A LESSON LEARNED
                              AND A LESSON
                                FORGOTTEN
                                    
       Nearly a half-century ago, General MacArthur ordered Homer
     Sarasohn to tell Japanese businessmen how things were done. The
                 Japanese listened, but the U.S. forgot.
                                    
                         By Robert Chapman Wood

     "WHAT THE JAPANESE learned about management after World War
II, they learned from the Americans. And the Americans forgot
their own lessons."

     There is a lot of truth in that statement. Only a few
decades ago, the world, Japan included, looked to the U.S. for
management models. Now we look to the Japanese. How did this
reversal of roles come about?

     A good man to ask is the one who made the above statement,
Homer M. Sarasohn. He was among the very first who taught Japa-
nese business people how the Americans did it, and he was in a
strategic position to watch the unfolding of the drama of U.S.
industrial decline and Japanese industrial rise. Returning to the
U.S., Sarasohn built a successful career that included serving as
director of engineering communications at IBM headquarters in
Armonk, N.Y. Sarasohn believes that his former employer has
retained the elements that once made the U.S. the envy of the
industrial world. But our industry as a whole has lost it, he
sadly fears.

     Living in retirement at age 72, in Scottsdale, Ariz.,
Sarasohn recently gave FORBES his views on how it happened that
the Japanese learned from us while we forgot our own lessons.
In a long interview, he not only told us how it happened but gave
his views on what we can do to recover what we lost. Here's the
story.

     In 1946 General Douglas MacArthur was commander of the U.S.
Occupation forces in Japan. He urgently wanted Japan to
mass-produce radios so that the U.S. Occupation authorities could
reach every Japanese village quickly with its messages.
Sarasohn, the son of a midwestern manufacturing representative,
had worked as a radio product development engineer at the old
Crosley Corp. (long since absorbed into what is now Textron)
during World War II. He went on to work on radar as an engineer
at MIT and Raytheon after the war, becoming part of an exclusive
fraternity of young engineers.

     In 1946 Sarasohn received a telegram: "General MacArthur's
headquarters has requested your services earliest possible date."
Brandishing the now-yellowing telegram, Sarasohn recalls thinking
it was a joke. When a call from an irate colonel convinced him it
wasn't, he decamped for Tokyo. He was 29 years old.

     MacArthur wanted Sarasohn to help the Japanese produce the
radios and communications equipment dear to the general's heart.
Sarasohn found that while the Japanese knew a fair amount about
electronics, they seemed to know nothing of modern management or
production techniques. Sarasohn recalls:

     "They thought that quality meant making half of your prod-
ucts okay and throwing out the other half. They couldn't under-
stand why they shouldn't make vacuum tubes in a shack with a dirt
floor. [Air filled with dust particles produced defects when dust
landed on filaments.] I decided that I was going to be a dicta-
tor." At age 29 he took a role in much of the electronics indus-
try analogous to the role MacArthur himself took toward Japan as
a whole: a dictator who paradoxically demanded "democratic
management." In four years, this democrat in dictator's clothing
may have accomplished more than any economic dictator in history.

     Initially, Sarasohn spent much of his time finding materials
the Japanese needed to get radio parts into production. Soon a
trickle of miserably unreliable radios was reaching Japan's
villages. Sarasohn kept prodding for improved productivity and
better management.

     In 1948, Sarasohn was joined in the Occupation forces' Civil
Communications Section by Charles Protzman a Western Electric
engineer. They concluded the Japanese would never produce quality
unless someone taught them modern management, starting with the
basics. So in 1949 the pair of young Americans proposed a course
for top Japanese managers.

     And here's the rub: Most of the principles Sarasohn and
Protzman taught in the course are principles that Americans now
think of as Japanese attributes. The Japanese quickly saw the
sense of it. They liked the course so well they were still
repeating its teachings 25 years later in a standard course for
people on the track to top management.

     Sarasohn and Protzman's pupils went on to become a Who's Who
of Japan's electronics industry. They included Matsushita
Electric's Masaharu Matsushita; Mitsubishi Electric's Takeo Kato;
Fujitsu's Hanzou Omi; Sumitomo Electric's Bunzaemon Inoue; Akio
Morita and Masaru Ibuka, the founders of what is now Sony Corp.
This cadre of leaders spread the principles throughout Japanese
industry.

     Matsushita Electric's Masaharu Matsushita recalls the course
clearly:

     "I believe this seminar was very useful to Japanese manufac-
turers at that time. Mentioned on the first page of this
seminar's text was the title 'The Objective of the Enterprise,'
under which the philosophy of corporate management--the social
mission of the enterprise--was clearly explained and this made a
deep impression on the participants of this seminar.

     "The theories in the seminar may well be used today,"
Matsushita adds, "especially the concept about the social mission
of an enterprise as the objective of the enterprise."

     The Occupation's Economics and Social Section objected to
the seminar. "They said we might be too successful," recalls
Sarasohn. It was perhaps the understatement of the century. But
both the ESS people and the CCS engineers made 20-minute presen-
tations before MacArthur. The ESS warned of the perils of Japa-
nese competition. Sarasohn insisted that it would ultimately be
more practical to teach the defeated and starving nation to be
self-sufficient. After both sides had finished, says Sarasohn,
MacArthur turned to him, snapped, "Go do it," and walked out of
the room.

     Sarasohn and Protzman were followers of scientific manage-
ment in the tradition of Frederick W. Taylor. When people today
think of Taylor (if they think of him at all), they tend to think
of dehumanizing time-motion studies, as made famous in Charlie
Chaplin's Modern Times and in Cheaper by the Dozen by Frank
Gilbreth Jr. and Ernestine Gilbreth Carey. This does an enormous
disservice to Taylor and to the scientific management Sarasohn
and Protzman taught. What Taylor principally urged was what came
to be known as the systems approach to manufacturing: the idea
that every part of a factory or a whole organization should be
scientifically analyzed and redesigned to achieve the most
efficient output. Managers should look at every aspect of a
manufacturing operation as a piece of an integrated system, and
should think through the consequences for the entire system of
fiddling with any of its parts. Unfortunately, as the power of
the human relations movement grew in the 1950s and 1960s, this
eminently sensible systems approach to running a business came to
be considered insufficiently sensitive to human needs and wants,
too mechanical.

     But when Sarasohn and Protzman began their course, U.S.
management still thought along industrial engineering lines. The
M.B.A. was still a rarity. Many managers studied engineering and
science in college, then learned management on the job. Literally
on the job. Typically, they did not start out as "managers" but
did stints in every part of their organization. U.S. managers
generally knew what it was like to work a lathe or serve on an
assembly line. Business, like the army, was not a democracy, but
managers tended to be up-from-the-ranks types, chosen purely on
merit rather than on educational qualifications.

     Here, as Sarasohn presented it, was the gist of the message
he imparted to his Japanese pupils:

     ù Every company needs a concise, complete statement of the
     purpose of the company's existence, one that provides a
     well-defined target for the idealistic efforts of the em-
     ployees.
     
     ù Companies must put quality ahead of profit, pursuing it
     rigorously with techniques such as statistical quality
     control.
     
     ù Every employee deserves the same kind of respect follow
     managers receive, and good management is "democratic manage-
     ment." Lower-level employees need to be listened to by their
     bosses.
     
     After MacArthur approved the course, Sarasohn and Protzman
quickly wrote a text. (A revised edition entitled CCS: Industrial
Management is in the Harvard Business School library.) They drew
heavily on U.S. management texts, and stressed the basics. For
example, they wrote:

     "Even though you know these things [management principles],
you are not applying them in a logical manner.... People at low
levels who should be responsible and accountable are confused....
Any initiative and interest they [workers] may have in trying to
do a job is often destroyed by interference and meddling."

     On the first page, a motto used at Newport News Shipbuilding
was cited: "We shall build good ships here; at a profit if we
can, at a loss if we must, but always good ships."

     "It was much to the participants' surprise," recalls
Masaharu Matsushita, "to find such a basic policy on corporate
philosophy on the first day of the seminar, on the first page of
the text. This point made an impression on all the participants.
The case study about clarification on the organizational concept
for the management division as well as the management theory
based on the systematic analysis of business facts and data--all
furnished us with much information."

     No question: The Japanese took the American message to
heart, even as the Americans were forgetting it.

     Sarasohn and Protzman wrote: "Every business enterprise
should have as its very basic policy something of this nature,
[to aim] the entire resources and efforts of the company toward a
well-defined target, a target that would benefit society." Today,
most Japanese companies have such a statement of basic policy.
Like many of America's best engineers at the time--and like many
Japanese managers today--Sarasohn and Protzman saw no conflict
between "scientific" management that carefully measured and
analyzed everything about a company, and "democratic" management
that fully respected employees. They disagreed with "human
relations" experts, who were starting to stigmatize practitioners
of scientific management on the grounds that scientific manage-
ment focused on nuts and bolts whereas managers should care
principally about people. Sarasohn and Protzman presented to
Japanese business leaders both scientific management and
America's tradition of respect for the common man.

     The point was not lost on the Japanese: If you have articu-
lated a worthwhile purpose and you constantly strive to create
the best manufacturing system--culture, in today's jar-
gon--possible your human relations problems will tend to take
care of themselves.

     Sarasohn and Protzman advocated "democratic management"
within a traditional, hierarchical organization. That meant that,
while the boss was still the boss, he didn't so much bark orders
as listen to the people who worked for him. He was the voice of
the organization, not its dictator. "A leader's main obligation
is to secure the faith and respect of those under him," wrote
Protzman and Sarasohn.

     How many U.S. managers today believe that, let alone prac-
tice it?

     The Japanese, humbled by their military defeat and acutely
aware of their country's economic plight, were in a learning and
listening mood. They repudiated their feudalistic and militaris-
tic ways and promised to lead new lives. The course was "the
light that illuminated everything," wrote one executive,
Bunzaemon Inoue, who went on to become technical director of
Sumitomo Electric.

     After the course was offered for the second time (in Osaka
in 1950), the Occupation was near its end. But the course did not
die. Its old students spread the message, both through their own
businesses and through word of mouth. Later on, the CCS course
became a standard in the training program associated with the
Nikkeiren, the Japan Federation of Employers' Associations.

     Before returning home in 1950, Sarasohn established Japan's
Electrical Testing Laboratory. He Introduced the certification
for electronic products that the U.S. government would criticize
as a "nontariff barrier" 30 years later. While certification in
the U.S. focused largely on safety, Japan set continually in-
creasing performance standards for products. By the early 1980s,
many American products weren't able to meet its demanding stan-
dards.

     The man that is most responsible for bringing the
Sarasohn-Protzman course to light and spreading its message today
is Kenneth Hopper, an industrial consultant associated with
Management Advisory Associates in Bowling Green, Ohio. Back in
1948, when Sarasohn was still working in Japan, Hopper went to
work for Procter & Gamble in Manchester, England as an industrial
engineer.

     "U.S. management was evolving in directions that would now
be described as 'Japanese,'" Hopper recalls. European companies,
like most Japanese companies before World War II, kept people on
well-defined tracks. University graduates spent little time in
factories. But at Procter & Gamble and many other U.S. companies,
engineers like Hopper spent years on the factory floor. Six
months after becoming a design engineer, Hopper was appointed as
a foreman in maintenance.

     U.S. firms were introducing wave after wave of improvements
in technology and knowhow. Communication between engineers and
ordinary factory workers--evidence of what Sarasohn and Protzman
would call "democratic management"--made their successes possi-
ble. The practical knowledge of ordinary workers fertilized the
expertise of the engineer, and the workers had quick access to
engineers' knowledge. It was a revelation to a young manager
brought up in the class-conscious, ossified English system--as it
would be to a young manager brought up in U.S. manufacturing from
the mid-1960s to the present.

     In the 1960s, Hopper decided on an academic career. But he
found that he had quite different ideas from the academics about
what made the U.S. system work. The practical people who had
built the U.S. corporations communicated poorly with the academic
elite. Innovative business scholars showed little respect for how
factories were managed, preferring to write about marketing,
financial techniques and "human relations."

     Hopper got a one-year grant to study at Harvard Business
School in 1965-66, but while there he couldn't find a professor
to sponsor his Ph.D. dissertation on the use of college graduates
as foremen. So he went back to a career as an industrial consul-
tant but refused to give up on communicating what he now calls
"classic American management." In 1969 Hopper met former
Mitsubishi Electric executive Takeo Kato. Kato led him to Frank
A. Polkinghorn, who had been Sarasohn and Protzman's immediate
boss when they taught the CCS course. Hopper has been collecting
details of their achievements ever since.

     The real irony, of course, is that Hopper believes that the
U.S. excellence of the 1950s and the Japanese excellence of the
1980s have closely related roots. And he has watched the
decline of the American management systems that produced "Yankee
know-how" with anguish and dismay--in much the same way many
serious scholars watch the sickening decline of American educa-
tional standards.

     Hopper notes that Protzman, who wrote many of the sections
of the CCS course that dealt with human relations, had been a
foreman at Western Electric's Hawthorne plant in the 1920s. At
the time, the famed Hawthorne experiments, which underlay the
human relations movement in management and ultimately undermined
scientific management, were being conducted. At Hawthorne,
scholars looked at how changes in the work environment affected
productivity, concluding that productivity would rise if managers
concentrated on workers' needs. As Cornell University professor
of manufacturing L. Joseph Thomas puts it: "It became fashionable
to think that measuring a person's work devalued him. Rather, you
should simply trust people to do the right thing." This was the
death of the systems, or industrial engineering, approach. And
the birth of the human relations approach to management.

     Hopper spent a lot of time talking with Protzman. Protzman,
who died in 1987, concluded the Hawthorne experiments were
meaningless. Protzman felt that good managers didn't need elite
consultants to tell them how to treat humans as humans and that
scientific management-based systems were entirely consistent with
humane management.

     "The people in the human relations movement set themselves
up as a kind of high priesthood that would teach how factories
could be run better," says Hopper. "Suddenly it seemed that these
people knew how factories should be run better than the people
who worked in them."

     Japan went the other way. Its approach, descended from both
Japanese tradition and Occupation teachings, had no high priests,
no specialized human relations experts. Instead, everyone was
supposed to be as sensitive to human relations as to finance or
technology.

     Today Japanese management has developed far beyond what a
handful of Americans taught a half-century ago, adding exclusive-
ly Japanese elements and refining what the Japanese learned.

     In 1950 Sarasohn returned from Japan to find many changes at
home. "Two things struck me immediately," he recalls. "First,
there was an attitude of self-satisfaction--we'd won a war, and
there was nothing else to be done. And second, there was already
a great emphasis on achieving demonstrable success immediately on
getting an immediate return on the buck." As a Booz, Allen
consultant Sarasohn worked for H.J. Heinz in Pittsburgh, and he
says: "They wanted me to upgrade their distribution system, at a
time when their product manufacturing system was not meeting its
reasonable objectives."

     Now as then, he says, "Few American managers show any sense
of the long-term implications for their companies and their
customers of what they are doing in their business."

     What would Sarasohn do today to make the country's factories
more competitive? One thing he would not do is try to play
catch-up with the Japanese by copying them.

     "This present-day fad of aping the Japanese style of manage-
ment is absolutely destructive of our own future, " he says.
"We've got to recapture the enthusiasm, the pioneering spirit
that made America a world leader."

     There are no pat answers, but the key is to create more
companies like IBM and Hewlett-Packard--more companies, in brief,
where the workers identify with the enterprise. "All my life I
fought against becoming a 'company man,'" says Sarasohn. "And
then I joined IBM [in 1957|. Under Tom Watson [both junior and
senior], the company showed respect for its workers, it was
committed to honesty with its customers; and it saw itself as an
institution with social responsibilities. When I was visiting a
branch office and saw that their attitude toward their customers
was perfunctory, I was quite shocked. Then I looked at myself and
said, 'Hey, I've become a company man.' "

     Capturing their employees' imaginations--getting them to
expend their energies for something less tangible than a
paycheck--is the greatest challenge managers face today. With
help from a couple of young Americans more than four decades ago,
the Japanese have excelled at this challenge. Now it's America's
turn again.