WORKS MANAGEMENT LIBRARY 
 
 EXPERIENCES 
 IN EFFICIENCY 
 
 BY 
 
 BENJ. A. FRANKLIN 
 
 NEW YORK 
 
 THE ENGINEERING MAGAZINE GO. 
 1915 
 
Copyright, 1915 
 
 By THE ENGINEERING MAGAZINE CO. 
 
INTRODUCTION 
 
 Mr. Franklin's book is offered in answer to a many- 
 voiced inquiry for specific examples of efficiency 
 methods. It shows the employer or manager, strug- 
 gling with problems of increasing cost of operation 
 and diminishing returns, how other men discovered 
 and used a road to success out of similar difficulties. 
 It is a concise record of "leading cases." The ma- 
 terial is selected from the author's wide and success- 
 ful experience and represents a diversity of .situa- 
 tions in a variety of industries. In each case the 
 story is reduced to its simplest elements, but it still 
 shows clearly the character of the problem attacked 
 and the nature of the solution found. It tells what 
 was done, why it was done, and how it was done. 
 
 Most of the chapters appeared originally in THE 
 ENGINEERING MAGAZINE. As here reprinted they 
 are revised, adapted, and marshalled in sequence so 
 as to constitute a logical and progressive survey of 
 practice, following the order in which it demands the 
 manager's attention. It begins with the thing which 
 is generally uppermost in a manufacturer's mind 
 the handling of labor. Four chapters are given to 
 methods of increasing both output and quality of 
 direct production ; the fifth extends the same princi- 
 
 Eles to the treatment of clerical, or "non-productive," 
 ibor ; the sixth enlarges the same applied ideas so as 
 to include the entire force. In the seventh chapter 
 
 ill 
 
v INTRODUCTION 
 
 we pass from the individuals to the organization; 
 in the eighth we attack a reduction of factory ex- 
 penses; in the ninth we develop an efficiency cost 
 system, and in the last chapter we find all the preced- 
 ing measures connected to and based upon the fun- 
 damental necessity of "efficiency will" as a driving 
 force in the establishment of efficient practice. 
 
 CHABLES BUXTON GOING 
 
PEEFACE 
 
 The methods employed even in the most efficient 
 plants are, in the main, after all but the methods, 
 possibly somewhat modified, tried and found effective 
 here and there in different places in the manufactur- 
 ing and business world, and passed along consciously 
 or unconsciously. 
 
 The successful executive, after all, is essentially 
 or even generally not an originator of new ideas, so 
 much as he is an assimilator and an adapter inspired 
 by what he sees, hears and reads. 
 
 What is successful in one plant, with proper 
 change, adaptation, and modification will be success- 
 ful in another, if the basic principle of its operation 
 is understood. 
 
 These three principles have emboldened the author 
 to recite the few experiences herein enclosed, with 
 the hope that here and there they may offer that in- 
 spiration by which so many efficiencies find their be- 
 ginning. 
 
 BENJ. A. FRANKLIN 
 
CONTENTS 
 
 PAQB 
 
 CHAPTER I. A SUCCESS SECURED BY STUDY OF WORK- 
 MEN'S TENDENCIES. 
 
 Why Labor is most Frequently the First Point 
 of Efficiency Attack A Case where Savings Ex- 
 ceeding $30,000 a year were Effected The Scene 
 Laid in a Large Leather Factory Conditions 
 Surrounding the Work How Inefficiency was 
 Manifested The Workmen's Influence on Out- 
 put An Incentive to Increased Production De- 
 termined Upon Dangers of Loss of Quality by 
 Increasing Output Increased Inspection must 
 Accompany Increased Piece Kates The Prelimi- 
 nary Studies The Rates Determined Upon The 
 New Methods Outlined The Results Described. 1 
 
 CHAPTER II. A PROBLEM OF QUALITY OF WORKMAN- 
 SHIP. 
 
 Quality Requirements Always Present Quality 
 does not Depend upon Day Work or Piece Work, 
 Slow Work or Rapid Work Quality is a Mat- 
 ter of Systematic Insistence Three Weaknesses 
 of Human Nature which Tend to Lowering of 
 Quality Description of the Plant in which Qual- 
 ity of Output was to Be Improved Character of 
 Production, Arrangement of Departments, Man- 
 ufacturing Practice Abuses which Existed How 
 the Delays and Losses were Investigated What 
 the Causes were Found to Be What Methods 
 were Installed Inspection and Report System 
 Adopted Organization of the Inspection Depart- 
 ment Cards and Forms Used How the Better- 
 ments were Introduced What Results were Se- 
 cured 14 
 
 vii 
 
Vlll CONTENTS 
 
 PAGH 
 
 CHAPTEB III. WASTE SAVING THROUGH QUALITY 
 PIECE WORK. 
 
 Where Quality is Insisted on the Men will 
 Work to it A Plan by Which Quality Require- 
 ments are Automatically Secured A Mill where 
 Waste was Considerable under Day- Work Plan 
 How Quality was Raised by a Piece-Work Sys- 
 tem How Rates were Fixed, Limits of Waste 
 Determined, and a Bonus for Savings Introduced 
 The Results The Three Requirements for a 
 Successful Quality Piece-Work System 3? 
 
 CHAPTER IV. GANG PIECE WORK. 
 
 Prevalence of the Piece-Work Method Its Re- 
 lations to Efficiency of Operation How Piece 
 Work may be made Efficient What Gang Piece 
 Work Means Its Differences from the Contract 
 System An Example Taken from an Envelope 
 Factory How Gang Piece Work Solved the 
 Problem, with its Advantages to both Factory 
 and Men An Example from a Plating Room 
 How Gang Piece Work Secured Economies 
 where Individual Piece Rates were Impossible 
 An Example from an Assembling Department 
 How Gang Piece Work Stimulates Co-operation 
 and Works toward Greater Total Efficiency 42 
 
 CHAPTER V. THE PROBLEM OF CLERICAL LABOR. 
 
 Executives Fear Efficiency Methods because 
 they Apparently Increase Non-Productive Ex- 
 pense How a Factory Employing 600 People 
 Minimized Expense in its Cost Department In- 
 creased Statistical Information was Needed with- 
 out Increase in Number of Cost Clerks, as the 
 First Step was to Be Placing the Statistical De- 
 partment on the Time-Note System What the 
 Time Notes were How they were Received by 
 the Clerks How they were Studied by the Head 
 of the Department How they Led to Better Dis- 
 tribution of Work and Use of Time How Indi- 
 vidual Time Schedules were Made up How they 
 Began to Stimulate Individual Efficiency The 
 Lessons Applied to General Problem of Clerical 
 Labor How Clerical Labor can be Made Actu- 
 ally to Pay under this System 53 
 
CONTENTS ix 
 
 PAGH 
 
 CHAPTER VI. INCLUDING THE WHOLE FORCE IN LABOR 
 REWARD. 
 
 Labor Yields Most Readily to Intelligent Ef- 
 fort Increased Production Reduces the Ratio of 
 Expense Burden Efficiency of Labor may be In- 
 creased in Three Principal Ways: Substituting 
 Machinery, Re-modeling the Executive Organiza- 
 tion, or Rewarding Labor According to Results 
 The Three Plans Compared All Fall Short be- 
 cause they Reach Only the Direct Producer 
 A Story of a Plant where even the Office Force 
 were Paid on the Incentive Basis The Situation 
 Described What the Weaknesses Proved to be 
 What Measures of Importance were Deter- 
 mined upon How the "Squeeze Point" was Lo- 
 cated How Standard Rates were Fixed How 
 the Gang Piece Work was Applied to Store- 
 keepers, Labelers, and Shippers How Expense 
 Standards were Determined How the Bonus 
 Rates were Fixed The Gains at the End of 
 Six Months and of a Year 66 
 
 CHAPTER VII. PRODUCTION LARGELY INCREASED BY 
 SIMPLE REORGANIZATION. 
 
 An Example from a Rubber-Goods Manufac- 
 turing Plant The Situation Described Difficult 
 Conditions Imposed by Seasonal Demand, Trade 
 Customs, and Character of Goods How These 
 Affected Unfavorably the Efficiency of the De- 
 partment How Reforms were Inaugurated 
 How a Simple Planning Department was Or- 
 ganized to Relieve the Foreman How the Work 
 of the Production Clerk was Laid Out How 
 Working Schedules were Compiled How the 
 Work of the Various Departments was Co-ordi- 
 nated How the Central Production Department 
 was Formed The Favorable Effects upon Out- 
 put, Wages, Customers, and Volume of Business. 79 
 
 CHAPTER VIII. REDUCING THE FACTORY EXPENSE. 
 
 The Logic of Efficiency and the Reluctance of 
 the Executive The Manager's Fear of an In- 
 creased Expense Account How Total Expense 
 and Ratio of Expense to Unit Production Costs 
 were Reduced with Increased Efficiency The 
 
X CONTENTS 
 
 PAGE 
 
 Example of a Light Manufacturing Plant Em- 
 ploying 1200 Hands The Expense Conditions 
 in this Establishment Its Old-Fashioned Form 
 of Organization How this was Left Unimpaired 
 and a Cost Department, Inspection Department, 
 and Production-Planning Department were Add- 
 ed How Expense was Analyzed How the Ex- 
 pense Figures were Interpreted How Changes 
 were 'Decided upon Item by Item How Econ- 
 omy was Applied to the Use of General Supplies 
 Methods Employed in Introducing a General 
 Store-Room How Repair Expenditures were Re- 
 duced How Non-Productive Labor was Cut 
 Down How Tool Expenditure was Lowered 
 What Results were Secured in Six Months 
 What General Advantages, Both Financial and 
 Moral, were Secured 94 
 
 CHAPTEB IX. BUILDING A COST SYSTEM. 
 
 Knowledge of Costs now Considered to Be 
 Necessary The Cost Problem as it Appeared 
 in a Machine-Building Plant Comprising Three 
 Departments and Employing 125 Men What 
 Controlling Figures the Executive Wanted 
 What the Human Equipment was: a Bookkeeper 
 and an Assistant The Detailed Costs were Di- 
 vided as Usual into Material, Labor, and Ex- 
 pense Expense Figures were Attacked First 
 How they were Analyzed How the Expense Fig- 
 ures Startled the Executive Objections Encoun- 
 tered among the Workmen How their Opposi- 
 tion was Overcome How Material Expense was 
 Attacked Description of a Simple Store-Room 
 System Description of the Material Journal 
 How the Cost Figures were Utilized How Analy- 
 sis of Weekly and Monthly Statements Led to 
 Economies The Favorable Results at the End of 
 Eight Months 121 
 
 CHAPTER X. THE NECESSITY OF EFFICIENCY WILL. 
 
 Many Executives are Still Suspicious of the 
 Efficiency Engineer His True Relation to his 
 Clients Every Business has Two General Divi- 
 sions, one is Special to the Business, the other is 
 General to all Business. It is in this Second Di- 
 
CONTENTS XI 
 
 PAGE 
 
 vision that the Efficiency Engineer should Exer- 
 cise his Functions The Story of Three Metal- 
 Working Establishments in which an Efficiency 
 Engineer was Successful First, a Concern with 
 Weak Executive Organization Second, a Case of 
 Strong and Energetic Dual Control Third, a 
 Case of Shrewd but Superannuated Proprietor- 
 ship with Divided Authority in Second Command 
 How "Efficiency Will" was Inspired in all 
 Three Cases with Happy Results in Every In- 
 stance * 148 
 
EXPERIENCES IN EFFICIENCY 
 
 CHAPTER I 
 
 A SUCCESS SECUKED BY STUDY OF 
 WOKKMEN'S TENDENCIES 
 
 TN American business life, especially in the 
 * manufacturing division, there has arisen 
 almost a hue-and-cry for methods of higher 
 efficiency. This demand is in no sense tempo- 
 rary, nor is it illogical. It is the reasonable 
 outcome of three well-known conditions. 
 
 It is, first, the natural corollary of the 
 forward movement of the last few decades 
 in science and invention, of which an enor- 
 mous increase in efficiency by machinery has 
 been a feature. 
 
 Secondly, the high cost of living has been 
 persistently demanding an antidote, and 
 greater efficiency apparently offers some 
 hope of remedy. 
 
 Thirdly, the constant demand by labor for 
 increase of wages, meets, on the part of 
 
 1 
 
2 EXPERIENCES IN EFFICIENCY 
 
 capital, an offset in a demand for higher 
 efficiency; and there are those who hope to 
 see, finally devised and developed into uni- 
 versal practice, some method or methods of 
 efficiency and reward which will go far 
 towards solving the problem of proper jus- 
 tice and balance between these two warring 
 elements. 
 
 The methods of efficiency most often and 
 most spectacularly attack labor. This is so 
 because this element possesses the most elas- 
 ticity in its efforts, can be quickened into 
 more efficient action with the least expendi- 
 ture in surroundings, and of course is the 
 most oft-recurring element in production 
 and in the cost of manufacture. 
 
 The results obtained in this attack are 
 sometimes almost magical in effect. The 
 magician sets out his stock in trade, rolls up 
 his sleeves, and explains how ordinary and 
 usual are all the conditions. A few graceful 
 motions, and lo! the unexpected and appar- 
 ently impossible has taken place, and we 
 wonder and admire the result. But back of 
 every wonder-production lies a simple expla- 
 nation, a definite plan, the skill of practice 
 and experience, and a knowledge of human 
 limitations and tendencies. 
 
PROFITING BY WORKMEN S TENDENCIES 3 
 
 So, exactly, is the case with some examples 
 of efficiency work, although often results, 
 which in the end are remarkable in compari- 
 son with the conditions at the start, may 
 take some time six months or a year or 
 even longer in arriving at their fullest val- 
 ues, and faith and patience are necessary in 
 their moulding. And often there come by- 
 product results well worth while, if unex- 
 pected. 
 
 Such a case, where in the work of a gang 
 of a dozen men on one operation over $30,- 
 000 a year is saved, may be cited as an ex- 
 ample. 
 
 The scene is laid in a large factory where 
 leather in various finished shapes is the prod- 
 uct. Now leather is a very valuable material 
 in the finished state, especially in certain ar- 
 ticles of large and fine quality, but it de- 
 creases in value very rapidly when it be- 
 comes waste. Therefore waste is to be fear- 
 fully avoided. But it must be noted that 
 Nature, abetted by certain careless handlings 
 en route to the final process, has not ar- 
 ranged that the bovine hide shall always be 
 perfect, of uniform thickness, or each one 
 like every other. The hide must therefore 
 be cut into different parts for different uses, 
 
4 EXPERIENCES IN EFFICIENCY 
 
 and the different parts trimmed according 
 to their particular conditions. And this 
 makes waste. 
 
 At one stage of the preparation of certain 
 leather for a final use, the operation consists 
 in trimming off, from the ends of certain 
 long heavy strips, that portion which (be- 
 cause of thinness or other defects) is unfit 
 for the purpose of the strips. 
 
 The volume of business at this operation 
 causes the employment of about a dozen men, 
 working on the day-work basis: i.e., being 
 paid a fixed amount per day or hour. These 
 men are instructed to trim the strips accord- 
 ing to their judgment, somewhat trained, and 
 one inspector looks over all the strips when 
 finished, turning back to the workmen any 
 strips not properly trimmed. 
 
 Leather left on the strips is worth on the 
 average 50 cents per pound. The leather 
 waste, cut off at this point, is worth about 
 10 cents per pound a very decided loss. 
 
 Thus the stage is set and the conditions 
 seem very natural. 
 
 But here really exists a situation with 
 very strong tendencies to high inefficiency, 
 which the watchfulness of a general fore- 
 man could not prevent very materially, and 
 
PROFITING BY WORKMEN S TENDENCIES 5 
 
 which any effort of his toward greater pro- 
 duction per man was liable to make worse. 
 
 This inefficiency expressed itself in two 
 ways : First, in a small production per day, 
 based on the plea that too rapid work meant 
 careless trimming and high waste; second, 
 since no trimmer desired to have the inspec- 
 tor throw back work upon his hands for a 
 second trimming, he made sure, so far as he 
 could consistently with not making too much 
 waste, that enough was cut off to take it 
 safely past the inspector. These tendencies 
 meant small quantity and poor quality of 
 work ; and they were very strong tendencies, 
 because they were daily present in a some- 
 what monotonous task. 
 
 High efficiency for constant or increasingly 
 better results demands right tendencies. The 
 ordinary workman will not continuously 
 fight against wrong tendencies without re- 
 ward. It is evident, then, that the problem 
 here was to discover methods that would re- 
 verse the tendencies, viz., make them operate 
 towards more and better work. 
 
 To accomplish this, it is plain to every 
 practical man that some incentive must be 
 offered to the workman, for the tendencies 
 
6 EXPERIENCES IN EFFICIENCY 
 
 operate through him and must be counter- 
 acted through him. 
 
 In the final analysis, from a practical 
 viewpoint, the workman works for money, 
 and appeals through other motives must be 
 subordinated. He has a family to support, 
 or hopes to have, and an increased weekly 
 pay appeals strongly to him. Not that this 
 appeal is in any sense confined to the work- 
 man, and it is somewhat unfair to him to be- 
 lieve that, as a rule, he does not take pride 
 in his work, and attempt definitely to do it 
 in what he thinks a fair and capable manner. 
 There is a tremendous lot of human nature 
 in the ordinary everyday workman, and de- 
 spite the occasional belief of many employers 
 to the contrary, he is not in the class of the 
 donkey with the corn dangling in front of 
 him. He is exactly the man his employer is, 
 only lacking some opportunity, training, or 
 quality which has placed the employer in 
 the more fortunate position. But with his 
 pride in his ability and his work, there is 
 needed, to keep it up to high and constant 
 pressure, a reward which he can express in 
 things he wants. Such a reward is, of course, 
 money although appreciation as an addi- 
 tion is always welcome. 
 
PROFITING BY WORKMEN S TENDENCIES 7 
 
 The problem in this case, then, narrows 
 down to the devising of a proper money in- 
 centive to turn the tendencies toward inef- 
 ficiency into tendencies toward efficiency. 
 
 Now the universal form of incentive to 
 labor is to pay it, in some manner, propor- 
 tionately to increase of production in the unit 
 of time. But it is plain that in this case an 
 incentive for quantity would cause a haste 
 in trimming which would only increase the 
 tendency to waste, and thereby much more 
 money might be lost in waste than could be 
 saved by increased production per man. 
 
 On the other hand, an incentive to save 
 waste alone would have the tendency to slow 
 up production and materially increase the 
 labor cost. 
 
 Very evidently, then, what was needed was 
 an incentive dealing with both quantity and 
 quality, in such a way as to get the maximum 
 production with the minimum waste. But 
 since the saving of waste was much more im- 
 portant than the obtaining of a large pro- 
 duction, the incentive must be so arranged 
 that the workman should with certainty net 
 the highest wage from just that combination 
 of increase of production and decrease of 
 waste which would also net the company the 
 
EXPERIENCES IN EFFICIENCY 
 
 best returns of value. In such an incentive, 
 however, there existed just as strong a tend- 
 ency to leave on bad leather as formerly 
 existed to cut off good leather. This tend- 
 ency must be controlled by honest inspec- 
 tion. Thus far, then, went the study in hu- 
 man tendencies. 
 
 Now began that study of surroundings, 
 time of operation, mechanical arrangement, 
 tools and conditions, which every effort for 
 efficiency demands. This involved time 
 studies, experiments, and records, in order 
 to fix upon that maximum number of strips 
 which the competent workman could trim 
 with the minimum waste, under the best ob- 
 tainable conditions. 
 
 Such studies involve experience and tech- 
 nicalities, and are more interesting gener- 
 ally in the result than in the relation. Neces- 
 sarily there was computed the saving to the 
 company in labor for every hundred strips 
 trimmed over the average number already 
 being produced, and the saving in waste re- 
 sulting from every % per cent reduction 
 under the average percentage being made. 
 
 These studies accomplished, there were 
 now known the following facts : 
 
PROFITING BY WORKMEN S TENDENCIES 
 
 Average number of strips trimmed per 
 day, with average percentage of waste. 
 
 Standard number that should be trimmed 
 per day with standard minimum waste. 
 
 Saving to be made to the company by every 
 unit of advance, both in increase of produc- 
 tion and in decrease of waste, in passing 
 from the average to the standard. 
 
 An analysis of the tendencies of workman 
 handling the strips, and an incentive devised 
 to make these tendencies right. 
 
 It thus became a fairly easy matter to ar- 
 range the incentive at a base rate per hun- 
 dred strips trimmed, with the waste at the 
 average percentage and with an additional 
 rate per hundred for every % per cent of 
 waste saved, and a decrease of rate per hun- 
 dred for every % per cent added to the aver- 
 age. Thus the rates might look like this : 
 
 Percent of Waste Cents per 100 
 
 7 46 
 
 6% 47 
 
 61/2 48 
 
 6% 49 
 
 6 (Base Rate) 50 
 
 53,4 51 
 
 51/2 52% 
 51/4 
 
 5 57 
 
10 EXPERIENCES IN EFFICIENCY 
 
 That these figures are not the actual ones 
 does not make less their ability to illustrate 
 the method of reward offered for betterment, 
 and penalty assessed for doing worse than 
 the average. 
 
 In fixing the additional rates there had to 
 be taken into account two things the amount 
 saved to the company by better work, and 
 that portion of the saving which would be 
 sufficient to cause the workman to strive 
 to make it; for men will make increased ef- 
 forts only for what they consider a reason- 
 able reward. 
 
 There yet had to be counteracted the tend- 
 ency of this method to make the workman 
 leave on bad leather to make his percentage 
 of waste low; and this was accomplished by 
 very materially increasing the salary of the 
 inspector, with the warning that his job de- 
 pended on no bad leather getting past him. 
 He now had a much better paid job than he 
 had ever expected. It was too good to lose, 
 and he volunteered the remark that "any 
 guy what got past him with any bad stuff 
 that lost him his job was in danger of his 
 life." He still has the job, with no casualties 
 reported. 
 
 The new methods were now put into opera- 
 
PROFITING BY WORKMEN'S TENDENCIES 11 
 
 tion; but before success could be assured 
 there were still conditions to be regulated. 
 Methods alone are inanimate. They must be 
 animated, to be successful. Many good ones 
 fail for lack of this addition of a soul. In 
 the first place, efficiency is the result of con- 
 certed effort, and this does not generally 
 come except through enthusiasm. This is 
 to say, indeed, that efficiency founds itself 
 on a state of mind, and this is a very vital 
 point to consider. To create in the workmen 
 enthusiasm for the new methods, it was first 
 necessary to assure them that the incentives 
 were fair and that the opportunities before 
 them were real. Certain guarantees had to 
 be made against any loss to them. Consid- 
 erable attention had to be paid them in the 
 matter of judgment of good and bad leather, 
 and in the way of training them. And espe- 
 cially was it essential to encourage and assist 
 those who were known to be the most skilful, 
 in order that they might, as an example, 
 make some worth-while pay-envelopes. Once 
 the possibilities were developed by one or 
 two, there quickly grew the desire in others ; 
 a friendly rivalry as to records and pay 
 sprang up, the monotony of the work van- 
 ished, and efficiency had arrived. 
 
12 EXPERIENCES IN EFFICIENCY 
 
 The company itself learned things it had 
 not properly appreciated before. Urged by 
 disputes between the workmen and the in- 
 spector, it made more careful tests (through 
 a testing machine) as to what, for the par- 
 ticular purpose desired, really did consti- 
 tute good and bad leather. 
 
 Likewise, as is always the case when men 
 are put on their mettle in a battle, in a 
 game, and in work as well when a measur- 
 able call for ability was made, it soon de- 
 veloped that certain men, by their perform- 
 ances, showed clearly their superior skill in 
 getting out a large production, combined 
 with the judgment of just where to cut to 
 make the least waste and others showed 
 their lack of adaptability for the work. This 
 discovery very soon brought about better 
 training of the men, and also some readjust- 
 ments in the plant which brought to this op- 
 eration the men most capable for it. 
 
 The day-work method of payment permits 
 many a man to work at a task for which he 
 has neither taste nor ability, when he might 
 make his mark at some other. Proper incen- 
 tive methods pick out the able men and often 
 force out the unable, not infrequently into 
 tasks at which they achieve greater success. 
 
PROFITING BY WORKMEN'S TENDENCIES 13 
 
 Touched thus by the wand of efficiency, 
 the net result of these changes in this opera- 
 tion was remarkable. The men made very 
 much better wages, and found a real interest 
 in the attempt to make good records and good 
 pay weekly. They had now something defi- 
 nite to work for. But to the company came 
 the magical result. In six months the per- 
 centage of waste had dropped to one-third 
 of the former average, and the production 
 per man had materially increased, effecting, 
 as previously stated, a saving in operation 
 of over $30,000 a year. 
 
 Thus a study in tendencies led to a great 
 efficiency, through quality piece-work. 
 
CHAPTER II 
 
 A PKOBLEM OF QUALITY OF WORKMAN- 
 SHIP 
 
 TN manufacturing, the problem of quality 
 * of workmanship, or, perhaps, to put it 
 more practically, the problem of producing 
 articles to a predetermined standard of qual- 
 ity, is ever present, and never completely 
 solved to a thoroughly satisfactory degree, 
 even in the best managed plants. Even in 
 articles of few parts and involving few pro- 
 cesses, there constantly occur difficulties and 
 defects, some natural and some avoidable, 
 causing complaints and losses. 
 
 Multiply the few parts into a greater num- 
 ber, many of them being small ; the processes 
 into many and delicate ones; and the pro- 
 duction into large volume (as in the case of 
 many complicated machines, like the type- 
 writer, the automobile and so on), and the 
 possibilities of loss and delay may be multi- 
 plied still more rapidly. There are those who 
 
 14 
 
SECURING QUALITY OF OUTPUT 15 
 
 may desire to make the further observation 
 that if to these multiplications, there be fur- 
 ther added the substitution of piece work 
 or incentive methods in place of day work, 
 the problem of obtaining standard quality 
 is still further complicated; and it is not to 
 be denied that under improper conditions 
 a tendency toward deterioration naturally 
 lurks in any incentive method that tends to 
 hurry the mind or body of the workman. 
 
 Nevertheless, considerable experience has 
 shown that quality of workmanship is not 
 a matter of day work or piece work, of slow 
 work, or rapid work. Quality is a matter 
 of systematic insistence. That plant which 
 demands a standard quality from its work- 
 men and aids them by proper appliances, 
 training and discipline, obtains it equally 
 well under either plan of payment. And 
 there are very many plants operating today 
 under incentive methods, yet producing 
 higher quality goods than similar plants op- 
 erating by the day-work plan. 
 
 The necessity of the constant struggle for 
 standard quality of workmanship is the very 
 natural outcome of three main weaknesses 
 of human nature as applied to modern in- 
 dustrial production (1) wide variations in 
 
16 EXPERIENCES 'IN EFFICIENCY 
 
 the natural skill and in the past training of 
 operatives, due somewhat to the lapse of the 
 apprenticeship system; (2) the constant ex- 
 pression of a lack of interest and concentra- 
 tion on the part of a certain percentage of 
 the operatives, not sufficiently counteracted 
 by discipline; and (3) a failure on the part 
 of the management to make proper prepara- 
 tions, to give proper instructions and train- 
 ing, and to maintain necessary discipline. 
 
 It is not practically conceivable that these 
 weaknesses will find any radical and uni- 
 versal remedy within the very near future, 
 even if it may be said that modern methods 
 are creating a tendency constantly to reduce 
 them. Nevertheless the practical man finds 
 himself impelled to seek definite remedies to 
 suit his particular needs, and perhaps the 
 methods employed in the case of one large 
 plant may be of interest as illustrating a 
 successful method of betterment, not merely 
 of quality of workmanship but of other at- 
 tendant results. 
 
 Consider, then, the elements of the situa- 
 tion: A large plant with some twenty de- 
 partments, consisting in storerooms for 
 rough and finished parts, machine shops, tin 
 shop, forge, paint shop and assembling 
 
SECURING QUALITY OF OUTPUT 17 
 
 rooms ; with about six-hundred operatives, 
 the number fluctuating somewhat according 
 to the season of the year; producing in pre- 
 determined yearly quantities a machine of 
 numerous parts, many of which are small, 
 and undergoing in their preparation from 
 five to twenty operations each, these opera- 
 tions frequently performed by as many dif- 
 ferent operatives the parts being ordered 
 in the rough from foundry or forge or cut 
 from raw material, being worked upon in 
 the preparatory departments in lots, till, 
 passing through the finished stores to as- 
 sembling rooms, they are first assembled into 
 sections and the sections then assembled into 
 the finished machine. 
 
 Such a situation is a rather usual one for 
 many factories, and theoretically it would 
 seem (after the questions of design are set- 
 tled) rather a simple one to plan and to push. 
 But the practical man will recognize at once 
 the many probabilities of difficulties, delays, 
 and losses, even granted that the large prob- 
 lem of getting all the parts into the plant 
 and started to the first operation has been 
 satisfactorily accomplished. 
 
 In practice the parts were started through 
 the plant in lots of 10 to 200 pieces, accord- 
 
18 EXPERIENCES IN EFFICIENCY 
 
 ing to size and length of operations, the in- 
 tent being that no lot should be so large in 
 bulk or number as to halt more than a rea- 
 sonable time at any one operation, so that 
 it might be unnecessary to split it. And, of 
 course, there were very many lots constantly 
 on the march towards the finished stores and 
 assembling departments. 
 
 All this sounds very simple and orderly 
 in recital. The imagination can readily pic- 
 ture these parts, grouped in lots, in boxes 
 where possible, properly ticketed with in- 
 formation, progressing from department to 
 department through needed operations of 
 finishing, and all arriving finally to their in- 
 tended use and function in the complete ma- 
 chine for of course this is exactly what the 
 plant, its organization and methods, existed 
 for. But the actual practice might readily 
 have been compared to numerous bodies of 
 soldiers starting in good order to a battle 
 rendezvous, going through the struggle, and 
 assembling, though victorious, in much de- 
 pleted array. For, under the conditions ex- 
 isting, while some lots came through quickly 
 and intact, others came through much dim- 
 inished in numbers and the missing parts 
 could never be found. Still others came 
 
SECURING QUALITY OF OUTPUT 19 
 
 through entirely or in part unfit for use. 
 Some halted in their progress until insistent 
 cries from the assembling room started trac- 
 ers after them to give them a push along 
 their way. And some lots disappeared en- 
 tirely, or were discovered only after dupli- 
 cates had been ordered to take their place. 
 
 Despite the fact, then, that completed man- 
 ufacture went on and many successful ma- 
 chines were shipped out, the net result of 
 this situation was that the floors of the de- 
 partments, especially in the busier season, 
 were clogged with parts; foremen and trac- 
 ers were kept busy searching and "hustling" 
 needed parts, and delays in the assembling 
 room caused much loss of time and money; 
 and the disappearance and loss of parts 
 through poor workmanship mounted up to a 
 considerable sum. 
 
 A peaceful canal running past some of 
 the machine shops had the even tenor of its 
 way frequently and rudely interrupted by 
 the impact of spoiled parts passing swiftly 
 and mysteriously out of the windows, and 
 it was said to have a steel-lined bottom; a 
 well-known quotation, representing a certain 
 spirit in the shop, which frequently followed 
 
20 EXPERIENCES IN EFFICIENCY 
 
 them, was "what the eye don't see, the heart 
 don't grieve for." 
 
 Now, of course, there can be no pretense 
 that any such situation could be character- 
 ized as efficient, yet it is not different, if the 
 imagination is not forced in this conception, 
 from that which exists in many plants. And 
 this plant made a fair profit. 
 
 The first necessity in any attempt at a 
 remedy was an analysis to discover the 
 underlying reasons why delays and losses 
 seemed to occur constantly, as if there were 
 some evil principle at work. It was not diffi- 
 cult, of course, to find the reasons in many 
 given cases, and though they varied consid- 
 erably in detail, it soon became clear that 
 loss and spoiling of parts were definitely due, 
 at the bottom, to the fact that very many op- 
 eratives did not have (and could hardly be 
 expected to have) any idea of the use and 
 function of most of the parts they worked on. 
 They were therefore performing their me- 
 chanical operations doubly mechanically and 
 monotonously, and did not have either that 
 supervision or that sense of constant ac- 
 countability which is necessary to counteract 
 such a condition. The loyalty and pride of 
 work which might have been of material as- 
 
SECURING QUALITY OF OUTPUT 21 
 
 sistance here did not sufficiently exist, be- 
 cause the somewhat seasonable nature of the 
 work made many of the operatives transients, 
 and generally of the less skilled class. Of 
 course there were many loyal, skilful men 
 and there were good reasons generally for 
 losses for which they were responsible. 
 
 The delays were readily traceable to the 
 fact that the parts were inanimate, and 
 moved forward only at the volition of an ani- 
 mated system, while the management, in 
 their order system, foremen and tracers, had 
 supplied this so that it was a spasmodic 
 rather than a continuous operating plan. 
 
 The problem, therefore, in the search for 
 quality and satisfactory movement was to 
 discover and put into effect those methods 
 which would give each operative the desire 
 to perform every operation he undertook in 
 his best style, and to supply animation to 
 the lots as desired. 
 
 Now it is a fortunate quality of efficiency, 
 not sufficiently used as a basis of operation, 
 that very frequently the simple method is 
 the best, and sometimes it is the only suc- 
 cessful one. This is recognized often un- 
 consciously when it is said of some plan or 
 mechanical arrangement which is successful ; 
 
22 EXPERIENCES IN EFFICIENCY 
 
 "How simple! Why wasn't that thought of 
 before?" Efficiency in its conception is not 
 at all a complicated proposition requiring 
 wonderfully ingenious devices. But a fre- 
 quent trouble with the obvious method is 
 that it involves expense, and requires pa- 
 tience and persistence to get into operation, 
 so that faith and imagination are required 
 in the inception and through the develop- 
 ment. 
 
 The philosophy of Hamlet that it may be 
 "better to bear those ills we have than fly 
 to others that we know not of " has undoubt- 
 edly found many followers in the ranks of 
 manufacturers in their consideration of the 
 methods of efficiency. 
 
 In this case any method effective in mak- 
 ing each man intent on the quality of his 
 work, must make it very clear to him that 
 at the completion of each job the manage- 
 ment would know just how well or poorly he 
 had done it, and that he should expect to 
 be held definitely responsible for lost or 
 spoiled parts. This is merely operating 
 along the lines demanded by the ordinary 
 human nature of the situation, a necessity 
 lying at the root of all methods of labor effi- 
 ciency. 
 
SECURING QUALITY OP OUTPUT 23 
 
 The obvious necessity, then, was that each 
 lot of parts should be inspected and reported 
 upon after each operation. Such a plan 
 would bring about a simple but vast differ- 
 ence ; for, instead of a general knowledge that 
 parts were spoiled or missing when the lot 
 reached the finished stores or assembly 
 rooms (creating possibly an investigation in- 
 volving a dozen or so men, some of whom 
 might have left in the meanwhile, and cover- 
 ing frequently a considerable lapse of time, 
 all of which investigations usually end in 
 befogging disputes), there was substituted 
 a definite responsibility, readily placeable on 
 one man at the moment. Such a method, as 
 indeed proved to be the case, immediately 
 tended to relieve the work of monotony, since 
 it introduced to each operative a definite and 
 constant accountability, and brought inqui- 
 ries as to methods, uses, and needs, which 
 much elevated the tone and interest in the 
 shop. 
 
 Now this plan necessarily involved a corps 
 of inspectors and a definite expense, always 
 a point of much consideration to the execu- 
 tive, and properly so. On the other hand, 
 it carried with it measurable possibilities 
 of the saving of lost and spoiled parts, and 
 
24 EXPERIENCES IN EFFICIENCY 
 
 in addition promised a fine means of bring- 
 ing parts through the shop in desirable or- 
 der for the saving of delays in assembling. 
 It proved not too difficult a proposition to 
 balance the estimated cost of inspection 
 against probable savings of losses and delays 
 and the plan was accepted. 
 
 It is not to be maintained that in all such 
 circumstances a similar decision might have 
 been adopted. It is not true of methods of 
 efficiency that if successful in one plant they 
 are necessarily similarly applicable in an- 
 other. The principles of efficiency are always 
 operatable, but it frequently happens that a 
 particular principle, effective and profitable 
 when carried out by a given method under 
 certain conditions, human or mechanical, 
 under different conditions, may need to be 
 applied by some other method to be profit- 
 able. Herein, indeed, lies the necessity and 
 value of ingenuity in efficiency application. 
 
 In the given case, the plan being decided 
 upon, it was proceeded upon. And the 
 method of it was this: 
 
 An independent inspection department 
 with a chief, a clerk and a corps of inspec- 
 tors chosen from the best men in the plant, 
 was established. This corps comprised about 
 
SECURING QUALITY OF OUTPUT 25 
 
 ten men eventually ; but since it absorbed the 
 tasks formerly occupying the time of three 
 or four tracers of lost and delayed parts, 
 there was a net addition of only six or seven, 
 at an approximate cost of $6,000 or $7,000. 
 The department was equipped with blue-print 
 drawers and ample inspection tools. 
 
 All parts were issued from the rough 
 stores (where they were received at the fac- 
 tory) in lots, the number in which depended 
 upon the size and intricacy of operation. 
 These lots were sent to the operating depart- 
 ments through the inspection department, 
 after passing inspection. 
 
 With each lot went a lot card stating the 
 lot number, part number, blue-print number, 
 operation numbers, number of pieces in the 
 lot, and any other necessary information. 
 This card, guarded against loss by the in- 
 spection after each operation, followed the 
 lot through to the finished stores, and pre- 
 sented to the observer a history of any loss 
 or delay. 
 
 With each lot was also issued a time note 
 with necessary details thereon, on which was 
 the rate, if an incentive method was used. 
 Of course it eventually contained such neces- 
 sary data as the name and number of op- 
 
26 EXPERIENCES IN EFFICIENCY 
 
 erative and time of starting and finishing, 
 and the inspector marked on it the number 
 of good parts finished, and the number 
 spoiled, with cause, before it was turned in 
 to the inspection department clerk. Each 
 lot was thus constantly equipped with com- 
 plete information. 
 
 As the lots were finished in each opera- 
 tion, they were inspected and the cards were 
 properly marked, each inspector reporting 
 daily as to what he inspected, with full in- 
 formation as to the result, and the lots were 
 passed along physically to the point of the 
 next operation. 
 
 This inspection took place as often as was 
 possible in the inspection room when the 
 parts could be easily brought there after 
 the operation or where the inspection was 
 important as to exactness. In those cases 
 where the parts were large and expensive to 
 move, or where the principal item of inspec- 
 tion was a verification of the count, as in a 
 roughing operation, the parts were inspected 
 in the department where they were operated 
 upon. Common sense decided each case. 
 
 The clerk in the inspection department had 
 in his charge large cards, one for every ma- 
 chine part, of different colors for different 
 
SECURING QUALITY OF OUTPUT 27 
 
 sections of the machine. These cards, filled 
 from the time notes daily, showed the entry 
 of each lot of parts into the factory and its 
 progress by dates through the various op- 
 erations, with all casualties reported. 
 
 Now this is all very simple and straight- 
 forward in method and dull in recital, even 
 without further details added in the develop- 
 ment of the plan. For interesting as ef- 
 ficiency methods are in their development 
 and operation, it would take more than a 
 Jack London to emotionalize these details in 
 script to make their description fall among 
 the best sellers. The general reading imagi- 
 nation, readily as it pictures and enjoys the 
 unreal, emotional, and adventurous, refuses 
 to deal after working hours with the affairs 
 of everyday business life and the educa- 
 tional, for perhaps after all, to the majority, 
 these are dull and dry. 
 
 Of course, simple as this plan was, it had 
 to undergo development, for development is 
 essentially the means by which an efficiency 
 method passes from the theoretical, where it 
 is believed in by a few, to the practical where 
 it is operated by all. In every plant of any 
 size, it will readily be understood, there are 
 many varying opinions, habits, rights or sup- 
 
28 EXPERIENCES IN EFFICIENCY 
 
 posed rights, customs, and individual meth- 
 ods, not to speak of physical obstructions, 
 all of which must swing into average accord 
 with any plan before it becomes effective. 
 This development consisted first of a slow 
 spread of the inspection to cover all parts 
 and all departments, taking weakest spots 
 first, and thereafter of a refining process. 
 First the newness of the plan had to wear 
 off. The inspectors had to be trained to 
 work rapidly and systematically, to know 
 what to inspect carefully and what roughly, 
 and not to wait around to be sent here and 
 there, so that the cost of inspection might 
 be kept at a minimum. In short, the inspec- 
 tors had to be trained to inspect accurately 
 and rapidly and to do a day's work. It took, 
 of course, some time to decide in each case 
 where the parts should be inspected, i.e., at 
 point of operation or in the inspection de- 
 partment. Some time must pass also before 
 the operatives got accustomed to having 
 their work inspected without agitation and 
 comment, and without some embarrassment 
 on the part of the inspector if in their pres- 
 ence. In fact, the whole proposition had to 
 work itself into a routine affair where the 
 inspectors, chosen men, did a full and un- 
 
SECURING QUALITY OF OUTPUT 29 
 
 biased day's work and reported facts. It 
 took some time, of course, to bring order 
 and sequence of the flow of the lots to the 
 finished stores, instead of the former spas- 
 modic and erratic movement. 
 
 But the plan adopted in a few months be- 
 came very effective, for, once the operatives 
 learned that the result of each job they did 
 was a matter of record, and that they were 
 subject to criticism and in many cases to 
 actual loss of pay or position, the quality 
 of their workmanship vastly improved, and 
 the disappearance of parts and the number 
 spoiled very shortly fell to a minimum. The 
 poor and careless workmen very soon be- 
 trayed themselves. Questions as to uses 
 of parts, possibilities of machinery, demands 
 for jigs and all helpful appliances, became 
 more frequent; the saving amply justified 
 the expense, and the canal again flowed 
 peacefully on undisturbed by the surrepti- 
 tious Jeer-plunk. It had to conceal no more 
 industrial crimes. 
 
 But this was not by any means the whole 
 gain. The cards of the inspectors' clerk, 
 giving the history and position in operations 
 and departments of every part, soon became 
 the basis of knowledge and operation of a 
 
30 EXPERIENCES IN EFFICIENCY 
 
 proper routing system. The finished stores, 
 issuing in advance the assembling orders, 
 could demand (with great certainty of ob- 
 taining them) any desired parts, thus elimi- 
 nating delays in assembling; and the saving 
 did not end even here, for the method of con- 
 trol of the movements of the parts soon 
 brought about better physical order in the 
 departments and kept in front of each op- 
 erative ample work for himself and machine, 
 thus cutting out delays on his part and es- 
 sentially increasing the production per man 
 of total parts worked on, even in addition 
 to the increase of good parts produced by 
 the reduction of the number of the spoiled 
 parts. The relief to the foremen was of 
 course also very great. Their time, formerly 
 largely spent in hunting and pushing needed 
 parts, could now be spent in looking after 
 their departments in the way logically 
 planned for them, and the knowledge of the 
 result of each operative's work gave them 
 some command of the situation. 
 
 In fact, as is always the case when a par- 
 ticular efficiency method is introduced to 
 remedy some particular fault, especially 
 when order is brought about, many other 
 
SECURING QUALITY OF OUTPUT 31 
 
 faults were likewise remedied and economies 
 unsuspected were made. 
 
 Thus by the obvious method and the cour- 
 age of expenditure based on a right princi- 
 ple, loss of material and labor was much re- 
 duced and production increased by the re- 
 moval of delays, and the ideal function of 
 the plant to receive, finish and assemble 
 parts into workable machines was more 
 closely attained. 
 
CHAPTER III 
 WASTE SAVING THKOUGH PIECE WORK 
 
 TN these days of increasing agitation for 
 A economical methods of manufacture, per- 
 haps the element that receives the most uni- 
 versal attention is that of labor. This is 
 not to say that there are not other elements 
 of very large importance from the stand- 
 point of possibilities of economy in every 
 business, and indeed, in some plants, of 
 greater economical significance than labor. 
 But in the first place many of these other 
 elements have received, and are receiving, 
 in a progressive systematic manner, such 
 attention as to bring not only constant im- 
 provement, but (which is really very much 
 more to be desired in the plan of things) 
 to open up still larger fields of returns for 
 human effort. And in the second place the 
 quick returns on intelligent action, the hu- 
 man interest involved, the increasing profit 
 that lies in volume of production, the un- 
 
 32 
 
QUALITY PIECE WORK 33 
 
 limited possibilities of increase of product 
 per hour that every man seems capable of 
 developing, and, perhaps not a little, the fact 
 that in any plant more energies and brains 
 become immediately interested and active 
 when the element of labor is dealt with, make 
 it of supreme interest. 
 
 And so we are developing the possibili- 
 ties of this element through motion studies 
 and scientific analysis, and coaxing it on 
 through its human side by the incentives of 
 piece work, premium plans, bonus methods, 
 efficiency standards, etc., with economical re- 
 sults as to cost, and with a hope that in the 
 long run, all this will lead to decreasing sell- 
 ing prices. But there are those who think 
 that this latter could be radically effected 
 much more quickly by a decrease in the 
 tariff, the discovery of a plan of distribu- 
 tion more direct, or a law-compelled or 
 heaven-sent abnegation on the part of capi- 
 tal of all unreasonable profits. 
 
 However, to return to labor, it must be 
 acknowledged that very good economical re- 
 sults are being obtained by the various 
 studies and methods employed, and that a 
 new era of labor values is being developed. 
 It cannot be denied that too often the incen- 
 
34 EXPERIENCES IN EFFICIENCY 
 
 tive back of the introduction of these mod- 
 ern methods in labor handling is solely the 
 narrow one of plant profit, and not the 
 broader one of mutual benefit to labor and 
 capital alike. Yet it is a fact of observation 
 that when these methods of incentive have 
 been introduced with a sense of fairness and 
 appreciation of the full and continuous 
 rights of labor, the net results to capital have 
 been even greater than when the work was 
 done in a narrow way, since such operation 
 has aroused the most liberal spirit of friend- 
 ly co-operation, which is most absolutely and 
 essentially the true basis of all of these meth- 
 ods. And it is not to be doubted that through 
 such a spirit of co-operation lies a develop- 
 ment of this great problem that will lead to 
 Utopian results. 
 
 But in all this effort to increase the 
 product per man-hour, quality must not be 
 forgotten. In the matter of moving materi- 
 als, of much rough work, and even of a good 
 deal of work with precision and automatic 
 tools, haste does not make waste nor affect 
 the desired quality. But there are many 
 operations and articles where judgment and 
 care play a material part in the items of 
 
QUALITY PIECE WORK 35 
 
 quality and waste, and the unquestionable 
 tendency of haste is to deteriorate. 
 
 This latter is the statement that is met 
 when methods of labor payment according 
 to product are suggested to the manufac- 
 turer who is proud of the high grade of his 
 product, and who guards, as the secret of 
 his profits, against any tendency towards de- 
 terioration. And certainly no advance is 
 made, either from a profit point of view 
 when one element of cost is decreased at the 
 later expense of the selling price, or from 
 a broader materialistic point of view when 
 a poorer article is made from good material 
 which care, would make into a better article. 
 
 One hears much complaint, whether with 
 a true basis or not, that workmen are not so 
 skilled, so careful, as they used to be; that 
 articles are not put together so solidly and 
 well as formerly. If this is true, as indeed 
 it may be in cases, it is only fair to labor to 
 say that it is probably more the fault of 
 the design, the plan, the attempt to imi- 
 tate cheaply some popular or high-priced 
 article, or perhaps even more than these the 
 different divisions and training of labor, 
 brought about by modern methods, than the 
 fault of labor itself. Nevertheless, some 
 
36 EXPERIENCES IN EFFICIENCY 
 
 years of experience in many varied indus- 
 tries have left the conviction that quality is 
 a matter of insistence, rather than of meth- 
 ods of either day or piece work. That is to 
 say, that in that plant where a given stand- 
 ard of quality is insisted upon, the workmen 
 will work to it whether they be paid on a 
 day-work or piece-work basis. 
 
 To obviate any danger of retrogression in 
 quality and loss through waste by possible 
 carelessness on the part of workmen hasten- 
 ing toward daily increase of production on 
 account of the rewards offered by the piece- 
 work or other plan, the writer, working as a 
 business economist, devised and put suc- 
 cessfully into operation in several plants a 
 plan of piece work in which the rate varies 
 with the quality and per cent of waste, so 
 that the daily pay of the operator depends 
 not merely upon the quantity done per day, 
 but very largely on the quality of the work. 
 There is nothing new under the sun, it is 
 said, and it would not be wonderful if one 
 or more of the minds that have for years 
 been working on these problems should have 
 evolved some similar methods. Neverthe- 
 less, neither at the time of introduction of 
 these methods, five or six years ago, nor 
 
QUALITY PIECE WORK 37 
 
 since, has any similar method come to his 
 attention. 
 
 There are many articles the manufacture 
 of which, both as to quality and the waste 
 of raw materials, can be gauged very accu- 
 rately ; in which no great scope of judgment 
 is allowed; in which accurate measurement 
 and prearranged jigs and tools play a guid- 
 ing and correcting part. There is little 
 chance for judgment or waste, except 
 through punishable carelessness, in the work 
 of machining to blue-print size a casting, 
 perhaps with jigs and fixtures. Here, and in 
 many like cases, piece work finds a safe 
 economy. 
 
 But there are many operations in very 
 many staple businesses where haste and 
 carelessness may spoil much material, or 
 where care and interest may save more in 
 material than the total wages of the worker. 
 In these cases the executive naturally hesi- 
 tates to reward speed and volume of pro- 
 duction, because of a fear that his loss in 
 waste will be greater than his gain in labor 
 cost. 
 
 In such cases the executive will find "Qual- 
 ity Piece Work" a valuable method. 
 
 A practical case will illustrate this method. 
 
38 EXPERIENCES IN EFFICIENCY 
 
 In a large mill an important operation in- 
 volved the pasting together of sheets of ma- 
 terial. This operation developed a large ten- 
 dency toward imperfections of various kinds, 
 not only those arising from the spoiling 
 of the material in pasting, but others due to 
 further enlargement of defects during the 
 drying and finishing operations defects 
 which careful pasting might avoid. The 
 value of the material was such that its waste 
 was a very considerable matter. Quality was 
 the most important element to be considered. 
 
 Even on the day-work plan, it was the cus- 
 tom to sort over the material, so that the im- 
 perfect sheets were eliminated to be pasted 
 separately. The pasting gang, therefore, 
 started with presumably perfect stock, of- 
 fering a fair basis for waste-gauging. 
 
 Starting with perfect material, there were 
 two losses to guard against. The first was 
 the turning of perfect sheets, through poor 
 workmanship, into sheets not imperfect 
 enough for waste, but so defective as to bring 
 a lower selling price. The second waste was 
 that absolute one where only a scrap value 
 remained. The scheme put into effect must 
 take care of reward for speed, but a reward 
 so proportioned that the most careful and 
 
QUALITY PIECE WORK 39 
 
 skilled gang obtained a large return for good 
 work, while poor work carried penalties in 
 reduced rewards which forced out poor work- 
 manship. 
 
 The detail of the method on this case was 
 as follows. A standard ratio of imperfect 
 pasted sheets to perfect pasted, sheets was 
 fixed, as well as a standard percentage of 
 total waste. These standards were, of 
 course, the result of records and experience. 
 
 The rate was based primarily on the per- 
 centage of imperfection. 
 
 While the figures given below are not ex- 
 act, the following table shows in a general 
 way how the rates look: 
 
 $1.12 per 100 pastings at 2% per cent imperfect 
 
 -i -i r\ (( (( (( fy (( (C (( 
 
 L08 " " " 31/2 " " " 
 
 -j r\n (( ec <e A (c (( (( 
 
 l'.04 " " " 41/2 " " 
 
 1.00 " " " 5 " " " 
 
 .98 " " " 5% " " 
 
 (\n (( (( <f <f tf 
 
 QO (( <e <t iv 
 
 .90 " " <c 
 
 In addition, the waste is set at 1 per cent, 
 and a fixed bonus per 100 pounds arranged 
 for every 1/10 per cent reduction, or a deduc- 
 
40 EXPERIENCES IN EFFICIENCY 
 
 tion for every 1/10 per cent increase in this 
 amount for the week. 
 
 The results in saving to the company in 
 imperfect and waste, and the weekly increase 
 of production, have been very well worth 
 while indeed, and the employees have ben- 
 efited 25 per cent to 50 per cent in increase 
 in wages; one operator indeed for some 
 years having averaged nearly 100 per cent 
 increase over the old rate. The judgment 
 as to the quality of the sheets pasted lies in 
 the hands of people so far away from the 
 pasters that there can be no question of its 
 fairness to both the company and the work- 
 men. The pasted sheets go through other 
 operations and are sorted out as to quality 
 when they are put up in final counted pack- 
 ages. 
 
 This example has been given in some de- 
 tail in order to make clear by figures the 
 method employed. The same method has 
 proven applicable in many cases where judg- 
 ment, carefulness, and attention could get 
 more of an article out of a given quantity of 
 raw material, with less waste, than the ordi- 
 nary methods of supervision and labor pay 
 will obtain, and it has been especially valu- 
 able in the case of leather. 
 
QUALITY PIECE WORK 41 
 
 The three elements in the operation of 
 quality piece work are: 
 
 1. To find operations in which waste is to 
 be saved or quality bettered by care. 
 
 2. To find by observation and data what 
 can be done per hour on the quantity basis. 
 
 3. To find what the average waste or 
 standard quality is as a base for quality rate. 
 
 There have already been some important 
 developments of this quality piece work in 
 several factories. It can be applied with 
 careful study to any operation where waste 
 is to be saved or quality bettered. 
 
 Important from the point of economy as a 
 reduction of labor unit cost may be, the 
 struggle for speed cannot last without a full 
 accounting with quality, and the betterment 
 of quality and saving of waste will take its 
 place in the progress of the world as a good 
 second with the betterment of morals and so- 
 cial practice, and indeed has an effective 
 place in their progress. Perhaps the next 
 step in the progress of increasing per-hour 
 production in manufacture by means of ex- 
 tra wage incentive will be the betterment of 
 quality through quality piece work. 
 
CHAPTER IV 
 GANG PIECE WORK 
 
 work, founded on the ancient busi- 
 ness principle of barter and trade, of 
 giving a stipulated price for a stipulated ar- 
 ticle, is an old institution, in principle and 
 practice well known of both capital and la- 
 bor. And while there rests in the minds of 
 very many (whose interests would be much 
 better served by knowledge) a considerable 
 ignorance of the significance of differential 
 rates, premium plans, etc., every manufac- 
 turer knows of straight piece work, and most 
 of them believe that their factories are 
 operated to a very high percentage on that 
 method of payment. 
 
 Yet actual experience with a great many 
 manufacturing plants shows that, if the pay 
 roll is consulted week after week, it will bear 
 witness in the average plant to no such con- 
 dition, but will usually prove that in the sev- 
 eral departments, all labor considered, there 
 
 42 
 
GANG PIECE WORK 43 
 
 is from 10 per cent to 75 per cent piece work, 
 none too often reading up to the higher mark. 
 
 It is true that manufacturers are begin- 
 ning to be more susceptible to the call of in- 
 creased labor-efficiency. The propagandists 
 . of scientific management are beginning to be 
 listened to somewhat more respectfully, as 
 the message of increased efficiency is a joy- 
 ful one to the ear of the American business 
 man, when he can be persuaded that it ap- 
 plies in some practical way to his particular 
 case. And it may be believed that the agi- 
 tation about the $1,000,000 a day loss by the 
 railroads will do more than any recent oc- 
 currence to urge manufacturers farther 
 along these lines, not only by calling the mat- 
 ter strongly to their attention, but also by 
 that happy trick of our human natures that 
 makes many of us hasten, sometimes uncon- 
 sciously, to correct or improve when the 
 fault or opportunity is shown to exist in an- 
 other. 
 
 But that manufacturer who desires to op- 
 erate his labor on piece work has still, on 
 the average, a definite opportunity of ob- 
 taining a real increased efficiency in develop- 
 ing this method of payment to the highest 
 degree by getting his whole factory working 
 
44 EXPERIENCES IN EFFICIENCY 
 
 on this plan. It is not impossible in many 
 factories to get almost 100 per cent of the 
 total labor, even including the foremen in 
 most departments, on piece work. To accom- 
 plish this, however, it is not infrequently nec- 
 essary to depart from that method of piece 
 work whereby a fixed rate for a given opera- 
 tion on a given article is paid to an individ- 
 ual, or what might be called "individual 
 piece work." 
 
 A most effective method of departure lies 
 in gang piece work. 
 
 The term "gang piece work" does not here 
 signify that form of labor payment which is 
 not now in as great practice as it once was, 
 and which deserves a grave in the cemetery 
 of discarded methods, viz., the method by 
 which work is farmed out for a given sum, 
 to a foreman or sub-contractor working gen- 
 erally inside the plant, who in turn hires and 
 pays his own labor according to his own 
 ideas. Such a method holds in it no real 
 economy to the final consumer, but leads gen- 
 erally to tyranny, insubordination, poor 
 work, and poorly paid (and therefore inef- 
 ficient) help. It is, indeed, the father of the 
 sweat shop. 
 
 By gang piece work here is meant some- 
 
GANG PIECE WORK 45 
 
 thing entirely different. It is a plan where- 
 by the manufacturer still pays a stipulated 
 price for a given amount of work to a gang 
 the foreman generally included but the 
 division of the pay is made by the manufac- 
 turer himself on a basis of fairness to all 
 concerned, each individual sharing propor- 
 tionally in any increase of gang pay earned, 
 and the manufacturer retaining to himself 
 the usual prerogatives of hire, discipline, 
 and discharge. This plan is not new; but it 
 is not practised as freely as it should be, for 
 it has distinct advantages. 
 
 Such a method is economically valuable, 
 especially under that condition where the 
 work in the final result is divisible into defi- 
 nite units performed by a gang, but in its 
 progress passes through the hands of indi- 
 viduals in such a varying and changing 
 method as to be practically indivisible into 
 units for individual piece-work value. The 
 gang becomes the contracting individual ; the 
 final result, the paid for operation. 
 
 Let us take a definite example to illus- 
 trate : 
 
 In an envelope factory there works a gang 
 of eight men including the foreman. The 
 duties of the individuals are somewhat wide- 
 
46 EXPERIENCES IN EFFICIENCY 
 
 ly divided. Two men are cellarmen. They 
 unload paper from the cars and wagons, take 
 up paper on order to the envelope machines, 
 and bale the waste cuttings as they come 
 down the chute from the envelope cutters. 
 Four men, including the foreman who also 
 plans and lays out the work, cut envelopes 
 on machines. One man cuts envelopes of odd 
 sizes by hand, and the eighth member of the 
 gang is a boy who delivers the cut envelopes 
 from the cutters to the envelope machines. 
 The envelopes are of all possible sizes and 
 quantities, and it is easy to imagine that 
 there was ample basis in fact for the predic- 
 tions that were made that it was impossible 
 to put this work on piece work successfully, 
 without more labor in working out the rates 
 on the more than 1,000,000 cut daily than 
 the saving would be, not to mention the dif- 
 ficulties of planning the work so that each 
 man got an equal share. Gang piece work, 
 however, solved the situation in the simplest 
 way. 
 
 A rate of 2 cents per 1,000 envelopes of 
 any size for the whole gang of eight men was 
 arrived at by careful record and observa- 
 tions, covering all kinds and sizes of en- 
 velopes, and the weekly amount earned is di- 
 
GANG PIECE WORK 47 
 
 vided between the members of the gang on a 
 fixed percentage basis, the foreman getting 
 the largest and the boy the smallest propor- 
 tion. The pay roll of this gang is arrived 
 at in five minutes at the end of the week; 
 for, take note, the gang is paid each week, 
 not on what it cuts but on the number of 
 thousand shipped out of the factory. This 
 method has, first, the decided advantage that 
 only good work is paid for, and the number 
 is beyond the question of dispute. 
 
 In this case gang piece work has worked 
 most excellently to the advantage both of 
 the factory and the men. Production has 
 increased largely, and so has the pay of the 
 men, despite the decrease in cost. 
 
 Gang piece work developed here its nat- 
 ural tendency toward co-operation, always 
 the great force toward results. While it 
 would have been very difficult, if not impos- 
 sible, to have made individual piece-work 
 rates for the different operations and classes 
 of work, it would have been much more dif- 
 ficult, on the individual piece-work plan, to 
 have divided the work so as to have obtained 
 satisfaction with each man. When all were 
 in the same boat, however, they learned 
 quickly to pull together. 
 
48 EXPERIENCES IN EFFICIENCY 
 
 Take another example a plating room. 
 Here the parts of varying sizes, weights, and 
 shapes went now into this man's hands, now 
 to another's. The work could not be divided 
 into separate operations and be economically 
 finished. The day-work plan was the only 
 method by which it appeared possible to do 
 this work. Individual piece work, as any 
 plating-room foreman will acknowledge, 
 where the operations are many and varied, 
 seems impossible. Gang piece work, how- 
 ever, solved the problem. Piece rates for the 
 finished article were worked out, and the 
 gang (including the foreman) were paid 
 weekly on the product turned out by the 
 room, the piece rates varying as to the dif- 
 ferent articles and the total amount being 
 divided between the operatives on a prear- 
 ranged percentage basis, the foreman getting 
 the largest percentage. The result was de- 
 cided economy to the plant and increased 
 wages for the operator. 
 
 Many more examples of the value of gang 
 piece work where individual piece work is 
 impossible might be given, but there is also 
 to be obtained from gang piece work fre- 
 quently a value where individual piece work 
 is easily possible. Such cases arise where 
 
GANG PIECE WORK 49 
 
 the policy of "each man for himself and the 
 devil take the hindmost " (which, we must 
 confess, individual piece work has some ten- 
 dency to foster) is a policy that leaves the 
 company also with the rear guard. 
 
 Here the value of the co-operative force 
 of gang piece work becomes very apparent. 
 Let us again take an example. 
 
 A force of 25 to 30 men assemble small 
 parts into a finished whole. There are a 
 great many small parts, and some of these 
 have to be assembled and passed on for ad- 
 justment with other parts likewise partly as- 
 sembled. Despite careful planning, the week- 
 ly production constantly varied and an ex- 
 cess of small parts was constantly demanded 
 on the individual piece-work plan. Each man 
 was working for himself, hoarding parts 
 whenever possible, frequently stealing them 
 from his neighbor, passing on partly as- 
 sembled parts poorly done, demanding con- 
 stant inspection, adjustment of disputes, and 
 not a little confusion. 
 
 Gang piece work was installed and the sit- 
 uation immediately changed. Production 
 rose to a fixed maximum. Inspection was 
 unnecessary except to test the finished arti- 
 cle. There was a decrease in parts disap- 
 
50 EXPERIENCES IN EFFICIENCY 
 
 pearing. The necessity of co-operation for 
 the general good, the broadening of the scope 
 of the individual to look to the welfare of the 
 whole instead of his own solely, had in this 
 work (as it has in any other affairs of the 
 world, political, religious, humanitarian) an 
 extremely beneficial effect for all involved. 
 
 In fact, gang piece work seems to be espe- 
 cially adapted for results where numbers of 
 small parts are involved, when these parts 
 have to pass through many operators ' hands. 
 This same plan was put into another depart- 
 ment of the same plant, where certain small 
 parts went through a number of different 
 kinds of operations necessitating that one 
 operative should pass them to another. On 
 the individual piece-work basis, there was 
 considerable delay and much necessity for 
 special rush to get certain needed parts out 
 of this department, despite careful routing. 
 Unforeseen delays and occurrences, lack of 
 interest on the part of each individual ex- 
 cept in his own work, much loss of labor paid 
 on work spoiled before it reached the last 
 operation, beside a great deal of calculation 
 necessary to make up the pay roll, were dis- 
 covered. 
 
 Gang piece work miraculously stopped 
 
GANG PIECE WORK 51 
 
 this. The gang, paid a single rate on good 
 finished parts, quickly discovered ways of 
 getting through a greater proportion of good 
 finished parts and of reducing to a minimum 
 the time of routing. 
 
 Co-operation and it is a fact, comment 
 upon it as you will, that the opportunity for 
 gain will bring the most intelligent co-opera- 
 tion on the part of the average body of men 
 when properly led co-operation educates. 
 It makes common to the gang the education 
 and skill and energy of each man. It works 
 towards greater efficiency of the whole. 
 
 To establish gang piece work it is neces- 
 sary, first : to find, as a basis for rate pay- 
 ment, some final result or results which a 
 gang of men are engaged in accomplishing; 
 second to establish a definite method of di- 
 vision between them of the amount earned by 
 the gang, this being based generally on the 
 relative skill and position of the men in- 
 volved. 
 
 While as before noted, gang piece work 
 is not a new institution, it is one that in most 
 plants has never been utilized to its most 
 profitable extent. For it is useful both in 
 attaining the highest percentage of piece- 
 work efficiency and in introducing what most 
 
52 EXPERIENCES IN EFFICIENCY 
 
 concerns stand badly in need of co-opera- 
 tion. And if it be from the point of view 
 of labor itself, since it demands equal wage 
 for all of a class and decries piece work part- 
 ly because of its discriminating effect, what 
 could more justly meet its views and still 
 satisfy the employer than gang piece work? 
 From many ethical considerations, it is 
 well for men to be bound together for a com- 
 mon cause when that cause is a fair one, and 
 any possible advantage that such a com- 
 bination in a manufacturing plant may get 
 because its demands for rates and privileges 
 may be incited by the cleverest and strong- 
 est man in the gang, may well be considered 
 as offset by the fact that its results, the en- 
 ergy and skill of its workers, are likewise 
 incited by the same force. And it is unde- 
 niable that this form of payment brings 
 about a concerted action on the part of the 
 gang, which while it may not replace or be 
 as effective as a careful and intelligent plan 
 from a superior executive source, is, never- 
 theless, a good abettor of such a plan and 
 assists materially when there is no such plan. 
 
CHAPTER V 
 THE PKOBLEM OF CLERICAL LABOR 
 
 TF the minds of many executives, in these 
 -*- days of demand for efficiency, could be 
 read, perhaps very prominently would ap- 
 pear this advertisement: 
 
 Wanted More efficiency and the facts to base it 
 on, without increase of clerical labor 
 
 This story is not necessarily a universal 
 answer to that advertisement, but it gives 
 the experience in one plant where the prob- 
 lem was met in a successful way. 
 
 The plant in question employed some six 
 hundred people in the manufacture of a sta- 
 ple article. 
 
 It had a department of costs and statis- 
 tics in which some eight men were engaged. 
 This department had concentrated in it all 
 the statistical work of whatever nature cost, 
 sales analysis, pay rolls, and records of all 
 kinds outside of the actual bookkeeping. 
 
 53 
 
54 EXPERIENCES IN EFFICIENCY 
 
 This concentration in itself offered an ad- 
 vantage, since it meant the least duplica- 
 tion of facts recorded, and the most ready 
 at hand information from the point of view 
 of economy and effectiveness. And this is 
 an important point. 
 
 This department furnished a great amount 
 of information, but there came a time when 
 more statistics still were demanded, and it 
 seemed to those in authority in the depart- 
 ment that more clerical labor was necessary 
 to make the studies and produce the facts 
 required. But the executive refused to ad- 
 mit this increase. 
 
 And so developed a very usual situation. 
 
 There were two things to do to drop the 
 idea of further statistical work, or to find a 
 means to get the eight clerks to do it. To 
 the active mind this is no situation for hesi- 
 tation. There was to be found a way. A 
 study of the conditions was therefore decided 
 upon. 
 
 The problem was considered exactly as 
 would have been the same problem in rela- 
 tion to eight operators or producers in the 
 factory. Indeed, here is a mistake made by 
 very many, working towards higher effi- 
 ciency, in that too often they assume that the 
 
MAKING CLERICAL LABOR EFFICIENT 55 
 
 direct producer needs the most painstaking 
 study and watching, and that through him 
 lies the only road to savings. This, of course, 
 is most largely true because of the greater 
 number of direct operators. But it is just 
 as true of the indirect operator, commonly 
 called non-producer, that his work is sus- 
 ceptible of study and change, and much un- 
 expected economy can be made through this 
 means. 
 
 In the case in question the first thing done 
 was to put all in the statistical department 
 on the time-note system. A nomenclature 
 was devised for all the different final records 
 being collated and the constituent parts 
 thereof. Each clerk stated on his time note 
 each day, in minute periods, what tasks he 
 performed, and how long it took him to do 
 them, following of course the nomenclature, 
 so that there might be no mistake in inter- 
 pretation later. The time notes were simply 
 a recital, on one daily sheet, at what hour 
 and minute the clerk started and finished 
 each task of routine or given work. 
 
 This at first was met with a not entirely 
 agreeable humor. The clerk is very little 
 likely to take the view that, from the execu- 
 tive down, all are laborers for one common 
 
56 EXPERIENCES IN EFFICIENCY 
 
 cause, and alike subject to methods that pro- 
 mote the good of the business. But very 
 shortly the clerks fell into the proper spirit 
 and response. 
 
 The time notes were daily studied by the 
 head of the department, with the result that 
 very shortly they began to show that quick- 
 ening of effort always shown when a worker 
 is conscious that his record is under scrutiny. 
 In the course of a fairly short time it be- 
 came apparent that each clerk had a little 
 more time on his hands than had been previ- 
 ously supposed. 
 
 From the time notes so obtained the chief 
 clerk was enabled eventually to make up a 
 schedule of how long it ought to take to make 
 up the whole or a separate part of any given 
 record or statistical statement. In this, of 
 course, he was assisted by his personal judg- 
 ment of the work, and the schedule so made 
 was quite a little shorter than an average 
 of the times taken in the different parts 
 would have shown. It compared favorably, 
 however, with the best times made. 
 
 This, of course, is simply following the 
 well known methods of efficiency in making 
 a time study and, from that, a plan. It is 
 
MAKING CLERICAL LABOR EFFICIENT 57 
 
 merely an application a little unusual though 
 not unnatural. 
 
 In the course of this study changes were 
 naturally made in the office and desk ar- 
 rangements so that light and quiet might be 
 best attained. 
 
 The scheduled time for each record, or 
 part, having been decided upon, an arrange- 
 ment of the records was made in a daily, 
 weekly, and monthly schedule for each man 
 separately. 
 
 This schedule for each man was made up 
 with the idea of giving him a fairly full day's 
 work, and with that arrangement also which 
 correlated his work so that he got the most 
 possible to do along certain lines of work in- 
 volving a like understanding and the use of 
 the same basic records. This gave a se- 
 quence to each clerk's work so that he had 
 some idea what he was doing and took a 
 greater interest in it. He was naturally able, 
 therefore, to make correlated records with 
 more facility. 
 
 Now in this work it developed that, once 
 the intent was understood, the intelligence of 
 the men asserted itself. They were naturally 
 men who desired and expected advancement. 
 
58 EXPERIENCES IN EFFICIENCY 
 
 They eventually lent every aid to the de- 
 velopment of the study and plan. 
 
 When the work for each clerk had been 
 scheduled, it was written out on a card, so 
 arranged that the first column contained the 
 names of the records or parts to be made, the 
 second column stating what time (day, week, 
 or month) the records were to be ready, and, 
 following this, thirty-one columns in which 
 each clerk must check (according to state- 
 ment in second column of the day when the 
 records were to be finished) the fact that 
 they were finished. These cards then formed 
 in effect the regular schedule of work for 
 each man and an up-to-date record of how 
 the work stood. 
 
 Well, this must be all very simple and 
 plain. But it was very effective. In the 
 first place, it absolutely relieved the head 
 of the cost department of any specific work, 
 since all records were scheduled to the 
 others, but it left him to look after the whole 
 job, to study the statistics, and to do such 
 separate studies of costs and statistics as 
 seemed from time to time necessary. In the 
 second place, it permitted the taking up and 
 carrying on of certain statistical work for 
 which another clerk had been demanded, thus 
 
MAKING CLERICAL LABOR EFFICIENT 59 
 
 making a saving of about two clerks' time, 
 seven men doing what would have formerly 
 taken nine men. 
 
 The modus operandi as thus seen was sim- 
 ple the time study, the fixing of a fair aver- 
 age time for record-making, the scheduling 
 of the work of each clerk so that his day's 
 work was planned for him, the giving to each 
 man correlated work, the schedule card 
 whereon each man checked up himself the 
 fact that the daily, weekly, or monthly rec- 
 ord was, or was not, finished on schedule 
 time. 
 
 This was the experience, copyable in very 
 many plants, no doubt, with a very definite 
 advantage. But back of all these experiences 
 there should be a thorough understanding 
 and belief in the philosophy, in the reasons 
 and fundamental understanding. 
 
 The question of costs, of records, of sta- 
 tistics, of a systematic study of operations 
 in any business, necessarily involves a con- 
 stant investment in clerical labor. This fact 
 is one of the great difficulties in the way of 
 progress of efficiency; for clerical labor is 
 the most feared and most easily-dispensed- 
 with overhead expense, the average execu- 
 tive being more inclined to trust his judg- 
 
60 EXPERIENCES IN EFFICIENCY 
 
 ment than to be guided by the facts of 
 statistics where the clerical cost of obtaining 
 them is involved. Yet efficiency can result 
 only from, and be maintained only by, a con- 
 stant recording and studying of the running 
 facts of operation. 
 
 The average executive, if pressed to a 
 choice in the expenditure of $1,000 between 
 the purchase of a piece of machinery, or a 
 year's service of a clerk, would ordinarily 
 take the machinery. That is tangible and 
 possessable at the end of the year. The ser- 
 vice of the clerk seems evanescent. The 
 product of the machinery is definite and sal- 
 able. The product of the clerk is problem- 
 atical, and therein lies the difficulty. Yet 
 it is not improbable in very many plants 
 in fact it is daily proving so over and over 
 again that the product of the clerk, through 
 facts brought to light and correlated, may 
 show that even some of the machinery al- 
 ready on hand can be discarded and increase 
 of product obtained from what is left. This 
 is one of the commonest things it does show. 
 It may show losses to be corrected, wastes to 
 be saved, profit possibilities disregarded, 
 leaks to be stopped. But what it will show 
 is a matter of gamble in the mind of the ordi- 
 
MAKING CLERICAL LABOR EFFICIENT 61 
 
 nary executive, for if he suspected the things 
 clerical labor might show in his business he 
 would correct them without the clerical la- 
 bor or thinks he would. 
 
 Even the executive who has had some ex- 
 perience of the gains to be made still hesi- 
 tates to invest further in clerical labor, 
 doubting, despite some happy experience, 
 whether a still further gain sufficient to off- 
 set the expense is possible. 
 
 Theoretically, of course, every business en- 
 tity deserves thorough study throughout. 
 Practically, it deserves that clerical labor 
 be engaged for the study of all operations 
 and their phases where it appears possible 
 that savings commensurate with the expendi- 
 ture may be hidden, with the reasonable ex- 
 pectation that when such study is carried on 
 in a practical and economical way, the ad- 
 vantages actually gained in some operations 
 will more than offset the expenditure with- 
 out results in others. 
 
 As a matter of fact, the average executive 
 goes at efficiency attainment a good deal like 
 a boat in a fog, feeling his way slowly and 
 making a good deal of noise about it which 
 is perfectly natural, and just as it should be, 
 provided he has the compass of confidence 
 
62 EXPERIENCES IN EFFICIENCY 
 
 and is steering knowingly toward the port 
 of high efficiency. 
 
 From the point of view of the average ex- 
 ecutive it must be admitted that there is 
 something irritating in the persistency of the 
 burden of clerical labor ; something agitating 
 in the constant question as to whether it is 
 a dead weight or really valuable. It seems 
 non-productive very often, and even when 
 the results it has brought about have been 
 worth while in the past, there must still be 
 the question as to whether the records it 
 keeps piling up are ever again to be valu- 
 able. When the ordinarily necessary tasks, 
 having to do with keeping the business ma- 
 chine smoothly moving, are performed, such 
 as bookkeeping, putting through of orders, 
 etc., it is bound to be a question as to how 
 much more clerical labor is profitable, and 
 no effort is made here to solve this question. 
 
 Of course, the methods of efficiency, of sci- 
 entific management, offer some definite ad- 
 vice on this point, but it has never been 
 shown to the average executive's satisfac- 
 tion that there is any sure relation between 
 success and the volume of clerical labor. 
 
 The one fair gauge of this problem, to be 
 taken only over a reasonable period of time, 
 
MAKING CLERICAL LABOR EFFICIENT 63 
 
 is based on a consideration of the purpose of 
 clerical labor. Clerical labor is employed 
 specifically to facilitate the work of the pro- 
 ducer by preparation for him, and to econo- 
 mize or " efficiencyize " it by study and rec- 
 ords showing the relation of actual cost to 
 standard. It must be very apparent, then, 
 that clerical labor is spent in the definite ex- 
 pectation of saving more than its cost in the 
 work of direct producers. Under these cir- 
 cumstances, a total economy by clerical labor 
 is made when the total index figure of labor 
 plus expense is reduced. Increasing clerical 
 labor with logic is merely to increase ex- 
 pense with the expectation of reducing pro- 
 ductive-labor unit-cost more. 
 
 This is of course merely to bring again to 
 the attention that, after all, labor and ex- 
 pense as cost figures cannot be considered 
 separately. Expense is the tool through 
 which labor is efficiently handled, and that 
 tool is rightly bettered and made more ef- 
 ficient and effectivej even through consid- 
 erable expenditure, so long as it reduces cost 
 per unit of labor more than it increases cost 
 per unit of expense. Only a cost system will 
 show the net value of clerical labor. 
 
64 EXPERIENCES IN EFFICIENCY 
 
 It is fair to say, however, that the pre- 
 ponderance of experience is that it does pay 
 to expend clerical labor in making a thor- 
 ough record study of manufacturing opera- 
 tions. The average case (and it is to the 
 average case that most methods of efficiency 
 should appeal) is that of the executive who 
 is making some study of his operations, 
 whose clerical labor is quite a material and 
 growing expense, and who has obtained re- 
 sults which encourage him to further effort 
 but yet is deterred by the fear of the burden 
 of clerical labor. To this one this study 
 should be interesting and encouraging. 
 
 The reasons for the results obtained in 
 this experience were simple, for a regular 
 order or schedule or planning of any work 
 productive or non-productive, simple or com- 
 plex, co-ordinated or not, brings better re- 
 sults with human nature. Moreover, an 
 added orderliness and interest was given. 
 The mere fact that each clerk must check 
 himself up on his own card, and be ready to 
 present it on demand, in itself offered a 
 large reason for efficiency in ambitious young 
 men. 
 
 The method thus outlined will readily ap- 
 
MAKING CLERICAL LABOR EFFICIENT 65 
 
 ply itself to any intelligent indirect labor, 
 no matter how complex, and the principles 
 involve'd are applicable in all indirect labor 
 and will be found efficiency-worthy. 
 
CHAPTER VI 
 
 INCLUDING THE WHOLE FORCE IN LABOR 
 KEWARD 
 
 l\/rOST of the exploited efficiency methods 
 - * deal with the human element in pro- 
 duction labor. This is not because labor 
 cost is usually the largest element in unit 
 cost (for as a matter of fact it is most fre- 
 quently the smallest), but because it is the 
 most elastic, the most susceptible to im- 
 provement, by its very nature yields most 
 readily to intelligent effort ; and particularly 
 because, from the cost point of view, the ele- 
 ment of expense is so closely knit with it, 
 that any increase in production per time-unit 
 carries with it often a greater decrease in 
 unit cost through expense reduction than 
 through labor-cost reduction. 
 
 Of course little argument is needed to clar- 
 ify this partiality of efficiency schemes for 
 working with labor. The tendency of the 
 other two elements of cost material and 
 
 66 
 
PUTTING EVERYBODY ON BONUS 67 
 
 expense is to resist reduction when op- 
 erated with apart from labor. 
 
 Material, given the quality and design, it 
 is true, offers some definite opportunity of 
 cost reduction in most plants through saving 
 of waste and recovery of by-product values, 
 but not continuously so in any large per 
 cent; and the tendency toward increase in 
 cost of raw material seems to be such as to 
 overcome such savings as are possible in 
 most plants. 
 
 Expense, as a bulk, both by the studied 
 increase of the administrative function in 
 the attempt to increase efficiency, and by that 
 counterpart of the increasing cost of living 
 which attaches itself to business, has a tre- 
 mendous tendency to enlarge, its main op- 
 portunity of reduction being in lowering the 
 unit cost through increase of production. 
 
 Labor, on the other hand, while it demands 
 an increasing reward in a bigger weekly pay 
 envelope, nevertheless, through its intelli- 
 gence and will power, its susceptibility to 
 training, and its skill in the use of machin- 
 ery, possesses an unlimited ability to in- 
 crease its productivity or daily output. It 
 is elemental, then, that it should be the mark 
 of efficiency methods. 
 
68 EXPERIENCES IN EFFICIENCY 
 
 To accomplish the increase of efficiency of 
 labor there are three main bases or methods 
 of operation. 
 
 The first and oldest, and indeed the most 
 effective, is the substitution of machinery 
 for hand work, and its constant improvement 
 is of course having an always increasing ef- 
 fect. This method, as far as management is 
 concerned, has to do mainly with capital. 
 
 The second method is the building of an 
 executive organization to assume, to the 
 maximum, all the functions of preparation 
 up to the final direct labor operation, so that 
 this operation shall be most efficient. This 
 has to do with expense. 
 
 The third method is the rewarding of la- 
 bor itself in some fixed proportion to its at- 
 tainment of results under given conditions of 
 operation. 
 
 Probably the first of these methods will 
 always be the most effective. For the sec- 
 ond there have been devised several distinct 
 plans or schemes, that of scientific manage- 
 ment being the most complete in theory, and 
 the old military plan by far the most prac- 
 tised. 
 
 For the third method, that of offering in- 
 centives to labor, there have been advanced 
 
PUTTING EVERYBODY ON BONUS 69 
 
 some fifteen or twenty plans. In almost 
 every manufacturing plant some of these 
 plans are in use (straight piece work being 
 the most popular), for this third method is 
 the only one which meets labor 's demand for 
 increased pay without increasing unit labor 
 cost, or indeed with a decrease in that cost. 
 
 These plans, under which labor may be in- 
 duced by a reward to increase its output, 
 have nearly all been explained in detail with 
 charts showing the tendencies of labor and 
 expense cost under their operation, and it 
 is not the intent of this article to discuss 
 their merits. Time study and motion study, 
 the means of fixing the basis of reward, have 
 also been sufficiently made clear. But all 
 these methods may be said to fall short in 
 one respect not entirely unimportant 
 namely, that they usually reach only those 
 performing the direct and more simple op- 
 erations. It may, therefore, be interesting 
 to cite the experience in a plant where all 
 the employees, even the office force, were 
 paid on the incentive basis. 
 
 This plant manufactures a very simple ar- 
 ticle, but in several thousand shapes and 
 grades and in large quantities, so that it is 
 fair to say of it at the start that its product 
 
70 EXPERIENCES IN EFFICIENCY 
 
 is somewhat exceptionally susceptible of 
 being placed on the incentive basis. It em- 
 ployed some two hundred operatives, but its 
 business was growing rapidly, so that there 
 was an ample field for efficiency work. On 
 the other hand the executive had already for 
 a long time had the principal and simple 
 operations on piece work, and this involved 
 more than three-quarters of the force. These 
 operatives were earning what was consid- 
 ered fair pay, but were not increasing their 
 output, having arrived at that point, prob- 
 ably, where they thought it to their advan- 
 tage to keep the amount of work done at 
 about the level it had reached, for fear that 
 the rates might be altered. Certain import- 
 ant operations, which were ' i squeeze points ' ' 
 so to speak (since all production had to go 
 through them), were on day work, thus mak- 
 ing it difficult to get through them more than 
 a given amount of work except at the ex- 
 pense of new equipment. Now this condition 
 had not been unsatisfactory, and indeed was 
 reasonably profitable, until the increasing 
 business began to crowd the situation, de- 
 manding either increased efficiency or in- 
 creased equipment. The foremen apparently 
 had been " energized " as far as was possible, 
 
PUTTING EVERYBODY ON BONUS 71 
 
 and seemed to have " crowded " the opera- 
 tives and equipment as much as they could. 
 But more production was necessary and some 
 action had to be taken. 
 
 Now this is not an uncommon situation, 
 even in very well operated and very success- 
 ful plants. It is not improbable that it will 
 persist in many for a long time to come, sim- 
 ply because it is the easiest plan on which 
 to, operate, viz., to put the main and straight- 
 forward operations on piece work and to 
 depend on organization for further effort in 
 expansion of production. And it is not to be 
 denied that this is found a very satisfactory 
 method. But it is to be said of every manu- 
 facturing situation, no matter what and 
 where, that efficiency holds for it, now or in 
 the future, a plan or method by which it can 
 be improved, no matter how good it is 
 which is one of the cheerful, enticing, and 
 eternal virtues of efficiency, and the basis 
 for efficiency engineering as a profession. 
 
 Many experts in such a case as this, where 
 (despite a fair efficiency existing) increasing 
 demand called for increasing supply, and the 
 main equipment was not to be increased, 
 would have advised the introduction of some 
 different form of incentive as being more 
 
72 EXPERIENCES IN EFFICIENCY 
 
 encouraging to the highest attainment of ef- 
 ficiency of the operatives than straight piece 
 work, .and this might have had some good ef- 
 fect. But there were elements in this propo- 
 sition (or possibly in the mind of the execu- 
 tive) whereby it was determined to adhere 
 to the plan of piece work in practice. This 
 made it necessary, then, to turn to that part 
 of the operative force and organization not 
 working on the piece-work basis, and to de- 
 vise schemes which wpuld make the organiza- 
 tion in part and whole all work toward 
 greater production, and would so actuate the 
 installed piece-work plan to get the maxi- 
 mum results. 
 
 An analysis of the situation showed, then, 
 that its weaknesses, to be corrected by any 
 efficiency scheme, must be strengthened 
 along the following lines: the organization 
 must have a reward for any increased re- 
 sults; the operations where work was most 
 liable to be held up, or the "squeeze points," 
 must have an incentive to improve ; and some 
 guarantee must be offered to piece workers 
 to increase their output. This meant simply 
 that working from the already obtained 
 standard of production, all concerned must 
 
PUTTING EVERYBODY ON BONUS 73 
 
 obtain an increased pay for an increased out- 
 put with the same equipment. 
 
 Working then on this basis, the first part 
 "tackled" was the work where the principal 
 "squeeze point" existed the point where 
 all production began, since it had to do with 
 the cutting of the blanks. There had always 
 been some delay caused by this operation, 
 and it had never been put on piece work be- 
 cause of the great variety of the size and 
 shapes, and the quickness with which even a 
 large order could be produced. Moreover 
 some of the cutting had to be done by hand, 
 and much of it was done by the foreman, 
 and there were only five men employed at 
 the work. The management had concluded 
 that on account of the small number of op- 
 eratives and the great variety of sizes, it 
 would cost more to calculate and keep track 
 of this situation, on the piece-work basis, 
 than the gain over the day-work basis would 
 warrant; moreover it did not understand 
 how to operate the rates so that the fore- 
 man, who worked at the cutting most of his 
 time, should make more than his men, or 
 how to regulate the rates of the hand cut- 
 ting. 
 
 A little investigation, however, soon 
 
74 EXPERIENCES IN EFFICIENCY 
 
 showed that there were two other elements 
 to this operation to be taken into account- 
 namely, the prompt supply of material to be 
 cut, and the removal of the cut pieces and 
 the waste. The workers doing this work 
 were therefore included in the gang cred- 
 ited to this operation. But to put this op- 
 eration on piece work there first had to be 
 found a fair unit of production for payment. 
 An examination of the records of ship- 
 ment over a considerable period of time 
 showed that despite the great variety of 
 parts, there actually existed a somewhat reg- 
 ular proportion of the main sizes, and only 
 a reasonable variation per week in the total 
 number shipped. Naturally, then, from 
 these facts it was no great difficulty to bring 
 forth the following scheme. A rate was fixed 
 per 1,000 pieces shipped per week, regard- 
 less of size. This rate had several very 
 patent advantages to the company. It paid 
 only for pieces shipped, and not for those 
 spoiled in operation; and the pay for the 
 gang was easily obtained by one calculation 
 at the end of the week total number shipped 
 multiplied by rate. The regularity of ship- 
 ment and proportion of sizes made it a fair 
 rate as to these two points, and of course 
 
PUTTING EVERYBODY ON BONUS 75 
 
 it was lower than the day-work cost. The 
 gang among whom it was divided on a week- 
 ly percentage basis formed by hours worked, 
 on a percentage arrangement which gave 
 the foreman the larger share and the un- 
 skilled handlers the smaller, consisted of the 
 workers who brought up the raw material 
 and took away the waste, the cutting gang, 
 and those who removed the cut pieces and 
 carried them to the forming machines. They 
 worked as a harmonious unit thereafter with 
 marked results. 
 
 This same general scheme was put into 
 operation on the only other set of operatives 
 not already on piece work, namely the store- 
 keepers, labelers, and shippers. These were 
 all formed into one gang and the gang slight- 
 ly decreased, the day-rate cost being de- 
 creased in a slightly less ratio as a piece- 
 work rate. The operatives were now all on 
 piece work. 
 
 The second proposition taken up was 
 to make increased production monetarily 
 worth-while to the foremen and superintend- 
 ent, for it is not to be presumed that be- 
 cause those in responsible positions are 
 usually paid fixed salaries, they are not sus- 
 ceptible, and as reasonably so, to the lure 
 
76 EXPERIENCES IN EFFICIENCY 
 
 of the incentive as the general line of op- 
 eratives. 
 
 To accomplish this it was of course neces- 
 sary to fix standards of production per op- 
 erative for each department. But it was 
 likewise necessary to fix standards of ex- 
 pense for each department, since it was plain 
 that otherwise increases might be obtained 
 at the expense of the company. There was 
 eventually arrived at, then, for each depart- 
 ment, a standard based on a given produc- 
 tion per week per operative, and a given 
 percentage of expense to productive labor, 
 the foremen to get an increasing bonus as 
 the production went up and the expense ra- 
 tio went down. It must again be confessed 
 that the simple nature of the work made 
 this an easier task than it would be in many 
 plants, but it is not on that account less pos- 
 sible in other plants. 
 
 The superintendent received his bonus as 
 a percentage on the foremen's bonus. 
 
 The office force was paid on the increase 
 of shipments, the payment for any extra help 
 to come out of the bonus. This was a pay- 
 ing proposition for the company, because 
 the bonus paid was at a lower cost per 1,000 
 
PUTTING EVERYBODY ON BONUS 77 
 
 than the original cost, as indeed were the 
 bonuses to foremen and superintendent. 
 
 It was now arranged that all the opera- 
 tives and all the organization had an interest 
 in the increase in production through incen- 
 tive. 
 
 But the third and most important feature 
 of the plan, since it had to do with the great- 
 est number of operatives, had still to be put 
 into operation with the piece-work plan, viz., 
 to assure all that no fear of a cut need be 
 felt no matter what the earnings. This was 
 simply accomplished by a guarantee on the 
 part of the company that for a term of years 
 no change would be made in the rates. 
 
 It took some six months to get all these 
 plans into operation, simple as they were, 
 and it must be acknowledged that the 
 product of this plant in its uniformity and 
 the possibility of expansion through the 
 pressure of business made this proposition 
 rather easier of comprehension of scheme 
 and carrying out of plan than might always 
 be the case. But the unification of the in- 
 terests of all, the centralization of the good 
 of each in the good of all, and the fact that 
 every one, no matter what his position, 
 shared in the forward movement, brought 
 
78 EXPERIENCES IN EFFICIENCY 
 
 about very definite results. In a year, with 
 practically the same force, production and 
 shipments had advanced over 20 per cent, 
 and there seemed then to be greater leeway 
 for a still larger output than had existed a 
 year previously. 
 
 And though this was a simple case, and 
 worked on the old plan of piece work, it 
 wound up by being at least somewhat unique, 
 in that it included successfully the whole 
 force, organization and all, in the labor re- 
 ward. 
 
CHAPTER VII 
 
 PEODUCTION LAEGELY INCEEASED BY 
 SIMPLE EEOEGANIZATION 
 
 A GREAT struggle takes place constantly 
 *^ in nearly every American manufac- 
 turing plant for increase of production. This 
 is not the result of natural growth alone, but 
 also of an effort based on the economic argu- 
 ment that the greater the production from 
 a given plant, the lower the unit cost, and 
 of course the greater the profit. And so, in 
 a healthy factory, a friendly rivalry takes 
 place between the sales force and the fac- 
 tory force the one to keep the plant full 
 of orders, the other to increase the produc- 
 tion. 
 
 Such a rivalry shortly brings the plant to 
 that condition where, at least in some depart- 
 ments, its capabilities and facilities of pro- 
 duction seem to be taxed to the limit. It 
 becomes then a necessity either to build 
 increased facilities, or to discover some 
 
 79 
 
80 EXPERIENCES IN EFFICIENCY 
 
 method of increasing its capabilities within 
 the facilities it possesses. This latter ac- 
 complishment is frequently attained very 
 satisfactorily by an increase of efficiency. 
 
 Now, since production involves nearly all 
 the plant forces, material and human, its in- 
 crease without added facility is not always 
 simple, nor brought about by improvement 
 in one direction alone. There may be many 
 weaknesses of operation, but it has been 
 made very plain in a great many cases that 
 inefficiency (or, let us say, lack of highest 
 efficiency in the matter of production) is 
 nearly always a fault chargeable to the plant 
 organization, and not to the producers. And 
 indeed it may be set down as a general rule 
 that lack of efficiency in any plant is, in the 
 main, chargeable to the executive organiza- 
 tion rather than to the workmen, exception 
 being made only when labor organization in- 
 terferes, as it unfortunately does at times, 
 in the matter of restriction of output, oppo- 
 sition to the introduction of incentives, and 
 restriction of the number of apprentices. 
 
 An apt example of increase of production 
 through the introduction of methods of ef- 
 ficiency may be cited in the case of the water- 
 hose department of a large rubber-goods 
 
BETTERMENT BY SIMPLE REORGANIZATION 81 
 
 manufacturing plant. Some idea of the con- 
 ditions of this department before the said 
 methods were introduced, is necessary to 
 make plain how and why they were effective, 
 and it may be said that these conditions are 
 in no wise exceptional today in very many 
 manufacturing plants. 
 
 This, then, was the situation. Orders were 
 received daily from all sources, and those 
 items belonging to the water-hose depart- 
 ment were neatly typewritten on a printed 
 form, with necessary specifications, and sent 
 to the department office, where the foreman, 
 assisted by a clerk, studied them, sorted 
 them, and, according to his best judgment, 
 ordered, at the proper time from another de- 
 partment, the various materials of which 
 they were to be constructed. When these 
 were received the foreman saw to it that 
 his men made the hose in a workmanlike 
 manner. This appeared to be a simple, 
 straightforward, and indeed a usual condi- 
 tion; but it was an extremely inefficient one, 
 not a little because of the following condi- 
 tions which existed in relation to this depart- 
 ment: 
 
 First: The department upon which the 
 hose department depended for its materials 
 
82 EXPERIENCES IN EFFICIENCY 
 
 of construction, was receiving just as im- 
 portant orders from the foremen of eight 
 or ten other departments as well. These calls 
 were all independent and urgent ; but no man 
 can serve two masters, not to mention eight 
 to ten, in a busy manufacturing plant, any 
 more than he can outside of it. The result 
 was, plainly, that the water-hose department 
 got its material just when and as it wanted 
 it, only when the other departments were 
 not busy, or when it was the most violently 
 insistent. 
 
 Second : The demand for water-hose, espe- 
 cially garden hose, is seasonal, and depend- 
 ent upon the action of nature. The ship- 
 ments are much the largest in spring and 
 early summer, and of course production is 
 most demanded then. 
 
 Third: The buyer demands generally 
 some mark of his own put on the hose, which 
 can be done only in the course of manufac- 
 ture, and he will not always anticipate his 
 wants. 
 
 Fourth: Rubber goods deteriorate some- 
 what, and so cannot be manufactured and 
 piled up very long in advance. 
 
 This, then, was the state of affairs; and 
 the net result was that during the busy sea- 
 
BETTERMENT BY SIMPLE REORGANIZATION 83 
 
 son there was piled up in the foreman's of- 
 fice a sheaf of orders, the daily production 
 was less than the demand, and the com- 
 plaints, cancellations, loss of present and fu- 
 ture business (to which were added the con- 
 stant investigations and comments of the 
 management), made the lives of the foreman 
 and his clerk, during the busy season, uncom- 
 fortable, to say the least. This affected the 
 efficiency of the department still more un- 
 favorably, for highest efficiency is neither at- 
 tained nor maintained under conditions of 
 stress of mind and physical effort, but with 
 tranquil minds and an effort reasonably 
 within the elastic limits of the mental and 
 physical nature. 
 
 The problem here was to get the maximum 
 production from the facilities of the depart- 
 ment, and to take care properly of a demand 
 that was greater at one season of the year 
 than another, all of which, when properly 
 done, would, of course, forestall complaints 
 and bring increased shipments, sales, and 
 profits, not to speak of the peace of mind of 
 all concerned a rather usual factory prob- 
 lem. 
 
 Now, most efficiencies are attained by di- 
 rect operation along the lines of definite 
 
84 EXPERIENCES IN EFFICIENCY 
 
 principles. The seeker after efficiency must 
 know something of these principles, and they 
 have been much written about, if not well 
 known and practiced (for executives gen- 
 erally are not great readers of technical 
 writings). They are based on experience, 
 experiment, and a knowledge of human ca- 
 pabilities. 
 
 The principle, or principles, that deal most 
 directly with production volume, decree, in 
 plain language, that there shall be a constant 
 planning of work, an effective preparation 
 according to the plans before the work 
 starts, and a persistent following up of the 
 plans from start to finish ; and that the tasks 
 involved under such a scheme shall be di- 
 vided along certain lines of easiest and most 
 effective operation, termed, under scientific 
 management, functional organization. And, 
 indeed, it will not be difficult for any prac- 
 tical man to believe that in work of any 
 complexity or changing mass of detail, it is 
 only common sense when maximum results 
 are desired, to put one set of brains and en- 
 ergy sorting out the work as it comes in, into 
 classes, grades, lots, and planning its course 
 through the factory in accordance with the 
 previously studied facilities and capabili- 
 
BETTERMENT BY SIMPLE REORGANIZATION 85 
 
 ties; another set of brains and energy fol- 
 lowing the details of these plans; and the 
 operations themselves under still another 
 set which can concentrate thus on the all- 
 important element of actual performance 
 where, everything prepared, the very effi- 
 ciency of action must take place. For the 
 common intention and the common sense is 
 that the organization shall be planners and 
 preparers, and the workmen the producers 
 only; but, scientific management points out, 
 organization has never been properly edu- 
 cated to do its full share of the work. 
 
 After all, efficiency is largely the result of 
 educated common sense. 
 
 Now, working on this principle in the hose 
 department, a little analysis soon made it 
 evident that any man of the standard which 
 the pay would cause to be retained (for it is 
 a fact in our economic arrangement that cer- 
 tain positions can seldom pay more than 
 given rates) would be working generally just 
 within his elastic limit, if his task were only 
 to handle his gang in such a way as to get 
 out daily the standard production. And so 
 all other duties were taken from the shoul- 
 ders of the foreman except those of seeing 
 
86 EXPERIENCES IN EFFICIENCY 
 
 to it that his men did this daily allotted 
 work. 
 
 To discover what this allotted work should 
 be, or rather the standard probable daily 
 production of the department, a definite 
 study of operations was made, a careful ar- 
 rangement of benches and machinery to best 
 permit of consecutive progress of work was 
 determined, and proper incentive methods to 
 the workmen for production volume were es- 
 tablished. The department was then ready 
 to do its part, and the foreman relieved of 
 all clerical work to see that it was done as 
 fast as the orders and material were deliv- 
 ered. 
 
 But following the principle of efficiency 
 laid down in the matter of production 
 volume, the main solution in this case lay 
 with the executive organization. There was, 
 first, the question of planning to be dealt 
 with; and a planning or production depart- 
 ment, using the services of the hose-depart- 
 ment clerk, was started in the factory office. 
 It became necessary now, since the foreman 
 was relieved of this duty, for this produc- 
 tion clerk to lay out a daily stint for his de- 
 partment. To do this in any different way 
 from what it had formerly been done, it be- 
 
BETTERMENT BY SIMPLE REORGANIZATION 87 
 
 came immediately evident that, for intelli- 
 gent action, several regular bases of knowl- 
 edge in definite statistics must be laid, for 
 statistics of all kinds play a large and im- 
 portant part in good management. Action 
 should be based on facts. 
 
 The important fact for the production 
 clerk to know in planning was, not what in- 
 dividual customers ordered, but what the or- 
 ders totaled by grades. So there was made 
 up a production schedule showing just how 
 many lengths of hose of each size and grade 
 were needed to fill all orders, and this 
 schedule was corrected day by day by the ad- 
 dition of new orders and the subtraction of 
 production. Where the production was more 
 than the quantity needed to fill shipping or- 
 ders, as when stock orders were filled, the 
 balance in stock was shown on the schedule 
 in a circle, so that in case new orders came 
 in for this article the production clerk would 
 know they could be filled from the shipping 
 room an apparently small matter, but 
 really important, since it made the knowl- 
 edge complete. 
 
 With this schedule in hand, the mind of the 
 production clerk, instead of being agitated 
 by the details of a great number of individ- 
 
88 EXPERIENCES IN EFFICIENCY 
 
 ual orders, now found itself suddenly rising 
 above the situation. On one sheet could be 
 seen the total demands on the department, 
 and with the new knowledge of the standard 
 probable daily production in mind, it was 
 very readily calculated how many days ' work 
 there was ahead, and the day's work was 
 laid out with the whole situation in view, 
 the details of special markings being sep- 
 arately ordered. 
 
 Now the great step had been taken toward 
 actual efficiency, when, through this schedule, 
 a mental ascent was made so that the situa- 
 tion could be viewed as a whole, not so much 
 in the handling of the daily situation as in 
 looking to the future, since in factory life, as 
 elsewhere, the preparation for the future 
 makes the present more effective. For the 
 dusty tomes secreting the orders and ship- 
 ments of the previous year were hauled out, 
 and their conditions likewise scheduled as a 
 guide for the changing conditions and the 
 coming busy season. 
 
 In a simple way, then, there had been sub- 
 stituted a certain knowledge instead of a 
 despairing wave toward a mass of orders, in 
 answer to the all-important practical ques- 
 tion of planning production, "What has 
 
BETTERMENT BY SIMPLE REORGANIZATION 89 
 
 this department got ahead of it T ' With this 
 knowledge the magic touch of efficiency was 
 made. 
 
 So far, then, two important points had 
 been covered the foreman was relieved and 
 his department studied and arranged to get 
 out the standard daily production, and the 
 production department was established and 
 a proper basis for planning the daily work 
 and the future established, and the planning 
 begun. 
 
 But since the hose department could get 
 out its standard production quota only when 
 it was supplied promptly with its material 
 of construction, the trick was not yet turned. 
 It became necessary that the production de- 
 partment, when it laid out a daily stint for 
 the hose department, should analyze this 
 stint into its elements of construction, and 
 plan its progress through the other depart- 
 ments several days ahead, so that it would 
 arrive on time. 
 
 Of course, it must be plain, then, that such 
 a plan, when persistently put through, would 
 simply operate to the advantage of the hose 
 department as against all other departments, 
 and the corollary in good management was 
 that all other departments soon came under 
 
90 EXPERIENCES IN EFFICIENCY 
 
 the same scheme, and gained their schedules 
 and their place in the production department 
 work. 
 
 This was accomplished in much the same 
 way in the other departments, consistently 
 with their peculiarities of manufacture, as it 
 was in the hose department. The foremen 
 were relieved of all responsibility of laying 
 out a plan of work or order fulfillment, but 
 were simply expected to see that their men 
 accomplished the work planned daily for 
 them by the production department. The 
 clerks formerly used by the foremen, when 
 they had any, were put into the production 
 department. Each department was studied 
 as to its physical arrangement and produc- 
 tion possibilities, and desirable changes 
 made. 
 
 Thus there was established a central pro- 
 duction or planning department with no 
 more total clerical labor than was formerly 
 employed, (since in some cases several 
 smaller departments could be handled by one 
 clerk), and to this department came daily 
 all orders. From it issued daily to each de- 
 partment the orders for the work of the fol- 
 lowing day, and to the preparation depart- 
 ments went also orders for material looking 
 
BETTERMENT BY SIMPLE REORGANIZATION 91 
 
 forward several days to the work of the fin- 
 ishing departments. 
 
 Thus instead of "each department for it- 
 self, " their interests were tied together and 
 made to fit in with each other, which of 
 course made for harmony and increased pro- 
 duction for all. 
 
 A good method once firmly introduced into 
 a manufacturing plant travels through it 
 faster than a poor one. 
 
 Once the planning was under way, the next 
 essential (and a very difficult one to get un- 
 der way at first) was to make sure that the 
 plans were carried out. In this particular 
 case this work was given an assistant super- 
 intendent, and it may be taken for granted 
 that no easy task was his. He was asked to 
 institute a set plan in place of the long-used, 
 independent judgment of foremen who did 
 not even desire at first to be convinced that 
 a production clerk could do as well as they 
 in planning what should be done in their de- 
 partments. He was asked to institute new 
 ways with workmen who had formed habits 
 of their own in their operations. He was 
 asked to meet all the thousand-and-one dif- 
 ficulties, natural and unnatural, that sprang 
 up to thwart the program. Efficiency de- 
 
92 EXPERIENCES IN EFFICIENCY 
 
 mands a state of mind in predisposition 
 toward it, not in opposition to it. 
 
 But gradually the situation righted itself. 
 The production clerks planned the plant ca- 
 pabilities; i.e., they learned what combina- 
 tions of materials and articles could best be 
 put through. The foremen learned that the 
 new ways produced more goods with less la- 
 bor to them, and praise instead of blame be- 
 came their share of the new order of things. 
 The workmen learned that to obey orders 
 strictly meant to make higher wages through 
 greater production. 
 
 Efficiency had arrived. The department 
 standard production fixed, the foreman re- 
 lieved of all duties except to operate through 
 his gang, the orders scheduled, and a view 
 given of the total necessities of the present 
 and future with the schedule of the previous 
 year as a guide, the daily work planned back 
 to the origin of raw material, and intelligent 
 effort made to see that the plans were car- 
 ried out the hose department's capabilities 
 with its old facilities were found to be very 
 materially larger than were suspected. Its 
 production rapidly increased. The wages of 
 the workmen increased with the production. 
 Customers were satisfied. Orders flowed in 
 
BETTERMENT BY SIMPLE REORGANIZATION 93 
 
 more freely. Work became a pleasure. Ordi- 
 nary intelligent vigilance, always an abso- 
 lute essential in the life of efficiency, alone 
 became the necessary element to the continu- 
 ation of a vastly improved situation in pro- 
 duction increase, lower cost, and greater 
 profit. So production volume was really 
 merely a matter of organization. 
 
CHAPTER VIII 
 REDUCING THE FACTORY EXPENSE 
 
 TN considering modern theories and prac- 
 ^ tices of management one fact which has 
 always given pause to the average executive, 
 and has been a decided deterrent to the more 
 rapid introduction of methods of efficiency, 
 is that they appear to increase that element 
 so difficult to control in cost expense. In- 
 deed, the more prominent theories teach the 
 necessity, generally, of deliberately increas- 
 ing certain items of expense, of materially 
 enlarging, for example, the ratio of non-pro- 
 ducers to producers. 
 
 The logic of the efficiency experts is plain, 
 of course. They argue that it is only the 
 part of wisdom to add sufficient expense to 
 gather statistical facts as a basis of action, 
 since these facts will bring greater econo- 
 mies through wise guidance; that it is only 
 economic common-sense to create expense in 
 organization to plan for, to prepare the work 
 
 94 
 
REDUCING FACTORY EXPENSE 95 
 
 for, and to train and assist, operatives, since 
 thereby greater efficiency may be attained, 
 bringing about total cost reduction ; and that 
 increased expense, in physical arrangement 
 and preparation, finds its ample offset in in- 
 creased production. And there can be no 
 doubt as to the truth of these theories if their 
 introduction is made along practical lines. 
 
 But on the other hand, the executive has 
 very naturally certain definite points of view 
 gained through his experience, and urged by 
 the burden of his responsibilities. He sees 
 the increase of expense constantly encroach- 
 ing on his profits. He is handling his labor 
 and material within his best knowledge and 
 ability, and ordinary human nature does not 
 readily permit him to believe it can be much 
 better handled in his particular case. And 
 a somewhat natural inertia of the busy ex- 
 ecutive in the matter of radical changes is 
 not easily overcome, when the force used in- 
 volves an increase of that bugaboo to prog- 
 ress expense. 
 
 For it is true that despite all struggles to 
 the contrary, expense, both in its total and 
 in its ratio in the cost of the production unit, 
 has a tendency to increase. The experts ad- 
 mit this, and advise therefore that the ex- 
 
96 EXPERIENCES IN EFFICIENCY 
 
 ecutive swim with the tide, and increase his 
 expense intelligently and scientifically, in or- 
 der to save greater amounts through the 
 other elements of cost labor and material; 
 and the wise executive may certainly lend 
 an attentive ear to be shown whether this is 
 probable. 
 
 But after all, by the very nature of his re- 
 sponsibility, the mind of every executive will 
 hark back to the problem of reducing ex- 
 pense, and perhaps therefore some may find 
 an interest in a successful experiment, 
 wherein both the total amount of expense 
 and its percentage relation to production 
 unit cost were reduced without detriment to 
 general efficiency. 
 
 This experiment was conducted in a large 
 factory employing about 1,200 hands, and 
 manufacturing large quantities and varieties 
 of a small mechanism. This mechanism con- 
 sisted of some one-hundred parts iron, 
 steel, brass, and wood. The plant was di- 
 vided into about thirty departments, produc- 
 tive (preparatory and assembling), and non- 
 productive, and the volume of expense, as 
 separate from labor and material, ran un- 
 comfortably well up into six figures per year. 
 
 This plant had grown from a small one to 
 
REDUCING FACTORY EXPENSE 97 
 
 a large one with many years of success ; but 
 a few years of falling off in sales when it had 
 reached its zenith, while in no sense endan- 
 gering its existence, yet made its bulk seem 
 a little unwieldy. And at the psychological 
 moment, there entered the combination of a 
 new element into the management, a determi- 
 nation to revamp the methods of the plant, 
 and an expert. 
 
 Of course this forecast eventually the do- 
 ing of many things, but only one of these 
 the attempt at expense reduction is of pres- 
 ent interest. And it is by no means unusual 
 or strange that it takes some such event as 
 occurred at this plant, to make many con- 
 cerns conscientiously study their expenses. 
 Yet efficiency teaches study and comparison 
 of expense as a constant practice. 
 
 Now in the consideration of any applica- 
 tion of efficiency to a given situation, it is 
 always wise to study and analyze the existing 
 conditions, to consider the method and reason 
 of its existence, and the nature and value of 
 its application. 
 
 This is especially so of expense. For ex- 
 pense is not directly a producer. It is very 
 plain that a given amount of material, vary- 
 ing as the waste per cent, is essential in the 
 
98 EXPERIENCES IN EFFICIENCY 
 
 manufacture of a given article. Labor of 
 course must be used to shape it. These may 
 not vary much in given countries and under 
 given conditions. They have a direct appli- 
 cation, generally the straightforward opera- 
 tion of one mind working from a plan, or 
 according to a general practice, and espe- 
 cially in staple articles, are readily suscepti- 
 ble to standardization. 
 
 But expense has only an indirect, even if 
 important, bearing on the manufactured ar- 
 ticle. In theory it is the tool of the execu- 
 tive, with which he operates his labor and 
 material to produce the salable article, and 
 it varies materially with the ability and plan 
 of operation of each executive. It is the 
 channel through which one man, or group of 
 men, put into operation their plans and or- 
 ders, controlling large production. Its sole 
 reason of existence is to forward, improve, 
 and quicken the work of the producer. It 
 furnishes machinery, power to operate it, 
 and keeps it in repair. It purchases mate- 
 rial, cares for it, transports it. It obtains 
 orders, transmits them, makes records of 
 their cost and progress, and makes shipment. 
 It supplies light, heat, and comfort. It fur- 
 nishes a guiding organization to command, 
 
REDUCING FACTORY EXPENSE 99 
 
 instruct, and reward the acts of labor. It 
 creates and maintains channels of exchange. 
 It starts, guides, assists, and disposes of 
 production. And from this enumeration it 
 is not difficult to imagine what wide varia- 
 tions varying abilities and conditions bring 
 about in expense. 
 
 In primitive industry almost negligible, it 
 has grown with industrial civilization and 
 concentration of production to be a tremen- 
 dous factor, being frequently one-half of the 
 total cost. 
 
 Its theory is essentially beneficent. Every 
 original expense and every addition, in the- 
 ory is presumed to be, and should be, de- 
 signed to make labor efficiency increase in 
 larger return. And of course expense is 
 natural and necessary under our industrial 
 regime. 
 
 But in practice it has become a bugabco. 
 It is called a " burden", and many execu- 
 tives sweat under it; or it is spoken of as 
 " overhead ", as if it might occasionally fall 
 and bring down the structure, as indeed it 
 sometimes does. The method of its upbuild- 
 ing is varied and occasional, and plans of 
 actual organization and operation vary 
 
100 EXPERIENCES IN EFFICIENCY 
 
 very considerably. Standardization has not 
 found in its practice any large use. 
 
 Too frequently an addition to it is made, 
 especially in larger plants, on the foreman's 
 "I need" or "if I had", without sufficient 
 consideration of the truth of the position 
 taken. Too often, indeed, the foremen, or 
 even workmen, are permitted to undertake 
 additions to the expense account without 
 consultation with higher authority. The 
 fact, in practice, therefore is that frequently 
 the structure of expense is the result of the 
 plans of many architects incapable by experi- 
 ence or unripe of judgment. The old prov- 
 erb "Too many cooks spoil the broth" is 
 very pat to the expense accounts of many 
 plants. Or it frequently happens that cer- 
 tain expenses, built up properly to meet 
 given conditions, as of rush or increased 
 business, are not altered when these condi- 
 tions change. 
 
 Of course it is also true that much expense 
 is contracted with the idea of preparing for 
 an expansion of business or an economy 
 which does not eventuate. This is frequently 
 a necessary "gamble", in which even very 
 experienced and successful business men 
 lose, and about the only comment that can be 
 
REDUCING FACTORY EXPENSE 101 
 
 made as to it, is that a recession from it 
 should be made as soon as failure of expan- 
 sion or economy seems certain. 
 
 With this understanding in mind, it is plain 
 that there are two important elements in 
 expense consideration (1), the theory of its 
 plan of operation; and (2), study and watch- 
 fulness in the economic practice and carry- 
 ing out of that plan. 
 
 In the case in question, then, this realiza- 
 tion of the theoretical and practical nature 
 of expense was glimpsed, and it was deter- 
 mined that possibilities of improvement lay 
 in the second direction, because it became 
 evident that the expense of this plant had 
 not been a miscellaneous growth, and had 
 not received the close study it deserved. 
 The plan in use (namely, that of a sequence 
 of executives down to the foreman, or the 
 military plan usually adopted in manufac- 
 turing plants) was not seriously altered, ex- 
 cept in the addition of a cost department, an 
 inspection force, and a production depart- 
 ment responsible for laying out, balancing, 
 and following through production. This is 
 not at all to say that the plan used is the 
 best one, for this is only a story of how a 
 given expense was reduced. And of course 
 
EXPERIENCES IN EFFICIENCY 
 
 it is not to be understood that this case, of- 
 fered as it is as a typical case of what can be 
 done in many plants, is intended to contro- 
 vert the theories of the experts that it pays 
 to increase certain expenses. For even 
 while expense as a whole was being reduced 
 here, certain organization expenses were in- 
 creased. 
 
 But one does not pull down a structure 
 without studying its detail of construction, 
 especially if in its place is to be reared an- 
 other, and all the while "business is still go- 
 ing on at the old stand during alterations ". 
 It was necessary first, then, to make a study 
 of the expense, and its relation to the run- 
 ning production. 
 
 This brought into existence the expense 
 analysis. This expense analysis was the 
 necessary concomitant of the cost system, 
 which was first introduced. Its method and 
 plan (see Chapter 6, Cost Eeports for Execu- 
 tives * ) were devised to give a comparative 
 monthly detailed picture of the various 
 items of expense in each department of the 
 plant, productive and non-productive, so that 
 each item should tell its story without fur- 
 
 * Cost Reports for Executives. By Benj. A. Franklin. 
 The Engineering Magazine Co., New York, 1913. 
 
REDUCING FACTORY EXPENSE 103 
 
 ther analysis, so that all items pertaining to 
 the department, direct and indirect, should 
 be portrayed, and so that finally the relation 
 of the total expense to the productive hours 
 of the department, i. e., the expense cost per 
 productive hour, should be shown. 
 
 In form (see Forms 13 to 19, Cost Eeports 
 for Executives *) it was for each department 
 a recital month after month, in parallel col- 
 umns, of the details of the expenses of the 
 department, set down one below the other, 
 but in related groups, the figures for the 
 same item appearing always in the same 
 horizontal line. In addition to these parallel 
 detailed columns of monthly expense, there 
 were likewise interplaced each month col- 
 umns showing the totals of each item to date 
 from a given date, and a monthly and period 
 indicative figure, showing at a glance the 
 running cost per hour of expense for the 
 month and period. 
 
 Now it may take a little imagination to 
 see this expense analysis, but once seen its 
 mission and value are plain. For the in- 
 dicative hour-cost figure shows, monthly, 
 whether the expense cost is increasing or de- 
 
 * Cost Eeports for Executives. By Benj. A. Franklin. 
 The Engineering Magazine Co., New York, 1913. 
 
104 EXPERIENCES IN EFFICIENCY 
 
 creasing, whether an effort toward economy 
 in expense is being effective or not ; and any 
 and all items, such as the use of supplies, 
 non-productive labor under different head- 
 ings, repairs, and other details, may be fol- 
 lowed and compared month after month, 
 their value in the progress of production 
 studied, their relation to production under- 
 stood, and the result of any attempt at their 
 reduction observed immediately. 
 
 And it was not difficult to see in the con- 
 crete; for with thirty departments, beside 
 some divisions of them, and odd items, such 
 as shipping, etc., this analysis filled a loose- 
 leaf book of some forty pages or so, and took 
 about one-fourth of the time of a clerk each 
 month to make it up from the books. 
 
 Of course it will be understood that when 
 expense is dealt with here, it covers every 
 expenditure made by the plant, with the ex- 
 ception of the material which went into the 
 salable article and the labor which actually 
 shaped it into its salable form. Expense 
 then included supplies of all kinds, tools, re- 
 pairs, power-cost, non-productive labor of 
 every nature, inspection, office force, selling 
 force, and all miscellaneous and general items 
 
REDUCING FACTORY EXPENSE 105 
 
 not properly specifiable under the heads of 
 material and labor as described. 
 
 The new executive, eager then to econo- 
 mize, and the expense analysis in operation 
 long enough (two or three months) to be 
 telling a fair and average story of expense 
 in its relation to the progress of production, 
 the study of reduction was undertaken vig- 
 orously. 
 
 There has been so much exploitation of 
 efficiency in a somewhat sensational way 
 from the days of the fight before the Inter- 
 state Commerce Commission against higher 
 freight rates, and possibly even before, that 
 the everyday reader is likely to get the idea 
 that it is some sort of secret subtle ability 
 or power possessed by those who practice 
 as experts, by which, while a gaping execu- 
 tive force looks on, shop conditions are 
 transformed to produce unheard-of results, 
 as if the experts were the medicine men of 
 the industrial tribes. Of course scientific 
 management, efficiency, call the movement 
 what you will, is purely a set of principles 
 and rules, and of methods based on them, 
 which, when applied to particular cases by 
 experienced men, with common sense and 
 persevering co-operation of those concerned, 
 
106 EXPERIENCES IN EFFICIENCY 
 
 are capable of rendering marked results. 
 And these results, when strongly contrasted 
 with previous conditions, with the machinery 
 of alteration lightly touched upon, and the 
 operator well brought out as the deus ex 
 machina, certainly present attractive fea- 
 tures. The efficiency expert is doing a great 
 work. He is doing it because he is operating 
 on the known principles and methods, guided 
 by his wide experiences in them. But every- 
 where in manufacturing plants, without the 
 conscious knowledge of these principles, and 
 before they were enunciated or bruited 
 abroad, common-sensed executives were and 
 are still making changes which bring marked 
 beneficial results. It was through this work 
 that the principles and methods of efficiency 
 were developed and brought to the front; 
 and more and more, the executive is learning 
 and using the principles of efficiency him- 
 self, for they were enunciated for his use 
 and guidance. 
 
 It ought to be enough for efficiency, then, 
 as a modern movement, if it be said of it 
 that it has its place with the many other ad- 
 vanced movements, scientific and philosophi- 
 cal yet practical, of the last several decades. 
 
 Certainly in this case of expense, reduc- 
 
REDUCING FACTORY EXPENSE 107 
 
 tion there was nothing sensational. It was 
 brought about through hard work, by con- 
 stant consultations of three or four men who 
 were frequently gathered together (perhaps 
 not always prayerfully) with the expense an- 
 alysis in hand, and who dissected it, dis- 
 cussed item after item of expense in each 
 department, studied the needs and necessi- 
 ties, and decided upon definite changes or 
 experiments, after further discussing them 
 frankly with the foremen of the departments. 
 And this method must essentially underlie 
 any economic consideration of expense from 
 the point of reduction. While many definite 
 schemes, and logical ones, are offered for in- 
 creasing expense, no one has yet come for- 
 ward with any systematic plan (other than 
 that offered here) for reducing it, despite 
 the eagerness with which the business world 
 awaits it. Such plans are still in the class 
 with the non-refillable bottle, the non-pneu- 
 matic tube, and (shall we say!) perpetual 
 motion. 
 
 One of the first items demanding economy 
 application in the given case was the use of 
 general supplies. Supplies in every plant 
 seem to offer a great opportunity for waste. 
 There appears to be no definite relation be- 
 
108 EXPERIENCES IN EFFICIENCY 
 
 tween their cost and production cost in the 
 minds of operatives generally; and it is not 
 uncommon, when electric bulbs, for example, 
 are broken (and the new kinds are expen- 
 sive), or oil is wasted (and its price is rising 
 constantly), to hear the operative say jok- 
 ingly, "What's the diff! the company's 
 rich." Yet the same operative worries when 
 he spoils a small part of his work because he 
 feels a direct responsibility to check this 
 condition. 
 
 A supply store-room was established, some 
 study was given to fix the necessity and 
 amount of supplies to be used. They were 
 issued only on order of the foremen, charged 
 to his department in the expense analysis, 
 and the total detailed cost, with comments 
 thereon from the management, given the 
 foremen monthly. This had a decided eco- 
 nomical effect. The foremen realized their 
 responsibility immediately, and they real- 
 ized that the management had a measure of 
 it. They began to see to it that their men 
 realized that supplies cost money, for the 
 figures shown them monthly gave them a 
 definite measure thereof. It became im- 
 pressed upon their men through them, that 
 economy of supplies is due to watchfulness 
 
REDUCING FACTORY EXPENSE 109 
 
 and care, and that this was as important as 
 any other economy. Morale was introduced 
 a tremendous aid to efficiency. 
 
 A second important element of expense, 
 taken into consideration promptly, was re- 
 pairs. The cost of repairs is probably the 
 most difficult of all expense elements to con- 
 trol. It possesses no regularity to be stand- 
 ardized. Its necessity is not offset by any 
 feeling of gain made by satisfying it. It is 
 done merely to prevent loss, for the necessity 
 is generally considered as due to careless- 
 ness. There is too seldom in operation in 
 most plants any systematic inspection and 
 oiling of machinery. The operatives of ma- 
 chinery too seldom understand the mechan- 
 ism, or speed, of the machines they operate. 
 The machines therefore are liable to get out 
 of order quickly. Each repair is usually a 
 different proposition from previous ones. 
 The question of how long a repair ought to 
 take in the making, has never been given any 
 study as compared with direct-labor opera- 
 tions. Many repairs are rush jobs to per- 
 mit of restarting production, and are often 
 made without regard to best permanency. 
 A little study will frequently show that more 
 repair expense is spent on some machinery 
 
110 EXPERIENCES IN EFFICIENCY 
 
 in a year than replacement would cost, but 
 of course in many different amounts. Then 
 there are days when the repair gang has 
 more work than it can accomplish, and other 
 days when there does not seem to be any 
 necessity to hurry. There is likewise over- 
 time and Sunday work to be put in, unfitting 
 the men for the next day's work. Altogether, 
 then, repair expense is difficult to control be- 
 cause of its irregularity, and the impossibil- 
 ity of obtaining standards. 
 
 Now certainly this is a terrible score 
 against repair expense, but it exhibits the 
 necessity of a good, hustling, common-sense 
 foreman and the value of care of plant and 
 machinery as a means of avoiding this ex- 
 pense. 
 
 To assist in controlling and reducing this 
 cost, a repair schedule was first made, which 
 consisted merely of a large sheet, or sheets, 
 with all orders and description listed. This 
 list permitted a quick and complete view of 
 repairs and changes. All repairs or altera- 
 tions were done only on order signed by the 
 superintendent. Eush repairs were of course 
 put through at once, but in case of all other 
 repairs the schedule was considered at an 
 every-other-day meeting by the foreman of 
 
REDUCING FACTORY EXPENSE 111 
 
 the repair department and the superintend- 
 ent, and the work was laid out with instruc- 
 tion cards for the repair men for at least 
 two days ahead. Each instruction card, be- 
 ing also a time note, had a standard of time 
 set (very frequently by guesswork) as to 
 how long the repair should take, and a bonus 
 for the repair man who bettered the stand- 
 ard. Always two full days' work was 
 planned for each man, and instruction cards 
 for this period issued to him. By this means, 
 then, the repair man got the idea that he was 
 "full of work", and had some standards to 
 go by, even if they were not scientific, and in 
 the work thus laid out, preparation was 
 made so that delay was avoided in repair. 
 
 Perhaps a digression will be pardoned 
 here for a slight consideration of this form 
 of "guess" incentive method. There are 
 frequently forms of work, like repairs, 
 where each job is different from the next. 
 It might seem that such are impossible of 
 impetus through incentive, because of lack 
 of standard units. But these jobs do contain 
 certain standards, not readily set down on 
 paper, but rather sensed by the practical 
 man who is familiar with them. So it is not 
 a scientific fact, but it is a practical fact, 
 
112 EXPERIENCES IN" EFFICIENCY 
 
 that in the hands of the practical man a 
 "guessed at" rate, really obtained through 
 the mental action of a mind with good judg- 
 ment and practical experience, hits very 
 close to the mark on the average, and has the 
 effect of accomplishing economy by keeping 
 the operative thinking and hustling. 
 
 This constant going over the schedule for 
 repair orders by the superintendent and 
 foreman of repairs, with occasional confer- 
 ences with the room foremen, gave a famil- 
 iarity with the situation not before had, and 
 led to criticisms of the care of machinery, 
 the necessity and method of repair, the value 
 of certain repair men, which brought about 
 changes and economies unexpected. In fact, 
 the question of repairs had constant and de- 
 tailed study, instead of as formerly and 
 usually, the attempt of the foreman of re- 
 pairs to carry out, on his own best judgment, 
 any and all orders sent him. And in this 
 solution is really involved a large fact, which 
 should be a definitely understood principle 
 of efficiency namely, that in all manufac- 
 turing there are constantly arising situa- 
 tions and necessities for action which cannot 
 usually be most satisfactorily met by the 
 judgment of one man, but require for best 
 
REDUCING FACTORY EXPENSE 113 
 
 solution discussion by several, involving co- 
 operation. This principle indeed underlies 
 the whole question of expense reduction. 
 
 The expense analysis showed each month 
 the cost of repairs in each department, and 
 each month these figures were given to the 
 room foreman. It is not hard to believe, 
 then, that this method eventually led to a 
 reduction in repair cost. But this economy 
 was obtained only by hard work and study. 
 
 A third element of expense study was non- 
 productive or indirect labor. Now direct 
 labor is given intense study, but what execu- 
 tive pays the same attention to his indirect 
 labor, to the elevator man, the sweeper, the 
 inspector, the shipper, the trucker, etc.? 
 Yet this class of labor is expensive, and taken 
 throughout a plant of any size amounts in 
 volume of wages to a considerable sum. 
 When it is considered that in most plants 
 from 10 to 30 per cent of the employees are 
 non-producers, it is plain that there is a large 
 field here for efficiency work. And it is not 
 too much to say that at given periods of the 
 year the capable executive can go through 
 his plant and make decided economies in cut- 
 ting out non-producers, who, by changing 
 conditions, or occasional and ill considered 
 
114 EXPERIENCES IX EFFICIENCY 
 
 judgment in addition, are "making the work 
 last the day". 
 
 It ought to be no part of any economic 
 system to blame the operative, especially the 
 unskilled one, for " soldiering ", loafing, or 
 "making the work last the day", for after 
 all the hold and influence of the ordinary and 
 unskilled worker on his place in any particu- 
 lar industry or business is so slight, and his 
 strong selfish interest in life and the support 
 of his family so great, that if he willingly 
 co-operates to do just what he is told to do, 
 he is hardly to be blamed if he realizes it is 
 to his interest to appear to be busy during 
 the time he is paid, rather than to work him- 
 self or his companion out of a job. This of 
 course may not be the moral view of the 
 situation. It is purely the actual and practi- 
 cal one, and any system should simply be 
 based on it as a fact. While it is true that 
 the exceptional, ambitious, and capable man 
 shows his superiority to this view, and con- 
 sequently generally rises out of his position 
 by rising above it and the methods it entails, 
 nevertheless it should be the part of the ex- 
 ecutive, and of any economic system he em- 
 ploys, to meet the case as it stands. 
 
 In this case the work of each of these em- 
 
REDUCING FACTORY EXPENSE 115 
 
 ployees was studied their busy days, their 
 busy times of each day, and the amount of 
 work they did per day. This really in- 
 volved the larger questions of the move- 
 ments of materials, and the relations between 
 the departments. The net result was satis- 
 factory from an economical point of view. 
 For it soon became plain that while no one 
 of these employees could fairly be called a 
 loafer, yet because of a lack of capable ar- 
 rangement or co-ordination of their tasks, 
 and particularly because they lacked an in- 
 centive and the same attention and constant 
 "hustle" given their producing shopmates, 
 there existed large possibilities of greater 
 efficiency among them. These possibilities 
 were brought out in various ways. In some 
 cases certain tasks were rearranged to fit in 
 with others, and a time schedule arranged. 
 In many cases two men were given the for- 
 mer tasks of three, with a bonus if they ac- 
 complished them. In some cases it was 
 found possible to introduce straight piece- 
 work, as in sweeping and shipping, with a 
 reduction in the number in the gang, and in- 
 creased pay to those left. But altogether a 
 tidy sum was saved in the non-productive 
 labor. 
 
116 EXPERIENCES IN EFFICIENCY 
 
 In the matter of tools, a systematization 
 along the lines (now fairly well known) of 
 their care and issue, also brought a decided 
 saving. The power cost did not prove sus- 
 ceptible of reduction, and the office and ad- 
 ministration expense was actually increased 
 by some three or four clerks because of the 
 introduction of the cost system and statis- 
 tics. But items of general expense, which 
 included all the odds and ends other than 
 those mentioned which could not be charged 
 to department expense, were likewise stud- 
 ied, and certain extravagances in stationery, 
 postage, etc., were discovered and remedied. 
 
 In a properly divided expense, general ex- 
 pense is a sort of catch-all, which shows, in 
 addition to the administration expense, all 
 those little and sometimes large items, which 
 are the result of the executive's ventures 
 into policies which have not succeeded, his 
 co-operation with other concerns in the car- 
 rying forward of plans for the general good, 
 advice which he seeks, legal or otherwise, 
 and those miscellaneous expenses due to the 
 office use of supplies. It will always stand 
 study and consideration, for it frequently 
 tells a very interesting story, and despite 
 the superior intelligence of those who are re- 
 
REDUCING FACTORY EXPENSE 117 
 
 sponsible for it, shows, no less than the de- 
 partment expense, a strong tendency (and 
 indeed a natural one on account of the salary 
 increases) to increase in bulk. While in 
 theory increase in volume of production of 
 the ordinarily successful plant is supposed 
 to keep down its ratio to the production unit, 
 only constant care makes the practice con- 
 form to the theory. 
 
 Thus the main elements of expense, sup- 
 plies, repairs, non-productive labor, power, 
 tools, general expense, were each taken up, 
 studied, discussed, and altered where possi- 
 ble. Eight through the whole expense an- 
 alysis each expense item ran the gamut of 
 criticism, suggestion, experiment, and cut 
 and try. In many cases the economies, and 
 the methods employed, might almost make a 
 story in themselves, for they were not al- 
 ways brought about readily. 
 
 In many cases, once the expenses had been 
 reduced, the fixed standard or budget plan 
 was used to keep them down. This plan 
 consists merely in fixing a monthly sum be- 
 yond which the department is not allowed to 
 go in its expenses, and in certain cases it is 
 very valuable in its effect. In some cases 
 where judgment was particularly to be exer- 
 
118 EXPERIENCES IN EFFICIENCY 
 
 cised, the foremen were paid bonuses for re- 
 ducing expense or keeping it to a standard. 
 It took some six months of time to accom- 
 plish a fairly satisfactory result; but it was 
 well worth while, for the relation of expense 
 to the productive hour was actually reduced 
 by some 20 per cent, which meant a saving 
 of many thousands of dollars. And it was 
 well worth while for several other reasons. 
 For in the first place, it gave the manage- 
 ment a real knowledge of the factory opera- 
 tion, which it had thought it possessed, but 
 did not. It had builded the expense struc- 
 ture bit by bit (an entirely common and 
 somewhat necessary method in growing 
 plants), and it saw the whole now for the 
 first time in many years. Each department 
 had been taken off its peg, looked over and 
 cleaned, just as a jeweler, with his magnify- 
 ing lens in his eye, might take down from 
 his board watch after watch, clean and re- 
 pair it, and hang it up to go on ticking accu- 
 rately and merrily. And the clean-up gave 
 the management a new grasp of the situa- 
 tion, and new courage and energy. It was 
 made very plain to them, as a single in- 
 stance, for example, that it was just as im- 
 portant to them to weigh in advance the ad- 
 
REDUCING FACTORY EXPENSE 119 
 
 dition of one non-producer at a cost of $500 
 a year as it would be to investigate the wis- 
 dom of purchasing an $8,000 machine, the 
 interest on which investment would approxi- 
 mate $500. It became clear to them that ex- 
 pense in practice (no matter what the 
 theory) is a good deal like a fruit tree a 
 necessary thing if the fruit of good profits 
 is to grow, but needing constant and careful 
 pruning, sometimes grafting; and the older 
 it gets, and the larger the plant, the more 
 careful attention and pruning is needed. 
 
 This study brought likewise and necessar- 
 ily economies and changes in the matter of 
 material and labor ; for so closely is expense 
 allied to these elements, that the study of 
 one leads essentially into consideration of the 
 effect on the others ; and always it was neces- 
 sary to make sure that changes in expense 
 formation brought no reduction in the effi- 
 ciency of the others. And of course such 
 studies suggested improvements. 
 
 Furthermore, in the second place, this 
 work led the management into closer touch 
 and accord with the factory organization. 
 The latter gained new ideas as to their re- 
 sponsibilities. They realized that there was 
 something to their tasks besides mere vol- 
 
120 EXPERIENCES IN EFFICIENCY 
 
 ume and quality of production, important as 
 they were. They gained (those who remained 
 as capable ones) a larger idea of the watch- 
 fulness and intelligence of the management 
 under which they were serving. Morale ar- 
 rived. 
 
 So in this case large savings in expense, 
 made by study, by discussion based on the 
 expense analysis as showing true expense 
 relations, and by co-operation of the whole 
 organization, were accomplished. And after 
 all, how else can expense as an element be 
 controlled! 
 
CHAPTER IX 
 BUILDING A COST SYSTEM 
 
 THAT executive would be a bold one 
 (and perhaps some might use another 
 adjective) who would today deny to his 
 plant an advantage in the possession of a 
 cost system. Not that this statement is to 
 be construed to mean that every manufac- 
 turing plant has a right and effective cost 
 system, nor that there is any agreement as 
 to how far it is necessary and valuable to 
 carry a cost system. It is indeed the com- 
 mon complaint of those executives who have 
 had modern cost systems installed that most 
 of their competitors appear to be without 
 any, and in a measure they are very close to 
 the truth. Most plants, however, have some 
 method of figuring their costs, although the 
 occasional boast one hears that a certain 
 plant's system is "all its own" has a Gil- 
 bertian flavor. 
 
 And it may further be taken for true that 
 
 121 
 
122 EXPERIENCES IN EFFICIENCY 
 
 most plants have cost systems that may be 
 termed " occasional" or "approximate", 
 not continuous and complete ; for that plant 
 which has developed the cost system to its 
 farthest value is even today still somewhat 
 rare. Indeed, it takes some courage of ex- 
 penditure and constant patience to develop 
 a thorough system, and the remark of one 
 manager, in explaining his lack, that you 
 " can't make a bookkeeper out of a dago", 
 is both a criterion of the labor market in 
 some localities, and of one of the difficulties 
 of the case, though by no means insuperable. 
 
 Now no long arguments are to be ad- 
 vanced here as to the value of the cost sys- 
 tem in every business. No intelligent man- 
 ager is going to deny the value to him of a 
 knowledge of the facts of his business, if he 
 is satisfied that they are facts, even if he 
 does not possess them. The burning ques- 
 tion is how far to carry the cost system in its 
 completeness. 
 
 It is, however, true that the complete facts 
 of the business can be shown in any way 
 desirable; that complete and practically ac- 
 curate records of the use of material, labor, 
 and expense can be gathered; that it can be 
 done with no great expenditure of clerical 
 
BUILDING THE COST SYSTEM 123 
 
 labor ; and that it is very profitable to do so. 
 But those who have no theoretical doubt of 
 this, still find many difficulties in a practical 
 attainment, and perhaps the story of the in- 
 troduction, development, and use of a cost 
 system in a plant already successful, may be 
 of interest as illustrating this. 
 
 It is a somewhat long story perhaps, with 
 no particularly exciting incidents, but then 
 that is just the truth of obtaining a cost sys- 
 tem it is a long, slow job. And while the 
 introduction of modern methods may be as 
 difficult and slow of progress, and need as 
 much preparation, patience, and persistence 
 as the discovery of the poles demanded 
 (and be much more useful to humanity), 
 nevertheless, the details are so common and 
 intimate to most of us, in some phase or par- 
 ticipation, that no writer of shop adventure 
 has been able to make their recital as widely 
 read. 
 
 This particular cost problem was worked 
 out in a machine-building plant employing 
 about one hundred and twenty-five men, in- 
 volved in three main departments a foun- 
 dry, a wood-working plant, and a machine 
 shop, with a product varied in six or eight 
 main classes, and repairs on all of these. 
 
124 EXPERIENCES IN EFFICIENCY 
 
 While a certain amount of the work was 
 standard, yet much of it varied in size and 
 detail, necessitating bids, and much repair 
 work was done. 
 
 The executive, often away from his plant, 
 wanted several definite results, regularly 
 and accurately, as a means of giving him 
 some control of the situation. He wanted, 
 first, certain figures of labor costs and ex- 
 pense percentages as a proper basis for esti- 
 mating. He wanted, secondly, to know the 
 true cost of every order finished, so that he 
 might know where profits and losses were. 
 He wanted, finally, his expenses correlated 
 and compared in detail monthly, as a means 
 of controlling them. 
 
 The first need was of course automatically 
 met when the second was filled, and the 
 third was essential in obtaining the second. 
 Not unnaturally there eventually came out 
 of the fulfillment of these needs a fourth 
 value, viz., a complete showing of profit and 
 loss for the whole plant each month, the 
 showing being made as to all the work, di- 
 vided into eight different classes. And the 
 yearly inventory developed, not as usual into 
 a means of discovering whether any and how 
 
BUILDING THE COST SYSTEM 125 
 
 much profit was made, but merely as a means 
 of checking the figures shown monthly. 
 
 Now the needs of this executive are essen- 
 tially the needs of every executive. But it 
 cannot be said that they are fulfilled often 
 or completely enough, and indeed rather sel- 
 dom is the final development of a complete 
 monthly showing brought about. 
 
 There are, of course, many reasons for 
 this. In the first place, all businesses, on ac- 
 count of variations of processes, length of 
 time in progress of production and difficulty 
 of tracing elements to final product, are not 
 equally susceptible to the obtaining of these 
 results. In the second place the expense of 
 going the full distance indicated in certain 
 classes of work may not seem warranted by 
 possible returns. But unfortunately, and 
 most frequently, the valid reason that exists 
 for not obtaining the results is that the ex- 
 ecutive is not willing nor able to give his 
 time in the development of the system, to 
 help work out the details and overcome the 
 difficulties, and to interpret the results when 
 obtained. And it appears extremely difficult 
 to obtain cost clerks or bookkeepers capable 
 of carrying out and interpreting the system 
 in a practical way. 
 
126 EXPERIENCES IN EFFICIENCY 
 
 The human equipment in this case con- 
 sisted of a bookkeeper and an assistant, since 
 augmented after three or four years of op- 
 eration (and because of increase of business) 
 by another assistant. But these two were 
 very capable and hard-working. The only 
 other office force that existed in the plant 
 were two stenographers, although there were 
 an engineer and his assistant, who had their 
 part in the system, as will be seen later. 
 
 Now this equipment is a very important 
 element in the cost situation. As a matter 
 of fact, it is by far the most important ele- 
 ment in the development and use of a cost 
 system. For costs are not a matter of fig- 
 ures. Even bookkeeping is not an exact sci- 
 ence. For behold! how often is it that one 
 man will put into the expense account a 
 given expenditure, say the rebuilding of a 
 machine, thus reducing his profits by this 
 amount, while another will put such an 
 item to asset account. And each can ad- 
 vance weighty arguments and reasons as to 
 the logic of his methods. But the net results 
 of operation will differ widely with the same 
 actual occurrences, so that even bookkeeping 
 may be said merely to present results de- 
 pendent upon the aspects of the situation, as 
 
BUILDING THE COST SYSTEM 127 
 
 rendered by those who have the authority 
 or opportunity to interpret. Now the same 
 and indeed greater opportunity to render 
 varying interpretations exists in cost work, 
 but much aggravated by the further fact 
 that, while bookkeeping, through the double- 
 entry system, offers a proof, and gathers in 
 all the facts (even though some, by misin- 
 terpretation, may be wrongly placed), cost 
 keeping offers the further very strong temp- 
 tation to present incomplete figures as com- 
 plete. For the gathering, or, rather let us 
 say, the arranging of channels for continu- 
 ous and correct gathering of facts (involv- 
 ing, as it must, all the operatives, their 
 necessary co-operation, their changing work, 
 the issuing of and keeping track of raw ma- 
 terial, and the proper correlation of ex- 
 penses), is a laborious, painstaking, and fre- 
 quently discouraging task. Successful ac- 
 complishment demands therefore a good 
 equipment common sense, patience, diplo- 
 macy, a sense of accuracy, and an ability to 
 interpret facts and figures for all of which 
 most executives are willing to pay the cost 
 clerk possessing them $15.00 to $20.00 a 
 week ! 
 
 This, then, was the situation: machine- 
 
128 EXPERIENCES IN EFFICIENCY 
 
 building plant; three departments, foundry, 
 wood- working, machinery; one hundred and 
 twenty-five men; product varied in, say, 
 eight main classes ; all work put through the 
 plant on order numbers. 
 
 Wanted: a cost system showing in detail 
 the cost of each order proved, and leading 
 eventually through the bookkeeper to a com- 
 plete profit and loss shown monthly same 
 to be checked yearly by inventory. 
 
 Equipment: bookkeeper and assistant. 
 Incidentally there were three foremen, and 
 they were pretty good foremen as foremen 
 
 go- 
 Well the installation of the cost system 
 
 was undertaken in the usual divisions of ma- 
 terial, labor and expense. 
 
 The development was made along all three 
 divisions simultaneously, but necessarily 
 progressed in the division of expense most 
 rapidly. This was because of two reasons 
 (1) the total expense figures, with the excep- 
 tion of certain items of materials and labor 
 (the definite use of which had to be regularly 
 reported from the factory), rested monthly 
 in a total in the books, which total was read- 
 ily analyzable from the entries; and, (2), the 
 
BUILDING THE COST SYSTEM 129 
 
 work of the expense analysis involved only 
 one man the bookkeeper. 
 
 Of course it was necessary in analyzing 
 this expense first to decide into what main 
 divisions the expense should be divided 
 and the three departmental divisions of foun- 
 dry, wood-working shop, and machine shop, 
 with the further division of selling, were 
 chosen. It was then necessary to settle upon 
 a relation of expense to the running produc- 
 tion, so that when, in any given order, the 
 material and labor cost had been collected, 
 the proper proportion of expense might be 
 added; and it was decided to show the de- 
 partmental expense cost per productive hour 
 of labor and the selling expense cost per 
 dollar of sales. No argument can be enter- 
 tained here as to the validity of these deci- 
 sions. They have been treated elsewhere.* 
 
 These things decided, it was merely a mat- 
 ter of time to produce from the books an ex- 
 pense analysis for each department, showing 
 month after month in comparative detail 
 the expense and its relation to production, 
 with also period figures showing the average 
 
 * See Cost Reports for Executives. By Benj. A. Franklin. 
 The Engineering Magazine Co. 
 
130 EXPERIENCES IN EFFICIENCY 
 
 relation over a given time. This was merely 
 a bookkeeper's job. 
 
 But when finally produced the result was 
 astonishing and disappointing to the execu- 
 tive. He had always had some idea what 
 value of materials and labor went into cer- 
 tain machines, because their application was 
 direct, and individually measurable as to any 
 given order. But expense had always been 
 a guess because of its general application. 
 And so, when proper depreciation and all the 
 other marshalled expenses of each factory 
 department were taken into consideration 
 and shown in relation to the running game, 
 i. e. as so much per every working hour, the 
 executive was a little startled. For he dis- 
 covered that he was not making profits in 
 the way he had thought, and also he found 
 out that it costs more to keep a workingman 
 working for an hour, than the man was paid 
 for that hour. And indeed this is usually 
 the case, varying very greatly of course with 
 the kind of work and the size of the plant. 
 And though there is a tendency constantly 
 for wages to rise, it is true, despite all theo- 
 ries of expense-ratio reduction because of 
 volume increase, etc., that the tendency in 
 practice for expense to rise both in total and 
 
BUILDING THE COST SYSTEM 131 
 
 per cent is fully as strong as that of wages, 
 and can be kept down only by intelligent and 
 vigorous economy. But this analysis, show- 
 ing the same expenses comparatively month 
 after month, offered the executive a means 
 of criticism and control of expense. The 
 discovery of the true relation of expense to 
 production, and the variation on this point 
 in the different departments, immediately 
 brought the executive closer to the facts of 
 the situation and caused actions looking 
 toward the profit and loss column to be dis- 
 cussed later. 
 
 But the expense analysis also emphasized 
 one other important feature in cost-system 
 building, viz., a total sum, provably complete, 
 was always started with, and the analysis 
 showed what became of it. Eventually this 
 same method was adhered to in the matter 
 of material and labor, so that always a proof 
 was maintained. Thus eventually the total 
 expenditures of the business were divided 
 into the three main heads of material, labor, 
 and expense, and these were analyzed on to 
 order costs instead of operating from the de- 
 tail to the total. 
 
 Now of course this expense analysis, sim- 
 ple as it was, did not arrive at once. It was 
 
132 EXPERIENCES IN EFFICIENCY 
 
 necessary to get certain facts for it from the 
 factory. One of the most important was the 
 amount of non-productive or indirect labor, 
 and the obtaining of this item was involved 
 in the whole problem of getting an analysis 
 of the application of the second main divi- 
 sion of cost labor. And here is where the 
 first troubles began. 
 
 For when the doings of labor began to be 
 collected in any reasonably exact way, of 
 course every man in the shop became in- 
 volved, and human nature came into full 
 play. The foremen had the loudest com- 
 plaint to make, for it was attempted to issue 
 through their instrumentality all time notes 
 made out from the orders in their charge. 
 The work was too onerous and too distract- 
 ing to them. They were men well along in 
 life, and their ways were "set". Of course 
 a clerk might have been put at this work. 
 It usually takes in fact a certain amount of 
 expense in clerical labor to gather shop data 
 for costs. In most plants this must be reck- 
 oned upon to some extent. This was not, 
 however, a large shop and it was believed 
 that the facts could be gathered cheaply. 
 
 Eventually the way out proved to be not 
 so far removed from the most modern meth- 
 
BUILDING THE COST SYSTEM 133 
 
 ods. For it was finally decided that the en- 
 gineering department, in making out its or- 
 ders, was to make them in the detail of the 
 operations on each part, and these were 
 made in the form of time notes with neces- 
 sary instructions on them. This did not of 
 course include every little odd job that was 
 done. For these, there were blank notes 
 which the foreman willingly handled. 
 
 It thus became the duty of the foreman 
 merely to see that in giving out and taking 
 in the time notes of the workers, the times 
 were properly stamped thereon. The fore- 
 men satisfied, and their co-operation gained, 
 the workers were not so difficult to handle. 
 A willing foreman is half the battle won. 
 There was the worker who could not speak 
 English, termed the "dago" by those who 
 could not speak his language, but, with his 
 time note made out, he could easily punch 
 the time of starting and finishing on a time 
 clock, or indeed write it. And once he was 
 shown, he did it more willingly than his more 
 fortunately linguistic shop-mate. 
 
 There was the suspicious man who was 
 afraid the company had some ulterior motive 
 in finding out exactly the time in which he 
 did his work the careless man, the thick- 
 
134 EXPERIENCES IN EFFICIENCY 
 
 skulled one, etc., but all these with time and 
 patience came into line, for the time note 
 and instruction card combined really im- 
 proved the situation over the old way of 
 verbal instruction. But they all came into 
 line more particularly, because, in all recal- 
 citrant cases, the situation was frankly, 
 clearly, and sometimes repeatedly explained 
 to them, and their co-operation invited to 
 make the whole shop an intelligent unit. 
 When they were treated as human beings 
 they responded. But patience and persist- 
 ence were needed to get the time notes finally 
 practically accurate a matter of five min- 
 utes inaccuracy not being considered. 
 
 Of course this problem comes up in every 
 plant. Around it are frequently thrown 
 safeguards and helps, as time clocks, clerical 
 help, etc. These are always valuable aids, 
 but necessary only when the conditions are 
 complicated and the force is large. In most 
 shops of reasonable size, if the co-operation 
 of the workers is obtained, the facts can be 
 gathered very cheaply and sufficiently accu- 
 rately. 
 
 Once there began to flow to the office the 
 time notes of the men (and for all jobs not 
 finished Saturday night a special time note 
 
BUILDING THE COST SYSTEM 135 
 
 was turned in), it became an easy job to 
 make out a payroll showing not merely the 
 hours worked and the pay earned by each 
 man, but an analysis of this showing a divi- 
 sion of the labor as to indirect and direct, 
 and the hours worked on each order. The 
 indirect labor went of course to the expense 
 of the proper department in the extreme an- 
 alysis, and the direct labor to the record of 
 order cost. 
 
 And thus the total weekly payroll was 
 analyzed each week, and proved. Thus, 
 again working from the total paid to all la- 
 bor, the complete proved analysis was pre- 
 sented. 
 
 It actually took two or three days a week 
 to make this analysis. To the assistant who 
 undertook it, it at first seemed a terrific task 
 to take the time notes of one hundred and 
 twenty-five men, averaging possibly some 
 eight or ten per week, to set down on a pay- 
 roll all the facts of pay for each man and all 
 amounts of hours and charges for each order 
 number, and then make them all add up cor- 
 rectly. But by proving the figures for each 
 man separately this scheme eventually 
 worked out very well indeed, and since, when 
 the expense percentages were obtained, the 
 
136 EXPERIENCES IN EFFICIENCY 
 
 expense chargeable to each order could be 
 added on the payroll sheet to the labor 
 chargeable to each order (see "Cost Reports 
 for Executives") the fact that on this one 
 sheet they had a complete weekly proved di- 
 vision of all labor and expense ready for dis- 
 tribution to cost sheets and bookkeeping 
 records, this fact made the bookkeeper and 
 his assistant enthusiastic. They felt they had 
 cleaned up the situation, and, instead of hav- 
 ing a mass of disconnected figures on their 
 cost sheets, they had a proved situation to 
 be sworn by, instead of at. They had a 
 weekly grip on the labor and expense cost. 
 
 The next step now was to corral the ma- 
 terial. Most of the difficulties in the way of 
 this were physical. Everyone was perfectly 
 willing to report material used if the means 
 were readily offered. Barring those occa- 
 sions when parts might be spoiled through 
 careless work (not so recurrent in this shop 
 except on small parts controllable through 
 the storeroom) there was no reason material 
 used should be concealed. 
 
 The first step in this work was to put into 
 shape a storeroom, already in existence, and 
 arrange that any materials issued therefrom 
 should be reported daily by requisitions and 
 
BUILDING THE COST SYSTEM 137 
 
 with order numbers. All large supplies, such 
 as pig iron, coke, etc., for the foundry, lum- 
 ber for the wood-working shop, and iron and 
 steel for the machine shop, could not be put 
 into the storeroom of course, but had to be 
 under the general charge of the foreman of 
 the department. But in order to offer a 
 proper basis of use and report, the engineer- 
 ing department again came to the rescue, and 
 undertook to issue to each foreman for each 
 order a bill of material covering all parts 
 kept outside of the storeroom, and of course 
 of many kept in the storeroom. 
 
 It was not difficult for the foundry fore- 
 man to keep track of pig iron, etc., used daily, 
 as any foundryman will recognize, since it 
 was necessary to weigh it for the furnace 
 charge. The greatest difficulty came in the 
 matter of lumber. Here for many reasons a 
 lumber-moving gang was made to bring in 
 all lumber as planned by the foreman. This 
 situation was helped by the fact that the lum- 
 ber yard was some distance from the shop. 
 
 So, through the storeroom, the engineering 
 bills of material, and the foremen's daily 
 report, records of the material used, and on 
 what order number, were started. The 
 
138 EXPERIENCES IN EFFICIENCY 
 
 question arose, however, as to the accuracy 
 of these reports. 
 
 Accuracy could be checked only by occa- 
 sional inventories, and these were made, with 
 the result that curious and natural shrink- 
 ages and overages were discovered, cor- 
 rected, and allowed for. Coke was found to 
 have a natural shrinkage of about 7 per cent 
 between carload weight paid for, and truck 
 load weighed into furnace. This per cent 
 then had to be added to reported weights. 
 In the matter of lumber, so difficult was it to 
 make the feet bought and the feet used tally, 
 that eventually a definite per cent was added 
 to all reported as used, and the lumber in- 
 ventory was always expected to come out 
 higher than the book showing of it, which 
 it has done for the last five years. Cars of 
 pig iron were checked, bought weight against 
 used weight, and shortage or overage taken 
 care of in the costs. 
 
 . In order to get the material reports into 
 such shape as the payroll for cost and book- 
 keeping purpose, a material journal (see 
 "Cost Eeports for Executives") was de- 
 vised. Here all material reported was cred- 
 ited to its class of raw material on one side 
 and debited to its class of work in process on 
 
BUILDING THE COST SYSTEM 139 
 
 the other, the sides balancing weekly. And 
 since the order number was inserted oppo- 
 site each item, the journal offered a basis of 
 operation both for cost and bookkeeping pur- 
 poses. 
 
 And so eventually the material was cor- 
 ralled, so that in the last five years actual 
 inventory has shown it practically right. 
 
 Expense, labor, and material figures of 
 proved exactness collected, and flowing daily 
 and weekly into the bookkeeper's office, the 
 real work of making the cost system and of 
 using it with value now began. And this was 
 both pleasant and troublesome. 
 
 It was not so difficult of course to gather 
 the facts of labor, expense, and material onto 
 a sheet showing the total costs of each order. 
 The real difficulties were (1) to put these 
 figures together in such a form that they 
 would tell the executive the true story of the 
 order costs quickly, and permit a rapid back 
 "trek" to details as desired; (2) to tie all 
 these facts up to the bookkeeping so that 
 each month's trial balance told the story of 
 the business as a whole; and (3) to make 
 the proof of the whole as easy as possible. 
 
 There was, of course, still the largest and 
 longest of all the tasks to discover oppor- 
 
140 EXPERIENCES IN EFFICIENCY 
 
 tunities of economy and profit-making, and 
 operate from the cost system so as to bring 
 them about in fact, to gain those values 
 which the cost system was designed to give. 
 But this was not a matter of building the 
 system, though dependent on the proper 
 working out of the first difficulty. 
 
 It would be impossible, of course, to re- 
 count all the steps that were gone through in 
 overcoming these difficulties, but very inter- 
 esting if all the scenes could be re-enacted; 
 for the executive took a very active part in 
 them, knowing what he wanted but without 
 accounting knowledge, and the bookkeeper 
 possessed accounting knowledge, lacking the 
 practical, but like many accountants thought 
 that affairs must be handled according to 
 certain routines. And always there had to 
 be kept in mind the real truth of the book- 
 keeping method, v iz., that it is not a set of 
 fixed rules, but, consistent with the double- 
 entry plan for proof against clerical mis- 
 takes, it is merely a method of putting fig- 
 ures together to show results, and if practical 
 intelligence demands that the results be cast 
 in any given form, bookkeeping can be made 
 to fit this form. 
 
 Bearing in mind, then, that direct labor 
 
BUILDING THE COST SYSTEM 141 
 
 was shown analyzed by order numbers each 
 week, completely, with expense added weekly 
 by rates per hour, and that material was like- 
 wise shown in the material journal divided 
 weekly (labor and material being proved 
 weekly, and expense monthly) it is readily 
 seen that a bookkeeper could weekly record, 
 on a properly arranged cost sheet, the labor, 
 expense, and material in such detail as would 
 easily refer back to the record in case of 
 necessity for clarification, and in such col- 
 umns as would permit adding them at the 
 finish of the order to show total labor and 
 expense by departments and material by 
 classes. Thus was the detailed order cost 
 for every order put in assembled and com- 
 plete writing a week at most after its ship- 
 ment. 
 
 For the sake of the executive, however, 
 there was made a condensed sheet one sheet 
 for each kind of work on which were en- 
 tered only the totals in the detail of labor and 
 expense by departments and material by 
 classes, showing the selling price and the 
 profit and loss. Each duplication of an or- 
 der was placed under the result of the previ- 
 ous order. This, as can readily be believed, 
 gave the executive a quick cost knowledge of 
 
142 EXPERIENCES IN EFFICIENCY 
 
 each job put through his plant, and, as or- 
 ders were duplicated, a comparison which 
 soon gave him a grasp of the situation. And 
 he could refer back, as he desired, to the de- 
 tail, when the results proved unsatisfactory 
 to him. Thus was problem No. 1 solved. 
 
 Problem No. 2 was also purely a book- 
 keeper's task, namely, to unite all these facts 
 into a monthly showing of the whole. The 
 work was divided into about eight classes 
 into which all work finished must fall. It 
 was merely a question of focusing all the in- 
 formation to a point, where, in one of these 
 eight classes, when the work was finished, the 
 sale price on one side should be offset by the 
 cost on the other side to get the balance of 
 profit and loss. To accomplish this, it was 
 necessary to establish eight accounts of work 
 in process, and desired classes of raw-ma- 
 terials account. Bearing the fact of the 
 weekly payroll sheets, the material journal, 
 etc., in mind, the process briefly was this. 
 Weekly when the payroll was finished, with 
 the expense added, it became a journal, the 
 totals of which were credited to labor and 
 expense accounts, and debited to work-in- 
 process accounts. The material totals in the 
 material journal were credited to raw-ma- 
 
BUILDING THE COST SYSTEM 143 
 
 terial accounts, and debited to stock-in-pro- 
 cess accounts. When the order cost was 
 finished, and goods billed, the sale price was 
 credited to one of the eight profit-and-loss 
 accounts and the cost of the order credited 
 to work-in-process accounts and debited to 
 its profit-and-loss account. 
 
 Now this looks formidable and technical, 
 except to the accountant; but note the net 
 result, which any executive would be glad to 
 obtain, even at the expense of a little worry 
 to some one else. Every month there were 
 produced (1) figures showing the value of 
 raw material on hand, (2) the amount of 
 money tied up in various classes of work in 
 process, (3) the profit or loss on eight classes 
 of goods shipped during the month. And 
 all this information was only about ten days 
 old at the latest. The executive, and not 
 merely the bookkeeper, mastered every de- 
 tail of the development of the scheme. 
 
 There was then the third problem of ac- 
 curacy to settle. In the matter of labor this 
 was easily settled, because, as shown, the 
 payroll, a certified amount, analyzed and 
 proven, was used. The expense used was 
 the analysis of the total monthly amount 
 from the books. The material was operated 
 
144 EXPERIENCES IN EFFICIENCY 
 
 as explained, to leave figures showing in dif- 
 ferent classes what remained on hand, and 
 only actual inventory could show the accu- 
 racy of these figures. But five years' experi- 
 ence has worked these down to the point 
 where actual inventory always comes within 
 a fraction of one per cent of the book in- 
 ventory. 
 
 Then, of course, came the main test, viz. 
 the answer to the question as to the value of 
 all this work. And in this case the activity of 
 the executive made the results very real. 
 From the order costs came the first results, 
 for they showed many things astonishing, 
 as they always do. It was immediately ap- 
 parent that many orders were being filled at 
 little or no profit. This was particularly ap- 
 parent as to repairs made, and on all work 
 done away from the plant, and an immediate 
 increased charge per hour for men so em- 
 ployed took place. 
 
 These order costs likewise showed that, 
 while many orders undertaken were espe- 
 cially profitable, many were not. Where 
 prices were strictly competitive this could 
 not always be remedied, but assuming the 
 new proven elements of cost in the estimates 
 many future orders were obtained at better 
 
BUILDING THE COST SYSTEM 145 
 
 prices, and the introduction of incentives to 
 labor in the cases of certain regularly made 
 staple articles, on which loss was being made, 
 so reduced the cost as to bring them on the 
 right side. In the cases of special or patented 
 machinery no hesitation was had in raising 
 these prices on the basis of fair cost. Thus 
 the order cost alone brought, in six months, 
 more value than the system cost. 
 
 But the comparative detail of expense 
 soon brought about changes that made future 
 saving. The saving in the tool bill alone 
 was very large, because as soon as the execu- 
 tive saw, several months running, the amount 
 of money spent on tools, and the time notes 
 began to show time wasted in waiting for 
 tools and in sharpening them, a reform in 
 the tool system made a very respectable 
 economy. And there were many like econo- 
 mies through this expense analysis. 
 
 The regular system of time notes also 
 made an entirely noticeable saving in time 
 occupied in most operations, for most of the 
 operatives worked on the day-work basis, 
 and the moral effect of the knowledge of the 
 operative cost was great. 
 
 In fact, as is both theoretically and prac- 
 
146 EXPERIENCES IN EFFICIENCY 
 
 tically always the case, the men, honest be- 
 fore, if you please, soon realized (as the 
 foreman was called to the front to explain, 
 and passed the word along upon his crest- 
 fallen return) that "the boss was wise". 
 And they acted upon the boss's wisdom. 
 They began to "make the cost". In fact, 
 savings took place all along the line in logi- 
 cal ways brought about by constant knowl- 
 edge. 
 
 The saving of material, based on the fact 
 that all material used had to be accounted 
 for, was well worth while. 
 
 There was finally the satisfaction of the 
 executive in his monthly showing of the profit 
 and loss. This had the very definite value of 
 casting up the whole situation as an assur- 
 ance as to the general result, which, of 
 course, flowed from the average of the de- 
 tails, and gave a secure feeling which tended 
 much to give energy and direction to the 
 mind of the executive. It did more indeed, 
 since the showing of the eight classes made 
 it clear in what general direction an increase 
 of the business should veer, and efforts made 
 in pushing it in those directions were effec- 
 tive. 
 
BUILDING THE COST SYSTEM 147 
 
 And so after eight months of work, the 
 most finished of cost systems was installed 
 and began its work of economy. Met by the 
 ordinary opposition of the individual and 
 collective human natures, it was fought 
 through to such a quick and successful finish 
 by almost the only means that can accom- 
 plish such a result the constant insistence, 
 interest, and co-operation of the executive. 
 When the system was finished he understood 
 it, because he had helped to build it. 
 
 And it saved money because he used it. 
 It actually increased the average per cent of 
 profit. 
 
 And a year later he offered to pay one- 
 half the cost of an expert if three of his com- 
 petitors would install a similar system be- 
 cause, he said, their "fool competition al- 
 most compelled him to take some orders at 
 a loss, which he hadn't minded doing when 
 he didn't know it, but hated to do now that 
 he did know it". And, after all, does not 
 that characterize the value of a cost system? 
 
CHAPTER X 
 THE NECESSITY OF EFFICIENCY-WILL 
 
 'HpHE profession of efficiency engineering, 
 while not yet entered largely through 
 a definite course of education and training 
 looking towards its practice, but rather 
 manned by practical men (and perhaps 
 drawing a little too largely from one branch, 
 accountancy), is nevertheless becoming more 
 and more fundamentally established in the 
 United States as of real service to progres- 
 sive business interests. 
 
 The efficiency engineer, under whatever 
 title he may offer his services (and there are 
 as many different styles used as there are 
 phases of this large subject) is being con- 
 sulted and respected for his attainments, and 
 his profession is becoming recognized as a 
 distinct and worthy branch of engineering 
 science. If occasionally someone has entered 
 upon its practice without the necessary expe- 
 rience and standards, or (what is frequently 
 146 
 
EFFICIENCY WILL 149 
 
 fully as important) without the right tem- 
 perament or personality, he will perhaps not 
 be able to accomplish any great or perma- 
 nent harm, or place his profession in any 
 worse position than the other professions 
 find themselves in through their least able 
 members. And it must be remembered that 
 the profession is still young and in a state 
 of development. 
 
 It is true also, and not unnatural, that the 
 attitude of the executive towards this profes- 
 sion is likewise in a formative state, and is 
 full of a doubt, hesitation, and suspicion 
 which has to be met. 
 
 An early argument of the efficiency engi- 
 neer was that he stood in the same relation 
 to a business as a doctor to his patient, or a 
 lawyer to his client. This the executive has 
 as yet been unwilling to admit. He recog- 
 nizes his ignorance of his body despite his 
 intimate association with it, and has long ago 
 realized that the intricacies and technicalities 
 of the law are to be handled only by an ex- 
 pert. But his business! Why, that's the 
 thing he's expert in himself! He spends his 
 time, thought, and energy in its details. He 
 has been a part of it or made its develop- 
 ment. And if he has made it successful, it is 
 
150 EXPERIENCES IN EFFICIENCY 
 
 entirely natural that he should doubt the 
 ability of an outsider, not intimate even with 
 its nature, much less its details, to improve 
 it. And this is not an unnatural view. More- 
 over, he generally is most ready to give ear 
 to the efficiency engineer when he is feeling 
 best, financially, and not when he is sick or 
 in trouble. 
 
 There is, however, a basic and proper 
 viewpoint of business which offers the execu- 
 tive and the efficiency engineer common 
 ground. Business could never have become 
 so successful, so widespread, so far-reaching, 
 if its practice were not based on certain 
 principles of action ; or, if it depended solely 
 on certain peculiar individual abilities, and 
 not on definite methods and formations gen- 
 eral and applicable in all. Individual abili- 
 ties, it is true, have made for greater suc- 
 cesses, but only as they have guided and 
 animated or energized the general plan of 
 operation. 
 
 Every business, then, has at least two gen- 
 eral divisions. One division deals with the 
 particular article or articles of manufacture, 
 the machinery of its processes, its grade and 
 quality, and those elements which pertain to 
 its peculiarities. But another division deals 
 
EFFICIENCY WILL 151 
 
 with methods and practices which in princi- 
 ple are necessary and common to all busi- 
 nesses, i. e., organization, planning, routing, 
 storekeeping, costs, waste saving, incentives 
 to labor, etc. 
 
 Out of this common necessity there has 
 logically grown the fact that there have been 
 different developments along the line of this 
 second division, and similar developments of 
 varying degrees. Here and there analysis 
 and experiment are still developing funda- 
 mental theories and improvements in prac- 
 tice of economic value in some businesses, 
 which are of value to all. The busy execu- 
 tive, tied down with the daily detail of his 
 own business, and struggling with the diffi- 
 culties of his own peculiar production and 
 problems, cannot know of these develop- 
 ments; or knowing generally, cannot put 
 them into detailed practice. 
 
 The efficiency engineer, on the other hand, 
 studying and developing theory in relation 
 to this second division, but particularly ex- 
 perimenting and experiencing in plant after 
 plant, becomes acquainted with these meth- 
 ods and their necessary detail, developed 
 with successful practice. He is, therefore, 
 easily able to offer valuable advice in almost 
 
152 EXPERIENCES IN EFFICIENCY 
 
 any business along the lines of his experi- 
 ence. If he possesses tact, patience, per- 
 sonality, and particularly common sense, in 
 addition to experience, he is almost invari- 
 ably able to be of large service in at least 
 some of the elements of this second division. 
 Efficiency introduction thus becomes a nat- 
 ural branch of engineering. The broad- 
 minded executive has seen this to his ad- 
 vantage. 
 
 But both before, and for some period af- 
 ter, an executive has made up his mind to 
 submit his methods to the scrutiny, advice, 
 and eventual reorganization at the hands of 
 the efficiency engineer, he retains in his mind 
 a large question mark as to the outcome of 
 his determination to invest in such services. 
 It may, therefore, be not uninteresting to 
 some to hear of experiences through which 
 others have gone, and the net general result, 
 and there are in mind three establishments, 
 all metal-working, which illustrate fairly 
 well the possibilities, difficulties, and necessi- 
 ties of a successful relation between an effi- 
 ciency engineer and his clients. 
 
 The situation in the first concern was one 
 nearly always unfortunate as to organiza- 
 tion. The president was the chief stock- 
 
EFFICIENCY WILL 153 
 
 holder by inheritance, and so maintained his 
 position on this account, and not through 
 any special ability to fill it. The authority 
 under him was divided between three or four 
 who had some ability, but not enough to dom- 
 inate the situation, or to push to successful 
 conclusion any plan, which, by apparent radi- 
 calism or expense of operation, might meet 
 with the criticism or opposition of the presi- 
 dent. Too often the weak executive gathers 
 weak men about him. 
 
 The profits of the company, while real, 
 were not of such a volume as to encourage 
 this management to risk any appreciable 
 sum in making any changes or additions to 
 organization or methods that seemed desir- 
 able. There was a general feeling that effi- 
 ciency was some plan whereby with little ex- 
 penditure or outlay of money, other than 
 the fee of the engineer, marked improvement 
 in profits must follow. This idea had been 
 gained because of some work in a neighbor- 
 ing plant, where conditions were entirely 
 different, being simple, and under the con- 
 trol of an able, industrious executive. 
 
 Now this situation contained one great 
 weakness from the point of view of perma- 
 nent results. Efficiency is first of all, or 
 
154 EXPERIENCES IN EFFICIENCY 
 
 needs first of all for successful operation, a 
 certain state of mind. This state of mind 
 involves first the belief that efficiency, beyond 
 that already attained, is certainly possible, 
 attainable, and vitally valuable; second, the 
 understanding that efficiency, like any other 
 result of value, is to be attained and main- 
 tained by study, records, organization and 
 inspection demanding maintenance expense; 
 and thirdly an active determination of the 
 executive organization to co-operate enthusi- 
 astically and continually. This state of 
 mind may be called efficiency-will. It is, of 
 course, a part of the efficiency engineer 's task 
 to produce this state of mind. It is, however, 
 difficult to accomplish when the chief execu- 
 tive is really inactive in control and his au- 
 thority is delegated to several others. 
 
 In this particular plant the attitude of 
 the president was one of watchful waiting, 
 of criticism of any expense through addi- 
 tions to the organization, such as the cost 
 clerks ; and because of a lack of understand- 
 ing of the principles operated upon, it de- 
 veloped into a desire to judge all proceedings 
 by the next inventory trial balance. Such 
 an attitude, under the conditions, naturally 
 induced a similar one all down the line. 
 
EFFICIENCY WILL 155 
 
 This showed itself in several concrete 
 ways, which detracted from the attainable 
 values. For instance, the basic plan of the 
 cost method was developed, and that which 
 pertained to the book-keeping end expense 
 analysis, payroll division, etc. was well 
 handled. But the necessities for material- 
 cost gathering proper store room and 
 issue of material by requisitions were re- 
 fused, because of the cost of equipment. It 
 was expected that reports could be gathered 
 while material was stored all around the 
 plant and the workman took it as needed. 
 The material was valuable and the waste 
 great. Needless to say the reports were not 
 credible; and what was really most impor- 
 tant waste was not stoppable under such 
 conditions, to say nothing of the resultant 
 costs. Such a condition was one of adher- 
 ence to form, rather than to certain value 
 of costs. 
 
 Another example was that of the use of 
 the production schedule. This schedule 
 showed clearly the amounts on hand of a 
 great number of small parts, orders out un- 
 filled, and in connection with an analysis of 
 the use in periods of time of these parts 
 offered a right and reasonable basis for 
 
156 EXPERIENCES IN EFFICIENCY 
 
 planned production. But sucli a plan needed 
 study and insistence. The man in charge 
 of this found his work blocked constantly by 
 the orders of a superintendent, who had been 
 accustomed rather to keep his machines go- 
 ing in the way best suited to their set-up, the 
 condition of raw materials, and his own judg- 
 ment, and the lack of efficiency-will in the 
 executive organization had not developed 
 that confidence which insists that the old 
 ways, where they conflict, be set aside for 
 the unobstructed operation of the new. 
 
 These examples illustrate, of course, what 
 is actually happening in a great many plants 
 where efficiency is delayed. In plants where 
 the suggestions come from those of lesser 
 authority, it is, of course, somewhat excusa- 
 ble on the score of unripe judgment, if such 
 suggestions do not receive a thorough con- 
 sideration. Where expert advice is engaged 
 such action seems folly, but is really due to 
 the lack of efficiency-will. The net result in 
 this plant was that while the body of efficient 
 methods was gradually built up cost meth- 
 ods, production schedules and planning, in- 
 centives, waste reports, etc., the soul was 
 lacking. And efficiency schemes without a 
 soul are liable to develop into red tape, or to 
 
EFFICIENCY WILL 15 1 ? 
 
 arrive at a certain low plane of value, and 
 bar further improvement. 
 
 In one department alone, where there was 
 a change to a new and energetic head, did 
 the methods really reach any intelligent en- 
 ergetic development or use, and in this de- 
 partment a loss was quickly turned into a 
 profit of equal amount. 
 
 Here, then, is a typical case illustrating 
 one large reason why efficiency does not 
 travel forward as rapidly as its enthusiasts 
 think it should. Efficiency needs bel^f and 
 enthusiasm behind it. At its best it can at 
 first only start on a career. Its methods 
 must be developed. Except in its simpler 
 propositions it cannot jump at once into its 
 best pace. Doubt and executive inactive 
 watchfulness do not foster it. The first 
 necessary principle of efficiency must be co- 
 operation. "What the executives do not 
 stand behind, the operators stand in front 
 of" is a rule that follows infallibly from the 
 human nature of the factory situation, as it 
 follows in an army with a poor general, or 
 a baseball team with a poor manager. 
 
 The methods applied, conforming of course 
 to conditions, were precisely such as had 
 proved much more successful in other plants, 
 
158 EXPERIENCES IN EFFICIENCY 
 
 but they failed in this plant, except in cer- 
 tain spots, to possess more than a form. 
 Their development was stunted by lack of 
 efficiency-will. The executive organization 
 were not opposed to the suggestions made, 
 they were simply not enthusiastically for 
 them. 
 
 The second case was a very happy one both 
 in operation and results. The executive and 
 selling authority was divided between two 
 men who owned majority stock control, and 
 who had built the plant up from a small but 
 practical foundation. They could never have 
 been persuaded to invest a sum of money 
 in any plan of efficiency, because they had 
 worked in all parts of the plant themselves 
 and their training and familiarity with the 
 details, together with the condition of their 
 finances, were not conducive to any expendi- 
 tures along broad lines of action. They were 
 persuaded into the adventure, however, by 
 one to whom they owed some money. 
 
 Once they had committed themselves, 
 nevertheless, being practical men and want- 
 ing to get the value of their money, they en- 
 tered into the proposition enthusiastically. 
 It was a little difficult for them to grasp with 
 complete understanding and foresight all the 
 
EFFICIENCY WILL 159 
 
 theories enunciated; but as the work began 
 to develop, and they saw some practical re- 
 sults, they arrived completely at the proper 
 state of mind. They developed efficiency- 
 will and talked all of their organization 
 into it* 
 
 The first work put into complete operation 
 was the cost system. Long arguments as to 
 the proper theory of costs ensued. 
 
 Certain theories of cost very simple and 
 easy of operation, involving an addition of 
 material and labor costs, and multiplying 
 them by a fixed figure were held by one 
 partner. Any scheme which demanded the 
 following of an article through its opera- 
 tions, wherethrough it took its accretions 
 of labor and expense as it went along, looked 
 needless. The other partner took the atti- 
 tude that if the manufacture of an article 
 in their line was demanded of them, the 
 method of such manufacture was left to them 
 as experts, and the efficiency engineer should 
 have the same chance. He was given a free 
 hand and results were awaited. 
 
 But the plant was one where everything 
 went through in definite lots of shippable 
 articles, so that by the introduction of lot 
 costs it became possible to balance up every 
 
160 EXPERIENCES IN EFFICIENCY 
 
 month and show profit or loss for the whole 
 production, in addition to obtaining the de- 
 tail costs with profit or loss on each lot of 
 articles finished. And when these figures, 
 hitched up to an estimating system for bid- 
 ding in new work, began to operate well, 
 and produce tangible results and increased 
 profits, no suggestion was deemed impossi- 
 ble of accomplishment. This plant, indeed, 
 bore out very well the belief that a right cost 
 system is the proper basis for all improve- 
 ment, since it offers visible and indisputable 
 evidence (through its pictures of profit and 
 losses) of efficiency and lack, of opportuni- 
 ties of improvement. Care of materials, in- 
 centive methods, waste reports, expense con- 
 sideration, planning of work, all followed 
 quickly with the minimum difficulty. 
 
 A typical case of efficiency-will was shown 
 in the progress of the work. One depart- 
 ment handled an operation requiring very 
 skillful and highly-paid hand-work. This 
 work was paid on the hour plan, but it was 
 thought that a bonus plan would produce 
 definite economies. The operatives were dif- 
 ficult to obtain, and consequently very in- 
 dependent. They had no enthusiasm for any 
 change, and frankly stated so. In very many 
 
EFFICIENCY WILL 161 
 
 cases the matter would have dropped here; 
 not in this case, however. The partners got 
 the men together and told them plainly that 
 the scheme was going to be put into opera- 
 tion; that it would undoubtedly work to the 
 benefit of both the company and the men 
 who tried it earnestly; and that others were 
 invited to quit, a guarantee of certain re- 
 sults for a given period being made, how- 
 ever, for those who stayed. The scheme pro- 
 posed proved advantageous after a short 
 trial to all concerned, but illustrated very 
 well one of those occasions where lack of 
 the proper spirit and efficiency-will would 
 have prevented a material gain. 
 
 And after three years the whole scheme, 
 under their insistence, has remained so close- 
 ly in operation that an examination by an- 
 other firm of efficiency engineers brought out 
 the comment that this concern had one of 
 the simplest and most effective and up-to- 
 the-minute systems they had seen. The re- 
 sult is amply observed in the profits. 
 
 Thus hearty and quick co-operation in this 
 plant and a determination to hold to and 
 develop all suggested improvements, made 
 efficiency a simple and valuable proposition, 
 despite the fact that the executives had pre- 
 
162 EXPERIENCES IN EFFICIENCY 
 
 viously developed no great reputation as 
 business men. 
 
 The third example developed still a dif- 
 ferent eventual result. This plant, manufac- 
 turing a specialty, was quite successful finan- 
 cially. The president had originated, and 
 made successful by shrewdness, his venture. 
 But he had reached quite an old age, and 
 his infirmities prevented him from taking a 
 very active part in its management. The 
 authority of management was divided be- 
 tween the superintendent in the factory and 
 an officer who had charge of the office and 
 the selling. It was this latter who desired 
 more efficient methods in the factory. 
 
 There of course is something very human 
 about such a situation, where the head of one 
 section desires to see some other section im- 
 proved. This is a situation arising very 
 often. It is usually unfortunate only when 
 conditions are such that there is not some 
 bond of broad spirit of loyalty to the plant, 
 or an over-executive who is able to control. 
 This was one of the unfortunate situations. 
 
 The superintendent had developed some 
 methods of system gathered from his ex- 
 perience and reading, and was frankly much 
 opposed to the service of any outsider. This 
 
EFFICIENCY WILL 163 
 
 situation had in it what not unusually ex- 
 ists in the majority of cases where efficiency 
 is introduced, namely, one man in an im- 
 portant position who was unfavorable to any 
 method other than his own. It lacked what 
 saves many such situations, viz., an execu- 
 tive above him who eventually would make 
 it clear to him that his co-operation was ex- 
 pected. There were really two somewhat 
 antagonistic and independent authorities. 
 
 The superintendent, firm in the conviction 
 that his own methods were adequate, (and 
 perhaps, as is not unnatural, and indeed is 
 unfortunately a large cause of the stoppage 
 of the progress of efficiency, fearful that 
 methods introduced by others would be to 
 his detriment), could not, and did not op- 
 pose any plan offered openly. But he took 
 the practical position that since the work 
 was proceeding without his consent, it did 
 not entail any necessity of assistance from 
 him, and he took many opportunities to cre- 
 ate a spirit against it, the effect of which 
 was that those engaged in the work as em- 
 ployees of the plant felt that their jobs were 
 not permanent, and themselves possibly a 
 little ostracized. Such a spirit, of course, 
 
164 EXPERIENCES IN EFFICIENCY 
 
 held nothing encouraging to quick and valu- 
 able results. 
 
 The work was proceeded with under the 
 quiet opposition of the superintendent, how- 
 ever, and certain methods which led to the 
 office, and could be watched from there, were 
 introduced and gotten into good working or- 
 der. First class store rooms with card-rec- 
 ords of the income, outgo, and amount on 
 hand of parts in progress, and of finished 
 parts, were built and put into operation. 
 Lot-routing systems were introduced. Bec- 
 ords of waste and spoiled parts, and by whom 
 spoiled, were introduced. And finally a lot- 
 cost system on all parts and finished as- 
 sembled articles was established, as was a 
 production system. These were of course 
 valuable and fundamental and they were tied 
 together by reports and records to the of- 
 fice. Under the conditions this was all that 
 could be accomplished. But much can be 
 done with such basic methods. 
 
 As a matter of fact, what happened in this 
 case was that after two years a change came 
 about. A new element in the form of a gen- 
 eral manager was introduced, and the funda- 
 mental methods having been maintained, ef- 
 ficiency began anew with this as a base, and 
 
EFFICIENCY WILL 165 
 
 the work introduced without co-operation 
 began to bring forth its true value. 
 
 These experiences, unexciting and ordi- 
 nary but humanly natural, serve to illustrate 
 nevertheless some important necessary con- 
 ditions for success in efficiency attainment, 
 not always fully comprehended nor operated 
 upon either by the engineer or by the execu- 
 tive who desires efficiency in his plant. 
 
 They indicate clearly the fact that efficiency 
 needs, as a fundamental to build upon, a 
 proper state of mind in the executive organi- 
 zation not improperly termable "efficiency- 
 will." This state of mind, or efficiency-will, 
 involves (if perhaps not at first, yet finally) 
 a strong belief in the existence of a higher 
 efficiency and its attainability under makable 
 conditions. Following an understanding of 
 the principles of operation and perhaps some 
 slight attainment, there must ensue ener- 
 getic enthusiasm. For it must be realized 
 that after all most efficiency results are to 
 be gained through human effort all the way 
 down the line of employees, and enthusiasm 
 is a tremendous energizer. 
 
 And it is no more true of a metal bar that 
 a constant heat at one end will gradually be 
 felt at the other end, or that an icy bath at 
 
166 EXPERIENCES IN EFFICIENCY 
 
 one end will transmit coldness throughout 
 the bar, than that enthusiasm or indifference 
 will likewise be transmitted from the ex- 
 ecutive organization down. Too many ex- 
 ecutives think of efficiency introduction as 
 parallel to the case of a wire connection to 
 an electric current when the current flashes 
 immediately through the whole. Too often 
 the bar simile (and the simile of a long bar at 
 that) holds more nearly true. 
 
 But it must not be forgotten, also, in con- 
 sidering the efficiency-will, that knowledge 
 and enthusiasm must be transmitted down- 
 ward through a lure as well as a drive. Ef- 
 ficiency attainment is essentially a mutual 
 affair. The advantage gained must be shared 
 between employer and employee on a fair 
 basis. 
 
 Efficiency attainment involves, then, co- 
 operation of the executive organization. All 
 must work together with one purpose. This 
 natural law of any operation involving the 
 working together toward one end of many 
 people is indeed all the more essential in 
 efficiency attainment, because of the fact that 
 it means extraordinary results striven for, 
 and involves the uprooting and eradication 
 on the part of many, who are past that time 
 
EFFICIENCY WILL 167 
 
 of life when it is easy and natural to change, 
 of old habits, customs, methods, and man- 
 ners. 
 
 The executive who desires results should 
 understand and endeavor to bring about this 
 efficiency-will and co-operation, and not de- 
 pend entirely on the engineer to accomplish 
 it. The cases cited illustrate results obtain- 
 able by its lack and its presence suggesting 
 an underlying feature of the psychology of 
 the situation. 
 
 The operation of this psychology is so 
 plain in the ordinary every day affairs of 
 business, that its necessity in practical ac- 
 tion when the attainment of extraordinary 
 results is attempted it seems might be taken 
 for granted, and striven for or forced by any 
 interested executive. It is unfortunate, how- 
 ever, that too often efficiency attainment is 
 looked upon wholly as experimental. 
 
 Efficiency progress will however undoubt- 
 edly make stronger and more rapid advances 
 in the right direction when the executive has 
 learned to develop in advance, or at least co- 
 incidentally with the attempt at efficiency 
 increase, a strong efficiency-will. 
 
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