“Where Professionals Connect”
By Mark Bernstein
Reprinted with the author’s permission from Smithsonian Magazine, June, 1989
With systematized sales, a streamlined factory and well-cared-for employees, he made the cash register the essential tool of retailing
John H. Patterson built the National Cash Register Company with a flair for salesmanship, a gift for organization and an absolute genius for firing people. Some of his firings were truly spectacular: one executive returned to headquarters to find his desk and chair gloriously ablaze on the company lawn. He could fire repeatedly. Charles Kettering, an NCR inventor later turned wizard of the auto world SMITHSONIAN, July 1988), was recurrently hired and fired, once because he nearly slipped from a horse during an equestrian event Patterson had organized to build executive character. He could fire en masse. Displeased with his cost accounting department, he once marched its members, ledgers under their arms, to the boiler room. There, records were consigned to the flames and employees, as far as Patterson was concerned, dismissed to oblivion. He could afford to do these things, he maintained, because at NCR he had created an organization that relied less on men than on system.
It began in Dayton, Ohio, in 1884, when Patterson acquired the rights to the cash register, a device for which there was then no discernible demand. By about 1910, he had made the cash register the essential tool of retailing, as necessary to the merchant as the block to the butcher or the anvil to the blacksmith.
To accomplish this, Patterson systematized sales, introducing most of the methods of merchandising used by industry to this day-from direct mail literature to annual sales conventions. He systematized production, replacing the grimy, hazardous industrial plant with a gleaming steel-and-glass factory campus. And he systematized the workplace, where he pioneered an employee-welfare program unequaled in its time and frequently not matched today.
System may have permitted dismissals; personality impelled them. Patterson, among other things, was a crank. He pursued a varied list of causes, ranging from shredded wheat to landscape gardening to municipal reform, subjects about which his thousands of employees heard a great deal more than they likely wished to know. In his manner, Patterson reflected the personalized rule possible when owners managed and managers owned. In his methods, he pointed the way to the modern corporation, with ownership dispersed among stockholders, power diffused through committees and personality reduced to a logo.
In a sense, the modern business organization has lost the power Patterson prized most: the ability to be arbitrary. Patterson's life offers comment on whether this is a loss to be mourned. "What do we live for?" he regularly asked. The question was rhetorical; the answer his own: "To do good." Which, among other things, he did.
In his maturity, Patterson was a gamecock, moderate in height, wiry in build, jittery in movement and irascible in expression. He had been born in 1844 to a large Ohio farm family that was sufficiently prosperous to send him to college. He attended Miami University in Ohio, and Dartmouth, where he acquired a degree and a lifelong distrust of college men. Private life attracted him little more than learning. His marriage came late, at 43, to wellborn Katherine Dudley Beck of Massachusetts. It ended with her death from typhoid fever six years later, leaving him with two children, whose upbringing he largely delegated.
His focus was business, which he entered at age 25 as a coal dealer in Dayton, Ohio. His product, he reasoned, was largely generic; success lay in service and promotion. He built customer confidence through guarantees and reduced complaints by giving people accurate receipts. He reached for the public eye, installing one of Dayton's first telephones and using a fleet of delivery wagons that read "Patterson & Co." And he signed an exclusive agreement to market Brooks coal, believed superior. When the suppliers of Brooks wanted out of the agreement, Patterson's response was characteristic: "You will regret it only once," he stated, "and that will be all your life."
Business prospered; Patterson expanded. With his brother Frank he gained interests in coal mines, a railroad and a miner's supply store. To his chagrin, that store lost money, even though, Patterson said, it had almost no competition and our prices were high." The reason, he discovered, was that his clerks were consistently shortchanging the till. At the time this was a seemingly insoluble problem for retailers. Receipts were kept in an open cash drawer, a veritable sieve that leaked currency through employee theft, honest error and scrambled bookkeeping.
A Dayton saloon keeper named James Ritty stumbled onto a solution while sailing to Europe in 1878. Visiting the ship's engine room, he noted the mechanism used to tally the rotations of the ship's propeller. Back in Dayton, he adapted its principle to the task of tabulating receipts. In 1879 he patented his primitive cash register, grandly calling it "Ritty's Incorruptible Cashier," and awaited customers. Few surf aced; one was John H. Patterson, who bought a pair sight unseen on the strength of the first advertisement he read. They cost $50 each. In the next six months his store turned a $5,000 profit.
As it happened, two financial failures placed the cash register's future in Patterson's hands. First, neither Ritty nor those to whom he sold his invention could make it a commercial success. Merchants could not see why they should pay for a machine to count the money they could count by hand for free. Second, Patterson's budding empire went belly-up and he began casting about for a new, low-cost venture.
In 1883, the National Manufacturing Company, which then held the patents to the cash register, issued new stock. John and Frank Patterson bought all of it. The following year, John Patterson paid $6,500 for outright control, renaming the enterprise the National Cash Register Company.
Patterson's debut was ludicrous. Announcing the acquisition at his club, he was roundly informed that the company was a failure, its product defective and its location a slum. This concerned him, as he had purchased the company without bothering to inspect its factory. He sought out the previous owner and offered to resell. The reply did not reassure: "I would not have it back as a gift." Bridges securely burned, Patterson proceeded. In his rented factory quarters, 13 employees could build 30 registers a month, but demand did not reach even that figure. The problem, Patterson decided, was that far too few people knew about the marvelous machine he was offering.
He assembled a list of 5,000 prospective customers, then deluged them with mail-six pieces a week for three weeks-extolling the virtues of his registers. Not all were pleased. One wrote back, "For Heaven's sake let up. What have we done to you?" In time, Patterson built his list to 1.5 million names. With direct mail, he had created a modern sales technique.
In Arthur Miller's Death of a Salesman, Willy Loman sells a commodity never identified. He is, in a sense, selling himself, a survivor of that early tradition of drummers, men who, viewing their personality-not their product-as their chief ware, claimed they could sell anything. At NCR, Patterson laid this tradition to rest. He replaced the glad-hander, selling his smile, with the well-trained, well mannered sales representative, selling cash registers.
At the time, salesmen sold largely where they chose; if their tracks crossed those of others from the same firm, the competition was thought to keep everybody scrambling. Patterson assigned each salesman a guaranteed territory, then paid him commission on all sales therein. Thus protected, Patterson reasoned, salesmen could replace scatter shot efforts with the planned, and more profitable, development of their territories.
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