George F Johnson - The Real Deal

A long, long time ago, in a galaxy far, far away, a social and economic experiment occurred that was so successful and on such a grand scale, that we should all be riding on the ripples of the tsunami it created. But we're not. I decided to try and figure out why. First, a little background.

In the late 1800's a strapping young shoe maker with a God given talent for what we might call today "industrial engineering" (making industry more efficient) and personal skills found himself in quite a pickle. Having received a letter offering him a supervisor position at the Lester Brothers Shoe Company, he borrowed ten dollars from his older brother and made his way towards Binghamton, New York. On the trip, his collar and tie were stolen while he slept on a boat from New England. He walked the last dozen miles or so, covering him with dust. He stood in front of the factory supervisors for his interview only to be informed they were looking for an older man by the same name, his father. And to top it off, he only had eight cents in his pocket, not nearly enough to get home to his family. George F. Johnson needed this job. And he got it!

From the position of managing a "tree room" (supervisor to a crew of men making boots on shoe trees) he rose to obtain the number two job in the company. Through repeated process innovations that made his room the most productive in the factory, and the personal skills where every member of his team felt he was treated fairly and honestly, he began a meteoric rise to the very heights of the world wide shoe industry.

One day, his boss, the Lester Brothers asked if George F. had any suggestions about building a new factory to handle the demand for high quality products his teams were cranking out in ever increasing numbers. And of course he did. He suggested buying cheap farm land away from the dirt and grime of urban life. Wide open spaces, fresh air, green fields, plenty of land for the workers to buy plots and build houses. His theory, later described as the "Square Deal" was that if workers felt part of the enterprise, well respected, treated fairly, comfortable, and knowing their families were also happy and content, then they would be more productive, increasing profits, to allow his dream to grow. And it did.

The Lester Brothers followed George F.'s advice, and built the factory in what was then called Lestershire. But when it came to plots for workers houses, they were greedy, carving up tiny lots, and sold them for exhorberant fees. In fact they made so much money they neglected the shoe business and concentrated on land speculation. And as fate would have it, they lost most of their fortune in land speculation, and so George F. found himself with a new boss, the Lester Brother's largest debt holder, one Harry B. Endicott, a Boston millionaire who traded in real estate and tanning hides, for among other purposes, shoe and boot leather.

One day Endicott came to the shoe factory for a visit and was astounded by what he found. Happy workers, digging into their work with amazing proficiency. Every worker at the factory personally knew George F. And he made sure he knew every worker, not just as a manager, but as a friend, frequently stopping to discuss any matter raised by any worker. No problem or issue was too big or too small for George F. Johnson. Endicott liked what he saw and decided to put George F. in charge.

The shoes poured out at a stunning rate dropping the cost and price, which made them sell like hot cakes. More factories started sprouting up to meet the demand. George F. made sure he was aware of every aspect of the product, from buying leather, to making the shoes, to shipping, selling and marketing. Endicott asked George several times if he wanted a raise for all the extra business he was building, Johnson would simply reply that he was more than well compensated for his position as plant superintendent. Harry Endicott got suspicious. As business continued to grow, he finally asked George F. what he was up too. George F. replied if Endicott thought $150,000 was sufficient for half the shoe company. Endicott replied that was fair. The George F. asked him if he could borrow $150,000 from him. Endicott thought for a moment, then realized Johnson was the future of the shoe industry, and wanted him as an ally, not a competitor, so he agreed. There was one more thing though, the contract would require $150 in war tax stamps, so he needed to borrow that too. Endicott laughed, and agreed to pay for those. The Endicott-Johnson Shoe Company was born.

And here's where the real story begins. George F. Johnson set out to build a worker's utopia, or as close as he thought he could get to it. And what a reach he made. At it's zenith EJ's employed over 19,000 workers, cranking out over 175,000 pairs of shoes a day. Into the product price, George F. built in a two and a half cent cost that was reinvested back into the community. It was used to build parks, libraries, schools, recreation centers, athletic fields, farmer's markets - where the workers could buy directly from the farmers rather than the grocers - and a system of free medical clinics for the workers and their families.

But he wasn't done yet, heck, he'd barely begun. Remembering the land speculation of the Lester Brothers on the workers, he bought huge tracks of land and carved it up to respectful size lots, built comfortable houses and sold them to the workers at cost, through salary deductions. As Lestershire grew, and new factories were needed, he built another village, the village of Endicott, and went into the tannery business to cut out more middle men, including Harry B. Endicott - who wasn't thrilled with the idea, but figured George F. knew what he was doing, and he did. In all, he helped build three villages, Lestershire - which was renamed Johnson City in his honor, Endicott and West Endicott. He built more parks, more schools, more libraries, and now full blown hospitals, some of which were considered the best at that time, in New York state, if not the country.

His theory was simple: treat the customers, the workers and stock holders fairly and honestly. Make sure they realize how important they all are to each other's success, and every one will prosper. Sounds a lot like socialism, if not out right communism, but with one huge difference: it was all voluntary. There was no forced compliance by the government. Hell, George was ahead of the curve on social responsibility. He was the first CEO in the shoe industry to voluntarily move to the 40 hour work week, and paid the workers the same as when they worked 50+.

Then he instituted what may be the first profit sharing plan in history. After the stock holders were paid off, all remaining profits were split three ways. One third went to the customers in the form of lower prices, one third was plowed back into expanding the business, and the final third was split evenly between every worker in the business. George F. received the exact same sized check that the floor sweepers received.

But the real key was his idea of building cities. He believed the success depended primarily upon the workers and the managers, living together, going to the same parties, playing in the same parks, attending the same churches, being neighbors, their children growing up together. Summed up, when a worker sees a manager as a neighbor and a friend rather than a superior, it will show in his work. Same for when a manger sees a worker as a neighbor and a friend, and not someone to wring as much work out of as possible. And it worked!

And how it did work! Workers by thousands flowed into the communities for a piece of George F.'s Square Deal. It's been said many immigrants poured off the boats at Ellis Island knowing only a few words of English "Which way EJ?" The villages grew, the communities grew, the shoe business grew, everyone prospered.

During Franklin D. Roosevelt's bid for President he came to Johnson City to campaign. He filled the ball park (Johnson Field, George F. loved baseball) to standing room only. From reports at the time, FDR received a lukewarm response, but when George F. took the stage, he nearly brought down the roof. It seems that FDR and George F. had a cool relationship. FDR was not pleased that George F. had accomplished, in real life, what FDR's "New Deal" could only promise on paper. Imagine that for just a minute. A voluntary agreement between capitol and labor had pulled off in real life, what the likes of Marx, Engels and the New Deal brianiacs could only aspire too. He did it.

I wouldn't be surprised if there are skeptics to the above tale. To be honest, I wouldn't believe it either, except I grew up in Johnson City. I saw the huge factories, the parks, the libraries, the EJ clinics. I see the statues all around paying homage to the man who never shut his door to any worker in his company who had a gripe. They might not always have agreed with George F.'s decision, but the vast, vast majority believed they got a fair shake. And that's important to a person, it means they keep their dignity. And that's what I think the Square Deal was about, treating your fellow person, in what ever capacity you meet, with dignity. In the 1920's the workers in both Endicott and Johnson City got together and raised money to erect two large (at the time) arches across main street coming into the villages. Carved into stone on them is the phrase "Home of the Square Deal." they both still stand. It happened.

But my original quest was to find out what happened? After all, with all this success, one would think these methods and practices would have been replicated around the world? But they weren't. Why didn't the provable actions of the George F. Johnson continue on till this day? I'm not satisfied with the answers I've found so far, but they appear to be the best I can find.

George F. hated people receiving free money. They had to work for it. There was no free ride at EJ's, unless a worker met tragedy, illness, or old age. If a worker was too old, George F. would personally tell them he did not want to see them at the factory other than on pay day, when they received their full pay, every week. If a worker was sick, they had free medical, and would receive their full pay till they could return to the job. If a work died, their family would receive their full pay until the children were old enough to get work and support the family. But as for inheriting money, he thought it a sin. He refused to send his own son George W. Johnson to college, and instead put him to work at the lowest rung in the tanneries in Endicott. George W. worked his way up to president of the corporation, it was not handed to him.

I believe, over the years, as George F. Johnson's family became wealthy beyond their dreams, they might have drifted away from his primary tenet, in that workers and managers and owners, must live together in their communities. They must come to know each other as friends, neighbors, human beings. And I'm sure it the sheer size of their success has as much to do with it, after all, how can you personally know 19,000 workers? But when that connection is broken, when it's no longer "we" but rather "us and them." I believe that's when it breaks down.

In the end, it reminds me of something I've told my daughter over and over again through her childhood. At the end of the Disney cartoon, when the handsome prince and the damsel in distress ride off to live happily ever after, sure the peasants are happy. But what happens when their great-grand son becomes King, and turns out to be a real butt-hole? If you live at some one else's largess, you are doomed to their mercy.