The National Influence of OR/MS at Arthur Andersen in the 1950s and 1960s
Arthur Andersen was one of America’s preeminent “Big Eight” accounting firms in the 20th century. During their peak, the company was among the many that actively promoted operations research and management science methods in new industries. In the 1950s and 1960s, Arthur Andersen’s national profile supported a greater involvement in the larger OR/MS community under the initial leadership and vision of David B. Hertz.
Hertz was a founding member of the Operations Research Society of America (ORSA) and The Institute for Management Science (TIMS). He co-organized the latter’s first ever meeting in 1953 and recognized the importance of an industry-friendly organization. When Hertz joined Arthur Andersen in 1957, interest and involvement in the professional OR/MS community came with him. During his time at the firm, he served on the editorial staff of both societies’ journals and was Vice President of TIMS. His connection with these professional organizations was an entry point for other Arthur Andersen persons. Hertz hired OR/MS practitioners that brought management science to the financial sector. This team developed and published several novel methods and techniques. For example, Hertz and Kurt Schaffir developed a forecasting criterion “for deciding on the amount of inventory to be provided in anticipation of sales for highly seasonal, style merchandise” (Hertz & Schaffir 1960). Their group’s impact went beyond OR/MS for accounting as their methods have since been generalized in other areas.
Though Hertz departed the company after six years, what he started at Arthur Andersen continued well through the 1960s. The firm’s OR/MS groups expanded their projects and foothold in professional societies. This was evident in the numerous opportunities the company provided. In 1965, Arthur Andersen ran a hiring campaign for young operations researchers “whose primary concern is business management,” advertising placement at offices in New York, Chicago, Houston, Los Angeles, London, Paris, and Melbourne, Australia (Arthur Andersen 1965). Many contemporaneous firms, such as RCA in the Delaware Valley and Armour Research in the American Midwest, were regional stalwarts and played active roles in their respective geographic areas. Arthur Andersen, however, had a spread of offices and groups, leading to a dissemination of persons across multiple TIMS chapters. In the late 1960s, for instance, William Heuser and Granvill Gargiulo, were chairs of the Detroit Chapter and Metropolitan New York Chapter, respectively (TIMS 1965a, TIMS 1965b). And at a meeting of the North California Chapter in 1965, John G. Hughes of the San Francisco office gave a talk on minimizing trim waste and inventory cost.
In addition to societal involvement and leadership, Arthur Andersen persons were active authors of management science articles in the post-Hertz era. Kurt Schaffir was a prolific author of these papers and an editor of the Managerial Section of Management Science Series B in 1965 (TIMS 1965c). His work and others marked a growing acceptance of MS in accounting. At the 1966 National Meeting of TIMS in St. Louis, Arthur Andersen’s Leland A. Moody gave a talk on the “Development of Management Science in the Public Accounting Profession.” In it, he recognized that “management scientists working in public accounting have faced certain restrictions unique to the profession,” and that “developments strongly suggest[ed] that the importance of management scientists to public accounting and the number needed will increase rapidly in the future” (TIMS 1965d).
In addition to TIMS, Arthur Andersen also had a healthy relationship with ORSA and the operations research community. The company’s Chicago headquarters was noticeably well represented in this area. Between 1957 and 1961, there were at least four Chicago Arthur Andersen referees for the Operations Research journal, including John Curran and Phillip Carlson (ORSA 1961). Concurrently, David Hertz began his tenure as an Associate Editor of the journal in 1959 and Associate Editor for Publications in 1961. The published Arthur Andersen work in Operations Research expanded to such areas as the economic theory of the firm for management decisions, use of the Poisson distribution to model sales data, and industrial inventory planning. There was an active presence on the societal side as well. Georges Brigham of the Seattle office, for example, served as chairman of ORSA’s Nominating Committee in 1964-65 (ORSA 1965) and Recognition Committee in 1966-67 (ORSA 1966). In the first role, Brigham was a reader of papers nominated for the Frederick W. Lanchester Prize. He believed the award’s “Best Paper of the Year” system to be “rigged” and suggested that “because of the inherent inertia in human affairs […] a fundamental contribution to O.R. (sic) theory or a great contribution by O.R. (sic) to human affairs, cannot possibly be identified within a year” (Brigham 1965). These thoughts were taken seriously as the prize is now awarded to the best contribution to OR/MS published in the past five years instead of the past twelve months.
Compared to the other Big Eight accounting firms in the mid-1950s through mid-1960s, Arthur Andersen had the highest number of ORSA and TIMS chapter officers and journal editors, referees, and authors. Though a few of the Big Eight, like Price Waterhouse and Touche & Ross, indeed participated in OR/MS professional societies (a Price Waterhouse practitioner was a referee for Operations Research in 1961, for instance), others, like Deloitte Haskins and Sells and Coopers & Lybrand, were altogether absent during this period. (ORSA 1961) Those that did failed to do so with the same number of persons as Arthur Andersen across both OR and MS.
Many Arthur Andersen persons continued to influence the community after their time at the company. David Hertz published Progress in Operations Research, Vol. 2 a year after leaving the firm. The widely read and lauded book incorporated some of his Arthur Andersen projects. In the later stages of his career, Hertz served as president of both ORSA and TIMS. Other OR/MS luminaries, such as William Cooper and Charles Beightler, also had career stops at Arthur Andersen. In 1989, the technology consulting division of the firm and the accounting business split into two separate companies. As the latter folded at the turn of the millennium, “Andersen Consulting” changed its name to “Accenture”, a play on the phrase “Accent on the future”. Through these transitions, the Arthur Andersen legacy has remained evident. The company’s network of practitioners across the United States and within professional societies helped pioneer OR/MS in the financial industry and promote solutions in new spaces.
Compiled by: Reed Devany
Links and References
Arthur Andersen (1965) [advertisement]. Operations Research, 13(2), xiv.
Brigham, G (1965) Letters to the Editor: The Lanchester Prize. Operations Research, 13(1), 140-1.
Eddison R. T. & Hertz D. B., eds. (1964) Progress in Operations Research, Volume II. John Wiley & Sons: New York.
Hertz, D. B. (1958) A note on the political economy of organization. Management Science, 5(1), 136-8.
Hertz, D. B. & K. H. Schaffir (1960) A forecasting method for management of seasonal style-goods inventories. Operations Research, 8(1): 45-52.
Heuser Jr., W.A. & B.E. Wynne (1963) An application of the critical path method to job shop scheduling – a case study. Operations Research, 3(2), 128-144.
INFORMS. Miser-Harris Presidential Portrait Gallery: David Hertz. Retrieved: September 24, 2019. (link)
Marshall, B.O & W. P. Boggess II (1957) The Practical Calculation of Reorder Points. Operations Research, 5(4), 513-7
McDowell, I. (1960) The Economical Planning Period for Engineering Works. Operations Research, 8(4), 533-42.
ORSA (1957) Members of the Society. Operations Research, 5(6), 42 & 59
ORSA (1961) Application to the Referees. Operations Research, 9(1), 134, 135, & 139.
ORSA (1965) Operations Research Society of America: Chairman of Standing Committees. Operations Research, 13(1), xii.
ORSA (1966) Operations Research Society of America: Other Committees. Operations Research, 15(2), xii.
Schaffir, K.H. (1963) The Economic of Nonfunction Variety. Operations Research, 11(5), 702-20.
Schaffir, K.H. & J.H. Scott Jr. (1962) A system for control of order backlog. Management Technology, 2(1), 1-6.
Swanson, L.W. & J.G. Woodruff (1964) A sequential approach to the feed-mix problem. Operations Research, 12(1), 89-109.
TIMS (1965a) TIMS Chapter and College Officers Management Science, Series C, Bulletin, 12(2), C-29.
TIMS (1965b) TIMS Chapter and College Officers. Management Science, Series C, Bulletin, 12(4), C-101.
TIMS (1965c) Front Matter. Management Science, Series B, Managerial, 12(2).
TIMS (1965d) Program for the 1966 TIMS American Meeting. Management Science, 12(4), C57.
Associated Historic Individuals
Beightler, Charles S.Cooper, William W.
Hertz, David B.
Rivett, Berwyn Hugh Patrick