THE subject I have been given for these lectures is The Psychological Foundations of Business Administration, but as it is obvious that we cannot in four papers consider all the contributions which contemporary psychology is making to business administration — to the methods of hiring, promoting and discharging, to the consideration of incentives, the relation of output to motive, to group organization, etc. — I have chosen certain subjects which seem to me to go to the heart of personnel relations in industry. I wish to consider in this paper the most fruitful way of dealing with conflict. At the outset I should like to ask you to agree for the moment to think of conflict as neither good nor bad; to consider it without ethical prejudgment; to think of it not as warfare, but as the appearance of difference, difference of opinions, of interests. For that is what conflict means — difference. We shall not consider merely the differences between employer and employee, but those between managers, between the directors at the Board meetings, or wherever difference appears.

Certain changes have been going on in business practice which are destined, I believe, to alter our thinking fundamentally. I think this is a contribution which business is going to make to the world, and not only to the business world, but eventually to government and international relations. Men may be making useful products, but beyond this, by helping to solve the problems of human relations, they are perhaps destined to lead the world in the solution of those great problems of coordination and control upon which our future progress must depend.

There are three main ways of dealing with conflict; domination, compromise and integration. Domination, obviously, is a victory of one side over the other. This is the easiest way of dealing with conflict, the easiest for the moment but not usually successful in the long run, as we can see from what has happened since the War.

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Early psychology was based on the study of the individual; early sociology was based on the study of society. But there is no such thing as the "individual," there is no such thing as "society"; there is only the group and the group-unit — the social individual. Social psychology must begin with an intensive study of the group, of the selective processes which go on within it, the differentiated reactions, the likenesses and unlikenesses, and the spiritual energy which unites them.

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One of the most interesting things about business to me is that I find so many business men who are willing to try experiments. I should like to tell you about two evenings I spent last winter and the contrast between them. I went one evening to a drawing-room meeting where economists and M.Ps. talked of current affairs, of our present difficulties. It all seemed a little vague to me, did not seem really to come to grips with our problem. The next evening it happened that I went to a dinner of twenty business men who were discussing the question of centralization and decentralization. Each one had something to add from his own experience of the relation of branch firms to the central office, and the other problems included in the subject. There I found L hope for the future. There men were not theorizing or dogmatizing; they were thinking of what they had actually done and they were willing to try new ways the next morning, so to speak. Business, because it gives us the opportunity of trying new roads, of blazing new trails, because, in short, it is pioneer work, pioneer work in the organized relations of human beings, seems to me to offer as thrilling an experience as going into a new country and building railroads over new mountains. For whatever problems we solve in business management may help towards the solution of world problems, since the principles of organization and administration which are discovered as best for business can be applied to government or international relations. Indeed, the solution of world problems must eventually be built up from all the little bits of experience wherever people are consciously trying to solve problems of relation. And this attempt is being made more consciously and deliberately in industry than anywhere else.

It is a mistake to think that social progress is to depend upon anything happening to the working people: some say that they are to be given more material goods and all will be well; some think they are to be given more "education" and the world will be saved. It is equally a mistake to think that what we need is the conversion to "unselfishness" of the capitalist class.

The third reason why I am working at business management is because I believe in control, and so do our most progressive business men. I believe in the individual not trusting to fate or chance or inheritance or environment, but learning how to control his own life. And nowhere do I see such a complete acceptance of this as in business thinking, the thinking of more progressive business men. They are taking the mysticism out of business. They do not believe that there is anything fatalistic about the business cycle that is wholly beyond the comprehension of men; they believe that it can be studied and to some extent controlled.

Group organization is to be the new method in politics, the basis of our future industrial system, the foundation of international order. Group organization will create the new world we are now blindly feeling after, for creative force comes from the group, creative power is evolved through the activity of the group life.