Bonuses and "The Boys of Bethlehem"
Charles Schwab also brought to
Bethlehem Steel many new concepts in management and labor organization.
He was determined to make Bethlehem Steel a success without outside help.
He also strongly believed that there were no men of extraordinary ability;
every man could reach as great a success as another, given an equal opportunity.
(53) These tenants led him to use only those men already in the
company for management. The fifteen men he initially chose to be
on Bethlehem’ Board of Directors were known as "the Boys of Bethlehem".
His trust was apparently not misplaced, as each of "the Boys" became, or
very nearly became, a millionaire through the company. (55-6)
The precedent of leadership from within continued well into the 1960’s. (254-5)
The "Bethlehem Boys" on
July 4, 1921. Schwab(L) and Grace(R) are seen in front.
Another of Schwab’s notable practices
was his introduction of the bonus system. Under it, each man was
rewarded for his personal efficiency or work ethic as compared to a basis
set at 80% of the best man’s output. Men unable to reach this basis
were dismissed or demoted to an easier job; those who exceed it were rewarded
with a bonus in addition to regular wages in their bi-weekly paycheck,
and so did their foremen and department heads. (185) This
motivated laborers to work harder and more efficiently, and removed unqualified
men from the workforce. Schwab was against unions, which opposed
the Bethlehem method of payment in the bonus system instead of a standardized
wage. To prevent an industry-wide unionization after a 1919 U.S.
Steel Strike, Schwab established the Employee Representation Plan where
workers elected fellow workers to present their grievances to the company. (254) Certainly Schwab’s expansion and work policies were effective, since Bethlehem Steel’s workforce had doubled under his leadership from
1904 to 1910, and would double again by 1915. (198)