MANAGEMENT: The Company Doctors

To Washington this week as guests of the Navy will fly a planeload of businessmen and scientists to inspect a new system being used by the Navy to speed production of new weapons. The system, called Program Evaluation and Review Technique (PERT) was set up to schedule and keep under continuous review the progress of the Polaris missile program, an administrative task rivaling the Manhattan Project in complexity. Thanks largely to PERT, the Polaris missile is programed to be operational in late 1960, two years ahead of schedule.

PERT is the baby of the world’s largest (1958 billings: $11 million), most prestigious management consultant firm, Chicago’s Booz, Allen & Hamilton. When the Navy realized that the thousands of steps involved in development of the Polaris called for an overall plan to spot trouble before it happened, it called in B. A. & H.

With the project separated into 44 main components and thousands of subparts, the consultants got the estimates of scientists and technicians on how long each step should take, fed the predictions into a computer, got back success-probability curves. If the machine said a certain component had only a 10% chance of being ready on time, the Navy knew it had to put more money and men behind it or find a different way to do the job. In such cases the Navy could consult the computer to find out which of a score or more shortcuts around the obstacle was the best.

The Big Questions. Behind the experts that devised PERT lies 45 years of Booz, Allen & Hamilton experience in counseling more than 2,000 U.S. firms in management problems—getting the right outside man to become president of a slipping company, improving the flow of executive information, revising an outdated product line, amicably easing out executive deadwood. The firm was founded by the late Edwin Booz, a Reading (Pa.) ironmonger’s son who studied economics and applied psychology at Northwestern University while serving as an Evanston night cop. At the time, efficiency experts were entranced with time-motion studies on how to do such things as lay more bricks in less time. Edwin Booz’s instinct was to concentrate on the big questions involving basic company strategy, new products, sales ideas. His first big break came in 1925, when Sewell Avery hired his firm, then in a one-room back office, to help streamline U.S. Gypsum. This led to a larger commission from Avery on how to reorganize Montgomery Ward during the Depression. In 1935, the firm’s marketing-research side was strengthened by adding Partner Carl Hamilton.

The company’s fees were about $1,800,000 a year when Booz retired in 1946 and Hamilton died. The job of coordinating, i.e., managing, partner fell to James L. Allen, then 41, a scholarly Kentuckian with a steel-trap mind for remembering facts and a punch-card sorting machine’s ability to organize them. Holding that management analysts should continuously analyze themselves, Allen set up a think department to do nothing but figure out new services the firm could offer to an ever widening circle of clients.

Biological Warfare. Today, from the firm’s sumptuous, carpeted offices on Chicago’s La Salle Street, Allen keeps watch over branches from New York and Washington to San Francisco and Zurich, directs the works of 47 partners and more than 250 other professionals ready to take on any kind of counseling job, from a few thousand dollars up to a current $1,250,000 research job to help the Army biological-warfare experts figure out the best defenses against bacteriological attack. Some other Booz, Allen & Hamilton jobs:

¶ Helping RCA reorganize its divisions, beginning with Victor records, which set the pattern for RCA’s postwar growth. The consultants’ market studies marked out for RCA the most profitable lines to concentrate on.

¶ Showing the city of Seattle how to save $3,000,000 a year on its $86 million budget by instituting citywide accounting, starting a driver-training program for city employees that cut accidents 30%, and reading water meters quarterly instead of monthly.

¶ Pinpointing for the state of Connecticut the reasons why established industries were leaving and new industries were avoiding the state. Some recommendations: adopt a new state water law to allocate water supplies to industry, establish a radioisotope institute at the state university to attract new nuclear industries, simplify corporate taxes.

¶ Reorganizing the nonteaching side of Pasadena’s $22 million-a-year school budget to save $150,000 a year through such economies as keeping kindergarten-to-college records by IBM machine and stopping a $3,000-a-year loss in stolen gym towels by the simple technique of requiring the exchange of one dirty towel for each clean one.

Many clients often take such a shine to the Booz, Allen & Hamilton experts that they hire them. The firm counts 435 former associates holding industry jobs. Of these, 71% are presidents, board chairmen or vice presidents. The distinguished-alumni list ranges from RCA’s President John Burns (TIME, Sept. 7) to such other ex-partners as President Mark Cresap Jr. of Westinghouse, former Board Chairman Jerry Babb of Lever Bros., G.E. Vice President Harold Smiddy. This kind of high-level attraction does not dismay Coordinating Partner Allen, who is happy that his men are so highly regarded and particularly happy at the signs that more and more businessmen do not wait for their companies to get sick before they call in Booz, Allen & Hamilton.