IRC History: The Birth of IRC

On June 2, 1921, Raymond B. Fosdick, John D. Rockefeller, Jr.’s attorney, wrote him a highly detailed 14-page letter in which he pointed out the need for “highly specialized machinery constantly at work through which you can not only get current information as to industrial conditions, but can find out, on the basis of expert information, what policies are adapted to particular situations, and how such policies can best be promoted among the executives of your industries.”

He went on to propose the formation of an “Industrial Relations staff”whose purpose would be to provide expert investigation, help introduce approved policies, and keep in constant touch with these policies after introduction in the six areas of labor maintenance, research and statistics, safety and health, women’s work, industrial risks, and community conditions.

“Of course in all this business there would be no publicity, no muckraking, no harshly critical reports,” he wrote. “The aim would be entirely curative and the method would be persuasive. With this scientific approach there would be no more reason to publish the facts about a particular case than a doctor would have to publish the facts about one of his patients. Moreover, our work would be confined only to those industries in which you have some responsibility.”

Rockefeller agreed, and later that year, a small industrial relations staff was attached to Fosdick’s law firm, Curtis, Fosdick and Belknap, in New York City. George J. Anderson, a specialist in labor maintenance and working conditions with the New York Employing Printers’ Association, was hired to head the group.

“The term ‘industrial’ or ‘employee’ relations had little currency before it was used in 1922 to designate a section of the Department of Economics at Princeton University, newly organized with Mr. Rockefeller’s support,” according to Fosdick’s partner, Chauncey Belknap. “This was the environment in which Mr. Rockefeller one day asked Mr. Fosdick to check into a report that a corporation in which the Rockefellers were financially interested was operating on a twelve-hour day, seven-day week. Fosdick’s investigation confirmed the report; as Mr. Rockefeller’s representative he succeeded in bring about a change for the better.”

During the first two years of its existence, the staff conducted surveys for a number of companies in which Rockefeller had extensive holdings. They covered policies and practices regarding wages, employment, housing, services and benefits, and joint relations, including recommendations for change when necessary.

Thanks to financing by Rockefeller, in the years between the two world wars, industrial relations programs were established at several North American centers of higher learning, including the University of Michigan, Stanford, Queens in Canada, Massachusetts Institute of Technology, and California Tech.

In 1924, Arthur H. Young came on board to head the industrial relations staff. Gradually, companies outside the Rockefeller realm began seeking assistance with industrial and labor relations’ issues.

“In short, what had started as an exercise of power by a dominant stockholder was developing into an agency responding to the call of enlightened corporate management,” continued Belknap. Such efforts “were persuading corporate executives that attention to industrial relations was not just fuzzy-minded idealism but was, in fact, sound management policy that paid off in dollars and cents.”

In 1926 the research and consulting function was separated from Fosdick’s law firm and incorporated as Industrial Relations Counselors, Inc. (IRC), a nonprofit, tax-exempt educational and research corporation designed to “advance the knowledge and practice of human relations in industry, commerce, education, and government.”

Rockefeller agreed to underwrite its budget until consulting revenues and research grants could make the organization selfsufficient. On April 30, 1927, he wrote a note to Fosdick, pledging “to the Industrial Relations Counsellors, [sic] Inc., annually for five years, beginning May 1st, 1927, whatever amount may be required for the conduct of its work up to $150,000 a year.” He kept his word.

Soon after its incorporation, IRC began an ambitious study of unemployment benefits in the United States. During the 1930s, industrial pensions also were investigated. Four books on unemployment insurance were published: three on its administration, two on industrial pensions, and one on trade union plans. IRC came to be regarded as an authority in the field of social security, and its staff members frequently were called on as consultants by the legislators and administrators who were developing federal and some state unemployment insurance and social security programs. From 1927 to 1932, IRC operated a branch at the International Labour Office (ILO) in Geneva, Switzerland. Reflecting Rockefeller’s interest in international affairs, the organization conducted research and published volumes on national employment exchanges and unemployment benefits in several European countries. IRC also responded to ILO inquiries regarding U.S. employee relations.

“IRC was not designed—and has never pretended—to have a pat answer for every situation,” according to Leo Teplow, who served as president of the organization from 1974 to 1979. “It was solidly founded on basic concepts largely attributable to Mackenzie King, Clarence Hicks, and Bryce Stewart, its first director of research.” IRC’s governing concepts, he added, could be described as follows:

IRC’s concern is the long-term establishment and maintenance of sound employee relations through appropriate management structure and development and the application of appropriate employee policies and practices. This principle has been applied even when IRC was called in because of a specific, urgent problem. Consequently, in most cases IRC’s intervention resulted in far more serious attention on the part of top management to its employee relations responsibilities as a permanent aspect of corporate policy.
Management’s freedom to make decisions depends not only on responsible use of authority but also on full recognition of the needs and interests of employees. This recognizes that employee relations is an integral part of the management process and that employee attitudes, motivations, and loyalties derive from the totality of corporate employee relations policies and practices.
Decision making must be solidly based on determinable facts. Thus, a major part of every undertaking by IRC, whether in counseling or research, was the determination of the facts of each situation, whatever the aspect of employee relations involved.
The determination of the facts in employee relations has to be undertaken by confidential interviews with substantial numbers of management people at all levels—and confidentiality must be preserved at all costs.
No consulting arrangement should be undertaken with any company except at the specific request of its top management, and the IRC report must be made in person to high-level management. In this way, the report is most likely to lead to appropriate action.
The staff must consist of people of the highest competence and integrity.

At the end of 1933, Arthur Young resigned his position as head of IRC to join the U.S. Steel Corporation as vice president of industrial relations. Shortly after assuming his new post, he implemented an employee representation plan there, and U.S. Steel joined the Special Conference Committee.

Clarence J. Hicks, who had joined IRC as a special consultant after retiring as head of the industrial relations department of the Standard Oil Company of New Jersey, took over temporary leadership. In March 1934, T.H.A. Tiedemann, a former assistant to Hicks, was made IRC’s director.

Despite the worldwide economic depression, the creation of the National Recovery Administration (NRA) under the National Industrial Recovery Act in 1933 spurred interest in industrial relations. The shorter workweek and minimum wages on a national scale mandated by the act helped foster requests for surveys by IRC.

Meanwhile, however, Rockefeller began distancing himself from the organization, even though he remained dedicated to IRC’s principles and purpose and one of his sons, John D. Rockefeller III, was a member of its board of trustees. He reduced his contribution to $100,000 in fiscal year 1932-1933; to about $80,000 the year after that; to about $67,000 the year after that; and to $35,000 in 1935-1936, when he carried 23 percent of the organization’s operating budget. In a letter dated March 22, 1934, Fosdick had warned Rockefeller that any continued involvement with IRC might have negative repercussions.

“The country is at the moment witnessing a head-on collision between the labor union and the company union,” he wrote. “Your position has always been clear, i.e., that you stood for adequate representation no matter whether it was by one method or another. We have always tried to hold the scales evenly as far as the management of Industrial Relations Counselors was concerned, and we have had friends on both sides of the fence.

“In the heat of the present controversy—and it is a controversy which I believe is going to increase in the next few years—I am not entirely convinced that the detached attitude which we have thus far held can be maintained. Mr. Hicks with entire frankness has pointed out to me that the very nature of the work of Industrial Relations Counselors implies a sympathy toward the company union which as an organization we do not have toward the labor union. If this is true—and I fear it may be—it is possible that the charge might be made that you were financing an organization to fight union labor, and you might thereby be maneuvered into an uncomfortable public position.”

Once again, Fosdick’s advice proved to be sound. The National Labor Relations Act (Wagner Act) of 1935 established government recognition of labor’s right to organize and bargain collectively with employers. In effect, it outlawed company unions and employee representation plans could be construed as such based on the language of Section 8(a)(2). That very same language has, in recent years, confounded management attempts to involve workers in participatory work arrangements, plaguing company efforts to develop more employee participation.