1
From prehistory to history of banking computers: Mechanisation and pre-automation in data processing and accounting methods of French banks in the 1930s-1950s
Hubert Bonin, professor of modern economic historyat Institut d’études politiques de Bordeaux and atGretharesearch center-BordeauxUniversity[
Much of the recent work done by industrial economists on the history of the banking establishment is mostly limited to the last three decades of the 20th century and leaves much to be desired regarding the process by which these heavy-footed, staid banks turned into the sleek “firms” of today. To fill this lacuna, we need to delve into what may be called a “prehistory” of the banking establishment and its managerial practices. We will try and see how the banking establishment grew from being a rather informal structure which used administrative tools and accounting practices dating back to the 15th-18th centuries, to the highly “organised” edifice we see today. As we shall discover, “streamlining” was the keyword which instigated and determined this progression towards an entirely new type of service economy – from being “informal”, if not downright “disorganised”, to very much “formalised” and “streamlined”. Theentire process was kick started when banks suddenly realised that they could no longer keep track of the extent of the risks they were running. The requirements for identifying, understanding, and coming to terms with this cornerstone of their business made for the rapid adoption of “industrial” methods and the establishment of a true “service organisation”. The introduction of mechanical accounting machines formed only part of the entire streamlining process which swept over the banking establishment in the 1920s to the 1950s. Standardisation, elimination of duplicates,carbon-copies and redundant services, setting up of control mechanisms and the introduction of automation (for writing and book-keeping[1]) were all used to usher in the new era of “information technology” in the banking sector[2]. The growth of the volume of bills of exchange or of documentary credits forms on one side, the development of orders forms and book-keeping linked with private banking and operations on the Stock Exchange on the other side, converged with the development of accounting books within big banking organisations to fuel plans to rationalise data management and to introduce mechanisation or proto-computing.
To these constraints were added union and labour issues: a massive increase in the workforce, rising inflation and labour demands swelled administrative expenses alarmingly, not speaking of strikes which occurred in the mid-1920s from female employees from units processing data by hand who demanded stable jobs[3] instead of day-to-day paid auxiliary ones.
Table 1. Number of employees of Société générale1929 / 22,100
1935 / 16,660
1938 / 15,350
1948 / 16,180
1958 / 15,800
1963 / 18,600
The only way of reducing the workforce was by streamlining the work and introducing automated machines. At the same time, just as in the industrial and public sectors, administrative and technical managers began to gain in importance. Though the middle, higher and managerial personnel assigned to “commercial banking” remained preponderant, the balance of power gradually began to shift towards the people who managed the new “service organisations”.These “new kids on the block” began to form influential networks and wield ever-greater power at the core of the big banking houses. They began their climb in the 1920s in the name of modernisation. They continued to gain in importance and stature during the struggle to shore up declining profits in the crisis years of the 1930s.Hardly had the dust settled that they were given a further boost when the establishment turned to themin order to keep pace with exponential growth of operations in the 1950s.
The story of this mechanisation and automating of accounting work will also shed light on the whole drive towards mechanisation of the entire industry, the pressure groups and the spread of technological innovations at the national as well as the European levels. It will also afford pertinent insights into the forces and agents which, alongside the general trends of the whole economy[4], introduced and spread the lore of technological progress within the banking community as well asin its organs of promotion such as the monthly journal Banque. The first step was taken when several banking houses[5] began a rapid process of mechanisation in the 1920s and the subsequent installation of large accounting machines in the 1930s. This had obvious repercussions on the reorganisation of the “work space”: these machines needed floor-space. According to need, banks acquiredeither small or medium sised plots (or even entire buildings) next to their Paris headquarters to house tens, if not hundreds of these machines.Some of them, like theCcf (Crédit commercial de France), went underground… Meanwhile, another technological revolution was knocking at the gates – the punched-card accounting machines[6]had arrived. In their heydays during the 1940s-1950s, they would dominate the work-space like nothing else had done before them. Theyrepresented the apogee of electro-mechanical technology and also heralded its demise, because their improvement led to a door-step towards the age of electronics andcomputerised management information systems. The very issue was in fact to avoid a succession of data capture along with the transfer of the basic documents (with figures and account numbers), but altogether to keep reliable and standard tracks of data throughout the process and to allow each step of this process (the local branch, the regional or national specialised division at the headquarters, the administrative centre, then also the computing centre), to check them or to work on them. But they did not surrender easily, not without a proper shake-up of the system where the two technologies intersected. Once again the entire organisation and work space (buildings as well as the geography) had to be reshuffled in accordance with the new data transmission networks created by this technological “revolution”. Finally, a third stage followed with the advent of computers and our modern day electronic equipment which were pioneered by Ibm and Bull in the early 1960s. Though outside the scope of this text, we shall see how the historical and technological precursors of this last stage can already be seen from as early as the 1950s.
We intend therefore to establish bridges between the general history of technical innovation in banking and the building of firm organisation which got momentum from the 1900s with an acceleration in the interwar period. We shall insist on the precocity of some forms of “industrialisation” of big services companies, and how “models” were taught and transferred across western Europe. A first section will gauge the need of rationalising and re-organisation of banking firms; a second one will tell about the move towards the mechanisation of accounting tasks; a third one will analyse the organisational effects of the use of accounting machines; and the assessment of some kind of technological apex will be fourthly determined, before a short outlook on the first introduction of computing in the 1950s. We used printed documents, either banking magasines or firms’ publishings, and moreover banks’ archives about their investments and modernisation, within a global project of the history of banking organisation and firms, about which French research was still missing deep insights[7], beyond mere social history of employees – and the stimulation from American researches about the modernisation of services companies fueled our investigations.
1. The prehistory of computing in banks
When the second modern banking revolution (from the 1850s to the 1960s) met a firstmore and more measurable ceiling, that of the saturation of its administrative organisation to process millions of bills, slips, checks or else, managers commenced to argue about the way to tackle such an issue: rapidly, experiences were shared on a European scale, which contributed to compare the equipment conceived by new firms specialised in managing data processing systems. As in eveny “revolution”, the demand by users of systems and machines were met by the offer supplied by engineers.
A.A European community experiencing in mechanical engineering
During the course of WWI there emerged a European, or rather, due to strong presence in Europe of American companies such as Remington Rand[8] and Ibm[9], a transatlantic, technological community. These companies quickly established commercial survey networks. However, the adoption of innovative technologies was more due to a pan-European network of specialists actively involved in the banking sector. These re-organisers, or 'streamliners', met regularly at conferences and meetings in which information flowed freely. The advertisements issued by the machine manufacturers demonstrated the innovations: these specialists could then discuss among themselves the best ways of incorporating these machines into their organisation and the changes to be implemented in the work process. In fact, mechanisation by itself would hardly have worked had it not been accompanied and supported by a re-organisation of the data processing methods, a streamlining of the data flow and a standardisation in the presentation of such data. The vocabulary used in industry at the same time in relation to Taylorisation, Fordism and the streamlining of the work process, also found an echo in the banking world, just as it did throughout the services sectors and amongst accounting professions.
It appears that these new technologies were first and most often implemented in Germany. Due in no small measure to the quality of precision engineering attained in that country and the sise of the market, office automation was wide spread, either by means of a technology transfer from America or as a result of local innovations. Thus, Powers machines made major inroads into German banks (Diskonto, Dresdner-, and ReichsBank) in the 1920s, while Bull cornered the market in Darmstädter. These enterprises gained a large body of experience which then proved to be a rich breeding ground for their European colleagues. There was, for example, in the late 1920s, the publication of La«rationalisation» des banques en Allemagne (The “streamlining” of German banks[10]and a lecture, in Paris, by a director of Dresdner Bank[11] in 1930. This lecture was accompanied by the projection of a documentary film on the mechanised services of this German bank and, during 1930, was also screened at Nancy, Lille, Lyons and Marseille. Thus, during 1930, the secret functioning of this range of calculating machines was revealed throughout the four corners of France[12].
French managers, in turn, increased the number of visits made abroad in order to evaluate the possibilities offered by streamlining and mechanisation. Thus, in May 1923, two executives of Crédit commercial de France made a trip toRotterdamsche Bankvereiniging in Amsterdam “in order to better acquaint themselves with the new systems which had been implemented in its accounting division and which consisted of a large number of ingenious machines which could handle large numbers of book-keeping vouchers and even correspondence with great rapidity. This system allowed it to reduce the number of its employees by a third, from 1,500 to 1,000, even though the workload had increased a little. At the same time, accounting errors, which stood at 1.5 per cent to 2 per cent in the old system, fell to 1 per cent”[13].In general, the Bankers’ Association (Union syndicale des banquiers) undertook numerous foreign visits. The first took place in October 1930, with a visit to two banks: Banque de Bruxelles on the 9th and Dresdner Bank in Berlin on the 10th. A second trip was made between the 12 and 17 October 1931 with a visit to Brussels (Banque de Bruxelles, Société générale de Belgique and Caisse générale de reports et de dépôts), and then on to Amsterdam (Nederlandsche Handel and Incasso-Bank) before a final trip was made to banks in London (Midland Bank and Westminster Foreign Bank). Thus, during the 1920s and 1930s, a whole network of technological innovators and streamliners sprang up across Europe and helped form a body of “bank engineers”.
B. The rise of the French streamliners
The contacts formed throughout the rest of Europe and the work of manufacturers of machinery stimulated Parisian bankers. An automation committee was formed within the Permanent Committee on Banking Organisation which led bankers into discussing the management of operating costs. Regular discussions were held regarding technological progress and the practicability of new techniques. This facilitated the transfer of new technologies and the sharing of the lessons learnt from the first trials in reorganisation and mechanisation. Alfred Pose, a director of Sogénal, a bank in Alsace which was the subsidiary of Société généralein Strasbourg, became one of the French specialists of the scientific organisation of work in banks and was one of the promoters of the ideas of Henri Fayol, an engineer with novel ideas regarding the reorganisation of business. The scientific organisation of workfever, though, had caught on almost everywhere and encouraged specialists to envisage ever more efficient ways of reorganising the service sector. Such specialists, like Marius Dujardin, who began with the shares service in Crédit lyonnais in the 1920s, were pioneers. Similarly, in January 1927, Société générale recruited Joseph Boyé, an “in-house engineer” who, up till June 1934, was put in charge of “mechanical and electrical installations in the central buildings” and who oversaw the implementation of the machines[14].
In a more general fashion, the review Banque, published by an editor who was close to the big Paris banks, between 1928 and 1931 turned into an instrument for the popularisation of techniques dealing with the streamlining and mechanisation of banking. “Streamlining specialists”, who conducted courses in special schools oriented towards the training of employees who wanted to climb the corporate ladder, also contributed and shared their experiences within Banque's pages[15]. The review's director and editor-in-chief even went on a series of lectures throughout the country: through December 1928 to January 1929, he spoke in thirteen towns on “Streamlining and banks” to underline the importance and usefulness of “calculating and accounting machines” which, in those days, consisted of punching and tabulating machines and sorters. Banque also organised a significant event under the heading, “Bank and stock-exchange week”, which brought together bank officials, technicians and streamlining specialists under the aegis of a “Banking Organisation Congress”. This was held for the first time in September 1928, with a second congress following in October 1929.
At these first two congresses, the mechanisation and reorganisation of banks was made the central theme, with the presentation of numerous case studies, three lectures on the German, Belgian and American experiences and numerous presentations. The third congress, in October 1930, was marked by the participation of many big banking houses (Banque de France, Comptoir national d’escompte de Paris, Banque nationale de crédit, Banque de l’union parisienne). The fifth congress, held in 1932, was divided into two parts: after a conference in Paris on 22 and 23 October, with a “Salon of new accounting machines and organisational material”, the participants travelled to a centre of such innovations, Mulhouse in Alsace, where they visited a major branch of the Sogénal[16]. Throughout the first half of the 1930s, the monthly Banquejournal continued its efforts to encourage the mechanisation and streamlining of the banking system[17] and, as in the Anglo-Saxon countries, even published or godfathered a series of books on this technical subject, which collected its articles and inquiries within the very divisions of banks dedicated to mechanisation, rationalisation, and “re-organisation”.
C. Ads and technical culture: the dispatching of the US model
A comprehensive study of ads spread all over technical journals, among business journals – for instance L’Organisation[18] – and banking journals – mainly Banque – help understand how French managers could have been convinced of the relevance to adopt the “US model” of data processing. Like in the car sector, the pioneering breakthroughs achieved by US scientists[19] and engineers and moreover the “advance” of US firms in “business machines” (typing or data-processing)[20]encouraged a competitive spirit among bankers who were prone to foster such equipment to face the growth of their administrative organisation, because several French banks became “big service firms” too. Such ad campaigns fuelled the brand image of US companies and also cemented the legitimacy of the managers who had to convince the direction of the usefulness of such costly investments. Ads and pre-marketing campaigns insisted not only on the attraction of technology, but also on the very fact that they contributed directly to solve a key issue, that is how to send to customers frequent account documents, altogether accurate and up to date. The internal life of banking organisations was thus not solely at stake: bankers’ relationship with clients was involved.
Globally therefore, the technical revolution of the accounting and bookeeping electro-mechanisation resulted altogether from inner demands for rationalising and savings, which were met by consultants in services and suppliers in technology, and from foreign, US and Belgo-German, influences, through yearly connections within the banking community of interests and permanent transfers of “models”. No strict “national” approaches prevailed, processes of imitation and transfer were completed, and an interaction between local and international “progress” fostered momentum, all the more that banking professional journals promoted technical “modernity” in the name of “rationalising”.