John D. Rockefeller
The name John D. Rockefeller elicits a wide range of emotional responses, but seldom succeeds in conveying banality. From the socialites of high society that tout his entrepreneurial spirit and philanthropic endeavors as nearly god-like, to circles in which he has been demonized under the conspiratorial view that his rise to such unprecedented levels of wealth and power was by means of Machiavellianism and usury. Within both of these extremes is an underlying respect for a man who was self-made and who realized the opportunities of his day amidst the growing American industrialism of the late 19th century, which fed on the petroleum over which his company, Standard Oil, held monopoly.
Rockefeller was a man who changed the world of business through an unmatched level of ambition steadily balanced with a level of shrewdness that can only come from humble beginnings. This balance is what came to define John D. Rockefeller as a businessman, known as the wealthiest of his time and recognized for showing a profit every single month he was in business. It was within this gray area between fiduciary conservatism and unmitigated drive that he developed the accounting principals for which he is credited. These principals, when applied with the same zeal and discipline as they were by Rockefeller himself, will serve any enterprising businessperson at any stage of their endeavor.
Rockefeller’s methods of strict accounting were, in fact, a means by which to prioritize his spending while always finding a way to save and amass capital. It was his ability to save money, pennies at a time, even on his very humble salary in his early days as an accounting clerk, which provided him with the capital he needed to begin his first business venture. It was in his own endeavors that, under the veil of secrecy, Rockefeller began to incorporate double-entry accounting methods and develop practices that would evolve into the modern management accounting techniques of cost and capital accounting still in use today.
Accounting for Every Penny
Although the bigger objectives must always be kept in view, Rockefeller knew that it does not serve an entrepreneur to be blinded by his grand vision to such an extent that he fails to take notice of little opportunities to cut costs. His methods of accountancy, which he began to hone during his first job as a fledgling clerk while making entries into the now infamous, Ledger A, are recognized for their nearly obsessive level of accuracy and detail, which showed every cent accounted for. What Ledger A has really revealed to historians and leaders of industry alike is that these strict accounting practices followed an attitude of great reverence for the value of money earned and the accumulative power of each and every cent.
In one instance, Rockefeller approached a worker on the floor of one of his Standard Oil refineries to ask how much solder was used to seal a can of oil. When he learned that 40 drops were used, he asked that the worker try 38. Although the cans leaked at 38, it was discovered that 39 drops would seal the cans completely. The seemingly inconsequential savings that came from using a single drop of solder less than what had been routinely used, saved Standard Oil $2,500 in the first year, and hundreds of thousands more in the years that followed. Stay tuned for The Rockefeller Guide to Accounting (Part 2)