leather soles. After initial mockery and hesitation, the shoe became a hit. He managed to get orders from Prague, Galicia and Vienna. The name Bata flew around Europe for the first time. By 1897 he had paid all his debts.
In the third case his solution to the problem of how to face the danger of bankruptcy contributed to his reputation as an ingenious entrepreneur. We are dealing with the fact that the first postwar economic crisis in Europe did not spare Czechoslovakia. Whilst in surrounding countries this crisis manifested itself through astronomical inflation amongst other things, in 1922 the Czechoslovak government decided, with a great deal of courage, to prevent the danger of inflation by a revaluation of the Czechoslovak crown. This revaluation increased the value of the Czechoslovak crown by three to four times (1 crown for 5-6 US cents, to 18 - 20 cents) and resulted in an export decrease to half of the original amount. The Bata company export decreased from 64 million crowns to 15.4 million crowns. Unemployment was spreading fast. The domestic market suffered from the lack of buying power in the population.
Industrial companies found themselves in an unresolvable situation. Revaluation of the crown resulted in a distorted relationship between creditors and debtors. Production was financed to a certain extent by bank credits. The companies that received credits in previous time periods had to pay back these credits in a currency that was many times inflated. The debts were not reduced. Bata owed his employees almost 6 million crowns with 10% interest To fulfill all these obligations it was necessary to sell twice the amount of goods.
At a conference of the leading workers, Bata analyzed the situation as follows: "Our storehouses are overfilled with goods, sales are stagnating, exports have collapsed, production is at its lowest level, people need shoes but they have no money. It is useless to demand any sort of relief from the government (tax, customs, postage). It is not possible to keep firing workers, who would then make further demand on unemployment welfare from the State. If factories are closed down the State will lose its tax income and an unemployed worker will not buy shoes even for half price. That is why the production has to be kept going at any cost." An important institution, the Central Association of the Czechoslovak Industrialists, held a meeting on August 25, 1922 at which T. Bata spoke, saying that he had been listening to proposals for two days about what the government should do but he had not heard anything about what the speakers were proposing to do. He said that he had heard a farmer in his shoe shop saying: "I get half price for my corn. I will not buy shoes until they are half price too." T. Bata declared that he would arrange his affairs according to this farmer’s reality. His presentation was greeted with mockery and indignation. An excerpt from the company magazine Communication ran as follows: "We are standing at a crossroads. Either we stop production and fire all employees - as has been done in many factories - or we adapt the production costs to new circumstances. The first option would be more prosperous for our company because in that way we could sell all our supplies at reasonable prices and at minimum losses, be ready for the autumn season, and defer the purchase of new supplies until the prices of the raw material market adjust to the world prices. However these measures would harm the entire economy and, most of all, the workers."
From September 1, 1922 T. Bata halved the price of shoes. He halved salaries and he undertook to furnish his employees with food, clothing and other everyday necessities at half price (He purchased from producers to exclude gouging by middleman.) He decided that his company would become self-sufficient until other companies lowered their prices. For example, even the water supply piping for the company was made locally of wood. T. Bata justified his philosophy as follows: "We can see want everywhere, for example, in clothing and linen, and thus cannot comprehend how people can stop production and fire workers at such a time instead of making an agreement with workers, working together to provide buyers with products at a price that they, the buyers, can afford to pay."
T. Bata sought solutions only in work and production. One can produce only while selling at the same time. If there is no sale there is no production. If there is no production, there is no work and thus no salary. This vicious cycle had to be broken by lowering prices. Obviously he did not know, at the time of the decision, precisely where he would find 50% savings, when salary reduction accounted for only 12 - 14 % of production costs. One thing was obvious to him however: a big crisis cannot be solved by small measures. If a man is forced to fight, no one knows beforehand what will awaken in him to help him to win the fight.
The people seized the opportunity afforded by extraordinarily lower prices, shoes were being sold in huge numbers, the storehouses were emptied and production started again at full speed. In this creative way T. Bata managed to solve the economic crisis. He used to declare that he would never complain of the situation among his co-workers. His view was that the situation was there to be solved even if one was not to blame for it. "The situation is never to be blamed for anything". "In economics it is not necessary to understand the situation but to master it." And further: "To hell with the logic that proves that the best thing for me is to go and hang myself. The worse the situation in the outside world, the more one has to work. Even if I have to work for free, I will not run away."
His close co-worker A. Cekota described the situation this way: T. Bata impressed everyone around him with his views, and even those who did not understand him felt that truth was on his side. His direction was life, not misery: life full of toil and hardship, but life with hope for victory. At that time the Bata company had credits with two banks. The general director of one bank criticized Bata for lowering the property value by lowering the value of his goods by 50% and he threatened to take over the company. T. Bata countered that if the bank took over the company it would not receive half of what the company intended to pay. The second bank, Czech Union Bank, reacted with under-standing of the new situation and this bank went even further by providing additional credit. During May Day celebrations T. Bata expressed his appreciation of the attitude of this bank. In the presence of director Kraus, he made an indirect remark about the bank that had turned against him: "Some banks are like umbrella rental shops. They offer credit when the sun shines and want it back when it starts raining."
The crisis was overcome and the company took a deep breath and began vigorous development. Very soon - from 1931 - the firm managed to become independent of bank capital. From that year forward the company financed itself exclusively from its own resources, apart from the savings of the employees in their personal accounts. Since that year no one from outside has been able to exert any influence on the basic financial policies of the company.
PLANNING
Nowadays, after decades of socialist planning that have not brought the expected results, - it is hard to write about planning. The mistake was obviously not in inappropriate planning methods, but in other spheres of economic life.
The Bata company devoted great care to planning, especially to its accuracy and systemic consistency. The term "plan" meant essentially "prediction".
T. Bata hated risk. He tried to free the operation of the whole company from risk. His view was that if a man keeps his eye on the objective of his labors, he can manage to find the means of achieving it. Thus the whole company and every department worked on the basis of carefully worked out prior decisions; using plans made in advance. Eventually the employees were so influenced by the fight to fulfill the daily plan that when they learned about T. Bata's death in an air crash on the early morning of July 12, 1932, work was not interrupted, because it would have meant not fulfilling the plan and workers would not have been given their salary; also, workshops would then have had to pay their “internal customers” heavy fines.
Even in the pre-war years there were free Saturdays at the Bata Company. The work calendar included 253 working days for which 253 working plans had been developed. Every supervising employee was busy processing a plan for his area of activity. The department that did not fulfill the plan and caused harm to an adjoining department with which it did business, paid the injured department a negotiated penalty. Every workshop and every individual worker was very interested in fulfilling the daily plan. The size of their salary depended on it, as well as their share of the profits.
In 1924 T. Bata with his co-workers developed a plan for the next ten years. At the time Bata's factory produced 14,000 pairs of shoes daily. A gradual production expansion was planned so that 100,000 pairs of shoes could be produced daily during the last year of the plan. This aim was exceeded as early as 1931. Other long-term plans were no longer pursued, with the exception of the "Bata Works Three year plan" in 1939. It is most probable that the heads of the company made some long-term plans. However, these were not put into written form.
They were confidential and they were adjusted flexibly in response to the current situation. T. Bata proclaimed that he had no ultimate goals. However, in a letter to the then president, Dr. E. Benes, he wrote:"... every sort of production will have its center in a separate country. We endeavor to safeguard shoe production in the whole world for our state."
As far as we can judge from the three year plan, further concentration of production was not supposed to take place in Zlín. The size of any new works to be founded was not to exceed 3,000 employees.
The basic planning period was six months. Detailed proposals were developed at the lowest business centers (workshops). These proposals were divided into weeks, first in production units followed by estimates of production value. The plans were consistently coordinated with the preparation of plans for production (material purchase and auxiliary production outputs) and with the sales department, so that all workshops had an assured company market for their products within the company.
Individual business centers traded with one with another as if they were independent units. However, since negotiating the price was not permitted, - that is, it was not permissible to try to force down the price of the supply center and to negotiate the highest price with the purchasing center , the heads of the company set the transfer prices.
Only those costs that the workshop could influence by its activity were budgeted for. Thus depreciation costs were not calculated, nor were overhead costs included, etc. In case the half-year proposals did not meet the demands of the heads of the company, the targets were increased for particular parameters, especially profit.
The weekly and daily work schedules resulting from the half-year proposals had to be met unconditionally. For example, the task of the distribution center was to ensure the supply of material within the terms agreed in the schedule and to the agreed standard of quality. It is interesting to note that even during the week, the workshops always had material and all necessities for production ready and there was never a need to search for something. Every day, the planned daily amount was handed over as a whole. In simple words: 1000 or 1200 pairs of shoes were handed over, depending on the difficulty of the design. This enabled ongoing and exact supply to the shops and fulfillment of the export supplies.
The system for fulfilling the daily plan, for weekly control, and for publishing the business results, enabled prompt resolution of difficulties. If a production difficulty occurred it was not allowed to last longer than a week, even if the Saturday free time had to be sacrificed for its elimination.
The working hours (7 - 12, 2 - 5) were adjusted to allow daily plans to be completed. The cycle time of the assembly line was adjusted so that a worker could, to a certain extent, finish his work early and go to the toilet, or make up for delay due to the failure of the machine. (Machines were made to be readily replaceable.) Less able workers could come to work earlier, before the assembly line was switched on, or they could work during part of the lunch break and also after 5 p.m.
PRODUCTION MANAGEMENT AND ORGANIZATION OF THE COMPANY
In 1938 the Bata enterprise employed approximately 67,000 people at home and abroad. What sorts of managerial methods were applied to ensure that everyone in such a big collective worked efficiently and effectively? This principle of maximum output of every individual was obligatory. The alternative would mean the start of stagnation. However this danger - as we know - was not a real threat. The philosophy of Bata’s management arising from Bata’s way of thinking can be followed in every chapter of this book. In this chapter we will outline some of the basic ideas.
The real headquarters for all the works scattered throughout Czechoslovakia and the rest of the world was the Zlín company. The dependence was not only financial, but also related to supply of shoes, machinery, and prefabricated goods. It also included provision of trained personnel to ensure uniform forms and management methods throughout the whole concern. On the other hand, overseas works were used for contacts in order to acquire raw materials.
Today’s management theoreticians must be amazed that the company did not have any written organizational regulations. The heads of the company explained this phenomenon easily. There was never a need to create such regulations. Circumstances never arose that would force employees to study whether the task they had executed was in accordance with their work assignment. The system of company management has never been published. The evolution of the company organization went through such rapid development and frequent change that the issuing of organizing regulations would limp along behind the real activities in the company.
The organization was continually adjusted to needs and so personal instructions were preferred. Personal contacts between superiors and inferiors were very frequent. (The first organizational regulations were issued only in 1956 in the then state owned company Svit.)
A basic feature of the Bata system of management and organization was the division of the entire company into small economically independent accounting units [8]. Such units were, for example, cobbler workshops, purchasing department, sales department, analysis department, every shop and various supporting departments. When contracting with one another, the business units behaved as though they were external companies. Every unit bought raw materials or prefabricated products from a preceding unit and having carried out its part of the work it either sold the product to the following department or it sold the final product to the sales department. If the quality of the product was of lower quality than required, the accepting unit was offered a discount price. The calculation center and management of the company checked the business contracts and the unit prices.
Thus these business accounting units represented a lower rank of management. Each was headed by a manager fully responsible for the unit’s operations and achieving the profit that the unit was fiscally responsible to achieve. Such an organization did not allow concealment of losses or damages that would then have to be fixed up by other departments. Business centers formed themselves into groups and higher organizational divisions because they needed a higher degree of management and control. Every six months the accounting office issued a survey of business units, with their names and numbers. A privileged position, but also material responsibility, was reserved for the calculation, purchasing, sales and personnel departments and the accounting office.
The company determined fixed transfer prices for six months at a time and the internal units cleared their accounts at these prices. But these prices were not set independently of the prices in the outside world. On the contrary, the analysis department followed price developments outside the company very closely and watched the prices paid by the purchasing department. These prices encouraged the “buyers” (internal customers) to settle their disputes as quickly as possible so that no losses could arise, which would worsen the result of their department. Good business results in the “buying” department depended on many further precautions. For example, according to Bata’s planning principles the supplies had to be ensured for the whole six months by steps (supply norms) consistent with keeping the price and quality according to the reference products. Discounts for early invoice paying were applied, as well as other measures aiming at increasing the profit of the “buying” department. Other units were motivated in a similar way.
Only exceptional employees were appointed to higher positions. Heads of all ranks rose through the production process from the very lowest worker position. As a result, all heads mastered the work of their subordinates to the last detail. It made a strong impression when an elegantly dressed director went through a workshop, that if there was a problem on a production section and the work got stuck, he took off his jacket and tackled the problem, himself and showed how to manage it. Heads at such a level were able to react immediately, according to the situation. Furthermore, during business trips abroad they could notice innovations that they could later introduce smoothly at the company.
The population in our country expressed great dissatisfaction with their shoe supply, particularly in the 1980s. For that reason many experts went back to study Bata’s system of retailing. They saw that the company built shops with the intention of lowering sale costs (to lower shoe prices and to increase profit) and to operate production more efficiently and have better control over the amount of goods in stock. The standard design shops were divided into types, and for each type the number of shoe samples and number of shoes in stock was determined. A shoe and stocking repair workshop was installed in every shop. In the larger shops there were pedicures. The shops were supplied by railway, according to a weekly statistical report and according to orders of the shop master. The shop master made a security deposit upon his appointment to the position. He was interested in sales, because he paid all overhead costs, salaries of his employees, advertisements etc. from the profit from the sales. The shop master tried to sell as much and as quickly as he could because there was a danger that he would have to pay the price difference at the price discount declared by the company (e.g. seasonal shoes) from of his share of the profit. The level of expertise of shop staff was closely monitored from Zlin. There were more than 2,000 shops with 8,000 shop staff workers in 1937. In that year, more than 28 million pair of shoes were sold.
Perhaps the most important division in the company headquarters was the analysis department. Its workers were highly trained and reported exclusively to the boss. They carried out preliminary calculations and continually processed the data. They determined the internal clearing prices (i.e. transfer prices). In fact, the analysis department was the primary tool used by the company’s top management to lower production costs and increase profits, a matter in which the department had, of course, a material interest. Of course the workshops opposed this pressure. That is why higher training was essential, because the analysis department had to provide a realistic justification for its calculations.
Many observers admired the efficiency of Bata’s intra-company accounting, which provided weekly balance and salaries without using complex computing machines (which hardly existed then anyway).
The calculation unit certainly did an above-average job, but essentially all that it did was a comparison of calculations with reality. Thus it was a tool for internal business control. The weekly balance had to be completed by Friday evening, including the extramural departments, so that the data were ready for the conference of managers, which was held every Saturday. The reconciliation was carried out only manually on one original copy and adverse data were marked in red.
No written analyses were prepared for the conference. Monday and Tuesday were intentionally selected as paydays so that the employees could not spend their money on Saturday and Sunday without thinking about it. Only paper money was paid as salary; coin amounts were accumulated and paid later in paper money.
Apart from the analysis department, the personnel department also reported directly to the boss. His views on this subject can be deduced from other chapters. Here we simply note that this department was, among other things, in charge of the selection of workers to be employed in the factory. Due to the large supply of unemployed labor, a demanding selection process was carried out. Large turnovers of labor occurred because of the large number of workers who were not able to, or did not want to, adjust themselves to the stringent requirements for efficiency and obedience. 67.8% of the workers employed in 1939 were under 30. Many personal characteristics were taken into account when considering someone for promotion, positive attitudes to the company being the most highly valued.
One of the prerequisites of manufacturing quality and cheap shoes was production volume, even at the cost of a rather limited range.
Mass production required standardization of process, which was carried out very consistently, not only in shoe production (molds etc.) but also in the means of production. Everything functional was gradually standardized: factory halls, machines and their interchangeable parts, shop equipment (shelves, chairs, counters). The decimal system was consistently introduced everywhere – numbering of buildings, doors, production data etc.
We have noted that T. Bata required everything necessary for production to be of top quality. However other factories used top quality machines as well. How then can we explain that worker productivity was substantially higher at the Bata Company? In 1929 the daily production per worker reached 12.5 pairs shoes, which was 3 times higher than in other factories in the Czechoslovakian republic.
In the USA, peak daily productivity was 5 pairs of shoes per worker (Factory Organization, April 1990). These differences can be explained only by substantially more efficient methods and forms of management and a better organization.
Not only did the principles introduced into management work well for carrying out common tasks at normal times; the also proved to be good even under extraordinary conditions. This was evidenced immediately after WW II when the factory, which had been heavily damaged due to bombardment, was put into operation within a all-time-record short interval. Again, in 1947 the factory worked at full speed and was preparing itself for the newly emerging economic boom. For several years after February 1948 (communist overthrow) the Batovians defied the changed system of management, which favored collective irresponsibility, and tried to preserve at least some elements of their effective way of management, for example by proposing a system for a socialist company economy. To the detriment of the whole national economy they never succeeded in gaining acceptance of these principles.
ORGANIZER
Tomas Bata influenced the economy and social life of his country with many measures that arose from his outstanding and original thinking. First it was the introduction of worker’s participation in profit followed, between 1924 and 1926, by decentralization and autonomy of the workshops. Most people think that Bata’s only success was a straightforward application of knowledge that he had gained in the USA. Certainly, on his visits he was inspired to introduce outstanding methods, but the original ideas of decentralization and worker‘s participation in profit preceded by many decades the time of adoption elsewhere, and even today many other variants of these ideas are studied. During the period when T. Bata traveled to the USA, Henry Ford did not concern himself with such matters at all. This disregard of the workers had an adverse influence on the culture in the Ford works. At that time, universities in Czechoslovakia and elsewhere were not ready to study and fully come to grips with the problems of industrial and business enterprises as a whole.
In 1925 T. Bata published a booklet with the title: Wealth for Everybody, the content of which is concentrated in the slogan: "Wealth - duty, poverty - excuse". He described the basic idea as follows: "I was seeking a method which would work automatically, just as the sun rises and the sun sets." It follows from this concept that he was actually a social reformer; his company served only as a tool for the reforms he intended. To him, the company represented a school in which the employees learned to manage modern industry and their own lives.
T. Bata endeavored to transform the unprincipled style of thinking of every one of his employees into a responsible managerial mindset. The production enterprise with an unprincipled system of work is based on order, work and salary. There are no incentives for a worker‘s initiatives and in the event that initiatives occur with some workers, they cannot be objectively measured. They are reimbursed only by arbitrary amounts. The employer - employee relationship manifests itself only through the amount of work executed and the payroll.
Without principle-centered management, the employee – customer relationship does not exist at all. Using the Bata system of organization the company was transformed into a collection of many hundreds of departments, each with great business autonomy. Every department was led by a head whose way of work resembled that of an entrepreneur. He shared the profit from the workshop with his employees. Mutual exchange of both half-finished and the finished products was organized as between other parties. The analysis department and company management supervised the contracts. Every department processed a detailed plan at least a year in advance and this plan was gradually divided into individual days. Fulfillment of the overall plan presupposed coordination and fulfillment of completed plans in every department.
If we reflect on the organization described above, we will readily recognize that, in essence, it was all about relative autonomy in organization, accounting and economy. The general concept of company activities was designed by the management. Every department could manifest its autonomy only by carrying out its task on the level that best satisfied just this department, and thus the management of the company. In this way the whole operation of the company was simplified, because a great deal of the administrative agenda was transferred to the lowest production unit. The production costs were calculated for a planned number of shoe pairs. Every shoe pair above the planned amount was actually produced without overhead costs and each pair of shoes thus produced increased the planned profit rapidly. Recognition of this fact resulted in great efforts to exceed the calculated plan of production.
Profit sharing was not an entirely new idea: it was used in other companies. There the workers received "some" money after the annual balance report was developed behind closed door.
T. Bata’s views were substantially different. He established the following principles:
a) Profit balancing must be carried out as soon as possible, i.e. weekly
b) The participant can calculate his share himself.
c) Participation must relate to small departments so that every employee is able to influence the running the workshop. The size of the share depended on the importance of the work. Foremen, masters and workers had a share just in profits. Building operators and members of the board of directors participated in losses as well.
The workers’ profit share added about 20% - 30% to their salary. The share of profits of the higher ranked employees accounted for a substantial part of their income. It often exceeded their basic income many times over.
After autonomy had been introduced, the output of the workshops increased from 800 pairs to 1,200 pairs, depending on the complexity of the shoe design, and later even to 2,000 pairs whilst decreasing the number of workers from 210 to 180. At this point, the concept of autonomy was introduced, after suitable modification, into the non-productive sphere as well, such as sales and purchase departments, social institutions, restaurants, cinemas, the hospital and so on.
The profit share was paid every week, but only half of it was paid in cash; the other half was assigned to the worker’s personal account and held by the company at an interest rate of 10% p.a. The company defended itself against complaints about this restriction on personal freedom with the argument that the profit share could not be considered as a part of the salary. At any time, an employee could withdraw a quarter of his savings from his account for necessary purchases, apartment equipment etc. On leaving the company the employee was paid all his savings as soon as the guaranty, which the employee signed at entering the company, expired; this normally required a year.
As an example, employees’ deposits in company accounts reached 150 billion Kr. in 1932. The turnover of the company was far above a billion Kr., so the employee deposits did not have great significance.
However T. Bata regarded these deposits as a moral bond between company and workers. Psychologically, this system resulted in workers avoiding doing any sort of damage to the company because, in accordance with the law, the company could use his deposit to compensate for the damage.
Knowledge of Bata’s basic principles of reimbursement of the workers is important to the study of Bata’s system. The profit was computed locally (i.e. for a work center) and divided into two equal parts, one for the company, the other for the workers whose work had the decisive influence upon the results of the workshop. The share of profits was paid without regard to possible losses in other workshops and without regard to results for the whole company. Every week the balance was displayed for public judgement.
- A worker was reimbursed according to a rate calculated for each operation according to the efficiency and importance of the work. - Salaries was not allowed to drop below a certain weekly minimum, which guaranteed every qualified worker 400 - 500 Kr./ week.
- Profit participation was divided into to three categories. A participant was entitled to a plain profit share, a foreman to a double share, a master to 10% of half of the profit allocated to his workers.
- When introducing the profit share it was assumed that the average share for a participant would amount to approx. 100 Kr./week. Soon, this amount was greatly exceeded, although the profit share varied widely depending on results of particular workshops.
Despite the fact that workshop autonomy and profit share required constant calculation and accounting, the amount of paperwork and bureaucracy did not increase. There were very few professional accountants in the company. The system was based on the fact that anyone who initiated a business action was obliged to make the accounting calculation for it. A knife for cutting leather was as important for a worker as accounting. If he was able to learn how to cut leather well, he was also able to use accounting without a special business education.
From T. Bata’s rally of employees on March 11, 1924: " We are granting you a share in the profits not because we feel a need to give money to people out of the goodness of our hearts. No, in taking this step we have other goals. By doing this, we want to achieve a further decrease of production costs. We want to reach the situation in which shoes are cheaper and workers earn even more. We think that our products are still too expensive and workers’ salaries too low." And the results? In 1922, the average selling price of a pair of Bata’s shoes was 220 Kr. After a 50% discount in 1923, it was 99 Kr., in 1927, 53 Kr., and in 1937, 46 Kr. In 1931 the average weekly salary for a trained qualified worker was 270 Kr. in Czechoslovakia, and 400 Kr. at Bata. Unskilled workers in Czechoslovakia earned 150 Kr., and with Bata 280 Kr.. Such salaries were not achieved even in the most developed countries in Europe. Bata challenged the competition not only in quality of products but also in the size of dividends and magnitude of salaries.
In the early 1930s T. Bata found that he could not sell shoes from one center because of the customs and monetary policies introduced by the then totalitarian states. He decided to try to sell the shoes from many centers. The mother company in Zlin was structured in such a way that it managed to organize shoe production anywhere in the world - to build production halls, shops, apartments for personnel, to manufacture and to supply technical equipment and to train the local population.
This decentralization, together with workshop and shop autonomy and profit participation conditioned by responsible decision-making, in situ, enabled allowed the problems of an industrial enterprise to be solved even during the difficult period of the Depression.
Let us add some more indispensable principles of Bata’s system:
- Management strove to ensure that every employee felt satisfied with his salary. The worker had to calculate his salary himself after he had done his work.
- A company with decentralized and independent accounting units had to have an independent analysis department.
- Financial statements had to be done every week (while everything was still fresh and vivid in the minds of participants); simplicity was one of the basic administrative principles.
- Head employees had to compensate the firm from their personal accounts even for those damages for which they were not directly to blame .
- When accepting delivery of goods, a stock worker was forbidden to look at the invoice or the bill of delivery, but he had to issue a receipt. In this way, control of material was secured.
Workshop autonomy and decentralization enabled further company build-up to continue during WW II and in the post war period, even after contact with the mother company in Zlin had been interrupted.
For many decades we have been taught in our country about a number of correct organization principles, such as the importance of currency inflation. Great theoreticians such as Taylor and Gilbreth invented many special principles for effective organization of industrial production.
However, none of them surpassed Bata because none of them owned a factory in which they could verify their findings objectively. Let us give some examples:
Bata never hesitated to replace a good, not yet worn out, machine with a better one. He did not wait for someone else to take the initiative of starting a machine factory, but started constructing and manufacturing machines himself, always aiming at greater efficiency.
In his effort to repair machines as quickly as possible he introduced standardization of the parts and he forbade maintenance to use files or hammers for repair work. He acted similarly with molds and other means of production. In order to be able to move machines from one place to another he did away with belt transmissions. Every machine was furnished with a stand with its own electric motor. With this change, it was just a single step to introduce assembly lines, whereas at rival companies the partly manufactured shoes were transported from one machine to another. By the introduction of a two-storied conveying belt (one of the two being heated) he accelerated drying the shoes. He did not even bother to have these inventions patented; he knew that he had to keep going on and that competitors would never catch him. According to A. Cekota, T. Bata anticipated production technology by 20 years. Similar techniques appeared in the USA and in England as late as in 1950s. Some experts believe that Bata could afford these methods because of abundant capital. The question remains however, as to whether the situation was not the converse.
One could find tiny but effective standardization in every step. For example, identical forms printed in many languages coming from subsidiary companies abroad were processed in Zlin and employees fulfilled the tasks they described without even speaking that particular language.
Every head employee had his own signal (the Morse code). On hearing it from his pager - no matter where he was - he called in from the nearest telephone. The simplest signal was reserved for the boss: a dot.
Smoking and alcohol were forbidden throughout the entire premises of Bata’s works. The employees in administration worked in large offices. In some cases the whole floor of the administration building was a single office. Even if 5 - 10 - 50 - 100 people worked in the one room they did not disturb one another even if their desks with telephones were close together. Separate meeting rooms were available for dealing with clients. The administrative workers organized their work much more efficiently this way, than when they were separated in small rooms in twos or threes, with big time losses occurring because of useless phone calls, drinking coffee and other ineffective activities.
[1] Cekota also wote, in English, Entrepreneur Extraordinary; A Biography of Tomas Bata, published by Edizioni Internazionali Sociali, University Press of the inbternational University of Social Studies, (1968) [Printed and bound in Canada by T. H. Best Printing Company, LTD, Don Mills, Ontario]
[2] Rybka is writing about the opening of opportunities in the Czech Republic since the fall of Communism. However, his remarks are equally applicable all around the world.
[3] The author is not saying that Bata taught the Japanese the fundamentals of quality management. This was clearly done by Sarasohn, Deming, Juran, Feigenbaum and others. What the author is saying is that the basic principles Bata developed and tried to teach all who would listen are to be found actualized in many successful Japanese companies.
[4] For example, Bata completely revolutionized the selling of shoes. The modern shoe store, with the customer sitting in the center and with boxes on the walls all around, was a Bata innovation.
[5] We refer to Young Men and Young Women, for this is what the young people who entered Bata’s school were called. It was part of his purpose to help them become more mature and responsible.
[6] Translator's remark: multiple Olympic gold medal winner in the 1950's, in the 5,000 m, 10,000 m and marathon events.
[7] NOTE TO MYRON: I've changed "cobbler" to "shoe-making". I checked the dictionary. A cobbler is a shoe-repairer, not a shoe-maker, and as I understand it from reading this passage, his company MADE shoes.
[8] In modern parlance, “independent profit centers”.
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